Help me with my budget...

[guppy]

Hi everyone. I just registered to join the boards, but I've been lurking and reading posts for probably a few months now. Just a little background information...I am 24 and married to my highschool sweetheart. We live in eastern PA and decided around 8 months or so ago to start getting serious and making better financial decisions. In the past 8 months we paid off approximately 5500 in credit cards and now we want to start building an EF. The money situation is as follows:

ASSETS:
Home valued at approx 175,000
Investment Condo valued at approximately 145,000/2=72,500for our share (Admittedly a bad decision. My parents wanted to sell their vacation/investment condo 1.5 years back and my husband and I begged them to let us buy half of it from them since we thought it would be a smart decision. After becoming 50% owner, our mortgage is now more than what we make off of it. It's lost so much value the only thing we can do is refinance and wait it out.)
(rapidly declining assets...)
93 Honda Civic (own)
99 Volvo C70 (financing...never again)
78 Dodge Lindy RV (own)

INCOME:
Me: 2820 / month
Husband: 2450 / month
Rental: 800/2 = 400 (for our share) / month. Trying to raise rent for June - Possibly will go to 500 / month

RETIREMENT:
Me: approx 6.5% to pension, additional $50/paycheck to 403b
Husband: 7% to 401k (3% match by company)

SAVINGS:
EF: $1,580

MONTHLY SPENDING
Home Equity Loan 168,300 @ 7.24%= $1215
HELOC= $540/month Interest Only (Closing in a matter of weeks on a 30-yr fixed mortgage which will cost the same each month - should've done that to begin with) + another 100 goes to property taxes/maintenance/etc.
St Loan #1: 5,500 @ ?.??% = $65
St Loan #2: 21,000 @ 6.??% = $165
Volvo Car loan: 4900 left = $125
Electricity: $55
Prescription/Medicine (birth control, allergy medicine, etc): $25
Internet: $30
Homeowners Ins: $30
Car Ins: $125
Lifelock: $10 (Someone tried to steal husbands identity last year when he gave information to a site that he thought was ebay)
DirecTV Satellite: $50 (Will be cancelling in the next month. Now that there is hulu and other such websites, we are simply going to hook up our laptops to the television and watch shows and movies that way)
Cellphone: $15
Gym Membership: $20
Gas/Husbands Smoking addiction: $400
Groceries: $400
Weekends (includes additional gas, eating out, buying people gifts, household odds-and-ends, small fix-ups on house/cars, etc.): $1,200
Anniversary (10 years together/3 years married on Oct1st! Saving until then for nice vacation, after october can be used for anything else): $300
EF: $400
College: (paying for husbands to go part-time to college as we go so NO MORE LOANS) $300

Also, at the end of the year we normally get about 3000-5000 back from taxes. We use this to pay for our property taxes and the rest that we got back this year went to paying off another student loan. I think that's about it. I know there are many areas for improvement. The most noticable right off the bat is that fact that right now we are currently losing $240 a month to our <i>investment</i> property. Heck of an investment. My parents feel very guilty and have all but said they would buy back from us at the same price we bought from them, but they aren't in the greatest financial shape and quite honestly, I feel responsible for the bad decision we made, and feel we should own up to it and pay it since we can. I am hoping in a few years time we can raise the rent back up (since it's dropped dramatically over the last 1.5 years compared to the first 2 years my parents owned it) We will see.

If anyone sees any other glaring problems please let me know.. I would like a fresh set of eyes on the numbers so I can see where we might be going astray.

[KTP]

Any way at all to get hubby to ditch the smoking habit? I know I was filling up gas today and notice a pack of smokes was $5.69, and they were advertising that as a good deal!!! I told my wife in the car, wow, a person smoking 2 packs a day would be spending upwards of $350 a month!

Maybe a reward system. For each month he stops smoking, give him $200 bucks to spend on his favorite hobby guilt free (fishing, hunting, golf, etc.). Still you would come out ahead and he will live longer.

Also, the 1200 a month on misc seems rather high...but at your age we were spending double that on eating out, movies, random junk we could stack in the attic for years (stupid) so I can't point fingers.

[project15]

The weekend/miscellaneous account of $1200 is excessively high. Between my wife and I, we allow ourselves $400 of play money per month. We're 25, so we know the temptations to want to go out and blow all that money, but you just have to pick your priorities.

[disneysteve]

Welcome!

Any glaring problems? I'd focus on the $1,200/month on miscellaneous spending. Break that down item by item to see where the money is really going. Surely there is room to trim that considerably. Even if you could cut it by just 10%, that would free up $120/month for debt reduction and additional savings.

