Budget review?

[bma]

Hello! I've been a lurker lately and have enjoyed some of the advice given. Would you mind to take a look at mine?

I will eventually remove amounts, PDQ specifics.

Net monthly income: $XXXX

Expenses:
Mortgage: $XXXX (includes escrow) 3.75% Home purchased last year.
H vehicle: $XXXX (under 4%)
My vehicle :$XXX (4%)
Utilities (water, electricity, alarm, trash): $XXX
Insurance: $XXXX
TV and Internet: $XXX (we have the highest Internet package because I do some side work from home. I haven't included this in my income because I put it right towards my student loans)
Cell phones: $XXX (we have looked into reducing these. We both have separate lines because if we join them/make any changes we lose the unlimited plans we have. There wasn't enough savings for us to lose the benefits we have currently)
Grocery + dog food: $XXX
Gasoline: $XXX
Entertainment:XXX
Misc/gifts:$XXX
Allowance (clothes, hair, coffee stops, etc...):$XXXX
Sinking fund: $XXXX (house updates, vacations, appliance purchases, etc...)
Student loans:$XXX (balance of about $XXXfrom undergrad and graduate school- we just started "officially" paying on this in March).

We automatically have $XXper month put in our e-fund savings from our gross income. No credit card debt. We have $XXXin the e-fund. I also have a mental block that we consider $XXXin our checking as $0 for a safety net.

H puts 6% into 401k and has an employer match of 3%. His employer also funds a pension for him that he can cash out immediately if he leaves the company and invest into a 401k or other retirement plan.

I put 4% into 401k and have an employer match of 2%. I plan to increase this next month when I find out what my raise amount is.

Our house was brand new last year and has all new appliances. My car is 2 years old, H's vehicle is about 2 years old also (slightly less). I hope I didn't miss anything! Thanks!

[thefield]

Is my math correct that you have about $700 left over every month?

[bma]

I fixed a formula on my spreadsheet that wasn't adding correctly and it does look like there is $247 left so I need to figure that out. But definitely not $700.

[oswin]

Well, I'm seeing good and bad, but since you're not in the hole every month and don't have credit card debt you're doing ok - so I'm going to be critical here. Good thoughts: your mortgage amount is quite reasonable for your income, and your grocery budget seems reasonable. Bad thoughts: having two high car payments seems insane, but if that's a priority for you then I guess you can afford it. You've also got $1000 of discretionary spending between entertainment, gifts, and allowance - that seems insanely high. Your internet/cable and phones are also very high. Your sinking fund may be too low, though you might be okay since your house is brand new.

Most importantly, you're way under-contributing to retirement. If I were you, with the amount of fat that can be so easily cut in your budget, I would immediately up both of your 401k contributions to 15% (before match). You can afford it, and I'm guessing you're pretty behind on your retirement (at least by MM standards) since you're old enough to have gone to grad school. You don't want to get further behind by skimping on retirement contributions.

[bma]

Mar 4, 2015 14:54:10 GMT -5 Stan said:

$1280 for your vehicles/month? That's car payments and a lot in gas. Why so much in gas? Long commute? What kind of cars are they?

I have a 2013 Toyota Camry and H has a 2013 Toyota Tundra. His commute is longer than mine so his vehicle used more gas. I should have listed gasoline/oil changes/maintenance because I use that fund for that as well. Sorry!

I do own that the car payments are high/insane. I'm hoping to get them paid off and be able to drive my vehicle for several years after and buy with cash. I don't know that we will be able to save enough to purchase both of our next vehicles cash and H has to have 4WD (essential personnel and has to travel in any kind of weather) so we will likely have a payment for his in the foreseeable future and hopefully be able to fix that.

I'm struggling on what we "should" have in retirement so far. Is there a good way to calculate that?

We also want to look into Roth IRA's.

[thatgirl2478]

Where do you live that 4WD is essential? I've lived in IL all my life and never once had 4WD and never had a problem getting around - even when heavy snow hit Chicago during rush hour (so no plows were moving to remove it).

IMO the car payments, phones and entertainment (entertainment/gifts/allowance) are really too high if you aren't contributing at least 15% to your retirement (however you want, 401k or IRA).

The cable isn't too bad, neither is the grocery or mortgage. Since you have a shorter commute, can you switch vehicles with your DH to save on gas etc.

