In preparing for 2021 I spent some more time on my budgets. I’ve written about where I underestimated my 2020 budget before, and I have added in those changes – both the unknowns (utility bills) and the real underestimation (groceries). I also spent some time thinking about what matters to us as a family and where else we could make compromises.
This led me to some interesting conclusions. One of the things I love about the FIRE movement is that you tailor it exactly to you: your own wants and needs; what you find important now and in the future; and the options you see for your coming years. For me personally, I am always juggling compromises. If I want to work, I need to have childcare and the most likely thing is that I am going to pay for it. If I want to work in my chosen field then I have to travel, and have childcare which is available overnight and for days at a time. And so on and so forth. Setting budgets though helps me to think about those compromises and priorities, and how to get a balance that works for myself and my kids. I find it really empowering because it’s taking an intentional approach to money, and matching my actions to my aspirations.
So for 2021 these are the things I am not prepared to compropmise on:
- Childcare. We have a nanny who has been with us since my youngest was 3. With the pandemic and lockdown, I haven’t been travelling and haven’t needed overnight care etc in the way I usually do. But I still need childcare and value the care and engagement we get from our nanny, so this won’t change even though with all the additional costs (health care, insurance, travel) it’s not cheap.
- Kids’ clubs. I was quite shocked about how much these are in Copenhagen, and I’ve gone back and forth about the right balance. Since my kids are only young once and working means I don’t have time to e.g. take them swimming every week, I have decided to keep this in but limit it two two per child. This means they get to see friends, do sports (and lots and lots of dance…) and keep broad interests whilst ensuring I am not going crazy on this budget line.
- Holidays: I’ve kept in a decent line for this in 2021, though I hope it will be less since we have some vouchers from holidays we couldn’t take due to COVID which have rolled over to this year (well, fingers crossed that this happens and we don’t roll them over whilst staying at home FOREVER).
So what is the budget? It’s very similar to 2020’s actuals – a budget of £ 4,645 per month or £ 65,618 over the year. The breakdown is planned as below – this is an average over the year where some costs are annual, and some come out in specific months etc:
|Annual Plan||Monthly Budget|
|Childcare costs||£ 13,200||£ 1,100.00|
|Car (insurance, tax, petrol)||£ 1,500||£ 125.00|
|Charity||£ 800||£ 66.67|
|Eating out||£ 1,440||£ 120.00|
|Entertainment – media||£ 600||£ 50.00|
|Entertainment – going out||£ 1,200||£ 100.00|
|Kids – extra curricular||£ 3,000||£ 250.00|
|Family||£ 600||£ 50.00|
|Groceries||£ 4,800||£ 400.00|
|Holidays||£ 3,600||£ 300.00|
|Insurance||£ 2,400||£ 200.00|
|Personal care||£ 360||£ 30.00|
|Shopping – general||£ 300||£ 25.00|
|Shopping – gifts incl birthdays||£ 700||£ 58.33|
|Shopping – clothes||£ 350||£ 29.17|
|Rent and Bills||£ 20,400||£ 1,700.00|
|Transport||£ 500||£ 41.67|
|TOTAL SPEND||£ 65,618||£ 4,645.83|
To be honest it still feels like a lot.
However, the planned savings (shown below) mean that it would be another year where I spend 60% and save 40%. Again, this doesn’t include anything pre-tax, so money paid for health insurance, or my employer pension to which I pay around £17,000 per year:
|Annual Plan||Monthly Budget|
|Mortgage||£ 10,310||£ 865|
|Mortgage Overpayment||£ 15,200||£ 1,250|
|Emergency Fund||£ 1,200||£ 100|
|ISA||£ 20,000||£ 1,250|
|Kids’ savings||£ 2,976||£ 248|
|SIPP (private pension)||£ 2,400||£ 300|
|TOTAL SAVINGS||£ 41,776||£ 3,148|
This would put me on track to finish paying off the mortgage on my UK home by the end of 2022, earlier than I had planned, and to max out my ISA as well as paying into kids’ savings and a personal pension. So even though the spending is quite high, I am definitely working toward my financial goals.
The one unknown is housing. We’ve been looking to buy a home here in Copenhagen which would suck in savings (though this would become equity) and reduce monthly outgoings. So far, we have put in an offer and lost out on one home and we have an offer under consideration this week (please cross your fingers for me!). If we can’t find something by about March I will look to rent, since we have to be out of this rented house by July.
Once the housing is exactly known I will tweak the budget. I do feel like we could save more, and will keep coming back to the budget throughout the year to see what else we can trim away. Either way, we’ll keep on enjoying the free pleasures in this life, and the knowledge that we are trying to live mindfully. What’s your plan for 2021 and how are you going to stick to it? Let me know!