One Income Family looking to build savings

[44brendan]

You have made out a good list of monthly expenditure on your opening post. You have included credit card payments of 500/600 monthly in that list. Credit card is not an expense item!! You seem to clear the amount each month and still end up with a similar payment the following month. I.e. You are using the CC to supplement expenses that are not included in your budget.
I have assumed a sort of unofficial status amongst friends/family in advising them on how to control expenditure. One constant issue that arises in all cases is CC usage. Invariably the CC is not regarded as "cash" and used as a supplementary fund to cover "unallocated expenses". When you make out a budget you need to include and control all expenditure. This should also incorporate allocation for "emergency spend" such as car/appliance breakdown etc.
It is very difficult to control your monthly spend when a CC is used on a regular basis. I would tend to put the CC aside for 5/6 months and use cash to cover all supplementary expenditure. I.e. Take out a set cash amount each week in accordance with budgeted expenses (other than standard bills). When the cash is spent you are then in overspend territory. Your options are then to take out more cash (which means that your budget for the week is shot) or re-visit the budget. The biggest mistake you will find early on is that items are excluded from the budget. Its' not easy to implement a strict control system but will get easier as you progress. Much better to control when you can see the remaining cash after each spend. Good luck

 

[LM26]

You have made out a good list of monthly expenditure on your opening post. You have included credit card payments of 500/600 monthly in that list. Credit card is not an expense item!! You seem to clear the amount each month and still end up with a similar payment the following month. I.e. You are using the CC to supplement expenses that are not included in your budget.
I have assumed a sort of unofficial status amongst friends/family in advising them on how to control expenditure. One constant issue that arises in all cases is CC usage. Invariably the CC is not regarded as "cash" and used as a supplementary fund to cover "unallocated expenses". When you make out a budget you need to include and control all expenditure. This should also incorporate allocation for "emergency spend" such as car/appliance breakdown etc.
It is very difficult to control your monthly spend when a CC is used on a regular basis. I would tend to put the CC aside for 5/6 months and use cash to cover all supplementary expenditure. I.e. Take out a set cash amount each week in accordance with budgeted expenses (other than standard bills). When the cash is spent you are then in overspend territory. Your options are then to take out more cash (which means that your budget for the week is shot) or re-visit the budget. The biggest mistake you will find early on is that items are excluded from the budget. Its' not easy to implement a strict control system but will get easier as you progress. Much better to control when you can see the remaining cash after each spend. Good luck

Hi, thanks for reply. You have hit the nail on the head, the cc usage has gotten way out of hand. We are starting the month paying it off and therefore have no cash to cover the supplementary expenditure that you refer to. If I can try and get this under control this pay month, then we can start afresh and budget plan more seriously as you suggest. I am going to try really hard to avoid using cc and starting following month in a healthier position.

Thanks for feedback!

 

[eamo15]

i know it sounds mad but would you not snap the credit card, it makes it two easy to overspend or even see can you go through a month without spending it as at the moment your spening to pay back on a monthly basis with a second child coming it will just be to easy to increase the spending on the card scary stuff i know.. I have number 2 coming in the next five weeks myself..we are never fully ready are we

 

[LM26]

i know it sounds mad but would you not snap the credit card, it makes it two easy to overspend or even see can you go through a month without spending it as at the moment your spening to pay back on a monthly basis with a second child coming it will just be to easy to increase the spending on the card scary stuff i know.. I have number 2 coming in the next five weeks myself..we are never fully ready are we

I'm not brave enough to quite go that far but I am determined to try not and use it this month. Have planned weekend ahead to make sure no takeaways or meals out.
It is so easy to overspend as you say and effortless to hand a card over, you don't see the actual cash, very deceptive. Best of luck with number 2's arrival....no never ready, it is a crazy time of life...never a dull moment!

 

[elcato]

Put the credit card in a plastic container. Fill with water and stick into freezer. At least that will stop the local buying but probably won't stop internet or phone shopping.

 

[Fella]

Earning 80k a year and having to budget sounds like a pain I can see your husbands point of view , I always have money in my pocket not been able to buy a coffee when you want thats depressing stuff , if you earn 80k a year you don't want to be making lunches and watching every penny. My opinion is probably not going to be a popular one but I would sell the house downgrade to a cheaper house around 300k , that would leave you a fair bit of cash and a much cheaper mortgage.
You could live like you are now and you wouldn't be overspending , go on holidays when you want and enjoy your life go to weddings etc you are invited to .

 

[Sarenco]

Agree wholeheartedly with Fella on this one.

A mortgage of €400k, in my opinion, is simply too high for a household with an income of €80k. The OP's core problem is "too much house" and trading down to a lower value house would have an infinitely bigger impact on the OP's financial position than pinching pennies on lunches, cable services, etc.

It probably goes without saying that the interest rate on the car loan is nuts.

 

[LM26]

Earning 80k a year and having to budget sounds like a pain I can see your husbands point of view , I always have money in my pocket not been able to buy a coffee when you want thats depressing stuff , if you earn 80k a year you don't want to be making lunches and watching every penny. My opinion is probably not going to be a popular one but I would sell the house downgrade to a cheaper house around 300k , that would leave you a fair bit of cash and a much cheaper mortgage.
You could live like you are now and you wouldn't be overspending , go on holidays when you want and enjoy your life go to weddings etc you are invited to .

