Another DeLurker w/ Budget Review

[bostonmichelle]

Hi,

So I decided to come out of lurking as I have been lurking for a few months.  A bit about me, I married my DH this past summer, we bought a house last spring, and got a puppy this fall.  All in all it was an extremely busy 2012 and hopefully 2013 will be just as great, but not as busy.  DH works as an engineer at a defense company and I recently became partner of a local CPA firm, with my former boss.  I also do real estate on the side.  We are both 25.

So I need a bit of help with a review of my budget, I know we need life insurance and I need retirement, I will be signing up for life insurance in May and starting contributions to an IRA as well then, most likely with a catch-up for the first part of this year. I also just finished school in December, and paid the last 2 classes out of savings so I am not 100% positive on my SL payments as they keep changing.


Can anyone find anything different to do for our budget?

[gt7301b]

How much are you saving for retirement? If you don't have a Roth for you I would start that this year (you can make 2012 contributions till tax day) In an extreme emergency you could also pull out your contributions without penalty.

I'd use the $350 to start paying down the CCs early. You don't want to get to 2014 and have to payback interest.

[bostonmichelle]

We shouldn't have any major stuff since we bought a relatively new house and most of the major updates occurred within the last 2 years.

[bostonmichelle]

I planned to pay off the cc's before the 0% is up, I may have the dates wrong since I didn't have all the paperwork but I did it out that the monthly payments made it paid off the month before it expires.

[nancybotwin]

You are spending a lot on food. We spend less than that (in HCOL) and have 3 people. Maybe you could trim some of your dining/grocery budgets and have more money to put towards saving and debt? I agree with PP about putting more in saving.

You are also spending a lot on car payments but I am not sure what else can be done about that.

[bostonmichelle]

Yeah we have been trying to trim the food. That is half as much as we used to spend. We try to limit ourselves to one dinner out, a lunch and a breakfast a week. I meal plan and shop the cheapest grocery store an coupon clip and can't get below $80-$100 a week in groceries. We could probably eat lower quality food but we both like to cook and have quality meals. We used to each commute apx 100 miles a day to work when we bought the cars so we got nice Subaru legacys and we had no trade ins so that's the best we could do coming out of college.

[FWP]

Jan 21, 2013 9:30:47 GMT -5 gt7301b said:

How much are you saving for retirement? If you don't have a Roth for you I would start that this year (you can make 2012 contributions till tax day) In an extreme emergency you could also pull out your contributions without penalty.

This. The roth could contain your e-fund so long as you don't pull out your gains (only contributions w/o penalty).

Your income is good but you sure don't have much room in your budget... I think you need to consider whether this lifestyle is sustainable for you (and taking on extra debt on behalf of the SIL is going to exacerbate this). I do think your income is likely to increase in the next couple years, but (the engineering income at least) will probably stagnate after ~5 years unless your H is pretty ambitious.

[bostonmichelle]

I guess I could always start setting up using the Roth as an efund. I just get nervous to have to rely on pulling out anything from retirement, but then again maybe it will really hit me home to not pull from there. I think a few of the numbers may be high as well, but I'm conservative in nature and would rather budget more for items. DH sometimes picks up overtime and I pick up probably at least if not more from now until April 15th, so that's usually a good chunk of savings for the year. I guess I didn't clarify either that my sales commissions for real estate are not factored in there and those generally go to savings/paying off debt. DH is about 4 years into the profession, he has risen quickly and there are a few higher positions open that I think he will be able to move into within the next 1-3 years, which will come with close to a 10% raise.

[sunnydaze31]

Are you able to make principal-only payments on your student loans while they're in active repayment mode? It won't bring down your monthly payment amount, but you'll end up saving on interest.

[bostonmichelle]

I would assume I can make extra principle only payments while actively repaying. I was just hoping to knock off another $2-3k before they came out of deferment and they monthly payment would be $50-75/month lower.

