Learning to walk before I run

jimjames

edinburgher said:

None taken kaycastle - unfortunately we know of a couple of families who live within a few blocks of ourselves who have been quoted £80-90k for two storey extensions. We'd like two storeys at the side and a kitchen/diner at the back. Allowing for the work + a new kitchen etc. it doesn't seem too crazy compared to the other quotes of which we're aware. But yes, will need to get our own.

I guess it also depends how much work (if any) you're prepared to do yourself. We had a 2 storey extension 5 years ago for £55k but did a lot of the fitting out ourselves so plaster boarding, painting and arranged the trades to finish off. It probably took a bit longer but did save.

The numbers that really stand out to me are the pet costs, pocket money and groceries. Between those 3 items you have almost half your income taken up. Pocket money isn't really a line item, it should be split into the actual spend. It seems pretty pointless to get to the level of detail of showing spending £2 on specifics but £300 lumped into one item.

Spending £300+ on pet insurance but none on yourself seems a false economy so worth looking into. 

You also say that the credit cards will be covered by savings and while your savings balance is higher than the credit cards that does mean you will have virtually zero emergency funds. When your spending is more than your income that will reduce your savings too, with reduction in income with the new family member it might cause more of a pinch.

edinburgher

@jimjames - thank you for your considered input

I think we are going to have to be more realistic about what we can save. We've started considering potentially cheaper extensions such as a loft conversion and a single storey kitchen extension.

With pet costs and groceries, I completely agree with you. The pet costs can only go down (in fact, I've assumed these will go down by 50% as of the start of October). Mea culpa!

As for groceries, this number will be harder to shrink. We like food (as does almost everybody), but we have definitely been overspending in this area. I can, however, "fess up" to a multitude of sins in this area. For a period we included alcohol in this amount and I suppose we would be considered regular drinkers. By which I mean (for example), a weekly 4 pack of beers for me and a reasonably priced bottle of wine for Mrs E, plus the occasional bottle of spirits on an Amazon offer (mainly me). This could easily have added £55-70/month onto the bill.Obviously Mrs E is no longer drinking and I'm going to join her by buying no new booze (unless we go out and I'll use my own money for this). Basically it's another area where I've acted childishly and used a "big" budget line to hide consumption that should have been paid for out of our own pocket money. I'll stop that.

Other examples are eating too much pre-prepared food (dips, "lunch" items like pastries etc. that we would have bought with our own money from shops in town etc. while in the office). Our grocery spends went up by something like 1/2 between the month before the first lockdown and now. Costs have gone up during this time, but a lot of it is our choices, like all too often going for the "luxury" option. We also try and buy certain slightly more ethical/less intensively farmed choices, like Fairtrade coffee and bananas, organic eggs and milk, free range meat and cleaning products that are better for the environment. I'd like to try and keep the latter, but the former is just another hole in the bucket.

Re. pocket money, the whole point was always that we didn't have to account for it. We get the same amount and don't track it. I can see, however, that it's evidently too high for us to meet our goals, so it needs to be cut. We don't have joint finances per se, just joint expenses all paid out of one account. I absolutely take the point re. limited savings to heart - I said to Mrs E this evening that we have been riding our luck for too long and it has to stop, particularly with another mouth to feed.

We do have life insurance, but not income protection or critical illness insurance as it appers to be very expensive. Our life insurance would cover the current mortgage + £23,000 and we both also have life insurance provided by either our employer, or our pensions of 4x salary (so £102,000/£160,000 depending on who died). So worst case scenario of paid off house + £125,000 + balance of pension or widow's pension should one of us die.

In other finance news, I'll be dropping our Netflix down to the basic plan and I am willing to drop Spotify entirely (we get some free music from Amazon Music, enough for my purposes). Mrs E not so convinced that she can cut it, but would be willing to pay for it herself if this is the case. So that's another £17.99/month to be cut. Pocket money and groceries are very much in my sights, but groceries won't be an immediate fix. Pocket money will be easy enough to cut, but this won't be happening until November (when I also get a pay increment of 5%). I realise it's still small beer, but I can only do my best and come up with a plan that we can actually stick to.

