Am I spending too much, or just about right?

james_williamson_6544

Hello,
I am single earner in a family of 4.... adults are in 32-36 age group and both kids under 6 years age.
55% of our after tax salary goes in:

- Mortgage + Council Tax + Home Insurance + Boiler Cover + Grocery + Household Goods + Gas + Electricity + Water + Internet + Mobile and SIM plans + Car Insurance + MOT + Road Tax + Petrol + Eating Out

45% of after tax salary remains for:

- Life Insurance + TV subscriptions + Hobbies + Tourism + Holiday + Savings + Investments + SIPP

 Do you think this is about right for the age group, or too much spend or too little spend?
Our mortgage is relatively low as we are in a small 3-bedroom house, and will hopefully upgrade

Stubod

james_williamson_6544 said:

Hello,
I am single earner in a family of 4.... adults are in 32-36 age group and both kids under 6 years age.
55% of our after tax salary goes in:

- Mortgage + Council Tax + Home Insurance + Boiler Cover + Grocery + Household Goods + Gas + Electricity + Water + Internet + Mobile and SIM plans + Car Insurance + MOT + Road Tax + Petrol + Eating Out

45% of after tax salary remains for:

- Life Insurance + TV subscriptions + Hobbies + Tourism + Holiday + Savings + Investments + SIPP

 Do you think this is about right for the age group, or too much spend or too little spend?
Our mortgage is relatively low as we are in a small 3-bedroom house, and will hopefully upgrade

..difficult to comment without specifying the actual amounts?

Change your username so people are less likely to know who you are and then come back with actual numbers rather than percentages...

noitsnotme

james_williamson_6544 said:

Hello,
I am single earner in a family of 4.... adults are in 32-36 age group and both kids under 6 years age.
55% of our after tax salary goes in:

- Mortgage + Council Tax + Home Insurance + Boiler Cover + Grocery + Household Goods + Gas + Electricity + Water + Internet + Mobile and SIM plans + Car Insurance + MOT + Road Tax + Petrol + Eating Out

45% of after tax salary remains for:

- Life Insurance + TV subscriptions + Hobbies + Tourism + Holiday + Savings + Investments + SIPP

 Do you think this is about right for the age group, or too much spend or too little spend?
Our mortgage is relatively low as we are in a small 3-bedroom house, and will hopefully upgrade

Nowhere near enough information provided to give any meaningful advice.  In the 45% section you could be spending £thousands on holidays and only £tens in savings which a lot of people would consider not sensible.

james_williamson_6544

JamesRobinson48 said:

You have allocated your income between two buckets (55% and 45%), but it doesn't seem clear to me what these buckets conceptually represent or what could be learned from this particular split. At first I thought the 55% bucket is for essential spending and the 45% for discretionary items; but then I spotted that the 55% includes Eating Out. 

If you're asking whether 55% is too much or too little for essential spending, surely that would partly depend on how much you earn.  Typically I assume a low earner would spend most or all of his/her income on essentials; whereas for a high earner, spending on essentials might be a relatively small percentage of one's income.

I respectfully suggest that perhaps it might be more meaningful if you disclosed roughly how much £ is the after tax salary, and what % of that do you aim to save (Savings + Investment + SIPP) instead of spending.

My monthly take-home income is 3000.
This is the only source of household income, and my overall aim is to make the most of this money.
I thought a good starting point will be to know if I my spending levels are balance between good standard of living plus good financial management.
- £875/month is spent on mortgage on a small 3-bedroom house + council tax
- £125/month is spent on gas + electricity + water + internet + mobile + SIM plan
- £650/month is spent on Home Insurance + Boiler Cover + Grocery + Household Goods + Car Insurance + MOT + Road Tax + Petrol + Eating Out

james_williamson_6544

Forgot to add... I don't have any debt (other than mortgage) and I use credit card (where accepted) and pay in full on the next working day the credit card statement is generated.

kuratowski

It's good that you know how much you spend and where; that's half the battle.

Is the non-working parent in receipt of child benefit?  This is vital to secure their state pension entitlement.

How much cash do you have saved and set aside for emergencies?

How much are you saving into your pension per month (including employer contribution), and how much is the current pot?

james_williamson_6544

kuratowski said:

It's good that you know how much you spend and where; that's half the battle.

Is the non-working parent in receipt of child benefit?  This is vital to secure their state pension entitlement.

How much cash do you have saved and set aside for emergencies?

How much are you saving into your pension per month (including employer contribution), and how much is the current pot?

Non-working parent in receipt of child benefit - YES, although we opted out of money but only getting NI credits.

