Please critique our budget/finances

[misstee]

Hi we are a newly married couple (almost two years)
No kids.
Age 33 and 35

Below is our monthly budget. Income is net of taxes and 401k contributions (we contribute the max up to our employers contribution.

We would like to try to conceive in the near future and want to know if we are on a good track. Day care in our area runs about $220 a week for newborns thru 18 months YIKES! (plus the added cost of diapers, wipes, forumla.

Do you see any areas that we can cut down or does it look like we are doing okay?
Any changes you see that we can make?

Hubby is currently in school finishing up his BBA (at night, but his current employer pays for his tuition)Thus his salary is a lot lower than mine (about half) but hopefully after the degree it will increase substantially.


Total Net $6,720.00

Mortgage, Prop Taxes, Home Insurance $1,653.00

Student Loan $78.00
Utilities - Lights $150.00
Utitlities - Gas $25.00
Utilities - Water $75.00
Garbage (paid quarterly but we put it in ING monthly to save for the qtrly payment) $17.00

Groceries $200.00

HOA (paid yearly, save for it monthly in ING) $44.00
Alarm bill (paid qtrly) $17.00

Lawn $60.00
House Maint $150.00

Car Payment $291.00
Car Insurance $110.00
Auto - Gas- Hers $240.00
Auto - Gas- His $160.00
Tolls $100.00

Cell Phone $140.00
Cable & Internet (U-verse) $160.00

Fun Money $400.00

Savings - Baby Fund $200.00
Savings - Emergency Fund $2,380.00

Total expenses $6,650.00

Remainng $70.00



We have $19,541 in ING savings. $62k in IRAs,401ks, and sharebuilder.
Debt = Car loan remaining of approx $5000 at 4.5% thru credit union. Purchase price was $11k, we put down 6000. Term is 24 months (so total interest we will pay over life of loan is only $300
Student Loan - balance is $5,208.18 at 5.13%
Mortgage remaining = 178,194.00 at 5.5% on a 30 year fixed

[disneysteve]

Welcome.

Your budget should balance, not have $70 left over. Where does that $70 go each month?

Overall, it looks like you are doing well. You are living well below your means, have an emergency fund and contribute to retirement.

The one expense that jumps out as a place to consider cutting is cable/internet. We pay less than half of that (roughly $30 for cable and $30 for internet plus taxes).

Overall, what percentage of gross income is going to savings including 401k, baby fund and emergency fund?

Your monthly expenses, not counting the baby fund and EF, are about $4,070, so the $19,541 in ING represents almost a 5 month EF. I would stop adding to that and start focusing on debt repayment. You can have the student loan paid off in 2 months and have the car paid off 2 months after that leaving you debt-free except your home in 4 months. That will improve cash flow even more since you will no longer have those two payments to worry about.

It sounds like you are undersaving for retirement if you are only putting in enough to get the company match so you need to fix that and get retirement savings up to 15% of gross income.

[riverwed070707]

Originally Posted by disneysteve

Welcome.

Your budget should balance, not have $70 left over. Where does that $70 go each month?

Overall, it looks like you are doing well. You are living well below your means, have an emergency fund and contribute to retirement.

The one expense that jumps out as a place to consider cutting is cable/internet. We pay less than half of that (roughly $30 for cable and $30 for internet plus taxes).

Overall, what percentage of gross income is going to savings including 401k, baby fund and emergency fund?

Your monthly expenses, not counting the baby fund and EF, are about $4,070, so the $19,541 in ING represents almost a 5 month EF. I would stop adding to that and start focusing on debt repayment. You can have the student loan paid off in 2 months and have the car paid off 2 months after that leaving you debt-free except your home in 4 months. That will improve cash flow even more since you will no longer have those two payments to worry about.

It sounds like you are undersaving for retirement if you are only putting in enough to get the company match so you need to fix that and get retirement savings up to 15% of gross income.

Well I was going to comment but Steve said exactly every single thought I had

The interest saved from paying off your debt early may not be substantial, but once paid that same money can be put toward daycare, etc without having to cut into your savings contributions.

