Financial advice for young family

Leper said:

Excellent post there by Andrew and simple to follow. The main thing I like about it is the journey and its consequence i.e. debt free eventually.

The only item I would add is to clear credit card debt asap and afterwards use credit card as little as possible.

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Andrew365 said:

Am I missing something here, the discretionary spend does not seem overboard. From a lot of the feedback here, I'm assuming people live of porridge and toast sandwiches each month and don't spend a penny that is unaccounted for. We all need to enjoy life to an extent.

You would not try to a run a marathon without training right? So do not expect to solve your financial issues and change habits in a month. It is going to be a process of trying and failing, but if you keep trying you will get better and learn. I would only use the app for a month, tracking every little penny is probably unsustainable in your situation.

The underlying issue here is that people aren't taught how to be good with money, so we can't expect them to be good without training.

My advice would be the following.

1. Calculate all Bill's / fixed outgoings (childcare etc) for the month and deduct from income. For example you need 2k per month for Bill's. Set aside 2k and pay all bills out of that account. Over the next few months see which Bill's can be reduced but keep the 2k set aside as a fixed total cost.

2. Immedistely set up a savings account for 100 euro per month and treat it as a bill. This will start to help you learn to save.

3. Calculate what you need to live on, groceries, lunches, eating out etc. For example 1k, embed this figure in your head and start tracking on an app like Revolut or the one you've mentioned. It is amazing when you know you have overspent one day and that you'll skip the starbucks tomorrow.

4. Set aside 250 euro as real discretionary spend. I call mine a slush fund and I use it for purchases in the month like a new tshirt. It is amazing how much frivolous spending this has presented.

5. Debts - just keep paying them and as you get better with month to month spending you can start to tackle.

My biggest piece of advice is to start simple and keep building and trying. What you should ultimately aim for is something simple like the 50-30-20 rule.

The basic rule is to divide up after-tax income and allocate it to: spending 50% on needs; 30% on wants; and socking away 20% to savings.

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username123 said:

Can you clean up the figures for outgoings? Some are listed per week (child care), some are listed per month (mortgage) and some seem to be in totality (family loan). Similarly, E25 Gym - is this per month per person or what? It's hard to know what are fixed monthly or weekly costs, suggest you edit original post to make it easy to understand. List each expense clearly by amount and by timeframe. How much are you paying per month to your family loan? Is that included in the monthly loan repayment figure?

1) Stop Borrowing

Yes you need to stop borrowing money, from anyone IMO (family, bank, credit union, credit card. I assume you have cut up your credit card at this point?

2) Understand Interest and Cost of Credit

Also important missing information, what is the interest rate on your credit card balance? In other words, how much interest are you paying on this loan per month? How much are you paying off the outstanding balance per month? (This is in effect another loan).

Please find out for sure and find out if it's fixed, variable or what. Also, what are the interest rates on two personal loans? Assuming mortgage rate is actually 2.5 percent, forget overpayment. You need to clear high interest debts first.

3) Separate Needs from Wants/Nice to have spending
I echo other posters, your grocery+broadband+sky+phone bills seem crazy high. . You need to separate groceries (required) from eating out, eating in takeaways, lunches out, coffees out. Depending on that split, your *actual* groceries might only be a reasonable E800 per month, which sounds do-able me, saving you a whopping E700 per month (of non grocery spending).
For example, "lunch a couple of times a week" could be costing you 2 people * 2 times per week * 10 euro per person = 40 per week * 4 = 160 month (could be double that or half that depending on what lunch is for you).
Takeaways once a week for 4 must be E40 quid per week so another E160 per month.
Finally, eating out 2/3 times a month for 4 people is surely E200-300.By that estimate you're spending around 500-600 per month eating food you don't cook yourself. If you're serious about this then id suggest stop eating out, stop getting takeaways, make your own lunch and stop getting coffees for a month and see how much you save.

4) Hidden Spends?
I see no mention of cigarettes or alcohol. Do either of you drink or smoke? If so, you must factor in monthly spending on these expensive discretionary items, and obviously reduce them.

5) Child Benefit?
My understanding is that Child Benefit is €140 per month for each child? Where is this E280 per month going? I don't see it being added to the effective take home pay per month figure.

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Sumarisol said:

Should we consider moving to interest only on our mortgage for a period?

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