How do you spend your income and are we doing everything wrong with our money?

[PennyLany]

I don't openly talk about this in RL so was hoping to share here in MN and understand how others manage their income. We are not financially savvy so we are just aiming for a 10% deposit to buy our first home (we live in London so very £££) whilst managing two full time jobs and a little toddler in daycare.
I understand circumstances are very different for everyone and it will also depend on whether you have additional assets, savings, properties etc. This is where we currently are, are we being silly with our money? We are not depriving ourselves of anything and we lean into the occasional treats as we like eating out and want to enjoy life but I also feel constantly guilty to spend extra money on clothes, stuff for the home etc as non essentials.

Take home pay is £6600 between the two of us

£1750 rent
£1400 nursery
£300 commute costs for the two of us (I take the drain, DH drives)
£100 2 gym memberships (we are thinking we might cancel this and workout at home instead)
£60ish phone bills
£450ish bills every month including council tax, although these vary a lot
£450 food
£200 buying lunches when at work (yes this we could cut massively)
£250 food and coffee treats for the month (meals out and takeaways etc)
£200 or so is usually spent on monthly extras that change all the time, these could be things like bday gifts, dentist appointment and a haircut, extras needed for the home or DD etc

Holidays are paid for with our yearly bonus. Nothing too fancy, just a couple of European trips a year in nice but modest hotels.

We manage to save about £1400 per month which we are putting towards a house deposit. We don't have extra savings or investments on top of that growing savings pot for the house.

Are we doing this all wrong?

You're spending nearly £1,000 each month just on food (in various forms) that is huge!

If you rationalised this, made coffee at home, took packed lunches - that would have a big impact immediately.

Personally I see no point in living completely frugally with no space for treats if you don’t have to.

That being said, you could quite easily save £400-500 extra per month, which would really help boost your savings and deposit.

Why not have 6 months of meal planning, home workouts, reducing phone bill, checking other bills, no lunches at work & seeing what impact that has? Cash stuffing might help.

As pp said. Almost £1000 on food!

Yes I know, food is definitely something we are not organized with. We cook from scratch and eat healthy meals but rarely take lunch to work and we do really enjoy eating out as a family so those are our main treats. But I agree we could save more on that.

From your expenditure it doesn't look like a mortgage or savings are really a priority for you

It's all very well saying you're aiming for a 10% deposit but at the current rate of saving you're a very long way from that & house prices will continue to rise

Have you worked out how long you're looking at until you will have that 10%?

It's as well to remember that not all mortgages will be available to you with 10%, that's considered a low deposit these days and you may well be paying more interest as a result.

Agree with PP you need to cut the food expenditure massively and look at economising your holidays. It doesn't have to be forever.

You will get bombarded by people encouraging you to basically cut everything back and live frugally. Personally I couldn’t bare to live my life that way as it would be akin to living on JSA.

The worst thing is the fact that the money you are saving will be swallowed up on your mortgage payment when you do manage to get on the property ladder.

It’s a sad state of affairs when people with an income like yours are crippled financially by housing costs!

Have you considered relocating?

£900 on food!!
That will probably more than double what the average family with preschoolers spend so you’ll definitely be able to shave a few hundred off that figure.

Your phone bills seem high. We switched from a full gym membership to a swim membership and jogging, this was really cost effective and good value for money.

You could try setting up a fixed regular payment to your savings account and then you can cap what’s left to spend.

@SausageAndEggSandwich we haven't just started saving, we are planning to buy a house within the next 10-12 months depending on rates.

Having spoken to a broker it didn't seem to be so difficult to get mortgages with a 10% deposit. We have a very good credit rate, a good income and are first time buyers

@Quitelikeit Our life and jobs are in London. I think relocating to a place we don't like or want to live in is also something that massively impacts the quality of your life. I wouldn't be happy living somewhere else just for the sake of a cheaper mortgage.

Why do your bills vary so much? Surely your CT, electricity, internet etc should be fixed amounts?

What does a 10% deposit realistically look like? £10,000? £100,000? How much do you have saved already? If you want to prioritise a deposit, work out how much you still need to save and divide that by a realistic timescale. If you cut back on some of your discretionary (food!) spending and saved £2000 a month, you would have £24000 in a year from now.

https://www.moneysavingexpert.com/mortgages/mortgage-deposit-calculator/

Have you taken any financial advice on how much you could borrow in your future scenario, with hopefully a bit higher income and lower childcare fees, plus your deposit of £X amount?

https://www.moneysavingexpert.com/mortgages/how-much-mortgage-borrowing/

We sacrificed our holiday budget for the year before we bought our first home - that helped the most,

I think you've identified where you can cut back (gym, coffees, lunches, takeaways). Why not try cutting back for 6 months and see how much extra you can save? Can you go without a car if you live in London, use Zipcar or uber instead for occasional trips. We are both creative with our working hours to reduce childcare costs (one starts early, one finishes late), so we only have to cover core hours with a childminder.

@sansou yes we are doing the same this year; it will definitely help but not a massive difference given how high prices are

Yes you are spending a lot but you're a young couple living in London and you're still saving a really good amount every month and childcare costs won't last forever
Main thing for me would be how much will the mortgage payment be compared to your rent?
If a similar amount then you're fine
If its going to be a lot higher then you need to think about cutting back a bit so you can still save when you are owners
There is lots you can cut back on though if you need to

@Rosesanddaisies1 we own our (old) car outright and DH uses it to commute to work, he has free parking there so traveling by train will actually cost him more than driving.
We cannot cut childcare hours unfortunately :(

How much are your bonuses?

I would put that into the deposit fund every year and save up for holidays from what you can save on food spending.

How much are you aiming to save in the 12 months?

If you cut gym that would £1200
Lunches at work £1800 (assuming £50 per week ingredients)
Cut back coffee out to £50 a month would save £2400

Total 5.4k.

You could also add half your bonus and only go on one holiday or for one year save all of it.

Unfortunately if you want to save you need to cut back.

@Jmaho with current rates mortgage will likely be £300-£400 higher but our logic is that we will only have 1 year of childcare fees left and also we will still be able to save, maybe not £1400 per month but £1000 per month which isn't too bad. Once nursery is done we will be able to save even more on top and hopefully salaries will go up too

Have you looked in to the costs of wrap around and school holiday childcare?

Obvious things to save have already been mentioned- phone costs, lunches, takeaways, holiday costs.

There's plenty there you can cut back on. It doesn't look like the budget of people desperately saving for a deposit.

Along with ditching the coffees and lunches, and gym membership, you can get 1p mobile SIM cards and save another huge batch of money instead of paying that monthly cost. And switch to Whats app for phone calls if you are taking them where you can access the internet.

You could save a hell of a lot more if you really wanted to.

Can you do a few tweaks? I agree with pp i wouldn't want to live without any treats!

Can you start by cooking a double portion and taking the left overs to work and having one lunch out a week? Similar with coffee, take it with you other than one day a week? Reckon you could easy save a couple hundred and you might not even miss it!

How often do you use the gym? Mine would be one of the last things I'd get rid of but for me the gym is how i self regulate / improve mental health. Of course working out from home is an option.

One European holiday and one weekend UK City break?

Set up DD for all your main bills so you can spread the cost and make the same payments each month.

I have freezer tea once a week, much cheaper than take away and nor real effort!

How much deposit do you currently have saved

How much do you need

When do you want it by?

-> how much you need to save each month