Need help with Budget, numbers inside!!!!

[brig2221]

I wouldn't actually call this a budget. This is actually a list that I have compiled of all our known monthly and annual expenses and what we are spending as of today. We have always made enough money that we never have had to put a budget together and have saved a lot of money in the process as well. I put down the highest number on each expense. For example, my electric bill for many months of the year is in the $120 range, but is around $275 during a few peak summer months. For budgeting and cash flow sake, I am putting down a montly electric expense of $275. Same with all of the other bills that may fluctuate throught the year, I went with the worst case scenario, again for cash flow purposes. What good does it do me to budget for an average expense when I find I can't pay the bills during the high months is my mindset here.

A little background. Both my wife and I work and we just found out that we are pregnant on Monday (yay!). I am looking for two things here from this fine community:

First, based on our current spending listed, what annual income do you feel we need to continue to support it? Take into account that we will fall into the 28% Federal Tax bracket with no State Taxes, and that we will be contributing 16% towards our 401k and about $200/month being taken out of paychecks for medical through employer.

Second, do you see any expenses missing or any glaring holes in my numbers? I am certainly aware that there in A LOT of fat that can be trimmed from these numbers. That said, I am most interested right now in trying to establish a baseline salary needed to support the below numbers, and then work my way down from there.

Here are the numbers.......

Monthly Expense Monthly Cost

Home Mortgage $1,160.00 (includes homeowners insurance, taxes, etc. This is total with Escrow)
Gas $600.00
Auto Payment $475.00
Food $600.00 (includes what we spend now, about $75/week at grocery store, about about $8/day for lunch at for lunch for eash of us)
Electric $275.00
Cell Phones $165.00
Auto Insurance $120.00
Tollroad Tags $120.00
City Water/Trash $100.00
DirecTV $85.00
Prescription Meds $75.00
Phone/DSL $70.00
Gym Memberships $55.00

Total $3900.00


Annual Expense Annual Cost

Vet Care $600.00
Lawn Service $400.00
Pest Control $350.00
Homeowners Assoc $450.00

Total $1800.00

Grand Monthly Total including Annual Expenses $4050.00

This grand total obviously does not take into account additional expenses such as clothing, car repair, restaurants, entertainment, and unexpected medical.

All help is greatly appreciated. Very nervous soon to be Dad that needs to get his financial ducks ready ASAP!

[PrincessPerky]

Congrats on the baby!

The only bill I didn't see was sewage, but then lots of people have that rolled into water (we don't .) oh and gas is only listed once...no house gas?

I am curious...how much fat you want to trim? I have a family of 5 and spend less on food each month, but..well I could spend more if I had it
If you are aiming to cut out an income so one of you is home with the kid, you have lots of room to trim...and depending on your habits and attachments to stuff, most of it wouldn't be to painful. (with only one job do you need two toll tags? or is that for one? no idea the cost of that sort of thing)

As to what you need to earn....apparently you need to earn 4k a month.....plus 200 for medical (will that go up with a child?) plus X*.28 (taxes + X*.16 (retirement)

4,050+200+.28X+.16X=X
4,250+.44X=X
4,250=X-.44X
4250=.46X
9239=X

per month, so take 9239*12 for 110,868 salary per year.

but A taxed at 28% doesn't actually mean you take out 28%..it is so much for the first so much, and a higher percent for the next isn't it?

and B....like you said plenty of fat to trim should you want to.

[tabbycat31]

I think the easiest thing to trim would be the $8/day that you spend on lunch at work. Could you brown bag your lunch?

[jIM_Ohio]

Originally Posted by brig2221

Monthly Expense Monthly Cost

Home Mortgage $1,160.00 (includes homeowners insurance, taxes, etc. This is total with Escrow)
Gas $600.00
Auto Payment $475.00
Food $600.00 (includes what we spend now, about $75/week at grocery store, about about $8/day for lunch at for lunch for eash of us)
Electric $275.00
Cell Phones $165.00
Auto Insurance $120.00
Tollroad Tags $120.00
City Water/Trash $100.00
DirecTV $85.00
Prescription Meds $75.00
Phone/DSL $70.00
Gym Memberships $55.00

Total $3900.00


Annual Expense Annual Cost

Vet Care $600.00
Lawn Service $400.00
Pest Control $350.00
Homeowners Assoc $450.00

This is similar to how I started with our budget.

Hair cuts?
gas price increases?
Roth IRA/ Traditional IRA?- what is 401k balance?
diapers?
formula?
day care?
baby clothes?
adult clothes?

is there a number you need to trim to?
do you normally get a tax refund?

[bigsaver]

You could probably dump that gym membership.

[zetta]

I would recommend purchasing a budgeting package like You Need A Budget from yNab.com. The process of assigning all your existing money and your paychecks to budget catagories will really give you a feel for where all the money is going. Once you have set up a basic budget, you can also do some "what-if" scenarios to figure out how you will handle your money after the baby comes.

[deca]

Life insurance -- you need some with a baby coming

Gifts - family birthdays, christmas gifts, co-worker events, friends' weddings, etc -- I found that over the course of a year these added up to a lot more than I had thought

Child care is a huge expense -- whether you pay for care, or have a parent stop working to stay at home, it's an enormous bite either way.

