Living beyond our means.. will it ever end!

[Wharawho]

Aibu, to be completely fed up with living month to month and barely being able to pay for everything?

For context, we're a family of five... me, DH and 3DS.(7, 6 & 3)
Household income of £70k
3 bed semi- mortgaged (nearly £1k a month- this double last feb when the interest rate went up 😞)
2 cars (15yo car paid off and family car on pcp at £450p/m)
For context we need the family car to fit all 3 kids carseats in and I also require a big car for my business. I hate having finance, but we can't work without two cars or even go out as a family if we had one small car! And we definitely don't have the money to buy another outright.

Despite what I think is a reasonable household income, 1 week after being paid, almost every penny is claimed by our household bills and expenses and we spend the rest of the month penny pinching.
We're one big unexpected bill away from not being able to buy the shopping and I'm fed up of it to be honest!
We don't have big expensive holidays or eat out/ have lots of takeaways.
If anything I'd say we live quite modestly... we've lived in the same house for 6 years and still haven't be able to finish renovating it, as we don't have the money!
I haven't had my hair cut for 2 years, as I can't commit that much money to myself... I'm also in desperate need of a new pair of glasses, but I can't afford to buy a new pair ( I have to wear them all the time!)
Days out tend to be outdoor places, with a homemade picnic and maybe an ice cream for the kids!

We buy our clothes from places like Tesco and primark, rarely do me and DH get anything only when we really need something, just the kids and we pass down clothes through our boys as they grow to save on money.
The kids attend swimming lessons once a week, this is their only "luxury" or "extra thing" they do I'm all honesty, and something we prioritise, as we think it's important that they can swim! Even this I price shopped for the cheapest lessons to make sure we pay as little as possible!
We do have the typical Netflix, Disney etc and go for a Costa 2 times each month, but again nothing extravagant... just living and trying enjoy small pleasures and have something to look forward to!

I paid myself today and after all of our bills and food money we literally have £160 to last the month,.. which includes entertaining the kids, buying school clothes/shoes, treats, covering unexpected expenses or car/house repairs!
We don't have enough to save for a rainy day fund and the minute something comes up, any savings we do have are gone and we're back to square 1!
Last month the 15yo car needed new brakes/ discs and a few other bits to pass its mot, setting us back £500.... we paid for it on our monzo flex (we only use this in emergencies when we really can't afford and pay it back ASAP!) but now this has left us short last month and this month paying it back! (As I say... one bill away from despair)

I work for myself, from home and my business requires lots if space (I've converted our garage)... however my business is limited by my space and to grow and make more money I need a bigger work space/ bigger home.... which we can't afford!

How do people afford to go on holidays, have big flash cars and big 4 bed detached houses?!?!
18 year old me would have been thrilled to bring in £70k... but here we are struggling to make it through to the end of each month!

I guess this is just a rant really, as I'm feeling so deflated looking at our bank balance before the month has even started! 😞
Please tell me I'm not the only one experiencing this!

I actually think 70k is a pretty decent income (is it before or after tax?). Before tax it isn't massive but still pretty okay IMO, after tax it's pretty decent. DH and I take home 50k a year between us and whilst it's certainly not a huge amount, I don't feel like we struggle. Albeit we only have 2 DC, not 3, and we only have 1 car that we pay £150 a month for.

£450 a month for a car is an enormous amount. The HMRC debt is another big one. Could you possibly call them and say that the current payments are no longer affordable so could you negotiate a reduction? We also have a debt with HMRC due to underpaid tax, I rang them and sorted a payment plan and only pay £50 a month. They were very reasonable!

£700 a month for a family of 5 is a pretty decent food budget but is there any way to cut it down even further? I budget myself maximum of £150 a week on food at Aldi and always manage to keep it at/under that. I do a lot of cooking from scratch and meal planning and we never go hungry.

I buy most of our clothes from Vinted/eBay/charity shops. We have Netflix and Disney plus but they're the only subscription/TV service we pay for. We did have Sky but cancelled it once they started asking for £100 a month!

