please review my 12 month financial plan?

**lorraineb** · 04-02-2013, 09:41 PM

You're not going to like what I am going to say, but you will thank me in the long run if you follow my advice.

Houses are a lot more than the mortgage payment. That extra $1000 a month will disappear fast with maintenance, repairs, upkeep, furnishings, utilities, taxes, etc. With such a small amount, you can't afford a new car with a large payment. Stick with the older cars as long as possible and only replace when absolutely necessary. At that point, replace with an inexpensive, reliable car. Cars are depreciating assets and your "dream car" is nothing more than a waste of money, especially at your age. Wait until you are older and have plenty of money to buy your dream car with cash -- that is when you know you have your finances in order.

Sorry to burst the bubble.

**bjl584** · 04-03-2013, 03:49 AM

You will want a 20% downpayment for a house plus a 6 month emergency fund in place before you buy. Also, don't buy anything that is more than 2.5 to 3 times your annual income. Those are rules of thumb, but it looks like you should really consider following those guidelines based on what you posted so far.

You are nowhere near being able to buy a house. You need to do some serious financial cleaning up first. You have old debts from engagement rings, accidents, traffic violations, bail (am I reading that right?), plus you are upside down on a car. You need to take care of all of that FIRST, then you can start saving for a house.

You didn't mention, but I'm assuming that you have a wedding coming up. How are you going to pay for that?

You also said you want a new car? Can I assume that you are going to buy a brand new car? The smart thing to do would be to get out from under the Jeep and buy something for cash. You can't afford a brand new car.

**BMEPhDinCO** · 04-03-2013, 09:55 AM

First, welcome! Just by coming and posting, I can tell you are interested in doing the "right" thing.

While I do agree with the other posters, I want to offer positive encouragement - so great job trying to plan the next year ahead of time, it's better to look and decide first, rather than buying, then coming here freaking out about what to do.

My thoughts - take them as you will.

1. Pay off all your debt before you even think of a house, new car, etc. Sounds like you don't have student loans, so these should be gone (with no new debt added) as the first thing. If you want some more help with this, post your detailed budget and debt and we can suggest the best order, etc. I do think the jeep should be last, but then you should hit it hard and get rid of it now.

2. Great job contributing to a 401k, but also try to hit a RothIRA for both of you - even if you can only do $50 a month per person to start, it's something. Once #1 is done, you can boost it up. You should be aiming for 15% of your gross income (I usually say 17% of your net, in your case, around $8k per year or $680 per month). This will really put you ahead if you are starting at an early age.

3. Consider what your CURRENT monthly expenses are - how much can you save right now, how much can you save after #1 is gone (you said, $1k, so let's break down that to $320 after #2), where does that savings need to go? (ie, your kids, health, auto payments, etc). Once you are comfortable as can be with your savings goals, then...

4. A new car is great, it's fun, it's exciting, it's really cool - but you can't afford it right now, especially not that one (higher insurance, not as kid friendly, you are under 25 so higher costs with age, although that risk is reduced with marriage). Frankly, I'd make your wedding costs (or at least marriage license) your next goal, THEN the car down the road... your jeep should last at least another 3-4 years and then you will be in a better place for an auto purchase.

So hopefully that helps and doesn't make you upset to the point that you go do what you want, since the only way to get ahead is to learn from others... Get your financial house in order and THEN go for the fun stuff.

**hehateme000** · 04-03-2013, 11:03 AM

Thanks for all the replies so far guys. I should probably be more detailed with my budget

Income:
Me - 2300 (This is after taking 5% for 401K, about $150/month) (Also I get paid weekly so sometimes I get 5 checks in a month)
Fiance - 1400 (Bartender so it fluctuates, but this is the minimum)
Roommate - 300 (Older guy, plans on staying with us a while. He makes a lot of money just stays with us so he doesnt have to commute)

