How to meet Savings Goals?

[BMEPhDinCO]

Hi everyone,

I'm feeling a bit frustrated right now and would like some advice. I have mapped out what I think is reasonable for savings goals for the year (see below) but that number equals my GROSS salary for the year! Can y'all please look at it and tell me what you think? Thanks!

Savings Requirements/Goals:

15% to Retirement = $7,500 (actually it's more like $4,300 but we also get $18k per year from my in laws and my husband brings in side income from teaching lessons, the $7,500 accounts for that extra income - I REALLY want to max the Roths, but I don't see another $2,500 in the budget for that so I stuck with around 15% of the total money received for the year)

$1,800 to Auto (two cars, relatively new but will both need new tires soonish - this covers registration, maintenance, etc....)

$1,200 to Misc (this is for holidays, gifts, guest visits, new cell phones/computers, etc)

$1,500 to House (around 1% of the house's net worth, for repairs, upgrades, etc)

$2,400 to Taxes (self-employment taxes, accountant fees, it may be high as this is the first year fully doing self-employment but better safe than sorry)

$500 to Pet (might be high, but we just paid $520 for teeth cleaning so wanted to be more careful for future expenses and he has no insurance (one cat))

$2,400 for school/loan (MUST!!! - budgeting for loan payments returning in June 2012 if I go to Continuing Registration status, this would cover summer when we don't have as much income)

$1,200 to Music (my husband's professional costs and dissertation costs)

$600 to Medical (covers prescription medicine for the year)

$1,200 to Travel (one trip to the east cost to see family + 1 small trip for the two of us to stay sane)

=$20,400 (ie, BMEPhDinCO's Gross Salary)

So any thoughts? Our monthly costs are (at a high) $2,400 but usually lower, bill dependent. My husband brings in $850 net per month during the school year and we get $1,500 from our inlaws so you can see how we could (almost) meet this off my salary (~$1,500 net/mo) plus the extra income...but is that wise? This is about 42% savings per month, but I don't know where to cut - the pet is not an option to cut, the house is not an option, and the cars are paid off.

Thanks for any advice!

[humandraydel]

So any thoughts?

How old are the cars? To me, about $600 seems more appropriate. This is based on $300 tires every year, $50 registration and $250 in maintenance.

$2400 in taxes sounds expensive as well, though I guess I don't understand your tax situation. I do my own taxes, but have you considered some software like Turbo Tax? I would think Turbo Tax would at least do basic "self employment" returns.

$1200 misc could be cut in half. I spend $600 on Christmas...it requires buying ONLY for parents and grandparents, but I find that acceptable. In some cases, siblings were actually relieved that I suggested not exchanging gifts. As for the "new cell phones/computers, etc."...if your budget is tight, maybe you can't afford them?

$500 to get your cat's teeth cleaned? Are you serious? To be fair, I paid $2,000 to get my dog's leg amputated, but I can't imagine paying $500 for teeth cleaning? I don't pay $500 to get MY teeth cleaned!

$1200 to travel...could you just take the trip back east and go camping on the weekends? Could probably save $600 here

[humandraydel]

It sure does seem high, but there's a reason for it.

They have to put animals under to clean their teeth, which requires an anesthesiologist or anesthetist, typically a nurse, and the veterinarian. And this can take an hour or more.

Three people + room + drugs + equipment can add up.

Ok, that's understandable (I guess). But that begs the question, is it NECESSARY to get a vet to clean a cat's teeth? I've "brushed" my dogs teeth before, but never paid a vet to do it.

[disneysteve]

Sorry. I'm confused. What is your total household income? What are your total household expenses? You said you were mapping out savings goals but then listed numerous things that aren't savings-related (medical expenses, pet expenses, student loan payments, etc.).

I'm not clear on what the situation actually is or what it is you are asking here.

[KTP]

Ok, that's understandable (I guess). But that begs the question, is it NECESSARY to get a vet to clean a cat's teeth? I've "brushed" my dogs teeth before, but never paid a vet to do it.

