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?

I’m not sure that that model is particularly helpful to be honest for budgeting. Needs can encompass so many things depending on where you’re coming from. Eg the food shop is going to be a need but the budget for that will vary massively.

Also while massive mortgages sting, you are building equity and options for the future (eg downsizing) or being able to pass wealth down. Inflation will also mean the debt feels smaller in 20-30 years time.

Nursey years are killer really. I still spend a lot on wraparound but no-where near and it is possible to work with an older primary child in a way it isn’t with a toddler so there is an end in sight/flex if I really had to. I think it is very normal for people on good salaries to be eating into savings/having to live quite frugally during nursery years.

Different phases of life. In my late 20s my mortgage on its own was 60% of my salary. Now it's 0%. Personally wouldn't have found that rule useful.

So we earn 4.7k

Bills 3k
Saving 700
Fun / saving for fun 1k

But the 3k includes a £250 overpayment on the mortgage which is kind of saving

Nursery fees are for a relatively small part of anyone's whole life - think of that time as an exception to normal rules

I have no idea how I'd assess that. If you spend £80 at the supermarket, but there's a bottle of wine in there and some fancy cheese you don't strictly need, do you put the cost of that into "fun" and the rest into "need"? What about things like clothes and shoes, are they "need" or "fun"?

6.4% of my salary goes to my pension. I put money into savings but this isn't all for my old age. It might go on an emergency. Or I might spend it on a home improvement.

I put £500 a month into a "holiday savings" account for Christmas, summer etc.- some people might call that "future", but I consider it "fun".

YA(Definitely)NBU.

I don't have kids or a morgage, but 80% of my income goes on rent, bills, groceries, slowly replacing small things that have been long broken. The rest goes on savings and paying off debt (Yes, I've been an idiot when I was in my early twenties). I have a little left over for a day out once or twice a month. I am talking local museums, which are relatively cheap.

Finally, I get a big a expense, a few times a year, that takes a big bite out of my savings.

Not much to be done about it. In a year or so I will have built up enough skills and experience to switch jobs and make more money (hopefully). Of course, by then prices will have gone up even more.

It's a rat-race.

Yes that was my situation too. It was soul destroying working for nothing at the time but long term I have earned more as a result of keeping my career going throughout those years

Your gross is 145 or take home?

if gross, we have a similar HH income.

we designate £350 a month for family fun. We save £500 for a holiday. We also take individual money of £300 each month but it’s not all fun (think clothes, haircuts etc) so let’s assume £150 each on fun. Total £1150 fun. £13.8k a year.

Kids sports clubs aren’t inc in that - I put that down as necessary spending.

Our take home is £7600, or 91ish annually. So fun is about 15%.

Kids sports vary, but are about 150 a month at a guess.

As others have said, nursery fees aren’t forever. We have small nursery fees because we make big pension contributions to bring dh salary under £100k threshold to get free hours for 3 year old. I also went part time so that I could be there for holidays, pick ups and drop offs (which saved more than it cost us).

Our mortgage is v high though and combined with monthly bills and kids sports (excluding food) comes to 3750.

We make significant pension contributions. Have short term savings goals of £2k for Xmas and £6k for holidays, but outside of that save very little as we are doing up our house.

I think it's a bit of a nonsense as clearly depends what stage in life you are at etc.

My situation. I'm 40, my take-home pay each month is £2k pretty much on the nose but of this about £100 goes into pension so I'm adding that on for £2100 available to me, and taking it off in Save. Single, no kids.
This is first time I've broken it down line this so interesting to me anyway!
Summary:
Mine is 60/21/15 + 4 unknown, that 4 is probably some extra in all pots

Needs:
Mortgage £480
Electricity & gas £40, water £12, broadband £27, mobile phone £9, home insurance £8 = £96
Council tax £142
Car (essential for work and living semi-rurally): Insurance £220, tax £255, MOT/service (variable, average) £350 = together £69 per month, monthly petrol £80, total car = £149
Window cleaner £9 (need as I'm not physically able myself)
Work car parking costs £36
Repay parents for house deposit loan £200 (will drop off and move to savings next year)
Essential general repairs/maintenance costs which are very variable... , eg, this year so far repair my front door £200 & fence £50, got my boiler repaired £250... say £50 a month
Day-to-day food & house cleaning items, £100 per month

Needs = £1262 / 2100 = 60%

Fun:
TV Licence £13.25
Cleaner £80
Presents/treats for family birthdays and Christmas (5 kids x £50 x xmas&birthday=£500, + £500 parents + £200 ad hoc treats) = £100 per month
Holiday £80 (variable, I typically spend about £1k a year)
Once a month takeaway or eat out, coffees etc £25
Not essential food - chocolate, alcohol etc £20
Art galleries & concerts = £50
Clothes & shoes etc = £20
Home & garden spend, eg plants, electric blanket etc - variable but I reckon =£50

Fun: £438 monthly = 21%

Save:
Mortgage overpay to save interest £45
PAYE pension £100
Discretionary extra pension contribution £25
Overpay student loan (won't get written off so overpaying is not lost money, reducing interest so count as save) £50
General savings £100

Save: £320 monthly = 15%

How much could I change on this? I could probably move about £100 from Fun to Save pretty easily but my life would be unbelievably boring and frugal (to be honest it already is pretty boring!).

