Please critique my budget

[mgm]

Hi everyone,

Since we are expecting our first child and moving soon, I thought it would be a good time to get a check-in from Money Matters on our budget.  I have estimated childcare costs (budgeted pre-tax through our dependent spending accounts) and also our new mortgage amount after we move.  

Does everything seem realistic?  Does the mortgage amount seem high or low for our income/expenses?  (We could wait and buy a smaller or better house in a few months if it's best for us long-term financially).

Net Pay (After taxes , 401K Contribution/Dependent Spending Accounts/medical deductions)	$5,460
Expenses:
Mortgage	(1,850.00)
Phone/Cable/Internet	(200.00)
Car Insurance	(200.00)
Utilities	(200.00)
Monthly spending:
Gas	(300.00)
Professional Clothes	(200.00)
Wal-mart/Target, Baby Expenses	(300.00)
Entertainment/Gifts	(600.00)
Groceries	(400.00)
Eating out	(240.00)
Misc - Pets, Hair, Car Maint etc	(200.00)
House Cleaning/etc	(150.00)
Student Loans	(500.00)
Total Leftover	120.00

[Deleted]

How much in student loans and at what rates? How big is your emergency fund? Do you plan on not making any improvements to the house you move into - paint, furniture, knick knacks? I'd probably reduce house cleaning (sorry) and entertainment/gifts and have a "crap for the new house" line.

[mgm]

Hi again Thanks - great questions! Student loans are 60K at 5.25%. I'm deciding if I should put 5% or 10% down on the house (and possibly put the rest to pay off some student loans). Any thoughts?

The house won't need much work, but likely will buy some "house crap" over time. I'd be fine with reducing entertainment/gifts esp the first year that baby will be here since we likely won't be going too many places at first. I would love to keep house cleaning so I don't have to deal with that plus a full-time job and newborn!

[jenjen]

The format Is a little weird on my phone but a few questions.

1) the dependent care flex spending is limited to $5k annually I believe. You don't have a line item for additional daycare expenses. For example, I'm in a LCOL area and pay $8300 annually but only can have $5k withheld from my check. Not sure how you are accounting for your take home pay there but wanted you to consider.

2) does your mortgage amount include property taxes/home insurance/PMI? If so, I think that number is fine for you but wanted to see if you included everything in your mortgage amount.

[mrssandro]

Your entertainment and gifts line item seems very high.

What are you saving in your Efund or retirement?

[mgm]

jenjen-

1) was thinking I can put aside 5000 and my husband can put aside 5000 - is that off? I'll have to check.

2) Yes, that mortgage amount includes everything - my gut feeling is that it's the very max I'd feel comfortable spending (I like having $ leftover for savings,etc)

[Deleted]

Only one of you can do the dependent care FSA. You can't double dip.

[SJ]

I am confused by the first two figures and why there is a $3,640 difference between "Monthly Pay after 401K Contribution/Dependent Spending Accounts/medical" and the next number.

I also think that entertainment/gifts is high and food may be too low.

What does your current budget look like? Have you historically been good at sticking with it?

Are you maxing out retirement? Do you have IRA's or just work plans?

[LoveTrains]

I don't get the difference between the two income amounts.

[maddiepaddy]

Will you have a healthy e-fund after your down payment? Do you have any money set aside for baby start up costs? Does your mortgage include full PITI?

If your e-fund isn't fully funded, the $120 extra left to save is low in comparison to your take home.

Entertainment/gift does look really high. This is more tha $7k per year. Are you including travel savings here?

[formerlyak]

Jan 24, 2013 15:14:25 GMT -5 mgm said:

jenjen-

1) was thinking I can put aside 5000 and my husband can put aside 5000 - is that off? I'll have to check.

2) Yes, that mortgage amount includes everything - my gut feeling is that it's the very max I'd feel comfortable spending (I like having $ leftover for savings,etc)

Only one of you can put aside the $5000. Then that is taken out pre-tax and you get reimbursed the full amount you put aside (not the amount missing from your paycheck after taxes which will be different). I budget based on what my take home paycheck amount is and then add a second income line item in with the amount I get reimbursed from the DSA each month. Then under expenses, I put the full cost of what I pay to the daycare. It is still an expense that I have to write a check for each month. Does that make sense?

[gt7301b]

How much are you saving for retirement?  Do you have Roth IRAs?  Life Insurance?  What about travel?  Does the phone/cable/internet include cell phones?

 

How much cash on hand do you have in case of an emergency?  We have spent ~2K on some type of big home expense each year we have owened our home, this doesn't include random Home Depot trips.

[mgm]

Jan 24, 2013 15:16:23 GMT -5 SJ said:

I am confused by the first two figures and why there is a $3,640 difference between "Monthly Pay after 401K Contribution/Dependent Spending Accounts/medical" and the next number.  The difference is that the 2nd number is post-tax

I also think that entertainment/gifts is high and food may be too low.  I will adjust those, I agree

What does your current budget look like? Have you historically been good at sticking with it?  The current is similar, but with more eating out and no daycare.  Typically we are good unless it's christmas-time or some other big bill comes up.

Are you maxing out retirement? Do you have IRA's or just work plans?  We are not maxing retirement, we are putting in 10% each into 401K's (with additional company matching).  We are 30 years old.

