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?

@Overthebow that was a long response saying you agree with me 😆

I've been monitoring mine for about 8 months using a spreadsheet. Mine are 55:25: 20. They slightly vary each month by a few % but not much.

Of course it's not, companies are only obliged to match 3-5% on pensions, some go up to 10%. I don't know anyone who puts 20% in, that's excessive.

I live in London with 2 children in FT nursery and I don’t agree with £145k only just covering needs either.

We do 80% bills/rent/food
10% fun - we do a lot with this though, cheap fun!
10% pension/savings (the savings tend to be spent on boilers and/or holidays though)
Our pensions are going to be shite I believe 😜.

Of course it's not, companies are only obliged to match 3-5% on pensions, some go up to 10%. I don't know anyone who puts 20% in, that's excessive.

Some public sector employers will be putting in over 20% but not employees.

I live in London with 2 children in FT nursery and I don’t agree with £145k only just covering needs either.

It depends when they got on the ladder & what they are paying I guess.

To make it work your rent/mortgage payments should be no more than 30% of your monthly income.

Our situation is a bit different because we're self-employed, but we're 25/55/20.

Most people pay 5% into their pension, not 20% and a quarter of adults in the UK have less than £100 savings.

I'd be interested to see the breakdown OP, but I would just say you're at a difficult stage, with nursery fees and (presumably?) being earlier on in your mortgage contract needs will be high. As for me, I'm sure we've always managed to keep need to below 50% but we don't live in the SE.

The pension part of savings should also include the employer contribution though.

Sure but that’s the flaw in this black and white need/want system. Some people just count housing as the need, without factoring in the want. If you want an office and a spare bedroom and a bedroom each and a playroom plus 2 receptions etc then you can’t really moan about your basic housing needs being too high

£145k doesn’t only just cover a basic mortgage and nursery, I literally say that as someone in their early 30s in London with 2 under 3s in FT nursery.

She hasn't said it only just covers needs though. She says 70% covers needs.

Also If she is a low earner then the take home is lower than 2x people earning £72k each because of how tax tapers.

Thank goodness for that. Seen people say you are meant to put in thd same % of you age. No way I could afford that. But I honestly thought 20% would be about average with some overpayment snd some paying less.

You have to be honest about what you define as needs. I have a spreadsheet and in our bills list along with mortgage, utilities, car insurance, sit DS' gymnastics fees, swimming lessons, netflix. The latter aren't essential, we can afford them and still save well so they start on my bills list but if I was looking to save when I couldn't they should be things to go.

Some public sector employers will be putting in over 20% but not employees.

I would be so bold to say most, if not all, public sector will have at least 20% going into their pension between employer and employee contribution.

Whilst it's the employer technically putting in their contribution (and I know not quite accurate terminology with defined benefit schemes) but it's part of your overall package, so the employer's "contribution" can definitely be considered in the 20% slot.

Yes but the average contribution in the private sector is only 3%.

The rule of thumb used to be to take the age you start paying in, half it, and that’s the percentage you need to pay until retirement. So e.g.start at 30, pay 15%. It clearly doesn’t work in all cases though because if you start at 60 even if paying 30% it’s not going to get you much.

This is so depressing, this rule will only work if you're on a big salary surely
Low salaries/high rental prices paying into savings at that level is crazy!

I think that using 50/30/20 is useful as a rough guide to consider what you can afford when taking on things like a mortgage or big expense

Your needs are very high. Most people in the South East do not have 145k disposable income. You do not need to take out a massive mortgage even in the south east

I pay 25% in to my pension. But 10% of that is compulsary and then I pay 15% additionally. This is achieveable for me as I don't have young children and at my workplace we get an additional personal pot on top of our salary (that worth 10%) that can be "spent" on tax free non cash benefits - I use all of mine to make additional payments in to my pension. (People can choose other things like childcare vouchers, bike loans, additional private health care, additional leave etc..)

I think whilst you’re paying nursery fees all bets are off (unless you’re also planning private school the whole way through). People will probably tell you to eat out less, buy cheaper stuff at the supermarket etc, but at the end of the day IMO there has to be a balance and if you don’t do the things that make life enjoyable then what’s the point? Depending on where you live, your income isn’t huge if you’re spending several thousand a month on nursery.

Well...the amount going into a DB scheme is technically irrelevant, but yeah, it's a relatively large proportion of salary.

Only 17.3% of the UK population were employed in the public sector is 2023 though, so most people are contributing to DC schemes in the private sector.

I don't think it's impossible, I just think you are in an expensive phase of your life.

I've just tried to roughly work out ours and I think our needs (bills and food etc) is around 63%. I would like that to come down.

Savings is about 18%, but that includes husbands pension contributions as he is self employed. We can't currently afford to pay much into his pension but we pay what we can. My pension comes off my pretax salary so I don't count that.

The rest of it, so 19% apparently, is "fun money", but I couldn't even really tell you where this goes. We do have a cheap holiday each year and the rest I guess is on days out, snacks when out and about, haircuts, Christmas and birthdays.

Our bills were previously much lower but we moved from a flat to a house last year and the mortgage has doubled. So I do find things quite tight but hopefully this will lessen over time.

Edited to add @Yetanotherwittyname our household income is much less than yours. But we do not have nursery fees and live in a cheaper part of the country.