How much should we be saving a month?

[Cheesypizzaa]

We bring home about 6k in total between us. 1k mortgage, 1.5k childcare fees, 1.5k other essential bills, petrol, food. So 2k left for discretionary spending/saving. My partner and I can't agree on how much of this we should be saving!

We have a 35 year mortgage that runs until we're 70, so I'd like to overpay to bring the term down. And just general saving for potential baby number 2/another maternity leave.

Want to be able to enjoy ourselves and go on the occasional holiday, but not just fritter the money away (I work full time at the moment and want to go part time in future, so income likely to go down rather than up).

If I were you I’d be focussing on overpaying the mortgage and pensions

but of course keeping some aside to enjoy the finer things in life

This is what we're trying to figure out. We don't have a set budget for personal spends. I'm trying to get in the habit of whacking £500 on the mortgage on pay day. Then we usually just rollover whatever we don't spend that month out of the 1.5k. There hasn't been a lot recently due to buying house bits but also just lack of budgeting

I think when you have £2k / month "spare" it's easy to think like your husband that you've got plenty money.

But actually when you look at the long game, you really don't. Low pensions and long mortgage are not obvious on a daily basis but will become more so over the next 10 years. Especially if you want more children and still have the nursery years to come.

You also seem to have bought a house which requires work? How is that going to be funded?

I think the £2k pot needs splitting into

Long term savings - for house, mortgage etc.
Short term savings - for mat leave, nursery etc.
Current lifestyle - what does this need to include? Food nappies etc? £2k isn't going to go far really here.

I honestly didn't think 35 year mortgages were that uncommon! We bought just as interest rates soared so had to stretch the term to keep the monthly payments we were comfortable with.

Thank you! This makes a lot of sense and I definitely want to keep an eye on the long term.

Food and petrol are included as "essential bills" so that's covered.

House doesn't need loads of work - it's mainly just been things like buying furniture, white goods, etc as we came from a one bed flat. But of course there's ongoing maintenance. Could do with new bathrooms but that's not even on my radar at the moment!

I honestly don't know how anyone can say things like 'I don't know anyone with a 35 year mortgage' because surely most people know very little about the ins and outs of anyones mortgage except their own and maybe a few close friends/family members?

Surely any of your colleagues or even friends or siblings, cousins etc could have a 35 year mortgage and you wouldn't even know unless they told you?

I’d start with a £750 per month mortgage overpayment ( that you can change at any point) and then save the remaining £1250 in a savings account / premium bonds/ s and s isa.
you can then vary this as time goes on and you earn more/ less whatever.
overpaying your mortgage now will save huge amounts of interest. Try different amounts with a mortgage overpayment calculator

Are you both paying the maximum your employer allows into your pension scheme?

We're paying the max that our employers will match (which is a measly 4%) but then an extra 5% voluntary contribution too.

I suspect people saying ‘I don’t know anyone with 35 year mortgages’ are in their 40s and 50s… we just got a new mortgage (29 years) and our broker said longer mortgages are now incredibly common for younger buyers in the south.

anyway. I’m would separate overpaying the mortgage from your more pressing need to save for baby 2 / having 2 in nursery. I’d possibly overpay the mortgage by £100 or so a month just for now. You can overpay more when both children are in school. Then I’d save £400 a month for the second Mat leave. I’d spend the rest having a nice time tbh. I suspect I’m smack in the middle, personality wise, if you and your husband!

This is their total money available. Not savings availavle

ie holidays, Christmas, books, car insurance, unexpected house costs, new furniture, meals out, clothes for them and children, etc etc etc

Sorry. That last was meant to quote sashagabadon

I don't think a 35 year mortgage is unheard of.

Our first mortgage was 33 years....but we were mid 20s so wasn't an unrealistic age to have paid it off.

I would set aside at least £700 a month for things like Christmas, car, holidays, emergencies etc, £500 a month into premium bonds/Isa and then £800 a month over payments on mortgage

I'm also impressed that £1.5k covers all your other bills, food, petrol etc.

