Whether it's a £1,200 sofa, a £400 phone, or that £85 dinner, the question is the same. Enter the price and your salary for the honest answer in seconds.
Simply enter the price of whatever you are considering buying, whether that is monthly rent, a car, a new phone or a holiday, along with your annual salary. The calculator works out your take home pay after tax, then tells you what percentage of your income this purchase represents and whether it fits within healthy spending guidelines.
A widely used benchmark is that rent should not exceed 30 percent of your take home pay. If you are paying more than 30 percent, you may find it hard to cover other essential costs, save money, or handle unexpected expenses. In cities like London, many people pay up to 40 percent, but this leaves very little room for saving or emergencies.
Most financial experts recommend spending no more than 15 to 20 percent of your monthly take home on car related costs (finance payments, insurance, fuel, tax and servicing combined). If you are buying outright, a common rule is to keep the purchase price below 35 percent of your annual take home pay.
Phones on contracts often feel cheaper than they are. A £50 per month contract over 24 months costs £1,200, the same as a flagship handset bought outright. As a guide, phone costs (contract or otherwise) should not exceed 3 to 5 percent of your monthly income.
The 30 day rule is a simple behavioural trick that prevents impulse purchases. For any non essential item over £200 or so, wait 30 days before buying it. If you still want the item after 30 days and the maths still works, go ahead. Most impulse purchases lose their appeal within 2 to 3 weeks, so the rule typically eliminates around 70 percent of regret purchases automatically. Pair this with the 3 percent rule for a strong combined check.
Generally, no. The widely accepted personal finance principle is that depreciating assets (cars, phones, electronics, holidays, clothing) should be paid for in cash from current income. Putting these on credit cards or buy now pay later means paying interest on something that loses value. The exceptions are 0 percent finance arrangements that you can fully clear within the interest free period and genuine emergencies. If a purchase requires non zero percent credit, the honest answer is usually that you cannot afford it yet.