Author Topic: Case study: Couple in early career stages  (Read 4633 times)

UK Accountant

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Case study: Couple in early career stages
« on: March 16, 2019, 07:14:43 AM »
Hi everyone, looking forward to hearing your opinions/ suggestion, be brutally honest.

Life Situation:
We are a married couple, no kids yet, living in London, UK. I'm in my early 30's and my wife is in her mid 20s, we moved to the UK around 4 years ago.

Gross Salary/Wages:
I earn £55k a year (monthly net: 3,000 after tax, pension and other deductions) as a newly qualified accountant.
My wife earns £25k a year (monthly net: 1,500 after deductions) working in an HR entry level job.

Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc. -
My net salary is after deductions for health and dental insurance for both us and a combined 15% pension (8% me, 7% my employer).
My wife's net is after roughly 7% of combined pension.

Other Ordinary Income:
Nothing stable, we both tutor a few times a year, non-significant amounts.

Qualified Dividends & Long Term Capital Gains: N/A

Rental Income, Actual Expenses, and Depreciation: N/A

Taxes: Taxes in the UK on a 55k salary are 14.5k a year and on 25k they are 4.5k a year.

Current expenses:
Rent 1,500
Bills (water, gas, ,electric, council tax and TV licenes) 210
Mobile phones (sim only) 40
Broadband and landline phone (It includes calls abroad to and from our families that aren't in the UK) 50
Groceries 450
Public transport 300
Gym 70
Eating out 170
Going out 100
Cleaner 70
Clothing 70
Holidays 330 (we estimate 4,000 a year)
misc 85
Total: 3,445

Saving rate 23.5%

We are expecting our salaries to go up in the next 3 years to around 70k (net:3,900 monthly) and 35k (net: 2200 monthly) but we are also expecting to have a kid by that time.

Assets: Amount & description - Currently around 100k of savings from years of savings and our wedding, we are considering investing in a rental property, which should produce net 500 a month after expenses taxes and accounting for vacancy.

We also have a combined pension pot of around 15-20k.

Liabilities: No debt.

Specific Question(s): My main question is where we could do better (obviously I'm going to get roasted for the cleaner) and how we compare to similar couples at the same stage of their career.

RWD

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Re: Case study: Couple in early career stages
« Reply #1 on: March 16, 2019, 09:21:30 AM »
Adjusting for the exchange rate your monthly expenses are $4,588/month (USD). That's pretty high for just two people. We are also a household of two so I can compare expenses to some extent (though I'm sure the US is different in some respects).

You're spending £620 on food. That is more than double what we are spending.
Public transport seems high but I have nothing to compare it to. It seems you don't have a car though, so maybe this isn't too bad.
Your gym is expensive.
You're spending a lot on going out. (non-dining). About 10 times what we are spending (though we should probably go out more).
Yes, having a cleaner is stupid.
You are spending too much on clothes for two people that are [presumably] not changing in size. We spend roughly half as much.
Wow your holiday budget. You realize this optional category is nearly 10% of your budget, right? If you could reduce this to $0 (hypothetically, I'm not recommending that) it would mean about five less years you need to work to reach financial independence.

So yeah, pretty much improvements to be found everywhere. If you can shave £700 off your monthly budget that would bring your savings rate up to ~40% which is about a dozen years of working saved. Personally on that income I would be aiming for a 50% savings rate, as that is what we were saving when we had a similar post-tax income.

UK Accountant

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Re: Case study: Couple in early career stages
« Reply #2 on: March 16, 2019, 03:00:19 PM »
Thank you for your comment.

kei te pai

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Re: Case study: Couple in early career stages
« Reply #3 on: March 16, 2019, 10:32:20 PM »
Have you considered moving out of London? And how stable is your residency/visa situation? Will Brexit change things for you?

Playing with Fire UK

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Re: Case study: Couple in early career stages
« Reply #4 on: March 17, 2019, 02:54:16 AM »
Hi @UK Accountant - welcome to the forum!

I've flagged your post in the UK zone to encourage more UK folk to stop by. You should check it out if you haven't seen it already - it's not just taxes. If you change the case study name to include "UK" you might get more people stopping by.

