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!

I think you’re doing fine but why not suggest stuff you and friends can do yourself? A run/walk and a coffee? Movie night at someone’s house? Cinema on 2for1 night? Doesn’t always need to be eating out.

Re: pensions and general finance. Ask on reddit “ukpersonalfinance”. I’ve seen some terrible financial advice on here.

We are 28 with v healthy pension funds - we meet our employer match, then have low cost SIPPS (moneysavingexpert has a guide on this - we chose AJBell and Hargreaves Lansdowne based on their advice) invested in Vanguage Lifestrategy funds. We want to retire early so also have Vanguard S+S ISAs.

Good luck! And please, please do start a budget. When you start planning where your money goes actively, rather than reactively tracking it...that is when the magic happens!

@CountFosco 2k of savings monthly is good going. I'm assuming you do not pay a fortune in childcare & got on the ladder early so don't have a huge mortgage?

i keep £800 but that includes my food shopping, calling it 'fun money' probably didn't help when saying to your Mother. I would just call it money to last or personal money.

I think £100 - £150 per week should be ok.

My daughter started working this summer & will start a graduate training programme after Christmas. We suggested she saves 20% instead of paying us rent and that she needs to set up a savings account as well, maybe another 20%. It’s much easier to stay living student style and save the balance than have to cut back after a year or so.

So between £2700 to £3000 a month less pension student loans etc

You should be able to save £2000 a month which over 2 years will give you the right deposit for the mortgage you would be able to get on that salary.

My DD earns much less than that and is saving £1000- £1500 a month living at home.

Hi OP,
Don't jump into a rental property without really understanding your numbers. For higher rate tax payers (or people whose rental income, before deductions, pushes them into higher rate tax payer status) mortgage interest is no longer fully deductible as an expense. Tax is paid on the mortgage interest and then a 20% credit applied. This means it is possible to make a loss and still have tax to pay. The property is likely to produce very little income if you have a hefty mortgage with 20% tax on mortgage interest effectively and 40% on any profit after expenses. Then if prices fall with Brexit and so you have neither income nor capital growth you will have just thrown your money down the drain.

I didn't have the luxury of living at home to save
I rented a room which included bills
I ran an old banger car
I worked 3 jobs
Saved deposit

On top of deposit, you will need money for survey, solicitor fees, mortgage arrangement fee etc

First house no furniture, bought over the months that lived there

Suggest when you get paid put minimum 1k into savings, Lisa etc
You should be able to save more easily !

£1k into savings a month and £1k for you as disposal. £250 a.weekntomspend as you please will be just fine. You don't have to spend it and at the end of the month if you don't, it can go into savings.

Thanks for the advice about pensions @PooWillyBumBum just out of curiosity do you use a basic spreadsheet or were you able to find a good template? Do you update it every time you spend money or at the end of the month? I think I definitely need to be strict with tracking my outgoings

Maybe speak to a mortgage adviser and work out how much you need to save for a 10% deposit. That should give you an idea how much you need to save every month based on whether you want to save for 12/18/24 months and how much your ideal house is. What’s leftover I would spend 75% on fun money and 25% as an emergency fund.

Oh wow @SunniDay I didn’t know that about rental properties so thanks for informing me. More food for thought. To the people telling me I can save £2000 I appreciate what you’re saying but that simply won’t be possible. According to money saving expert after tax, pension (5% contribution) national insurance and student loan repayments the most I will take home is £2674. My essentials cost around £600 per month so I think saving between £1400 - £1500 per month is more likely

I also haven’t factored in solicitors fees etc into the saving calculations as i fortunately won’t have to worry about that. My uncle is a solicitor and so is my mother and another is a surveyor so they’ve promised to do it as a gift when the time comes which I’m incredibly grateful for

OP you mention planning to buy a 2 bed flat for approximately £200k. I'm not sure there are many appropriate areas in London that this will be possible - as you seem to be used to the "finer" things in life - happy to be corrected though!

I think it depends what you’re counting as essentials in that £600, to be honest. Break that down and really look at it...

Also, please look into you need a budget, it was life changing for me. I don’t have parents so didn’t have the easy option but that app took me from being in my student overdraft to saving a deposit, fees and buying my own place last year, and has taken me through saving almost as much again since I completed.

Save £1500 a month for as long as you can . Add to it if you have any money left over at the end of the month . Can you out I’m in an isa so you’re not tempted to touch it . Good luck ! Don’t move out and waste money on rent either .

Hi OP, I haven't read every single post but a fair few. You sound extremely sensible as well as grateful for the opportunities you've had, which I'm sure have also included plenty of hard work. My DD is 21 and has just graduated but I'd be more than happy to think she'll be in roughly the same mindset, at least.

I take home a bit more than £3k a month and £2k goes straight into savings accounts on payday. The remaining £1k is allocated on a simple spreadsheet, taking into account monthly direct debits for mortgage (very low), council tax, Edf, water (not a DD but a sixth of the bi-annual bill), bus fares. The rest has an approximate amount for food, clothes, entertainment, gifts, other, in categories so it can be mapped actual to budget. I spend on average £650 per month on the above, so splurge every now and then.

Years ago I would download a month at a time from my online banking account, filter in Excel and categorise accordingly as a PP suggested - very useful to see where any frittering goes. I also used to use card only, never cash, because it's too easy to take £100 out and wonder where it's gone, plus every item of expenditure is in black and white on your download.

Good luck - I'm sure you'll save your deposit and be on the housing ladder very soon.