I'm pretty happy with my lot!

Surely all saving is “slightly delayed gratification”?

I save into my pension because I am looking forward to being able to sit and have coffee and scones after a walk on the beach when I’m 70.

When I was in my 20s/30s/40s the ratio was more 80/5/15. Once the essentials were paid there was very little left over for fun or wants.

All that hard work and scrimping paid off in the end. I'm in my 60s now and the ratio is more 30/50/20. Happy days.

For a lot of the poorest in society there is no point in trying to save much because you lose top up benefits over a certain amount. I thought I’m doing ok to have a full state pension in my sixties (with no other work or private pension arrangements)

Yes, it depends on your circumstances for sure. I couldn’t take my children to my job either, but that just meant I physically couldn’t do that job any more. When you made a loss, where did the money come from to make up the shortfall? My job from before my baby was born meant working 40+ hours a week over six days which paid me around £175. Full time childcare for my baby was nearly £200 a week and it was very hard to find for the sixth day especially for a baby only a few weeks old. It would cost me another £14.40 a week in travel costs to get to work. I didn’t have the extra £40 a week I needed to pay in order to work, that was more than my weekly food budget. Circumstances differ quite considerably.

The shortfall for us came from our overall household budget. It meant less ‘fun money’.

It would be good if people could start paying into a tax free childcare account before they have actually had kids, a saving type situation like the save to buy scheme.

So many women give up work 'because childcare is more than their wage' and then have careers permanently stalled, even through childcare is a joint cost and should be spread between both parents.

Of course its still not a perfect solution, I imagine very few men would be choosing to save into one, but the cost of childcare needs to be treated as a temporary expenditure instead of a career ending one.

Lol I spend probably 90% on bills etc and 10% on things that make life worth living.

It's not a plausible balance with full time childcare fees, no. Maybe more so without them, depending on mortgage/rent costs

Savings in the 50/30/20 rule are medium and long term.
“Saving” for a holiday in a months time is not comparable, and it’s crazy for someone to mention that money in the same topic as actual savings.

But to me, our mortgage and pensions are long term savings. And saving to spend on holidays, replacement cars, a new bed or whatever we need/want keeps a lid on our costs. For example, my phone contract is £9.50 a month because I bought the phone outright.

So while we might be doing it "wrong" according to an American definition, but it works for us.

Overpay student loan (won't get written off so overpaying is not lost money, reducing interest so count as save) £50

Are you sure about that @ThereBeDragoons ? Because unless you have a tiny amount of student loans left (and I doubt you do, because you say you won't ever pay it off), overpaying by a relatively small amount won't make much of a dent at all in terms of interest, because of the compounded interest that's quickly accruing.

Our family income is much much less (approx 65k) and I'd say it's 95% needs 😩

I find it more useful to divide expenditure into fixed, reducible (things I have to pay for like food, electricity but I have ways of reducing the bill) and discretionary.

Agree bringing up young children is an expensive period. When DH left his reasonably well paid job to become a SAHD, our net income dropped by £10pw, once you took out childcare, commuting, suits and lunches.

I do think the rules about savings and claiming benefits should be reviewed as they act as a real disincentive to save. Which also means they act as an incentive to take on debt.

If you have savings then you can use those to replace household appliances, clothes etc - if you don't then you end up with hire purchase or buy now pay later feeling like your only options.

Or perhaps even if the rules don't change the language about savings on a low or insecure income could. From memory it felt like the conversation was that I wouldn't be punished so long as my savings stayed under £x. Whereas if I was talking to someone now I'd say that a small savings pot is even more important when on a tight budget so try and find a way to save something (even if a very small amount).

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.

We had 4 years when we were mortgage free and still working. For a very short period it was 30/20/50. However we are now retired and living off our pensions. From our pension income it is 96/2/2 And we feel very fortunate that our pensions cover all our needs for food, utilities, insurance etc. Our savings are for holidays (fun) and repairs / replacements. A new carpet and boiler have made a dent in that. A broken washing machine might be repaired or might be replaced. We have 'enough' but those savings are always going to going down, not replenished.