Case Study - UK family looking for inspiration

[StiffUpperLip]

Me (33) plus hubby (39) plus son (4) plus daughter (1). Below are total household numbers, monthly:

Income = £4100 Net (this is after income tax, national insurance etc. So this is the amount going into the bank every month.

Mortgage = £672 (principal and interest in the UK)
Council Tax = £105
Home Insurance = £25
Life Insurance = £35
Car Insurance = £30
Travel (petrol plus train tickets) = £100
Gas and Electricity = £80
Water = £20
TV Licence = £13
Mobile Phones = £65
Netflix = £7.50
Broadband = £20
Nursery Fees = £900 (!!!)
Afterschool Care = £100
Storage Unit = £110 (!!!)
Fun Money = £200
Groceries and Eating Out = £600 (!!!)

Holiday /Christmas Fund = £150
Son Savings = £100
Daughter Savings = £100

Remainder = £667.5

Pension (mine) = £6750 per annum from age 60 (final salary, defined benefit scheme, current benefit accrued)
Pension (hubby) = ~£8000 total (!!!)

Emergency fund in current account earning 3% = £6000 (currently putting any extra cash here as would like to have a larger emergency fund, but this may just be insecurity from growing up poor and may be better placed elsewhere).

No other investments or savings but no debt either. I keep a cashback credit card but it pays off monthly so the numbers are all included above (didn't include the tiny cashback amounts in income but meh).

Making about £100 every month from matched betting so far but not including this above as still building my pot and not taking any money out yet.

I'm slowly working on the hubby who likes to keep things 'just in case'. I've told him we need to get rid of about half our stuff, keeping a storage unit long term is ridiculous!  We got it initially when we put our house on the market to make it look like we had a more spacious house and get a head start on the packing... 18 months on and another baby has meant we have filled the house to bursting once again and it's still on the market!

Childcare vs my hubby giving up work... We come out about £200 up a month due to hubby working vs him staying home but that's his choice and as the higher earner I'm full time too.

I have a 45minute commute by train, to the only higher income employer in the area, hubby works within 5mins drive of the school and nursery and 10 mins from there to work. I'm trying to get relocated to a satellite office nearer home but this will likely take 6months plus to come through.

Help me figure out what to focus on first/next? In my lil family I'm the driving force behind managing the home and the finances and could do with a jump start as I feel like I've gotten lost in the weeds recently...

Let the face punches commence!

[Rightflyer]

Really just replying to follow. But...

As aspiring retirees to the UK we have been doing a pile of research. So, with the cheek that we don't actually live in the UK and so really know nothing, here goes.

Other than the items you have already identified as concerning (!!!), it looks like a very frugal budget indeed.

Our tentative budget for the UK for 2 people and 1 dog was just around 1100 GBP a month (not including rent/mortgage but including council tax/utilities etc). I posted it in a differnet thread and it seemed to be UK Moustachian approved. FWIW I can post our budget here if you're interested.

(FYI: We got a lot of the numbers from moneysupermarket.com)

[cerat0n1a]

Nursery Fees = £900 (!!!)
Afterschool Care = £100
Storage Unit = £110 (!!!)
Fun Money = £200
Groceries and Eating Out = £600 (!!!)
Let the face punches commence!

I guess these are the places where you have some scope to do something. You already know the answer - paying more than £1000 per year for storage seems crazy. How much of that stuff do you really need? Maybe buy a copy of the book "stuffocation" for your husband?

The nursery fees vs Husband giving up job is not entirely a financial decision - it's also about how you both feel about it. I guess at some point you stop paying when the children are at school. Also, it may be that taking a career break may impact future earnings, so that even though the net income currently is low, it may be that longer-term it pays off not to have stopped working for a few years.

[Kwill]

It sounds like you're doing really well as far as income goes. You've got 1017.50 going into savings per month, including the money for the holidays and the children. Is that new? It seems like the emergency fund would be growing pretty quickly, especially if you start cutting a bit on the areas you identified.

Maybe it would help to split out groceries and eating out. To me eating out is closer to fun money than it is to groceries. I've recently moved to the UK from the States, and I've been noticing that, except for meat, groceries are cheaper across the board. Bread, milk, eggs, fruit, and pasta are often 60 to 80% less at Sainsbury's than they were at my supermarket back in the States. At the same time, eating out in the UK is about the same cost as in the States, but you get a lot less food (no leftovers to take home). When you eat out here, you're paying much more for the service and the setting than you are for food.

