please review my 12 month financial plan?

[BMEPhDinCO]

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

Great job breaking everything down, regardless of the way this has decended into a "house or no house" thread, here are my overall thoughts on your post...

1. If you get 5 checks in any month, that 5th one needs to go straight to your EF, do not pass go, do not collect $200, just put it in savings.

2. You two need to (FOR THE MOMENT) cancel the tanning and gym, it's too expensive, that $115 a month would pay off the traffic ticket in 2 months. Adding that to the $115, in three more months, your old credit card would be gone. Another three months, and the tv is paid for. Another 6 months, and the car accident is paid off. That's really simple - it's 1 year taken off for those two things and you pay off THREE old bills. Sure they are small, but that's the point, they should already be gone.

3. I know you want a house, I know all the arguments for and against, but you shouldn't have a $0 EF and a $3xxx house fund - that's not safe, move $1k immediately into your EF.

4. I don't see food anywhere, does that come out of the $650? Make sure to account for that, it's important!

5. It looks like y'all have around $200 extra each month? In 8 months, the ring will be paid off and the bail too. Another 3 months or less and the court fees are paid off. Thus, in TWELEVE months, you will have nothing but car loan and student loan. You will also be pale and out of shape (or in great shape from taking a second job with manual labor to make more money AND keep in shape).

So basically, what I'm saying, is while I understand and admire your plan, I think this is a better one - in 1 year, you'll be in a better place with debt (car & SL but nothing else) and THEN you can put that $835 a month to good use saving for a car, bulking your EF, saving for a house, etc.

IF YOU DON'T LIKE THAT PLAN (not yelling, just getting your attention), then my second suggestion is...
1. still cancel the tanning and gym, I'm sorry but that's NOT necessary right now.

2. Your fiance does NOT need $100 play money - each of you get $25 a month. The kids get $10 (I'm assuming that's for a college fund, a baby doesn't need fun money). The rest needs to go to debt and the EF.

3. Any extra money y'all get (more bartending, extra checks, etc) need to go to debt and EF until you are able to cover at least 2 months WITHOUT living with parents, using a credit card, etc - that should also include your debt payments for now (ie, $720 more per month!).

Finally, I'd like to point out a few thoughts if you really want that house...

We bought for $125k and put down 20% - but we also budget another $200 a month at least for utilities, another $50-100 a month for "oh sh*t" stuff, we spent $1,500 extra last year on the hot water heater/ heater issues plus other stuff for the "minor" issues... a house is NOT the same as renting, there are many other expenses that come up. So sure, our initial $750 a month (we got a 5.5% loan, it's been a few years, another issue for another day) seemed low... but really it's been closer to $1k a month in other costs. Don't just budget for the lowest number, bump it up by AT LEAST 10%.

[hehateme000]

OP - I applaud you for coming to the site for advice. It's great that you're thinking about your budget in detail and planning.

I will also echo what (most) everybody else has said here - you shouldn't be thinking about buying a house. You don't have the down payment. You have outstanding debt. You don't have a suitable emergency fund.

Mortgage rates will still be low in a couple years. Maybe not as low as today, but you shouldn't buy something just because it's on sale.

thank you. If I were to buy a house in October, I would have paid off $5000 of my debt, plus have $8000 for a down payment, plus have $3000 in EF.....so I will have the down payment and my mortgage will be cheaper, plus as soon as I move in I will have $1000 each month to save or pay off debt..

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.

Well, initially ill only have about 3 grand, but like I said above I will have $1000 each month to build EF or pay debt

do you want to settle down or do you want a fast car?

honestly getting a house is most important. I have decided not to get a new car but rather keep the 2 we have till the wheels fall off. I also cancelled gym membership. I just want us to have a decent size house AND save money each month

You can tell that the Fiance may not be willing to make such smart financial compromises considering she was not willing to stay a night in jail which cost them 5k....

lmao yea seriously, its a product of her mother who hasnt done **** her whole life except live off the guy shes with. my fiance is way better but you can still see her roots...

For sure. Also the fact that she is spending $60/mo. tanning and I'm sure had something to do with going into debt for a ring and is involved in what is going to be blown on the wedding.

true as well. of course i go along with this because its important to her but we definitely are getting better and sticking to a budget

This is all based on the fact that they spend 1300/month on rent..which gives them nothing but a place to stay..this in itself is interest no one seems to care about..... I wouldn't suggest the OP to even think about a house if they can move into somewhere for half this much. They definitely need to change their spending habits and it's their priority...but some people are not willing to listen so you have to start with baby steps.