Total Income: $4,000

Expenses:
$1295 - Rent
$60 - Tanning membership for fiance
$320 - Engagement Ring
$155 - Car Insurance
$40 - Credit Card 1
$40 - Credit Card 2
$100 - School Loan Me
$50 - Traffic Ticket
$55 - Direct tv
$50-$80 - PGE
$50 - Water
$40 - Comcast Internet
$55 - Gym
$50 - TV financed no interest
$28 - Fiance car insurance (SR22 when she got in accident)
$278 - Car
$170 - Phone (hard to cancel because we have some of her family on there and it would be couple hundred to cancel each line)
$175 - Fiance Bail (she got arrested one time, couldn't stand being in jail for more than 3 hours. If she stayed overnight we never would have gotten this $5500 bill......geez)
$105 - Fiance old car accident (Some collection is making us pay or they suspend her license)
$20 - Old court fees

Total Current Expenses: $3,136

As of right now, we also budget $650 a month for gas and extra stuff like diapers, clothes, etc.

Debts:
Student Loan, 4 Groups:
$3,459.67----5.6%
$2,365.41----6.8%
$4,514.24----3.4%
$6,424.67----6.8%
$2,642.96----6.8% (Fiance Student Loan)
$12,392.87 --9.49% - Car
$3,080 ------0% ----Court Fees
$1440 -------0%----Fiance Bail
$1,596-------0%----Diamond Rings
$1,377-------0%----Fiance old car accident collection
$500---------0%----TV
$475---------0%----Fiances old credit card she cancelle, went to collections
$223---------0%----Traffic Ticket

Total Debt: $40,491

Current EF: $0
Current House Down Payment: $3100
Current wedding money: $300
Current 401K: $185.05

With these expenses and our income staying the same. this is what I have planned until October, IF we were to buy a house.

April: $50 wedding, $150 House
May, June, July: $50 wedding, $200 House ($150/$600 Total for these 3 months)
August: $50 wedding, $1450 House (We had to pay last months rent when moving in so well have extra money)
September: $50 wedding, $1750 House (Live with parents for 1 month)
October: We would be in our new house, with $7500 by then to spend on down payment, closing costs, appliances, and extra put into EF. Since no longer having to save for house, we can pay down debts in the next 2 months which would get rid of everything except for student loans, car, and court fees.
November, December, January: In these 3 months we would be able to save $2700 for EF, and have $800 towards wedding.
February: Since we have 2 kids, we always get a huge tax refund. All of the tax refund (5000-7500) would go to Wedding and EF. At that point we would have about $1000 extra a month, which I would like to split into the following:

401K - $0 (Taken out of check, but I would like to bump it to 10-15%)
EF - 200
Extra Debt - 200
House repair - 150
Sinking Fund (Annual fees, weird random expenses) - 100
Vacations - 100
Fiance Play money - 100
Silver - 50
Son #1 - 50
Son #2 - 50

At this point I was thinking about getting a new car and my car payment would be around 500-600, so I would have to drop some of the amounts in all the saving categories I have. Also, I have excellent health coverage for me and the boys through my work, $10 copays for MRI's and chemotherapy, to name a few.

This is just a tentative plan. I like making this stuff on Excel and seeing the future and making goals. I know this is a conservative forum and I respect your opinions, and although they may be the most logical, there HAS to be SOME room for fun. Me and my fiance are young but we have 2 kids, 2 years old and 7 months old, so we don't go out and party or waste or money on ANYTHING except eating out once in a while. Thats why I want a car because I dont spend my money on anything else except bills.

Also, I used to be on a weightlifting forum, and while they were very logical too, sometimes it was overboard. For their diet for example, someone would post their diet and have someone critique it, and someone that had a very good diet would get critiqued about everything, even though overall it was pretty good. So I know I am going to get critiqued, which is fine (and that is exactly why I'm here!), but realize that I would like some fun in my life, even if it is just a car.

Thanks again guys.

**bjl584** · 04-03-2013, 11:13 AM

Thank you for posting a budget.

But, my advice hasn't changed. You need to take care of all of these old debts and court costs, bails, etc. before you can think about getting a car let alone a house.

Think of it this way,
You said that a new car would cost about $500 or $600 a month. (Standard advice for a car loan is to have the payment be no more than 10% of your monthly takehome and have the term be no more than 36 months.) But I digress....That payment could be $500 or $600 that you could throw at your debts each month and be debt free all that much faster. You are young. There is plenty of time for fun. But, you need to take care of your financial obligations FIRST.

