First Real Job...No Idea How to Save

[Whitechapel]

E-fund (or EF, as commonly seen 'round here) is "emergency fund." It's 3 to 6 months of basic living expenses that you keep in very liquid assets, usually cash in a savings account.

Your EF amount should be calculated by considering your basic necessities -- so only what you couldn't cut if a true emergency suddenly hit you. So it would include rent and utilities, but not eating out or, say, an elaborate smartphone plan. It would include only minimum payments on debt.

As far as how many months you want, that depends on how comfortable you are with your job security, what other emergency resources you have, if you are the sole wage earner, how stable you think your job is, etc. Some people want a full year available in cash. Most are comfortable with between 3 and 6 months.

You have this money so if something happens -- a true emergency -- you can survive for a while without having to go back into debt. Ideally, you have enough so that if you were to lose your job or have a medical emergency you could pay all your bills and continue to live in your residence, pay your utilities, drive your car, and eat until you can get a new job.

Personally, I keep about 3 months in cash in a savings account. We are comfortable with this because we are a dual income household and we have other assets that we could tap in am emergency -- it would just take a couple of weeks to get to it. If we had fewer assets or only one income we would probably have twice as much in our EF.

Remember, the point of an EF is NOT return on your investment, so you aren't going to try to invest it in something high risk/high reward. You want it in something SAFE and ACCESSIBLE, which is usually -- yes -- a crappy low interest savings account.

Thank you very much for the explanation, it was very thorough and informative. I'll start working on my budget in a little bit here, and then I brought my lunch today so I can work on it during lunch.

[Whitechapel]

Here is what I have broken down so far, I might be missing stuff so I'll add it in as it comes to me. The N stands for what I identify as a need and a W is a want. I added them so I can reclassify if it's something you think I should rethink. I'm contributing 4% of my post-tax income to my 401k, the company matches 4%.

Paycheck, $1000-$1100 bi-weekly... $2000-$2200 per month. I have around 275 in my bank account right now and need help figuring everything out so I can move successfully in 2 weeks.
Due on 11/18 (move-in day) - $493.50, rent from there on out will be $635/month.
I will need to figure out cable, water, electric, and heat
N - $160 every 2 weeks - secret
N - $50 every check - mom
N - $50 per credit card typically until I get back below the limit. I don't know what to pay on these but have been paying ~$50 once every 2 weeks or so. I have 3 credit cards I'm currently paying on.
N - $35-40 2-3 times each week - gas. When I move I will be carpooling with a coworker to save on gas.
N - $60-70 - food for the week
N - $100 once - I need to repay my friend, once I pay him back I will have successfully paid off all of my friends finally! This may have to wait until the paycheck after next
N - $165 every few weeks for therapy. Until my deductible is hit, I will be paying this out of pocket. I imagine I will have to pay a doctor's fee once I start seeing my new psychiatrist. But I have good health insurance and my deductible isn't too bad ($600 atm right now I think, it'll be lower in 2012).
W - $100 - entertainment/going out
N - $50-70 once a month - paying for half of all utilities now

Things I want to save for:
$100-150 - shopping trip to Ikea for a coffee table/entertainment stand for my plasma tv
$500-600 - secret

[elessar78]

So if I understood your list... your income is $2166/month and you have out going expenses of $2463.

Can you give us the amount on each of the credit cards and interest rate? For example: Visa ($1,200 @ 10.99%), Amex ($3,200 @ 7.99%), etc. It would be good to know the minimum payment on each card as well.

I assume "secret" are expenditures you just don't want to tell us about?

Psychiatrist: "every few weeks" does that mean once a month?

The payments on the credit cards is a big question, it could swing your budget considerably. Also, the $160 every 2 weeks (320/month) expense is up there too.

Sorry, you might have to re-do this info in a more usable format.