Non-working parent also has a small SIPP of value £7400

Savings for emergencies = £5700 = 3.5 months of expenses that I have marked in 55% bucket

Workplace pension = £70k (I went aggressive in contribution during last 5 months). Getting max from employer plus putting something extra.

james_williamson_6544

To get some financial independence and have a bigger house due to family size/age:

- I need to find a higher paying employer (efforts not resulting in results at the moment)
- Partner needs to find a paying job (efforts not resulting in results at the moment)
- Need to reduce spend (finding that super difficult)
- Use the savings to get good investment income/growth (thinking on this topic, but not sure if I am at a good position to pursue that. I always thought it is for rich or high income people)
- Something else, which I don't know.

kuratowski

Thank you for the answers. As you know everything on here is opinions not advice. With that caveat:

Your emergency savings could be larger.  Appreciate holding a lot of cash can feel pointless with current low interest rates.  But 6 months of expenses would feel a lot more comfortable than 3.5, and it could save you from getting into debt one day.  Also, I question whether life insurance should be in the 45% bucket, it should be part of the 55% with enough emergency savings to keep up the premiums.  With only one income in the household, insuring your life is not optional.

Using the savings to get good investment/growth - the single most important thing you have done here already is making extra contributions to your pension.  Check what your pension is invested in.  In your mid thirties there are decades for this money to grow, do not make the mistake of investing too cautiously. Ideally a fund in the 80-100% equities range, if you can cope with the volatility (just don't look!!)

Investing outside the pension - probably not the right time to do this given your low cash savings, and your plans to move house soon (in all likelihood this will absorb some cash).  If you do manage to increase the household income(s) then, at that time, maybe consider using S&S ISA (or JISA?) to save towards the family's expenses in later life but pre-retirement.

Re child benefit - You haven't given precise figures for your pension contributions or gross income, which is your call, but I do wonder if your current pension contributions are sufficient to wipe out the HICBC?  In which case you could be claiming the money.  Difficult to say without the exact figures.

james_williamson_6544

kuratowski said:

Thank you for the answers. As you know everything on here is opinions not advice. With that caveat:

Your emergency savings could be larger.  Appreciate holding a lot of cash can feel pointless with current low interest rates.  But 6 months of expenses would feel a lot more comfortable than 3.5, and it could save you from getting into debt one day.  Also, I question whether life insurance should be in the 45% bucket, it should be part of the 55% with enough emergency savings to keep up the premiums.  With only one income in the household, insuring your life is not optional.

Using the savings to get good investment/growth - the single most important thing you have done here already is making extra contributions to your pension.  Check what your pension is invested in.  In your mid thirties there are decades for this money to grow, do not make the mistake of investing too cautiously. Ideally a fund in the 80-100% equities range, if you can cope with the volatility (just don't look!!)

Investing outside the pension - probably not the right time to do this given your low cash savings, and your plans to move house soon (in all likelihood this will absorb some cash).  If you do manage to increase the household income(s) then, at that time, maybe consider using S&S ISA (or JISA?) to save towards the family's expenses in later life but pre-retirement.

Re child benefit - You haven't given precise figures for your pension contributions or gross income, which is your call, but I do wonder if your current pension contributions are sufficient to wipe out the HICBC?  In which case you could be claiming the money.  Difficult to say without the exact figures.

Thank you for the advice comments - really appreciated.

With regards to emergency savings, I feel comfortable at 5 months mark and hence working towards going from 3.5 to 5. I was at a good position at start of April, but then put away £2880 in partner SIPP so that we can get £720 from HMRC. I thought I might be rebuild this emergency savings during the year though. So far it has worked OK in April and May, hopefully June and future months will be good too!

At around Feb, we realised that workplace pension pot (only pension pot) is not large enough and hence we significantly (relative to our income) increased workplace contribution. That now brings us down to very low level of HICBC - previously we had to pay a high proportion of it. So I guess I should do the numbers and see if it makes sense to claim £35.15/week. I don't have access to my latest payslips so don't know exact figures at this moment, will have that tomorrow though. I think, between me and employer, we are now putting £1200/month.

With regards to Life Insurance / Critical Illness / Income Protection: I have very good benefits from work (paid for completely by employer), however those benefits are only available while I am employed at this company. If I leave, I will have to buy insurance privately and at that time my age would mean a very high premium.

My conundrum is (purely due to lack of knowledge and guidance): If I put more money in workplace pension, I lock that money away for 20+ years minimum which means I will have low disposable money to build up emergency savings, or use money for a bigger house, kids education or other pre-retirement expenses. If I don't put more money in workplace pension, then I don't have enough for retirement, as my current pension pot of £70k is too low for my age.

theoretica

Look at it from the other side - you say you want in future to move to a larger place.  Have you got enough saved you could do that now without the higher mortgage impacting your quality of life?  If not, how long will it take you to get there at your current rate of saving?  Are you happy with this timescale?