How to pick what to save for?

[klarose]

Although I'll always been financially stable and good at saving. A lot has happened in the past few years including getting married, buying and remodeling a house... etc.

While we have managed debt free, our savings took a big hit.

We are just now settling in where we can begin forking back savings again.

The problem I'm having now is that we have so much to save for, and not much savable income.

How do I chose what is the most important?

If I give a little here and a little there it will take forever to save for everything. But if I focus on one thing, then the others will be lacking.

As of now we have about $300 a month to save.

We need 3 windows replaced before winter. So I'm going to take what little amount we do have saved and replace the windows asap.

So at the end of the year we will have used our savings to buy 3 new windows, and have $1,500 EF. (One month's expenses)

So basically at the start of the year we are starting fresh. With $1,500.

I know that is a small EF. But starting in Jan I'm going to start putting $200 a month into a ROTH. And I'm confident that can double as a emergency EF if it has too. I know that's not what most people like, but I feel safe with it. We both have insurance, both have good stable jobs, and we do have credit we can tap into no problem if we need too. So for now I'm more worried about getting my retirement started.

So after retirement money that leaves $100 a month for EVERYTHING else.

That's like nothing.

We need to save $5,000 for remodeling, we need to beef up the EF, my car is going to need some work soon... There is just such a long list.

Do I just start saving, and decide later what it's used for? That seems like a bad idea.

We will have other incomes randomly, like income taxes, any side jobs I do, school grants. Which will all be put towards savings.

But still the thought of only saving $1,500 or so a year is so disheartening.

[bjl584]

What's your income? Can you increase it with part time work? Do you have other ways to raise money? Yard sale, etc.?

[disneysteve]

I'd suggest posting your budget. Also, tell us more about the nature of the repairs and renovations. How many are truly needs and how many are wants? For example, you say 3 windows need to be replaced. Why is that a need? If they are drafty, there are ways to better seal them without replacing them.

I think saving for a purpose is fine but just general savings is also fine. Both ways work. We have never done targeted savings (other than retirement and college of course). The money gets put away and used as needed for whatever comes along.

[MonkeyMama]

I would personally focus on increasing income and cutting expenses, in order to save more. That's the thing - everything is important. (EF, home maintenance, car maintenance and so on).

Beyond that, differentiating needs versus wants, as per steve's question about if you really need new windows.

Like Steve, we have never really compartmentalized our savings. We have had an idea of a total to cover all of our needs. But then, you prioritize by importance. Things sometimes become important when they break unexpectedly, but then other things can clearly wait. I've always preferred the flexibility of this method. For example, we have saved up to replace both our vehicles. BUT, if something more important comes up in the interim, we will just wait longer or buy less expensive cars next time. We just had a $5,000 home repair that was entirely unexpected. If my car gets totaled tomorrow, I will buy a $5,000-less-expensive car. In the meantime, other home repairs and wants are getting pushed back a bit until we build that cash back up. There was some home maintenance (non-necessary but very cosmetic) that we were going to price out this year. WE decided we could wait until 2014, because we had a huge pile of home repairs this year. Since it is only cosmetic, it may get pushed off to 2015. In comparison, we had several water leaks this year that obviously had to be fixed right away to prevent furthe damage. Just to kind of explain the decision making process.

[klarose]

My budget has already been posted. But I can post it again if I need to?

We can't cut our budget anymore.

We already live without internet, or tv. My mom is currently paying my phone bill and car insurance until I finish school. (Sheesh that makes me feel like a little kid. But it helps, Nice mommy)

We really live off a basic bare bones budget as it is.

We only make a combined $2,250 a month after taxes.

I'd love to pick up more work. But I can't at my current job. I could get another part time job but I already work 5 days a week, and 2 evenings, and I got to school 2 evenings. So right now I really can't pick up more work. I have one semester left of class. So I'm hoping to maybe get another 1 or 2 day a week job either starting Christmas break, or in May after school is done.

I am a Web Designer. So I try to get freelance work, but it's sparingly and not dependable. I'm hoping in the next 2 years to go down to only 2 or 3 days a week at a real job, and make most of my income at home freelancing. But so far I haven't got a good following yet.

We really need the new windows. We bought a 100 year old house, with 100 year old windows. We have gutted and remodeled the entire house, sans windows and siding. The house has 15 windows on the first floor, and 11 on the second floor. 6 I think which are broken, and we discovered yesterday that one has leaked down the wall and onto our brand new insulation and drywall.

We had the 2 bedroom windows replaced, and we are hoping to save and replace them a couple at a time.

The windows downstairs aren't broken, but we are only living and heating the 1st floor at this time, so it seems smarter to replace the windows downstairs first to improve bills.