I didn't see home maintenance on your list.

[disneysteve]

You left out a biggie for me: travel. We spend up to 10% of income on travel each year. We've reigned it in a bit the past year or two but still will be at least 5% this year.

I agree with PrincessPerky that you need to be earning in the neighborhood of 110K to make this budget work.

That assumes, however, that the 16% going to your 401K is your only savings. You should be saving additional money outside of your retirement account for other needs like major home repairs, travel, non-reimbursed medical expenses. And once the baby is born, you will need insurance, college fund and all the costs associated with having a baby to feed and clothe.

[jmjj215]

Originally Posted by bigsaver

You could probably dump that gym membership.

Only if you could fina an alternative to working out that you would stick with. If you're not using it, then yeah...

[brig2221]

I downloaded Quicken last night and imported my credit card and bank accounts into it. I am in the process of getting everything categorized at what not. It is certainly an undertaking. That said, it is really helping me to figure out where exactly all our money is going.

All I can say is that no matter how small, it is amazing how it all adds up over time!

[jIM_Ohio]

Originally Posted by bigsaver

You could probably dump that gym membership.

Going to a gym can be a good thing. Seeing other people work out can be motivating to working out.

I worked out all thru HS and college and continued after graduating. Each time at a gym which I paid for.

I then moved to condo, which had a free universal. I used it a few times, but did not stay disciplined enough to continue. Working out by myself is not an option which worked for me... and Imagine I am not the only one which feels this way.

[anonymous_saver]

Also, get rid of either your cellphones or your land line. I understand you have a DSL/phone bill but maybe getting a different internet service (you can easily find great service for around $45/month. I think you are spending too much on phone service. $165/month for cell phones scares me too. Is there any way to knock this down a bit?

I would second the cut money on the lunches thing. More for your health than your pocket book though. Why pay for the gym membership when you eat out almost every day? I would say try to eat out no more than 2 days a week and see how that goes.

By the way your home association is only $450/year? Or per month? Just curious b/c I thought it might of been a typo.

Is one of you planning on not working once the baby comes? Are you both contributing up to your match in your 401(k)'s and in your Roth IRA's? This is incredibly important, and I didn't see mention of that.

Do you have any other debt other than car and home?

[Aleta]

I agree that your cell phone bill is excessive. You will have to list what you can't cut and then list what you can cut or cut out at any time. I would also say too that there are times that doing your own lawn would help take down the expenses for a while and maybe forgeting about the pest control unless you really have a problem. We used to have pest control service and then my husband went to a lawn and garden center and bought what he needed and did it himself. Even if you just cut down 10 to 15% of your food bill that would help. Turning out lights when you leave a room, using a programmable thermostat for your AC and heat. Also, call around and see if you can get your prescription meds at a lower cost. Definitely, you could work on lunches as has been said here.

[Aleta]

If you go to TheStreet.com, dated April 26th, Jeffrey Strain(Owner of SavingAdvice.com) has a great article that might make you rethink some of your larger payouts and that you may be able to lower your costs by checking out, negotiating, or switching your present companies.

It is a very good article and I think one that may help you toview your budget differently.

[LivingAlmostLarge]

Where's the daycare costs, unless one of you are staying at home? What about the car replacement fund, home repairs, etc? Just to replace things that break? You need life insurance soon. Disability Insurance also especially if you only have one person working.

[PrincessPerky]

Ditto the list of what you can and can't cut..if you really want to cut spending (like if you don't make over 100K a year) then you will feel empowered knowing what can go at anytime.


If you are currently making 100K and you want one parent to stay home at first glance it may seem impossible, but by listing what you must have (real needs) what you really want and what you just have cause you could you might find dropping to say 50K is a cinch. (and yes many people do live on less, far less)

[zetta]

Originally Posted by brig2221

I downloaded Quicken last night and imported my credit card and bank accounts into it. I am in the process of getting everything categorized at what not. It is certainly an undertaking. That said, it is really helping me to figure out where exactly all our money is going.

All I can say is that no matter how small, it is amazing how it all adds up over time!

I must say I would recommend against trying to use Quicken to track your budget -- it just doesn't really work with how real life really happens (for instance if you budget $100 for clothes each month, spend $0 in Jan and $105 in Feb, Quicken will show that you were under budget in Jan and over budget in Feb, where in real life you are doing ok.) Much better to use an envelope-style system (your envelope balance rolls over from month to month, so at the start of Feb you know it's ok to spend up to $200 on clothes). There's a list of packages here: Envelope Budgeting Software: Zetta's Striving to Get Rich Slow

[project15]

Originally Posted by PrincessPerky

4,050+200+.28X+.16X=X
4,250+.44X=X
4,250=X-.44X
4250=.46X <- should be .56X
9239=X

Not meaning to nitpick, but I just redid this formula and it turns out that X-.44X is really .56X

This turns out to be a salary of around 91k

[PrincessPerky]

Doh! yep it should be, thanks for catching it...should teach me not to do math with a 1 year old on my lap!

[mom-from-missouri]

I'd start living now, the way you intend to live after the baby is born. Which would mean either setting aside each month daycare money or start living off of 1 income.
This would show you now what problems you may have then, and give you time to get them worked out.