Can you look at this budget?

[DecemberMamato2]

We are considering purchasing a new home. Right now, things are quite comfortable since we live in a very small townhouse with very low property taxes. This move will change things quite a bit & i'm looking for brutally honest input if this budget is too tight:

DH Take Home: $5,746 (net of 401k contrib/medical/etc)
I am a SAHM

Expenses (very detailed here...):

Mortgage/Prop Taxes/Homeowners/PMI - $1,850
Student Loan - $124
Gas (cars) for both - $160
Car Ins - $125
Electricity/Propane Heat Expense - $375 (nervous this may be low - house is 2700 sq ft)
Trash - $24
Water/Sewer - $0 (well/septic system)
Cable TV/Internet - $125
Cell - $79
Netflix - $8
Matienance/Repairs - $60
E-ring Ins - $3
DH Life Insurance - $90 (he has a health issue)
My Life Insurance - $20
Gifts - $200 (budgeting throughout year for Christmas)
Prescriptions - $12.50
Cat Vet visits/litter/food - $35
Potential New Dog - $100
YMCA - $97
Groceries/Other Consumables - $500
Eating Out - $300
Diapers/Formula/Kid Expense - $300 (we have 1.5 yr old with another baby on the way)
Entertainment - $120
Charity Donations - $100
Clothes/Dry Cleaning - $165
529 College Savings - $50
New Car Fund Savings - $300 (both cars paid off, but we make a fake car payment into savings, as well need new ones eventually)

Net Surplus - $415

Notes:

- Large house expenses (new deck, etc.) & Vacations/Travel to come from DH bonus with is $10k+/- every March
- $5,000 Roth IRA contrib to be paid by tax refund (we never changed withholdings and get $5k+ back each year.. free loan i know..)

[cahabalily]

Is the Roth for you or additional retirement for your H?

I think your diapers/formula/kid line item is going to go up drastically once the baby arrives.

Can you bundle your insurances for a discount, or is this the bundled rate separated for our benefit?

What would the mortgage be on a new house? Will you sell the TH or are you renting?

[DecemberMamato2]

May 22, 2012 10:06:23 GMT -5 cahabalily said:

Is the Roth for you or additional retirement for your H?

I think your diapers/formula/kid line item is going to go up drastically once the baby arrives.

Can you bundle your insurances for a discount, or is this the bundled rate separated for our benefit?

What would the mortgage be on a new house? Will you sell the TH or are you renting?

Roth is for DH only... I have no earned income & cannot make a contribution. He makes a 7% 401k contrib, which is fully matched

$300 for babies would be going up drastically you think? I thought that number was pretty solid.

We actually benefited by not bundling (significantly)... we shopped around for best companies for each

Total Mortgage is $1,850 (principal & int alone is $1,180)
Townhouse will be sold. We will walk away with about $10k after fees which will pay for moving & one-time expenses for new house (riding lawnmover, some furniture, new tv, etc.)

[chessie]

The left over $- does that go to savings? Do you have other savings? I would setup an IRA for you separately. Look into new bundles for insurance and cables discounts. Are you sure on those baby costs? What about medical insurance increases, copays? I would estimate without daycare around 300-500 a month just for 1 baby. I would slim down your gifts and put more into savings per month. There would not be enough left over a month to make me 100% comfortable. If something happens, etc, breaks, someone gets sick, so many variables here. Its pretty tight I think.

[ReenaP]

It's tight, but I think you can handle it if you really want this house. We have a similar mortgage to net income ratio as you, and it works for us. The nice thing is that you can cut some areas such as entertainment, eating out, and clothes if you are feeling a crunch. Is that $2,400 in annual gift money all spend on Christmas, or spread over other occasions also?

[cahabalily]

Oh, well, I don't know for sure about the baby item, I don't have children, I was basing that off of several friends having had #2 and being surprised at the difference another makes.

I'm clueless about babies, so just ignore me...

[DecemberMamato2]

Yes, we do have additional savings:

$18,000 in a true emergency fund
$9,000 in a new car fund
$10,000 in the vacation fund
a few thousand in our "buffer" account
$170k in retirement (of which $40k is Roth)

obviously we wouldn't tap into our vacation fund or buy a new car should a major emergency arise.

I'm not sure on the baby costs.. but I was surprised to here you think it will be a drastic increase - I do know formula ran us $100/mo with DS & diapers/wipes were another $100/mo. If baby #2 is a boy, we already have all the clothes. If its a girl, clothes really didn't run that much (I shop at Target & Kohls). Our insurance is excellent, so medical costs are minimal - wells visits to the doctor are free, sick visits are $10 and those werent very often. I can't really think of anything else - we'll buy the occassional toys, Target brand J&J toiletries as needed, diaper genie refills, pacifiers - that's really not going to run more than $100/mo

Medical Insurance increases are usually fully covered by DH's raise.

The $2,400/yr for gifts is to be spent throughout the year (christmas, birthdays, showers, weddings, etc.)

[shopgirl07]

Right now your housing costs are 32% of your income. That's really as high as I'd want to go with 2 kids and only one income.

Where would you even get the down payment for a new house if you're only going to net $10K from the condo?

[DecemberMamato2]

I didn't mention the new house fund savings since that would all be spent on settlement day.