You have 3DC, 2 cars, a mortgage, are self employed. A lot of those things would be considered luxuries. I can totally understand how it feels like you're struggling, but there are definitely things you could cut back on.

As business owner myself there are various things that stand out here.

Your business should be financing the car that you require.
Paying yourself minimum wage OK - but across how many hours?
The wedding business is a largely saturated and seasonal beast and is never going to deliver a great income - really consider this.
Just as you get more clients, more people like you will come into that saturated market all vying for the same business. Is it really worth it??

In all honesty I don't think with 3 young children that you can afford to run this business that is not paying you nearly enough I'm afraid to say.
If you really want to keep it you need to be brutally honest with yourself with a firm business plan and accurate (as much as possible) projections for the next two years. But realistically you need another income stream alongside this.

It's inevitable that working part time for minimum wage, with three children, a mortgage, cars on finance etc is posing a problem. You have a choice to accept it or to recognise that it's not that feasible at the moment.

The HMRC situation will change - how long does that debt have left to run?

I think you're doing pretty well caring for three children and starting your own business, OP. It may feel tough but you are living the life you've chosen & succeeding at it. My advice would be to go through every single bill and try to get it down. We're doing that and are already £150 a month better off after just renegotiating/sorting out two! Also, like everyone else, I think there's got to be a better way with your car.

Just because you mentioned National Trust as a day out, I saw on Money Saving Expert that a free family ticket is going to be in some newspapers next week. Worth checking out. I am a big fan of researching brilliant free trips out with a picnic rather than paying for half-arsed ones.

To be honest I applaud you, our household income is slightly higher but we've sacrificed having the family we want as everything is so expensive, huge kudos for making it work and having a business you love set up!

It will get better, the business will grow, depending what you do, is there a possibility of diversifying it in any direction just to bring in a little bit extra so you can look at getting a unit to grow it bigger? Rent on small industrial units can be very reasonable...

In the meantime, can you go interest only on your mortgage for a couple of years? You can then put any "extra" money in savings where needed to give you a bit of flexibility with money when needed until your business is a bit more successful/something changes?

Yes. It is really important to keep track of mortgage rates and re-mortgage when possible to bring your payments down.

Very good point. Agree that weddings doesn't seem to be a growth area

Everyone is feeling the pinch financially. Big / fancy weddings don't seem to be in vogue now. Everyone brags about how they camped in a muddy field and all their friends said it was the best wedding ever

The car is an insane amount of money I would not have even considered. I would get rid of the smaller car hopefully use it as a deposit to buy a bigger car with a much smaller monthly payment. 30 minutes walk to school may not be great but manageable with a buggy. Or find nearer schools? Get rid of the £450 a month. That’s nearly your new mortgage extra. Food shop could be cheaper do you meal plan. Extra on childcare this month was probably more than you earned? I wouldn’t have gone. Could you consider jobs in health for local government health visiting/school nursing/social work. Some are part time and term time only. Then do your wedding job on the side. It sounds like you need to earn more.

As a fellow Mum of a large family, I think it's partly a budgeting issue as you're not setting aside money for irregular costs - car repairs, birthdays etc.

Look at how much you spend on car bills, birthdays, swimming, any annual bills and set this aside it month - it means you know how much you really have spare and you can cover expensive months.

Sounds rough op, so do you not have any savings whatsoever? What about savings accounts for the children’s future?
I’d look into increasing your income as it sounds like you live fairly frugally already.

You have 3 children AND pets - luxuries on your income.

Ways to increase income - take a partner, one with space so the business can expand and preferably one with a reliable vehicle.

Your business will be slack in winter. NHS bank work will help or now the 3 year old can be in nursery any Christmas job.

Once you pay off HMRC your life will be much easier. How long does it have to run? Would they let you renegotiate payments down a little?

Oh it's really difficult....we have been really tight financially for years with the odd moments of good fortune.