I do think you're grocery budget seems low -- is that what you actually spend or what you aim to spend? Do dinners out come from your fun money budget? I agree that your cable/internet and also your phone bill is high, but you can certainly afford them both so I don't think it's essential you cut them. Gas is expensive too -- do you have long commutes? Could you consider carpooling or taking public trasnportation a few times a week to cut back?

Definitely get your retirement contributions up. A good goal is to try to have one year's salary saved by age 30 and you're a bit behind that.

What do you do about med bills? Vacation/travel? Gifts? Life insurance?

[disneysteve]

Originally Posted by riverwed070707

I do think you're grocery budget seems low Do dinners out come from your fun money budget?

I was wondering the same thing but forgot to ask.

[misstee]

Originally Posted by disneysteve

Welcome.

Your budget should balance, not have $70 left over. Where does that $70 go each month?

Overall, it looks like you are doing well. You are living well below your means, have an emergency fund and contribute to retirement.

The one expense that jumps out as a place to consider cutting is cable/internet. We pay less than half of that (roughly $30 for cable and $30 for internet plus taxes).

Overall, what percentage of gross income is going to savings including 401k, baby fund and emergency fund?

Your monthly expenses, not counting the baby fund and EF, are about $4,070, so the $19,541 in ING represents almost a 5 month EF. I would stop adding to that and start focusing on debt repayment. You can have the student loan paid off in 2 months and have the car paid off 2 months after that leaving you debt-free except your home in 4 months. That will improve cash flow even more since you will no longer have those two payments to worry about.

It sounds like you are undersaving for retirement if you are only putting in enough to get the company match so you need to fix that and get retirement savings up to 15% of gross income.

Thank you so much for your response. May I ask who do you use for Cable & Internet? I agree I hate paying that amount each month and we should lower it.
Stopping contributing to EF is scary but it does make sense to payoff the stu loan and the car loan to free up cash flow for future baby. I would love saying that I longer owe student loans.
The extra $70 usually goes back in to budget. Our electric bill and water varies a little bit, but these amounts are the highest that we have seen in the 2 years in our home. or it is used on dr. co-pays or prescriptions. or put into savings
We will increase our retirement savings at the next open enrollment.

[misstee]

Originally Posted by riverwed070707

Well I was going to comment but Steve said exactly every single thought I had

The interest saved from paying off your debt early may not be substantial, but once paid that same money can be put toward daycare, etc without having to cut into your savings contributions.

I do think you're grocery budget seems low -- is that what you actually spend or what you aim to spend? Do dinners out come from your fun money budget? I agree that your cable/internet and also your phone bill is high, but you can certainly afford them both so I don't think it's essential you cut them. Gas is expensive too -- do you have long commutes? Could you consider carpooling or taking public trasnportation a few times a week to cut back?

Definitely get your retirement contributions up. A good goal is to try to have one year's salary saved by age 30 and you're a bit behind that.

What do you do about med bills? Vacation/travel? Gifts? Life insurance?

We are pretty strict on our grocery budget take our calculators to the store, etc . Just recently increased it from $150. I use coupons when I can and we bring our lunches to work and we eat leftovers.

We do have 30 to 40 minute commutes each. I can look into the vanpool service.

Dinners/happy hours come out of our fun money. Gifts as well, but we definitely need to start putting aside (in ING) for this.

One vacation a year comes out of our savings (we use to save for it seperately in ING, but have stopped, we need to start doing this again). We try to keep it around $1500 to $2000 for the trip plus spending money
We don't have any life insurance outside of what work pays for and also a policy we pay our via payroll thru aflac.

[disneysteve]

Originally Posted by misstee

May I ask who do you use for Cable & Internet?

Comcast

Stopping contributing to EF is scary

Once you are debt-free, the amount you need in your EF decreases since those payments will no longer exist. In general, the advice is 3-6 months in an EF. You guys are right around 5 months and can be debt free in 4 months and then top off the EF after that.

The extra $70 usually goes back in to budget. Our electric bill and water varies a little bit, but these amounts are the highest that we have seen in the 2 years in our home. or it is used on dr. co-pays or prescriptions.

This tells me that your budget, as nicely as you spelled it out, is not complete. Copays and prescriptions need to be included in your budget. They may not be totally predictable but you can estimate based on a typical year.

