Help me make a 'luxuries' budget!

[closingdownsale]

I've come to realise that I have no idea how much I should spend on my life's extras once all my bills have been paid, and I usually get into a bit of credit card debt every year.

This is what my outgoings typically look like:
50% bills
5% food
25% savings (been saving for a mortgage deposit for many years, mainly because I do into savings a lot)
10% holidays
10% for everything else (clothes, house stuff, presents, gym, social life and hobbies, etc)

Does this look right? I'm the only earner in my house so the bill percentage might look a bit high, but I just always end up taking money out of savings to pay off credit card payments every few months

Percentages don't mean much really.

The point is, you need to either set yourself a (small ?) number of ££ a month, and stick to that or you see what is left at the end of one month, and that is your "spending money" for the next month.

It depends on things like how desperate you are to build that deposit, or to go on holiday, or whatever.
I'm not a particularly high earner, (fairly senior in my career, but I work PT) but I don't spend anything like 10% of either my gross or net income on a holiday, for example.

When I was at the stage of life when I was saving for a deposit, it was even less.

10% for holidays is really high, especially as your dipping into savings regularly and are trying to save for a house deposit. You could cut that right back and prioritise the house deposit until you’ve got enough.

I tend to make savings pots for things I want or need and save a small amount a month for them. I don't have a credit card so everything is paid for out of savings.

Yes, it is delayed gratification but it's nice to be able to buy what I want, often combined with a sale.

Agree that percentages are meaningless because they look very different for low vs high earners, or due to what your true fixed essential costs (ie the basic minimum, rather than the 'nice to have' version of housing, cars, mobile phones etc) are vs your income and probably other factors too.

However, you might want to review your approach a little as it doesn't make sense to pay credit card interest and have savings at the same time, unless your credit card debt is at 0%, but you also say you've been saving for many years, but keep taking money out of your savings, so it sounds like you may be overspending/not focussing on your goal to buy a house if don't have a deposit yet.

But is buying a property a realistic prospect in the next few years, ie you'll have a deposit and will qualify for the mortgage that you'll need on your income?

As for the percentages:

50% bills - have you reviewed these regularly, can you live somewhere cheaper, are your bills the lowest they can be? If you reduce these as much as possible, it frees up money for savings and non essentials. But even if you don't move, you might be able to cut some costs if any of your bills are higher than they need to be.

5% food - this sounds quite low, are you sure this is all you spend? I'm assuming you live alone and are only feeding yourself?

25% savings (been saving for a mortgage deposit for many years, mainly because I do into savings a lot). How much have you saved? If you keep taking money back, it means your budget isn't working, or that you may be over spending. You could have two savings pots, one for your house deposit, that you don't touch, and another for annual/irregular expenses that you can dip into.

10% holidays. I agree that this sounds like quite a lot, and will be slowing down your ability to buy, but without figures, it's hard to say, but I'm guessing that you earn around £2-3000 pm, based on your bills and food percentages, which would mean you spend about £2400-3600 per year on holidays, could you reduce this a little?

10% for everything else (clothes, house stuff, presents, gym, social life and hobbies, etc). Again, is this what you spend or what you think you spend? It's probably an OK amount but taken alongside your holiday spending, it could be quite a lot of money, especially if it's actually more than that because it's also funded by what you put on your credit card and then pay for out of savings.

You don't mention any travel costs, are these included in bills? Likewise any healthcare costs, dentist, optician, prescriptions, also haircuts etc.

There's a financial flow chart that you might find helpful.

https://ukpersonal.finance/flowchart/

For help in setting and reviewing your budget, have a look at Moneysaving Expert

https://www.moneysavingexpert.com/family/money-help/

They also have a good first time buyer's guide to mortgages and house buying

https://www.moneysavingexpert.com/first-time-mortgage/

Where is your ‘emergency’ pot? I’d reduce your holiday saving a bit and put some into an emergency pot instead, then when you suddenly need a car repair or the boiler breaks your aren’t dipping into house deposit savings or using your credit card.
after that, analyse the hat you actually spent on your credit card - was it essentials or are you just going overboard on luxuries? How much are you willing to give up? Then juggle your %s accordingly, and set yourself a target of 12 months no credit card spending

I’m your position I would ask a different question.

How long would it take to save a house deposit if I cut my spending right down? No holidays, reduced treats, food on a budget, no new clothes etc.

If the answer is less than a year then I’d suggest that you do that. Sometimes with finances you need short term pain for long term gain.

I give myself what is effectively a grown ups version of pocket money
Typically around £300 a month for everything that isn't a bill/ mortgage, household food or fuel or planned expenditure on the kids.

This covers all treats, beauty products, clothing, presents, socialising, eating/ drinking out, books, you name it.

I have one week a month which I call the 'miser challenge ' where I try to spend as little as humanly possible out of my discretionary spend. This generally involves staying in a lot.

If I desperately want something I try to wait a week and see if I still want it. Usually the urge had passed.

I was/ am a total spendthrift until v recently but I was just buying crap all the time despite having a reasonable income.

Put the savings into an account less easy to access and concentrate on paying off the credit card, then cut the card up or freeze it in a block of ice to make it more difficult to use. Delete cards from websites so that if you want to shop online you have to go and get your card to input the details.

I work roughly off the 50% needs, 30% wants (includes holidays and Christmas etc as well as small wants like clothes and eating out) and 20% savings or debt repayments. This is from the book All Your Worth which is a brilliant read. Basically if you try to live off 80% of your salary and save 20% (includes pension contributions so you need to do a little maths) then you will make good financial progress. If you keep bills, food and petrol and other needs under 50% then it allows enough for wants that you don’t feel stretched. The book does go into what to do if you can’t manage those %.

Before I started doing this I worried a lot about spending on wants and could never decide if I could afford something so I find it helpful.