[thatgirl2478]

Mar 4, 2015 15:00:52 GMT -5 bma said:

Mar 4, 2015 14:54:10 GMT -5 Stan said:

$1280 for your vehicles/month? That's car payments and a lot in gas. Why so much in gas? Long commute? What kind of cars are they?

I have a 2013 Toyota Camry and H has a 2013 Toyota Tundra. His commute is longer than mine so his vehicle used more gas. I should have listed gasoline/oil changes/maintenance because I use that fund for that as well. Sorry!

I do own that the car payments are high/insane. I'm hoping to get them paid off and be able to drive my vehicle for several years after and buy with cash. I don't know that we will be able to save enough to purchase both of our next vehicles cash and H has to have 4WD (essential personnel and has to travel in any kind of weather) so we will likely have a payment for his in the foreseeable future and hopefully be able to fix that.

I'm struggling on what we "should" have in retirement so far. Is there a good way to calculate that?

We also want to look into Roth IRA's.

There are a number of different calculators out there, just google .  However the rule of thumb I've seen is 1x your income saved by age 35 3x by age 45 and 5 x by age 55.  The problem isn't how much you SHOULD have in retirement, but that by saving NOW you have the benefit of time in the compound interest game.  The example that's always touted is that if you saved $100 a month from age 21 to 65 you'd have over a million , however if you start at age 31 you'd only have like $300k.  (my numbers may be off, but you get the idea).

[thefield]

What are your goals?

My initial reaction is that you're doing fine, but you're spending a lot of discretionary expenses (entertainment, gifts, allowance) and could cut back there and possibly other areas to get further ahead and meet your short, mid, and long term goals.

The biggest gap to me is retirement. It's great that you're saving and getting the most out of your employer matches. If I was you, I would open Roth IRAs for each of you and try to get to the point where you could max them out.

[thatgirl2478]

Oh - and as far as cell phones got - both my DH and I have Verizon Smartphones, we have unlimited minutes & texting plus 2 GB of data (which is enough because when we are at home/the office/my parents we connect via Wi-fi). We pay $135 taxes included.

I don't know how much data you use, but Verizon is offering 20GB plus unlimited talk/text for 2 smartphones for $170/mo...

[bma]

Mar 4, 2015 15:15:14 GMT -5 thatgirl2478 said:

Where do you live that 4WD is essential? I've lived in IL all my life and never once had 4WD and never had a problem getting around - even when heavy snow hit Chicago during rush hour (so no plows were moving to remove it).

IMO the car payments, phones and entertainment (entertainment/gifts/allowance) are really too high if you aren't contributing at least 15% to your retirement (however you want, 401k or IRA).

The cable isn't too bad, neither is the grocery or mortgage. Since you have a shorter commute, can you switch vehicles with your DH to save on gas etc.

Great question- we actually live at the top of a mountain that has a very steep exit. They close the road every time there is any type of weather because most vehicles can not get up/down. We don't get weather as much as the northern states but his vehicle definitely came in handy a few times this year.

In the summer months he uses the truck to pull our boat (paid off and stored at our home).

I guess my goal is to get as much debt paid off as fast as we can. I would love to be able to put a large portion of our pay into retirement and savings so we can live comfortably.

Based on a quick google search we are doing OK (mostly because of how much H has in his pension + his 401k). We do have some catch up to do.

I will reevaluate the entertainment categories for sure.

[bma]

Stan I'm not sure of the terms off the top of my head. I'll have to look when I get home!

[oswin]

Mar 4, 2015 15:19:34 GMT -5 thatgirl2478 said:

Mar 4, 2015 15:00:52 GMT -5 bma said:

I have a 2013 Toyota Camry and H has a 2013 Toyota Tundra. His commute is longer than mine so his vehicle used more gas. I should have listed gasoline/oil changes/maintenance because I use that fund for that as well. Sorry!

I do own that the car payments are high/insane. I'm hoping to get them paid off and be able to drive my vehicle for several years after and buy with cash. I don't know that we will be able to save enough to purchase both of our next vehicles cash and H has to have 4WD (essential personnel and has to travel in any kind of weather) so we will likely have a payment for his in the foreseeable future and hopefully be able to fix that.

I'm struggling on what we "should" have in retirement so far. Is there a good way to calculate that?

We also want to look into Roth IRA's.