Thank you. Houses where we live (a pretty grotty town in the south east) cost half a million for a 3 bed. We have a decent amount of equity and earn decent money (although perhaps not by mumsnet standards!) and a 20/25 mortgage would have been too much of a stretch with nursery fees too.

Definitely conscious of wanting to save/overpay, but also enjoy the odd family holiday and days out with my little girl.

Given mortgage rates… amongst my friends, colleagues and family… it’s been a hot topic

Haha maybe I've missed some bills? That's literally just food, utilities, council tax, broadband and petrol. Not one off costs like car insurance etc.

I would consider keeping the mortgage term long in order to keep the mandatory payments low, but using a high interest savings account so save into which you will ultimately use to pay off the mortgage early. The savings account must have a higher interest rate than your mortgage for this to be worth doing.

I took out a 35 year mortgage when I was 28.

House insurance
life assurance
CI cover
home emergency cover

cleaner? Window cleaner?

Yep so everything you've listed comes out of that 2k.

So I'm thinking

500 mortgage
500 savings for holidays, Christmas, home maintainence, car repairs etc (more maybe?)
Then the remaining 1000 I need to work out how much we need for daily spends (meals out, clothes, day trips etc) and how much of that we could save. I think it will differ month to month.

I don't know if I'm putting too much emphasis on mortgage and should be whacking the money in a high interest account or isa instead?

We don't have a cleaner. Insurances we paid for the year when we bought the house a few months ago, but yes they will be an ongoing annual cost too that I need to account for.

I think that sounds reasonable.

You are also 'lucky' (haha) that you took your mortgage out when you did - in that it won't get much worse (you would hope!). When we finish paying childcare all that 'extra' money will go on interest when we come to renew!

I know multiple people with 35 year mortgages (late 20s/early 30s, south of England). It's not ideal but I wouldn't say it's abnormal with prices and particularly interest rates as they are.

I think, OP, I'd start with a sensible budget for all the annual things discussed above, including a holiday, and then allowances for birthdays, clothes etc, and probably at least some "pocket money" for you and your partner. See what that leaves you with.

Then have a think about what you want to save for (i.e. mat leave, paying down the mortgage). Recognising you're likely to be unable to do everything at once I would be thinking i.e. I want to have 12k (or 24k or whatever) saved up for maternity leave in 36 months time, so I need to save £350/£700 per month for it), and I'd also like to get the mortgage down by 5 years, that needs £X hundred per month.

When you've got all those figures you can then sit down and think (either on your own and present your case or together with your partner) does the budget plus the ideal savings = less than 2k or more? If more then do you want to change the day to day budget or the savings? Maybe you say okay, I still want to save for mat leave and I do really want to overpay the mortgage at least a little bit, but let's call it £50 a month until we've saved for mat leave and then put that up. If less, happy days.

If you have no cash savings I (sadly) wouldn't be whacking it on the mortgage until you've got at least an emergency fund and preferably a couple of months expenses in an easy access savings account. I might still do a token amount though, even a little bit adds up and makes a difference.

This ended up super long OP, sorry! It's how I go through my budgets, but trying to translate it out of my brain makes it quite long winded.

Haha yes! Didn't feel so lucky at the time, but at least we were aware of the situation and could factor the increased mortgage rates into our budget.

35 year mortgage is fine.
Agree you should allocate money into different pots.

Mortgage overpayments
holidays
Personal spends
general savings (subdivided if needed.

I would prioritise as standard mortgage overpayment maybe £100 or £200 (you won't even notice its going and it will put a dent in the mortgage. I set mine upnto reduce the term (you either reduce term or reduce monthly payment)

Assuming 5% of 400k youd pay it off 7 years early.

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/
You can play arpund on here.

Personally id go for max over payment usually £500 first first couple of years as that willake a massive dent (overpayments early are more impactful than slow drip payments)