And, stay away from the bodybuilding.com forums. They are all jerks on there.

**hehateme000** · 04-03-2013, 11:19 AM

Originally posted by bjl584 View Post

Thank you for posting a budget.

But, my advice hasn't changed. You need to take care of all of these old debts and court costs, bails, etc. before you can think about getting a car let alone a house.

Think of it this way,
You said that a new car would cost about $500 or $600 a month. (Standard advice for a car loan is to have the payment be no more than 10% of your monthly takehome and have the term be no more than 36 months.) But I digress....That payment could be $500 or $600 that you could throw at your debts each month and be debt free all that much faster. You are young. There is plenty of time for fun. But, you need to take care of your financial obligations FIRST.

And, stay away from the bodybuilding.com forums. They are all jerks on there.

So even though I will have money to save once I get in the house, with the low rates they are at, and how my mortgage would be 200 cheaper than my rent, still dont try to buy a house? I guess I feel as if I should get in a house because rates are so low. Since my job is secure, then i could build up an EF.

So what if I still went for the house, while paying off debts as I have listed, and then instead of the car I start putting an extra 600 towards student loans?

I feel as if getting a house is very important to me since we will stay here at least 5 years, and be building some equity, and be locked in an awesome rate. plus mortgage be cheaper than rent, however i know there are repairs and maintenance expenses.

LOL those bb.com guys are losers, I usually go to EliteFitness, just a better place overall.

**Singuy** · 04-03-2013, 11:29 AM

You need to put whatever money you were thinking about using for fun into your car/student loans ASAP. Those % percentages are really high! At the rate in which you are paying toward the car+student loans, it would take at least 10 years, accumulating about 11k of interest paid. If you were to add 600/month MORE to your debt with interest, you can be debt free by March 2016 with only $3,077.59 paid toward interest.

So, if you don't buy the car now and wait at least 3 years later, you will be debt free (at least the ones with interest) AND be 8000 dollars richer. If you buy the car now, then you'll feel like living from paycheck to paycheck for the next 10 years.

You'll be only 27 and debt free..or you can be debt free at 37 (assuming NOTHING happens, but of course your children will be older and more expensive)..your choice.

**hehateme000** · 04-03-2013, 01:21 PM

Originally posted by Singuy View Post

You need to put whatever money you were thinking about using for fun into your car/student loans ASAP. Those % percentages are really high! At the rate in which you are paying toward the car+student loans, it would take at least 10 years, accumulating about 11k of interest paid. If you were to add 600/month MORE to your debt with interest, you can be debt free by March 2016 with only $3,077.59 paid toward interest.

So, if you don't buy the car now and wait at least 3 years later, you will be debt free (at least the ones with interest) AND be 8000 dollars richer. If you buy the car now, then you'll feel like living from paycheck to paycheck for the next 10 years.

You'll be only 27 and debt free..or you can be debt free at 37 (assuming NOTHING happens, but of course your children will be older and more expensive)..your choice.

Good point. I am going to wait on the car then. So if I wait on the car and focus on my debts, will I be able to buy a house still? I know i can afford it, I have been paying more in rent for the past 3 years.

**Singuy** · 04-03-2013, 01:39 PM

Originally posted by hehateme000 View Post

Good point. I am going to wait on the car then. So if I wait on the car and focus on my debts, will I be able to buy a house still? I know i can afford it, I have been paying more in rent for the past 3 years.

Buying a house is a good option right now because mortgage interest is extremely low and it can be a sound investment as the value goes up, BUT, you need to think about the following first.

The following numbers are based on a 150k house @30 years x 3.25% interest rate, 10k down

1.If you can't put 20% down, you'll be paying mortgage insurance (84/month).
2. HOA fees (0-50/month)
3. Property Tax (about 170/month)
4. House insurance (about 80/month)
5. Increase in ultilities (+50/month)
6. Repairs/misc
7. Mortgage: 609/month

total: 993/month (does not include HOA fees, does include mortgage insurance).