There are a number of different calculators out there, just google .  However the rule of thumb I've seen is 1x your income saved by age 35 3x by age 45 and 5 x by age 55.  The problem isn't how much you SHOULD have in retirement, but that by saving NOW you have the benefit of time in the compound interest game.  The example that's always touted is that if you saved $100 a month from age 21 to 65 you'd have over a million , however if you start at age 31 you'd only have like $300k.  (my numbers may be off, but you get the idea).

Yep, pretty much this. The more you can save early on, the earlier you can retire, or if you get far ahead of where you'd need to be you can cut back later on in life - which might happen if you have kids and your expenses go up. There are any number of calculators out there that will help you figure out approximately how much money you'll need to retire (my favorite is a nice simple 25x expenses, which allows perpetual withdrawals and works for earlier retirement - others are based on income). 

[thatgirl2478]

Mar 4, 2015 15:28:56 GMT -5 bma said:

Mar 4, 2015 15:15:14 GMT -5 thatgirl2478 said:

Where do you live that 4WD is essential? I've lived in IL all my life and never once had 4WD and never had a problem getting around - even when heavy snow hit Chicago during rush hour (so no plows were moving to remove it).

IMO the car payments, phones and entertainment (entertainment/gifts/allowance) are really too high if you aren't contributing at least 15% to your retirement (however you want, 401k or IRA).

The cable isn't too bad, neither is the grocery or mortgage. Since you have a shorter commute, can you switch vehicles with your DH to save on gas etc.

Great question- we actually live at the top of a mountain that has a very steep exit. They close the road every time there is any type of weather because most vehicles can not get up/down. We don't get weather as much as the northern states but his vehicle definitely came in handy a few times this year.

In the summer months he uses the truck to pull our boat (paid off and stored at our home).

I guess my goal is to get as much debt paid off as fast as we can. I would love to be able to put a large portion of our pay into retirement and savings so we can live comfortably.

Based on a quick google search we are doing OK (mostly because of how much H has in his pension + his 401k). We do have some catch up to do.

I will reevaluate the entertainment categories for sure.

Makes perfect sense then .

[oswin]

Mar 4, 2015 15:28:56 GMT -5 bma said:

Mar 4, 2015 15:15:14 GMT -5 thatgirl2478 said:

Where do you live that 4WD is essential? I've lived in IL all my life and never once had 4WD and never had a problem getting around - even when heavy snow hit Chicago during rush hour (so no plows were moving to remove it).

IMO the car payments, phones and entertainment (entertainment/gifts/allowance) are really too high if you aren't contributing at least 15% to your retirement (however you want, 401k or IRA).

The cable isn't too bad, neither is the grocery or mortgage. Since you have a shorter commute, can you switch vehicles with your DH to save on gas etc.

Great question- we actually live at the top of a mountain that has a very steep exit. They close the road every time there is any type of weather because most vehicles can not get up/down. We don't get weather as much as the northern states but his vehicle definitely came in handy a few times this year.

In the summer months he uses the truck to pull our boat (paid off and stored at our home).

I guess my goal is to get as much debt paid off as fast as we can. I would love to be able to put a large portion of our pay into retirement and savings so we can live comfortably.

Based on a quick google search we are doing OK (mostly because of how much H has in his pension + his 401k). We do have some catch up to do.

I will reevaluate the entertainment categories for sure.

Ok, so I can kind of see owning an AWD truck for pulling a boat and the occasional snowstorm, though for the boat it could be cheaper to rent a truck on occasion than to maintain a huge gas guzzler year round. However, I don't see the logic in using it as a daily commuter car for the longer commute. How much longer is his commute? Would it make sense to have him commute in the Camry instead?

[msmerymac]

What are the terms of your student loans?

It doesn't look like you need to do any kind of house renos, which is good (I say as I try to save up like $75k for my own house renovations), so I don't think the sinking fund it that bad. For house maintenance it's usually 1% of the house price per year that's recommended to save.

Any other goals? Kids, bigger house, more vacations?

I would say to start contributing to a Roth IRA - go to vanguard or fidelity's website and set one up. Super simple. You can both contribute $5500 per year. That would be my #1 goal because you aren't eve close to saving 15% for retirement, although I don't know how his pension thing factors in.

I would also want to work on 3 months of expenses in an emergency fund - it looks like you have about 2 right now.