[Deleted]

We live in a HCOL (Shanghai, China) and we budget $315 for groceries (which is usually more than enough) and $325 for going out for 2 people, but we have very few other expenses and no debt CC, SL, car, mortgage, or otherwise. If we did, I would certainly be able to get our costs down more. I cook almost every night and we go out at least once a weekend, usually more.

I would really try to get your groceries down another $50-$75 ($350/month to start out) and consider cutting down on eating out, maybe just a dinner out and a lunch, nix the breakfast. Also, is the $75 for entertainment something you always use up, or could that be cut down at all? I would use that savings to bulk up your efund and pay off debt.

Finally, I'm a little confused about the SIL's student loan payments. Your DH cosigned? Ok. And IL's said they would pay, but probably can't? What about SIL? Will she be paying off her own SL? Do you know the amount so that if you do get stuck being responsible for the payments you will know what to expect and can possibly have a few months set aside in your efund to cover that?

[aspentosh]

The things that stand out to me as being too high for your income:

Car payments and insurance (13%)
Food (11%)

I think you need to cut back on eating out as much as possible and look into lowering your car insurance at least. I'd also put the extra money you're getting these next few months into savings since $3k for a homeowner isn't awesome. Also, make sure you pay off those CCs with 0% before they reset.

[AAM2012]

Have you shopped around for car insurance? We're in a high cost insurance state (Florida) and ours isn't even that expensive.

[bostonmichelle]

Yeah we shopped around last year for car insurance and switched companies and saved probably $50/month. Unfortunately I totaled a car when I was younger and my DH has an accident that is his fault as well, so we are less than perfect and don't qualify for the lowest premiums. I will probably shop around a bit when the premium is up this year, I'm also thinking the bad points will fall off this year.

We will try and cut back eating out and groceries next month, it seems like every time I try and eat healthy with fresh veggies and fruits are grocery bills go way up. We have been using a cash system for groceries, eating out, and household items and it is working. The entertainment we do not use every month either, as well as clothing and my work expenses. I usually put any unspent amounts into savings.

[Deleted]

You can do it (on the groceries and eating out)! Also, frozen veggies (where they work for recipes) are usually a lot cheaper and still have all the nutrients. And I don't know if you have an Aldi nearby, but they have lots of really good healthy options (like greek yogurt and fresh and frozen fruits and veggies) for a lot less than other grocers. I shopped there whenever I had one nearby and my parents shop there as well. It's no Whole Foods, but if you are looking to save money it is a great option.

And as for the SIL's SL...well she sounds like you said spoiled and rude, and unfortunately it looks like you will be on the hook for those payments unless she gets her act together. That sucks, but your DH cosigned. JMO, but I think your DH should discuss with SIL what she will do (get a job, maybe not just during the summer - that is really a cop out) and with ILs what they will do, just in case he was thinking only talking to his parents. Maybe he can try to talk to them about their financial situation also or recommend some kind of financial help. And I hope that if she needs any more loans your DH will not cosign. I hope you and DH can get on the same page about supporting them, because I'm willing to bet this will come up again in the future.

Good luck!

[midnightmare81]

I won't comment on your car payments because MM wouldn't approve of ours either, but I will comment on SIL's student loans.

Why are you going through your IL's in reference to SIL's loans. Your H cosigned for her, she is an adult, and the fall comes back to you. I do not understand why your IL's are a part of this at all. If I were your H, I wouldn't even consider co-signing student loans at all for someone who shows no respect for what her life is costing others. I understand what is done is done, but why consider taking on MORE loans next year for her? She will NEVER take responsibility for herself until someone makes her. Your H isn't her parents, and has no obligation to put her through school, esp when she has no interest in helping. She should be answering to YOU, not the IL's. Of course they will not be the bad guy and make her get a job and support herself, they are not the ones paying back the debt. I would tell her she either gets a job, a license, and shows effort, or stick her with her own debt next year. Things will get real then. What incentive is it for her or her parents to be making her take responsibility for herself when everyone else will do it for her.