Are you (both) looking to FIRE, or something else? Saving £1k a month is nothing to sniff at. If you are looking to save more and save faster:

Groceries/food out will be the easiest thing to cut. If your home allows it then switching a meal out for a (nice) meal in for socialising or date night will reduce the cost. We spend about half what you do on groceries and eat really well. Is the food out for socialising or lunches at work? Bringing lunch from home could be some solid savings as well.

Cleaner - are they really needed?

Does the holiday fund include trips to see family? It looks on the high side for an average UK FIRE-seeker, but makes sense if you have less option for cheaper holiday options.

The big thing: what are your savings doing right now? Are they sitting as cash? Do you have ISAs? What do you know about investing? A BTL isn't the only path to wealth. There are various factors that make it more or less sensible and profitable - maybe explore this a bit.

I think you should think hard about how to optimise your pension contributions over your working lives. Think about how much you are targetting over a lifetime, whether you want to FIRE well before 55 or 57 so need to have more in your ISAs and any issues you might have with the lifetime allowance if you get good investment growth.
- Contributions from work look good for you, maybe not so great for your wife. You are both maximising the employer contribution?
- You mentioned a child, it may make sense to contribute more to your pension when your child is young to maximise child benefit payments. It depends on your salary at the time and your thoughts on the ethics of it.
- Does your likely earning path take you above £100k? You might want to think about contributing more then to avoid losing your tax-free allowance.

Playing with Fire UK

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Re: Case study: Couple in early career stages
« Reply #5 on: March 17, 2019, 02:55:09 AM »
No student loans?

vand

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Re: Case study: Couple in early career stages
« Reply #6 on: March 17, 2019, 03:25:52 AM »
this probably isn't headline news, but do not underestimate the cost of having a child, especially in London! A full time nursery place will easily set you back £1500-£2000/month if that's what you want to do. Also consider if you want to have a car. It makes life with the baby much easier. And one-off costs are not inconsiderable. Pram? £500 please. Baby car seat? That'll be £300 please (its illegal to transport a child without one). 1yr old model? another 400 please.
Sorry, don't mean to scare you. Parenthood is a wonderful thing.

vand

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Re: Case study: Couple in early career stages
« Reply #7 on: March 17, 2019, 03:36:16 AM »
Tax laws have recently changed that make 2nd properties much more expensive to buy. This makes 2nd homes a much less attractive proposition. Depending on the cost of the house, you can expect to pay 8% stamp duty on any amount above 250k. If you go for the rental property now, but also want to stop renting and buy your own home later, this would mean you would need to pay a huge stamp duty bill on the 2nd property.

Playing with Fire UK

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Re: Case study: Couple in early career stages
« Reply #8 on: March 17, 2019, 03:43:24 AM »
@shelivesthedream has a journal which includes limiting the cost of having a baby and doesn't have a car.

Vand's experiences are far more common among my peers. Or the baby and primary child care parent move out of London while the primary earning parent commutes into London.

vand

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Re: Case study: Couple in early career stages
« Reply #9 on: March 17, 2019, 04:31:20 AM »
My brutally honest assessment (sorry should have probably posted this first):

***
I think you're doing very well overall. Good jobs and at the stage where your careers earnings will be growing at a good pace.

I think that maybe your housing costs as a percentage of your take-home pay are a bit high at around 37%. General rule of thumb is to try to keep it below 25%, but appreciate that can be difficult in London. Perhaps as a result of this your savings rate is not as high as it might be, but this is something that you can work on by trimming some fat around the edges, and as your careers progress.

Consider cycling if you don't already do so; you can trim your travel expenses and its also just a far more pleasant way to get around London. You might also get enough out of it to be able to stop the gym membership. A bike (and a good bike lock) is probably the single best investment you can make! Get some weights to use at home if you need.

You mention that you both tutor; this is a fabulous side hustle for you, and if possible I would look to grow that over the next years.

As a higher rate tax payer, you're effectively working for 50p in the £ on your marginal income which seems crazy to me (although millions of people voluntarily do it), so I would also be contributing enough into the pension that it brings my taxable income down below the 40% threshold to reclaim as much of that as I can.

