Noob! Please critique my budget!

[EconDiva]

Hi everyone

This is my first post. I've lurked around a little bit and decided to join. I'm really trying to do better at budgeting and setting/achieving financial goals, so I thought I'd post my budget for some helpful advice:


Gross Income 3751.56
Taxes
Fed Withholdng 507.72
Fed MED/EE 51.8
Fed OASDI/EE 150.05
State Withholdng 182.52

Before tax deductions
Medical 54.66
Dental 16
2% Employee retirement contribution 75.03
Employee parking 52.5

After tax deductions
Personal Accident Insurance 4.25
Short Term Disab After-Tax 6.75
Employee legal plan 15.74

Expenses
Car down payment (Goal: 5k 20 months from Jan 2012) 250
Emergency (ROTH) (Goal: 1k in 7 months from Jan 2012) 150
Rent 683
Cell 85
Water 30
Cable/net 85
Car insurance 85
Student loans 240
Groceries/toiletries 250
Electric 100
Car gas 150
Gym 30

3255.02
Income minues taxes/deductions/expenses: 496.54

[EconDiva]

Of note:

Of the $400-something that's left over, I know I need to do better at budgeting that amount. It seems I just spend it til it's gone on FOOD and CLOTHES (and randomnless like entertainment, birthday gifts, etc.) What I plan to do is create a 'discretionary sub-budget' for: clothing (100), eating out (50), entertainment (50), gifts/charity (50), hair/grooming (100), and put what's left over in cash in an envelope to be deposited into the 1k savings account as extra towards savings at the end of the month.

Besides the car down payment and 1k in emergency funds, here are my other goals:

-Open 3-5 year account (CD?) for house down payment (after 1k in ROTH is achieved)
-Increase cc limit to $500 by June 2012
-Increase monthly paycheck by getting a 10% raise by 6-1-12
-Buy new DSLR camera after above raise (around $750 or so). Photography is a hobby of mine and I plan to generate extra income monthly from it.

Here are my questions:

-Are there places you think I could cut back, and if so, where? I'm single, early 30's, no children, paid off car that runs fairly well, living in/around the metro Atlanta, GA area.

-Are there goals you think I haven't set for myself I need to be looking at (more aggressive 403b contribution, etc.?)

-What kind of account would you recommend for me to open for the car down payment and then the house down payment (CD, etc.)?

I have poor credit (last time I checked my score was around 610). I have one cc with a $300 limit that was upped from a $200 limit maybe 4 months ago. It was a secured card and is now usecured, so I'm working on rebuilding that very slowly.

[artwest]

Here's my 2 cents worth.

What is this Personal Accident Insurance? If you have auto insurance and health insurance, this seems like a waste of money to me. I could be wrong, but your federal taxes look like they could be a touch high. I like to get less than $200 back from the government. If your refund is higher than that, you should adjust. I would rather have that money each month to use as I want than to loan it to the government INTEREST FREE!

I think you should be giving at least $100 to charity. If you go to church, give it to your church. If you don't go to church, find a charity you trust and give it to them.

You should then have $396 per month left over. I would set aside $146 for "blow" money. Use this on whatever you want. You may want to put some of that into a savings account so you can buy your camera.

I would forget about the car and Roth for now. Add that $400 to the $250 ($396-$146) you have left at the end of the month for a total of $650. Put that into as savings account for a couple of months to build a small emergency fund. Then throw that $650 at your student loans and get them paid off as quickly as possible.

Once you have your student loans paid off, it appears you will be debt free. Take the $650 per month that you were applying to your student loans plus the $240 payment gives you $890 per month. I may take $40 of that and add it to the $146 "blow" money. You will now have $186 "blow" money. You still have $850 per month left. Put that into a savings account and build it up to 3-6 months expenses, which in your case looks like somewhere around $10,000.

Then increase your retirement contribution up to 12%. By my calculations, you should have $475 per month left over. Increase your "blow" money by another $25. You should now be up to $201 per month in "blow" money and have $350 left over. Put that into a savings account for your house.

Any bonuses or extras money you get, throw at your debt early on, then maybe put it into an account to upgrade your car.

I think that is what I would do if I were in your shoes.

[srblanco7]

My initial thoughts -

Short term -

Focus on getting retirement plan contribution up to at least take advantage of match offered by company (under the assumption that it's higher than the 2% you've noted) and increase allocation to emergency fund savings.

Long term -
Commit to increasing retirement plan savings annually(or each time you get a raise). Focus on maintaining a lifestyle where you live within your means. For example, you not you're saving for a car downpayment of $5k. I'd suggest that you continue to drive your current vehicle as long as it's viable and then use saved cash to purchase the next vehicle (not take out a loan for an expensive vehicle).

[EconDiva]

@srblanco7:

I forgot to mention:

I currently have about only about 13k in my 403b retirement plan. My employer puts away 6% (this isn't a match-it's guaranteed whether I contribute or not). Since I give 2% they match that 2% with 3%. So right now a total of 11% (their 6 + my 2 + their matched 3) goes into the 403b.

[riverwed070707]

First, I would not be holding my emergency fund in a Roth. Put it somewhere where it is accessible immediately should you need it and has no short term loss potential.

Secondly, I agree with the others on retirment savigns -- you need to be contributing more than 2%, regardless of what your employer contributes. You make a good income and you'll be thankful for that compound interest down the road.

[EconDiva]

Originally Posted by riverwed070707

First, I would not be holding my emergency fund in a Roth. Put it somewhere where it is accessible immediately should you need it and has no short term loss potential.