The next goal would be either the cars or the student loans, depending on the the interest rates of each. I agree with you about keeping your car for a while. I have a paid off car I bought new in 2007 and it feels oh-so-good to not have a car payment and be able to save for a new one. However, since you will still have to save to replace your car, the biggest savings from paying it off early would be the interest.

[msmerymac]

Oh, and I bought my cell phone outright and use T-Mobile for about $50/month. If you live on a mountain you might want to see who your neighbors use to make sure you have good service. I think Sprint is doing a "cut your bill in half" thing if you have AT&T or Verizon plus pay your cancellation fees, but I think Boost, VirginMobile and Republic Wireless are all low cost options that work on the Sprint network. Maybe Ting, too.

[bma]

Mar 4, 2015 15:46:57 GMT -5 msmerymac said:

What are the terms of your student loans?

It doesn't look like you need to do any kind of house renos, which is good (I say as I try to save up like $75k for my own house renovations), so I don't think the sinking fund it that bad. For house maintenance it's usually 1% of the house price per year that's recommended to save.

Any other goals? Kids, bigger house, more vacations?

I would say to start contributing to a Roth IRA - go to vanguard or fidelity's website and set one up. Super simple. You can both contribute $5500 per year. That would be my #1 goal because you aren't eve close to saving 15% for retirement, although I don't know how his pension thing factors in.

I would also want to work on 3 months of expenses in an emergency fund - it looks like you have about 2 right now.

The next goal would be either the cars or the student loans, depending on the the interest rates of each. I agree with you about keeping your car for a while. I have a paid off car I bought new in 2007 and it feels oh-so-good to not have a car payment and be able to save for a new one. However, since you will still have to save to replace your car, the biggest savings from paying it off early would be the interest.

$XXX @ 5.6%
$XXX @ 6.8%
$XXXX @ 4.5%
$XXXXX @ 6.8%
$XXXX@ 3.4%
$XXXX @ 5.4%

I don't really understand why they're lumped that way but that's how they show on my statement.

Also: we will not be having kids. We would like to celebrate paying off SL's by going to Europe.

We have two trips schedule for this year - visiting family in May and a beach trip in Oct. We have agreed to cut back on vacations in the next few years to be able to get debt paid off.

The only renovation we have planned is a deck added to the back and we have the money set aside for that once the weather is nice.

[gt7301b]

If I was in your shoes my number one goal would be to increase my retirement savings up to 15%. I wouldn't prioritize putting money in a low interest savings account over that. If you open Roth IRAs you can always access your contributions in a true emergency.

You could certainly cut back in some areas (fun $ + entertainment + gifts + sinking funds + cell phones) if you wanted to get more traction on your savings/ debt repayment. 

[msmerymac]

Ohhh, yeah, that 6.8% is killer. All of mine are that much. 

Once you get a bit more in savings and a bit more in retirement, I'd work on the 6.8% loans first.

[bma]

Mar 4, 2015 16:00:01 GMT -5 msmerymac said:

Ohhh, yeah, that 6.8% is killer. All of mine are that much. 

Once you get a bit more in savings and a bit more in retirement, I'd work on the 6.8% loans first.

Oh this brings me to another question.

Is it better to automatically tackle the high interest instead of doing the snowball method? When I calculated I think it came out to be similar in amount paid in interest but my math may have been off.

[Deleted]

My biggest concern would be your efund. While your house is new and shouldn't have major issues, you never know when something will come up. I'd be pushing to double or triple that about to get to 3-6 months worth of expenses. Just cutting $50/mo from your fun money and putting it toward your efund would help and not be super painful. You might see if a cheap commuter car would be a savings for your H when the weather isn't bad.

[illgetthere]

Mar 4, 2015 16:06:30 GMT -5 bma said:

Mar 4, 2015 16:00:01 GMT -5 msmerymac said:

Ohhh, yeah, that 6.8% is killer. All of mine are that much. 

Once you get a bit more in savings and a bit more in retirement, I'd work on the 6.8% loans first.

Oh this brings me to another question.

Is it better to automatically tackle the high interest instead of doing the snowball method? When I calculated I think it came out to be similar in amount paid in interest but my math may have been off.

Seeing as how the 6.8 is so much more than the others, I'd tackle the 2k and 3500 loans first (one 6.8% down!). I'd do the other 6.8 next since it is a fair amount higher in interest than the 3 and 4.x loans