Posting my budget for advice

[budgetae]

Hi MM,

I created an AE for this just because of the detail involved in posting a budget and the questions I have.

I feel like I have ignored our financial situation for awhile and I need some advice. I'm posting my budget below with some explanations.

Monthly Income (Take-Home):
2166 x 2 = 4332
1070 x 2 = 2140
Total Income = 6472

TSP and 401K loan payments, before take-home:
TSP payment = 67.14 (Balance: 2990.65; Interest: 2.875%)
401k payment = 48.55 (Balance: 2130.17; Interest: 5.25%)

Bills
Mortgage = 1786.95
Power = 110 (approx, higher in summer and lower in winter)
Natural Gas = 110 (approx, lower in summer and higher in winter)
Water = 90 (billed every other month; ~45/month)
TV/Internet = 133
Cell Phone = 152
Car Payment = 275 (Balance: 958)
Car Insurance = 123
Amazon = 10 min (Balance: 87)
Visa = 250 min (Balance: 7855.47; Interest: 10.25%)
Amex = 100 min (Balance: 4902.61; Interest 15.24%)
Student Loan = 180 (Consolidated Balance 14214.69; Interest: 2.875% on 12,300.02 and 2.360% on 1,914.67)

Total Bills = 3319.95

Other Monthly Expenses
Groceries = 550
Gas = 250
House cleaning = 125
Gym = 20
Pet Supplies = 200 (I know this seems high, but we have cut back here already. We have 5 animals, 2 seniors with health issues.)

Total Other Exp = 1145

Total Bills/Other = 4464

Total Current Debt = 18835
(Credit cards, car, TSP/401k loans; not mortgage and student loan)

Retirement Balances
TSP = 29,749.59 (5% of gross salary) [I'm 29 and got a bit of a later start given grad school]
401k = 52,948.94 (8% of gross salary) [DH is 32]

Random Info
- My car is paid off.
- I don't ever just pay minimums on cards; I pay 50-100 more...so monthly payments on credit cards are painful.
- We seem to have ~2000 left over after expected bills/expenses. And every freaking month we spend it and we're basically living paycheck-to-paycheck. We are saving zero.
- We need to get our eating out in check (seems to be ~600-800/month) and general 'buying stuff' in check. This is do-able for us, we've just been lazy and haven't been paying attention.
- I'm on the verge of getting a raise/promotion. I'm a fed and I'm very likely getting a grade increase next month. I'm anticipating a ~9800 raise (gross).

My concerns
- We do not currently have an e-fund. We have $1000 in savings.
- I think we need to better fund retirement, especially me...but I don't know how to focus on that with debt.
- The debt situation is a problem. I don't know where to start. DH recently got a bonus and we paid down a chunk of our Amex (~3k). I'm tempted to pay off DH's car and my TSP loan and then take out another TSP loan and pay off the credit cards, DH's 401k loan, etc.
- I think we will have some house-related expenses over the next 2-3 years and I think we need to start saving (big things like roof, deck, possibly A/C).

I'm really open to feedback. I feel like we're smart and can totally get this in shape, but we've really just not been paying attention and spending irresponsibly.

I need help knowing where to start and what to prioritize.

Thanks in advance and sorry this is long.

[ijack]

What's the rate on your car loan?
You need to really figure out where the *extra* $2000 is going. You should be able to pay off your amex in a couple months if you snowball it. Pay your minimums on everything for a couple months so you can get that taken care of. Then move onto the visa. I wouldn't worry about the SL right now, those are low rates. After those are paid off (which should be less than a year if you can throw more than $1000/month at them) then I would concentrate on beefing up your retirement and your home fund.

[countthestars]

I agree with ijack about the snowball.

Stop using your credit cards now if you haven't already.

I would cut back eating out significantly until you have a better handle on your debts. Be realistic (don't cut it entirely or you will never stick to it), but go to an envelope system and do not allow yourselves to cheat. I also suggest paying yourself first - automatically put money into savings every paycheck (my ING account does an auto withdrawal on the days I get paid so that money goes straight into savings). I would want at least a $3k e-fund. If you start with a few hundred per month, it won't take too much time to get there.

When you get your raise I would up your retirement so that you don't see much (or any of it). You don't NEED the extra income, but could use the extra retirement money.

Good luck!