[mgm]

Jan 24, 2013 15:20:23 GMT -5 maddiepaddy said:

Will you have a healthy e-fund after your down payment? Do you have any money set aside for baby start up costs? Does your mortgage include full PITI?  Yes, there's a 20,000 e-fund with 5,000 for baby set aside.  Mortgage includes full PITI

If your e-fund isn't fully funded, the $120 extra left to save is low in comparison to your take home.  What would you recommend for savings if the e-fund is fully funded?

Entertainment/gift does look really high. This is more tha $7k per year. Are you including travel savings here? Includes car trips to parents, beach, etc

[Deleted]

I think the leftover is too low. I assume you have an emergency fund to use when you have an emergency. But how will you build it back up if your leftover is only $120?

FYI, eating out may increase after having kids. Both parents will be working fulltime right?

[mgm]

Jan 24, 2013 15:26:14 GMT -5 gt7301b said:

How much are you saving for retirement?  Do you have Roth IRAs?  Life Insurance?  What about travel?  Does the phone/cable/internet include cell phones?  Saving 10% of income in 401Ks.  Have life insurance through work.  Likely will not travel much in the next 3-4 years, but driving-distance travel is included in "entertainment". Yes, cell phones are included (mine is paid through work, we have no landline)

How much cash on hand do you have in case of an emergency?  We have spent ~2K on some type of big home expense each year we have owened our home, this doesn't include random Home Depot trips. Our e-fund is 20,000, so we should be okay.  I do think a "house" category should be in there - maybe 100-per month?

[AAM2012]

IMO your budget is too tight.

[AAM2012]

Posted too soon

Your mortgage seems high for your take home amount.

[Deleted]

Do you really need $200 for clothing every month? That's $2,400 a year.

[mrssandro]

I would think you would want 3-6 months in your efund to be truly fully funded. I would have enough in my budget to save at least $200-300 a month until you reach that. But I also think having vacation funds, pet funds, college savings, etc are good ideas.

[mgm]

Jan 24, 2013 16:03:47 GMT -5 d0ri said:

I think the leftover is too low. I assume you have an emergency fund to use when you have an emergency. But how will you build it back up if your leftover is only $120?  Normally we would cut other expenses (entertainment, eating out, etc if we had an emergency situation and needed to save more money).  How much do you recommend should be "left over"  I feel like savings account have so little payback and our e-fund is pretty decent at $20,000. Is that a decent amount given our expenses?

FYI, eating out may increase after having kids. Both parents will be working fulltime right?  Yes, both of us would be working full time, I can see us doing take-out more often...

[babybchbum]

Jan 24, 2013 14:48:31 GMT -5 mgm said:

Is your efund after taking out the down payment for the house or before?

DH and I bring home about what you do and our mortgage is lower even with our over payments but what you have isn't outrageous. Is that mortgage payment taking into consideration his dues you may need to pay?

[babybchbum]

Is your efund after taking out the down payment for the house or before?

DH and I bring home about what you do and our mortgage is lower even with our over payments but what you have isn't outrageous. Is that mortgage payment taking into consideration his dues you may need to pay?

[babybchbum]

Is your efund after taking out the down payment for the house or before?

DH and I bring home about what you do and our mortgage is lower even with our over payments but what you have isn't outrageous. Is that mortgage payment taking into consideration his dues you may need to pay?

[SJ]

OK if your take-home is $5460 and that only includes $5,000 of childcare costs, where is the rest coming from? What is your estimate for yearly childcare costs?

[mrssandro]

Deleted because I am still totally lost.

 

[mgm]

Jan 24, 2013 16:18:49 GMT -5 SJ said:

OK if your take-home is $5460 and that only includes $5,000 of childcare costs, where is the rest coming from? What is your estimate for yearly childcare costs?

Right now the childcare number is a bit flawed- it includes $10,000 of child care costs pre-tax since I had mistakenly thought we both could use a dependent care spending account.  Daycare in my area is about $10,000 per year.

[ReenaP]

Your mortgage to net income ratio isn't bad (we used to have a higher % and didn't feel house poor). But add in that $500 student loan and you are looking at 43% of your net going towards debt, which isn't ideal. Obviously you can't do much about that though. Are you looking at job raises/promotions anytime soon? Added income would be great.

[mgm]

Jan 24, 2013 16:18:13 GMT -5 babybchbum said:

Is your efund after taking out the down payment for the house or before? The efund is after downpayment would be paid

DH and I bring home about what you do and our mortgage is lower even with our over payments but what you have isn't outrageous. Is that mortgage payment taking into consideration his dues you may need to pay?  If your mortgage/expenses were the ones I listed, would you feel like it's too tight?  There are no other dues or fees we'd have to pay.

[mgm]

Jan 24, 2013 16:25:37 GMT -5 ReenaP said:

Your mortgage to net income ratio isn't bad (we used to have a higher % and didn't feel house poor). But add in that $500 student loan and you are looking at 43% of your net going towards debt, which isn't ideal. Obviously you can't do much about that though. Are you looking at job raises/promotions anytime soon? Added income would be great.

We normally get 2-3% increases every year, but likely nothing major until 3-4 years down the road.