Seems like the next question is where to invest after your emergency fund. 3% is good for a savings account, but there are probably better long-term options.

[dreams_and_discoveries]

You've already done a great job in identifying what looks high in your budget, do you have a plan and timelines for making changes?

Is this level of income recent? I'm just asking as you don't seem to have much savings, or have you been spending the excess?

What are your long term goals and plan as a family? Do you want to both retire early? One of your be a stay at home parent? Travel the world? Fund university for the kids? Move house?

Once you've got a common goal to aim for, I think it will help hubby get on board and be receptive to making changes.

[StiffUpperLip]

Thanks for all the replies!

My level of income isn't very new, probably pretty steady from early 2012 but we were saving heavily at the time to afford maternity leave #1, then maternity leave #2... I'll admit to some lazy overspend on take out, Mummy coffee meet-ups etc during this time too! I took 10 months off with each and as the higher earner we needed significant savings to cover this time.  Hubby's income improved Jan 2015 when he moved jobs.

We used some of our emergency fund for a car when our previous one finally gave out too. I was 8 1/2 months pregnant at the time so time and other pressures meant we probably didn't work as hard as we could on research and negotiation. But we did buy with cash and got a car which will hopefully last us many years.

@Rightflyer - I would love to see your prospective UK budget,  it would be very useful for comparison to our own. 

We're lucky to have cheap hobbies etc which helps keep costs down and we're not big on travel or other expensive experiences, we may reconsider this when the kids are older?

Eating out and takeaways is an area I should separate out as suggested @Kwill, I know this is a big waste we could target. Sometimes I'm on the ball and stock up the freezer with yummy easy meals from leftovers or a slow cooker marathon and we eat easy and cheap for a fortnight,  then other times everything gets away from me with house/work/kids and we gave nothing easy and I'm tired and pull out the menus (complainypants alert!!!!!).  Definitely an area to focus on.

I've never really known what I wanted to do with my life and have to admit that growing up poor has me more focused on the security aspect of FI than the RE/freedom side, if you know what I mean?  I'd also like my kids to have the option of university if the want it and the UK university funding system appears to me to be moving towards higher and higher out of pocket costs.

[wespellitmoustache]

Hi SUL,


Your budget seems very minimalist to me. Do you budget anything to home repairs/car repairs/servicing/MOTs/tax/haircuts/necessary clothing/career development? I think mine, unlike my house, is quite cluttered as I like to break down my spends exactly and review them periodically so we can check our spending is in line with our priorities. Speaking of clutter, if you haven't even seen all of the stuff in storage for a while, would you consider just flogging the lot!?

I wonder if you could get your buildings and contents insurance down? We've just changed ours to the equiv. of £11 a month - after cashback - with a good supplier and it includes a £9k rolex (not Mustachian, I know!), other jewellery, £75k contents and various other extras. We've saved well over £300 a year from the one our broker set up.

Also wondering if your contracts can be shaved soon? I've just switched to GiffGaff which saves us £276 a year. These all seem like small silly things but a) neither of us get paid that much in an hour, so a simple switch it usually worth it b) when you keep shaving tiny little bits, after a while it really adds up. We've shaved £950 pcm off our expenses since I started "economising" in February of this year!

We're in a different position from you in that we're in a "debt emergency" rather than making headway towards FIRE! Our take home is £5.5k a month (this is after a 16% pension contribution) but we're currently spending £2.8k on paying down debts and we will be free by March 2017, at which point we plan to devote £2k a month to FIRE and the remaining £800 on travel/home improvements. I'm aiming for a 50% savings rate, even if our earnings increase or our expenses decrease further, as we're 25, enjoy working and want to strike a balance between the option of "getting out" but enjoying spending a little on seeing the world now.

University worries me somewhat, too. We're lucky in that DD's grandparents are extremely well off (they retired at 40/50 respectively, but swiftly went back to work again) and have a trust fund for her, but I have no idea what things will look like in the future. I do think, though, that if I had my time again I would have gone elsewhere in Europe to take advantage of the near non-existent fees or perhaps even have just commuted to somewhere close to home.

