First world problem

[Theflamingos]

I have name changed as I am giving out quite personal information here.

I also realise that we are extremely fortunate.

I just wondered how people allocate their money? We are in the process of moving and taking on a larger mortgage and I am now panicking that we have bitten off more than we can chew.

Our current situation:
Income after tax (joint) £9,000 per month
Bills and food £1,500
Personal spends, clothes, Christmas etc £1,500
Holiday fund/ house repairs etc £1,000
School fees £2,300
Pension and ISA's £2700

We have at present a large amount of cash savings that will be used on the house purchase - at the moment it is great to have that security as it would keep us going for years if we were made redundant.

Future budget would be something like this:
Income £9,000
Bills and food £2,800
Personal spends etc £1,500
Holiday fund/ house repairs etc £1,000
School fees £2,500
Pension and ISA's £1,200

I am panicking because the mortgage payments will be quite high - partly this is our fault for making the term 15years to keep inline with our current mortgage - is it worth seeing if we can change this to 20 years to reduce the monthly payment? DH is keen to have the mortgage paid off ASAP (we are virtually mortgage free right now but we have outgrown the house).

School fees - I wish in a way we had not started down this road. The fees only ever go up whereas our pay does not. We used to get decent bonuses each year but this year we will get nothing. We do have two years' fees squirrelled away which we are not counting in our house buying budget but it is still a worry and a huge financial commitment.

Holidays - this figure has not changed for years and DH refuses to spend more on holidays despite the cost increasing as the DC have got older, however even he is now complaining at what holidays cost in school holidays! Also, the new house needs a bit of decorating done (which we have budgeted for in the house buying costs) but I fear that we are stepping into the unknown, in this house I know the boiler is reasonably new and well maintained, for example, we could end up having to spend more than anticipated on the new house.

At the moment we have quite a bit of slack as we save a lot but I can already see that this will be reduced and after a few years this will be eroded further. I can ask to increase my hours as I am PT which could bring in an extra £1-£1.5k a month but there would be additional costs for wraparound care.

Our ISAs have enough in to cover emergency funds if we lose a job etc but they are meant to be for retirement really (we were late to the party on our pensions and neither of us have a great workplace one).

I also worry that DC get more expensive as they get older - they are 8 &6 at the moment.

We are 42 and 45.

Is this madness?

Please be kind.

@positivelynegative

I do hope you get people’s pension pots growing a bit above the rate of inflation...

I’ve spoken to retired relatives and actually reading about retirement living on here was a big eye opener that you don’t really need 40k a year as the lifestyle does get a lot cheaper. Retiring early, it’s pricier in the 60’s as people still have more energy to travel and go out more. However, in the 70’s and beyond, a bit of a top up to the state pension seems to suffice to fund a decent lifestyle - eg my MIL still goes out for some activities (some voluntary work, cheap classes and the odd theatre trip etc), has a weekly blow dry, 2-3 lunches out a week, a cleaner, decent car etc She doesn’t really travel as her health has deteriorated but she manages that comfortable lifestyle on just a top up rather than a significant private pension. It’s more expensive for relatives who keep a boat but then the OP doesn’t mention having one.

So anyway, to me it look that they definitely need to keep their pension contributions ticking over but don’t need to get their knickers in a twist if they can’t put ££££ away. They’ll also get lots of money out of the house unless they choose to stay in their expensive area and not downsize/move. If they do move somewhere cheaper, they’ll still have enough to help DC onto the property ladder (if they choose) and fund holidays and days out in their 60’s.

And anyway, I’m not convinced that many savvy people use their entire pension pot to buy an annuity. Probably just some of it as ‘longevity insurance’.

Our joint post-tax income is £4000, and mortgage is £1150. We're actually better off now as we are WFH and saving nearly £500 a month on travel (although utilities have gone up a bit!). We don't have school fees, but we do have pets (c.£150 a month) and a car payment (£250), and save around £700 towards a new kitchen.

Will the new house need much in the way of work - could you shave a bit off that monthly amount? Obviously good to have a contingency fund but you do have other savings that could be drawn on, or you could have a backup 0% interest credit card for true emergencies (boiler etc).

It's probably worth having a review of all direct debits - switching utilities, insurance providers, cancelling infrequently used memberships etc might give you a bit of a buffer too.

I do think it totally doable for you OP to increase pensions savings and pay this bigger mortgage as long as you know and spend wisely the rest of your money. Again work out where it is all going and don’t forget to factor in bigger council tax, bigger house insurance, bigger utilities too.
Enjoy the new house and extra space

it was an interesting evening

DH has zero clue about money. Zero. He had no idea what was going into his pension and what the amount in the pot was - he has always given me vague amounts.

Anyway, I made him log in last night to check - he actually earns more than I thought but he salary sacrifices £250 a month give as you earn (which his company matches) and £300 a month towards a share save scheme. He also gets private healthcare for all of us, life insurance for him and me and critical illness and income protection for him - these are all flexible benefits which he can choose each year... but it seems he leaves it at the default I also get life insurance for me and private healthcare for us all so we must have been doubling up for years it is frustrating as I know I have asked him about this before and queried whether I should have the healthcare in my name as I pay a lower rate of tax and he said yes!
We both get to change them in December which I think will mean our net income will go up a bit.

