I need some direction with personal budget

[Sivart5]

Hello- I am 33, wife is 30. We currently have 4 major credit cards with various levels charged on them. We also have a mortgage, second mortgage and vehicle loan. It seems like every time we start to pay a credit card down, something pops up such as a car repair or something with the house, and we end up charging again.

I am guessing I should start an emergency type of fund for these types of things, and I am wondering if anyone else does this. If so, what percentage of your monthly pay should you set aside for this?

I also have slacked a little in my normal savings account, and I'm wondering how much or what percentage I should be putting in a general savings per month.

I do have about $5,000 in my 401K, but I know I really need to start some more aggresive planning, I just can't seem to put all the pieces together to make it work.

I guess what I am asking is what I am doing wrong that makes me feel like I am never getting ahead. I always hear "pay yourself first", but for some reason can't figure the whole thing out.

Your ideas or suggestions would be very helpful! Thanks

[creditcardfree]

Hi! Good questions.

Sounds like you definitely need an emergency fund to avoid charging more on your credit cards.

First, I'll say that it is important to know what you are spending. It's a good idea to write down everything you spend for a couple of months. This way you can see where you may be overspending. Some people buy a coffee everyday for $2...which is $60 in a month.

I don't think I can necessarily give you percentages, although I've heard that 5% is a good idea. I would aim to have $1000 in an emergency fund and eventually aim for 3-6 months of expenses.

I happen to be a fan of Dave Ramsey, a radio show host and author of The Total Money Makeover. His website is www.daveramsey.com. He has a list of baby steps that help you get on the right track financially. It may seem extreme at first, but it has worked for many people.

Baby Step 1 is $1000 in the bank for a beginner emergency fund.
Baby Step 2 is to pay off all debts except mortgage...using a debt snowball.
Baby Step 3 is to finish emergency fund with 3-6 months of expenses.
Baby Step 4 is to save 15% of gross income for retirement
Baby Step 5 is to save for kids college.
Baby Step 6 is to pay off your mortgage early.
Baby Step 7 is to invest for wealth and the opportunity to give

I'm sure others will have other advice.
Good luck.

[sweeps]

I can't believe I'm saying this, but I agree with creditcardfree. This is an ideal situation for Ramsey's baby steps.

[Diolla]

Rather than a percentage you might try actually figuring how much you need (for car repairs, gifts all those little things that seem to come up) for instance if you look back how much per year does car maintenance run you? Then take that amount and divide by 12 to get the amount you need every month. I put aside $20 a paycheck (every 2 weeks) and spend from those funds for repair/maintenance of my car.

These kind of irregular expenses are the most difficult to budget for but if you have a realistic budget that you live by having these amounts set aside for when you need them can help you make progress.

I agree you nay want to try out the baby steps, also Ramsey has a terriffic budget sheet on his website (free) that lists lots of things people forget when budgeting. I like it as a guideline when first setting up a budget so I don't forget things.

If you need some help you can always post a budget here and people will help.

[greedy4chips]

I have to go with the rest and recommend Dave Ramsey.

I would also list all of your debts, min. monthly payments, and interest rates.

Can you increase your income by getting part time jobs. I assume you have some free time, since you did not mention children.

If you cannot increase your income, then you must cut expenses.

Make sure to keep every debt current. Then create a small emergency fund of 1k to avoid charging more on the CCs.

Deciding which card to pay off first is up to you. DR advocates the smallest balance first. Many others would recommend the highest interest rate first, to save interest. The choice is yours, but concentrate on 1 then move on to the next.

Can you transfer any of the balances to a 0% card or even a low interest card like 2.9%. Try calling each card and ask for a lower interest rate. Ask everyday until they do lower it. If they do not, then ask one of the other cards if you can transfer it to them with no transfer fees!

Every little bit of interest save will help!

Then eat beans and rice, and rice and beans for the next year and you will be fine!

Good luck.

[LuxLiving]

Think about what you are saving FOR. I'm with Diolla - target what those unexpected emergencie are and pre-plan for them. The others had good advice w/the DR stuff.

[Ima saver]

I have always paid myself 10% of my take home pay (and my husband's) before i pay the bills. You need to get a good sum in an emergency fund for unexpected things. If you can not start with 10% start smaller and increase it every few months.

[LuxLiving]

I agree with you Ima - we all just have to remember that things like an oil change or brake job are not emergencies. We drive our vehicles and we can just KNOW that eventually we will have repairs.

Budgeting and saving for repairs or replacements up front is what is likely needful if we don't have a big salary coming in and low expenses going out. Too many people think their boyfriend's birthday, the holidays or things of that ilk are an emergency expense.

NO NO NO! We've got all year to get ready for it.


It isn't until one gets off that merrygoround and begins saving ahead for the sometimes forgotten but we knew it would happen someday expenses that one can 'GET AHEAD', so to speak.

Yes, when we're heavily in debt and every penny is going to CC payments then starting a baby emergency-fund is needful and these expenses will come out of that pot.

But if we stay with digging ourselves out long enough we get to the tipping point where we no longer have those CC's and can put back for the upcoming expenses we can safely predict will be there in the future.

