Bought our forever home and now scared of the finances - should I reduce pension to pay for it?

[lboogy]

Bit of a hand hold or advice really.

We've had our offer accepted on a house. After bills, food etc we have £650 left over

I know people manage on less but I've always loved brow my means so not used to potentially things being so tight.

Our biggest costs are a £370 per month car loan and £1200 for childcare which will not exist on 2 years time.

I pay in 16% of my income into a pension. I'm wondering if I should reduce my pension a bit to get another £300 cushion for 2 years.

What do you think? Silly move or just deal with the financial challenge for 2 years and pray we keep our jobs?

I wouldnt. Two years on £650 after food and bills is more than manageable and it's worth doing it so you keep your pension going.

Could you get a cheaper car?

Is there anything you can do to bring childcare costs down (work compressed hours or similar)

I think it is doable for 2 years as long as there are no unexpected costs

Thanks for the advice. The car loan is just an ordinary loan so we'd have to sell the car to downsize to a cheaper one.
That's an option if things get tight.

I suppose it may take a couple of months maybe three before exchange and completion so We're going to try and live on 650 pm and see how that actually feels vs theory .

Childcare - we discussed a childminder which would probably half the cost. I'm just not keen on childminders only because back in the 90s my siblings and I expended some horrific ones. I know times have changed with inspects etc but I just feel more comfortable with a nursery setting.

Compressed hours is possible, I tried a 4 day week but I find myself working the day off so just went full time.

Yes that's a good idea and the end will be in sight with the childcare if it's only for two years I'm sure you can manage . It's not like it's a permanent thing . There aren't any special occasions to buy clothes for at the moment so that may be a saving as well ! Can't go on holiday ! There's always an upside!

What is after bills? Does it include fuel, MOT? £150 a week for clothes, Christmas, birthdays, days out , holidays , replacing appliances , do you have school uniform and school trip costs? It seems very tight.

It's for 2 years, easily doable and you won't regret it.

How much does your husband put into his pension?

If you really need extra then I'd rather reduce the car loan than reduce my pension pot.

I think balance is the key. Don't overinvest in a house to.the detriment of other.investments/having a comfortable lifestyle. Also not sure there is such a thing as s forever house. Needs change.

Reducing pension contributions should be a last resort. Firstly you receive tax relief on contributions (20% or 40% depending on your income tax band) which is 'free money'. Secondly many employers also contribute but obviously not if someone opts out of the scheme. Some pensions are particularly generous (such as public sector), but all are cumulative and missing years early on has a lifelong impact.

I'm about to move and since offering I've saved the £400 extra a month into a savings account and lived on the new lower figure.

It's been fine and I feel confident we can do it long termX I'm glad I tried this though as I'd be worrying like you are!

I don't see the what the problem is with £650pcm of disposable income AFTER bills including food. We're in lockdown for at least a month so unless you can't control your online spending habit and go OTT on Xmas presents, you can save most of that amount.

Yes I would give myself that cushion- save it, Chuck it back into your pension at the end of the years if you haven’t had to use it.

£650 a month after bills/food is roughly £160 a week.

I'd love to have that much spare money to save/spend as needed! That's not remotely tight unless you have shocking spending habits, although it may mean you're saving a lot less than you did previously which is why it's making you twitchy.

This is perfectly do-able, especially when you factor in the £1200 a month that's going to become available when childcare isn't an issue. Leave your pension alone for now at least. If you do find it becomes tough you can change it then, but I'd make that the last thing you change in your budget to be honest.

I've never had £160 spare after bills and food (I presume food doesn't include takeaways/eating out. It's easy enough to reduce expenses for a shorter time, you have the end in sight re childcare. I wouldn't reduce your pension.

Lockdown should help spending, I'm sure you have plenty of clothes etc so it's only kids stuff you will need

I would not reduce pension savings. As pp said, it should be last resort.
£650 per month margin should be sufficient unless you have other periodic high costs like needing new eye glasses or dentistry. I’d also look at reducing child care costs/hours. Might be possible if you can adjust your work schedules at all? I used to go in early and start at 6am so was picking children up at 3pm. My DH would go in late for a 10am start so was dropping them off between 9-9:30am (traffic dependent). This reduced their hours from 10/day to 6/day so we qualified for PT rate.

There is nothing much to spend anything on right now! Give it a go but I wouldnt change your financial arrangements for six months.
I'd change your car rather than pension arrangements if anything at all.

No, I really wouldn’t stop your pension. You’ll need that money when you’re older.

I know someone who stopped their pension payments and then never started them up again. They’re in real trouble now they’re nearing retirement.You’re also giving up free money from your employer if you stop the pension.

I would reduce the pension pot contributions to have more wiggle room with finances.

However, are you talking the mortgage out over the max max term? That’s a good way to bring monthly repayments down and most mortgages allow overpayments if you find you’ve got some spare money.

I wouldn't reduce my pension contributions, at least not immediately/without being certain you have to. I'd be worried that if you have more money you end up spending a little more, whereas if you feel a little strapped for cash it will help you be frugal for the 2 years your child is in nursery.

I would do it if you really like the house and area; you may regret it if you don’t. I will reduce pensions contributions for the next two years. Unless you are very uncertain about your jobs.

Did you take into account repairs, entertainment, holidays?

Also, does the house have good energy? Why are the owners selling? If there have been major problems on it, I will not buy it.

OP is not stopping pension contributions; she is paying 16% instead of the 5% compulsory. Her Company will still pay at least the 3%, maybe more depending of the Company she works for.

Thanks everyone.

Just to clarify on the pension - I put in 17% not 16 (I forgot I increased the amount recently) and my employer puts in 3%. Next year they will put in 4%.

I won't reduce the pension. You're all correct it should be the last resort.

The new mortgage is £900 more than the current one plus increased council tax.

The remaining budget I gave is what's left after all essential bills, food, clothes.

I'm not a big spender so I think we can manage on £650 a month. I think I panicked because of the huge additional costs and doubting if I made the right decision. I'm very prudent and don't spend a lot of money and I recognise the house move is an emotional rather than a prudent decision.

But as they say you only live once so I'm going to bit the bullet

@Kerry987

I would do it if you really like the house and area; you may regret it if you don’t. I will reduce pensions contributions for the next two years. Unless you are very uncertain about your jobs.

Did you take into account repairs, entertainment, holidays?

Also, does the house have good energy? Why are the owners selling? If there have been major problems on it, I will not buy it.

I've accounted for maintenance but it is an old house so I've probably underestimated that cost. Hopefully the survey will pick up some of the potential issues.

It's a probate sale . The house is in a quiet cul-de-sac which is a welcome relief from my current area and it has good school. On balance I think it's a good long term decision.

We are in a very similar position where we're moving to the bigger family house and currently spend £1k in nursery fees. I think with childcare bills as large as that it's a temporary hardship and even with after school club/holiday club etc you won't be spending that each month and it frees up a large amount of income. I worry too about things feeling tight until my DC are in school but to be honest these are the years when you can live cheaply....they don't need expensive Christmas presents, they're happy with a trip to the park/picnic etc, won't be going on expensive foreign holidays for a while! I'd say if you're anything like me, I was so worried about the childcare fees when mine started nursery, our outgoings were going to be so much higher than before and we've managed... hopefully it'll be the same with the house!