UK Accountant

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Re: Case study: Couple in early career stages
« Reply #10 on: March 17, 2019, 03:29:28 PM »
@Playing with Fire UK

I'll try to answer your point one by one, really appreciate your detailed response.

1. I'm looking for FIRE, my Wife is not

2. Groceries- Yes, we could get this down, I'll admit that, but not by that much because we (choose to) eat kosher meat (we're Jewish) which is more expensive and my wife has many allergies so her groceries are a bit more expensive. However, you're 100% and this can be reduced.

3. Eating out-
 For me food out is work lunches (I cut it by half and it needs to be cut to 0), my wife's is mainly socialising.

Does the holiday fund include trips to see family? Mostly, yes. However, it's just an estimate, I don't think we'll really reach the annual £4,000.

Current asset allocation- currently mostly in an sp500 and as I said, ot might all go towards a rental property.
I started a LISA (maxed the 4k and going to do this again this year) and I also max the help to buy ISA (2.4k a year).
Also, what's BTL? Sorry if that's a stupid question.

We both max our employers contribution (free money haha).

"- You mentioned a child, it may make sense to contribute more to your pension when your child is young to maximise child benefit payments. It depends on your salary at the time and your thoughts on the ethics of it."
Could you explain? I must admit I did not understand this part.

"- Does your likely earning path take you above £100k?" Yes, should be there in around 7-10 years.

Thank you again for all these points to think about!

Oh and just saw your other comment- no student loans.
« Last Edit: March 17, 2019, 07:16:19 PM by UK Accountant »

UK Accountant

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Re: Case study: Couple in early career stages
« Reply #11 on: March 17, 2019, 03:40:06 PM »
@vand

My kid will have 2nd hand stuff haha.
I see that EVERY parent that has the 2nd child stops buying new things, I'm going to try and implement this from my 1st child.

Also, I am aware of the costs of raising a child, it won't be easy but I'll have to up my tutoring hours to make it happen.

Regarding the flat, I forgot to mention it's big enough to have a child so we won't be moving when that happens. We have no plans of moving, even when we have kids and when our salaries increase.

I will look into contributing more to pension, I though that 15% combined from me and my employer but you raise an interesting point.

Cycling- Cycling in the roads of London still scares me a bit, I must admit and the weather is an issue too. i know these are excuses, would be interesting to hear from people who cycle to work in London.

Thank you for your detailed comment!

shelivesthedream

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Re: Case study: Couple in early career stages
« Reply #12 on: March 18, 2019, 01:56:17 AM »
Costs of raising a child thus far (10 months):
£1000 pre-birth capital costs
Average £40/month on physical stuff (tapering off now - mainly just updated clothes and charity shop books)
£20-£30 month nappies and wipes (we tried cloth. It was All Too Much. I am still sad about that.)
Not sure how much on food. £20? We buy a bit of formula (he's just been fully weaned) and baby cereal (easy nutrients) but otherwise he eats actual food.

So pretty cost neutral when you factor in child benefit. Don't plan on working more to afford a child. You won't be able to when they're a newborn and won't want to when they're older and more fun. Time is the most precious thing with them. Don't plan to spend more time away from them in order to buy them things.

And you'll want to read a book called Precious Little Sleep. I swear I am not on commission.

Eta: Obviously the biggest cost is lost earnings for one of us to be a SAHP. We thought before birth we would probably do that, and are now committed to spending as much time with BabySLTD as is reasonably possible. (Things are changing for us right now, but we hope to settle down again soon.) But another thing to consider with only one worker is that you need much more of an emergency fund because if the one breadwinner loses their job you have zero income.
« Last Edit: March 18, 2019, 02:09:12 AM by shelivesthedream »

Playing with Fire UK

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Re: Case study: Couple in early career stages
« Reply #13 on: March 18, 2019, 02:01:26 AM »
Hold off on increasing the pensions until you've looked into everything.