Speaking of savings, you aren't saving nearly enough. You are well below 10% going toward retirement and you don't even have a 1-month EF. I think you guys need to really slash spending until you correct those problems. There is a lot of fat on your list.

I'm curious why you still owe $4,900 on a 10-year-old car.

[KTP]

Ah, wait, I see a problem...or if not, I am moving to PA next week.

Your only utility is electricity? And that is $55 a month??

Free sewer, water, coal, heating oil or gas? free garbage pickup? Sign me up!

How can your rates on electricity be so low? We are 0.10 a kwh here on the west coast..my electric bill (electric heat/water heaters) was $325 last month and we have been keeping the heat on 58 degrees or less except when guests come over!

[disneysteve]

I just saw that you have $400/mo. going to the EF. I missed that first time through.

[guppy]

KPT: I've tried incentives before for my husband to stop smoking, but it doesn't work. I've since come to learn that no one is going to do something for someone else; they have to want to make the change for themselves. I pray he comes to his senses sooner rather than later, and when it happens, I'll be more than supportive.

project15: I'm starting to see that myself..We normally eat out for around $50 twice a weekend, and then maybe fast food once or twice on top of that. The rest ends up being household odd and ends or gas (to drive all the way to NY or NJ to see either of our parents), but it's funny how you don't notice how much of that money gets away from you if you don't pay attention to every dime. I think I might try to set a goal of $200 every weekend instead of 300 and see how deprived we feel.

[guppy]

KTP: I've heard your same comment from other people as well and I'm really not sure why it's so low. Our home is around 1300 sq ft and we actually found it was cheaper to use little space heaters in our bedroom at night and in our living room and use oil as little as possible to get us through the winter. This year we spent about 700 on oil that we had socked away in another savings account, and it upped our electricity to 125/ month for a few months. I guess we were a little bit chilly compared to last year, but to save a couple hundred bucks easiy I didnt mind one bit!! Garbage pick up and all that is included in those taxes I was talking about that we pay at the end of the year. It normally runs us about 3600 for property/school/real estate taxes but we get at least that back each year when we file our own taxes. Water also runs about 20 bucks a quarter, forgot to factor that in.

[disneysteve]

Originally Posted by guppy

I think I might try to set a goal of $200 every weekend instead of 300 and see how deprived we feel.

Good idea, but don't set a goal of $200. Set a LIMIT of $200.

Work on controlling the things you can control. Visiting parents probably isn't negotiable so gas is whatever price it is (though make sure you are using the cheapest station you can). When you know you will be traveling to NJ, try to time it so you can fill up there since gas is much cheaper than in PA.

When dining out, drink water instead of soda or alcohol. That alone can save a lot of money. Maybe share one appetizer instead of each getting your own. Same for dessert. Or skip dessert at the restaurant and have something when you get home. Even if you can cut the 2 $50 dinners to 2 $45 dinners, that will save you $40/month. It all adds up.

[maat55]

On a serious, I want out of debt plan, I see 2200 a month that could be applied to that purpose.

1000 of the 1200
200 smoking habit
300 vacation
400 EF
300 over withhold w-2's

1200 for misc., 200 smoking, 300 vacation, these are signs that you are not serious about getting out of debt. You can go through life dragging your debt or change your mentallity to live debtfree and save to pay for things.

You are not in bad shape, but you are just normal. I recommend you read The Automatic Millionaire by David Bach.

[guppy]

I appreciate all the responses (even the criticisms; it's really making me rethink all of this). I see there is too much room for superfluous spending.. When we paid off our credit cards I think I got excited and thought we could spend a little more freely. A little more freely is turning into a lot more freely.. I have this fear of getting too restricted because I'm afraid I'll start to feel too restricted and just go crazy one day and spend. I decided that since my husband and I haven't taken a vacation in 3 years I want to do something special for our 10yr together/3yr wedding anniversary; I've priced out online for a short cruise and I think we can do it for no more than 800. We've already got 200 saved towards the mini vacation, so now I only need 600 more. That means that 300 a month can be drastically reduced now that I won't need so much for our trip. Also, my husband agreed with me last night that 300/weekend is way too much to be spending, so we've agreed on the 200/weekend limit. I think we are going to start putting any extra money on the car loan and pay that off as fast as possible. Or should we forget about the car loan and build up the EF first?

