Learning to budget and save.

[sandrark]

Smiley, your answer is in your question. You need a budget before you can do anything else. (Actually, I call mine a Spending Plan, since I include all things we plan to spend $$ on - and it seems to be a good distinction for my husband).

- First of all, if you're self-employed, you should be setting aside 25% of each check for taxes.

- Secondly, it's unlikely that your wife's employer is setting aside $10K in an IRA. She has to do it, and $5K annually is the max. Do you mean 401(k)?

- Thirdly, $50 a month in Sharebuilder is NOT a retirement plan for you.

I work my spending plan on a monthly basis, and savings & retirement funding comes OFF THE TOP. I do not fund my savings by what's "left over after bills." This makes all the difference.

It sounds like you're making $120K a year or so - let's presume gross income. So net is ~ $96K. That means your monthly takehome is $8K.

So work it down:

Income: $8000

Housing: (s/b ~ 25%, including taxes, insurance, HOA, etc.) $2000

Retirement savings at 15%: $1200 per month

Non-retirement savings (vacation, car replacement, home repair, etc., 10% $800

Utilities: $250 gas & electric; $50 internet; $75 cable; $50 water; $40 trash - $465

Transportation: $350 car payment; $400 gas; $200 insurance; $50 tags; $100 repair/maint fund

Entertainment: $100

Cell phones: $150

Groceries: $350

Eating Out: $200

Debt payments, CCds: $250

This isn't complete, but it's a start: and it's about $7000 total. You should have PLENTY of money to save aggressively for retirement and have a good standard of living.

Common problems:

- A house payment that is more than 25% of net pay?
- Expensive car loans/lease?
- Expensive premium cable - HD, HBO/Showtime, etc.?
- Crazy cell phone data packages?
- Excessive eating out or entertainment?

Good luck - it's totally worth getting a handle on this. I started saving at 25, and not a lot each month. I've increased my savings each time I got a raise or promotion, and we've got a house payment (stayed put in our first house instead of migrating up) that's only 18% of our GROSS income. We're now saving nearly 30% for retirement.

It can be done. And doing this now, instead of at 40 (or 50!) makes it MUCH, MUCH easier to retire with dignity and build wealth.

Sandi

[snafu]

Do you carry disability insurance? I suggest you look at the amount of interest being charged to each of your CC. Multiply that sum by 12 to understand how much you are losing to interest in comparison to how little is earned in savings. You've taken a giant step forward by acknowledging that you need to change your spending habits and manage your money rather than having money manage you.

[simplenomad]

Savings and Budget

Dear Smileyboy

First, before you even start a budget, you should review your spending habits. Do you know where you spend your money between paychecks? You will find items you can cut back on such as dining out or shopping. This gives you wiggle room to increase your savings. Once you know how you spend, then create a budget and stick to it.

Second: Pay more to the credit card with the lower balance to get it out of your hair. Then start on the next one.

Third: What type of account are you saving to now? Start building a savings account for emergency reserve. A good rule of thumb is 3 months of living expenses. Since your self-employed, you should look into a Roth account and or and IRA or Simple Retirement plan. These account have penalties for early withdrawal, hence the emergency reserve.

Next: Focus on the big picture. Can you pay down the cards and car and save 10% ? You may find ample room when you review your spending habits.

For further great reads and suggestions, I have included a link to my blog.
Happy Savings

[savingdealz]

I agree ^_^

[justinblake]

I guess the others have already given you a great idea on how to start. I just cannot imagine how much you have spent on things that are beyond the basics. Do you guys spend way too much on groceries? Or your wife on clothes, bags and shoes? Or you on gadgets and maybe toys for the big boys? Because that's always the top culprits in my book. They are right. You should be able to pinpoint where all that money went.