Nice to see another UK MMMer - good luck!

[Rightflyer]

Hi StiffUpperLip,

Below is our base budget and the sources we used. We tried in all cases to recreate what we have at home (Canada) so the costs reflect a very average, middle class living.

Notes: The budget doesn't include contingency, renter's insurance, vacation or fun money. We also missed the      water and TV licence, as was pointed out by the excellent UK Moustachians here.
          The numbers are rounded up to the nearest 5 pounds.
           


Item                          GBP/mth   Notes/Sources   
Rent                          £900.00    2 bedroom detached in Stroud area   
Council tax                  £133.33    from Stroud District Council site   
Gas                          £40.00     from moneysupermarket.com   
Electric                  £40.00     from moneysupermarket.com   
Internet/Landline      £35.00     from moneysupermarket.com   
Netflix UK                  £7.49    Netflix   
Mobile                  £15.00    from moneysupermarket.com   
Food                          £265.00    compared our current spend with Numbeo   
Booze                  £100.00    mysupermarket.co.uk&bighospitality.co.uk   
Meds                          £35.00    assumed same pharmaceutical costs   
Dog                          £30.00    mysupermarket.co.uk   
Auto                          £234.75    from AA cost of auto ownership   
Misc                          £100.00       
Total Monthly          £1,935.57    for 2 people and 1 dog   

[Doubleh]

Good to see more UK faces! You're budget overall really doesn't sound crazy so give yourselves kudos for that. I'd chip in a couple of thoughts:

1. Mobile phones definitely sound expensive. If you're not in a contract or can get out of it then PAYG sims are much cheaper. Giffgaff is a good option and you could at least cut your bill in half.

2. Childcare is a big cost obviously, and not much you can do to change it. But you should both be eligible for childcare vouchers which help by making some of the cost tax free. Are you getting these yet? If not speak to your employers; if one or both don't provide them you may be able to talk them into it as the cost to them should be nothing and the providers will do all the work. Also I'm assuming you know whether or not you're entitled to child benefit and are claiming it if you are?

3. We also have two small kids and fall back on takeaways more often than I'd like. But what often saves is us from this is having pre cooked food in the freezer that is as quick and easy to make as getting a takeaway or supermarket meal. I don't batch cook specially, just double or quadruple up portions whenever I make something that will freeze well, for example bolognese sauce, curry or anything in the slow cooker. It's no harder than making a single portion.

Have you been on moneysavingexpert.com? It's a fantastic resource for the uk and has a 30 day money makeover that might help you trim some areas.

 Good luck and hang in there, this is not an easy time so to be saving at all now is great and things should only get better!

[Playing with Fire UK]

Those storage unit costs are crazy. Would your husband be convinced that money is there for just in case (sell everything that you haven't used and put £100 per month into a 'just in case' fund). That is a hell of a lot of money. If you heard there was a fire in the storage unit what would you go out and buy again?

Eating out and takeaways is an area I should separate out as suggested @Kwill, I know this is a big waste we could target. Sometimes I'm on the ball and stock up the freezer with yummy easy meals from leftovers or a slow cooker marathon and we eat easy and cheap for a fortnight,  then other times everything gets away from me with house/work/kids and we gave nothing easy and I'm tired and pull out the menus (complainypants alert!!!!!).  Definitely an area to focus on.

Seconding separating out groceries and takeaway. It seems like you are solely responsible for this? Can you stock up on long life ingredients that either your husband can pull together into a meal or that is so easy you can do it when the madness hits? This will depend on your level of chef-ery but I'm a fan of three different tins of veg and a tin of tomatoes heated in the microwave and served over couscous (personally I cover it in hot sauce but not sure your kids would enjoy that!).

Do you have an idea of how often takeaway is happening and how much it is costing per time? If only a couple of times a month maybe look at the shopping list first?

Can you get childcare vouchers (nursery fees are high, but temporary), will you be eligible for any free nursery time when your daughter turns two?

If you are playing higher rate tax have you thought about a SIPP? You pension looks great for 33 but your husbands not so great for 39. It may work out cheaper to put the SIPP in your name to claim the tax back.

