To ask how much disposable income is enough to live on?

[Ebonyandivory2]

Hi, apologies this is long. I wanted to name change but I don’t want others to think I’m a troll or stealth boasting. Fully aware this is a sensitive topic so I’d like to start by saying I’m after practical advice and really don’t want this to turn into a bun fight or some kind of competition with regards to who has it worse. Right, now that’s out of the way.... I’m currently looking for a new job and I’m in the running for a few. The salaries offered range between £43k and £48k. I’m now 26 and have moved back home as I think it’s time to get serious about saving for a house. My question is this, and again this really isn’t meant to be goady, but how much do you think I can have as disposable income? This will be for fun and separate from bills/rent. I’ve done the maths and once bills/travel card and upkeep is taken care of I’ll have between £1700 and £2000 left over. I currently pay £100 “rent” a month. I’m aware I’m very fortunate and I’ve offered to pay more but charging your kids to live at home isn’t really the done thing in my family’s culture. My mum and I have agreed this will go up to around £150 once I’m earning more. Currently earning £33,000 and I’m not great with money. I go through feast of famine cycles where I’m sometimes itching to spend money and sometimes so anxious about money I barely spend a thing outside of the essentials. My mother is a very high earner but my dad was the total opposite. Never did anything with his life and they argued about money a lot as a result until they split. It’s left me with a very unhealthy attitude towards money and I’m booked in to see a financial therapist and a financial advisor about it as I really need to get serious about saving. A friend of mine is very frugal and lives on £300 a month. Not trying to be ignorant but that just seems like such a little amount as I have very social friends so I do go out a bit. She earns less and has more financial responsibilities so I take that into account. I discussed my anxiety about money with my mum and said I’d set aside £600 every month as “fun money” she made a face and said that’s far too much so now I’m really confused 😐 my mum is also quite frugal and doesn’t really go out much so she can get by on a lot less. My question is how much is a sensible amount? I want to save but I also want to live (within reason of course) any advice on how to get over money anxiety would also be greatly appreciated. I was earning half what I am now last year as I was part time and I worried much less. I find the more I earn the more I stress and it’s really getting me down. I’ve suffered with anxiety since I was a teenager and it just isn’t getting better. Again I don’t mean to sound woe is me as I know I have a good salary, it’s just stressing about money is all I’ve ever known thanks to my parents. I’d like to have a rough idea of the right thing to do before I see my therapist and advisor. Thanks if you’ve made it this far!

Oops sorry it had paragraphs when I initially typed it out!

You should set aside what’s left once you have accounted for bills, savings, food and anything else you have to pay for. It’s ok to enjoy money - you don’t get a great salary without working for it.
I’m all for enjoying money.
Keep it realistic and if you think you could save a little more / particularly whilst you are living at home as you’ll appreciate it later do! But be realistic! I know I like a good chunk of fun money!

I always set aside £400 pcm for “miscellaneous” that was clothes, meals out, lunches at work, coffee.

What does your 'fun' money have to include? Clothes? Food? Holidays? If it's all of that, then £600 is okay. If it's just going out drinking, then yes, it's quite a lot.

Fun money is for clothes, any beauty purchases and socialising, holidays etc. It’s purely for myself to do whatever with it. I never spend more than £50 on food as I’m back home so I include that with the essentials. My essentials total up to £600 a month

I'd put 1k in savings and keep the rest. Any left over, add to the savings. Don't spend for spendings sake.

How much does a suitable house cost and how much would the mortgage be with a deposit of 10%?

Are you paying into a pension?

It's up to you to choose what you think is acceptable regarding your social life. I wouldn't necessarily be telling my DM how much I earn or what I spend it on.

I think you should try to cut back to £100 per week for fun money which for a single person without commitments and children should be plenty. You don't have to go out every week!

I don't know where you are but think about your ideal deposit to put down. And see how long it will take to raise it on £600 fun money Vs £400 fun money.

Since you may be hitting 40% tax it's better to put money into a pension as well as save for a deposit.

If you are moving home for a year to mooch off your parents, then just save all of it.

As you are trying to save for a house but you like to socialise you could get all your bilks/commute budgeted for and then allow yourself £100 a week "fun money" for ad hoc purchases and socialising. You could draw this out in cash or use a budgeting app or separate bank account to track it. Although it is a little less than you suggested you could budget separately for clothes and a holiday so you don't have to find these from your weekly £100?

If I was in my twenties again, I'd be putting more into a house deposit, more into a pension, and more into savings to cover child associated costs for in my 30s.

I think if you have moved home to save money for a deposit and are only paying £100-£150 a month towards your keep then keeping £600 as personal money is high. Presumably if you were not being subsidised by your parents you would not be able to afford that much. Most people take advantage of living with their parents by saving as much as possible so they can move out and be independent. I think I would be a bit gobsmacked if I were your mum too.

I've been in the same situation, aren't we lucky to have such lovely and understanding parents?

As @Stressy said I would start with £100 per week (depending on where you live - that won't do much in London, for example) and see how it goes. You could experiment with different amounts for a few months and see how you go. You should also decide how you estimate your budget for "fun" money - are you including things like haircuts and/or clothing for work? (I didn't count this when I was budgeting as I saw it more as a professional appearance thing, but others may disagree.)