We don't have a mortgage but our rent is more than your mortgage.

My apologies if it's already been mentioned, but your grocery bill is very high. I wondered if there's anything you can do in that area.

We probably didn't even get a coffee out for twenty years. We did however have homemade brownies and hot chocolate in a flask, with spray cream 🙂

We still don't pay for subscriptions. We don't pay for days out. We do go camping. It may sound grim but in a cheesy way we made our own fun!

It can be relentless. It sounds like your job brings you joy

Is the car your only unsecured debt?

I think you need to write out your budget in excel and really see what's going on.

We're also a family of 5, £70k salary before tax, checking my own spreadsheet we're paying about £850 on mortgage and about another £1000 on paying down unsecured debt. We're still able to put away £100 a week minimum in savings (it was £200 until a few weeks ago when I decided to send half of it to one of the debts!).

So the short answer for us is debt. It's short now, but we're in the fat times now - we were in the lean times for a long, long time. But even with all the debt we have, we're comfortable.

My kids are teens by the way and we spend anywhere between £130-£200 a week on food.

What stands out to me is the mortgage, but with out knowing the financial details it’s hard to say if you looking to get a better deal would be worth it?

I think weddings is probably the only industry where you hope NOT to get repeat customers!

On ice creams, I know it's a nice treat to have an ice cream while out, but it's so much more expensive than having it at home from the supermarket or even bought from a convenience store on the way home. I bought 3 Magnums from the Co-op yesterday for £2. A single one from 'an attraction' would cost £3 at least.

Comments like this make me laugh so much (sorry!).

Yes, ice creams are considerably cheaper from the supermarket, however if you're on a day out at a NT place then it's not like you can take ice creams with you in your bag 😂

And I don't think a tenner or so on ice creams once in a blue moon is the issue here.

£70k for a family of 5 isn't a massive amount of money these days with mortgages, cars etc.

However, having read the OPs breakdown as to what money is spent on, it looks like after bills, fuel and food shopping (on a normal month) there is about £900 left??? @Wharawho Is that right? You've mentioned car batteries and other stuff you've needed to pay for but those are one-offs. I would say anything over £500 (after all essentials have been paid) should be fine to live on!

If your mortgage doubled, then you need a better rate
It's absolutely worth using e.g. https://uswitch.com to find a better rate
That alone could give you another £2-400/month

I hear where you are coming from OP, we are on 55k and have two small dcs, and our mortgage rates are relatively high. We are just making ends meet with some strict budgeting, unfourtantely we had a lot of unforseen expenses last year which went on the credit card. The next 18 months are going to be lean whilst we pay off the debt and DD2 is still in childcare.

Okay this is really useful perspective. They say that budgeting goes wrong because people only allocate their usual monthly expenses. You've just demonstrated perfectly why that doesn't work.

Have a look on the MSE website at budget planners. They advocate taking everything and dividing by 12. So set aside money for car repairs, birthdays, Christmas, clothes/uniform other annual costs.

It won't help money magically appear but it will allow you to get a proper handle on your finances.

The £350 is tax payback will at least come into the pot at some point.

Things you could consider in the longer term - can you increase the term of your mortgage? How long are you fixed for? Depending on your current rate you may be able to get a better deal.

Can you earn more over the summer for the wedding season? If so try and apply this to the longer term budgeting above

70k combined is less than the average salary (37k) in the UK so I wouldn’t say that you have a reasonable household income for the way that you live (big family, house and two cars).. wages are low in comparison to the cost of everything right now, the UK is a mess

Yes

Yes ,Your the only one, nobody else ever has money worries.

I agree with all this. Your business is costing you more money than you realise, because you are only earning minimum wage and then it is costing you £450/month in a car that you otherwise wouldn't need. If it is also costing fuel to travel and the space for storage then those are extras too (I know you're not paying for storage but that is space that could otherwise maybe be rented out for parking or you could look at moving to a smaller house without a garage). You are sometimes paying for adhoc childcare to cover your work. The other thing that your business is probably not managing is to pay you a pension which may not seem a big deal now but certainly will in 20 years.

