Please critique our budget

[steenbean]

Net monthly income: $6,700

Tithe: $340 (%5 for now)
Housing: $1718
-$998 to rent
-$300 to electricity
-$50 to gas
-$80 to water
-$160 to 2 cell phones (soon to decrease)
-$50 to maintenance
-$90 to pest control/internet

Food: $250 (2 people)

Automobile: $990
-$645 to 2 car pmts (will decrease to $348 in 6 months)
-$150 to gas
-$170 to insurance
-$25 to car washes/repair

Debts: $1465
-$100 to credit card
-$1205 in student loans
-$160 to a personal loan

Entertainment: $600
-$400 to eating out/activities
-$200 to vacation savings

Medical expenses: $110

Miscellaneous: $436
-$40 to toiletries
-$36 to gym membership
-$200 for "fun money"
-$160 for guitar lessons

Extra: $791 which will go toward paying down our debt snowball.

What do you guys think?

[steenbean]

I guess I should add:

Current Debts:
-$19,000 on 2 vehicles
-$10,800 in credit cards/personal loan (this is from our wedding last year)
-$155,000-ish in student loans

Our goals: to pay off our car/credit card debt and buy a home within 3 years.

[disneysteve]

Welcome. What do you currently have in savings? How much do you add to savings each month? What percentage of income are you each contributing to retirement accounts?

At first glance, I'd have to say that $600/month for dining out and fun money seems like an awful lot for someone with about $185,000 in debt and hopes to buy a house in 3 years. Where will the 20% down payment come from? I'd suggest slashing the entertainment budget to perhaps $100/month. That will get you a couple of decent meals out. That will bump up your grocery budget a bit but still free up $400/month or more to attack the debt faster.

[steenbean]

Thanks for the reply Steve.

We currently don't have much in savings. We have our $1000 e-fund and a few hundred set aside for a trip in August. We haven't been making this kind of money for long. I'm a recent college grad, just started my first "real" job, and haven't started a 401K yet. We are both 26 yo. We've decided not to add to our savings until our current debt in the snowball is paid off ($4,300). At that point we were planning on putting 1/2 of our "extra" money into the snowball and the other 1/2 toward saving for a downpayment. We can cut down our entertainment, but the $200 toward vacation has to happen because we have family weddings coming up. Maybe cut down to $200 eating out/entertainment? Still frees up $200 extra/month for debt

[jIM_Ohio]

I guess I should add:

Current Debts:
-$19,000 on 2 vehicles
-$10,800 in credit cards/personal loan (this is from our wedding last year)
-$155,000-ish in student loans

Our goals: to pay off our car/credit card debt and buy a home within 3 years.

Have you put the payoff on a timeline? When does $791/month get you debt free?
What do houses cost where you want to move?
Will you have 30% down in 3 years? 20% for down payment, 10% for closing costs, inflation and moving.

[jpg7n16]

What do you guys think?

I think you have a weird system of where expenses should go

$90 to pest control/internet

So Orkin provides your internet? Might wanna break those out.

Here's my proposed changes: (from largest to smallest, with recategorization and estimated breakout of non-related expenses)

Housing/Utilities: $1508
-$998 to rent
-$300 to electricity
-$80 to water
-$50 to gas
-$50 to maintenance
-$90 * 1/3 = $30 to pest control

Debts: $1465
-$1205 in student loans
-$160 to a personal loan
-$100 to credit card

Automobile: $990
-$645 to 2 car pmts (will decrease to $348 in 6 months)
-$170 to insurance
-$150 to gas
-$25 to car washes/repair

Entertainment: $660
-$200 for "fun money"
-$200 to vacation savings
-$160 for guitar lessons
-$400 * 1/4 = $100 to activities

Food: $550 (2 people)
-$400 * 3/4 = $300 to dining out
-$250 to Groceries

Giving/Tithe: $340 (%5 for now)

Internet/Phone: $220
-$160 to 2 cell phones (soon to decrease)
-$90 * 2/3 = $60 to internet

Medical expenses: $110

Miscellaneous: $76
-$40 to toiletries
-$36 to gym membership

Extra: $781 which will go toward paying down our debt snowball.


I think this gives a better picture of where your money is going, and what your main expenses are. It would then be most helpful to review the highest expense in each category, and ask, "is there anything I could do to lower this expense?"

it's also worth noting that if you move your car payments into debt (arguably a better spot for it), it would push your debt payments to nearly 1/3 of your income. Just something to think about as you fight through this debt. Remember that so you don't get back into debt later on

[parafly]

Some observations:

Your electric bill seems awfully high.

