Where are we going wrong economically?

[Threebear]

Young family (35f + 37m + 1 child 4y), living in an expensive European country. Income is 4700€ net per month + any income from a newly formed business (many months of 300€, occasional months of 2000-3000€). Averaging at 5500€/month over a year although there is no guarantee, the only guarantee is our 4700€ income.

Living costs per month (many of these clearly go up and down by month ergo holidays / presents / expenses, but overall the averages over 12 month periods are as so :

HOUSING:
1600€ mortgage
300€ community fees (bloody expensive we’re aware but nothing to be done)
300€ heating, water, phone, electric, Netflix and Disney tv

FOOD:
700€ food supermarkets
150€ eating out
100€ alcohol, drinks in bars etc

CARS:
100€ petrol
250€ insurance and mechanic work etc for 3 vehicles (2 oldish cash bought cars + 1 old Campervan)

EXTRAS per month average:

100€ food and vet bills for 2 large dogs

150€ presents (Christmas and birthdays)

500€ holidays (1 big 3 week trip to tropics + 2-4 weeks camping in own camper)

150€ healthcare (this isn’t private, this is dental and therapy and medications)

300€ purchases (including everything and more : business fees, parking, clothes, local passes, parking or speeding fines etc.)

200€ kid expenditure including holiday clubs for 6 weeks a year approx.

TOTAL = 4900€

As I hope is clear I keep a very detailed excel of our expenses. We are living day to day and we cannot see where we can cut costs easily which may sound laughable but allow me to explain..

Our holiday expenditure seems high clearly, however it is our 1 desire, not wait until retirement to enjoy our life and see the world. We love to travel, we love our Campervan, and we absolutely love that we can take many weeks a year with our child while he’s young to show him the world whether camping in southern Europe cheaply or travelling further afield (trying to be cheap in places like India or Thailand but always ends up over budget as though we’ve been vacationing in the USA which we do not ).

Bar this I cannot actually see where and what we could cut. For that reason I wondered if it might be useful to hear from other people/families in similar salary ranges, to know their expenditure and where they have managed to cut corners during times of inflation.

In reality our home costs us a huge amount but it is a dream. It needs a full redo and we don’t have a penny to spare to do so but the purchase was necessary and never in a million years would we give it up. It’s only 120m2 with small outdoor space but as I mention it’s an expensive country. Moving countries isn’t an option at all although we have considered it time and time again. Finding this quality of life is hard to come by.

We have 3 vehicles. The camper is clearly not necessary but sadly the 2 cars are for business / work and hobby reasons. If we give up the camper we save maybe 1000€ a year but no doubt would quickly swallow that back in extra holiday expenses. The Campervan over time is cost friendly and so worth it. Our vehicles are all cash bought, but they’re all getting old and due to climate we live in get older quicker. We cannot afford to get newer vehicles.

We purchase the most basic of clothes for ourselves once holes appear in the used ones. We buy presents that are useful ergo to avoid expenditure over year (bike for birthday, skis for Christmas, winter jacket as main present for each other etc etc).

The reality is we need minimum 1000€ to save/invest at this point in our lives. If business goes well then great but if it doesn’t I am terrified to find myself mid forties with nothing but a lovely home to show for it.

Luckily retirement is settled for us as both come from families that did ok during the 80s and 90s meaning we will inherit more than enough to retire at 65 comfortably. Previous to this our existence is just month to month however and we do not trust the world economy or politics now to be ok without our own savings being built monthly.

Many thanks for any comments on how you would personally cut expenditure on this budget.

Basically you need to gradually reduce spending so it becomes a habit and concentrate on sorting out the home as quickly as possible.
I really think you need to be careful about relying on good inheritance money by the time you are 65. Anything can happens. The money could disappear before the parents pass away. What is something life changing happens to you or your DH and you can only have 1 income? In 10 years time your child's expenses will start growing significantly (education and hobbies and sports clubs and so on).
Push as hard as you can for 2-3 years to get the house sorted, then start saving for the future a little bit whilst reverting back to your current spending.

I'm not sure what you want from this post? Obvious answers are cut down on hols, don't speed, don't eat out. But if you want to do all those things and aren't prepared to compromise because they're important to you there's not much anyone can advise. earn more?

