Need Help/Advice on Personal Monthly Budget

**disneysteve** · 12-07-2012, 11:51 AM

Welcome!

Can you clarify the credit card issue for us? Are you carrying a balance? If so, how much is the balance and at what rate?

Do you have any savings other than your 403b? Any emergency fund at all?

It looks like you are putting 3% of your income into the 403b. Is there a company match?

Your ultimate goal should be to save 15% of your gross for retirement and another 5% of gross for other needs. You also want to build an emergency fund of 3-6 months worth of basic living expenses (that can come out of that other 5% savings at first).

There is a good general rule called the 50-30-20 budget. That is 50% for needs, 30% for wants and 20% for savings. That's very broad but is a good solid place to start.

**riverwed070707** · 12-07-2012, 11:54 AM

Originally posted by MalecoDC View Post

Hi all. I'm new to this forum, but really excited about a place to discuss personal finance and get some helpful tips and advice.

I'm a young professional living in Washington, DC, looking for some advice on my personal budget. Below is what I've set up so far:

Gross Monthly Income: $3075.20 (annual $40,131)

Health/Dental Insurance/FlexPay: $240.22
403b Contribution: $92.26
Taxes: $567.60

Net Monthly Pay (after taxes & pre-tax items): 2175.12
------------------------------------------------------------------------
Rent/cable/electricity/water/gas: $500
Cell phone/tablet data plan: $149
Credit Cards: $100
Transit for Commute to/from work: $64
Pandora One Account: $4.23
Podomatic Account (I manage a podcast as one of my hobbies): $9.99
Dropbox: $9.99

At this point, there is about $1338 remaining to budget. I've intentionally left food & savings out because I specifically want some advice on how much of my remaining monthly finances I should allocate to each.

Please also note, that because I live in DC, I've decided not to have a car, which means no note, no gas, no insurance to worry about either.

If I could get some feedback on whether or not I'm on the right track and how much should be allocated to food and savings, I would be most appreciative.

I wanted to go ahead and get a firm grip on this before I spend a penny on Christmas gifts this season. I've been living paycheck-to-paycheck and I'm wanting to transition out of that mode.

Thanks in advance for any help you all can provide!

Well I think seeing the break out of what you're spending the other $1300 on would be helpful but a genral rule of thumb often expressed here is the 20/30/50 rule. Basically what this rule says is that you should go through your budget and mark everything as either savings (20%), a want (30%) or a need (50%) and use these percentages as a guide to see where you may be overspending. Debt is placed in the savings category during repayment because often you aren't going to be saving 20% when you have debt but as your debt goes down, don't forget to increase your savings rate. Needs should be things like housing, food, transportation. Wants include cell phones, dining out, shopping, etc. You can find more on this method by searchign the forum.

Hope this helps give you a starting place.

ETA: Ha what DS said! We were posting at the same time.

**BMEPhDinCO** · 12-07-2012, 12:47 PM

I agree with what you've already been told - including the total debt you currently have as a number that would be useful to share.

That said, based on what you gave, it sounds like you are living with a roommate (?) and doing pretty well with balancing your stuff. I would suggest redoing some of the suggested numbers - I recommend closer to 25% savings, 25% wants, 50% needs. I also do this off the NET, not the gross that people usually use. By doing this, that 3% for retirement doesn't get included, but then the 15% that you should be adding gets a little boost (the 15% would come from the NET savings category). This would mean:

15% to retirement - $326 (into a RothIRA)
10% to other savings (house, auto, car, travel, electronics, health, pet, gifts, etc - tailor to your situation, but have an emergency fund with at least 3 months plus some category stuff) - $218
25% to wants (most of what you listed, also clothing, hair cuts, going out for drinks/lunch/whatever) - $540
50% to needs (food, housing, rental insurance, credit card payments UNTIL THEY ARE DONE) - $1090

Because your housing is so low, anything you don't use in the "needs" category can go into savings to build up your fund sooner - it should be 3 months of EXPENSES, not income. But it should include COBRA payments or individual health insurance so give yourself that buffer.

There's my two cents, hope that helps!

**riverwed070707** · 12-07-2012, 12:58 PM

Originally posted by BMEPhDinCO View Post

I agree with what you've already been told - including the total debt you currently have as a number that would be useful to share.

That said, based on what you gave, it sounds like you are living with a roommate (?) and doing pretty well with balancing your stuff. I would suggest redoing some of the suggested numbers - I recommend closer to 25% savings, 25% wants, 50% needs. I also do this off the NET, not the gross that people usually use. By doing this, that 3% for retirement doesn't get included, but then the 15% that you should be adding gets a little boost (the 15% would come from the NET savings category). This would mean:

15% to retirement - $326 (into a RothIRA)
10% to other savings (house, auto, car, travel, electronics, health, pet, gifts, etc - tailor to your situation, but have an emergency fund with at least 3 months plus some category stuff) - $218
25% to wants (most of what you listed, also clothing, hair cuts, going out for drinks/lunch/whatever) - $540
50% to needs (food, housing, rental insurance, credit card payments UNTIL THEY ARE DONE) - $1090

Because your housing is so low, anything you don't use in the "needs" category can go into savings to build up your fund sooner - it should be 3 months of EXPENSES, not income. But it should include COBRA payments or individual health insurance so give yourself that buffer.

There's my two cents, hope that helps!

So just out of curiosity, 403 contributions don't count toward savings percentage in your book, and on top of that you would contribute 25% of net to savings while paying off debt? Where does the priority to paying off the debt come in? If she hypothetically spend $500 on rent, $100 on transportation and $200 on food, that only leaves $200 to take care of the CC, rental insurance and any other necessities that might not be highlighed here (idk if there are utilites, etc). Saving 25%+ is great but I wouldn't make it a priority over getting rid of debt. She indicated she is living pay check to pay check so I don't think it would be as easy as just throwing $550/mo into savings off the bat

**breathemusic** · 12-07-2012, 02:06 PM

Do you not have any student loans?

I can tell you from personal experience living in DC that if you don't have any student loans and your rent is really that cheap, then you are perfectly fine and should really be able to save up and contribute more to retirement. It sounds like you have a REALLY sweet deal on rent (what you pay is cheap even for having a roommate). Unless you left them out, you apparently don't have student loans. No car, no car insurance, so living within your income is very do-able.

**thesimplemoneyblog** · 12-08-2012, 10:42 AM

Part of the answer depends on your goals. You should probably be putting more toward retirement as DS indicated (whether that's more to the 403b to take advantage of any employer match or adding funds to a Traditional IRA or Roth IRA). Also, make sure you set aside enough money to have 3-6 months in your emergency fund savings, and then begin to save for any other goals you might have: wedding, home purchase, car purchase (if you decide you need to get one or if you move to a city where you might need a car), children's education if you have kids, etc.

Need Help/Advice on Personal Monthly Budget