Step 1. No car..done
Step 2. Spend that car money on debt, done
Step 3. Lower your monthly spending (including rent)...buying a house was just a suggestion for lowering their rent AND it's something they are willing to do. Not sure if you can get anywhere by telling them to move into something half its current size....

this is how im looking at it. im already gonna not get the car, but the house doesnt make sense to me still....i know there are additional costs with owning but ill have an extra 300 a month from 1300 to 1000, so that 300 could go towards house repair fund. And the other money go towards EF and debt. Yea?

[feh]

thank you. If I were to buy a house in October, I would have paid off $5000 of my debt, plus have $8000 for a down payment, plus have $3000 in EF.....so I will have the down payment and my mortgage will be cheaper, plus as soon as I move in I will have $1000 each month to save or pay off debt..

You should have 20% of the cost of the house as a down payment. You should have at least 6 months of living expenses in an emergency fund.

Your finances are insufficient to buy a house this year. That message should be quite clear to you. If you didn't want our advice, why did you ask?

[hehateme000]

I'm going to be the curmudgeon here - that seems to be the role I've taken on lately. As someone else put it, this may be the slap in the face you need, so take it as intended - advice to save you from yourself.

Your budget is a disaster. You need to fix your spending habits now, before you even begin to think about a major purchase like a house. You are living beyond your means in ways that are very troubling.

For example, you couldn't afford to pay cash for a TV. Really? I bet if you look on craigslist, you can find dozens of TVs for sale in the $50-$100 range. Instead, you took out a loan to buy a TV. Ironically, you can "afford" to pay $55/month to watch TV with your DirecTV subscription.

The tv was 0% interest for 24 months! who wouldnt take that???

You have over $40,000 in debt but you can "afford" $60/month for tanning and $55/month for the gym. All of this at the same time that you have ZERO in your emergency fund.

I just cancelled my gym today. My fiance does modeling so she kinda needs to tan...i hate that bill but i like her to have something our money goes toward, rather than nothing. My EF technically has $3100 in it, I just say its a house down payment. But really it is in my savings account.

You expect to get a $5,000 to $7,000 tax refund that you intend to use for the wedding and EF. Why aren't you using it to pay off a big chunk of debt? Put $1,000 in the EF and the rest toward the highest interest debt.

We split our taxes between the two of us, and we agreed to each put an amount toward the wedding, which is reasonable. I plan on spending ALL of my half of the refund on debt and EF, but for her she will probably spend it on little stuff. I just like to make sure she has some money to spend, Id rather pay debt a little slower and have her be happy rather than every penny put towards debt but she never has anything. I dont want her to feel the financial stress that I do.

I could go on picking this apart but I think you see my point. You guys have created quite a mess and you don't seem to have any plan or intent to clean it up. Instead, you are finding new ways to spend even more money that you don't have (wedding, house, new car).

A wedding is something we need to do, but we arent going to spend a ton. Maybe 2000-3000 tops. A new car is out of the picture, so thats done. BUt a house is still in the air

The regulars here know that I don't often suggest this, but this is a case where I would highly recommend you pick up a copy of Dave Ramsey's book "The Total Money Makeover" and also go to his website and find a Financial Peace University class in your area. You guys need professional help to change your mindset and get you on the right path for a secure future.

thanks for the advice!

Good luck.

in red above ^^^^^

[hehateme000]

You should have 20% of the cost of the house as a down payment. You should have at least 6 months of living expenses in an emergency fund.

Your finances are insufficient to buy a house this year. That message should be quite clear to you. If you didn't want our advice, why did you ask?

No I appreciate the advice you guys have given. It makes sense what you are saying. But 20% down? 6 months expenses? Those are just personal opinions...I respect those, but even the top financial experts disagree on how much you should save. I mean why wouldnt you just suggest that I dont buy a house at all unless I have cash, doesnt that make the most sense? Why is 20% the magic number, why not 30 40 or 50? Or what if the house went up in value by 25%? I would have made 40K. What other investment lets you put 3% down with a chance to make 10x your money....

This is what I am seeing in my situation, and I am sacrificing already.

