Learning to walk before I run

edinburgher

Hello all!

I am returning to the forum in an attempt to gain your collective wisdom in sorting out our dire finances. I've been experiencing a series of mini lightbulb moments of late and have realised that it's time for a change. Despite being vaguely savvy as regards areas of personal finance such as pensions, I have to admit that I'm an absolute spender, with poor impulse control and a budget that only ever goes up. I used to think that decent pension provision was enough and that we'd magically reach a day where our finances would just "work" (because DD would be grown up and we wouldn't have to pay for x, y and z). But I'm starting to think that's a load of cobblers and that if we don't stop up the holes in our boat, we'll not make it to retirement in 20 years time

Please treat this as an episode of "Secret Eaters" - carve up my SOA below and feel free to tell me how much of a daft sod I am. In terms of cuts, nothing is really off the table, but I'd like to try and keep DD's swimming lessons and somehow find the money for the extension as set out. Mrs E recently told me that she is pregnant and we will need more space

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2287.1
Partners monthly income after tax....... 1655.78
Benefits................................ 84.6
Other income............................ 0

Total monthly income.................... 4027.48

Monthly Expense Details
Mortgage................................ 582.9
Council tax............................. 226
Electricity............................. 51.5
Gas..................................... 51.5
Mobile phone............................ 18.8
TV Licence.............................. 13.37
Satellite/Cable TV...................... 30.64
Internet Services....................... 21
Groceries etc. ......................... 560.14
Petrol/diesel........................... 47.85
Road tax................................ 11.95
Car Insurance........................... 47.55
Car maintenance (including MOT)......... 112.28
Car parking............................. 8.78
Other child related expenses............ 155.8
Pet insurance/vet bills................. 338.21
Buildings insurance..................... 7.51
Life assurance ......................... 15.31
Presents (birthday, christmas etc)...... 209.06
Holiday................................. 337.89
Extension Savings....................... 912.18
Electronics Replacement................. 144.98
Charity................................. 28.88
Dentist................................. 9.21
Home Maintenance........................ 193.22
YNAB.................................... 5.77
Glasses................................. 3.48
Excercise Classes....................... 60
Account Fees............................ 2
Union Dues.............................. 20.3
DD Swimming Lessons..................... 26.5
Window Cleaning......................... 8
DD ISA.................................. 84.6
Amazon Prime............................ 4.16
Garden Waste............................ 4.45
Pocket Money (Mrs E).................... 300
Pocket Money (Mr E)..................... 300
Pocket Money (DD)....................... 15
Total monthly expenses.................. 4970.77

Assets
Cash.................................... 6003.07
House value (Gross)..................... 250000
Shares and bonds........................ 1830.83
Car(s).................................. 6100
Total Assets............................ 263933.9

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 161212...(582.9)....1.89
Total secured & HP debts...... 161212....-.........-  

Unsecured Debts
Description....................Debt......Monthly...APR
Credit Card 1..................3625.36...36.26.....0
Credit Card 2..................1932.56...48.09.....0
Total unsecured debts..........5557.92...84.35.....

Monthly Budget Summary
Total monthly income.................... 4,027.48
Expenses (including HP & secured debts). 4,970.77
Available for debt repayments........... -943.29
Monthly UNsecured debt repayments....... 84.35
Amount short for making debt repayments. -1,027.64

Personal Balance Sheet Summary
Total assets (things you own)........... 263,933.9
Total HP & Secured debt................. -161,212
Total Unsecured debt.................... -5,557.92
Net Assets.............................. 97,163.98

Created using the SOA calculator at www.stoozing.com.
Reproduced on Moneysavingexpert with permission, using Firefox browser.

kaycastle

Congratulations on the baby news

Here were my initial thoughts:
What is the pocket money for?

Areas I'd maybe focus on is groceries, presents and the pocket money.

How much have you saved for extension so far?

Also I thought the pet insurance and vet bills seemed huge, what pets do you have?

tacpot12

Congratulations on your news, but you are going to have to tighten your belts.

