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?

Except when I was unemployed I've always saved 10-20% (inc pensions) but 30% for fun sounds wildly ambitious even now we're comfortable. Assuming no ones counting children as a hobby. Think my life has always been 70:10:20

I mean 145k income

If we are talking pre pension in that case I guess I am 50/10/40
I am saving for a house though as well as my pension
But even at that I can see me having enough to retire as although I pay 18% it is 18% of a fairly low wage.

If your household income is £145k then you are either terrible and budgeting or living beyond your means.

I live in the South East, our income is much less than that but we manage just fine.

If your mortgage is huge then what sort of house are you living in? What cars are you driving?

You need to sit down and look at where your money is really going and you'll find that lots of your NEEDS might actually be wants.

OP Maybe give a rough breakdown of

• net income per month
• mortgage
• nursery fees
• any other major ongoing outgoings such as car repayments

Our net household income per month is about 5k with 2 salaries, on a joint gross income of around 90k. Pensions paid at about 9% (nhs).
We don't have nursery fees, but do pay around £500 per month on school wraparound care/holiday clubs.
Expensive area, and our council tax is 3.8k per year. Mortgage 1.5k per month

I would say we are operating on about

• 55 daily costs
• 20 'fun' - I'm including the children's clubs like swimming, Brownies, dance etc in this, along with holidays, eating out etc
• 25 into savings - we bought our house knowing would need about 100k of work to make it really warm, add on a study and utility and needs a new kitchen, but was best we could afford in an amazing location wirh great schools. So the 25 is savings for this work, plus we will have to extend our mortgage.

You are being unreasonable to not understand this general rule probably doesn't apply during famously expensive nursery years.

50:30:20 is about right for us – though I had not heard of this ratio before. We’ve only just come out of childcare costs (for twins) however which probably took ‘needs’ to 60-65%.

I don’t think 70% on needs with young kids is unrealistic on an income of 145k in the south east. Assume that’s gross income and split down the middle. That’s about £8000 a month. Say mortgage £2000 and childcare for two £2000 – both reasonable figures – that’s snapped up your 50% already.

Totally! Also @mumda let’s not forget the takehome of £145k is like £85k.

OP our situation is exactly the same as yours. Not worrying about savings until 2026 when DD starts school.

Is that calculation based on gross income or take home though?

Our take home is after pension deductions, so although we save a relatively modest amount each month, it is in addition to paying into our pensions.

And the nursery years are some of the toughest financially. I don't think people paying nursery fees alongside big mortgages should be made to feel irresponsible about not saving 20% of their income when they are probably struggling to keep their heads above water.

DH and I saved almost nothing during those years and our fun was mostly the free kind. The only thing I would say is that it gets better. The nursery fees end, promotions happen and your mortgage isn't forever. Don't let someone on social media make you feel inadequate.

When I was getting out of debt, the 'fun' budget was 5% not 30. You can still have a lot of fun on 5%. You just need to think hard about what when and how.

Life can be a bit hand-to-mouth when DC are young. We had a decent income but most of it was burned off on 'needs' (mortgage, bills, food, keeping the car on the road) and not much on 'fun'. We really struggled to put anything towards 'future' - the best we did was to save up a bit to then spend on improving the house and making it bigger and more useable. That improved its resale value.

Hang in there. It gets better.

Is this net or gross? It's a pretty meaningless suggestion as gross spilt will always be high on 'needs' as that will include taxes, whilst a net split won't include pension in the 'future' pot. If you want to save more look at your discretionary spending- I spend very little on cars, a modest amount on holidays and only about £20 a month on subscriptions- lots of people seem to have multiple TV packages which is a lot of money.

"20% is probably about average for pension alone."

I'm sorry, what? This is so not right at all.

Typically, a workplace pension will be 8% of pre-tax income (so less than that when you're looking at take home pay).

Even defined benefit schemes aren't 20%. The teachers pension scheme is between 7.4% and 11.7% of pre-tax pay.