1.) List debts from smallest to largest, to whom it is owed, and interest rate
2.) List your bills in a monthly format (see below, right now this is how I think it looks):

Rent: 635
"Secret": 320
Mom: 50
CC1: 100
CC2: 100
CC3: 100
Gas: 520?? (assuming 3x/week)
Food: 303
Therapy: 165 (1x/month)
Entertainment/Discretionary: 100
Utilities: 70

[riverwed070707]

Basing this on 2 paychecks a month (leaving you with 2 extra per year) here's how I break down your expenses:

Here is what I have broken down so far, I might be missing stuff so I'll add it in as it comes to me. The N stands for what I identify as a need and a W is a want. I added them so I can reclassify if it's something you think I should rethink. I'm contributing 4% of my post-tax income to my 401k, the company matches 4%.

Paycheck, $1000-$1100 bi-weekly... $2000-$2200 per month. I have around 275 in my bank account right now and need help figuring everything out so I can move successfully in 2 weeks.
Due on 11/18 (move-in day) - $493.50, rent from there on out will be $635/month.
I will need to figure out cable, water, electric, and heat
N - $160 every 2 weeks - secret 320/mo
N - $50 every check - mom 100/mo -- what do you owe total? Are you paying interest?
N - $50 per credit card typically until I get back below the limit. I don't know what to pay on these but have been paying ~$50 once every 2 weeks or so. I have 3 credit cards I'm currently paying on. $150/mo. What do you owe on each card? Interest rates?
N - $35-40 2-3 times each week - gas. When I move I will be carpooling with a coworker to save on gas. This seems incredibly excessive. Estimating high at $40/fill up and 3 times a week that means you spend $540 in gas a month. On the low end its' $315 which is still a lot. How much do you estimate you'll be spending when you carpool?
N - $60-70 - food for the week $315/mo. This is more than I spend for my family of 3. You should be able to cut this down to >$200/mo easily
N - $100 once - I need to repay my friend, once I pay him back I will have successfully paid off all of my friends finally! This may have to wait until the paycheck after next I'm not counting this. If it's going to be done next month, it doesn't need to be in your budget
N - $165 every few weeks for therapy. Until my deductible is hit, I will be paying this out of pocket. I imagine I will have to pay a doctor's fee once I start seeing my new psychiatrist. But I have good health insurance and my deductible isn't too bad ($600 atm right now I think, it'll be lower in 2012). $330/mo. Yikes -- can you look into a place that has a sliding scale fee where a portion is covered by united way or another agency?
W - $100 - entertainment/going out
N - $50-70 once a month - paying for half of all utilities now

Things I want to save for:
$100-150 - shopping trip to Ikea for a coffee table/entertainment stand for my plasma tv
$500-600 - secret Is this the TV you want for your mom that you really can't afford right now?

Excluding the things you want to save for, I come up with expenses totaling $2,560... you're spending more than you make. are you really considering your "feel good thing" a need? Sometimes we need a little bit of a reality check to see that just because we want something doesn't mean we *should* have it. Are you starting to see the problem here? Obviously we don't know what the thing is or what it does for you but somethings gotta give. You make a decent salary for someone just starting out and are in a position to be maxing your retirement, putting away a good amount in savings, etc and instead you're spending more than you make and putting yourself in a hole. How do you expect to get out if you aren't willing to adjust your expenses to match your income?? AND you're still talking about shopping trips and expensive Christmas gifts. Just going to put that on the card too? Time to wake up if you really want to get on the right foot.

If you want my advice (which I suspect you probably don't given your past responses but I'm going to give it anyway), cut the feel good expense or at the very least scale back to once a month (do you know this is costing your almost $5,000 a year?!), start carpooling ASAP to get that gas bill down, cook at home and get your grocery budget under $200/mo -- $150 is better, look into a therapist with a sliding scale fee because you can't afford the one you have, and I'd probably cut the fun money down to $50/mo until you get some of your debt out of the way. It's not easy, but its necessary and can be done.

[disneysteve]

N - $160 every 2 weeks - secret

This secret need is sucking up 16% of your income. That's a pretty big chunk of money that is significantly impacting everything else. I hope that you are properly classifying it as a need. A need, in my mind, is something that you absolutely can not do without - food, water, shelter, transportation, medical care, etc. If it doesn't fall into one of these categories (and if it does, I'm not sure what the big secret is), you really need to reconsider how much you are spending on this one item.

