Squeezed middle class? Decent salary but struggling to save with a family.
I have just finished analysing our income and expenses in 2023 and need some help critiquing our expenditure so I can budget better for 2024. Any other ideas of what I should be doing or prioritising would also be helpful as although I'm fairly organised, I'm quite new to this sub.
Current situation:
- My (M33) full-time salary is £75K + £5K-£10K annual bonus (increase from £60K in year so now definitely no child benefit now)
- Salary sacrifice electric vehicle lease for 3 more years (£443 per month but net amount after tax / NI is £260 and can charge car for free at work)
- Wife (F31) part-time (15 hours) salary is £12K but currently on SMP
- 3 kids (4, 2, 3 months) so childcare costs have been high but hopefully will get better with new rules
- House worth £500K with current mortgage of £380K of 2.5% fixed for another 3 1/2 years.
- Combined pension pot only £32K and both company pension schemes are the legal minimum (5% EE + 3% ER between £6,240 - £50,270. I claim higher rate tax back on SA.
- Emergency savings of £6K in cash ISA. Never used S&S ISA or any other investments.
- Personal loan of £5K taken out to help buy bigger second-hand family car - effective interest rate of 7.25% over 3 years - £4.5K remaining.
- Aim to give 10% of net income to charities (for faith reasons but given to multiple local charities which we are actively involved with)
Thank you everyone who takes the time to share your wisdom. I think it is just our stage of life that young children are expensive and being a one high earner, one low earner household.
We have always put all our savings into house purchases as we value where we live above expensive cars / holidays and have managed to grow deposit to £120K from £25K inheritance.
Our average monthly income / expenses for 2023 (rounded) is below. Ask me any questions you need as I have everything further broken down than the below summary:
| M33 Salary / Bonus (before SS) | £4,230 |
|---|---|
| F31 Salary / SMP | £1,000 |
| Interest / bank switches / child benefit | £70 |
| Less charity giving | (£515) |
| TOTAL MONTHLY INCOME | £4,785 |
| Essential costs | |
| Mortgage | £1,275 |
| Council tax / utilities | £415 |
| Insurances (home, life, critical illness) | £125 |
| Childcare (using tax-free childcare) | £750 |
| Supermarket (food, toiletries etc.) | £550 |
| Clothes | £120 |
| Health / haircuts / dentist | £25 |
| Car lease | £260 |
| Car running (fuel, insurance, tax, parking) | £195 |
| Car MOT / repairs | £145 |
| Interest paid | £20 |
| TOTAL ESSENTIAL COSTS | £3,880 |
| Other costs | |
| Internet and mobile | £70 |
| TV / Music / Book Subscriptions | £40 |
| Sport (including swimming lessons) | £35 |
| Children's Toys / Ballet classes | £35 |
| Meals Out / Takeaways | £85 |
| Other Food / Coffees / Pub | £120 |
| Other costs | £30 |
| Gifts to others (Birthdays etc.) | £50 |
| Christmas / Easter / Family birthdays | £155 |
| Holidays (2 x Family holidays, 2 weekends away) | £260 |
| TOTAL OTHER COSTS | £880 |
| TOTAL MONTHLY EXCESS (Basically nothing!) | £25 |
In 2023 we spent £12K of savings on home improvements and buying bigger family car, leaving only £6K as emergency savings. We have around £5K - £10K of further home improvements we would like to spend in the next year but don't see how we can afford any more.
EDIT: Thank you all for commenting - it has given me a dose of reality and will be talking through with my wife this week.
Just wanted to clarify two things:
- Most people appear to assume my charitable giving is to large charities where my money may not be making much difference. We actually give to very small charities (mostly without any employees) where a much higher percentage of the money goes directly to where it is needed.
I’m an accountant (slightly ironic I know) and I volunteer quite a lot of my time already helping with the bookkeeping / finances of these small charities (getting them through their annual independent examinations) so I see the impact they make with a small amount. These charities do not receive central funding so rely on normal people giving money to make things happen. Whilst we may review how much we give over the longer term, I would not feel comfortable stopping giving immediately unless I really needed to.
Yes, it might seem crazy but we take our commitment seriously. If we couldn’t afford our house once our fixed term mortgage comes to an end, we would downsize but continue charitable giving. It is a sacrifice and it isn’t logical, but we believe that is our faith in action.
- Car spending was really high last year in 2023 and isn’t representative of our budget going forward. We had two older cars which both needed one-off high repair costs and ended up selling them both and getting the leased car and a bigger family car (for third child).
We live in a very rural village (not even a village shop) so it just isn’t practical to only have one car - we did try for a while but was a nightmare.