To ask you to look at my budget and for the money savvy amongst you to give me some advice?

[Swinningforza]

Context is I'm a lone parent renting in the south east. I am financially responsible for my children for 50 percent of the time but I get no maintenance.

My monthly family budget is as follows, with the emphasis on each number being a limit not a target:

Housing 1050 (includes monthly rent 975, sofa payment and then bits and bobs like paint etc)
Bills (TV license, prime, audible, bt, 3, car insurance, water, council tax, energy) 350
Food (grocery shopping) 400
Childcare, clubs, school lunch, and education things (2 primary aged children) 360
Personal care (medicine, prescriptions exercise) 150
Eating out (3 times per month) 150
Shopping for me (my clothes, shoes for work make up etc) 75
Leisure (kids days out, entrance for attractions, films bought on Google etc) 100
My lunch at work 40
Miscellaneous (bits and bobs) 50
Monthly payments to a savings account (to cover 500 for Xmas and 250 for each child's birthday 500 for car tax and mot) 291
A family loan towards house deposit (15k at 2.5 percent over 10 years) 141
Petrol 300
Socialising (3 evenings out a month ) 150

Total: £3,577

I work as a self employed consultant and I earn per month after tax and allowing for 6 weeks holiday per year: £4,800

(This figure is with a recent increase in pay and I would think it is a stable figure going forward)

Which leaves me with £1223 to pay an outstanding tax bill and to save for a house.

The outstanding tax to pay (2 tax years which are being calculated now I think it's going to be about 7k - was frantically trying to pay off debt acrrued for solicitor's bills for child arrangements order and divorce and did not put aside for tax .

I'm also trying to save for a house deposit (trying to get to 10 percent of a 300k property).

I have the 15k family loan for house deposit in premium bonds but aware I am likely to need a large chunk of that for tax.

Any thoughts or suggestions, is there anything I've missed or could do better with? I think the overall goal is to not have a fairly ok quality of life ie it's unrealistic for me not to go out or to have kids days out, but to be financially stable and able to buy my own home within 3 years.

@NeverTwerkNaked that is really helpful thank you!!

Instead of answering individual points I'd say I have wanted to maintain an active social life since divorce which I think I need to cut down on and can have people round since I've made the rental nicer.
Everyone is right about grocery shopping and our lunches - I'm not in the habit of making packed lunches and I could definitely cut down. I'm rubbish at meal planning.
Yy on spending less on bdays - that includes the price of the party which I've always enjoyed.
Re the family loan - no they wouldn't mind if I spent it on the tax as they know I was really up against it with the solicitors costs and debt repayment being a priority so I could be debt free for mortgage application.

I don't mind paying interest for the home loan as it's got me started with savings which has been really helpful psychologically.
How much about money is in relation to my state of mind, I hadn't realised
Personal care is not high because of illness but more cause I get it coloured and cut regularly

Generally it looks sensible and realistic.

Have you accounted for haircuts and kids' clothes & school trips, party gifts?

£400 food budget looks really steep for just one adult and 50% of 2 children. You could cut that drastically if you wanted, especially as you have 3x going out yourself AND 3x eating out every month.

I am also not sure why you are paying out for the loan at this stage but I'm sure it makes sense to you.

You could also look at whether your exercise costs are value for money. You could massively reduce some of these and save quicker, which would be my choice I think, but it doesn't have to be yours. £225 pcm for exercise, clothes, makeup and medicines seems a lot to me.

Apologies, massive crosspost

@Swinningforza you don't have to apologise for how you spend it. But it's a balance between how much you want a house Vs how much you want to just live for now.

I love throwing parties for the children too but am learning that they love cheap and cheerful parties as least as much as the pricey ones. I just did a sleepover for my son, cost £30 for takeaway pizza (could have bought them from shop tbh!) And that was it and they had so much fun.

Really thanks all so helpful.

Yes I also have coffee on the budget but I don't get lots but still not 20 per month

@Soontobe60 I didn't include that in that direct debit is also the cost of travel as I do like to take the kids camping alot over summer

Yes I agree - I really do want to own my own home and be financially stable , not just live in the moment

In terms of Petrol it is so high because I have an old petrol car with a big engine - I don't really know what to do about this, should I change cars to cut petrol costs on stay with this one till it conks out ?! Any advice or recommendations on how to drive sonething more cost effictive but that the kids and I will fit in for family trips would be welcome too!