He also has quite a few shares in his company (he has worked there for 18 years and gets them as part of his bonus every year). Everything is paperless and so he has to physically log on to see all of this information.

He has thousands in unclaimed dividends - all he needed to do was put his bank details in, they stopped sending cheques ages ago. I cannot believe he just let this go. He also has to work out if he needs to pay tax on any of this. The share price has dropped quite a bit this year so no real point in selling them at the moment.

His pension, oh his pension. He is in two work schemes - a DB one which they closed several years ago and a DC one which he then started paying in to. He does not have a clue what any of it means - he has asked for a breakdown of what his DB will actually pay out on retirement, it depends when he takes it, whether he takes a lump sum etc but it is a surprising amount. He has £180k in the DC one and for the past few years he has put the maximum he can in for tax purposes- fortunately his employer seems to work that out but with no bonus this year he might be able to put more in there (his bonus usually takes his earnings up to £200k +). He also casually mentioned that he might have a pension with his previous employer but he never updated his address with them when we moved. He has found an old letter with a reference on and is going to contact them. He worked there for 6 years.

I have £140k across two DC pensions.

I think we are in a better state than I thought but we really need to tighten up on what we spend and keep an eye on what we actually have coming in.

We are going to go for the 20yr mortgage term.

The cleaner stays!

We have gone through our discretionary spending and cancelled a few things, DH also needs to claim on his work expenses for some additional things we have been paying for since lockdown (his work have told him to do it but he is too lazy). We have set up new accounts so that we can have "pots" - we are also going to give ourselves a set amount for our personal spending as I think we both see "x" in the account and it burns a hole in our pocket.

Food shopping and eating out costs we are also going to look at, alongside the DC's extra curricular activities - for example, they both have music lessons after school at a music centre. The lessons start half an hour after the end of school, so I collect them, take them to a cafe next door and we have a snack and a drink (£10 right there) and then I wait in there (another drink £3) whilst they do their lesson. The school classes are the same price and I won't have to ship them around or pay for snacks (Covid means the music centre no longer has a waiting area).

The plan is to stick to the new budget and save the extra until we move house and then review in a few months.
Then I think we will prioritise our pensions - it makes sense for DH to keep putting the most he can in, especially if it would have been taxed at 45%. My employer puts the bare minimum in, does not match or offer salary sacrifice and so I will keep topping it up - currently £500 a month (which is £625 after the tax top up) but I would like to increase this if possible.

School fees - in the past my MiL has suggested that she might be able to help us with fees as part of her own tax planning. DH is an only child and so our DC are her only grandchildren. She is pretty wealthy. I don't want to ask her though but DH has said she has mentioned it to him a few times and he thinks she will contribute to the senior school fees. I don't want to count on that though.

I feel much better about things today. It is good to get it all down as DH is not someone I can usually talk to about money. He buries his head in the sand.

Oh and he usually has a season ticket loan from work - the money is still going out of his pay despite him not commuting since March. He didn't bother cashing the ticket in

So that is another £100 a month we will save.

I am a bit sick over how much money we waste. I am just as bad but always justify things at the time other people manage perfectly well, why are we so rubbish?

I have factored in the extra £1,000 for the mortgage and bills increasing by £300 - I know the council tax is more and I know utilities will be.

The house is in good condition, one of the reasons we like it so much. We saw a house a few doors down for sale for £1.3m and were considering an offer on that when this one came on the market - it has had a side return and loft extension already and the kitchen and bathrooms are only a couple of years old. We will need to do a bit of painting and we want to replace the carpet - nothing major wrong with it, hopefully. The other house needed everything done to it, way more than £100k would need to be spent on it, plus that was mid terrace and this is end of terrace.

We will need furniture though - the new house is twice the size of our current house. Our sofa will look lost in the new living room but that can be done over time.

I do hope you get people’s pension pots growing a bit above the rate of inflation

If you take a look at what the FCA requires, that is more realistic than most people think. The high growth rates of the past have been spent on QE.

And anyway, I’m not convinced that many savvy people use their entire pension pot to buy an annuity. Probably just some of it as ‘longevity insurance
I’ve not bought an annuity for a client in 15 years.

Clearly expectations vary, but going from earning 140k to living off 15k isn’t what most people dream of. Retiring at 60 is usually because people want to travel. Back packing tends not to be high in the list.

I’m just saying a lifestyle retirement is more expensive than people think.

I think that you definately need to move and the house seems to suit, the mortgage is still very modest.

Mentally remove yourself from the wealthier families at your dcs schools, that will skew your attitude to budgeting!!

Expensive school trips are not essential, their education is where the value is in the fees.

Due to your DHs slack attitude to finances, make a monthly,set in stone, meeting to check progress and set goals. It will pay dividends in keeping you on track.

Extending the mortgage term is sensible in such a low interest rate environment, pay lump sums if you have a surplus at the year end.

