It's another budget/life check..

[JJLinDoorCo]

Hey everyone. I'm a long-time lurker and finally decided to create a thread and gain some insight and advice on future steps. I live in an area of Northeast Wisconsin that has a low/moderate cost of living. I'm 29, a college graduate (though employed in a profession different than my major/minor - go figure), and own a small home as well as a 2007 Jeep Compass. I have two jobs..my full time job is as Member Services Director at a YMCA, and my part-time jobs are as an Auditorium Director and PA announcing for sporting events.

My budget:

Income (monthly)

$3200 gross; $2500 net (all jobs).
I will be receiving a raise effective mid-November at my full-time job, so my net should increase to $2650-$2700 month.
Full-time job includes health insurance with dental and vision.


Expenses (monthly)
Mortgage - $486 (includes escrowed property taxes and insurance)
Cell - $88 (no land line)
Internet - $50
Netflix - $8
Student Loans - $175
Electricity/natural gas - $113
Sewer - $51
Auto Insurance - $42
Auto Loan - $171
Gas - $275
Groceries/Restaurants - $175

Loan Breakdown
Student Loans - (Federal) $26000 @ 4.1% ($103/month); (Private) $16000 @ 4.5% ($72/month).
Auto - $3400 left @ 2.75% ($171/month). I've been paying $325/month to expedite the payoff. I drive 80 miles round trip to work and want to pay off this quicker to start saving up for a new vehicle. Jeep has 116,000 miles currently.
Home - $77,000 @ 3.75% ($486/month) includes property taxes.

Savings
EF - $10,000
Maintenance - $200
401K - $5,000. I contribute 3% to get the full match and my employer contributes 9%.

I know I need to get serious about a Roth and the magic of compounding interest over 30-35 years, but I find myself wanting to continue to grow my EF, create a separate savings ($1-5K for auto maintenance/new vehicle down payment) and paying off my auto loan at an accelerated rate and other debt. This is where I'm looking for constructive advice and rationale on my next steps.

[siggy_freud]

Well, generally you want to pay off the highest rate first. But, your highest interest rate loan is $16,000. You could start contributing to that and pay it down quicker.

If it were me though, I'd take some of that EC fund, and pay off the car. You've got a solid emergency fund, more that you probably need for 3 months given your expenses. That would immediately free up the $300 a month you've been putting at the loans, and allow you to roll that into the student loan.

Or you could take half of that free'd up money, put it towards the loan, and take the other half and start investing in retirement.

Or, start building yourself a replacement fund, drive the car until it dies, and then buy something with cash, or at least a large down payment.

Your car loan is your lowest interest loan, but given that you could wipe it out today, why not?

[skydivingchic]

So adding up your numbers, including the extra payment toward your car loan, I come up with just of $700 left over each month. The $200 savings for maintenance you listed - is that how much you save each month or is that the balance of the savings. If that is how much you are saving each month, then there is still $500 unaccounted for. Where is it currently going? Is your budget missing stuff - vehicle maintenance, medical expenses, vehicle registration, personal care and grooming items, etc?

The biggest problem I see is your retirement savings. The bare minimum you should be saving (not counting employer match) is 10%. 15 - 20% would be superior. So I would remedy that immediately in your case. Your debt is at low interest rates and isn't causing any cash flow problems, so I think retirement needs to be upped immediately. I would recommend you open a Roth IRA and start contributing enough so that you are putting $320 total into retirement accounts each month (401k and Roth combined, again ignore any money your employer matches). That gets you up to 10% toward retirement (not counting the raise you are expecting, recalculate numbers once that comes through).

After you've done that, then I would look at your debt. Any extra money could get put toward whatever debt you are focusing on. Your EF looks quite adequate to me, unless you have reason to believe you are at risk of losing one or both of your jobs. So I think focusing on your debt makes more sense than growing your EF right now.

I think you have good reason to get your car loan out of the way first. So I would pay that off, then focus on the private SL, then the federal SL. After the car is paid off, you could start saving a portion of that payment, say $150, toward a new car purchase/car maintenance. The rest should go toward knocking out your SL debt.

[bjl584]

I'm with the others in that you should strive for a 10% savings rate for retirement. I'd slowly build to it over the course of whatever timeframe is comfortable for you. Maybe increase savings by 1% every other month or something like that. That way it won't be such a shock. I agree that you should open a Roth.

I think your EF is good. It represents 4 months of net income which should be enough to get you through most emergencies.

I'm with you on paying off the car.

The rest of the debts you may want to just make the monthly payments and invest any extra money. Both the mortgage and the SL's have low interest rates and both have tax writeoffs associated with them.

[JJLinDoorCo]

So adding up your numbers, including the extra payment toward your car loan, I come up with just of $700 left over each month. The $200 savings for maintenance you listed - is that how much you save each month or is that the balance of the savings. If that is how much you are saving each month, then there is still $500 unaccounted for. Where is it currently going? Is your budget missing stuff - vehicle maintenance, medical expenses, vehicle registration, personal care and grooming items, etc?

With everything I listed, I did forget some money. The approximately $650 (low end) to $750 that is left over each month gets thrown into savings. The random oil change and personal care items will be budgeted for in that specific month (but not every). It usually averages $25 with those items per month. Otherwise I have no medical expenses, and I do budget $7 month for vehicle registration. I look best with a buzz cut, so I do those myself.

[skydivingchic]

So if that money is going to savings right now, I think you should start looking to put that toward debts instead. Let's say you start putting another $150 per month toward retirement. That leaves you ~$500 per month extra you can throw at debt, so ~$1000 per month total going to debt. A debt snowball, from lowest balance to highest has you paying everything (except mortgage) off in 50 months.