Budget critique

[SDCAuditorium]

Hey everyone. New (registered) member here but have been lurking on the forum for a while. In either case, I'd love to get feedback on my current budget and any suggestions that you might have.

Income (monthly)
Gross - $3000
Net - $2460

Expenses (monthly)
Auto (gas) - $225
Auto (insurance) - $37
Auto (payment) - $171
Cellphone - $89
Electricity/Heating - $98
Groceries - $125
Home Maintenance/supplies - $50
Internet - $52
Personal - $90
Sewer - $51
Student Loans - $140

Other
Credit cards - $2470 balance. I am paying $900 a month the next three months to get rid of that debt.
Savings - Emergency Fund at $6,055. A couple other specific-purpose savings accounts with $270.

At this point, I do not have any mortgage/rent payments or house insurance. I receive health insurance and a 401K with company match through work.

Goals
1. Pay off credit card debt by August.
2. Build up savings to $8,000-10,000.
3. I will be purchasing my Dad's old house (July mortgage app) for what's left on the loan (just under $30,000) and will probably do much needed improvements - total loan of approx. $65,000.

Like I mentioned, I'm just looking for general advice, critiques, etc.

[disneysteve]

Welcome.

You listed expenses of $1,128 leaving you $1,332/month free.

How much will the mortgage payments be? What are you using for a down payment? You didn't list that in your savings. Also, what is the fair market value of the house?

You said that your job offers a 401k but you didn't say if you are participating or what percentage of income you are putting in.

What are the balances and terms on the car and student loans?

While paying of the CC is definitely necessary (and don't ever carry a balance again), with you planning to purchase a home very soon, I wonder if it wouldn't be better to hoard cash right now for your down payment and all of the expenses involved in moving. Once you are settled in the house, you could pay off the card at that point, certainly by the end of the year.

I think the budget numbers you listed all seem reasonable.

[SDCAuditorium]

Thanks for the quick response! I included my answers in your original post below to make the reading a bit easier.

Welcome.

You listed expenses of $1,128 leaving you $1,332/month free.

How much will the mortgage payments be? What are you using for a down payment? You didn't list that in your savings. Also, what is the fair market value of the house?

EDIT: if I went with a 30-year fixed, it'd run around $325 a month. If I went with a 15-year fixed, it'd be up to $475. Which of the two would you advocate going at? I believe the last time the house was assessed, it was right around $80,000 give-or-take a bit. Since I'm getting a deal on the house either way, I don't think I will be using a DP at this point.

You said that your job offers a 401k but you didn't say if you are participating or what percentage of income you are putting in.

I am participating in it, and I need to double check the percentages, but it's a 9% of gross, 6% match I believe.

What are the balances and terms on the car and student loans?

The car loan has a balance of $4700. It's a 3-year with a balance of $4700 (interest at 2.75%).

Student loans are at $42,000 ($16000 at AES (approx. 4.5%) and $26000 with Great Lakes (similar interest).


While paying of the CC is definitely necessary (and don't ever carry a balance again), with you planning to purchase a home very soon, I wonder if it wouldn't be better to hoard cash right now for your down payment and all of the expenses involved in moving. Once you are settled in the house, you could pay off the card at that point, certainly by the end of the year.

I'm living in the house right now, and as such, there won't be any moving expenses whatsoever. My Dad moved a few towns away with his fiance, and with the housing market as it is, has let me live here and maintain it with the intent I'd purchase this summer for the remainder of the loan.

Historically I don't care a balance on my cards, so this is more of an aberration that WILL NOT be happening again after August.
I think the budget numbers you listed all seem reasonable.

[SDCAuditorium]

Also, I keep a buffer of anywhere between $500-1,000 at all times in my checking account as a buffer for any unplanned emergency/needed expenses.

[disneysteve]

if I went with a 30-year fixed, it'd run around $325 a month. If I went with a 15-year fixed, it'd be up to $475. Which of the two would you advocate going at?

It looks like you are already paying the utilities, so that won't change. Are those mortgage numbers including taxes and insurance? I don't see any reason why you shouldn't go with the 15-year loan. You are living very frugally and can afford it easily.

I believe the last time the house was assessed, it was right around $80,000 give-or-take a bit. Since I'm getting a deal on the house either way, I don't think I will be using a DP at this point.

