Budget Critique

[midwest07]

Just to clarify, you said your current job doesn't offer 401k, but you just started one? Can you confirm how that is working?

[ohgillian]

I'm not sure you should be putting anything extra toward you mortgage. What is the interest rate?

[jstu]

I'm not sure how to @ people...
Low house payment: large down payment plus rural area... taxes low, etc.
401k: through a financial advisor place in town. I can contribute, just no employer match.
Baby fund: yes, that was a question I forgot. Any idea how much to budget? We have a large garden and thought about making our own baby food (to an extent) but I'm not sure how realistic that is! Might be fun though. I'm not into the cloth diapering idea... too much "ick"!

[Deleted]

1) no, I would not be comfortable on only $3000 a month, no matter what the numbers are. You personally aren't saving for retirement and I don't see a line item for an IRA.

2) Retirement-- specifically, a Roth IRA for each of you ($5,000 each a year= $833 a month for both of you together).

3) Nothing extra unless your mortgage is above 5%. Again, put extra towards a Roth IRA.

4) I thought you said you weren't eligible for one. If you are at a new job, then put an amount that would get you a match from your employer, if a match is given. Otherwise, 10% is a good start. But I'd still go the Roth IRA route. 529s are optional- your kid can take out a student loan, but you can't take out a loan for retirement. That being said, we contribute $250/month to ours. I think its low but we are maxing out all retirement options since thats a priority.

[katb]

Does insurance include car and life? What about an account to save up for a car? I assume since you have no car payment listed, yours are paid off.
How much longer do you have on the mortgage? With that much left, you could really almost pay a low mortgage balance off quickly if that is one of your goals. Some people prefer to invest rather than paying off the house, some people want to be mortgage free.
If not paying off mortgage, is an option, I would sock everything I can away for a sahm budget. Figure if you want to stay at home for a few years, all the time, more children, etc. You could save your salary or half, for a year or so and have a nice cushion. Then if you never need it, use it to help one of you other goals.

[dexteroni]

1) With these numbers, would you be comfortable staying home for a couple of years? Obviously things can change situationally, but at our current level...

**If this really would be your budget after the baby, I would say it would be ok. But you don't have added baby costs. And did you account for insurance for you and the baby coming out of your DH's pay? My fear is that baby stuff and insurance will eat up a lot of the $749.

2) There is a possibility of my working part-time. If I do, what would I put the $ towards?

**Insurance and baby stuff. But also, what are your child care options? You don't make that much, and you might find yourself paying your entire income to child care. Maybe not, but if you don't know, you definitely need to find out.

3) How much should we be putting towards mtg? We typically put an extra $150 on principal, just because the money is "there".

**At your current income level, it's fine to pay an extra $150. I might even pay more. You may need or want to reduce it after the baby comes and you've figured out whether or not to return to work.

4) How much to start putting into my 401k? in the 529? Should I be more aggressive now to plan for less income later?

**Most advice I see recommends putting 10% - 15% toward the 401k; I think that would be a fine place for you to start. No idea about 529. I would say to get your other costs in line first and worry about the 529 later.

[Deleted]

Oh yes, you need life insurance if you don't have it, and approx $75/month for baby stuff in the beginning (can be less if you dont work, BF exclusively and dont need an expensive pump. Also cloth diapering saves a lot of money).

Groceries/take out may also go up if you dont have time to prepare food-- it did for us. But we go out to eat less, so it balanced out.

and if you do work part time, what will you do for childcare?

[jstu]

These are all good thinking points... thanks so much. We are meeting with the financial advisor later, which is why I was looking for contribution advice now.
A couple more adds, then probably won't comment until/if I delete.

1) Low interest rate on 30 year loan (our first house)... I guess it just feels good to put extra towards principal each month and see the amount go down. The goal is to pay it off before kid#1 would go to college.
2) Child care is from a good friend and would be cheap. If I did work PT, some of my earnings would go towards that.
3) We have talked about life insurance and hadn't done that yet. Plan to once we actually know I'm expecting.
4) The 401k is a Roth. But thanks for the IRA questions... a talking point for later.
5) Part of our savings is earmarked for a "family" vehicle, again, once we have a more definite timeline.
6) Health insurance: it will definitely take a chunk out of husband's paycheck. We've looked into that, but I can't remember the exact numbers. Thanks for the reminder, though. I'll check!