Yes that's exactly how my husband feels about it and I don't blame him, he's on a great wage and works hard, he shouldn't have to penny pinch. Moving to a cheaper house has been brought up myself quite recently and went down like a lead balloon, I suppose it would feel like a bit of a fail on our part if we had to do that. The upside of having more disposable income would be great though. Thanks for your feedback.

 

[LM26]

Agree wholeheartedly with Fella on this one.

A mortgage of €400k, in my opinion, is simply too high for a household with an income of €80k. The OP's core problem is "too much house" and trading down to a lower value house would have an infinitely bigger impact on the OP's financial position than pinching pennies on lunches, cable services, etc.

It probably goes without saying that the interest rate on the car loan is nuts.

Thanks for your feedback., makes sense.

Yes need to look at car loan as suggested above.

 

[Sarenco]

Thanks for your feedback., makes sense.

Yes need to look at car loan as suggested above.

Thanks for taking the comment in the spirit in which it was intended - I know people can react very negatively when their family home is mentioned in a financial context.

Best of luck (and get that car loan paid off ASAP - 12.39% is a criminal rate of interest).

 

[kennyb3]

Agree wholeheartedly with Fella on this one.

A mortgage of €400k, in my opinion, is simply too high for a household with an income of €80k. The OP's core problem is "too much house" and trading down to a lower value house would have an infinitely bigger impact on the OP's financial position than pinching pennies on lunches, cable services, etc.

It probably goes without saying that the interest rate on the car loan is nuts.

I completely agree.

Sorry OP but you've a mortgage repayment that is nearly 50% of NDI income - yet still want to take holidays, have take aways, be generous with presents etc. time to cut your cloth to measure.

The car loan at 12.39% APR over 5 years shows a complete lack of financial awareness imho (and also taking fixed rate esp when rates were trending downwards ).

Also It's great that your husband earns 80k but at end of the day that's the same as two people earning less than €40k each (probably closer to €35k each given how the tax bands work). So with having a big mortgage it's obvious why you are struggling. (granted you've no childcare costs as a result of you being at home)

What's done is done mortgage wise but you need to get your head out of the clouds. At start you never mentioned bonus or child benefit. Where is this accounted for?

As others of said you need to draw up a true picture of income & spending habits and listen to some good advice given above.

I do think you need to realise that €80k income for household, regardless of who earns it, with jumbo mortgage (over €2k pm) is not a huge income.

So you've to chose what sarenco is advising - freeing up equity or facing your reality properly and making the necessary cuts.

I'd actually favour 2nd option as I'd fear you've blow the equity given your financial history.

 

[LM26]

I completely agree.

Sorry OP but you've a mortgage repayment that is nearly 50% of NDI income - yet still want to take holidays, have take aways, be generous with presents etc. time to cut your cloth to measure.

The car loan at 12.39% APR over 5 years shows a complete lack of financial awareness imho (and also taking fixed rate esp when rates were trending downwards ).

Also It's great that your husband earns 80k but at end of the day that's the same as two people earning less than €40k each (probably closer to €35k each given how the tax bands work). So with having a big mortgage it's obvious why you are struggling. (granted you've no childcare costs as a result of you being at home)

What's done is done mortgage wise but you need to get your head out of the clouds. At start you never mentioned bonus or child benefit. Where is this accounted for?

As others of said you need to draw up a true picture of income & spending habits and listen to some good advice given above.

I do think you need to realise that €80k income for household, regardless of who earns it, with jumbo mortgage (over €2k pm) is a lot of income.

So you've to chose what sarenco is advising - freeing up equity or facing your reality properly and making the necessary cuts.

I'd actually favour 2nd option as I'd fear you've blow the equity given your financial history.

Quite a patronising post IMO. I have capacity to earn €60k+ in my trained profession, we have chosen for me to stay at home for a few years, this is a priority for us at the moment, we will struggle for a few years granted but our 'financial history' before our child came along was stress free and we are just trying to adjust with current arrangement.

I will take all advice onboard and come back in a few months for an update.

Bye for now and thanks for all the feedback I've received here.

 

[kennyb3]

Quite a patronising post IMO. I have capacity to earn €60k+ in my trained profession, we have chosen for me to stay at home for a few years, this is a priority for us at the moment, we will struggle for a few years granted but our 'financial history' before our child came along was stress free and we are just trying to adjust with current arrangement.

I will take all advice onboard and come back in a few months for an update.

Bye for now and thanks for all the feedback I've received here.

Sorry if it was patronising but you've €5.5k savings fund that is diminishing by all accounts. Surely you should have built this up further before having kids if the intention was for you to give up work? Seem very low as a rainy day fund, given size of mortgage. (covers only 2.5 months)

You've a 35yr mortgage (madness), €400k (madness on at nearly 50% of net disposable income).

You've taken a very small loan over 5 yrs at 12.39% APR (crazy) and is suggestive of a real struggle.

You're borrowing from family.

And you've another kid on the way.

My post is harsh yes - that was the intention, hopefully to provoke a reaction and make you realise the situation isn't good.

When you go back to work it's likely a huge portion of any income will be swallowed by full time childcare costs for 2 children.

I think it's your spending pattern that needs to be looked at and making better decisions (not fixing mortgage, not taking small loans with high APR over 5 years).

You need to fix something in order to increase your savings rather than chewing through them. I'd also be looking to start saving the child benefit immediately into a separate account to build up a college fund (or similar).