Disagreement re. DP with finances/budget - what do you think?

[Raceacrossworld]

DP and I are looking to move house, however we have had a disagreement over budget and what would be affordable.

If we were to get the Mortgage I think would be manageable, our outgoings would look similar to the below. I think it would be fine but DP doesn’t believe we have sufficient left over funds.

We have an emergency fund saved already.

Can I ask for your thoughts?

Monthly:

Combined income post tax/NI/pension contributions is £4000 + £100 child benefit = £4100 total

-Mortgage/house bills - £1900
-Nursery (we have one DC) - £100
-Petrol - £150
-Other (eyecare, phone contract etc) - £50
£2200 total

Food at an estimate c.£450 a month

Bills + Food = £2650
£4100 - £2650 leaves £1450 for social, savings etc.

I think £1450 left over is plenty, we aren’t particularly extravagant people. We enjoy the odd meal out, DP goes to watch football maybe twice a month.

This would be a move to a house which in theory would last us for the foreseeable, so the need to save heavily would be removed somewhat. We would still want an abroad holiday a year and luckily have 2/3 years until DC starts school so can go away out of school holidays etc.

Any thoughts welcome!

@Raceacrossworld

Can you clarify how much the mortgage will be without the other costs you have included in £1900?

Yeah DC doesn’t go in much as I’m PT and we also have family support.

He earns about 75% of income.

Edited to add if made redundant he’d receive about £30k so would have safety net when looking for a new job

Then I think you are grossly underestimating your other costs.

£500 for gas, electric, council tax, home and contents insurance, car insurance (I know you say you pay it annually, but divide that by 12 and that is the monthly cost to you), broadband, phone, any streaming services, food etc is crazy low.

Do you manage the finances or DH?

Food is outside of that.

We do jointly, because current outgoings aren’t huge and we have a good amount left over we don’t break everything down as much, but I appreciate why people are saying that would be needed with higher outgoings.

Gosh it sounds tight, your outgoings sound too low also as others have said. You say you can go on term time holidays for now, have a look at school holidays to see how much you'll be paying in a few years !

Unexpected costs with kids are relentless. We aren't extravagant either but in the past couple of weeks, DD has needed a uniform for brownies ( cost about £60 plus the monthly subscription), DS ripped his wetsuit for swimming lessons so that was another £20, school trip £325 ( and not a fancy secondary private school one) , about £40 for birthday presents for classmates, you get the gist.

Applying the 50/30/20 rule (50% bills, 30% spend and 20% save), you are spending 50% on bills which is about right. Also if you know that you are regularly saving £1000 per month (and this is definitely going into savings, not holidays or other large spends) then yes on the face of it it’s affordable.

Have you taken account of the fact that stamp duty and moving costs might make a big hole in your emergency funds.
If you can stick to that budget then it might work but there is little wriggle room if you have underestimated your costs or one of you looses your job.
I would aim for a max 33% of your income.

Yeah we’ve accounted for moving costs separately, emergency fund won’t be touched for them.

You use your savings a lot - this is fine as long as you replace these savings.
Supposing you have another child? What about swimming lessons, school trips and extra - curricular? Supposing the car breaks and you need a new one? The boiler packs in?
Also kids parties, birthday presents etc.
You need a much more detailed budget before you go ahead with this.

There are so many things you're not accounting for.

TV/music subscriptions
TV license
Activities for your DC
Things like gym membership, swimming, family days out.
Kids parties, presents.
Christmas presents and decorations.
Things for your DC as they grow - shoes, clothes, toys, furniture etc.
Replacing or repairing the car if needed.
Passports for holidays, insurance etc.
Takeaways, snacks on days out, ice-creams, coffee, soft play

You need a properly detailed budget. Your DC is only going to cost you more money as they get older - uniform, school trips, books, technology etc.

I’m afraid I didn’t read much beyond your mortgage making up a most half your income - if you have the choice for it to be around 33% (which you do), you should do that.