[phunluvin82]

I would focus on the CC debt and snowball from highest to lowest interest rates. I would hesitate to pay off the TSP loan only to take out another TSP loan to pay off more debt...number wise, maybe it's smart, but it would just enable you to perpetuate a cycle of debt.

You could knock out that credit card debt in less than a year if you get your spending under control.

ETA: once the CC debt is gone, I would focus on the e-fund and increasing retirement, etc...and would maybe also knock out whatever is left by that point in time on the 401k loan.

Another ETA: looks like your car will be paid off soon...I would snowball that car payment into your CC debt payments...that's already an extra $275 at your disposal before you even cut any spending out of your budget.

[gt7301b]

Please don't use another TSP loan to pay off your credit cards. If you do that you will just end up with a TSP loan and more credit card debt. You need to change your behavior. Are you still using the cards? If so stop!!!

Next where is that $2,000 a month going? You need to figure out what you are spending money on. Cut back your eating out and stay away from Target..... $550 on groceries + $700-$800 a month eating out, wow!!!!

I would focus on the Amex first because it has the highest interest rate. Then pay your bills off based on the highest interest rate remaining.

It would also be good for the two of you to sit down and talk about your finances. Pick up a copy of David Bach's "Smart Couples Finish Rich" from the library and use that as a starting point.

Good Luck!!

[dexteroni]

- We seem to have ~2000 left over after expected bills/expenses. And every freaking month we spend it and we're basically living paycheck-to-paycheck. We are saving zero.

This is your problem. Track your spending for a few months and figure out where that money is going. Either you're spending more in some categories listed above, or there are categories for which you haven't accounted. For the next few months, stop using cash as much as possible and use your debit card for every purchase you can, for better accountability. I also recommend signing up for mint.com. It does a better job than Quicken (in my experience) of categorizing your purchases, and gives you nice graphics that show where your money is going.

Then obviously, once you know where your money is going, you can figure out what you can cut, and put all of that money toward debt.

I also recommend using www.whatsthecost.com to figure out a snowball plan, where you pay minimums on all but one debt, and put every extra dollar toward that one debt. Then when that is paid off, you take that payment and add it to the next debt's payment, etc. until you're all paid off. You never reduce the total amount you're paying until your balances are zero. That's how you get out of debt fastest and for the least amount of money.

[budgetae]

Car loan is ~4.75%. It's DH's and I can't remember and don't have access to it at the moment.

The extra $2000 is going to eating out and 'stuff.' DH buys comics, music, art supplies, movies; I buy clothes, house stuff. My clothes spending has been a bit higher lately due to weight loss (so buying smaller clothes, but also buying workout clothes, shoes, etc.).

I'm starting to use the BoA "My Portfolio" tool and the "General Merchandise" and "Entertainment" categories together total $1200. "General Merchandise" includes a lot of purchases at Target, Costco. So these are trips for things like deodorant or vitamins that turn into larger purchases and impulse buys. "Entertainment" includes book stores, Amazon, movie theater, etc.

[budgetae]

May 16, 2012 12:27:20 GMT -5 countthestars said:

I agree with ijack about the snowball.

Stop using your credit cards now if you haven't already.

I would cut back eating out significantly until you have a better handle on your debts. Be realistic (don't cut it entirely or you will never stick to it), but go to an envelope system and do not allow yourselves to cheat. I also suggest paying yourself first - automatically put money into savings every paycheck (my ING account does an auto withdrawal on the days I get paid so that money goes straight into savings). I would want at least a $3k e-fund. If you start with a few hundred per month, it won't take too much time to get there.

When you get your raise I would up your retirement so that you don't see much (or any of it). You don't NEED the extra income, but could use the extra retirement money.

Good luck!

We stopped using credit cards several months ago. Really those balances we have we've just been carrying for awhile.

Good idea about the raise. Should I use some of the extra money first to pay down debt before increasing my TSP contribution?

[HoneySpider]

I would break down the general merchandise into smaller categories and then make cuts. With that kind of cc debt, you need to make sacrifices, plain and simple. It doesn't mean you can't ever buy new clothes or go to the movies or whatever, it just means you have to do it when you can make it fit in your budget. Force yourself to decide if you really need/want something before you buy. Find cheaper or free things to do.

Find a budgeting system that works for you and really go at it hardcore - whether it be a spreadsheet, mint.com, whatever. Make the commitment to pay off your debt. You can do it without feeling deprived and you will feel so much better when you are done.