You can’t afford to spend €500 a month on travel when you mortgage is a large proportion of your income and your home needs renovations. The campervan isn’t really paying for itself when you’re still paying for long haul trips on top of the van holidays.
reduce your spending on presents and eating out if you’re serious about saving money for other things
ditch the subscription services
shop around for better deals on mobiles, insurance, broadband etc

You are spending beyond your means. Just do what everyone else who doesn’t have endless pots of money do - budget.

I'm not sure I'll get over a 4 year old needing a 390€ bike because they (aged 4) go to a professional bike club!

In order to save you must spend less…it’s very simple!

I think that’s a little mean. We are highly sport driven people and live in a place that produces top world sports people in certain areas. He is part of 3 professional sport clubs one being a certain type of biking. Yes he’s 4 and that’s the age they have to start if they want a chance at professional sporting later in life. We cannot afford private school but at the minimum we offer him these sport clubs to get the most possibilities for him in the future. If we were musicians no one would bat an eyelid at 300€ clarinet or 500€ piano for example, of if we were in the uk and wanted him to be multilingual would you judge for paying 100€/month for French or Spanish classes? But for being a bike you think it’s laughable… and so you are aware that’s actually heavily discounted pricing due to my connections and I sell the bikes for near purchase value 2 years after heavy use.

You’re completely right, hence why I am here to work out where to budget. Easy to say and hard to do sometimes objectively so best to go out and find the public’s opinion. One little post and I’ve already got a great idea of what to do and where to start.

So you’re paying off a mortgage (which will eventually be an asset), enjoying holidays (so lots of wonderful experiences along the way) and think retirement is likely sorted? Honestly, that doesn’t sound too bad to me.

We have four kids and while they were young and we were working, the cash flow was tight. It meant we didn’t really get to investing until our 40s, but they had great childhoods and we enjoyed the travel and experiences.

Really, if you want to invest now, you only have two choices, cut back or earn more. It sounds like with your business growing, earn more is the answer. If I’ve read correctly, the only guarantee is the 4700. So, why not continue to manage on that? Then, for the next two years, put every cent extra from your business into investments, like ETFs? Reinvest all dividends and let things compound. In two years that investment will have grown, by that time, maybe take the share dividends as ‘bonus’ money for the budget, but keep investing all business profits. If you can’t rely on the profits now, then don’t, live within the 4700 budget and don’t get used to having that money from the business. It could really boost your situation very, very quickly.

Thank you for that response! I was feeling bad about all the travel but in reality what you mention was always my plan… to live on one and use business assets for investment portfolio but 1. We ended up purchasing a far more expensive property than originally expected so no extra cash available as stretched out on the mortgage and back to 0 again in savings. 2. I’ll be honest and say I often panic about said business as though it will produce nothing, it’s early days and the reality is it’ll either go up or I’ll go back to employment one day. I think it depends on the day and my outlook but the reality is as you say, and it’s nice to hear someone else did it that way with all the travel and experiences and it worked out great. 😊

At age 4? Yes. Many people would baulk. I’ve four children. The pie wouldn’t cut that way. Do you plan on having more children. £390 is a lot on a hobby for a very young child. But o really think holidays and incidentals is where you are stretching ourselves (given you’ve no childcare costs.)

Without knowing what things cost where you live and what deals etc are available it's hard to specifically advise.

In the UK a good place to start is the Moneysavingexpert money makeover because it systematically walks you through reviewing all your expenses so if you reduce the cost of most or all of them a bit, the savings can add up to a decent amount that increases your disposable income significantly.

https://www.moneysavingexpert.com/family/money-help/

If you have comparison sites where you live can you use these to reduce the cost of your utilities etc?

But for a family with a decent income in 'an expensive country' your essentials don't seem that expensive, the only thing that jumps out at me is your mobile phone bills. Here you don't need to pay more than £10 a month per person for all the data you could ever need plus unlimited calls and texts that most people don't use much of anyway. Broadband around £25 if you hop from deal to deal, loyalty is expensive in the UK.

