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?

Your spending is not lavish, but there is a balance to find between saving and enjoying daily life. You can’t have your cake and eat it, unfortunately.

A more detailed budget will help. I agree with pp that you should budget monthly for quarterly, annual, and random expenses. It seems a chore but it really takes the pressure off. it will also help when you are the one responsible for maintaining your home and dealing with emergencies.

You need to cut your food budget somewhere. Either weekend meals or work lunches. look at how you can achieve the meals out more frugally - can you sometimes have a really nice picnic, or go out for lunch once a fortnight or even once a month instead of weekly. Choose a cheaper dish, have coffee at home. Be clever with your spending so that the quality of what you eat doesn’t go down but you are shaving bits off here and there.

We and our friendship group place a lot of importance on our social lives, eating and drinking out etc; but it’s also been totally the norm over the past few years for various friends to suggest dinner parties at home rather than a restaurant, or going to a particular restaurant on a particular day which has a set menu value price deal, or to the Wetherspoons rather than an expensive pub for drinks, because they’re really hammering down on saving for a house deposit. And everyone has always been very happy to oblige! If you spend a lot on socialising, your friends are likely to be as amenable.

In your shoes I’d probably try and take lunch/coffee to work, but keep the weekend treats.

One thing you might want to think about - saving 10% deposit isn’t enough. You’ll probably want to consider saving some extra for solicitors fees, surveys, removals costs, stamp duty, any decorating/new curtains/furniture/white goods that you’ll need in the new place. Plus you don’t want to leave yourself without any money as soon as you’ve moved in, just in case the boiler goes or whatever two months down the line.

Are you making regular savings for your DD? £50 a month will add up to a good chunk by the time she’s late teens and wants driving lessons or something.

If you used something like Monzo you can save regularly across the year into separate pots for things like car insurance, home insurance, Christmas etc so when you come to the month it’s due the money is ready.

You've had a lot of good advice here. I'd be very nervous about the 25 year mortgage window - you're pretty close to a point where the maximum mortgage you can get starts to reduce as you won't have time to pay it off before retirement. Given that, I'd suggest a year or so of saving hard might be worth it for your long term goals on the basis that next year you know you'll have some free cash from reduced nursery so can make up for it.

OP You're saving 1.4K a month both with nursery fees and being 'frivolous'. Without the former you'd have close to 3K which is almost one of your entire salaries.
So no, you're not being 'silly'.

However:

• You need to have some savings after moving. What happens if one of you gets made redundant?
• As a PP said your ages might restrict the size of available mortgage for FTB but also, a smaller mortgage can mean winding down or even retiring earlier.

You said you're not 'financially savvy' but there's plenty of advice online e.g. MSE, run the figures and make the decisions yourselves as to what you value.

make sensible swaps

meal prep for lunches on a Sunday night for the week

buy some nice meal deals in m and s or Bingham ready meals instead of a takeaway or meal out - many meals out are ready meals anyway - so just swap something into your weekly shop. Keep some nice frozen fish and oven chips in the freezer for a Friday night, that type of swap.

your dh travels by car but you don't list insurance, MOT, service - which would be spread over 12 months so you don't have unexpected bills.

Have you thought of swapping your gym membership for a cheaper gym?

swap mobile phone for sim only for £10 each

The broker we spoke to said we could even get a 30 year mortgage if we wanted to. Just to be clear, we don’t want to do that and plan to overpay once nursery fees are done so I truly hope we won’t still have a mortgage in our 70s (plus some inheritance much later in life). But this is just to say that we were never told we couldn’t get a standard 25 yrs deal.

We eat out, but probably only average once a week and more likely to be brunch/lunch or coffee and cake than dinner so total spend for the month is about £150.

watch/listen to Meaningful Money (youtube/spotify), that will quickly help you understand the basics of financial planning. Pay yourself first (savings/paying off debt) as this is what will improve your financial standing. Good luck!

There’s a whole spectrum between ‘never eating out’ and ‘£450 on lunches, coffee and meals out’.

That's true, but with today's prices that's not 'a lot'.

200 a month on lunch is 50 quid a week. For 2 people. So that's 25 a week which is either daily sandwiches or a single work lunch + drinks out. Which isn't 'that' bad.

Similarly takeaways are very expensive for two people it's at least £20 so even one a week would add up to £250 a month.

£450 seems high especially as OP mentions 'coffee and cake' but it's nowhere near the cost for having a takeaway twice a week, or more, for 2 people (not counting the young child) once you break the figures down. I appreciate that some people eat out once a month so this counts as a lot but unless you're actively trying to cut back I don't think it's that extreme.

Before Covid... that would've been just above £200... things have become so much more expensive.

Maybe I'm biased because I spend on takeaways/meals out but I budget X amount of 'fun spends' for everything clothes, 'house non-essentials' etc. If I need to buy new clothes then I just reduce the eating out.

@PennyLany I have just been approved for a 34 year mortgage 🫣 and I am 41, for specific lenders as long as the lender can see pension contributions 75 is deemed OK (I actually plan to pay it off in 15 years but wanted the flexibility of the lower payments and then will overpay on an ad hoc basis)

Can you explain this logic?

Id have thought having a 30 year mortgage and paying mortgage instalments would be better use of the £1750 per month over at least 2 years, than paying rent and having a 25 year mortgage than a 30 year mortgage. Especially as the first 2 years your mostly paying interest on the repayments

@MikeRafone what I meant is that we’d take the 30 year mortgage with the idea that we will overpay it and not actually end up having a mortgage for 30 years.

Ahh, it’s just the way it reads

just to be clear, we don’t want to do that

just check the restrictions on overpaying

how long away are you from having u to our deposit and purchasing a house?

Your phone bills are extortionate!

Mine is just £10/month on a sim only plan - I'm out of contract now and don't need a new phone so this was thd way to go for me.

You don't need to worry at all. We got a mortgage recently and they didn't even look at our bank statements. You clearly have a good amount of disposable income, which you could spend on your mortgage payment if you had to. They look out for committed payments like debt repayments.

Quite a few people here mentioning about phone contract costs - but how do you factor in the cost of a new handset every X many of years?

For me paying monthly for a phone is much more affordable than having to fork out huge amounts for a new handset when needed.

I would find a man who's had 20 years to buy a starter flat and pissed away his high earnings instead as deeply unattractive.

You budget for it 🤷‍♀️ by putting money by in a savings account accruing interest until needed.

If I did my maths right you listed about £4,700 worth expenses + £1,400 savings (= Total £ 6,100). Your income is £6,600, so where does the extra £500 go? I'd try and see where you're bleading money and make some cut backs

Nevermind just realized I did definitely do my maths wrong 😅

I'd cut on the food, especially lunches at work!

Sack off the gym. You have a toddler, no-one needs the gym!

As pps have said, your foodie expenses can be reduced.

Do you have to take the train/drain (😄) daily?

Can you WFH or buy advance tickets??

What I did not get op is your £450 a month food for two people doesn't cover most lunches and a fair number of dinners. What on earth are you spending £450 on?

It’s just a couple of brunches in a cafe and a couple of take aways we are talking about, plus the odd bought sandwich from pret or m&s when in the office

^^

But it massively adds up