[dexteroni]

- We need to get our eating out in check (seems to be ~600-800/month) and general 'buying stuff' in check. This is do-able for us, we've just been lazy and haven't been paying attention.

OK, I missed that - I admit I didn't read past the "missing $2k" part. Since you don't have that listed in your budget, I presume that's part of the $2k. (And "buying stuff" probably accounts for a lot of the rest of it.) How are you eating out so much and still spending $550 in groceries? You must throw out a lot of food. I know when I was working, I would buy groceries for the week with every intention of cooking, then one or both of us would work late and we would end up getting takeout, and our groceries would go to waste. If this is your situation as well, believe me, I understand. But you have to find a way to change it.

[dexteroni]

comics, music, art supplies, movies;

book stores, Amazon, movie theater, etc.

These should fall under a budgeted amount of fun money. $100 a month is plenty for each of you because you're in debt. And some people will say even that is too much.

[budgetae]

May 16, 2012 12:31:26 GMT -5 gt7301b said:

Please don't use another TSP loan to pay off your credit cards. If you do that you will just end up with a TSP loan and more credit card debt. You need to change your behavior. Are you still using the cards? If so stop!!!

I really didn't want to but I just didn't know if it made sense interest-payment-wise. I hate to fiddle with my TSP anymore than I already have, esp considering it isn't well-funded. And yeah, credit card use has ceased.

Next where is that $2,000 a month going? You need to figure out what you are spending money on. Cut back your eating out and stay away from Target..... $550 on groceries + $700-$800 a month eating out, wow!!!!

Yeah, the eating out thing + groceries is unsustainable and ridiculous. DH and I both eat lunch out every day and that is just silly. I used to pack but have been at a new job for the past two months; when I go back to my old job it will be way easier for me to pack lunch again.

I would focus on the Amex first because it has the highest interest rate. Then pay your bills off based on the highest interest rate remaining.

It would also be good for the two of you to sit down and talk about your finances. Pick up a copy of David Bach's "Smart Couples Finish Rich" from the library and use that as a starting point.

Good Luck!!

A few comments above. Thank you!

[aspentosh]

Taking out a loan to pay off debt is not a good idea. Figure out where that $2000 a month is going and use that to snowball like PPs have suggested.

Most of your other expenses aren't too bad, but the groceries PLUS easting out is probably killing you. And this is coming from someone who eats out a bunch.

I'd do this:

Stop using the credit cards if you haven't already
Pay off the car ASAP
Start snowballing to pay off the Amex
Snowball to pay off the Visa
Then start to work on your 401k and TSP loans

GL!

[budgetae]

May 16, 2012 12:39:37 GMT -5 dexteroni said:

- We need to get our eating out in check (seems to be ~600-800/month) and general 'buying stuff' in check. This is do-able for us, we've just been lazy and haven't been paying attention.

OK, I missed that - I admit I didn't read past the "missing $2k" part. Since you don't have that listed in your budget, I presume that's part of the $2k. (And "buying stuff" probably accounts for a lot of the rest of it.) How are you eating out so much and still spending $550 in groceries? You must throw out a lot of food. I know when I was working, I would buy groceries for the week with every intention of cooking, then one or both of us would work late and we would end up getting takeout, and our groceries would go to waste. If this is your situation as well, believe me, I understand. But you have to find a way to change it.

Yes, this is absolutely us. We've been buying way more organic stuff lately...and then throwing a lot out at the end of the week or tossing meat in the freezer. I'm also struggling with the new routine of going to the gym. When I get out of work (~5) and go to the gym (~5:45-6:45 or 7:00), I am just not in the mood to cook when I get home. DH has the same routine as me lately. Nothing like going to the gym and then getting chinese take-out. UGH.

[budgetae]

May 16, 2012 12:42:15 GMT -5 dexteroni said:

comics, music, art supplies, movies;

book stores, Amazon, movie theater, etc.

These should fall under a budgeted amount of fun money. $100 a month is plenty for each of you because you're in debt. And some people will say even that is too much.

We used to do this years ago and completely fell off the wagon. You're right, this needs to be put in place again.

Would you figure clothing into 'fun money'? I'm really struggling with that part of my budget lately because I've had to buy so much new clothing.

[Roc A Bee]

You don't have a eating out budget at all. That is a problem. Set an amount and stick to it! Start with $200. You can do it! You also don't have a clothing/ house supplies/ gifts budget. If you put an amount to those, that will help you figure out where the $2000 is going.