I understand its nice to help, and your H sounds like a great guy who wants to help his sibling, but sometimes the best way to help someone in the long run is to use tough love. She will never last in the real world at the rate she sounds like she is going. It would be worse to have paid her entire way through school and have her get no job for lack of incentive then it would be to tell her you have helped her this far and its time to become an adult and let her learn what its like to have debt to pay off. At leasdt if she ends up not paying it, its not your debt then, it's hers.

[Roc A Bee]

Why did he consign? I don't have SLs, but don't 18 year olds routinely get these themselves, most don't have consigns right?

[bostonmichelle]

Thanks for all the recommendations. I talked to DH and we are going to try and cut $200 between groceries, eating out, and entertainment for next month. I am also going to cut out another $50 from my work expenses and just go to a few less networking events, it won't be hard since I'll already be working 70hour work weeks.

[holly22]

I don't know how much he has cosigned for on the SLs. it sounds like it would be a terrible idea to cosign again (unless your prepared to take on that financial burden). I would have a come to Jesus talk and if she wants to be disrespectful then I'd tell her she can get a new consigner. I don't understand why she cant work too. I personally wouldn't cosign on something unless I was willing to make all the payments

[Roc A Bee]

I would take the $350 and start a Roth for you. I would take the extra 1000 for the next few months and add to savings.

[Deleted]

You've gotten great advice from the previous posters. A few things that I would emphasize:

Absolutely ensure you have those cc's paid off! Sounds like you have a plan to do this.

Definitely contribute to an Emergency fund - I believe everyone should have AT LEAST 8 months in cash. If we assumed you needed $5k / month to live on, that would be $40k. Having a healthy emergency fund ensures you can avoid cc debt in the future.

Start investing in your retirement - you can start with using some of that extra leftover $$ but this is a good use for that extra $1k/ month you mentioned.

Finally, your cars are a bit pricey, but you're halfway done with the loans, so just keep paying them off and AS SOON as they are paid off, invest the balance (in retirement until that is maxed out, or in a non-retirement account if you've maxed out by then.) You'll have an extra $595 / month freed up by then, so round it up to $600 and that is a really great extra savings per month. Bonus if you pay them off earlier and can start saving sooner.

Congrats on your life changes for last year, you're on a great path but a few smart decisions with money over the next few years can put you in a much more secure position. Thanks for sharing your budget and welcome, glad you stopped lurking!

Any puppy pics to share

[bostonmichelle]

Thanks girls. I am definitely going to start contributing to an IRA, just have to figure out how to do the auto draft on the website. DH and I were just thinking of sending $250 and $375 to the car loans since we usually budget for the round amounts as well, so I'll change the autodraft on those. I definitely think I will be focusing more on savings than paying off the SL, I have one more in the group that has about $900 left on it so I'm going to focus on paying that off before July 1st so I can knock my monthly down to

And here is a cute picture of my puppy from the Christmas Cards we sent out.  Sorry I can't figure out how to rotate it and save it on my computer or make it smaller.

[zacksbride]

i am guessing if SIL needs a cosign on the loans that they are likely private loans.  this is just a guess on my part, but as someone who has 6 figure SL debt myself, the only loan i ever needed a cosign for was a small private student loan.  the rest of mine are all federal, and never required a cosign.  if i were your dh, i would not be talking to my parents about the SL issue.  i would talk directly to SIL - you say she isnt even 21 yet, but presumably she is over 18 and therefore should be considered an adult.  under no circumstances would i cosign for another loan for her.  i dont care if she got a summer job.  that is not long enough for me to be convinced she would actually pay these loans.  if you guys have shared finances, i am not sure what the legal ramifications are, but if anything were to ever happen to your marriage, is there any way you would ultimately be held responsible for these loans since the debt was assumed while you were married.  i know it is terrible to think like that, but i would not ever want to commit to paying SL for someone else.  SL do not go away in the event of bankruptcy.  i wouldn't take on that debt at all.