I did read on, though, and I think you’ve neglected contingencies, unforeseen expenses, emergencies. You’ve also not accounted for inflation at a time of wage stagnation, especially food inflation, and a growing child who will soon need expensive things like shoes and uniform and after school care (assuming you’ll go FT) and any extra-curriculars. You have no means of building up your emergency fund once it’s gone.

Then I read that your DH is the main breadwinner. If something were to happen to him, this is all financial pie in the sky.

Your calcs give me palpitations I’m afraid! I appreciate many people don’t have the choice and I do what they must. You do have a choice. I think you’d be crazy to proceed like you live in a period of economic growth and prosperity when the reality is the exact opposite.

It would be tighter than I’d lie comfortable with, unless you have promotions coming up work. Costs get more expensive as Dc get a bit older and you won’t be losing nursery costs as the at is already very low. Things like birthday parties, birthday presents for friends x after school activities, school trips all add up. You won’t be able to go on holiday in term time once in school and prices are often double, days out are more expensive. Bills and food costs go up every year. You save £1k a month now but you take money out of that for holidays etc and you’ll be saving less with the higher mortgage.

It looks ok on the face of it but it is high… have you done an honest, detailed budget breakdown?

the other stuff can really add up.

Car maintenance
Car tax
birthdays/christmas
shoes/clothes
TV/internet
hair cuts

So things that may seem minor but add up over time (as a monthly cost):

• Haircuts £25
• Dentist £21
• Childs clothing £40
• Adult clothing £60
• Christmas £80
• Birthdays £60

This is before any insurances paid yearly, a holiday budget, days out, school uniform, car repairs, new tyres, new washing machine

This is our budget, you need to account for absolutely everything to make it work…this is ours.

Me 3100
DP 4100
CB 280
Total 7480
Housing
Mortgage: 1900.
Insurances(life, house): 150
Total Housing: 2050
Utilities
Electricity 150
Waste collection: 30
Broadband & TV: 70
Mobile phones x3: 60
Total Utilities: 310
Food & Groceries
Groceries & household food: 500
Dining out / takeaways: 200
Total Food: 700
Transportation
Fuel: 250
Car insurance & tax: 150
Maintenance & NCT: 100
Public transport / Parking: 20
Total Transport: 520
Education & Kids
School books, uniforms, fees: 50
Activities, sports, clubs: 50
Pocket money/treats: 60
Total Kids & Education: 160
Entertainment & Lifestyle
Family outings, hobbies, gifts: 200
Subscriptions, books, etc.: 60
Miscellaneous expenses (haircuts,nails): 60
Personal spends: 200 x 2 = 400
Total Entertainment: 730
Savings & Miscellaneous
Emergency fund / Savings: 2,000
Holidays (monthly allocation): 500
Clothing: 200
Miscellaneous buffer: 300
Total Savings & Misc.: 3,000
TOTAL MONTHLY SPENDING: 7,480

There's a reason that 1/3 of your income is guide for mortgage.

I would be surprised if you would even pass a mortgage calculator with any mainstream bank.

Have you factored in increase in council tax and utilities if you move to a larger property?
Personally I wouldn’t feel comfortable with 50% of income allocated to the mortgage.

Yeah it’s included within the £1900, that isn’t solely the Mortgage

You're not answering any of the questions/points about all the daily costs that you've not accounted for.

i clearly need to work on my reading comprehension!

I’ve tried to as I go, most of what’s mentioned if not in bills listed would be absorbed in the leftover £1450

TBH. The next 5-10 years are so unpredictable, I would be very reluctant to spend half my income on housing. Being in a financially sound position is so so important.

In your shoes I’d concentrate on increasing my savings TBH.

so your mortgage - and likely heating and council tax - will be higher than they are now?

are you currently able to save the difference every month? Try it for 6 months and see what happens.?

Leftover 1450 is plenty.

I see no problem with your figures.

It might be absolutely fine, OP.

what you should do, either way, is sit down with your DH and go through both your bank statements for at least the last three months.

create a spreadsheet for each of the spends then categorise.

that will give you a true idea of how much you spend.

we do this twice a year. It is not often a pleasant experience!