I would throw $1500 at the debt each month. I'd pay amazon off immediately just to get rid of it then attack AMEX because of the interest rate. You could be out of cc debt in 6ish months. Then I would pay back the retirement loan. Then I would increase retirement and save up for your house projects.

[dexteroni]

Totally understand re: not wanting to cook. I developed a repertoire of super fast meals (stir fry, slice chicken thinner so it grills faster, pre-assemble a dish that can right into the oven when you get home, etc.) and freezer meals. Chili, pulled pork, and taco meat all freeze really well. You can have a dinner made in like 5 minutes just by defrosting/heating a container and getting out the other things you need for each meal. It's not something I would want to do every night but it's better than eating out every day.

Also check out Trader Joe's for shortcuts like frozen meals or pre-cooked chicken breasts. It's more expensive than buying raw ingredients, but way cheaper than eating out.

[dexteroni]

As for clothes, the necessities can come out of the household budget - a basic work and casual wardrobe. Keep it minimal until you're done with your weight loss and out of debt. Non-necessities like "I'm in the mood for some fun sandals or some new colors of t-shirts" type of purchases can come out of your fun money. And congrats on your weight loss!

[Sxia]

Buy from the good will. You can get a lot.

[Melissa W.]

It can be really eye opening how much money you spend when you don't track.
I would recommend that.

[smilelari]

I know most people here don't like Dave Ramsey, but we're doing a Total Money Makeover right now and it's the first time we've ever had control over where our money goes. You might check out the book and see if you can grab some useful ideas. The biggest thing for us was creating a budget and sticking to it. When you create a budget the Ramsey way, you make a new budget at the beginning of each month. Some things will stay the same (mortgage, cable, etc). Other things will be different every month. For example, we grocery shop every Sunday, so our grocery budget is higher in months that have 5 Sundays. Setting up our budget this way has been huge for us. Before we tried to follow an "ideal" or "average" budget and every month it would be something like "well, we were over on X, but that's because of X". There was always a reason to deviate, which made it impossible to stay on track, KWIM?

So, our current budget process is:
-Talk about our expenses for the upcoming month
-Create a budget that is realistic for that month and categorizes every $$$
-If something comes up that causes us to go over in a category, rebalance the budget. So, if we're going to end up spending $650 on groceries instead of $600, that extra $50 has to come from somewhere.

As for retirement, well we're following Ramsey and he has you concentrate on paying off consumer debt and then building up the e-fund and pumping up retirement contributions. If you're not comfortable with that, I'd probably do something like build up a smallish e-fund as quickly as possible (maybe like 1-2 months of living expenses) and continue contributing to 401Ks at whatever rate is needed to get max company matching.

One thing we did that Ramsey would frown at is we moved some of our CC debt to a 0% card, which will greatly speed up our snowball. There are lots of offers out there right now and many of them don't have any transfer fees. Might want to check it out.

[ijack]

This might not be the most popular opinion, but it might be a more realistic to help you cut costs a bit. What if instead of buying groceries you don't cook and eating out all the time you buy some already prepared meals? It's cheaper than going out, but still really convenient.

[smilelari]

May 16, 2012 13:14:01 GMT -5 ijack said:

This might not be the most popular opinion, but it might be a more realistic to help you cut costs a bit. What if instead of buying groceries you don't cook and eating out all the time you buy some already prepared meals? It's cheaper than going out, but still really convenient.

This isn't a bad idea. I did Dream Dinners preparing for maternity leave and meal prep places might be a solution as well. It was quite a bit more expensive than preparing yourself, but way cheaper than the average restaurant.

[phunluvin82]

May 16, 2012 13:12:41 GMT -5 smilelari said:

One thing we did that Ramsey would frown at is we moved some of our CC debt to a 0% card, which will greatly speed up our snowball. There are lots of offers out there right now and many of them don't have any transfer fees. Might want to check it out.

This is a good point. I hesitated to do this for some reason (opening another CC, not being aware of something in the fine print, etc...), but last year I finally opened a new CC with a 0% for 18 months intro rate and transferred our debt over to it.

I wish I had done that sooner...it was so nice not to see the interest keep accumulating and accumulating while we struggled to pay down the debt.

Two things to keep in mind with this: make sure you calculate the transfer fee to make sure it is worth it (for your amt of debt and interest rates, I suspect it would be worth it though)...and make sure you are going to be able to pay off the debt completely before the intro rate expires.