[mrs.spunky]

Sept 19, 2012 12:46:48 GMT -5 jstu said:

3) We have talked about life insurance and hadn't done that yet. Plan to once we actually know I'm expecting.
4) The 401k is a Roth. But thanks for the IRA questions... a talking point for later.

You need life insurance NOW.
Pregnancy can cause or exacerbate conditions that can leave you uninsurable in the future.

You can have a Roth 401k and a Roth IRA.

[Deleted]

Sept 19, 2012 12:53:11 GMT -5 mrs.spunky said:

Sept 19, 2012 12:46:48 GMT -5 jstu said:

3) We have talked about life insurance and hadn't done that yet. Plan to once we actually know I'm expecting.
4) The 401k is a Roth. But thanks for the IRA questions... a talking point for later.

You need life insurance NOW.
Pregnancy can cause or exacerbate conditions that can leave you uninsurable in the future.

You can have a Roth 401k and a Roth IRA.

This. I got life insurance when I was pg, and it was a lot more expensive than it should have been bc I was a) above healthy weight and b) because I was pg. I applied for new insurance after I gave birth and the premiums were substantially lower.

And as someone who can't contribute to a Roth IRA-- do it if you can. It grows tax free and you have many more options available than most people have with a 401K. And the fact that you don't have a 401K available now means you should absolutely be contributing to an IRA.

Paying off a low interest mortgage instead of putting money towards retirement is not smart use of your money, in my opinion.

[Deleted]

I don't think you should always count on your H's overtime in your budget. You never know what could happen. How much is the overtime above his reg salary of the $3000?
Also, since you have health insurance thru your job, if you quit, you and a child would need to be added to your H's-that may be several hundred dollars.
You'll also need diapers and/or formula for a baby.
I know you said its non-neg, but who came up with the 15% for tithing?

[phunluvin82]

Sept 19, 2012 13:11:42 GMT -5 flygirl said:

I don't think you should always count on your H's overtime in your budget. You never know what could happen. How much is the overtime above his reg salary of the $3000?
Also, since you have health insurance thru your job, if you quit, you and a child would need to be added to your H's-that may be several hundred dollars.
You'll also need diapers and/or formula for a baby.I know you said its non-neg, but who came up with the 15% for tithing?

b/c of the bolded, I would probably choose to work PT if I were in your shoes. Unless child care will eat up your whole PT salary, in which case, that obviously wouldn't make sense...but it seems like that would not be the case if you have an inexpensive child care option.

Health insurance plus baby expenses could probably eat up a lot of your H's excess income faster than you might think. Then if he has a job loss, or even a loss of some of his overtime income, you could be in a tough spot. I'd want the peace of mind of having a little bit extra coming in, but that's me.

[Deleted]

Sept 19, 2012 11:46:20 GMT -5 jstu said:

6) Total amount in our 401ks is comparable to others our age.

What does this mean exactly?

[Deleted]

I didnt realize that $3000 was WITH overtime.

I don't even feel comfortable with $3000, let alone less than that.

and re: "comparable 401(k) for our age" comment- the majority of Americans have nowhere near the amount of money they need to retire. People are simply not saving enough.

[SJ]

How much does he make WITHOUT overtime? What is his base take-home? How much is he putting into his 401K?

Also, are you sure that you didn't open a Roth IRA with the financial adviser in town? I'm not sure how you can have a Roth 401K if it isn't offered through your employer. Either way, how much are you putting into it?

ETA: If you have indeed opened a Roth IRA for yourself, I would put the maximum in it each year ($5,000/year). Use some of the $50K in savings to do so. Personally I would do one as well for your husband and max it out, but yours should come first since you don't have an employer plan.

Does your state offer tax benefits for 529 contributions?

[honeybee]

We have pretty similar expenses, LCOL area $500 on a mortgage is fairly normaly.

Anyway, I'd be comfortable on 3000 but only if that was base pay. Overtime can vary too much. Mine can bring in anywhere from 0 to $1500 a month on overtime.

[jstu]

Sorry, I accidentally deleted my entire first post instead of modifying.. but.. thanks for all of the advice. We now have an appointment for life insurance for each of us. I promise I will take all advice into consideration. It's really helpful to get different perspectives. Have a great day!

[thegooser]

Sept 19, 2012 13:43:51 GMT -5 jstu said:

Sorry, I accidentally deleted my entire first post instead of modifying.. but.. thanks for all of the advice. We now have an appointment for life insurance for each of us. I promise I will take all advice into consideration. It's really helpful to get different perspectives. Have a great day!

YES! I helped one person today!