If you are interested in FIRE and going to use a pension (although you won't be able to access it until around age 57), you'll need to contribute more per working year than an average person who is going to work for twice as many years. Don't listen to the US guides to accessing pensions before then - they don't work in the UK (assuming you are going to stay in the UK? There are some clever things you can do with some other countries at the moment, but who knows if they'll continue for 20+ years ).

There are times when it will make more sense to put more into the pension.

Look at this or this for more info on the child benefit. If you (both) keep your wages below £50k by making pension contributions while claiming child benefit you can avoid a tax to claw it back from high earners.

Similarly, when your pay crosses £100k, you start to lose your tax-free allowance, so you will pay more tax. If you pay this money into a pension then you'll get more tax efficiency from it.

While 42% tax might seem a lot, there are times when you might be paying more than that. Obviously, don't stop contributing entirely or avoid the employers' match; but do think about when it makes most sense to make big top-ups.

If you are planning on FIRE before 57, you'll need an investment pot to see you between when you FIRE and when you can access the pension, you want to build that in the most tax effective way.

BTL is Buy To Let - used to mean either a rental house or the mortgage you buy one with.

A rental house could work really well for you if you are planning to leave London at some point or if you are planning on never buying in London. You could buy a place now, rent it out while you live and work in London, and then move into it when you stop working and move away.

I cycle in London, but I grew up cycling in cities. Have you looked at whether any of the off-road cycle superhighways or parks could be strung together to give you a route into work? Google Earth and street view are good tools to find suitable routes.

shelivesthedream

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Re: Case study: Couple in early career stages
« Reply #14 on: March 18, 2019, 02:11:08 AM »
I have cycled in London in the past. It really depends on the route.

brunetteUK

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Re: Case study: Couple in early career stages
« Reply #15 on: March 18, 2019, 04:26:41 AM »
Hi UK Accountant!

We're in similar situations, I live and work in London as a newly qualified accountant so hopefully the comparison/comments below will help you. I'm not married but I don't think it changes things too drastically.

Gross Salary/Wages:
I earn £55k a year. That's the benchmark for newly qualified, I'm on £50k but with 8% pension contribution + 12% employer match. I also believe you when you say you expect your salary to keep increasing until you get to £100k.

Current expenses:
Rent 1,500 - £937 and I flatshare with a friend. I understand people will tell you it's too much a percentage of your income however there is a lot of terrible housing in London. I think £1,500 to live in a good place where you don't feel like you're forever a loser in life is a fair amount.

Bills (water, gas, ,electric, council tax and TV licenes) 210 - That's similar to what me and flatmate pay too.

Mobile phones (sim only) 40 - I pay £10 on giffgaff, I can refer you if you want :)

Broadband and landline phone  50 - That's included in the 200ish pounds we pay for bills so could be an area of savings for you. All my family is abroad and everyone talks via WhatsApp (my dad pops in at my gramma's all the time so he video calls when he's there).
Another options are landlines you call that then call your country, it's usually 1p per minute, I used that before smartphones (google "cheap calls to X country" and loads come up, never had a scam). Another option is Skype calls to landlines although personally I just hate that app.

Groceries 450 - What? Wait... what? I understand allergies and food choices but still looks way too expensive. I'm a Waitrose girl and I still spend max £150 per month going all out. My guess is that you guys are not buying/cooking very efficiently. Maybe you keep stock the pantry and then don't want to eat anything in your cupboard/fridge and then go out to buy some more or keep buying and not using stuff. I'd look into making meal plans and trying to cook using all the stuff you already have at home. There are plenty of advice on these forums, my two life savers are a slower cooker similar to Insta Pot and www.budgetbytes.com


Public transport 300 - That's a fair number. My advice is to consider cycling, especially now the weather is warming up. I've cycled for 5 years in London and I rarely give up cycling because it's raining (I do give up because of many other reasons including being tired/lazy/not in the mood). I strongly recommend a Giant Escape bike for £350 + a D lock, it will pay back in a few months.
We can send me a message if you want help with cycling in London or deciding on your route.

