Feel overcommitted - Am I overthinking?

[jamiestress]

Morning.

dh and I moved to our 'forever home' in June of this year. It was quite a big move for us and one that we pondered over for a long time. we essentially doubled our mortgage. We decided it was worth it for the house, the area, the schools ( we have 2 dd's) and the numbers do work on paper.

I love the house, but I keep finding myself worrying about the money and our level of outgoings. My dh thinks that I am overthinking and that we are fine. I would welcome some perspective on this, to soothe my anxious brain if nothing else!!

Our joint take home pay is £5134
Mortgage is £1600
Childcare £400
All household bills inc internet, phones etc - £730
Food - £400 based on recent shops
Car - £130
Car fuel - £150
Gym - £24
Birthday parties, christmas, days out etc - £120
Holiday savings - £200
dh training loan - £125
haircuts/prescriptions - £20

Total - £3899

This leaves about £1235, although we will use some of this for home improvements etc.

Am I overthinking this? I think it's the mortgage payment that affects my brain!

I would feel the same. It's tight enough for low level anxiety but not panic.

What's your projections over the next few years? Will your income go up or down? What about your outgoings?

Seems fine to me.

I expect things to pretty much stay as they are for the next few years

I think it looks fine, and there’s a few areas you can temporarily cut back on if needed for an emergency (like presents, holiday saving).

You do have a surplus each month so maybe focus on building up your savings for unexpected costs.

Mortgage is about 31% of take home pay. That is ok but is higher than Dave Ramsey would suggest (25%) so you may feel what he calls House Poor. Your subconscious may have picked up on that and thus you are thinking about it.

If you have fixed the rate on the mortgage for 5 or 10 years then that gives you a known payment amount. If you are on variable rate then you have uncertainty.

Do you have over £1k for extras and home improvements? Think you’ll be ok.
it will probably just feel tighter than what you are used too

We take home £5400 between us and mortgage is £1400 with only £60 per month for the odd after school club. We spend more in food than you at about £160 per week as we buy organic etc and have £1500 left over.

when things go wrong it can feel tight financially eg when the fridge freezer broke and we had to buy a new one and it was a birthday month for one of the kids. But otherwise it’s absolutely fine. Will childcare costs go down over time?

my student loan will be paid off in 16 months so I’m really looking forward to that £200 more per month to buffer as stuff gets more expensive.

We have about £500 not accounted for each month so I think you'll be ok. What are you thinking you'll spend £1200 on each and every month that would mean you've no money? You've accounted for days out and food AND still have £1200. £300 A WEEK that you don't have tied up in direct debits etc. That's more than most people can say. YABU.

As you say, it looks fine on paper.

If you have a decent amount in savings and your mortgage is fixed, that should give you some additional comfort.

Plus, over time, childcare costs will go down and your salaries will go up.

I think there's too much fixation on the percentage of income that your mortgage is, because it's only part of the whole picture.

25% of a £2k income would be a lot tighter than 30% of a £5k income because the amount left for other things is a lot smaller.

Other costs like childcare, commuting, car payments etc etc can be similar or more than your mortgage, so could have equal or greater impact on your overall financial level of comfort.

Lifestyle expectations - you'll be more comfortable with a larger mortgage if you like to spend a lot of time at home and want it to be nice. Less so if you see it as a base and get pleasure from going out and about doing and buying things.

You do have some slack in that budget, eg days out and holidays. You might also be able to reduce some of your bills, eg are you on a deal for broadband? How much are you spending on your mobile phones?

It also depends on whether any of the £1235 is going on things like clothes, work lunches etc. If you are both buying coffee out of the house and a nice lunch every day, it could take up a good chunk of that.

Maybe have a look through your last few months of spending to see where your non direct debit spending is going?

You do seem relatively financially comfortable, but not to the level where you can spend freely on everything, so it's worth being mindful of what you're spending on, especially if you have something expensive in mind that you want, like home improvements.

It would be to close for comfort for me personally, but we’re all different. The mortgage payment is higher than I’d be willing to commit to, presumably you either didn’t have much of a deposit, or have borrowed at the top end of affordability to buy your dream house? Both come with sacrifices.

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If you keep check of what you spend I think that's OK.

You have areas of optional spending you could cut back on if needed.

If you don't already have any savings try and build up an emergency fund. A few thousand pounds saved would mean any unexpected car repairs or other emergency spending would be covered without impacting on your monthly budget.

Yes, save as much of that £1000 as you can and that might give some peace of mind.
It is a big mortgage repayment, but you can afford it in my opinion.

I think it depends how long you’ve fixed your mortgage for. The rates now are much higher than in June and would take a lot of your left over money.

we are fixed until 2027 thank god!!

Have you fixed your mortgage for a long time?

I would avoid any further fixed outgoings such as cars/kitchens on finance.

Take some time to see how comfortable finances feel and save an emergency pot (if you don't have one).

I would add to your outgoing £100 each savings for the kids - driving lessons/cars if that is a route you choose, helping get them started at uni.

At your income level you will be expected to help your kids out at uni quite a bit and if your outgoings expand to meet your income you won't be able to afford to. Saving something for them now will give you a head start and get you used to having the £200 less.

I can see you pay childcare at the moment but chances are as your kids get older and childcare costs fall hobbies, clubs and music lessons will take over some of this. If not you could increase your savings for them when childcare falls.

Do you pay for life insurance? If not that is important to look at. Consider critical illness too and whether you want to pay for that. We get some "death in service" as well as our life insurance but even Large amounts of money can start to look small when I consider I would find it very difficult to work if my husband died (as we are each others childcare, I work nights and I have a 4 year old with special needs) so both salaries would be lost.

OP I think it's the current climate which is making you feel like this. It's really depressing stretching to buy an amazing home and then reading how prices are crashing around us. I feel the same