[disneysteve]

Originally Posted by guppy

I think we are going to start putting any extra money on the car loan and pay that off as fast as possible. Or should we forget about the car loan and build up the EF first?

What is the interest rate on the car loan?

I'd probably split the money. You definitely need to build up your savings cushion but you'll actually get a better return by paying off higher interest debt. So do both. If you have an extra $300, for example, put $150 into the EF and $150 toward the loan, or something like that. It doesn't have to be an either-or deal.

[swaymonae]

Geez.. if you don't go all crazy over the weekend you can pay off your debt in no time.. are you strongly oppose to a couple months of picnic baskets?

[jIM_Ohio]

INCOME:
Me: 2820 / month
Husband: 2450 / month
Rental: 800/2 = 400 (for our share) / month. Trying to raise rent for June - Possibly will go to 500 / month

RETIREMENT:
Me: approx 6.5% to pension, additional $50/paycheck to 403b
Husband: 7% to 401k (3% match by company)

Is the income above gross or net? Please post both gross and net.

The 6.5% to pension is off gross
The 7% to 401k is off gross.

This is about 7% of gross to retirement plans. You want this to approach 15% for a successful plan. If you are 35 or older, I would suggest 20 or 25%.

[guppy]

What a difference a year and a half makes! I hate to drag up old posts, but I wanted to update everyone. I started coming to this site around 2 years ago and since then my husband and I have been focused on making smart financial decisions. We've had a few missteps along the way (namely the Volvo that we had recently paid off and dropped collision on only to get in an accident and have to buy another car), but are plugging along and now it's even possible for me to go on maternity leave without feeling like we're sinking further into debt.

WHAT WE’VE PAID OFF SINCE THAT POST:
5,000 volvo loan
5,000 student loan
10,750 pontiac g6 loan
_________________________
20,750 in 1.5 years!

And here’s the nitty gritty details if anyones interested…

ASSETS
Home valued at approx 175,000
Rental valued at approx 72,500 (Own half of the 145k valued property with my parents)
Approx. 25-30k in Retirement
93 Honda Civic (own) - 2,000
2007 Pontiac G6 Sedan (own) - 8,000
78 Dodge Lindy RV (own) - 1,000

DEBTS
Mortgage (4.5% for 15 yrs – start 170,815 ) = $1650 (165k and 14 yrs remaining)
Rental Home Eq. (4.6% for 20 yrs – start 93,000)= $595 (Just refinanced…20 yrs remaining)
St Loan: (6.7% for 20 yrs – start 21,000 ) = $165 (20,075 bal..?? Yrs remaining)


NET INCOME
Me: 2840 / month
Husband: 2820 / month
Rental: 850/2 = 425 (for our share) - 100 prop taxes/ins/etc = 325 / month

RETIREMENT:
Me: 10% to Pensions/Roth IRA/403b
Husband: 8% to 401k

SAVINGS:
EF: 6,500 once Friday paycheck hits!

MONTHLY SPENDING
Mortgage (4.5% for 15 yrs – start 170,815 ) = $1650 (165k and 14 yrs remaining)
Rental Home Eq. (4.6% for 20 yrs – start 93,000)= $595 (Just refinanced…20 yrs remaining)
St Loan: (6.7% for 20 yrs – start 21,000 ) = $165 (20,075 bal..?? Yrs remaining)

EF: $1150 (was going on debt, but now directed to savings for maternity leave)
Weekends (includes additional gas for visits to family, eating out, buying people gifts, household odds-and-ends, small fix-ups on house/cars, etc.): $1,000
Gas: $400
Groceries: $400
Xmas/Oil/Paying as we go for Eng. Associates Degree: $300 /mo
Car Ins: $100
Electricity: $90
Roth IRA: $50
Internet: $50
Cellphone: $35
Gym Membership: $25

Sorry this post is so long!! I was just excited to update everyone!! Thank you SavingAdvice!!

[terri77]

You've done a great job!

[woodie96]

Great job Guppy. Its nice to hear a good success story. Keep up the hard work and it will only get even better. Congrats

[guppy]

Another year has gone by and I'm happy to report things are still going well!!

Our beautiful daughter was born in Oct 2010 and I was able to take 6 months of unpaid leave to stay at home with her. I paid for it with savings and we even made some progress with debt during that time too due to a savings bond that had been left to me by my grandfather. My student loan is down to a 4,600 dollar balance and we are focused on having it completely gone by mid February. Once that happens we will only have our rental mortgage and our home mortgage as debt. EVERYTHING ELSE WILL BE GONE!!! Thanks saving advice!!