Budget Recommendations

**disneysteve** · 04-07-2012, 11:38 AM

Originally posted by ShoGunZek View Post

$65k income

Contribute 10% Roth IRA (looking to up to 14%)

Welcome. I don't have time for a full response but let me just point out the flaw here. You can only contribute $5,000/year to a Roth. On a 65K income, that would be about 7.7%.

**ShoGunZek** · 04-07-2012, 12:42 PM

Yes. Part of that has to due with the timing of when I started to contribute to the Roth IRA. I am catching up as I have only contributed to the Roth IRA for about 8 months. The contributions fall in between two tax years (2011 and 2012). Should have clarified that.

I adjusted to a higher contribution as I only had about 4 months in the 2011 tax year. If I started with the 7.7% like you stated, I would not have been able to contribute as much as I wanted to in 2011.

I did overlook that for the tax year of 2012 I will have a full year of the contributions. I will adjust accordingly so I do not hit over the contribution limit.

Thanks.

**jpg7n16** · 04-07-2012, 01:13 PM

Room you could save? Yes - in food and miscellaneous expenses. Also gas seems high, though not sure how flexible that is with prices these days. Do you drive a lot?

More importantly, what got you looking into your budget? And what goals are you saving towards?

**ShoGunZek** · 04-07-2012, 03:55 PM

My main goal is to increase my emergency fund. Ideally I would like to have 6 months saved up for this purpose.

I am not really looking to save for a house as I will be moving quite frequently and does not make sense for the next few years.

**disneysteve** · 04-07-2012, 06:58 PM

I'm back. I think there is definitely room for improvement.

$500/month on food is quite ridiculous for one person. There are folks here who feed a family of 4 for that much. I'd knock that down immediately to $250 as a starting point and then continue to trim it from there.

You bought way too much car. How much is the car currently worth (go to kbb.com to find out). If you aren't upside down, sell it. If you are upside down, keep paying on the loan until you're even and then sell it (or sell it when you have enough saved to cover the difference).

How much are you contributing to your 401k? You said the 11% includes the company match.

I would cut back to just enough to get the company match and use any extra to fund your EF. Funding your 2011 Roth is a great idea but you can certainly delay funding for 2012 until you get the EF up. You've got a year to get that contribution made.

And of course your $300/month on "impulse" spending needs to be reduced. Give yourself a cash allowance - no debit card, no credit card - for this purpose. Maybe half of what you've been spending, so $150. When the cash is gone for the month, no more impulse purchases.

I think you are in great shape and if you just tune things up a bit, you will have a very bright financial future.

**kork13** · 04-07-2012, 08:13 PM

Originally posted by ShoGunZek View Post

Income
$65k income
$3286 net monthly after below contributions
Contribute 11% 401k (includes company match that I am maxing)
Contribute 10% Roth IRA (looking to up to 14%)
No significant EF (yes I need to start doing that) ~$1000

Debt
$840 rent (internet and utilities included in rent)
$400 car loan at 5.99%, 72 months ~18k still owed on car
$97 auto/renter’s insurance
$90 student loan, ~7k left to pay at 6.15% (loans are combined)

Expenses
$250 gas
$500 food (lots of restaurants, etc.)
$300 impulse spending (electronics, etc.)

Steve just beat me to the punch on a couple things, but here are my thoughts:
- Don't include the company match in your 401k savings. Definitely max the match, but your budget shouldn't include their money.
- Good on the Roth, but instead of raising your contributions there (for now), you might send that extra to building an EF.
- If I did this math right, you bought a $35k car as a 22 year old in college with little-to-no financial standing to back you up, and you still have 3.5 years to go on it.... You definitely spent WAAAY too much there. Is your intent to keep this car for the next 10-15 years? If so, then I guess you might be okay, though you should pay it off as soon as physically possible. But if you don't think you'll keep this for more than 4-5 more years, you should strongly consider selling it and getting something far more affordable.
- All of your listed 'Expenses' seem too high, and yet too low.
a) You only list expenses of $2477, $800 below what you say is your take-home pay." What are you spending that $800 on? That's alot of unaccounted-for money in a budget.
b) At the same time, you're spending far too much on food (restaurants), and although I personally believe that everyone needs spending money, 10% of your take-home is a little excessive. How much do you drive every month? It must be at least 1500 miles per month to spend $250/mo just on gas.

One other thought... How much do you normally get back each year as a tax refund? If it's more than about $500, you should consider adjusting how much you're getting taken out in taxes every month.