So this has really gotten me thinking. Who brushes the teeth of all the wild animals (wolves, bears, deer, etc.?) Is there a group who goes around doing this? I have heard of groups doing things like cleaning oil off of birds during spills, but I don't think I have ever heard of a tooth brushing brigade.

[snafu]

Good idea to plan for upcoming expenses. Savings are sums that you don't anticipate spending for at least the next 5 years. Can DH bring in more income?

[adstalker]

if you really want to save money you can rent out the house and move in with your parents

[Coronet]

Professional cleaning of pets' teeth is important as they build up tartar just like people which can lead to more serious expenses in the future like tooth removal so $500 is justifiable imo.

[riverwed070707]

I'm going to agree with the others here that your savings goals are admirable, but it's something you're going to have to work up to. Your income is incredibly low (guess it helps that you get money from the inlaws but still) and you are trying to save a lot. I make double what you do and even with bare bones expense, can't afford to put away as much in retirement.

How old are you? Its true you should try to save 15% for retirment, but that's something you can work up to as your earning potential increases. I suggest putting together a monthly budget (including a monthly breakdown of what you'd like to save) and see if we can't better help you that way. It's easier to slice and dice in a smaller pieces.

[BMEPhDinCO]

Wow, a lot of questions...

First - I am 27 and my DH is almost 27. We are both grad students for at least until May 2012 (although probably really Dec. 2012 for my DH and Dec. 2013 for me)

Our monthly budget is:
$750 - mortgage, insurance, taxes
$625 - groceries, monthly household goods, DH gas
$125 - my gas
$150 - fun money
$75 each for personal money (haircuts, clothing, lunches out, etc)
$110 - insurance (car, personal property)
$13 - my life insurance
$35 - internet
$78 - cell phone
$140 - house gas (max, usually less and then the extra goes to savings)
$140 - WSTRE (max, extra goes into savings)
$35 - security system (we don't have a choice on this one - locked into contract thru oct. 2012)
$13 - netflix (we have no cable)

I know gas is high, but we both commute quite a bit (no choice here, I do take the bus when I can) and we have no car payments. My SL is in deferment until either 06/2013 or I go into continuous enrollment (06/2012) - not sure how it works for sure and that would be another $203 per month - that's where the $2,400 comes in, I was trying to build up a buffer for that expense. We have no other loans, CC payments, etc.

As for the pet - the $500 is pretty low, for our area, and we just did it so he probably won't need it again for awhile, so I just want to have it saved instead of putting it off like we did this time, since he suffered for a year. I know it sounds like a lot, but it is a necessary expense (his breed is prone to teeth issues) and otherwise he is very low maintance. This amount would also help cover litter, food, pet license, vet fees, etc. And to KTP - usually wild animal diets are such that they don't need their teeth cleaned, it's only household pets that do, since they don't eat bones, raw meat, etc - and wild animals tend not to live as long as pets!

Our family lives in GA and KY - so living with them is not an option as we live in CO.

I think it's a little confusing here as to "Savings" versus "expected expenses" - I used "savings" loosely - some of this might not be needed right away and others would be for the year, but it all goes into an online account as none of it is "monthly" - that's part of the problem though, as Steve pointed out, some of these aren't savings and we would need to spend on them each year. Other things, like retirement, we don't need now but I feel are important to do.

So what I'm asking is - what kind of flexibility do you see in the numbers - is it safe to cut back on, for example, the auto account, seeing as how we do have a $14k EF?

To Humandraydel - tires are $350 per car, as I priced out, but that could vary a bit with taxes and such. Our registration in CO is much higher - try around $140 per car per year and for maintance, we do oil changes 3-4 times per year per car at a cost of ~$30-40 per car (so $320 on the high end). Of course tires aren't a yearly expense, so I suppose once we buy them, we could save a bit less per year to be prepared.

The taxes are high, and they are a rough estimate, but we just got socked with a $600 tax bill for 2010 in addition to $380 for SE taxes for april and $380 for SE taxes for June - there will be the same amount needed for Sept. and Jan. - so I wanted to be prepared.