We will increase our retirement savings at the next open enrollment.

No need to wait. If you are getting the full company match on the 401k, the next step should be to open Roth IRA accounts for each of you. Go to Vanguard or Fidelity or T. Rowe Price and set up accounts. You can each contribute up to $5,000/year.

[disneysteve]

Originally Posted by misstee

We don't have any life insurance outside of what work pays for and also a policy we pay our via payroll thru aflac.

You should both have life insurance on your own. Forget about the work policies. Those are just a bonus. If you leave your job, you lose that coverage. Term rates are dirt cheap. Get a good policy for each of you for 10 times your income.

[misstee]

Originally Posted by disneysteve

You should both have life insurance on your own. Forget about the work policies. Those are just a bonus. If you leave your job, you lose that coverage. Term rates are dirt cheap. Get a good policy for each of you for 10 times your income.

Excellent will do!

[misstee]

Originally Posted by disneysteve

Comcast

Once you are debt-free, the amount you need in your EF decreases since those payments will no longer exist. In general, the advice is 3-6 months in an EF. You guys are right around 5 months and can be debt free in 4 months and then top off the EF after that.

This tells me that your budget, as nicely as you spelled it out, is not complete. Copays and prescriptions need to be included in your budget. They may not be totally predictable but you can estimate based on a typical year.

No need to wait. If you are getting the full company match on the 401k, the next step should be to open Roth IRA accounts for each of you. Go to Vanguard or Fidelity or T. Rowe Price and set up accounts. You can each contribute up to $5,000/year.

Good Point about removing the debt vs. EF fund. We were set on trying to get to 8 months of an EF. but paying off the stu loan and the car sounds better
I have a small roth with fidelity that I can contribute to and hubby has a tradititional with fidelity as well.

[misstee]

[quote=disneysteve;296424]Comcast


This tells me that your budget, as nicely as you spelled it out, is not complete. Copays and prescriptions need to be included in your budget. They may not be totally predictable but you can estimate based on a typical year.

QUOTE]

Thanks is the best way to save for medical via setting up an ING entitled medical or just putting in on our locak savings account. So, its easy accessible for dr's appointments at a moments notice versus the two day wait with ING?

[maat55]

Originally Posted by misstee

Good Point about removing the debt vs. EF fund. We were set on trying to get to 8 months of an EF. but paying off the stu loan and the car sounds better
I have a small roth with fidelity that I can contribute to and hubby has a tradititional with fidelity as well.

You should take full advantage of your Roths, they are your best tax shelter investments.

[Slug]

Much good advice has been provided. I might add:

1) Consider mowing your own lawn. Investing in a cheap lawn mower would pay off quickly at $60/mth in savings.

2) Open the Roth's but do it through a brokerage, not a mutual fund company. At some point you might want to diversify beyond a single family of mutual funds and avoid the associated annual fee.

[riverwed070707]

Originally Posted by misstee

May I ask who do you use for Cable & Internet? I agree I hate paying that amount each month and we should lower it.

Do you watch very much cable? This year we cut our satellite tv and never looked back. For us it wasn't worth it becuase we found nearly everything we watched we recorded first anyway. We now just have hulu plus and netflix which costs us about $25 a month.We only have one option for internet and I don't love them so I won't make a recommendation on that

[LivingAlmostLarge]

Does the $2300/month EF cover things like clothes? Or buying anything? What about car replacement?

[couchrobt]

Stay indoors instead of eating out all the time. That will add more to your savings. Most household or individual spend more on dining out. If you have the time-- find time--- to cook and eat out less, you will be surprised of your savings.

[jpg7n16]

So adding up your numbers, I get true expenses of $3670/month (not savings or fun money)

Currently in cash you have: $19,541 = 5.32 months expenses

So you're good on your EF in my opinion. I like what others have suggested, up your 401k or Roth contributions.

I also agree that the 'EF savings' currently includes things like, clothes, car repairs, oil changes/tire replacements, and insurance - so you've probably got around $1500-1750 extra each month available for retirement savings.

Or to just enjoy by having a family night out a couple times a month.

You're doing great, keep it up!