Secondly, I agree with the others on retirment savigns -- you need to be contributing more than 2%, regardless of what your employer contributes. You make a good income and you'll be thankful for that compound interest down the road.

You're right about the income contribution, and I needed to hear that. I was at 8% and took it all the way down to 2% in December because of anticipated holiday spending . I should have left it where it was at. But I can adjust that. I will do some tweaking and see how much more I can contribute.

[BMEPhDinCO]

Great job sorting through all this!

A few things that jump out:
Employee legal plan - $15 and change
Employee parking - $52 and change

What is this $75 a month you are giving BACK to your employer? Are these mandated? If you can get rid of these, it may be worth it (although I know parking is $$ in ATL, still...)

Cable/net: $85 is very high for these, why do you need cable? Can you watch your shows online? (even Hulu plus is only $8 a month, add netflix for another $20 a month with 1 dvd out and cable for $30 a month and get $60, a savings of $25) In ATL, there are two sources of internet I believe (it's been awhile) so you should be able to play them off each other, or at least call and ask for a deal - we do that every 6 months and pay less than $25 a month for internet (+$20 for netflix).

Car insurance is also a bit high - we pay $110 a month for two cars...can you ask for a re-adjustment?

With $650 (let's round it, since you can do the above), you should be saving ALL of that to an EF, to get $5,000 in an EF by the end of August (put this in a separate online savings account, NOT a Roth, instead, put $150 into Car and $100 into Roth until you get the EF built up). With the $5k, you'll have 3 months expenses saved up (if you got rid of the gym, cable - which you would if you lost your job).

From September forward, put $300 a month into your EF, $100 into an "Uh-Oh" fund (ie, car breaks, extra taxes, flight somewhere for emergency, etc - ie everything else in life besides a major health/job concern), $250 into the Roth, and then you can do $250 towards the car.

If you can, also boost retirement at work to at least 5% for now.

Hope that helps!

[EconDiva]

Originally Posted by BMEPhDinCO

Great job sorting through all this!

A few things that jump out:
Employee legal plan - $15 and change
Employee parking - $52 and change

What is this $75 a month you are giving BACK to your employer? Are these mandated? If you can get rid of these, it may be worth it (although I know parking is $$ in ATL, still...)

Cable/net: $85 is very high for these, why do you need cable? Can you watch your shows online? (even Hulu plus is only $8 a month, add netflix for another $20 a month with 1 dvd out and cable for $30 a month and get $60, a savings of $25) In ATL, there are two sources of internet I believe (it's been awhile) so you should be able to play them off each other, or at least call and ask for a deal - we do that every 6 months and pay less than $25 a month for internet (+$20 for netflix).

Car insurance is also a bit high - we pay $110 a month for two cars...can you ask for a re-adjustment?

With $650 (let's round it, since you can do the above), you should be saving ALL of that to an EF, to get $5,000 in an EF by the end of August (put this in a separate online savings account, NOT a Roth, instead, put $150 into Car and $100 into Roth until you get the EF built up). With the $5k, you'll have 3 months expenses saved up (if you got rid of the gym, cable - which you would if you lost your job).

From September forward, put $300 a month into your EF, $100 into an "Uh-Oh" fund (ie, car breaks, extra taxes, flight somewhere for emergency, etc - ie everything else in life besides a major health/job concern), $250 into the Roth, and then you can do $250 towards the car.

If you can, also boost retirement at work to at least 5% for now.

Hope that helps!

Sorry for such a late response.

First off, thanks so much for the input so far everyone

In regards to your question, I drive to work so the employee parking is mandatory. The legal plan I have taken advantage of every year I've had it so I've been afraid to let it go. I can't drop it again until open enrollment in October. But it's served it's purpose so far.

Thanks for the cable and insurance tips; I'm going to look lowering those expenses.

I think I can definitely up the retirement over 2%. I think I will log on and change it back to 8% tonight.

[EconDiva]

So from what I'm reading so far what stands out to me as priorities:

Emergency fund
Pay off student loans
Increase retirement

I'm going to up my contribution to 8%. I'm thinking now I should take the $$$ I was going to save for a car and instead put it towards the student loans...?

ETA: I need to learn how to cook more/inexpensive meals. This will save me a TON of $$$ actually. If there's anywhere in my budget that I tend to go over, it's eating out and groceries/food. Gets me EVERY.TIME.

[Gina23]

First of all, let me tell you that you are doing great thinking about financial goals. I'm proud of you. I'm also a female in my early 30's and I can tell you that none of my friends are even thinking along the same track as you. I wish they were, but talking about finances living out West is like taboo (LOL, that's a whole other thread).

Everyone else has pretty much given you the same advice I would and you have it together. As far as the meals go, I get that. Here are a few rules, and see if you can start with these:

1) Never eat out unless it's for someone's birthday, catching up with a friend, or it's a social event. If you are by yourself, you don't get a treat. I know it's hard, but this will save you so much, trust me. No starbucks, no nothing.

2) Make big meals and eat left-overs. I can't stand cooking for just me, so I'll bake 3 chicken breasts at once and just throw them in with rice/soup/vegetables for lunch or dinner. I know this may sound gross, but things like hamburger helper are easy, quick, and will last you for days. Plus it's CHEAP. For example, I'll buy some chicken sausage (3.99) and some Zatarain's jambalaya mix (1.29) and make a big batch of it. That will last me 3 meals. So $5.30/3 = $1.76 a meal.

3) When you do go out, split meals with friends and drink cheap drinks if you can. ALWAYS split your portion of the bill off. I find when I'm with friends who always want to split the bill I cover a lot more than I should.

Before you know it you'll be investing like crazy! Have fun!