Gym 70 - I think it's a fair price for 2 people, probably isn't even a fancy gym. Consider cycling :)

Eating out 170 - I don't think your eating/going out spend is stupid. London is expensive and friends are always far, social dynamics are also different that "inviting people over" doesn't always work.
My suggestion here is to think really hard what actually adds extra value/happiness. I'm awfull but I decided some people weren't worth spending a penny on, so they always get an excuse. There is also the option of leading the group, if I suggest an activity or restaurant, my friends usually don't care each way and agree to it. This means you can steer everyone towards cheaper or less stresfull or more joyful options. Again, I'm not agaisnt your spend here, just saying it's really easy in London to spend and spend going out and not even realising you are't getting much enjoyment.

Going out 100
Cleaner 70 - That's 6 hours per month. I'd suggest skipping one month, doing the 6 hours yourselves and seeing how it goes. Again, is the cleaner worth the money or do they come in, vaccum and bugger off? When I lived with 2 other girls, we had a cleaner for 2 hours every week so it seems 6 hours a month for a couple seems a bit high. I'd move towards a professional clean once/twice a year so you can actually get the house cleaned decently and then you two do a maintenance once a week. Honestly, watch some youtube videos or just think about it like an engineer and you can clean the house in one hour every week. Viakal is the best product, clean the hell out of everything. If your wife has allergies, then you can do the cleaning and she can do the food shopping.


Clothing 70 - My clothes/shoes budget for this year is £100/month =P I'm never writing a case study!

Holidays 330 (we estimate 4,000 a year). hmmmm that's in line with what I spend but that's because I have family literally on the other side of the world. This could be an area to look into or maybe having a baby will put a stop to it anyway.

misc 85
Total: 3,445

Saving rate 23.5% - are you including your pension in your saving rate? It is still saving, it's just automatic! :) My savings rate is 40% (24% pension, rest is "cash" saving)

Good luck!


brunetteUK

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Re: Case study: Couple in early career stages
« Reply #16 on: March 18, 2019, 04:34:40 AM »
The best recommendation ever is www.moneydashboard.com to track your spending. You can link all your accounts, create budgets, create a cash flow planner so you know how much you will save before the month even started. You can also add in offline accounts that you update yourself (I do this for pensions).

UK Accountant

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Re: Case study: Couple in early career stages
« Reply #17 on: March 18, 2019, 05:05:28 AM »
@leroleroUK
Your comparison is so interesting! Thank you for that.
I'll answer about the groceries and saving rate.

Saving rate- no, I do not include pensions just
(Net pay-expenses)/net pay, would be so helpful to hear another way of calculating it.

Groceries- breakdown is
Sainsbury's (everything, not only food) 280
Health stores (the allergies) 60
Butcher and fish shop 85. I think that's the big one but we spend less than budgeted, I'll look at our last 3 months and re-evaluate.
Rest is jewish stuff like kosher wine and bread etc.



UK Accountant

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Re: Case study: Couple in early career stages
« Reply #18 on: March 18, 2019, 05:38:18 AM »
Also, an update on the clothes:
My new job is at a place where it's casual clothes (no more suits, ties and shirts) so that will go down sharply by more than half. As a lot of you said, my size doesn't change so the only item I need to replace quite often are my sneakers I run with (less than £50 a pair).

shelivesthedream

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Re: Case study: Couple in early career stages
« Reply #19 on: March 18, 2019, 07:08:28 AM »
This probably sounds a bit tedious, but the best possible way to get down that grocery spend will be to list all the allergies and list every meal you ate in the last week and we'll have at it. @never give up has been a shining beacon of reduced food spending in his journal. A brief outline of kosher requirements if they're more than just "thou shalt not cook a kid in its mother's milk" would help too.

Playing with Fire UK

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Re: Case study: Couple in early career stages
« Reply #20 on: March 18, 2019, 07:30:14 AM »
Cutting down on meat and fish and replacing with cheaper protein will have a big impact on grocery costs. For allergy food shopping, it'll be cheaper if you can design meals to avoid the allergens rather than buying specialist foods such as eating more potatoes and vegetables rather than gluten-free bread or pasta substitutes. Obviously, you'll know more than me and I'm not your doctor!

It's sounding like you are budgeting but not tracking spending? If you want to save more it's important to know exactly how much your spending on clothes, food, holidays etc.

