How has your spending changed in 2021, after more than three months of lockdown?
Since the start of this year, I’ve continued keeping my spending diary, to see where we saved and where costs soared.
Even better, I’ve swapped spending diaries with Mrs Mummypenny, not just because I’m nosy but also to see what I can learn from someone else.
We’ve pored over each other’s spending diaries in the past so it’s been fascinating to see what’s changed in 2021.
We’re both self-employed money bloggers in our forties, living outside London in four bed houses. Our spending is both for families of four – for me including my husband and two children, and for Mrs Mummypenny including her three boys, who live with her half the time since her divorce.
Find out where we spent the same – and where we differed!
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Saving vs spending
The pandemic has caused deep financial divides. Some people are in dire straits, due to job loss, furlough or their income evaporating. Others actually have extra cash, if their jobs continued but their spending shrunk during lockdown.
Hands up, Mrs Mummypenny and I are definitely some of the lucky ones.
Our businesses kept going, but we had less chance to spend on eating out, going out, shopping, travel and holidays, when almost everything was shut.
So for me, the biggest change in my spending for 2021 was actually saving more.
In fact the money I ploughed into savings, investments and pensions blew everything else out of the water. It accounted for nearly 60% of my outgoings, nearly three times as much as the 22% for Mrs Mummypenny.
Setting aside savings, investments and pensions, we actually spent pretty similar totals: £8,912 for Lynn and £8,195 for me. How we spent the money did differ!
Making chunky pension payments
Pension payments have been by far my biggest category so far in 2021, at 50% of my outgoings.
I’m a big fan of pensions because of the free money that gets added in tax relief. The drawback is that you can’t whip anything out of your pension until the age of 55 (rising to 57 from April 2028).
However this time last year, during the first lockdown, some work projects were delayed or cancelled, which made me nervous about tying anything up in long term investments.
In the second lockdown, I finally got round to setting up a small but regular monthly pension payment.
During this third lockdown, which continued through the end of the tax year on April 5, I felt confident enough about my income to stash a chunky £10,000 of my Covid savings into my PensionBee pension (affiliate link).
I’m self-employed as sole trader, so don’t have a boss to choose a pension for me or make contributions on my behalf. It’s all down to me.
I do normally wait until after filing my tax return in January to stash a lump sum in my pension. That way, I have a better idea how much I can spare, between money coming in and money going out in bills and tax.
This year, part of the reason I whacked more than usual into my pension was because I’m celebrating a big birthday this year, edging distinctly closer to the magic age of 55, when I can actually get my hands on my pension money if needed. Retirement is no longer just a distant dream.
My pension is also particularly attractive because I can rake in higher rate tax relief. For every pound I pay into a pension, I get 25p added automatically in basic rate tax relief. I can then claim another 25p tax relief back on my tax return, cutting my tax bill. So my pension pot goes up by £1.25 – but it’s only actually cost me 75p. Most people can pay up to 100% of earnings, capped at max £40,000 a year, into a pension.
Making pension payments can also help higher earners hang onto more Child Benefit. Normally, once the highest earner in a family earns over £50,000 a year, the government starts clawing back Child Benefit. Once you earn over £60,000 a year, it’s all gone.
But pension payments are taken off your income before any Child Benefit calculations. That means if you pay enough into your pension to bring your income down below £60,000 you’ll still get some Child Benefit, and if your income after pension payments dips below £50K, you’ll hang onto the whole lot.
My post with more on how pensions can cut your tax bill over on the PensionBee blog:
Meanwhile Mrs Mummypenny put £2,000 into her pension during 2021, after bigger contributions before Christmas. As Lynn is the company director of her own limited company, her tax breaks on pension payments are slightly different from mine as a sole trader. She saves on corporation tax by making pension payments from her company, as they count as a business expense.
Debt is expensive
Comparing spending diaries reminded me again about the burden of debt, and how borrowing pushes up living costs.
We made the decision back in 2014 to move from London to Suffolk, which meant we could clear our mortgage completely. We try to avoid debt wherever possible, just running credit cards that are paid off every month. It was a big deal for me last year when I took out a Bounce Back Loan for my business (interest-free for the first year) as normally we pay for stuff in cash rather than borrowing.
So our debt repayments in 2021 have totalled a big fat zero – compared to nigh on 40% of Mrs Mummypenny’s outgoings, across her mortgage, car financing and bed repayments.