And lots aren't saving at all

when nursery fees are involved normal rules of finances go out the window. They are a huge amount and last a limited amount of time.

you do have to just get through this period. When I had both my children in nursery for an overlap period of about 18 months, my salary was exactly the same as the fees. At that time there was no ‘fun’ particularly - definitely no holidays until they both at school.

but it did pass and we got back to a normal routine.

I'm a single parent with two teens. If I count home improvements as fun or future then I pretty much do it...it's the more pretty things rather than absolutely necessary that I'm doing a lot of lately. I'm way past the nursery stage but supporting uni would go into my needs too.

The 50:30:20 scheme and others annoy me a bit as it comes from a place of privilege and that's very rarely acknowledged by the people who promote it. It may be aspirational, it's a measure of affordability that around 30% of your income is spent on rent/mortgage. However, if the minimum mortgage/rent + utilities + council tax + travel costs + childcare costs come to more than 50% it's impossible, you don't tend to be able to reduce them that much (if at all) and that's before food, clothing etc. There's a lot of people in that situation. Maybe a better way is to make sure you aren't 'wasting' money somewhere, and whatever is left (if anything) is used in a 30:20 split or whatever works for your household. But as a society we have an issue with the cost of living relative to income.

The nursery fees years are a temporary aberration - no household budget balances happily during those years. Batten down the hatches and get through it. The crucial tactic is to NOT let your standard of living go up when your nursery fees requirements disappear. Carry on living the same for at least a year, just putting anything left at the end of each month into paying off debt and topping up savings, then take stock and see whether you can apply the 50:30:20 rule then.

Not really. If you have two people each earning £72.5k then their joint take home will be just under £101k per year (assuming 8% pension, but the OP is counting the pension as part of her 100%) or £93k with a student loan.

Or in the situation of one person on £100k and the other on £45k then just under £100k per year (assuming 8% pension) or £92k with a student loan.

My rent alone is 50% of my income. I’d say you are doing just fine.
5 years ago I would have been devastated to be in the financial position I’m in now, but circumstances have put me here and I’ve learned a lot about happiness.
I have a roof over my head, enough money (just) to pay my bills and give my kids food. As teens they both have jobs and now appreicate what it takes ti earn and thats all they have to spend. I can’t give them extras any more.
My idea of luxuries has changed. Now its being able to let the kids choose the bag of crisps they’d really like when we food shop or getting a takeaway once a month.
Before it was having a cool holiday somewhere or living in a big, gorgeous house, or a day out somewhere amazing or a huge birthday party with the whole class invited. Those things are gone now, and you know what, I’m actually kind of glad they have. We didnt need them and I’m not conviced they made us happier than the little things we get to do now.
My future is very uncertain. Its probable that I’ll always just about be able to get by…but I’ll be grateful for that.
We are no less happy than we were then, in fact we’re more so, because we appreciate everything we have and we enjoy one anothers company and we’re healthy. We’ve been through a lot of change and come out the other side knowing that whatever happens we’ll be fine and more importantly we have each other. Thats priceless.

We earn the same as you OP and are also in the south east. I think we're roughly on 50/30/20, but we overspent during house renovations so still need to clear £3k of debt. If you count debt repayment as saving I think we're about there!

My rent is just over 50% on its own! Add in all the other "needs" and I'm at almost 100%

An alternative opinion is I don’t know anyone IRL who has less than 20% going into pension. Some companies match contributions up to 15% for instance.

No they won't.

As reported in The Guardian earlier this year,

"It said 11.2 million people lived in households that had savings of less than £1,000, accounting for about one in three working-age households."

So, one in three non-pensioner households have savings of less than £1,000.
.

"It said fewer than half of working-age households in the UK had savings worth at least three months of income, leaving them ill-equipped to face events such as unemployment or family breakdown."

So, more than half of working-age households do not have even three months worth of income as savings.

Yes, there are plenty of people that can afford to save, but over half of the country cannot.

https://www.theguardian.com/business/2024/feb/12/more-than-11-million-britons-have-less-than-1000-in-savings

I don’t know how much any of our friends IRL put into pensions, I’ve never asked!