I'm suprised at how much you are spenting on pets bills and insurance. We have five animals (one with renal problems, high blood pressure and diabetes) and pay £150 pcm for pet insurance (PetPlan) plus perhaps £150 pcm on top of this for vets bills and renal food. 

You should only be saving out of your excess income, and you have no excess income currently. If you reduce the other amounts you are savings you should be  able to get to the point where your income matches your expenditure and you have been savings for expenses that you now will come up such a house maintenance.

The extension, holidays, electronics replacement and DD ISA seem prime targets to be reduced. You could almost make your budget balance just by stopping the extension saving. Reducing your pocket money would give you more scope. 

Brie

Congrats on the news and also on having a light bulb moment.

Leaving aside the TV license your phone/TV/internet/amazon is costing £75 a month.  There should be ways to halve that although  you may need to wait for contracts to end.   

And yes the pocket money other than that for DD needs to be reviewed.  

What's covered with home maintenance?  Is it something essential??  

£2500 a year for Christmas and birthdays?  Why??

£300 a year for charity??

I think that some times when one looks at the monthly cost things look minor but when you look at the yearly cost it can be a bit of a kick up the back side.  Like when someone considers how much one pays for cigarettes in a year or 10 years rather than the price of a single pack.  (not suggesting that you are a smoker)

Why pay for garden waste disposal?  or window cleaning?  DIY!!

You might also want to reconsider the other non essentials like exercise classes.  And what's the account fee? and YNAB??

If I was you I would focus on what you are trying to save in any form and apply it to the credit cards to get them out of the way.

South_coast

Congratulations on the new Ed in the oven 😍! I don't think you need to hammer the credit cards, as they're both 0% and I'm assuming you're intending to clear them by the time that ends (I don't think things have slipped that badly)? So for me I'd say groceries, pets, holidays, home maintenance (you could roll some of this into the extension savings, as that will be the ultimate home maintenence project) and pocket money are the obvious ones.

The pocket money works out at roughly a tenner a day for both you and Mrs E. What is it going on that's not covered in your other categories, as they seem very detailed? I'm guessing some of yours end up as the SIPP contributions that you make, so doesn't sound like it's entirely being wasted, but as a total it's a lot for fun money. 

Good luck, I know you can do it 😀!

edinburgher

@kaycastle - pocket money covers all our personal spends (alcohol, dining out, day trips, clothes, gifts for each other etc.) We have next to nothing saved for the extension

@tacpot12 - re. pets, it's a combination of poor choices and bad luck. In the last two years we have got a new aquarium and two cats. The aquarium was meant to be a learning experience for DD and in fairness to her, she does take an interest. That said, it's a lot of faff to maintain and a monthly trip to the pet shop to see their fish would probably have sufficed. There's a good chance I'll strip it down when the current inhabitants kick the bucket. As for the cats, our first cat is a moggy, but had a bad accident. We were underinsured and ended up £1,000+ out of pocket. I've fixed the insurance issue. Cat 2 (no excuse for this one) joined the family recently and is a pedigree (£1,000+). He also comes with an insurance cost of £30+

As for fish and cat #2, I have nobody to blame but myself. Cats are both beloved family pets and aren't going anywhere as they are our responsibility.

The holidays budget can be cut back to £0 from November onwards (existing trip planned that we can't get out of).

@Brie - "TV and internet" spends covers Virgin BB (cheapest possible rate), Netflix, Disney+ for a year (I protested this and won't renew it) and Spotify. We should probably consider canning Spotify, as we get some music free via Amazon Prime anyway.

Home maintenance covers the cost of fixing things that break (so a roof repair, or broken tool), as well as chemicals for the garden, paint etc. for general maintenance and general things that wear out and are used solely to maintain the house.

Presents - this covers birthday and Christmas gifts for immediate family and DD, presents for family and friends, mother's/father's day presents for parents, birthday party presents for DD (a large class of friendly kids) and larger one time gifts (say the birth of a child or a wedding). I'll freely admit to adding stupid stuff to the bill, like a couple of bottles of wine if we're visiting family and take a gift. I struggle with this one. It feels like many of our friends are more generous than us (they probably are, they earn more) and Mrs E (in particular) seems to expect a certain level of spending.