Plus obviously your travel and hobbies so do what you can to reduce the cost, discount codes, slight date changes or other flexibility like choosing what looks good value at any particular moment when booking instead of thinking 'I want to go to place X on Y date', when there's somewhere else you'd like to go and if you travel a day or two later it's hundreds of pounds cheaper.

Can you grow your business so you increase your income that way? That would probably be the most reliable way of freeing up money to pay for renovations as well as everything else you need and want.

Cut down spending on holidays, presents, eating out and alcohol. You just have to be honest about what you can and cannot afford.

Well I can see 650 euros at a glance without taking all the joy away.

It's exceptionally concerning that you can't do that if you think you might one day develop a successful business.

Your biggest mistake is to contemplate relying on inheritance for your post 65 years. You should be endeavouring to be independently financially secure.

You need to cut down the discretionery spending and you also need to get a job. Do your side hussle on the side because that's what it is. Otherwise you are living beyond your means.

I think in your shoes the obvious things are either for you to take a paid job 1-2 days a week while the business builds up (I hope I understood correctly, that this business is your full time job), and to drill down into your supermarket, restaurant, transport and gift spending aiming to reduce each by 10% or so.

+1 for homeswapping. It’s brilliant for young families, especially when you swap with someone who has a child around the same age.

Agree with this.

I'd also apply it to presents and knock the holidays on the head.. "for this year"

We make significantly more than this and spent nothing like this amount on presents.
Granted our children and younger but the adult gifts should be reviewed. No no child needs a 400 euro bike get a second hand one.

Nah, you’re being unfair. Sat here, absolutely not baulking at a £350 bike. It’s for a sport. It’s going to be used regularly, and resold.

OP has many savings she can make as pp’s have pointed out, but the bike isn’t one of them. They can well afford it.

being able to allow their children to do a hobby that incurs costs is exactly why many don’t choose to have 4 kids.

earn more?

I think this poster was being tongue in cheek but actually it’s not a bad suggestion. You have set out your spending. You’ve identified spending that lots of people would think of as discretionary, and explained why for you it’s something you would prefer not to cut. That’s perfectly fair.

You have a business which has the potential for growth. I would put your efforts into that, so that the variable and contingent income you currently get turns into a reliable and predictable income that can fund your savings.

At the moment you’re having your cake & eating it …

working part time, building a business you presumably enjoy. Flexible work schedule to allow holidays etc.

multiple holidays / travel

big house

eating out etc

3 vehicles

expensive hobbies

relying on future inheritance for long term security

not sure what you want from this post… any cut backs are going to hit one or more of the above? You could choose to get a job & earn more regularly, or reduce spending, or plan for the future (what are you going to do if the inheritance doesn’t arrive?! Care fees, divorce, tax etc).
But any more sensible approach will reduce the indulgence you appear to value

You could eat out less, and drive/park more sensibly; but realistically it's the holidays.

Could you go for two weeks or even 10 days rather than three weeks? Or save the big trip for every other year?

How long can you keep this up without getting into trouble financially? It will be a big mindset shift to start budgeting, but doing it now while child is small will be easier thannwhen they are 8 or 9 and can remember what they used to have.
I say this as a relative has been waiting for their inlaws to die for the last 15 years. And spending in expectation of a big inheritance. Inlaws are a robust late 70s, with all the money in the world to throw at medical treatment. There is no reason they won't live for another 15 to 20 years at which point my relative may be bankrupt.

Is exceptionally concerning humans like you exist.

Thank you and yes exactly! No plans for any more kids precisely so we can enjoy our life / hobbies / have 2 dogs etc

What did @RosesAndHellebores say that warranted that response? What a strange reaction to the truth.

I’m not sure why you think we will get into financial trouble. We do save as we earn on 0-500€ extra a month over expenditure, however it goes up and down. We have no debt bar the mortgage and never have. On a rainy day we cut everything bar food and housing, on an extremely stormy day ergo crash in markets we sell the property and move somewhere else. The relatives in question are mid 60s, by the time we hit 65 they will be 95 and 100 respectively. They are 2 different families from 2 different countries, so even if one goes down the drain I highly doubt the other will which is fully protected in trusts since the death of a another family member 20 years ago. I think I can rely fairly certainly on this inheritance therefore. Fair point however on learning budgeting now while my child is young.