One thing I did was to check through a few months' bank statements with a coloured highlighter for each type of spend; I think I used 5 colours - essentials (food shopping, travel for work), direct debits, socialising, unessential (internet shopping, takeaways), and miscellaneous. It really helped to see where money was going when it was spent. e.g. I smoke, but I highlighted cigarette purchases as "unnecessary" as I choose to buy and smoke, it's not like food (YES for any posters who come at me, I'm aware smoking is an addiction, I've smoked for 17 years, but I won't die without them).

Something that helped me was to decide on my weekly "fun" budget and to withdraw the month's worth from a cash machine. I kept it on the chest of drawers in my bedroom (if not in my wallet). Having it so clearly visible made me think more seriously about what I was spending and if I was being too frivolous.

Good luck OP, I hope some of this helped.

Monthly we do £100 each misc., £40 clothing and £15 each for hair (him) and makeup (me), £20 for gifts (shared), also have Netflix and Apple Music which comes out of normal budget. Sometimes we use some clothing for fun spends if it accumulates.

This doesn’t include budget for holidays which is a separate pot.

We are late twenties - I earn about what you do and DH significantly more but we save lots. Already have a house but hoping to retire early which is why so frugal. Plus I think when you’re a couple it’s slightly easier to save more...more nights in together etc.

How much do you need to save? I’d start by projecting how quickly you’d get there saving £1500 a month then increase the frugality if you get impatient or it seems too far away!

PS. Can highly recommend You Need a Budget if you want to get serious about money management. Also now is the time to start retirement planning if you haven’t already!

I would set up a direct debit for at least as much as you would pay in rent/ mortgage, so at least a third, and then maybe add what you would pay in bills and emergency maintenance (water, power, council tax etc.). This way when you buy a property you know you can afford it. Regular savings accounts sometimes also pay more interest. Knowing that you have to put that money aside will stop you dipping into it. I would then aim to live as frugally as possible so you can save as quickly as possible.

How much do you NEED, rather than have available to spend? Think about what your social life entails, and what you don't want to give up. I.e, do you go out for dinner and drinks with the girls every Friday religiously, so that will be £x, budget for clothes, gym, whatever.

I think £600 is an awful lot just on fun money, every single month

If you're living at home with the intention of saving, then I'd make the most of that and save as much as you can. It doesn't mean you can't live, and have fun, you just don't have to be excessive. If you're going on holiday for example, you can just save less that particular month(s) you are paying for it.

Phew £48000 at 26! I was in a long term career and did not earn that at retirement! In rough terms you will pay £7000 in tax and £4500 in NI so will be left with £3000 in your hand each month. This does not take account of - for example - student loan repayments.

I'd feel that you could live in clover on that amount each month. I would suggest that - if you live at home - you should discuss how much rent you could pay. Now with DCs I took the view that whatever they paid got secretly saved for them but whether your parents will do that I can't guess

I think £100 per week is a reasonable amount of 'fun money'. It also depends on how much you like to go out vs how quickly you want to save for your own house. You might have to turn down the odd night out if you have already hit your budget for the month.

It really depends on how quick you want to buy a house!? 44k a year must be around 2 - 2.5k monthly take home. So obviously pay off your monthly billl's and any debts you may have. Then decide how much deposit you need,the timescale you want to buy and go from there.

It's not our place to comment on the lucky position you're in OP, and it's clear you're very aware of it.

As a previous poster said, what your "luxury" outgoings are is going to depend a lot on where you are in the country.

You're earning pretty well for someone of your age. Does that mean that there are certain obligations on you to look a certain way at work? So manicures, good haircuts and regular clothing purchases might only be semi-optional for you. If so, I would separate that out.

As for socialising, work out what you're currently spending. Roughly. In your position I would try and work out what you need to do what you enjoy, within reason and give it to myself as an allowance each month. I'd keep it separately, probably in a different bank account. Once it's gone, it's gone, and anything you don't spend by payday you transfer into savings. Because at that point you get a new "allowance".

This has the added benefit of making you more aware of what you're spending.

It's ok to be comfortable and have fun. Especially in your 20s. It's also sensible to remember that it might not be like this forever. Though actually, for quite a lot of people it is.

I had spending power in my 20s that I don't have now. I'm glad I enjoyed it then, as I don't expect to get the chance again and it helped me to maintain friendships that I couldn't put a price on.

I would take this opportunity to save as much as possible, but I did still like to go out and party at 26. You can do both, you just need to gauge it against which you desire more, the deposit on the house or the socialising.

If you want the deposit more cut your monthly spend down to £400, if you want to get all your partying and "holidaying" done before you get your mortgage use it for that.

I personally don't think £600 is a massive amount for personal use, if you go out on 1 weekend night a week that would be £100, which leaves £50 a week for clothes, make up, products, coffee/snacks here and there.

I would still save as much as possible though.

Oh and if you're not aware, for goodness sake don't pay extra into your student loan if you have one. Save it for your mortgage, which will be much more expensive.

I live on £50a week 'fun' money

I’m not “mooching” off anyone @Baguetteaboutit no need for your snarky comment. I help out around the house and give my mum an agreed amount of money