How do you budget for big one-off or annual expenses? It's easy to ignore them in budgets if you don't track everything.

UK Accountant

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Re: Case study: Couple in early career stages
« Reply #21 on: March 18, 2019, 08:09:22 AM »
@Playing with Fire UK
One offs- we budget for it every month in advance,  that's what the clothing and holiday lines are for example, the others- misc.
I do track expenses but don't have the data in front of me, will try and share tonight the actual numbers for the last few months.

@shelivesthedream
I don't have a list of weekly meals but will try do that for next week and share.

shelivesthedream

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Re: Case study: Couple in early career stages
« Reply #22 on: March 18, 2019, 11:56:42 AM »
I don't think I've seen anyone mention this, but have a look here for some journals that sound like they're in a similar situation to you: https://forum.mrmoneymustache.com/uk-tax-discussion/post-your-uk-journal-link-here/ For example, we're late twenties with one baby and live in London (although our employment situation is bonkers right now so you might not want to get involved...)

Here are our numbers:

Category   2017 Average   2018 Average
Gas & Electric   £74.33   £67.26 (Swapped to Bulb (eco-friendly). If I send you a referral link we both get, um, something. We like them a lot)
Internet & Phone   £18.99   £21.51 (Have now swapped to Pop Telecom.)
Insurance   £49.65   £5.39 (I auto-renewed in 2017. FAIL.)
London Review of Books   £2.00   £7.29
My phone   £12.80   £12.64 (Both now changed to SMARTY, average £6/month. If I send you a referral link we can both get a free month. We like them a lot. Includes buying a new phone.)
Husband phone   £14.00   £32.62 (Includes buying a "new" iPhone.)
Charity   £50.00   £129.17
My personal spending   £225.00   £193.75 (reducing in £10 increments for both of us with a goal of £100)
Husband personal spending   £225.00   £193.75
Ocado   £96.62   £153.48
ASDA      £14.90
LIDL/ALDI      £38.74
Tesco      £36.82
Other fresh food   £128.13   £13.61
Parking permits   £9.33   £0.00
Booze   £24.33   £24.92 (no longer exists as a category - comes from Mr SLTD's personal)
Date night   £35.92   £9.46 (no longer exists as a category)
House items   £71.12   £76.44
Misc joint spending   £104.31   £86.93
TFL travel   £103.35   £71.23
Clothes      £0.00 (we have both just dropped a bomb on some new new clothes)
Holiday   £213.69   £68.50 (not planning to go anywhere any time soon - maybe a train trip or two to visit friends)
Garden   £5.66   £6.25
Healthcare   £2.51   £19.88 (includes vast quantities of Gaviscon while I was pregnant and glasses for me)
Coffee      £13.92
Tea   £6.42   £0.00
Cash   £35.00   £21.67
Baby items      £99.72 (an average, obviously spread out unevenly between pre and post baby)
Shoe repair      £9.20
Cheese      £24.17 (don't ask)
      
TOTAL   £1,508.17   £1,466.24
      
Total food average   £224.75   £294.77
Average meal cost   £2.50   £3.28
« Last Edit: March 18, 2019, 12:06:22 PM by shelivesthedream »

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Re: Case study: Couple in early career stages
« Reply #23 on: March 18, 2019, 12:14:40 PM »
Thanks @shelivesthedream! (Pauses typing to tick off, "be a shining beacon at something" from my bucket list).

Yes I've taken 25% off of my grocery shopping and was never wasting food before. I have done this by:

1. Give myself plenty of time to do the shop. Rushing leads to impulse buying and missing cheaper items.

2. I was buying a lot of chicken breasts which is an expensive way to buy chicken. I now buy a whole chicken (with legs and everything) and get two dinners and enough for my salads that I take to work each day. This has saved a fortune. Similar swaps for essentially the same item but involving more prep time is the way to go. We pay dearly for companies adding value on our behalf.

3. The expensive, non-perishable, infrequent purchases I now look for every time I shop rather than when I need them. I only buy when they are on offer. Looking for them every week means I never miss an offer. When they are on offer I buy as much as I can store at home. This applies to items such as washing tablets, toilet rolls, cleaning products and the like.