Try thinking about it as priorities? Is it more important to you that you do X rather than y? When there's a budget constraint you can't do everything so you need to think in terms of choices.

Personally, I'd never spend £300 a month in dinners and nights out if I owed the tax man £7k. But I'd still need social contact and would try to find a middle ground where I went out maybe once a month but had friends over more regularly so I cut the cost but keep the purpose intact. Yes, you could cut it out all together (and live a lifestyle of old clothes and porridge supplemented by the occasional Mumsnet chicken as lots of respondents will tell you), but you've already said it's important to you.

Maybe having days out with your kids is important, too, but £100 a month (for 50% care) is something you could halve with a little imagination (particularly if you live in a big city).

So, to prioritise you discretionary spend, write a list of what's important to you and then take your current budget for those items/activities and half it. Now work out how to make it work within your new budget. Some things won't (eg you like your hairdresser and don't want to change), that's fine, bump it back up but know it's a choice you've made to do that. Sweep the resulting budget decrease into your savings account the day you get paid (not at the end of the month).

What’s the prescription charge for? Have you looked into prepayment card?
Tbh, lots of that can go.
You can pause Audible for 3 months.
Sandwiches rather than buy lunch.
Cut back on eating out/cut it out altogether.

Sorry had this open for ages and massively cross posted!

with the emphasis on each number being a limit not a target

This is the key to your success with it. If you can cream off the excess from these separate budgets into easy access savings at the end of the month, that will really accelerate your saving and give you a huge psychological boost. By keeping it easy access you can think of it almost like an overpayment pot, that you can draw on for unexpected expenses without affecting your main house savings. Though you don't want to spend your whole time obsessing with spreadsheets.

Arrange a repayment plan with HMRC and go from there. I would look at reducing my spending as much as possible for say, two years and save as hard as possible alongside paying the tax debt. I reckon you could be debt free and looking to buy in a couple of years or so.

You have an excellent income and incentive.

Are you writing off enough things as work-related expenses on your annual tax return so you can effectively reduce your tax bill? Are HMRC trying to charge you tax for next year? I found out you can opt out of paying next year's tax in advance (I'm self employed and my earnings vary widely year-by-year as I'm an author, so next year's tax is unlikely to be the same as this year's) although if you're sure you'll be getting the same money next year, I suppose you'll have to pay it at some point anyway.

Looking at your actual spending, I feel like you've got some redundancies/crossover between your different allocations.
For example, are you getting enough use out of your TV licence and Prime TV if you've also got "Google movies" in your leisure budget? Could one replace the other instead of having all three? We don't have a TV licence because we only watch Prime/Netflix.

Another example is socialising, eating out and leisure...£400 per month. Do you do all of these? Every month? That's a lot of budget for what all really counts as leisure.

Your monthly payments to the savings account vastly exceed the stated expenditures for birthday, Christmas etc and if you're saving for a house, why not put the excess money from this into your house fund?

And if you're spending £75 per month on clothes and shoes, that's quite a lot of new items being brought into the house, can you clear out your old things and sell them on ebay to raise a bit more capital for the house purchase? One person's old shoes are another person's new shoes.

Also none of the things you've listed will come to exactly the amounts you've budgeted, so be sure to siphon anything left over from each pot and put it into the house savings. For example, are you going to spend precisely £300 on petrol? If there's even a tenner left over, put it into the house fund.

Rather than comment on your budget I'm going to suggest a free app on your phone to track your actual spending over the month. I have a much smaller income than you, am really careful with my money and have found it really useful to see where the pounds and pennies go. I use the Money Manager app because it lets you set your own categories and shows the monthly spend in a pleasing pie chart 😁. I don't link my bank account to it but just use it as a record of spends. Having an ongoing balance on my phone means I consider more carefully when I want to buy something frivolous.

It’s hard to say as that budget isn’t very granular (e.g. hard to see if mobile cost so/specific bills are high) but off the top of my head:

Groceries - do you meal plan every week, using up what you have and focusing on seasonal (therefore cheaper) produce? Have you tried Lidl or Aldi? Have you tried “branding down” to see if you notice? I check Lidl deals before I go shopping, look what’s in my cupboards, make a meal plan and list then shop alone when not hungry. We spend roughly £200 a month including cleaning products and cat food for the three of us, but we don’t eat meat and cook lots from scratch.

Bills - do you check you’re on the best deal every year? I use MSE energy club to check gas and electric. I also never get mobiles on credit. We buy the oldest iPhones available out of pocket then get giffgaff contracts for a tenner a month. Not worth hundreds extra for latest flashy additions in my opinion.