I spoke to our current mortgage lender today and pending a full application and valuation, we meet their affordability criteria to borrow another £50,000. This would pay for a loft extension and we could perhaps squeak a loft extension and a single storey kitchen extension if we combined this and using 0% credit cards for spends to retain cash. Assuming the same rate, this would add c. £200/month on to our mortgage payment, which would be a sight easier than saving £50,000 at £900/month. We would, however, have to clear the credit cards as well, but I believe that this would be relatively straightforward when we came to remortgage in 2 years time and realised the increase in value arising from any works. We have a full meeting to go through figures in a fortnight, plenty of time for me to trim more fat from the budget

edinburgher

I have done the maths and Mrs E's maternity leave will cost us £4,969.12 (lost earnings vs. additional Child Benefit). That's 3 months at full pay, 3 months at 50% and 3 months at SMP. I remain optimistic, I'm sure I remember it costing £10k last time as her then employer had the most miserly approach to maternity leave ever.

I think that some of this will need to be covered by savings and that some of it will just need to be balanced out by a much leaner budget. That's not a big issue - while we'll make sure DD keeps up her activities, you basically do nowt for a year when a baby comes along bar baby stuff.

It doesn't cover baby equipment. We've been offered a cot, but would need new (to us) baby monitor, mattress, pram, car seat (this would be new unless a trusted friend wants to get rid of a secondhand one), bottle steriliser etc. Happy to go secondhand and hopefully we'll be able to borrow a few items from friends who have already obtained their full contingent of children I wonder if every second time parent feels like they were a bit of a twit the first time round with spending?

LadyGnome

Congratulations to you both.  Ed from memory you are a keen and good cook.  I think you should challenge yourself to produce the best food you can on a tighter budget.  Maybe a couple of vegetarian days a week.  I think you are saving too much for your DD right now.  I understand why you want to do that but you can't afford it.  Can you halve that figure?

If my spending starts to slip then I write down everything I spend for a month to see which bad habits have crept in.  

Have you sat down with Mrs E and agreed spending and savings goals.  It may be easier for you both to work as a team if you both have a clear target to aim at.  I think you have very clear ideas of what you need to save but has that been agreed with Mrs E, if you want to tighten your budget for a period of time then you both want to be on the same page.  For me, having a goal and a timescale helps as it doesn't feel as tough if I know why I am saving and how long I have to be extra careful for.

themadvix

Congratulations on the baby news Ed!

Only a tiny contribution from me, but totally see why you wouldn’t want to cut the window cleaner - but can you get them to come every other month? Ours does.

Watty1

Congratulations on the baby news.  
and some very wise suggestions here on the finance stuff too

edinburgher

@LadyGnome - I struggle a little with vegetarian meals as DD is a typical 6 year old and not massively adventurous. She will, however, eat Quorn-type offerings, so that's something. I did my first healthy and more controlled shop in a long time this evening. More vegetables and fruit, less, healthier carbs (brown bread) and a few more opportunistic bargains (including a massive pack of steaks from Lidl with 40% (ish) off and a reduced pork joint that can be portioned up and turned into lots of meals. No booze, soup for workday lunches and I'm back on the porridge (which I actually ate for 5 days a week quite the thing for a two year period prior to Covid). It came in at about £63, which is a lot leaner than usual.

DD's ISA DD has been put down to £1. We will just have to be like all the other parents who don't have huge amounts invested for their sprogs and have to help them out with a monthly bung when they're at college, university or generally finding their feet in the world. The main thing is having a happy family and a settled home base for all that we can fit in without colliding every 30 seconds

Mrs E and I are very much on the home page, although my page might have a few more spreadsheet columns than hers...

@themadvix - That is a good idea - I will ask him when I next get a chance to chat

@Watty1 - thank you, we are excited but very nervous as we've had bad luck in the past. Everything crossed!

powerspowers

Congratulations on the baby news and well done for addressing your leaky boat- it’s not easy to admit that things aren’t as in control as you’d like. 

I think you’ve got some good changes to get started with. I would see how you get in and review again in a few months- even delaying the extension decision to then as that has the potential of making the boat leakier.
good luck Ed

edinburgher

@powerspowers - The additional borrowing from our mortgage lender can be drawn down for up to 6 months (similar to a mortgage offer being in place). Assuming another month to get agreement (if we do) and we have a 7 month window to steady the ship. I think it could take that long to get a builder in place anyway, so lots of opportunities for incremental improvement over that period. Another option would be to do some of the extension plans quickly (say the loft) and then look at the kitchen etc. once baby comes along - I'm aware you don't really want a building site at the same time as your wife is about to give birth!

themadvix

edinburgher said:

Another option would be to do some of the extension plans quickly (say the loft) and then look at the kitchen etc. once baby comes along - I'm aware you don't really want a building site at the same time as your wife is about to give birth!

Really? I thought that was all the rage? Don’t you ever watch grand designs?! This week’s was a classic - IVF and a self-build! 😂