New job, pay raise, figuring out a budget

**lorraineb** · 04-20-2013, 04:07 PM

What is the car rate loan? What is the credit card rate?

First question is why do you have $14k in credit card debt? Has that issue been resolved and there is no chance of putting any more on it? If not, that is the first priority.

**Olivia1** · 04-20-2013, 04:20 PM

Wife had over spent before we met, I've only managed to pay it down some after we got married. We stopped those habits though when we met. She wasn't taught much at all about money management when she was growing up. We are both on the same page about getting our financial situation as clear as possible and hoping to start putting away for retirement.

Haven't had the opportunity to do more to it. I've tried to pay the minimum plus the interest rate each month.

Rates are 12 and 15% I believe (I would have to double check).

One argument could be to put that $3k for emergency fund into paying off the cc debt much sooner and then once thats paid off, then start saving for an emergency fund (while keeping the other $3k for the savings account).

Eventual goal is to keep our monthly budget to much lower than what we bring in every month.

Plus hoping my wife can find a job, but in a small town it'll be harder for her.

**~bs** · 04-20-2013, 05:38 PM

you should work on reducing debt. cc's first, then car loans.

you probably don't want me to lecture you regarding how low $30,000 in savings is when you're late 30s. When you factor in your debts, you probably have a net worth of $0. Then you factor in the gestational surrogate cost of $100k and you're deeply in the red. Perhaps with your financial situation adoption may be a better route? Just an idea.

**Olivia1** · 04-20-2013, 06:41 PM

Aside from the educational loans, would hope to be debt free in 4-5 years.

CC debt is my first priority, car loan isn't bad, but would like to see if I can pay that off soon as well.

Our savings is nothing, but considering I've essentially been in school or being paid peanuts while working 70-80 hours a week for the past 17 years, no way for me to have any real savings. Thats why I would like to be putting away some money while paying off the debt. But trying to see what is the best route. Go all out and just throw every left over penny into the cc payments, or take a slow steady approach to paying it off over the next year.

I don't expect to get rid of all these things at once, but we will in time. Trying to figure it out.

As for the adoption thing, we looked into it. I was not comfortable with adoption.

**Slug** · 04-22-2013, 06:58 AM

Can you say more about this new source of income? Is it salary vs. commission? I'm trying to get an idea how stable it is to understand where it should be directed.

The CC debt as others have noted has to be the first priority. I would actually take half your $30k and wipe it out today. At the rate you'll be earning, saving should be relatively easy.

Car loan next, then surrogacy, then student loans.

You also have to start saving for retirement. At least open a 401k with the new employer and max out to the match.

**Esozh** · 04-22-2013, 08:24 AM

basic budget

Income = 15K/Mo - $180K/year net

Debt
14K CC
18K Car
100K Student Loans

Expenses
4.5K a month on living expenses/Rent = 54K/year expenses

4.5K on living expenses seems high to me... I would like to see more of a blocked out budget, but that's up to you...

Savings = 30K

At 15K a month income, it doesn't matter if you pull the $14K out of the savings to pay off the CC or not, as long as you stick to a budget.

You have 10.5K in residual income each month. How I would break it down is this.

Month 1 - 10.5K @ CC - CC has 2.5K left on it.
Month 2 - 2.5K @ CC - paid off. 8K @ car loan.
Month 3 - 10K @ car loan. $500 at savings.
Month 4 - Buy a nice used car for the 10.5K. You can get a very nice car for this, and buy it outright. There is NO REASON to buy a brand new car, or to lease one, or to have payments.

Month 5 - 10.5K @ saving for baby. Note that you pay off all your debt first, thereby lowering your interest payments, and you don't have an aggregate loss on your baby savings.

Month 6 - 2K @ Baby, 8.5K at student loans.

Rinse and repeat month 6. You'll pay off your student loans in ONE YEAR from the time you start that, and then you can pay off the costs of baby in ONE YEAR as well. 30 months from now you should have paid off all your debt, and paid for the costs of baby.

Lets say that puts you at 40. If you maintain the 180K/year income, let's say you up your living costs to 75K a year with baby. You're still living on less than half of your income, and you can put 105K a year into savings, for, say, 25 years - still giving you a retirement of ~2.5 Million.

I really think you should be able to get your monthly expenses down to 3K or less, and save an extra 20K a year... but that's up to you on quality of life.

**Olivia1** · 04-23-2013, 05:28 PM

Thanks.

I think our priority is to become debt free. CC is first and I think after reading everyone's thoughts I'll concentrate on trying to wipe it out as soon as we can.

I need to juggle things with keeping a balance available for the surrogate process. I estimate 100k in expenses. Hopefully it comes out lower and not higher. Its more of an immediate pay off that needs to happen versus everything else (aside from the CCs).

I need to sit down with the wife and talk all this out with her. I'll need her to buy into everything as well.

I'll look into getting her grandmother's old car (2010 hyundai elantra). She recently just passed away ...

**Wino** · 04-23-2013, 06:15 PM

You are spending money you don't yet have. Paycheckcity is not an employer. Your pay will vary. There's no reason to make a budget until you know your new payscale. Work with reality. Your budget should reflect today's pay.

Something about counting chickens from eggs comes to mind here...

Once you know you have a larger income, then everything here applies. The main thing is that once your pay goes up, your lifestyle doesn't go up until you pay off your bills; all of them including student loans and car payments.

I foresee you in a new Mercedes or BMW with still 100K in student loan debt if you don't make a pact with your wife to get all loans gone as soon as you can.