1: Cancelled gym membership
2: Keeping track of every expense this month to see where extra money goes to tighten budget and reduce spending
3: Looking for another part time job
4: not going to get a new car
5: A mortgge would be 300 cheaper than rent
6: By the time I buy a house, I will have $8000 towards down payment (5% on 160K house), paid off $5000 in debt, resulting in about $700 extra each month. Plus the $300 savings from the rent cost, Thats $1000 each month to replenish my EF, pay off debt, and put towards house repairs and maintenance.

I dont understand what is bad about buying a house at the low interest rate, given that I am paying off debt and creating cash flow? I will still have all my debts paid off within 2 years whether I buy a house or not

[sblatner]

This has been an interesting read. Did I miss how much house you are looking for? I can't remember if I read a range for purchase price.

[hehateme000]

Great job breaking everything down, regardless of the way this has decended into a "house or no house" thread, here are my overall thoughts on your post...

1. If you get 5 checks in any month, that 5th one needs to go straight to your EF, do not pass go, do not collect $200, just put it in savings.

Excellent advice, thank you.

2. You two need to (FOR THE MOMENT) cancel the tanning and gym, it's too expensive, that $115 a month would pay off the traffic ticket in 2 months. Adding that to the $115, in three more months, your old credit card would be gone. Another three months, and the tv is paid for. Another 6 months, and the car accident is paid off. That's really simple - it's 1 year taken off for those two things and you pay off THREE old bills. Sure they are small, but that's the point, they should already be gone.

I just cancelled gym. Tanning is sort of necessary because my fiance does modeling shoots here and there..

3. I know you want a house, I know all the arguments for and against, but you shouldn't have a $0 EF and a $3xxx house fund - that's not safe, move $1k immediately into your EF.

Techincally like I said aboe to another guy, the $3000 IS my EF. I just want to buy a house so everything I save I have been saying its for the down payment. But it is my EF too, depending on what I do. By the time I buy a house I will have $8000 down payment, $3000 EF....

4. I don't see food anywhere, does that come out of the $650? Make sure to account for that, it's important!

food comes from that yes, we dont eat much, she also gets WIC for the babies

5. It looks like y'all have around $200 extra each month? In 8 months, the ring will be paid off and the bail too. Another 3 months or less and the court fees are paid off. Thus, in TWELEVE months, you will have nothing but car loan and student loan. You will also be pale and out of shape (or in great shape from taking a second job with manual labor to make more money AND keep in shape).

THats exactly how much we have left over! THe way I have it set up now, is that in 10 months, everything will be paid off except for Court fees, Student loans, and Car. AND I will have a house with an EF. I really wish I could take a screen shot of my excel sheet and show you guys what I have, but I have a MAC. Does anyone know if the iMac keyboard has a print screen shot?

and lmao at being pale and out of shape, i already feel like it. I actually have a manual labor job in a warehouse, good union job with good pay and benefits.

So basically, what I'm saying, is while I understand and admire your plan, I think this is a better one - in 1 year, you'll be in a better place with debt (car & SL but nothing else) and THEN you can put that $835 a month to good use saving for a car, bulking your EF, saving for a house, etc.

IF YOU DON'T LIKE THAT PLAN (not yelling, just getting your attention), then my second suggestion is...
1. still cancel the tanning and gym, I'm sorry but that's NOT necessary right now.

2. Your fiance does NOT need $100 play money - each of you get $25 a month. The kids get $10 (I'm assuming that's for a college fund, a baby doesn't need fun money). The rest needs to go to debt and the EF.

true. she doesnt need more money!

3. Any extra money y'all get (more bartending, extra checks, etc) need to go to debt and EF until you are able to cover at least 2 months WITHOUT living with parents, using a credit card, etc - that should also include your debt payments for now (ie, $720 more per month!).

Finally, I'd like to point out a few thoughts if you really want that house...

We bought for $125k and put down 20% - but we also budget another $200 a month at least for utilities, another $50-100 a month for "oh sh*t" stuff, we spent $1,500 extra last year on the hot water heater/ heater issues plus other stuff for the "minor" issues... a house is NOT the same as renting, there are many other expenses that come up. So sure, our initial $750 a month (we got a 5.5% loan, it's been a few years, another issue for another day) seemed low... but really it's been closer to $1k a month in other costs. Don't just budget for the lowest number, bump it up by AT LEAST 10%.