**ShoGunZek** · 04-07-2012, 10:24 PM

Cannot find delete button for this post. :/

**ShoGunZek** · 04-07-2012, 10:25 PM

Originally posted by kork13 View Post

Steve just beat me to the punch on a couple things, but here are my thoughts:
- Don't include the company match in your 401k savings. Definitely max the match, but your budget shouldn't include their money.
- Good on the Roth, but instead of raising your contributions there (for now), you might send that extra to building an EF.
- If I did this math right, you bought a $35k car as a 22 year old in college with little-to-no financial standing to back you up, and you still have 3.5 years to go on it.... You definitely spent WAAAY too much there. Is your intent to keep this car for the next 10-15 years? If so, then I guess you might be okay, though you should pay it off as soon as physically possible. But if you don't think you'll keep this for more than 4-5 more years, you should strongly consider selling it and getting something far more affordable.
- All of your listed 'Expenses' seem too high, and yet too low.
a) You only list expenses of $2477, $800 below what you say is your take-home pay." What are you spending that $800 on? That's alot of unaccounted-for money in a budget.
b) At the same time, you're spending far too much on food (restaurants), and although I personally believe that everyone needs spending money, 10% of your take-home is a little excessive. How much do you drive every month? It must be at least 1500 miles per month to spend $250/mo just on gas.

One other thought... How much do you normally get back each year as a tax refund? If it's more than about $500, you should consider adjusting how much you're getting taken out in taxes every month.

The car was ~26k (tax included). I was not able to have any down payment as I bought it right out of school (age 23). I was able to secure my own loan and that is why it is a higher percentage rate (no co-sign from a parent).

KBB is showing it to be worth around 22k (trade-in)and 24k (private party).

My intent is to keep the car for awhile. I did not want to lease as I bought it in a state that charges sales tax for leasing. I also didn't want to deal with the hassle of mileage limitations, etc.

Excluding company match, I input 6% (this number allows me to get the max match) on the 401k.

I drive ~1600 miles a month. This will shorten considerably as I will be moving to a country where the commute will be a lot less.

I have only had 1 tax return (2011) as not being claimed a dependent because I graduated in 2010. I took back ~$1300 this year. I have filled out my tax forms to get the most taken out, but am learning that I should probably adjust that.

A lot of the unaccounted for money would go into miscellaneous expenses. Previously, a lot of it was going toward the credit card debt I had (~900 a month before it was payed off). Since then, I have had a few major purchases (computer ~2300, new windshield ~300, and various electronics).

I didn't include those in the budget as those have been very recent. I will not have those kind of expenses in the future and am hoping to save/invest that leftover money after expenses.

I am stocking up on the electronic end because I will be moving abroad in the upcoming months and they will be about 3X the price than in the US. Last computer I had lasted me through college and was 5 years old when I replaced it.

**kv968** · 04-08-2012, 05:16 AM

Budgeting items aside, let me focus on the Roth.

IMO, as the other have said, you could take your current contributions for 2012 and apply that to your EF. You have until April of 2013 in order to make the 2012 contributions.

However when that time rolls around, and even if your EF isn't fully funded, I'd recommend maxing out the Roth at that time. Even if you have to consider your contribution as a quasi-EF for the time being I'd do it since you can't go back and make up for it.

**ShoGunZek** · 04-08-2012, 12:24 PM

Originally posted by kv968 View Post

Budgeting items aside, let me focus on the Roth.

IMO, as the other have said, you could take your current contributions for 2012 and apply that to your EF. You have until April of 2013 in order to make the 2012 contributions.

However when that time rolls around, and even if your EF isn't fully funded, I'd recommend maxing out the Roth at that time. Even if you have to consider your contribution as a quasi-EF for the time being I'd do it since you can't go back and make up for it.

Thanks. I think I will do that.

**disneysteve** · 04-08-2012, 03:03 PM

Originally posted by ShoGunZek View Post

$400 car loan at 5.99%, 72 months ~18k still owed on car

KBB is showing it to be worth around 22k (trade-in)and 24k (private party).

If you could actually get 22-24K for the car and walk away with 4-6K profit on the deal, I'd take that in an instant. Then get yourself something used but very nice for maybe 8-10K. You can put down the 4-6K profit and just borrow a couple thousand to make up the difference. You'll eliminate almost all of your car debt and knock that payment down significantly.

**bucks_online** · 04-08-2012, 08:01 PM

Hmmm, disney is right, you cam actually save a lot from that car's deal... =)

**disneysteve** · 04-09-2012, 06:03 AM

I was thinking about this thread last night (yes, I do that, I'm a geek).

Your numbers really aren't that bad. You are currently saving 16% of your income. Standard advice is to save 20%. For you, that would mean an additional $2,600/year or $216.67/month. You could easily free up $216/mo. by trimming the food budget and the impulse spending. The car payment is too high (and for too long) but it isn't horrible and really isn't sinking your budget. If you really like the car and want to keep it for the long term, work on cutting back in the other areas, especially food and impulse buys, boost the savings rate to at least 20% and I think you'd be fine, even though replacing the car would be even better I think this budget works even if you keep the car.

**riverwed070707** · 04-09-2012, 06:55 AM

Try doing the same thing w your savings as you do w your retirement. If your company will allow it, have the amount you'd like to save each month direct deposited into a different account from where your bills are paid. I have mine with ING and I don't have a debit card or any easy way to access the money. Of course i can transfer money if i reall need it but it takes a couple days and the time/effort that goes into accessig it really makes me think twice about spending it. It's really kind of an out of sight, out of mind trick but it works!

Budget Recommendations