Are you sure you can get a mortgage with no down payment? Have you and your father looked into the tax implications for him selling the house to you at such a steep discount? The $50,000 discount is probably going to count as a gift from him to you. That might not be any issue but is something to keep in mind and make sure you both understand.

I am participating in it, and I need to double check the percentages, but it's a 9% of gross

That's a great start but keep in mind that your goal should be to save 15% of gross for retirement. As you pay off debt, of course, you will free up income that can go to increased savings.

Speaking of income, what are you doing to improve yours? $36,000/year isn't very much. I take it you have a college degree to go along with that $42,000 in student loan debt. What are your prospects for advancement at your current job? Or are you in the market for something better elsewhere?

[SDCAuditorium]

It looks like you are already paying the utilities, so that won't change. Are those mortgage numbers including taxes and insurance? I don't see any reason why you shouldn't go with the 15-year loan. You are living very frugally and can afford it easily.


Are you sure you can get a mortgage with no down payment? Have you and your father looked into the tax implications for him selling the house to you at such a steep discount? The $50,000 discount is probably going to count as a gift from him to you. That might not be any issue but is something to keep in mind and make sure you both understand.


That's a great start but keep in mind that your goal should be to save 15% of gross for retirement. As you pay off debt, of course, you will free up income that can go to increased savings.

Speaking of income, what are you doing to improve yours? $36,000/year isn't very much. I take it you have a college degree to go along with that $42,000 in student loan debt. What are your prospects for advancement at your current job? Or are you in the market for something better elsewhere?

Actually, my gross is anywhere between $40,000 and $42,000. I'm a membership director at a Y (full-time) and auditorium director (part-time). I live in NE Wisconsin, so COLA isn't too bad at all.

You're right on about retirement. My biggest concerns are getting my EF upped and car loan paid off. I don't mind as much about the student loans to an extent. I definitely plan on bumping up my retirement contributions within the next year (at most).

As far as the house, he's looking into that with his tax advisor to see what the financial implications would be to him if we proceeded this route. Another route would be to buy the house for $70,000 and have him pay for the improvements...just thinking out loud.

[snafu]

In addition...are you buying dad's house to live in for at least 5 years or to fix and flip? Is the work primarily cosmetic or structural like roof, furnace, electric upgrade, floors and walls? Is the kitchen a tear-out or needing paint, flooring and new appliances? Does the bathroom need to be gutted? Do you have the the skill sets, time and perseverance to carry out a significant amount of the work or is it your plan to hire a contractor and have him arrange sub trades? Have your priced out supplies? How will these changes be funded?

Before deciding on a 15 year mortgage, it's a good idea to run the numbers to see the sums saved in interest based on how amortization tables work.

[disneysteve]

Actually, my gross is anywhere between $40,000 and $42,000.

Oh. Then your monthly gross is more than $3,000, which is the number you gave in your initial post.

[SDCAuditorium]

In addition...are you buying dad's house to live in for at least 5 years or to fix and flip? Is the work primarily cosmetic or structural like roof, furnace, electric upgrade, floors and walls? Is the kitchen a tear-out or needing paint, flooring and new appliances? Does the bathroom need to be gutted? Do you have the the skill sets, time and perseverance to carry out a significant amount of the work or is it your plan to hire a contractor and have him arrange sub trades? Have your priced out supplies? How will these changes be funded?

Before deciding on a 15 year mortgage, it's a good idea to run the numbers to see the sums saved in interest based on how amortization tables work.

The improvements include new roofing, siding, windows, flooring, bathroom and kitchen remodel along with a new garage. Someone I work with had his own contracting business and said he'd be more than willing to help lead these improvements with no pay to him. I'm fortunate in that regard, as I'll be saving a ton on labor.

I have priced out supplies and developed a pretty comprehensive (if not close budget). I do plan on keeping this house for the long term at this point..definitely longer than five years.

[ecoadapt]

Oh. Then your monthly gross is more than $3,000, which is the number you gave in your initial post.

If your monthly gross is more than the amount you've posted on your first post then, I believe it's beyond reasonable. Imagine 3,000 yet your real monthly gross is 40,000. I think with that amount of money you'll have a good budget!