Well this is exactly my point. If I buy a house for $300 less than rent per month, I would put that 300 back into the house. By the time I got a house in October, the debts mentioned above would be paid off, freeing up an additional 700 to put towards debt and EF. Doesnt that seem like it would be a good idea? I feel that I have more than enough money to cover mortgage cost and home ownership costs and maintenance costs.

above in red ^^^^^

[hehateme000]

This has been an interesting read. Did I miss how much house you are looking for? I can't remember if I read a range for purchase price.

Yes I agree, getting a lot of good advice and honestly this thread has made me realize two important things so far:

1) My Student Loan debt. i JUST finally realized that I need to pay it off. otherwise it is going to sit over my head for the rest of my life. I guess when I got it all I thought was free money, it was so easy. I actually spent most of it on a down payment on an 06 charger srt8 and then ended up trading it in for the jeep and getting cash back. I lost a lot of money and learned my mistake. But I am all of a sudden very motivated to pay off the student loan. I always figured it was a big amount and id never be able to pay it off fast. Now i feel like it can be gone in 2-3 years.

2) Getting a new car would be stupid so I am not going to do it. I will save for a nice used one, or if finances are in excellent order, put a lot of cash down on a nearly new car, maybe 40K-60K miles..

BTW, I am looking in the 130K-170K range. I would love 150K or less

[bjl584]

No I appreciate the advice you guys have given. It makes sense what you are saying. But 20% down? 6 months expenses? Those are just personal opinions...I respect those, but even the top financial experts disagree on how much you should save.

20% down and 6 months in an Emergency Fund are not arbitrary numbers. 20% down = no PMI payment. It also gives you instant equity in your home, lowers your mortgage, and gives you piece of mind that the bank doesn't own nearly 100% of the place. The 6 month EF is for all those unexpected expenses and situations that WILL come up once you can't call your landlord to fix what's wrong anymore. Without it, what would you do if the furnace quit and the roof leaked? Use a credit card and take on even more debt to fix the problem?

I don't know how many ways we can say it, but you can't afford to buy a home right now. You need to get your finances in order first and foremost. Ignore interest rates. Buy when you are ready.

What "experts" are you looking to that say less than 20% is ok? Please don't say the guy at the bank. Cause we all know that he has your best interests in mind....

[hehateme000]

20% down and 6 months in an Emergency Fund are not arbitrary numbers. 20% down = no PMI payment. It also gives you instant equity in your home, lowers your mortgage, and gives you piece of mind that the bank doesn't own nearly 100% of the place. The 6 month EF is for all those unexpected expenses and situations that WILL come up once you can't call your landlord to fix what's wrong anymore. Without it, what would you do if the furnace quit and the roof leaked? Use a credit card and take on even more debt to fix the problem?

I don't know how many ways we can say it, but you can't afford to buy a home right now. You need to get your finances in order first and foremost. Ignore interest rates. Buy when you are ready.

What "experts" are you looking to that say less than 20% is ok? Please don't say the guy at the bank. Cause we all know that he has your best interests in mind....

Yea PMI would be an extra expense, but still my whole mortgage would be 300 cheaper. That 300 would go towards the problems you are saying like furnace quitting, roof leak, water heater going bad, etc.

Also, you realize by the time I get the house, most of my debt will be paid off, giving me an extra 700 a month to work with? So its not like I will be in a financial "mess". I will have student loans and a car payment, but is that really a big deal before buying a house? I will have all my debts paid off within 2-3 years whether I buy a house or not. So I dont understand how my mortgage affects my debt situation besides the fact that things could go wrong with the house, which again is why I would have an extra 300 a month going towards a house repair fund. I think that is more than 99% of homeowners probably put toward their houses each month.

Idk. I have gotten a lot of good advice on here so far. I just am still unsure about the house.

Yea, it was the guy at the bank

[BuckyBadger]

I would bet a year's salary that if OP bought a house right now it would cost them more over the next 5 years than if they continued renting.

I agree. What about new furniture to fill the house? Repairs? Modifications? Are you going to "rent a center" that stuff at 300% interest paid over 5 years?

And I'm not so sure about that house payment number, either. Considering the credit score (which must be pretty bad if they have a 10% rate on a car loan) and taxes and insurance and PMI and virtually no down payment, that monthly payment by my calculation is going to be pretty darn close to what they're paying in rent right now.

And what about if the house doesn't go up in value? What if it goes down? It's never a good idea to bank on a house as an *appreciating* asset -- the housing bubble taught us that. With no equity in the home you're left with very few options.

