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?

Almost 100% on needs. Literally can't earn more, got 3 jobs

I think we're crossed wires, I'm saying I will be one of those who will pay the loan off in full (for many it just gets written off - if it's going to get written off it's stupid to overpay for sure).

My student loan interest rate is currently higher than my mortgage interest rate so if I was smart I'd really only be overpaying on the student loan but I like to feel I'm chipping away slightly at both. Yes it's only a fairly small amount, but cumulatively it'll shave a few years off paying it and I think at least a thousand in interest (it's quite hard to calculate as it's not a conventional loan).

But yeah it's maybe one to clear more 'psychologically' than need - I just feel like I'd like it knocked on the head and, as I know I will pay it off, overpaying is not wasted money.

It's very much a general guide to illustrate financial prudence of 'spend less than you earn, try to limit your essential costs but it's OK to have fun too, but don't forget you need to save a decent amount too'.

Obviously there's some a certain baseline of essential expenditure that often cannot be limited to the 50% especially if individual circumstances dictate high housing and childcare costs.

But the 'childcare years' aren't forever and hopefully your income will increase so you might get there in years to come.

It's also good to appreciate that there can be an element of 'want' in your 'needs' costs so if any of these are above average you need to be honest with yourself about this and if you're choosing to spend more on these things then it will reduce the amount you have available to spend on wants or to save/invest.

Mine is awful because of the mortgage rates going up. Really flipping awful.

We're currently renovating so I'd say our needs are more than 100% of our income. Interest rates have really, really not helped.

Never heard of that rule. You're on 100k more than me and DH. I can't imagine that not being enough

well i’m sorry but in london and south east you have no choice but to pay rent and mortgage that is so called above your means even on a relatively decent wage unless you squat i suppose or so poor you get housing allowance

My whole income goes on living at the moment, so long as my bills are paid ive food to eat, i am more than happy with myself keeping my head above water, which is better than an awful lot of people at the moment, my home is paid for as is my car, although they need maintaining, 30% on fun, ive never done that.

Well I was bracing to be obliterated on here for all the reasons that are perfectly valid, but it’s so reassuring to know that so many seem to be doing similar with their finances.

Nursery fees are incredibly high but at least not forever as many have said. The high mortgage rates are what have really tipped us though. If they don’t come down then we’ll be forced to seek (which of course is expensive in itself, so would feel like such a waste).

I’m still making my through all the comments but I’ve already found them so useful. Thanks especially to those who shared different ways of approaching our finances!

I can’t understand how you haven’t had a holiday on that wage in 3 years. I totally get the 50/30/20 thing is impossible. But something has gone wrong there! You’re in the like what top 1%?! Millions of people have holidays.

When I used to rent they used to say that 50% should be your rent. I thought I was doing well paying £800 on a £1500 salary and when it was about 50% I felt like a boss! That included water, electric and heating though. We'd probably spend £150-£175 a month on food. And I haven't even factored in travel to work, clothes, haircuts, insurance etc. We did have a time when we could save £1000 a month (when we both working) to put towards a house deposit but we didn't have "fun" or new anything or takeouts to be able to do that. I think it's very idealistic compared to what real people have as disposable income at the end of the month. I think there are many now who are just hoping to be in the black at the end of the month rather than planning 20% in savings!

As soon as you mentioned 145k (more than 4 times average) I knew OP would be flamed. Seriously there are people trying to make ends meet on or below average salary. Totes OP's choice to live in a pricey area. Need to consider life's priorities

We are 50% on needs (counting DC school fees, right on the edge of it still being childcare versus school), 35% savings and 15% fun. If we weren’t paying fees, saving and fun would be 40% and 28% respectively. We are a high income household though (£250k) and in a lower tax country.

This is a bit arbitrary, 50% on needs is low given costs of housing, essential bills, groceries. That’s without considering childcare costs. Unrealistic for most households.

70/30/0 here. Total HHI 60K. We are doomed as both a handful of years away from retirement. Will have to work until we can't. FML.

It might be the way you look at things.

I’d hazard a guess than on a £145k household income, a chunk of that 70% is what many would class as ‘fun’ (things like premium groceries, hair salon appointments, clothes you like, nice stuff for kids etc) and another chunk is ‘investment for future’. Things like nursery fees to support career progression. Mortgage rather than renting.

I save about 70% of my salary currently, big but here, I have no mortgage/rent costs, no debt, nothing on finance, and no children. I will be buying a new house in the next year or so, so am saving as much as possible to keep the mortgage costs down.

I don't know about anyone else but my split is 90/7/3, and that's no word of a lie.
I would give anything to have even 80/10/10, but it's simply not possible.
My HHI is £18k.

£145,000 - humble brag time. Jeez - another world..

My rent alone is 78 per cent of income lol

Some of the comments have naturally asked what I’ve counted as “needs” which is fair - I’d challenge that too. So just to clarify: I’ve included mortgage, nursery fees, bills, groceries, petrol and other car costs (MOT, service, insurance), and train travel.

We have a very ordinary car, bought for 5k about 4 years ago. We’d never get a car on license as it’s a cost we couldn’t justify.

I buy my clothes & most of the kids clothes on eBay. I buy occasional kids basics from Sainsbury’s or John Lewis (the latter for things like vests & underwear which you want to be soft on the skin).

I don’t spend money on beauty stuff either, except a good face cream. I get my hair cut every 6 months as it’s long so I can get away with it (sort of).

I do think the South East is crazy expensive. I know someone who lives in a very nice town in the North and he has a lower salary, much bigger & nicer house, and his wife doesn’t work.

We both need to work in London and we don’t really want to move away from all our friends and family. And we’ve chosen our specific area because the schools are good - so our mortgage is sort of investing in our kids’ education.

Just to add: there are way too many comments for me to reply to them individually but thank you everyone who’s posted. A huge relief to know we aren’t the only ones! And some useful ideas on how to think about things too. I honestly wish I’d discovered MN sooner in life!

I don't think the 50/30/20 way is particularly useful tbh.

I include lots in our bills that would be prioritised but are technically 'fun' - dc activities for example, gym passes...probably others.

These are 'fun' but I count them as necessary for us - so I'd reduce the amount we're saving before cancelling these. I'm not cancelling ds's swimming lessons so I can stick that 50 quid a month in savings or pulling one of them from football to put the £300 annual subs in my pension.

Thats probably highly inadvisable, to prioritise fun over savings - but I'd imagine many would do the same.

Where a need crosses the line into fun isn't black and white.

It sounds like you have a treble whammy of mortgage/nursery/commuting, so your needs are high.

I hadn't heard the percentage split before this thread and I'm not sure it's helpful. Especially during the nursery years when you are trying to keep your head above water. Years ago I heard, a third mortgage, a third bills and a third left to split between spending and saving. That seems more realistic but even then there wouldn't be much saving in the early years.

What I would say is that for us and most of our peers things really did get better bit by bit. You lose one set of nursery fees, then two, you get a pay rise, your mortgage seems less enormous by comparison and little by little things improve. As long as you have a pension, significant savings can wait a while.

Where do you shop for four for just £300pm? Ours is around £5-600pm