ETA:

$160 - Super secret feel good expense every 2 weeks.

Ok. I'm confused now. I missed this earlier. First you classify this as a "feel good expense" but then you list it as a need. Something is fishy. I suspect this isn't a need at all. So you are spending 16% of your income on this feel good thing that you don't want to tell us about (which makes me wonder if it is legal). Whatever it is, it isn't worth 16% of your income when you are living beyond your means. Cut it out and move on.

[elessar78]

I've been out of college for a while but that secret weed, er, need is killing your budget. ha ha. I kid. I kid.

[Whitechapel]

Basing this on 2 paychecks a month (leaving you with 2 extra per year) here's how I break down your expenses:



Excluding the things you want to save for, I come up with expenses totaling $2,560... you're spending more than you make. are you really considering your "feel good thing" a need? Sometimes we need a little bit of a reality check to see that just because we want something doesn't mean we *should* have it. Are you starting to see the problem here? Obviously we don't know what the thing is or what it does for you but somethings gotta give. You make a decent salary for someone just starting out and are in a position to be maxing your retirement, putting away a good amount in savings, etc and instead you're spending more than you make and putting yourself in a hole. How do you expect to get out if you aren't willing to adjust your expenses to match your income?? AND you're still talking about shopping trips and expensive Christmas gifts. Just going to put that on the card too? Time to wake up if you really want to get on the right foot.

If you want my advice (which I suspect you probably don't given your past responses but I'm going to give it anyway), cut the feel good expense or at the very least scale back to once a month (do you know this is costing your almost $5,000 a year?!), start carpooling ASAP to get that gas bill down, cook at home and get your grocery budget under $200/mo -- $150 is better, look into a therapist with a sliding scale fee because you can't afford the one you have, and I'd probably cut the fun money down to $50/mo until you get some of your debt out of the way. It's not easy, but its necessary and can be done.

I'm here for help. I literally just listed anything that came to mind that could be an expense. I'm not saying I'm not going to cut down on anything...if I need to, I will! These are just the things that come to mind.

N - $50 every check - mom 100/mo -- what do you owe total? Are you paying interest?

I owe $50 per check, no interest. I skipped this check's since she was fine with it, I will need to repay her back though.

$150/mo. What do you owe on each card? Interest rates?

The amounts I owe are listed on the previous page in the mint.com picture. I will get the interest rates for you at some point today or tomorrow.

This seems incredibly excessive. Estimating high at $40/fill up and 3 times a week that means you spend $540 in gas a month. On the low end its' $315 which is still a lot. How much do you estimate you'll be spending when you carpool?

Like I said, I commute 50 miles each way to work every day. I'm moving up here to be closer to work. I estimate I'll be filling up probably once a week once I move.

$315/mo. This is more than I spend for my family of 3. You should be able to cut this down to >$200/mo easily

I agree, this area could definitely use improvement.

I'm not counting this. If it's going to be done next month, it doesn't need to be in your budget

That's fine, I can wait one more check. He's the last person I need to pay off and then I'm done!

$330/mo. Yikes -- can you look into a place that has a sliding scale fee where a portion is covered by united way or another agency?

I cannot. And I only have to pay this for a couple of months before I hit my deductible. I really don't have any other options at this point other than paying it up front until the deductible is met.

Is this the TV you want for your mom that you really can't afford right now?

No. It's not appropriate so I wont post what it is right now. I will tell you it's something I want to start putting money towards each check until I have enough to buy it.

[Whitechapel]

I've been out of college for a while but that secret weed, er, need is killing your budget. ha ha. I kid. I kid.

We'll talk later.

At any rate, these are just numbers I wrote down. It's nothing I calculated, more of just ideas of how much I will be spending. If I need to cut spending, I can and will. I have not once said I wouldn't do anything you guys suggested. I just need help shaping up my budget so it's reasonable and doable. And while I may seem standoffish, it happens. Just know that I am open to all ideas at the moment, even if I despise them.

[BuckyBadger]

And your secret need? Any chance you can mitigate that expense for a while?