Have a contingency plan in case one of you to lost your job, takes the fear away l find, however unpalatable the course of action required.

Pensions need improvement, shock DH by showing how long he would have to work for if he doesn't work to maximise it!

You sound on top of it all.

My DH also never knows how much he’s earning or has in various accounts so I need to keep track too.

Sounds like you’re doing better than you thought. All good news, then. If he doesn’t get a bonus or chooses not to take the various taxable benefits, you should be able to put a lot into his pension pot. That tapered annual pension allowance has been a bit sucky for higher earners.

Appreciate your frustrations OP - some people just don't seem to 'get' money at all, no matter how intelligent they are in other areas.

One thing that might be worth considering as you plan your future - your other half is presumably earning 'London money' but you say his firm is planning to close the London office & keep everyone WFH - not a unique situation at the moment.
In the coming years there WILL be a downward pressure on salaries for such roles & I'd look to plan this in to your forecasts. Whatever his role would currently earn him if he were working in the wider home counties / South East, I'd anticipate it moving more towards that in a 5-10 year timeframe. I take it you've considered a move away from central London in the hunt for more space?

Also, definitely look at selling the company shares your OH has if they are vested/no tax liabilities - having all your eggs in one basket is a very bad idea.
If the value of them is depressed purely in line with the overall market then selling them, transferring the money into a stocks & shares ISA & repurchasing something like a UK index fund tracker is a very good idea.

Thanks, yes, we have been considering a move out of London but (for me at least) it is just too much of an upheaval - 2 DC to change schools, my friends and family are here and I hope, post Covid, we can get back to some our hobbies and social life which is London-centric.

We also couldn't agree on where to move to - DH wanted proper rural whereas I have to keep in mind that I will be going back to the office at some point (I have been told this, we have been specifically warned not to relocate on the basis of being able to wfh in the future) - my job is usually client facing, we are managing remotely but I can see that changing once the Covid risks have subsided. Plus, I like my job (I actually prefer going into the office). DH is only considering a move out of London because it suits him. We live quite central because it has always been about his job and his commute.

Also, I like being able to walk everywhere. I would hate to rely on a car and so I would only consider towns or large villages with a direct train link to London and DH hated all of my suggestions as "we may as well be in London then". One place he did like we would have to have driven DC to school (again, he insists on private which limits options outside of London) in a nearby town which would have been 20mins + each way. We walk to school in 10 mins now. It would make work quite difficult for me as I am the one that does all the drop offs and collections (even though DH is now at home).

His shares - yes, I agree, we should sell some. The loss is a little hard to bear but reinvesting them is a good idea. He has to send a form in for anti money laundering purposes (again, he sold some shares when we bought our house but he never updated his details on his share account 🙄).

I think after our conversation and looking at the figures DH now has second thoughts! He was gung-ho about the move, moreso than me but today he is quibbling about calling to pay the mortgage booking fee to get the survey arranged.

I think he realises that the plan only works if he continues to earn at this level. I don't see why he wouldn't but I think he has liked having the comfort of being able to walk away if anyone annoyed him 😂 to me, though, it isn't like either of us can afford to retire (although he talks as though we could afford a house for £250k by the sea, near a picturesque beach, an outstanding school for the DC and still have £1million in the bank..... ) we would still need to work - we are both professionals and we have transferable skills.

I think I need to consider my position and look to getting my career back on track, I should be earning double my current salary by now. Maybe I need to go back FT and just tell DH he needs to start pulling his weight with the DC.

I feel very powerless. Like I have no say in this.

I think you’ll be fine £1300 mortgage on £9k/mo.
It’s the private school that is eating up your income.

Seems like you didn't think enough about the school fees before going down that route. It's obvious that even for one DC it is akin to a mortgage, double for two DCs, but keeps rising with inflation.

That said, the new mortgage isn't that much, so you'll just have to cut your cloth on your other expenditure.

I feel very powerless. Like I have no say in this.

It does sound like you can manage the higher mortgage especially with MIL contributing to school fees. And your husband needs to own his decision: if he wants to live in a 1.4M house and send children private all through, he’ll need to carry on working given his and your level of income.

But anyway, what would you do if it was your decision?

If it were my decision we would move - we are desperate for the space. My house depresses me now. I am having a huge declutter this week to see if it helps my mood.

DH is talking about selling and renting, not sure why that is better financially but whatever gets me out of this house, I will agree to. I guess house prices might drop next year - who knows!

I suspect it is to give him time so he can wear me down to move to the arse end of nowhere (he knows it isn't feasible at the moment as he has not had confirmation from his employer that he will be able to wfh permanently). He grew up in the country and I can see the attraction- if he wanted to move closer to his mum I would agree to move there but he doesn't, he says he doesn't want to go back to his old village as a failure and wants a fresh start somewhere completely new. Except he does no research for schools or anything really, he just has a romantic notion in his head.

He refused to agree to pay the mortgage booking fee as he wanted more time to think and now it looks like everything will be delayed by a new lockdown anyway.