If the choice for not having a SAHP was just financial, would it be worth looking at making it balance by providing after school care for another child or bringing in some other income (maybe taking over and increasing the matched betting)? Not an issue if it is a choice you are both happy with.

Once nursery costs reduce and the kids are more independent I'd expect that savings rate to shoot up!

[Lunasol]

Perhaps you could get a different credit card with higher cashback rewards, after a year the points would build up and might be enough to cover christmas gifts?

[Kwill]

Sometimes I'm on the ball and stock up the freezer with yummy easy meals from leftovers or a slow cooker marathon and we eat easy and cheap for a fortnight,  then other times everything gets away from me with house/work/kids and we gave nothing easy and I'm tired and pull out the menus ...

You don't have to be at either extreme necessarily. Making things from scratch would save the most money, but there is some middle ground between that and takeout. I am often too lazy to cook, but I try to keep my fridge stocked with tortelloni or ravioli. And in the freezer, I have bags of turkey drummers and frozen peas for quick meals, and I also have frozen minced onion and frozen sliced bell peppers to speed up cooking. Ideally I'd also have frozen chips / fries, maybe some pizza or chicken nuggets. There's pasta sauce and dry pasta in the cupboard. So if I come home and don't feel like actually making anything, I can still make and eat dinner quicker than I could go anywhere else to eat.

[Doubleh]

Second the advice about the storage unit. Imagine that it is on fire and you have time to rescue just a fraction of the items inside - what if anything there is really valuable to you? I once had a storage unit with a company that went bust. It was great because I only got charged the first month's fees before the company shut down. But then one day I heard that the building was about to be bulldozed. I went over there and was amazed to find there was almost nothing I had put into that unit that I needed, wanted or cared if I would ever see again. If I had been paying to store it, I would have saved a ton by throwing it all out and using the money saved to rebuy the handful of things I did need. In fact you can go one better than this and store your unused stuff on Craigslist or ebay:

http://www.mrmoneymustache.com/2011/08/11/get-rich-with-craigslist/

[former player]

Why are you trying to sell your house, and why hasn't it sold yet?  Moving is expensive so not to be undertaken unless absolutely necessary.

If the stuff in storage has been in storage for 18 months, you don't need it.  Even if you end up in a bigger house you don't need it, you can just use the furniture you've got in your current house in a better configuration with more space around it.

[Kwill]

Second the advice about the storage unit. Imagine that it is on fire and you have time to rescue just a fraction of the items inside - what if anything there is really valuable to you? I once had a storage unit with a company that went bust. It was great because I only got charged the first month's fees before the company shut down. But then one day I heard that the building was about to be bulldozed. I went over there and was amazed to find there was almost nothing I had put into that unit that I needed, wanted or cared if I would ever see again. If I had been paying to store it, I would have saved a ton by throwing it all out and using the money saved to rebuy the handful of things I did need. In fact you can go one better than this and store your unused stuff on Craigslist or ebay:

http://www.mrmoneymustache.com/2011/08/11/get-rich-with-craigslist/

I wonder if https://www.gumtree.com/ might be closer to what Craigslist in the US is like. UK Craigslist doesn't seem to have as much as Craigslist in the US.

Another option might be an email list at work if people post ads.

[wespellitmoustache]

Second the advice about the storage unit. Imagine that it is on fire and you have time to rescue just a fraction of the items inside - what if anything there is really valuable to you? I once had a storage unit with a company that went bust. It was great because I only got charged the first month's fees before the company shut down. But then one day I heard that the building was about to be bulldozed. I went over there and was amazed to find there was almost nothing I had put into that unit that I needed, wanted or cared if I would ever see again. If I had been paying to store it, I would have saved a ton by throwing it all out and using the money saved to rebuy the handful of things I did need. In fact you can go one better than this and store your unused stuff on Craigslist or ebay:

http://www.mrmoneymustache.com/2011/08/11/get-rich-with-craigslist/

I wonder if https://www.gumtree.com/ might be closer to what Craigslist in the US is like. UK Craigslist doesn't seem to have as much as Craigslist in the US.

Another option might be an email list at work if people post ads.

Yes, Gumtree is probably the closest, or a local paper. But I find eBay (for my area) much more "well stocked" and easier to navigate.