I know I'm going to need new unmentionables in the future and I can put a few pennies back now toward that end or act all 'surprised' when my overtheshoulderboulderholder gives out!

I prefer to NOT be surprised and be ready to sling a new song!! Pun intended!

[PrincessPerky]

For me the hardest part of pay8ing myself first was the huge amount I thought I aught to be paying, I couldn't arrange my budget so that 10% was free to deposit, so I kindof didn't do anything at all for a while..now I am doing just a small amount and supprisingly w are still afloat, I will be upping the amount next month, and then I will suprise myself by not missing that money, maybe some day I will make it up to the full 10%, but for now I am happy it is at least something!

start somewhere, with a buck if you have to, then add to it as you reduce other bills/spending.

[Ima saver]

That is the way it works, princess!! Start small! Start with 1% and put it away. After while, it will be easy to go to 2%. It is what David Bach refers to as the latte factor. By cutting out a latte or coffee and donut, etc. each day, you free up a few dollars each day to save. You will not miss it!

[LuxLiving]

Originally Posted by PrincessPerky

start somewhere, with a buck if you have to, then add to it as you reduce other bills/spending.

NOW you're Talking!!!

[disneysteve]

Originally Posted by PrincessPerky

I couldn't arrange my budget so that 10% was free to deposit, so I kindof didn't do anything at all for a while..now I am doing just a small amount and supprisingly w are still afloat, I will be upping the amount next month, and then I will suprise myself by not missing that money, maybe some day I will make it up to the full 10%, but for now I am happy it is at least something!

Perfect plan. Start small and gradually build up. We started in 1992 saving 6% of our take home pay. Little by little, year by year, we increased it. Now 14 years later we save 28% of our gross pay!

[Sivart5]

Wow, some great information. I am going to take a hard look at my budget this weekend and see what I can do to use some of these suggestions that fit my budget. Thanks!

[autoxer]

If you are willing to share more of the details, everyone can offer more specific advice. First things first, is to keep a spending log. Writing down every expense even the coffee & gum, for about a month will give a clearer picture of exactly where your money is going. This can be a real eye opener & really helps focusing on the problem areas.

I like to trick myself into saving. If all of the money went into my checking account, then it would all be spent. If I split my paycheck between a few accounts, then I have my spending account, my retirement account & my bill paying account. That way I don't have easy access to the cash that is earmarked for bills & long term saving.

[lrjohnson]

Originally Posted by Sweepsplayer

I can't believe I'm saying this, but I agree with creditcardfree. This is an ideal situation for Ramsey's baby steps.

Now that was worth a good laugh. Thanks for the chuckle, Sweeps. Since when.....

[creditcardfree]

Here's a thought when working on your budget.

In order to save for items that are not paid on a monthly basis, maybe car registrations, auto insurance, or other annual or semi annual bills, I make up my own escrow account to handle this.

I add up the total annual amount of those items for the year and divide by 12. This gives me a monthly amount to put into my savings account just for these things. I have this automatically transfered on the same day each month. When it's time for the auto insurance premium to be paid, it's automatically deducted out of my savings account (or could be transfered to your cking acct to write a check in the case of car registrations).

I adjust the amount, when changes occur to the items I include in the escrow, or at least once a year. This way the money is always there for those large bills that don't occur monthly.

I hope that makes sense and helps. It has helped us tremendously. It could even be used for holidays and birthdays...I haven't gone that far yet, though.

[Wealthizfreedom]

I have recently moved to an all cash system. The transition was difficult at first but when seeing the credit card as a seperate bill it became easy. The real trick is realizing exactly what you have to spend each month and then always use cash. It's amazing how free you feel once you know what is going out of your pocket with each purchase.

All the ideas above are exactly where you should start.

Credit Cards = bondage

Cash = Freedom!

[lrjohnson]

Originally Posted by Wealthizfreedom

The real trick is realizing exactly what you have to spend each month and then always use cash. It's amazing how free you feel once you know what is going out of your pocket with each purchase.

All the ideas above are exactly where you should start.

Credit Cards = bondage

Cash = Freedom!

A lot of people on this forum are of the mind that using cash back credit cards with serious discipline is what works best for them. Others, like me, find that when we have cash we spend more not less (though I know we are in the minority as far as stats go). One size fits all doesn't work so well with financial stuff. I am glad you found something that works so well for you.

[Ima saver]

Yes, I am a cash person too. Of course, i use the envelope system, so there is no borrowing from another envelope. DH and I each get an allowance and that is all we can spend. If it is something we really need that we can't pay for out of our allowance, we do charge it, but pay it off every month. I budget $240 a month for the credit cards. This month I put $170 on the credit card.

[BCHGRL]

It sounds like you are living beyond your means. Consider down-sizing where you can. For example, do you really need a gas-guzzling suv or the latest keeping-up-with-the-Jones' gadgets?

Do you have a budget? Your expenses should not equal or exceed your revenue. Once you have a positive cash flow situation, it should not affect your lifestyle to pay yourself first.