Savings - set up a direct debit for the first of the month to “pay yourself first” and stop you spending it.

Most importantly you haven’t mentioned pension savings - are you taking advantage of tax savings as you’re in the 40pc rate?

In general I can highly, highly recommend You Need a Budget, it’s an app and there are support groups on Facebook. Since we download it our net worth has literally increased by hundreds of thousands. Every Christmas we are chilled because we’ve been tucking away 1/12th towards the cost every month. Same with birthdays, insurances, etc etc. It’s amazing. They do a free trial (no credit card details needed!).

It’s not about cutting everything but being intentional. It’s fine to prioritise going out, or eating out...as long as you are happy delaying debt repayment or house buying for it, because that’s the trade of you make. The great thing about YNAB is it’s helped us spend intentionally (I know I keep harping on but it’s changed our lives!)

Couple of things

1. you are paying 2.5% on the home loan to your family member but you have invested it all in premium bonds? Premium bonds yield a mean average 1.4% although most people don’t get as much as that. So you are effectively losing money on that every month. If I were you - given you might have to raid the pot for your tax bill - I’d look at putting the money in some Best Buy savings accounts instead. By the way, I think that whoever lent you that money is getting a very good deal for themselves, getting a long term rate of 2.5%... unless they have doubts about your creditworthiness of course...

2. I am worried that you don’t seem to be saving anything towards your pension? I know you are trying to save for a house but its really important for women to start saving for their pension, even just a little bit. You don’t say anything about how old you are but if you are under 40 and a first time buyer you should maybe look at a Lifetime ISA which gives you the option to use your savings for either a house purchase or a pension, plus the Govt gives you up to £4K a year tax free.

There are all such helpful posts thank you so much.

@WhatTiggersDoBest that is so helpful and motivating, thank you

Eat out less often or go to cheaper places / use vouchers. Have 1 cheaper main course rather than 3 courses.

Buy fewer or cheaper clothes.

Save money on shopping by going to a cheaper supermarket. Buy own brand rather than branded, especially for staples like pasta, tinned tomatoes, squash. Our shopping bill for 2 adults and 1 child is £200 per month, so I am surprised by £400 for 1 adult and 2 children, who are only there half the time - and that £400 doesnt even include lunch!,

Also agree with @Windowboxgardener premium bonds are trash...see the moneysavingexpert article on them.

What’s your savings goal for house including fees and stamp duty, and what do you have saved so far?

I will come back in more detail but just about to go to the gym - I have put the 15k in premium bonds so I can get to the money quickly, could I do the same with best buy savings?
I do have a pension plan sorry that's not clear in there , it's a salary sacrifice scheme
About tax I stared the self employed consultancy about 3 years ago and I thought I was keeping up with the tax, then didn't know how to, now have an accountant who is currently working out this year's and last year's tax and has said he will make sure it's efficient but that my salary is enough to look promising to a mortgage lender. Although in reality I know I'm not there yet with the deposit , this has been good for me psychologically to think in terms of home buying, if that makes sense
Az

I know use a company which takes my tax and ni at source so I know where I am. Tax advice also appreciated!!

Thanks Mumsnet where would I be without you?!

Skint with an abusive husband is where

It sounds like you m ight need the £15k urgently so any kind of long term tie up is not a good idea. I am not sure why you are paying a family member interset on it though if uyou don't need it yet. Could they not hang on to the money and only hand it over the week before you buy a property? Do speak to HMRC as they may well agree a longer term payment plan for the tax and make sure every week from now on or month you put aside the current tax too. I don't regard any money I receive or earn each month as mine until I have put aside the tax and NI needed on that.

About the family loan, it's more to get me started with a house deposit any old how tbh - my family are not wealthy so this was a good middle ground. Family member will make over 10 years from me more than they otherwise would with their savings interest, I would struggle to borrow for less and get a mortgage approved

I have £7k in premium bonds and win £25 or £50 amazingly regularly. I don't mind losing a tiny amount of interest (if I am) because I'm in it to win it!

I reckon you could shave £200 - £300 per month on your spending without really feeling it, op. You have a very generous budget for birthday and Christmas presents too.

You do realise OP that when you apply for a mortgage with a bank you will have to declare your family loan?
Effectively you have taken out a ten year loan you don’t need right now, at an interest rate higher than most mortgage rates, which will reduce the amount you can borrow from the bank...