If your total rent is close or exceeds this, then BUY BUY BUY!

**hehateme000** · 04-03-2013, 01:42 PM

Originally posted by Singuy View Post

Buying a house is a good option right now because mortgage interest is extremely low and it can be a sound investment as the value goes up, BUT, you need to think about the following first.

The following numbers are based on a 150k house @30 years x 3.25% interest rate, 10k down
1.If you can't put 20% down, you'll be paying mortgage insurance (84/month).
2. HOA fees (0-50/month)
3. Property Tax (about 170/month)
4. House insurance (about 80/month)
5. Increase in ultilities (+50/month)
6. Repairs/misc
7. Mortgage: 609/month

total: 993/month (does not include HOA fees, does include mortgage insurance).

If your total rent is close or exceeds this, then BUY BUY BUY!

My rent is 1295 right now....thats why I want to buy as well. So i think it is safe for me to buy right now to get locked in the low interest rate, and keep paying off my debt with the snowball effect.

**ua_guy** · 04-03-2013, 01:53 PM

My advice would be similar to what's already posted.

My only question is...and you don't need to answer, just think about it... What do you really want to do? Are you ready to settle down in a house with a wife and 2 kids, or are fast cars and nice things more your style right now?

**bjl584** · 04-04-2013, 04:08 AM

Originally posted by hehateme000 View Post

So even though I will have money to save once I get in the house, with the low rates they are at, and how my mortgage would be 200 cheaper than my rent, still dont try to buy a house? I guess I feel as if I should get in a house because rates are so low. Since my job is secure, then i could build up an EF.

So what if I still went for the house, while paying off debts as I have listed, and then instead of the car I start putting an extra 600 towards student loans?

I feel as if getting a house is very important to me since we will stay here at least 5 years, and be building some equity, and be locked in an awesome rate. plus mortgage be cheaper than rent, however i know there are repairs and maintenance expenses.

LOL those bb.com guys are losers, I usually go to EliteFitness, just a better place overall.

A house should be something that you buy when you are personally financially ready to do so. Ignore interest rates, rent, etc. Save up a 20% downpayment, get the rest of your finances in order, and then and only then should you consider a home purchase.

It's a lot easier to move into something cheaper if you are a renter and get yourself in a bind. With a mortgage, sometimes your only option is a foreclosure.

**TheMom** · 04-04-2013, 04:31 AM

The first year in a house can be really expensive. Do you have a lawn mower? Garden hoses? Rakes? Garbage cans? Will you want to replace window curtains? Will you want to fill all the rooms with furniture? Will you want to paint or do other changes (likely, really). How will you pay for things that come up? A kid blocks a toilet and it runs, overflowing into the bathroom upstairs, so no one notices for a couple hours, after the carpet in the hall is soaked and the drywall downstairs is wet, for example. It's best if you have at least a couple of months of expenses in savings before buying to cover emergencies.

**MonkeyMama** · 04-04-2013, 04:57 AM

The thing that most of us have learned, and people on the other side don't *get* is that having a wee little bit of patience is always pays off in spades.

I absolutely would not buy a house or a car *right now.* Save up until you can actually afford these things. Clean up the mess. A little secret: It's easier to buy what you want when you aren't still paying for things from 5 years ago (TVs, cars, education, diamonds, etc.). On the flip side, you can't have everything. So you need to learn to prioritize. As someone else said, do you want to settle down or do you want a fast car? & I don't think these two things are mutually exclusive. But, as other things pop up you are going to have to learn to prioritize. For the right now, which is more important? Choose one big goal to prioritize. IF it were me it would be the goal to get debt-free. Use the same effort to clean up all the debts (but the car). Then trade your car for something more reasonable and try to get a better interest rate. Decide if you want a car or if you want a more financially stable life for your family.

The good thing is that you are young. So you though you have a bit of a mess, it is not an overly huge mess. But I think it has the potential to turn into a much bigger mess if you go through with your plan. If you can slow down a little bit and wait another year or two or three I think you will be doing quite well.

please review my 12 month financial plan?