I'm on Steve's side here.

You shouldn't be thinking about that car at ALL, so I'm glad that's off the table.

I also don't think you should be thinking about a house without 20% down and a 6 month emergency fund.

But something tells me that you don't actually care what people think about that. You posted to get people to tell you it's okay, but most of us are telling you that it's not, but I don't get the feeling that it's going to change your mind at all.

(Oh, and unless you itemize deductions, you don't get any tax benefit in paying interest on a home loan.)

[hehateme000]

I agree. What about new furniture to fill the house? Repairs? Modifications? Are you going to "rent a center" that stuff at 300% interest paid over 5 years?

And I'm not so sure about that house payment number, either. Considering the credit score (which must be pretty bad if they have a 10% rate on a car loan) and taxes and insurance and PMI and virtually no down payment, that monthly payment by my calculation is going to be pretty darn close to what they're paying in rent right now.

And what about if the house doesn't go up in value? What if it goes down? It's never a good idea to bank on a house as an *appreciating* asset -- the housing bubble taught us that. With no equity in the home you're left with very few options.

I'm on Steve's side here.

You shouldn't be thinking about that car at ALL, so I'm glad that's off the table.

I also don't think you should be thinking about a house without 20% down and a 6 month emergency fund.

But something tells me that you don't actually care what people think about that. You posted to get people to tell you it's okay, but most of us are telling you that it's not, but I don't get the feeling that it's going to change your mind at all.

(Oh, and unless you itemize deductions, you don't get any tax benefit in paying interest on a home loan.)

actually, im glad you guys gave me advice. i will have the cash flow to furnish my house, pay for repairs, build my EF, etc.....

my credit score isnt bad, its not GREAT, its about 670 right now

a loan for 150k on 3.75% will not be 1300 a month. BUt include the money put away for repairs and stuff it will probably be the same. Thats why i dont understand the opinions as far as the house.

BUt I do understand the other stuff, which is why I cancelled gym membership, and why I am not even thinking about a new car anymore. So its not that I dont want to listen. I just feel like a house isnt going to set me back any further than if i were to continue renting. But a car and a gym membership, WILL set me back.

[BuckyBadger]

actually, im glad you guys gave me advice. i will have the cash flow to furnish my house, pay for repairs, build my EF, etc.....

my credit score isnt bad, its not GREAT, its about 670 right now

a loan for 150k on 3.75% will not be 1300 a month. BUt include the money put away for repairs and stuff it will probably be the same. Thats why i dont understand the opinions as far as the house.

BUt I do understand the other stuff, which is why I cancelled gym membership, and why I am not even thinking about a new car anymore. So its not that I dont want to listen. I just feel like a house isnt going to set me back any further than if i were to continue renting. But a car and a gym membership, WILL set me back.

What I'm saying is that you'll get nowhere near 3.75%. And don't forget taxes, insurance, and PMI.

The fact that you don't realize the importance of 20% down and a 6 month EF is what scares us.

How about this number: According to a report by the University of Illinois Extension, homeowners need to budget 1% to 2% of the purchase price of their home, each year, to cover the costs of home maintenance and repairs. That's $200 a moth right there that you can plan on spending on water heaters, garbage disposals, leaky windows, cracked concrete, cleaning gutters, etc.

When you rent, you don't have to worry about the unexpected costs. Home ownership is nothing BUT unexpected costs, and if your budget shows us one thing, it shows us that you have absolutely NO CAPACITY for dealing with unexpected costs. And very little capacity for dealing with expected costs!

[hehateme000]

It used to be 20% down when interest rates were 8%. So lets say I put 20% down on a 150K loan, so the loan would be 120K.

20% down:
30 years on a 120,000 loan, 8% int, you would pay 196,986.30 in interest

5% down
30 years on a 142,500 loan, 4% int, you would pay 102,414.05 in interest

So even with 5% down, Im still doing better than people were before. When 20% was considered "good". So I guess mine would be considered great. Obviously the more cash, the better, but to say at least 20%....this isnt 1995 anymore.. i appreciate the advice and i have taken everything else said to heart, but the house just makes sense to me.

No one knows if the interest rates will stay the same or go up. I think they will go up. Thats why I wanna buy a house. Get locked in a nice rate with a payment that is less than rent, giving spare money towards house. Sounds very reasonable.

[BuckyBadger]

Sounds very reasonable.

Good luck then.