I'm sorry but I think you need to give yourself a deadline for your business to become more lucrative and if you don't hit that then it's time to stop. It does not seem like a viable business.

You could work in a school hours/flexible from home PT admin job and put your 3yo in free preschool, so childcare would be free. If DH is wfh some days and it is flexible and he can collect the kids then you could even do 2 or 3 long days when he is wfh to enable you to work more hours.

If you cannot get free childcare for your 3yo and if your DH works 9-5 and WFH 3 days a week and commutes 2 days then the other option would be to look into getting an evening/weekend job and work lets say 5-9pm on two or even all three of the evenings that he is at home and then a full day on a saturday or sunday. So again you would have no childcare costs but be able to bring in an income.

Just going back to your original question of how people manage... we also have three kids age 6, 4 and 1. Our lifestyle is very similar to yours except we don't have a car payment. We don't do big holidays, the kids do a couple of activities, we rarely eat out, we don't do expensive days out - it's always parks and picnics etc. I work 21 hours over 4 days a week so that I can have the luxury of a day off each week with the younger two and also do pick ups and drop offs (my husband does a couple of morning drop offs on the 2 days I start ay 8.30). We spend around £600 a month on food, we don't have sky TV or expensive phones etc. So our situations are very similar. However we are financially quite comfortable and able to save around £5-600 a month despite having a bigger mortgage than you. The reason for this is that my DH is on £55k and I am on £39k for my part time hours (i.e. a role that would be over £60k if done full time). Those sound like massive wages but unfortunately it's what you have to earn now to have the lifestyle you describe. If my part-time wages were paying minimum wage it would not be doable at all.

Martin Lewis website has so much helpful advice sitting down and going through literally every expense (budget tools) can throw up some easy wins, comparisons on Gas/ electric, insurance etc etc. Set aside time to go through your bank accounts and see if there are any direct debits you can cut subscriptions. Definitely look at major expenses such as Car finance and Mortgages.

You are struggling but not yet at the position where you lose the luxury of choice, in your case choosing to opt for a lower salary to do something you love.
You say you need one car for the business and that you use the garage, does the business pay for these? Are they covered as expenses on your tax return. If you were previously not able to pay yourself minimum wage was the business making a loss? Again is this shown in your tax return, am assuming you are self employed and not a limited company.

Your household income is actually quite modest - it’s about 15k per person for the year! (Pretax)?

It comes down to budget better and earn more. My 2 pennies:

• Cancel your expensive car!
• Cancel the Netflix and Disney
• You can’t afford £90 per month for swimming lessons for the kids
• Shop at Aldi and reduce the food budget
• You can’t afford to eat out or buy coffee out
• Buy clothes and shoes on vinted (better quality items will last longer)
• Buy uniforms second hand
• Cut your own hair
• You can’t afford pets

Good luck! Wedding industry is going downhill - people are spending less on weddings now.

There are big changes you could consider, which would have a huge impact on your lives, and smaller changes you probably wouldn’t notice.

How much are the TV subscriptions/ Costa? If getting rid of those saves £ 100/ month, there’s a saving with minimal pain.

TBH I think you’re probably at the stage with your business where you’ve paid the big outlay in setup costs, so should be in a position where your relative profit should start to increase. I understand your argument about childcare costs - if a PAYE job costs the same in wages as you would pay in childcare you’re no better off. I think some people underestimate the toll taken on your health by working full time in a very stressful, high-pressure job. And NHS jobs often entail shift work, making childcare even more tricky and expensive.

How long will the tax repayment take to complete? Is that just for this year, or longer term? Is there any way of contacting HMRC to see whether this could be negotiated to a smaller payment over a longer period?

It would probably be worth you looking at some kind of temporary seasonal work when your business has a quiet period.