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?

@Justkeepswimmingswimming we budget £50 a day for holiday clubs and
£15 a day for wrap- around and extra curricular clubs per child. We don’t use holiday clubs at Christmas or for three weeks in summer. It’s still a big saving compared to nursery.

@InfoComet we are not "desperately" saving. We are saving whilst also trying to enjoy our life a bit when we are not at work.

@Justkeepswimmingswimming yes, still much cheaper than what we are paying now

Those phone bills seem high, too. If they're not locked in to your TV/broadband package, I'd recommend doing as a PP suggested and getting 1p mobile pay as you go Sims. If you're on the WiFi at home and at work, and accessing downloaded content on your commute, you hardly need any data at all.

I top up my 1p mobile balance by about £40 a year.

There are some easy cut-backs you can make without having to completely sacrifice "treats".

You seem to spend a lot on food. If you cook your evening meals at home then it is a very easy fix to cook at bit more and that is your lunch the next day. Instead of a take-away or meal out once a week then make it every other week.

Regarding gym membership, that depends on what you do at the gym. If you just use the running machine and do some sit-ups then you are wasting money but if you are using weight machines then that is less easily replicated at home. If you do classes, can you pay per class instead? Do you go often enough to justify £50? Are there cheeper classes locally? With commuting and a small child I would be surprised if you are using the membership to its fullest.

You don’t mention pension so hopefully that comes out of your income before take home? If not, pensions are the most solid ‘investment’ you can make, so prioritise that!
I your shoes saving for a deposit it makes sense to keep your money easy access, however that means you’ll not see the benefits of compound interest over multiple years.
In your shoes I’d cut back somewhere to give myself an additional £200 a month and put it into an investment account (Hargreaves Landsdown or similar) and forget it exists! Over time you’ll see compounding increases for the same outgoing and hopefully have a nice lump sum for uni fees/kids first cars etc

The first thing to do is painless savings. So go on money saving expert and compare all your regular bills and see if you can get a cheaper deal.

Then see what you can downshift, so can you drop to budget brands for anything, can you limit the number of takeaways or meals out, can you use a cheaper gym, cut commuting costs etc.

You don't have to be miserable, but taking a packed lunch to work three days a week and limiting meals out to say half of current levels would make a big difference while still allowing yourselves to enjoy yourselves and not feel deprived. You might find you enjoy your treats even more if it is less frequent.

Then I would aim all of the bonus at savings this year and not take a holiday or reduce the holiday spend to say a third of usual until you have bought your house.

Make sure you are getting the best rates on your savings too!

Oh and look up good to go boxes for cheap food.

You could get one from a sandwich shop or bakery and use it for lunch then next day.

If it were me, I would dump most of the bought in lunches. Do it once a week perhaps. Ditto most of the eating out and takeaways. And gym membership. And rein in your holidays. It looks as though you could save £8000 or so in a year by trimming things. But you are not me so your priorities will be different and your desire to own your own house might not be as strong.

Definitely the food- like everyone else has said.

Realistically you could half it - say £350 a month for food shopping including a packed lunch for work. Then maybe £100 a month for a meal out?

There's easily another £450 a month into your savings pot. Or more if you cut eating out.

It's more about the lifestyle you are willing to accept.

Your phone bills seem high, and I'd drop buying lunch, that's an instant winner - I do ours while cooking tea, I've usually got some home made cake on the go, sandwiches with salad cheese and home made chutney work out pretty cheap. Then we each have a thermal flask of coffee.

Just double checking that you have thought about -

-pensions
-life insurance
-income protection and/ or critical illness cover
-moving costs - at least you don't have stamp duty, but estate agent, surveyor, solicitor

Also once you have a house you need to budget a certain amount for maintenance every year.

Basically I do think you would ideally be saving more, not 'just' for the deposit, and protecting yourselves a bit more against health issues in the future. Are you using your ISA or LISA allowances?

But it's true that that 1400 going on nursery fees is going to feel amazing when it stops.

Yes, we do have a pension, the income I have shared is after pension payments

@PermanentTemporary I get those benefits via work. DH only gets pension out of what you have listed though. We want to invest in insurance for him once we have bought our house, I know it needs to be sorted

I actually think you're doing really well! You spend half your income on childcare and mortgage, and still manage to save almost half the rest while living in London and enjoying your life a bit.

I imagine your mortgage repayments won't be anywhere near your current rent + your savings, so if you're close to buying as it is, I'm not sure there's a problem to solve?

If you are looking to save more, you can see where to cut. But you're not obliged to live on a shoe string and squirrel everything away if you don't want to

[shrug] I would say you would ideally sort life insurance right now, sorry. My dh died suddenly but had become so ill for years that he was uninsurable for a decade beforehand. It made life a lot harder. With 2 small children and those sorts of childcare fees your life is expensive.

Tbh life insurance is not difficult. I pay £10 a month and there's plenty of cover.

I'd also say wills but as you're married that's not so bad, it wold be ideal to have them but not terrible.

Sorry you asked how we spend also. I do put a lot into pension, over pay the mortgage, have a dd to an isa. That's my "sensible " money stuff

So all the rest I don't feel too guilty about spending on what I like

Take a packed lunch to work, you would be astonished how much money you save every month.

I think you’re doing things right! A good balance of saving and enjoying life.

Do not leave London for a cheaper mortgage - live where you actually want to live.

How old are you? Is there scope for promotions / pay rises in the future?

I think your budget is OK and looks liveable.No point taking yourself to the absolute minimum and being unhappy.You have been told you would be eligible for a MG so I would maybe see if a few cutbacks here and there but overall all good!

I think you have a good balance. You are saving a good amount each month and you are having a few take aways and eating out but not often. Soon the nursery fees will be replaced by cheaper wrap around care and you'll be able to save a lot more. Unless you have another child, of course, in which case the money you are currently putting into savings will go towards more childcare.
I would maybe cut the gym and make pack lunches 3 times a week. I don't think I would cut anything else.

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

Say 6K for 2 or 3 trips - that's easily a saving of £500pcm which you could add to your current £1400 pcm savings - yes, it makes a big difference. But holidays are a luxury in my eyes, not an essential and I love my holidays.

If you don't want to "desperately save" for a deposit, it'll obviously take a lot longer if you don't want to make short term sacrifices for a year or two.

Are those normal gym membership prices for London? We pay just over half that at a local (non-chain) place and it includes swimming.

As other people have said, phone bills are too high for no reason. Lots of places do a pay monthly rolling sim with plenty of data, texts and calls for £20 or less a month.

Would also suggest having an overall food budget, it's easier to keep it in check that way.

Putting the bonus straight into house money instead of holidays will make a big difference too.

Also how/where are you saving the money - what kind of interest rate are you getting? There are some good ones out there atm.

It may help to look at when you're planning to move and work back toward calculating how much you need to save per month, as £1400/month doesn't really tell you anything about whether you're on track/being realistic or not. Let's say you've just started saving and you're looking at a £450k first home - with all the other costs to account for and a buffer, you're looking at saving for what, at least 3 years, ideally longer.

How much do you want to save and within what timeline?

Either if you able to go for promotion or a better paid job?

Are you using a LISA? That’s a free £1k for nothing.

How much is your bonus? I would salary sacrifice bonuses into your pension to avoid the 40% tax. Save for your holidays from cutting your food budget, which like everyone else has said is very high. You bills also seem very high.

I would shop around for cheaper phone deals, I pay only £8/month on mine. Gym also seems a bit expensive.