But thanks for the tips everyone, any more based on the new advice are welcome - otherwise I think I'll try and reasses the car, travel, and misc.

[Frugal]

Some ideas that might help you save:

1) Commute perhaps in a limited way by bike vs. car if you live close to college campus.

2) Use coupons and shop sales- this was not mentioned in what you said your savings strategy was.

3) Perhaps have a garage sale and sell old things you no longer need.

4) If you plant a garden, you could grow vegetables to save money this fall like I am doing.

[riverwed070707]

I feel you on car registration...are there really places where it only costs $50/year?! Mine is like $260 just for my 06 CR-V. Much more if you have a car under 5 years old!

I think it's good for you to have a ballpark on what you'd like to have saved but I wouldn't put too much emphasis on savings vs income becuase that means you're looking at it as if this money will be spent in a year when really you have more time than that to save up this amount. You're not comparing apples to apples.

Instead I would add in a line in your budget and list how much each month should be going to savings to reach these goals. Then, if you aren't able to reach that amount, I would cut back non-essentials.

As far as your budget goes, why is your husband's gas included with home expenses and groceries? I would say this category is high, but its hard to tell given that we don't know how much he drives. You guys also get quite a bit for fun money since you have a separate category for personal expenses. It's hard to critique much beyond that because you didn't state what your net income is. How much is left over at the end of each month? Also, do you have health insurance? Where do medical expenses come from?

What does your husband do during the summer? Can he take on full time work to help ramp up the savings? His contribution is pretty small once you take into account his music expenses.

[disneysteve]

What is your combined annual household income from all sources?

[BMEPhDinCO]

Thanks again!

Our combined household NET income ranges, based on the SE - but it's around $43,000 before that's added in - and the lessons bring in anywhere between $200-1,000 more a month, more during the school year we hope! I can't budget for the excess though, since it's really variable, so I just plan to add that to savings whereever we need it (ie, a higher than expected expense pops up).


Frugal: We don't live close, although I plan on trying to take the bus twice a week until the snow crazyness starts - that should mean I can try and stretch gas to $100 a month for me. My DH refuses to do public transport, but he won't be commuting more than 1-2 times a week this year, so hopefully it'll be less

We use coupons when possible, but we eat mostly non-prepared, healthy food, and those don't have a lot of coupons (if someone knows a site for an apple or other fresh fruit coupon, please clue me in!)

I have considered a garage sale - my MIL sent a lot of crap last year - but no time right now, perhaps we will try before the end of the summer for a craigslist thing though

We are not gardeners - we kill things - we do grow mint and basil though :-)

River - gulp, more for new cars?? We haven't actually paid for them yet for yearly - I hope my estimate isn't too low! My DH's gas is included in with home monthly expenses since he does all the joint driving and doesn't want to track it - he's not a "finances are fun" person.

Our net income, per month, during the school year, is $3,810 - $1,410 is available for non-monthly spending, and $200 of that goes into a school account for the loan. So that leaves $1,210 for non-monthly needs/savings. (In the summer, it's only $2,960 since DH doesn't get paid)

My DH does teach music lessons during the summer (that's the SE tax stuff) but he also works on music so his time isn't available for other jobs - the lessons do bring in another $200-500 a month though and yes, I know the music budget is high in relation - but unlike in sciences, music departments don't pay for supplies for a dissertation so that is why we have the budget - the faster he gets out of school the better!

I did reassess the costs though and I think that, if I give up the 15% retirement (and bring it down to 10-12% - ie, ~$6,500 per year) that the rest is doable, especially with the extra lesson money I'm not including since it's too hard to estimate.

Thanks y'all!

[disneysteve]

I would look to trim spending before I cut retirement savings.

You are spending $300/month for personal/fun money. I'd start with that category.

$625 - groceries, monthly household goods, DH gas

Break this down into the individual pieces and see if there is room to trim there. I'm guessing there is, maybe not on gas but probably on food and household stuff.

You list your life insurance but none for him. Does he have coverage? If not, he should. If he only has coverage through work/school, he needs his own policy.