please critique my budget

[grey56]

You all helped me ~1 year ago on TN by offering up ideas I hadn't even THOUGHT of so I'm back, a year later. TIA.

So my financial goals are to be debt-free except for house. I also want another baby and/or a kitchen renovation. I am wondering where to focus my energy.

INCOME:
Take home pay after taxes, paid every 2 weeks: $3150, of which $450 goes to savings and $50 goes to each of two personal "mad money" accounts for each of us. So $2600 for bills, etc.

MONTHLY EXPENSES:
Mortgage & home insurance: $1550
Cars: $263 (will be paid off Jan 2014) and $376 (will be paid off June 2014)
Cell phones: $85
Cable/internet/phone: $135
Car insurance: $125
Gas bill: average $100
Electric bill: average $100
Daycare: $950
Gas: $300
Groceries/dining/coffee: $500
DH's credit card: $250 (14.99% with ~$4K left)
Best Buy credit card: $156 (0%, to be paid off before interest is charged)
Taxes: $100 (we got audited and owe $100 per week until we've paid $2500)

SAVINGS: $6K total

I would like to get rid of:
Cars
DH's credit card
Taxes


DH wants our taxes set up so we get a refund. I was brought up to OWE taxes. We currently have it set up so we get a refund. I have not fought this fight yet but I will if you think I should. DH wants to use our tax refund to pay off what we owe in back taxes to get that off our plates. I would prefer to pay off DH's credit card since the interest is higher. (Need to check interest on taxes....it's not 0% but it's low.) BUT I could be missing something.

Last year, you all advised me to put all my savings towards our CC debt and then rebuild our savings, assuming our jobs were stable. Our jobs are very stable, so we did that. It was liberating. We are now back to where we were before, minus the CC debt and with that same $ in savings. Should we do this again, only for DH's CC?

WWYD? What am I missing?

Also. Do you think I can afford to upgrade my cell phone plan? Would jump from $85 to $150 per month. We'd get iphones. We currently have a talk/text plan. No internets. Or should we wait until we have less/no debt.

THANK YOU.

[SJ]

I will come back later with more details, but I absolutely think your priority should be getting rid of that CC at 14.99%.

Personally, I'd be fine using savings to do so, since you will immediately free up $250/month to add back to savings on top of the $450 you are already saving.

How are you doing on retirement? Do you have employer plans? Roth IRA's?

[grey56]

Ooh, forgot that. Yes, we both have 401ks through our employers. I started mine in 2002 and I have $80K (just checked). DH started a year or two later and has a little less? We are both doing the max contribution to get the employer matching part. I am 33 and he is 36.

[SJ]

Sept 7, 2012 12:39:34 GMT -5 grey56 said:

Ooh, forgot that. Yes, we both have 401ks through our employers. I started mine in 2002 and I have $80K (just checked). DH started a year or two later and has a little less? We are both doing the max contribution to get the employer matching part. I am 33 and he is 36.

Great job.

I would be inclined to start Roth IRA's as well. Once the cars are paid off, you will have almost enough to max them out without changing much else in your budget.

[midwest07]

What is your plan when you get three paychecks in a month? I would probably use the next one to wipe out all or most of the credit card, and then the next one to wipe out all of the taxes, then you have freed up $350 a month. Then you could look at your priorities again and decide if you still want the phone upgrade or would rather pay off the cars quicker. I would probably work on the cars because you don't really have that much longer on either of them and could knock them out quickly. Then you could really free up a lot of cash each month for savings/retirement/other goals.

I am also interested in status of retirement saving, and I would consider adding college savings for your child.

I don't think any of your expenses seem out of line with your income level. I was confused at first thinking you made $3150 a month, but you are making $6300 (right?) a month in two paycheck months.

[aurora]

I don't remember the backstory, but can you follow-through with not running up DH's CC again once you pay it off? If so, I would just pay it out of savings since it will leave you with $2k plus adding $700/month. I would not upgrade phones until you're back up to at least your current savings. Actually, I wouldn't upgrade phones until I had my cars and taxes paid off, too, but not everyone thinks like me. (Either that, or I would cut cable and use that money to upgrade phones, but TV not at all important to us.)

Congrats on making good progress so far!

[grey56]

DH's CC, we just have been picking away at, $200 at a time (just upped to $250). I had 3 CCs last year, each with $1-2K. THOSE are the CCs we paid off. My interest rates were higher. I had been doing $50/month to each. Now, $50 got added to DH's CC, and the other $100 we are putting towards the taxes.

Once all CCs are paid off, we plan to use for cashback bonuses, etc. but ALWAYS paying off completely each month. NO CC DEBT EVER AGAIN.

Cable/internet/phone can't be cancelled b/c DH works from home and needs phone/internet. Company pays a portion. We considered dropping cable and using AppleTV or Roku, but DH is a big NFL fan. Maybe next year. I watch very little TV except a little Honey Boo Boo when I accidentally turn it on (can't....look.....away......).

I don't see the immediate need to upgrade phones but dang that iphone is sexy. Or should I say....smexy.

Next 3 paycheck month is March 2013.

[glynn2009]

I would use savings to pay of CC. Then put that money to the taxes then Best Buy. After those are paid off I would then get savings back on track and start on the cars. My reward for does these things would be to upgrade the cell phones. I would use the extra pay checks to increase savings when they come in.

[heygrey]

i'm coming up with a surplus of $219 at the end of the month... is that correct? if you add that $200 to the cc it could be paid off in ~9 months. if you add it to the taxes it could be paid off in ~8.5 months.

what is your short term goal for the savings account? i'd pick a number there (maybe it's $6k? maybe $10k?) and once i hit that, scale back savings to $100-200/month and put the extra towards debt. you're not in a horrible position, if you can start snowballing the debt.

and i would love an iphone, but i don't feel comfortable adding that expense to our budget until we're in a better place savings/debt-wise. my phone works just fine, even if it's not my favorite.