4. Cheaper substitutes - the cheapest shaving cream, dustbin liners, home brand cereal, tin foil, washing up liquid etc all completely rock and save £'s.

5. Not being precious on favourite flavours or whatever. E.g. yogurts. There are loads of flavours in the brand I like. Buy the one that's on offer rather than my favourite flavour. I can often save £1.50 doing this. Repeated over three or four items every week and it really starts to add up.

I still eat like a horse (quantity wise I'm referring to here, I can assure you I use cutlery) and haven't impacted my diet in any way yet I've saved in the region of £600 a year and I'm just a single person. Others are far better than me. I don't have a great choice of supermarkets which holds me back a bit. I also need to learn a bit more about batch cooking which can only help bring the average meal cost down.

Looking at your non-food expenses:
Some expenses are mandatory and we have no choice to pay them. Others are our choice. You have decisions to make about Gym, Eating Out, Going Out, the Cleaner and Holidays. I like the simple formula of multiplying a monthly expense by 173 to see how much you would have after ten years if you invested a monthly expense each month rather than spending it on said item. That gym membership is not costing you £70 a month it's costing you £12,110 from your stash.  Or if you want to fund a monthly expense post FIRE you need to save 70x12x25 assuming a 4% withdrawal rate. This equates to £21,000. So you've got to go to work each day and save £21,000 on top of covering all of your other expenses just to be able to go to that gym forever more. Still worth it?

Maybe it is, maybe it isn't. The biggest single benefit I have learned from these forums is to track all of my expenses thoroughly. Every penny. Where did spending provide value and where did it not? Cut out the spending that doesn't provide value. For me I have factored being a gym member into my post FIRE figures for the social aspect. However I'll exercise for free while I'm in accumulation. Maybe someone else would find it does provide value even doing the x173 sums. If so then great. To keep spending knowing how this impacts your stash, means something must provide value or you simply wouldn't do it.

A £400 monthly car payment or £69,200 in your ISA in 10 years time? I know which I would choose. It's a fun game and can be applied to everything. Understanding this ensures someone is living with intention and purpose and not drifting along not understanding the impact of financial decisions on their long term future. Every decision you make is either extending or reducing your time to FIRE.

FIRE isn't a race but cutting out as much of the stuff that doesn't seem worth it means we get to FIRE quicker. Find what gives you value and what doesn't. You mentioned you are interested in FIRE but your wife is not. This may mean higher expenses as you compromise here and that's fine. As I say it's not a race. However once we have our expenses organised, that gives us our savings rate which in turn allows us to produce an estimate of when we could FIRE. I know I cannot whinge and moan about the length of time left that I have to work. If I want to achieve it earlier then I need to permanently cut some expenses e.g. that gym membership I want post-FIRE. If I don't want to do that then I will need to work for it.

You are in a great position with your salary levels and I certainly wish I had found these forums at your age. I wish you the best with your careers and journey towards FIRE.

(One last thing, the cleaner has got to go. Dance around the house with your wife while cleaning and singing into your feather dusters. It's great exercise (saves on cleaner and gym costs in one fell swoop!), a lot of fun, and your house will be spotless.)

UK Accountant

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Re: Case study: Couple in early career stages
« Reply #24 on: March 18, 2019, 02:34:45 PM »
@shelivesthedream  thanks for your detailed answer, I'll look at the Journals. my only problem is that now all I want to do is ask about the cheese hahaha.

@never give up regarding the gym- I saw a few comments about that and I think I need to give some details:
The £70 is made of 45 for gym and an in-house massage my wife has once a month (£25) to deal with her back pain, which is really helping.
Based on the 4% rule- would I rather have lifetime access to the gym or 13,500? I'm really not sure to be honest.

Regarding all your other points- you've given me some food for thought, thank you!

brunetteUK

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Re: Case study: Couple in early career stages
« Reply #25 on: March 19, 2019, 03:59:27 AM »
I found the article I was looking for:
www.mrmoneymustache.com/2015/01/26/calculating-net-worth/

Basically the money you earn is: what hits your bank account + what you contributed to pensions (8%) + what your employer is contributing (7%).

