Budget Recommendations

[ShoGunZek]

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.

Yes. I really want to keep the car. I ended up getting a very good deal for what it was worth, and was able to secure my own financing.

I plan on reducing my Roth IRA contribution to 7% (so I do not go over the 5k limit) and then upping the 401k contribution to 13%. I would then still get a 5% company match on top of that for the 401k.

[ShoGunZek]

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!

That is a good idea. I do have a savings account which is not accessible by debit card and I would have to transfer the money to get access to it (although it is instant transfer).

[stazstaz]

For savings, it can be difficult to find the right money to save, especially for savings that are not particularly urgent (such as an emergency fund). One of the things I personally do is to separate the hundreds from the "small change" when you get your take home pay. For example, you said your take home pay was $3286 per month, put the $86 right into a different savings account. Since you make a decent amount per month, you can even up it to $286 and take home a full 3 grand instead. You can then just cut back a little bit on everything else so you won't really notice the difference.

[ShoGunZek]

For savings, it can be difficult to find the right money to save, especially for savings that are not particularly urgent (such as an emergency fund). One of the things I personally do is to separate the hundreds from the "small change" when you get your take home pay. For example, you said your take home pay was $3286 per month, put the $86 right into a different savings account. Since you make a decent amount per month, you can even up it to $286 and take home a full 3 grand instead. You can then just cut back a little bit on everything else so you won't really notice the difference.

Thanks for the suggestion.

I have changed my contribution rates to 20% (not including 5% company match) for the 401k and moved the Roth IRA down to 7% so I do not go over the $5000 limit.

After bills are paid and there is money left over, I will start to put the extra money into a savings account to start building the EF. I will also leave some in the checking account for disposable income.

[sblatner]

This suggestion isn't ideal but if things get tough, a Roth IRA could be used as an emergency fund...you can pull out your original contributions anytime. I like Suze Orman's suggestion of an 8 month emergency fund especially if you are single and hope that you will make your EF a priority. Not ideal to pull money out of retirement :-).

I think you wrote that you were moving to a different country soon. Are you taking the car with you? If not, what will you do with it while you are gone?

[jpg7n16]

I like Suze Orman's suggestion of an 8 month emergency fund especially if you are single and hope that you will make your EF a priority. Not ideal to pull money out of retirement :-)

Why do you think an excessive EF is more important for a single person?

Usually, the more people counting on your financial situation, the larger it needs to be. Standard recommend EF is somewhere 3-6 months. Beyond that you subject yourself to unnecessary inflation risk.

[disneysteve]

Why do you think an excessive EF is more important for a single person?

First, that's a loaded question since you are calling it "excessive" to save 8 months. Putting that aside, I do think an EF is more important when you are the only one supporting you. If my wife lost her income, I'd still be working and able to support us just fine with my income. If I lost my income, she'd still be working and bringing in money. Although she earns a lot less than me and we couldn't live on her income alone, it would help stretch out our savings and we wouldn't burn through our EF as quickly. Also, she could always increase her hours and boost her income temporarily while I was out of work. You have a better safety net when there are two of you generating income.

[ShoGunZek]

This suggestion isn't ideal but if things get tough, a Roth IRA could be used as an emergency fund...you can pull out your original contributions anytime. I like Suze Orman's suggestion of an 8 month emergency fund especially if you are single and hope that you will make your EF a priority. Not ideal to pull money out of retirement :-).

I think you wrote that you were moving to a different country soon. Are you taking the car with you? If not, what will you do with it while you are gone?

The car will stay with family. I will then lower the insurance to just the bare basics (if the garage fell on top of it etc.) to save money on that monthly cost.

[ecoadapt]

$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.

I definitely agree. $500/month on food and for yourself only? You can save there. Without really compromising your health.

[ShoGunZek]

I definitely agree. $500/month on food and for yourself only? You can save there. Without really compromising your health.

Haha. It is mostly ordering out and restaurants. Still exuberant though for a single person.

[sblatner]

Why do you think an excessive EF is more important for a single person?

Usually, the more people counting on your financial situation, the larger it needs to be. Standard recommend EF is somewhere 3-6 months. Beyond that you subject yourself to unnecessary inflation risk.

For a single person, I don't think 8 months is excessive. As Disney Steve pointed out, you don't have anyone else to rely on.