Charity - another hole in the boat, but there are people far worse off than we are. Not really much more I can say on that front, it can be cut back until we have some proper savings.

Garden waste disposal and window cleaning aren't optional. Garden waste isn't collected by the council unless we pay it and the alternative would be hauling it to the tip in our car, which would make a mess of the car. Not sure it's worth saving £4x a year for. Window cleaning I did try, but ended up dropping a fully extended 20' ladder on my shoulder, not worth injuring myself for £8/month!

Exercise classes - yeah, fair point. This is a "me" cost and should be covered from my pocket money. Account fee is an account fee and YNAB is (ironically) a budgeting app.

tacpot12

As a general observation I think you are probably like 50% of the UK adults, spending all (and more) of your income each month. And generally everything will be ok, until something happens to disrupt your income. 

If you had a problem with your income for a couple of years you would all be homeless, unless you have some permanent health insurance (PHI). I would recommend that you get some PHI in place if you don't have this already and curb the spending impulse to buy this valuable protection. 

When I was working, these were my priorities: 

1. Council Tax + other regular bills (+ saving for annual bills
2. PHI + Life Insurance
3. Pension
4. Mortgage
5. Saving for expenditure that can be foreseen (e.g. house maintenance, appliance replacement)
   
6. Savings (for a rainy day or for treats) + Spending Money 

I would try to save half of what was left after 1 thru 5, but also allowed myself to spend half because life is for living.  

edinburgher

@South_coast - sorry - I missed your comment!

Credit cards are covered with cash savings. Re. the pocket money, I wish I could tell you, I feel skint 1/2 the time

@t@tacpot12 - The income consideration is definitely a consideration for Mrs E. For my part, I have worked in the public sector for the last 9 years and work for an employer with a no mandatory redundancies policy. I'm also a productive worker (for the most part) working in an area that is specialised and (at least currently) mandated by a range of statutory obligations.

kaycastle

Maybe it could be a good idea to work backwards.

Do you know roughly how much you need for an extension? And do you know ideally when you would need it by?

Then using that amount and date to work out how much you need to save each month.

Let us know what that works out as.

Then work out where that's going to come from and what you are going to cut. Aim to put that amount away before your spending each month.

I think it will be easier to cutback this way as you'll have a solid reason and target 

edinburgher

@kaycastle - the figure in SOA was fairly realistic for the costs of extending in just over 2 years time. I don't think we have that long, as new baby's room would be 1/2 a box room that we currently use as a home office. Say baby shows up in 8 months and is in our room for 6 months max, that's 14 months from now. Most good builders near us need c. 1 year's notice at present and an extension would take what? 3-6 months? Basically we seem to want the moon on a stick

On the other hand, I think I've been a mite pessimistic in the amount that the bank might lend us to extend. I based it on a value of £220k, whereas a teardown on our street just sold (quickly) at offers over £220k. Plan would be to borrow more from current lender, potentially take out a personal loan and combine these two with any savings we can gather. I think any less than £100k would be unrealistic, so we'd need to try and save £23,500 if my estimates of value are accurate (assuming £250k, which I think is perfectly reasonable in the circumstances).

The alternative is moving, which neither of us is opposed to. We would actually be about £400/month better off if we moved to a house costing another £100k (increased mortgage vs. trying to save to extend where we are). Still, DD is at a lovely school with a great sense of community and a lot of friends. We tell ourselves that she'd easily make friends anywhere else, but she is our only child and it feels like a big decision to make.

kaycastle

100k for an extension? That seems really steep and I'm in a more expensive area I think. Have you got any quotes etc. Maybe worth getting a few to have a certain target. Especially as you might need the extension sooner now. Then you'll definitely know how much extra needed per month.

Do you also know how much you need to save for maternity time/baby stuff?