To think the 50/30/20 rule is impossible to do?

[Yetanotherwittyname]

I’ve been having a look at our household finances against the 50/30/20 rule. For the unfamiliar this suggests you should spend 50% of your income on needs (bills, groceries, etc), 30% on fun, and 20% on future (pension, saving etc).

We’re way off!!

Our “needs” is more like 70%, mainly due to mortgage rates and nursery fees. Fun is about 10-15%; we haven’t had a holiday in 3 years. We have a total HH income of 145k so we should be more comfortable, but we live in the South East so costs are frighteningly high.

So are we in the minority, or are the majority in a similar camp to us?

AIBU to think the 50/30/20 rule is impossible to meet?

Nursery fees will pass. Hopefully in a few years when they’re at schools 50/30/20 will look more viable.

That said, the problem with calling things “needs” is it masks the fact that we can still control them to a degree. Nursery and mortgage are hard to change, but cars, food etc can all be looked at.

Ours is pretty much 100% on needs.

It depends on age, a lot of younger people will be spending a lot more on needs because housing costs are so high. Same for young families with nursery costs.

Nursery fees are a bit of a red herring though, it’s for an incredibly short period of time. While the “needs” might be closer to 70% now in 3 or so years they will probably be comfortably under 50%.

If you’ve mortgaged a house which means your bills and housing costs amount to over 50% of joint income then frankly you’re just living over your means which can be done on any income.

145k only covering your needs means your needs are excessive.
Can you review your expenditure?

You cut your coat according to your cloth.

Look what you have got and the good things you have and be grateful for that.

Think about the choices you have made/could make. For example it's more fun to live in a house with enough bedrooms that you get to sleep in a bed/bedroom and not sleeping in the living room in an inner city flat somewhere. Or have a garden. Or off street parking. Or takeaway now and again or whatever.

Don't compare up: comparison is the thief of joy as they say.

Some people can't afford heating and eating.

I’d say our needs are around 80 % with little that can be changed. We have no car repayments, food around £300 a month for a family of 4. No matter how we go through the finances there is little that can be changed. Will be easier once the nursery years are done,

30% on fun seems high. We try to save, but that is always at the expense of fun. 50% on essentials seems very low to me. I don't think this rule was dreamed up in recent times and likely before housing became so expensive. I would set your own realistic goals.

why not try tweak it to your personal circumstances - 70/20/10 and see how you go?

I would go through all outgoings and see if you can cut back on anything or get cheaper deals.

Track your spending on a spreadsheet every month and get a clearer picture of where your money is going. Things like impulse buys, take aways etc can add up fast from personal experience.

Is this 50/30/20 before or after pension
If so 50/30/20 seems a little irresponsible. 20% is probably about average for pension alone.

Most people are not paying 20% into their pension….

We have also been trying to sell our house and downsize to give us more money but no one is moving , not one house of our size has sold on our estate in the last 6 months so it’s always as easy as saying down size expenditure

You can’t live via that aim while you have nursery fees. They are short term. Re assess when they are not part of your outgoings. I’m assuming you won’t then have school fees but you will need to budget for wraparound care once children start school (if you need it). My wraparound is £250 a month as I work full time and need it every day and my DD’s school has no free breakfast club for example. I generally do manage 50-30-20 but the cost of food in particular is pushing weekly costs up significantly.

I think it’s too much of an all encompassing rule. It’s going to vary at different stages of life.

At one end of the spectrum, if someone is older and mortgage free because they’ve been paying it off their whole life, the “need” bit is going to naturally be smaller. At the other end (as you comment) when you have both a mortgage and nursery it will be higher.

As another example, we have always lived modestly but comfortably (no foreign holidays or flash cars, as MN likes to say 😅). When I got a big pay rise we maintained the same lifestyle except for buying a bigger house in a more expensive location. So now our mortgage is a lot higher, and a much bigger proportion of our outgoings, but we are very happy because the rest of the spend is the same I.e. maintaining the same lifestyle that we were already happy with.

You are a bit out of touch.

I've read about and used thiis model before, but it's only a way of thinking about personal finances that might be useful to you. And as others have said, it's quite an old model, and it doesn't take into account different life stages etc.

I never managed to figure out how to include pre-tax pension payments, so my numbers didn't include these. I think everyone probably forgets about these, but they should still be included.

This is a much more up to date and useful way of figuring out where you are:
ukpersonal.finance/flowchart/

No but that 20% includes savings too, so lots will be putting away 20% when you include both pensions and savings/investments.

I could see 10% going into savings, 5% into pension then for each individual in the couple to make a sensible 20% figure - in an ideal world. But the 10% savings bit is hard for people to hit at the moment.

And judging by the 20 long queue at the community food shop before opening yesterday, people are generally pretty hard up…. Still.

I think if you like structure it can work really well, although with the knowledge it can be tweaked to suit your personal circumstances.

Personally I find the living within my means philosophy more helpful, having done the 59/30/20 thing with spreadsheets, which was helpful seeing ‘in black and white’ where I was initially going wrong.

Nursery costs being high isn't new. 9 years ago I had 2 in nursery and our combined income was more than half what it was now. We didn't have holidays or treats and a lot of things were second hand. We had to sell things to buy a pushchair and relied on hand me downs. It used to be normal to be a bit more frugal but sadly influencers portray an unobtainable lifestyle for younger people.

Parents of toddlers, who might be around the age of 30 see instagram and think everyone has the lovely forever home with a large kitchen diner decorated in the latest trends, the new cars, expensive holidays etc. It's actually not the reality for most people.

Ours is totally off id say 90% on needs 10% on fun. Nothing saved or in place for the future

Clearly someone who doesn't live in the southeast with property and nursery costs at South East rates!

You think the average person is paying 20% of their salary into a pension?
Id never really heard of the rule but I’ve just done some quick calculations and we’re about 40:30:30. However we no longer have nursery fees and our mortgage is low (deliberately moved to a cheaper area when we had kids, plus have stayed in our house when we could have upsized a few years ago to keep the costs down). When we had 2 in nursery at the same time (3 kids with small age gaps so the 2 in nursery years lasted quite a while!) it would have been a different story.

That's a US rule isn't it? They have much higher wages and lower housing costs. Also they need to save much more for medical costs, uni fees etc.

It all depends on where you've set your needs. Mine is about 30% needs, 40% fun and 30% future. But I purposely chose to stay in my small But very adequate house so I've never overstretched and could have the mortgage paid off to be free of it in my 30s.