Tithing, eating out, vacation savings, fun money, and guitar lessons need to be cut down significantly until all credit cards and personal loans are paid off.

You need to build up an emergency fund of 3-6 months expenses.

You need to ramp up retirement savings big time: contribute enough to get the maximum match from employer plans and/or max out Roth IRA's for both of you.

[Hector]

You had 155k in student loan, but you were not comfortable in buying a couple of cars each worth 5k and you had to take loan on buying expensive cars. Now you have 185k in debt, but you start thinking about owning or should I say borrowing money from bank for house within 3 years. Interesting!

[jpg7n16]

Some observations:

Your electric bill seems awfully high.

Agreed. I think ours for 3 people is around $150.

Tithing, eating out, vacation savings, fun money, and guitar lessons need to be cut down significantly until all credit cards and personal loans are paid off.

Except for cutting tithing, agreed.

You need to build up an emergency fund of 3-6 months expenses.

Eventually, yes. Build up to 1 month first while in serious debt elimination mode for max results.

You need to ramp up retirement savings big time: contribute enough to get the maximum match from employer plans and/or max out Roth IRA's for both of you.

Eventually. Take employer match, but eliminate all high interest debt before beginning on the ROTHs.

[steenbean]

I think you have a weird system of where expenses should go



I think this gives a better picture of where your money is going, and what your main expenses are. It would then be most helpful to review the highest expense in each category, and ask, "is there anything I could do to lower this expense?"

it's also worth noting that if you move your car payments into debt (arguably a better spot for it), it would push your debt payments to nearly 1/3 of your income. Just something to think about as you fight through this debt. Remember that so you don't get back into debt later on

Thanks I agree that the way you broke it down makes more sense. We're brand new to this budgeting thing so I appreciate your feedback! Still trying to figure it all out!

[steenbean]

Some observations:

Your electric bill seems awfully high.

Tithing, eating out, vacation savings, fun money, and guitar lessons need to be cut down significantly until all credit cards and personal loans are paid off.

You need to build up an emergency fund of 3-6 months expenses.

You need to ramp up retirement savings big time: contribute enough to get the maximum match from employer plans and/or max out Roth IRA's for both of you.

Our electric bill IS that high but only through the summer. We live in AZ and the A/C is incredibly expensive. Our highest last summer was $388!

Tithing is not negotiable. The bible tells us that 10% is what I should be giving, so 5% IS our sacrifice for now. Vacation is not an option because my brother is getting married in August and my husband is a groomsman. We're staying with family and borrowing a car to cut down on those expenses. Guitar lessons definitely should go, but I'm working on that one (it's my hubby's only hobby).

As for the match, I'm not eligible yet so we're waiting until I am to contribute.

[steenbean]

You had 155k in student loan, but you were not comfortable in buying a couple of cars each worth 5k and you had to take loan on buying expensive cars. Now you have 185k in debt, but you start thinking about owning or should I say borrowing money from bank for house within 3 years. Interesting!

One car has ~$2k on it and the other makes up the bulk. That was a decision that we made because our paid-for 92 subaru couldn't handle the AZ heat and was worth $800 but needed $4k in repairs. Definitely could've bought a cheaper vehicle, I agree.

[steenbean]

You had 155k in student loan, but you were not comfortable in buying a couple of cars each worth 5k and you had to take loan on buying expensive cars. Now you have 185k in debt, but you start thinking about owning or should I say borrowing money from bank for house within 3 years. Interesting!

Also Hector, Do you think that owning a home in 3 years is unreasonable? We have a lot of debt, but have paid off ~$20K in the last 10 months and my husband is currently in school finishing his degree and will be contributing to our income in ~18 months. As for now, I'm the sole earner with gross income ~$126K. Owning a home is my dream, but if that's not a realistic time frame, I guess we need to reexamine.

[minnie1928]

As for now, I'm the sole earner with gross income ~$126K. Owning a home is my dream, but if that's not a realistic time frame, I guess we need to reexamine.

$126,000 annual vs. 6700/month (80,400) is a big difference. You need to focus on your take home pay for this side of the analysis.

I would say that your home ownership timeline depends on you and your husband. At the current rate of payments/debt/outflow, I would say that it's not in your best interest to buy a house. You need to get the debts paid off (CC & auto) and get the SL paid way down. You say that you are living on your income...so when you husband starts working keep living on your income and use his to save/paydown. AND, you need to start saving for retirement ASAP. That should be non-negotiable...the same way you view tithing.

[TBH]

Retirement savings should come before saving for a house.