We all have things that we blow money on. You just have to realize that you can only blow the money on them if you have it first. I spend more than my mortgage -- significantly more -- every month on horses and horse show expenses. But you better believe that I have that money before I spend it.

Can you hold off on your "secret need" until you get into a better financial position?

[riverwed070707]

I can't see the pic. It's just a little box with a red x.

[Whitechapel]

I can't see the pic. It's just a little box with a red x.

Really? I'll reupload it and add it as an attachment.

And your secret need? Any chance you can mitigate that expense for a while?

I could, but I'd prefer not to. Will explain later since it's kind of a long story. If I were to hold off on it, how long should I hold off for?

[BuckyBadger]

I could, but I'd prefer not to. Will explain later since it's kind of a long story. If I were to hold off on it, how long should I hold off for?

Dare I say "until you can afford it?"

But I'll wait for your explanation.

[Whitechapel]

Dare I say "until you can afford it?"

It makes sense to me. Or I could just be cheaper on it and not spend the 160 every 2 weeks, it could be less than that. I will post when I get home from work if I have time before my next job starts. Also I should mention that it could be cheaper, 200 bucks for a month supply. But that wont be until a friend is ready.

So then, without any more regards to the ULTRA SUPAR SEKRET "need" (we will deal with that later today), what else can we do? All I have is guesstimated numbers. I haven't labeled or broken down any of the needs really, and honestly I don't know what I should be doing at this point. I did find out I can set up budgets though with my EasyMoney app, so that is a nice feature. Not sure if I can do it with the Mint app.

[elessar78]

I'm not saying this to badger you (no pun intended) or lecture or anything. But when you're dealing with money, a reasonable amount of precision is desirable. I don't feel you need to account for every penny (some people do), but it's a good habit to get into.

Secondly, it's okay to not have all the exact figures right now as you haven't started a job yet. My current budget represents a decade long evolution. It wasn't always great/exact in the beginning. A couple of times a year, I still forget something and it screws up my budget. For me, that just happens and I dig into surplus funds to rectify it.

I think you're in a "pre-budget" state. You probably need to collect more info and keep track of your spending for about 3 months, particularly since you'll be moving. 1.) Ascertain your income (should be simple enough). 2.) Get a notebook or app on your phone to track your spending. Every time you buy something make a note of it. Keep your bills so you can refer back to them.

Now it doesn't mean go on a spending spree. You'll still have a rudimentary budget, but you'll know to tweak it accordingly as your living situation changes.

From experience, I've tried a lot of software and apps to help me create a budget. None work for me, but they work for others. It's really in the way you construct your budget and how you interact with it. Basically I wrote mine down on paper, still do, but I can't find a budget program that's less tedious than writing it down.

[disneysteve]

I don't think this has been suggested yet but pick up a copy of Dave Ramsey's book The Total Money Makeover. If you can read that, I think it may significantly change your outlook on life and money.

The more I reread your posts, the more problems I see with how you are approaching everything. For example, you are carrying credit card debt (and maxed out on a couple of cards) but at the same time you are talking about giving your mom a $500 present next month and spending $50 or more on each of your friends' presents. You have no money! You are in debt and spending more than you earn. You've got $400 to your name. Where exactly is this money going to magically come from?

You can't spend money that you don't have. You shouldn't be spending money on wants and luxuries and "feel good" things like drugs and alcohol while carrying consumer debt. If you truly want to clean up this mess and get on solid footing going forward, you need a major attitude adjustment. It just sounds like the whole situation isn't a big deal to you. Maybe I'm wrong, but that's what I'm getting from your posts.

Dave Ramsey, who I don't entirely agree with by the way, teaches a system of 7 baby steps:
1. Save a $1,000 starter EF.
2. Pay off all debts except your mortgage using the snowball method.
3. Save a full EF of 3-6 months of expenses.
4. Invest 15% for retirement.
5. Invest for college.
6. Pay off your home.
7. Build wealth and give money.

Again, I am not 100% aligned with DR's teachings but I think his system works and helps many, many people clean up the messes they've gotten themselves into. Most importantly, it changes the way you think about money which I think is what you need to do. Check it out.