We have $33,000 set aside there which should pay for closing & be 10% down. We'd also ask for a little sellers assistance in the offer as well.

[Pom]

Roth is for DH only... I have no earned income & cannot make a contribution

This is WRONG. You can absolutely contribute to a Roth.

www.fairmark.com/rothira/spousal.htm

[shopgirl07]

OK, so what % of your income will your new mortgage be?

[chessie]

Sounds like you have a lot of side savings. Are you able save anything on a regular basis as well? Do you ever plan to go back to work? I would look into a retirement account for you, this is important. Will your DH's income get larger anytime soon? Housing costs is eating up quite a good chunk of his income. This is the part that is just so obvious in my eyes, still too tight.

[whitepicketfence]

I didn't read all of the responses so please forgive me if I repeat anything.

First off, I think those who say your baby expenses will go up after #2 comes are a bit crazy. I have a 2 kids in diapers and one on formula and I don't spend anywhere near $300/month on them so I think you're ok there.

Also, if you file your taxes jointly with your husband, you can still contribute to an IRA for you (Google Spousal IRA).

What does the leftover $415 go towards each month? Based on your $18K efund and your other savings accounts, I think this budget looks doable. It's a bit tight, but I don't think it's that bad.

[SJ]

You CAN contribute to a Roth IRA for yourself and I would highly recommend doing so.

[marchmom06]

In my experience, kids activities can be expensive. I know your kids are young now, but as they get older, I don't think $300 will get you very far, if that will need to include everything: diapers, formula, preschool, swimming lessons, etc. Activity cost varies quite a bit by COL, but still something to keep in mind as you're planning for the next few years.

[quickstepstar]

I might be in the minority, but I think you are ok. It looks somewhat tight, but there is certainly a lot that you can cut if needed.

How much is your DH putting into his 401K?

I would recommend starting a RothIRA for yourself.

[Deleted]

I personally wouldn't be okay with this unless you would be able to go back to work if your spouse lost his job.

the mortgage and utilities eat up 39% of your household income, and I would not want that huge of an overhead on one income.

[LLYS]

You qualify for a SPOUSAL IRA!

I would cut back on the eating out for additional savings.

What is your plan should you have to go back to work (DH health issues etc) ?

[DecemberMamato2]

Good news - I contacted an insurance agent and I overestimated our homeowners insurance by more than double. So new mortgage would be $1800. Car insurance also goes down significantly to $75.

So this gives us a surplus of $515 now. This would be put into savings each month assuming no unexpected expenses outside of the budget come up.

I do feel there are additional places we could cut as well - the Y membership could go, we wouldn't make charitable contributions if we couldn't afford our own bills first, eating out could go, and perhaps we wait on getting a dog. Doing all that would add another several hundred dollars to the surplus.

To answer some questions, DH puts about 8k/yr into his 401k. This is fully matched by his employer. He also gets another few thousand added to a retirement savings plan by his employer. Including what his employer does, we put over 20% into retirement which is why I am okay with not doing a spousal Ira for myself. Correct me if I am wrong, but a spousal IRA works similar to a Traditional IRA. We love the benefits of having the Roth so I wouldn't want to decrease his just to increase the retirement savings owned by me. The $170k I referenced in retirement savings does include IRA savings for me, so it's not like there is nothing in my name.

I honestly don't know about returning to work. There are no concrete plans for me to go back once the kids are in school, but I am certainly open to it. If DH ever lost his job, I would go back to work immediately, but I wouldn't make even close to what he makes.

[Pom]

Correcting you, because you are wrong. You can open a Roth IRA just for you. Do it now.

[cheese]

It would make me nervous not contributing anything to retirement in my name. I would open a Roth IRA.

[chessie]

May 22, 2012 16:53:16 GMT -5 cheese said:

It would make me nervous not contributing anything to retirement in my name. I would open a Roth IRA.

Would make most of us on MM nervous as well, trust me.

If you and your husband are comfortable with this, having your 8 months efund in line, and other savings, without saving on a regular basis I guess that is okay.

But if things get tough, cancel cable, slash your cell phone bill, reduce gifts- u really don't need to spend this much, just get gifts for the kids and weddings, charity donations, YMCA, I would not consisder a dog at all if I were you, 1 accident and its 1000's at the vet- are you up for that, will you have enough to pay for this? My last dog cost me 8k in 2 years with kidney issues. Have you thought about getting a part time job to maybe increasing your income, so your DH is not the sole earner? Like others have mentioned, I would open your own IRA if I were you so both of you are in line to retire comfortable eventually. Things happen, and you might need more down the line. My mom wishes she went back sooner to work, she had no Retirement, relying on my dads, now she is SOL. I would hate to see any woman in this situation. Its not enough to share between two people, especially with the rising medical costs and cost of living.

[barefootcontessa]

I think the budget is fine given your other savings. It sounds like you are a good manager of money. My DH puts a huge amount into retirement, like almost 30% of his salary, so I do not contribute to another IRA. I suppose I could be screwed if we got divorced, but given the law in our state I should get half.

[pb1124]

I am a SAHM and have a Roth IRA--you can definitely open one. I'm not worried about divorce, I just like taking advantage of the chance to save double in a Roth (we can save $5k each).

[gt7301b]

I would try living on this budget for a six months before buying a house. While living on this budget I would also open a spousal Roth for you.