**siggy_freud** · 04-24-2013, 05:07 AM

Originally posted by Esozh View Post

Income = 15K/Mo - $180K/year net

Debt
14K CC
18K Car
100K Student Loans

Expenses
4.5K a month on living expenses/Rent = 54K/year expenses

4.5K on living expenses seems high to me... I would like to see more of a blocked out budget, but that's up to you...

Savings = 30K

At 15K a month income, it doesn't matter if you pull the $14K out of the savings to pay off the CC or not, as long as you stick to a budget.

You have 10.5K in residual income each month. How I would break it down is this.

Month 1 - 10.5K @ CC - CC has 2.5K left on it.
Month 2 - 2.5K @ CC - paid off. 8K @ car loan.
Month 3 - 10K @ car loan. $500 at savings.
Month 4 - Buy a nice used car for the 10.5K. You can get a very nice car for this, and buy it outright. There is NO REASON to buy a brand new car, or to lease one, or to have payments.

Month 5 - 10.5K @ saving for baby. Note that you pay off all your debt first, thereby lowering your interest payments, and you don't have an aggregate loss on your baby savings.

Month 6 - 2K @ Baby, 8.5K at student loans.

Rinse and repeat month 6. You'll pay off your student loans in ONE YEAR from the time you start that, and then you can pay off the costs of baby in ONE YEAR as well. 30 months from now you should have paid off all your debt, and paid for the costs of baby.

Lets say that puts you at 40. If you maintain the 180K/year income, let's say you up your living costs to 75K a year with baby. You're still living on less than half of your income, and you can put 105K a year into savings, for, say, 25 years - still giving you a retirement of ~2.5 Million.

I really think you should be able to get your monthly expenses down to 3K or less, and save an extra 20K a year... but that's up to you on quality of life.

EDIT* I stand corrected. OP said take home of 15k.

**snafu** · 04-24-2013, 06:14 AM

What is the interest rate on CC and auto? I suggest calling CC and asking they lower interest rate if you have been up-to-date with payments every month for a year. If the first contact refuses, go up the ladder to the person who will negotiate. It would be immensely helpful if DW got a job, any job to contribute to CC debt.

It's important to verify that you are working with Net income not Gross income figures. For the short term I suggest noting all spending as it's very helpful to identify unexpected leakage and area that can be trimmed to free up $$$ for priorities. Does your employer offer any match for 401K program? It's very important to take advantage of free money.

**natewebco** · 04-27-2013, 02:16 PM

I would most definitely pay off the CC first! That will very likely be your highest interest rate by far. Pay as much as you possibly can each month until it is done. Then, snowball that payment into the car loan or whatever is the next highest debt amount. Continue until you are debt free!

I use Quicken to help manage and track all my accounts, as well as stick to a budget. It can track multiple checking, savings, investment, and loan accounts so you can see everything in one place. It can also help you figure out how to pay off your debts quickly. You can save about 45% on Quicken here: http://www.squidoo.com/discount-on-quicken

**Petunia 100** · 04-28-2013, 07:37 AM

Olivia1 - Where does a house fit into your plans? Do you and your wife intend to buy a house at some point?

**Olivia1** · 05-12-2013, 03:38 PM

Hi. We decided to put a house on hold for the foreseeable future and will continue to rent (apartment or house).

I hear there are some 0 down house mortgages that I could qualify for (suntrust I think). But I think until we get rid of the surrogate loan and the cc debt, no point in looking at buying a house.

interest rate on the car is 0.9%. Auto deduct from checking account. Part of a few auto deductions I got (disability insurance, life insurance and car insurance).

Credit card debt is all my wife's old cc debt that I inherited with the ring. I think the 2 cards are at 12 and 14%. I'm not sure what her loft card is at.

Our late grandmother's elantra was actually sold already ... will look at options for 2nd car again. Looking at maybe doing a 0 down lease for 24 months. And in that time, I can stash away a little to save up for a car to own once some of these things are paid off.

Putting some of our savings towards the cc debt next month once my overtime paycheck comes in. Plan to rid ourselves of the cc debt by August at the latest.

Then put cash towards the surrogate loan. Its interest free and I got 5 years to pay it back, but with it being a family loan, her mother buying a condo in manhattan, I'd like to return her money to her.

Speaking of that, in terms of paying that back without incurring gift taxes, would the max my wife and I could do is ($13000 apiece/year) ?, ie 26k?

Net income is quite a bit higher. they do match a 401k (I think I can contribute 17k and the'll put in 33k to max out at 51k). I'll be looking to max that out in 2013 when I get there. The figure I put out would be my gross income after throwing money into the 401k, group disability insurance, and health insurance.

So its gross income of 15k (is probably on the lower side).

So I've put aside $6000 towards our monthly budget. ($1200 rent, gas/car at $400, edu loan at $600, utilities (cable+ inet at 150, electric at ~$200), food at $1000 (a lot of room there, but learned a long time ago that my wife isn't frugal when it comes to food shopping), clothing/entertainment/misc at 1000, car payment at $600 (assumes $355 current car loan).

I'll stick the other $9000 towards paying everything off.

I feel a need to create an emergency fund and save on the side as well.
So last 9k, I figure $3k towards savings/emergency fund, $5.5k towards debt pay off. $500/month towards car down payment after lease over.

at a monthly, $5500, thats around $132k after 2 years and we should be clear of most of the debt aside from my edu loans.

New job, pay raise, figuring out a budget