Cooking vs takeaways
One of the big time sinks for me during lockdown was All The Meals.
Normally I work from home in glorious peace during the week, with my husband off at the office and my kids at school. During multiple lockdowns, we’ve pretty much been together 24/7, including every single meal and snack (there have been a lot of snacks). OK I will grudgingly admit there a few school dinners in the brief three weeks the kids were back at school before the Easter holidays.
There was no chance to eat out, and we spent just £61 in three months on takeaways – a single trip to the chippy, some snacks for the kids at the end of term, and an Easter treat when my husband took the kids to get takeaway waffles and milkshakes from a newly-opened local business, after a voucher for 10% off.
Meanwhile the grocery bill for our family of four totted up to just over £1,350, so around £100 a week in supermarket spending. I reckon our food bills have also been a bit higher than normal as I’ve been attempting to follow the Fast 800 diet, which is big on pricier protein and fresh fruit and veg, and cuts down on cheap carbs.
Mrs Mummypenny actually spent an almost identical £1,417 in total on groceries and eating out, despite only catering for one person half the time, when her boys were with their dad. Her total was split very differently, with only two thirds on groceries, but a third on assorted takeaways and Mindful Chef boxes.
Right now I’m just feeling a bit jealous of the takeaways. Steering clear of the likes of Deliveroo and McDonalds may have kept our food costs down, but I quite fancy the idea of time off cooking!
Spending more fun money in the latest lockdown
One area that has changed for me compared to the first lockdowns is more ‘fun money’ spent by the kids, my husband and myself.
We have not been frugal, but have invested in stuff for assorted lockdown hobbies, way more than during the first couple of lockdowns.
So for example, the kids embraced online ordering, and I’ve topped up their Christmas, birthday and pocket money to get books, art materials, board games, gaming vouchers, filming equipment, Zoom piano lessons, a model kit and a drone. We’ve also paid in advance for print making classes for my 13-year-old.
My own fun money went on magazines, books, flute lessons by Zoom, a Duolingo language learning subscription, an afternoon tea box as a Mothers’ Day treat, a gin box for a Zoom drinks tasting and another one as a future birthday treat.
Meanwhile my husband has been doing bass and Pilates lessons by Zoom, subscribes to Apple Music and the Guardian, and put his Christmas and birthday money towards buying an iPad.
After caving in to demands for Netflix during the first lockdown, I also splashed out on assorted trial subscriptions to Britbox, Amazon Prime video and MUBI, a film streaming service. We’ve stuck with Britbox but I’ve cancelled the others.
Overall, we spent a chunky £2,000 on the leisure, children and fun money categories, compared just £485 for Lynn and her kids.
Allowing for one-off costs
Looking at where my spending diary differed from Mrs Mummypenny’s, I kept thinking: “but that’s a one-off or annual cost, not everyday normal spending”.
Our car costs were bumped up by the £285 car service and our pet costs inflated by Otto the dog’s annual injection (£42), the first time he has been groomed in a year (£40) and the one-off operation when he got the snip (£168).
Household costs included nearly £125 replacing smoke alarms, nearly £100 for the water-softening salt blocks that should last a year, the £175 annual premium for buy to let buildings insurance and £96 for (hopefully) one-off boiler repairs. Bills were bumped up by a heating oil delivery.
The total spending on presents just happened to cover a period with five birthdays, Valentine’s Day, Mothers’ Day and Easter. We also forked out for a fancy glamping break booked for after lockdown.
Yet Lynn has also had out of the ordinary expenses, such as a dishwasher repair and buying a car battery jump start kit.
I guess the real message is that budgeting can’t just be based on normal, everyday spending. Every month there’ll be some kind of annual or unusual expenditure. Even if it’s not smoke alarms or a pet injection, the annual car insurance or whatever else will be due.
Now – over to you. How have your outgoings changed during the 2021 lockdown? Have you been able to save, or is it a struggle keeping body and soul together? Do share in the comments, as I’d love to hear.
Read Mrs Mummypenny’s post about our lockdown spending diaries over on the PensionBee blog.
Plus, join us for an Instagram live chat about lockdown saving and spending on Thursday 22 April at 1pm!
This post was sponsored by online pension provider PensionBee (affiliate link)