Then your savings rate is:
savings: what you contributed to pensions (8%, roughly £367) + what your employer is contributing (7% roughly £321) + whatever is left in your bank account.
divided by
earnings: what you contributed to pensions (8%, roughly £367) + what your employer is contributing (7% roughly £321) + what hit your bank account


Which should give you a 30% or more savings rate so you can feel all that much better for your efforts =)

Well done on the new job not requiring such formal clothes!

Let us know how you are progressing.




 

Playing with Fire UK

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Re: Case study: Couple in early career stages
« Reply #26 on: March 19, 2019, 06:24:37 AM »
@Playing with Fire UK
One offs- we budget for it every month in advance,  that's what the clothing and holiday lines are for example, the others- misc.
I do track expenses but don't have the data in front of me, will try and share tonight the actual numbers for the last few months.

Cool. Sometimes one-offs can be lost in a forward-looking budget. Things like furniture, presents, replacement electronics, (even cheese) can be the difference between what you expected the budget to look like and what the tracking actually shows you. If it's all being captured in misc then that's great.

Linea_Norway

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Re: Case study: Couple in early career stages
« Reply #27 on: March 19, 2019, 08:51:29 AM »
Just in general, not specific to UK.

In a podcast I listen to, a financial expert warns young people against putting too much of your savings into retirement accounts that are locked until you hit a certain old age. He says that you might want to save for a future home, or a bigger home. It is difficult to see now what your needs will be in the many years before you will hit that minimum age.
Therefore, make sure you also save into accounts that you can empty when you need them. Of course, you do make the savings that lead to free money (employer match).

In our case, we count on receiving enough pension to live off from 67 and only save our stash in normal accounts, so that we can use it up during FIRE before the age of 67.

We have always done all jobs in our house ourselves: cleaning, gardening, painting, cooking, washing cars. Outsourcing is expensive. So is training indoors. Doesn't your job have a sports room that you could use instead of paying for the gym?

UK Accountant

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Re: Case study: Couple in early career stages
« Reply #28 on: March 19, 2019, 11:12:42 AM »
Cool. Sometimes one-offs can be lost in a forward-looking budget. Things like furniture, presents, replacement electronics, (even cheese) can be the difference between what you expected the budget to look like and what the tracking actually shows you. If it's all being captured in misc then that's great.

The fact that a UK themed post is so focused  on cheese is the most British outcome I could expect haha

shelivesthedream

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Re: Case study: Couple in early career stages
« Reply #29 on: March 19, 2019, 12:19:45 PM »
Just to clarify, we quit the cheese this January and haven't gone back. We do kind of miss it.

Playing with Fire UK

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Re: Case study: Couple in early career stages
« Reply #30 on: March 20, 2019, 07:09:59 AM »
Just to clarify, we quit the cheese this January and haven't gone back. We do kind of miss it.
Sorry, I didn't realise. I'll be more considerate with my cheese budget comments. Apologies. Stay strong.

The fact that a UK themed post is so focused  on cheese is the most British outcome I could expect haha

Yes, we all have our budget-busting vices and we need to keep up the Britishness in our small corner of this big American forum.

shelivesthedream

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Re: Case study: Couple in early career stages
« Reply #31 on: March 20, 2019, 07:50:49 AM »
Just to clarify, we quit the cheese this January and haven't gone back. We do kind of miss it.
Sorry, I didn't realise. I'll be more considerate with my cheese budget comments. Apologies. Stay strong.


Hey man, no worries. It's hard, you dig me, but solidarity.

UK Accountant

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Re: Case study: Couple in early career stages
« Reply #32 on: March 22, 2019, 06:54:29 AM »
Quick update:
Me and my wife had a 2nd look at the budget, gave up a few things and got it under 3,200.

shelivesthedream

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Re: Case study: Couple in early career stages
« Reply #33 on: March 22, 2019, 07:25:05 AM »
Quick update:
Me and my wife had a 2nd look at the budget, gave up a few things and got it under 3,200.

I'm interested to know what you dropped and why.

 

Wow, a phone plan for fifteen bucks!