Our propane heat bill was over $500 a MONTH last year during the winter. We only heated the house to 65 degrees, and used oil electric heaters in the bathroom and bedroom. So we were cold.

All the doors and windows really need replaced. We will plastic them again, but the fact is they just need replaced.

[klarose]

When it rains it literately runs into our house, onto the floors and into drywall. We have to put towels down.

Luckily it's been a drought this year, so haven't had to deal with it. Until this week when it rained and made a water stain on our living room wall.

The windows are $350 a piece for them and the installation.

So it's going to cost $8,050 to replace all of them.

Luckily on the house addition the windows are newer... 70s or 80s. So we can leave those for now. That's about 10 windows that aren't important right now.

We replace 2 downstairs, so if we want to make the house airtight we need to replace the other 3 asap.

[disneysteve]

We bought a 100 year old house, with 100 year old windows. We have gutted and remodeled the entire house, sans windows and siding.

When it rains it literately runs into our house, onto the floors and into drywall.

I'm curious. Didn't you know the house needed all of that work when you bought it? There is nothing wrong with taking on a major rebuild like that if you can afford it but it sounds like you've poured a lot of money into the house with thousands more still to come and it has really impacted your ability to save for other needs.

[jIM_Ohio]

Start small, and do not get overwhelmed by big goals. $200/mo is not enough "to retire on", yet I remember starting at $50/mo 17 years ago.

I would build up cash reserves first, then diversify across mid term goals and long term goals. Do not sacrifice long term goals for mid term goals. For example, do not save ONLY for a home remodel and not retirement, because using this logic, all the mid term goals could outweigh the more expensive long term goal.

Key is balance, what is balance for you might not be the balance I look for myself.

[disneysteve]

We need to save $5,000 for remodeling

I'm wondering what you include in "remodeling" because to me, that implies wants - new carpet, paint, new counter tops, etc. as opposed to the leaking window which is a necessary repair.

[bjl584]

My budget has already been posted. But I can post it again if I need to?

Hello I'm new here!

Just looking to get some feedback on my current financial plan.

Married, and in early 20's.

Husband works full time, and makes about $1350 a month after taxes, and insurance.

I work part time and make about $900 a month after taxes, and I'm on my parents insurance.

Total being $2250 a month on average.

Last year we purchased a very cheap fixer upper farm. Our loan was $52,000. We had a good chunk of cash savings, which we have used to completely renovate the house. New wiring, plumbing, roof, drywall, insulation, flooring.... etc. You name it, it's all new except the studs. It was a great buy for our area, and we did about 95% of the work ourselves. It's worth about double the amount we pay according to the assessment.

Sadly husband had NO credit, so we couldn't lock in these record low rates. So they put us on a temporary loan, and we have 1 year left before we can refinance. We are paying like 6 or 6.5% right now, and next Aug. we will be paying like 2.5 or 3%.

We have no other debt besides this mortgage.

My mother is actually still paying my car insurance, and my cell phone until Oct. She is being very generous. Once Oct. hits that will add about $100 a month in bills.

We have $1,000 in savings for emergencies.

Our Current Monthly Budget
_________________________

$520 House Payment, taxes and insurance
$100 Propane
$200 Water & Electric & Trash
$280 Food & Household needs
$360 Gas
$75 Car Insurance & His Phone
$60 My Lunches
$230 Tithes

That leaves around $425 a month

Current plan is to put about $350 in emergency fund monthly until it reaches $3,000.
Then I will start putting $100 in Roth IRA and $250 in emergency until it reaches $5,000.

We are going to have to add a basement to our house, and we'd like to do this before children. So we are looking at a less than 5 year time frame. The cost will be around $30,000. We were going to add this to our loan when we refinance. But now we are thinking we won't and we will just save as much as we can for a few years and see how much we can come up with first.

Next year when our payments go down it will add about $150 more dollars to be saved monthly.

After our emergency fund reaches $5,000 we will began vigorously saving for the basement remodel. It is something that has to be done because our foundation is weak and won't last forever. We knew this when we bought the house, and it was part of the reason we got it at half price.

I feel like we are on the right track. And we are sooo far ahead of everyone we know our age. I'm about to graduate from school, debt free as well. I have one semester left. Our cars were bought with cash.

Any suggestions or ideas?


(Here you go. No need to repost.)

[klarose]

I'm curious. Didn't you know the house needed all of that work when you bought it? There is nothing wrong with taking on a major rebuild like that if you can afford it but it sounds like you've poured a lot of money into the house with thousands more still to come and it has really impacted your ability to save for other needs.

Yes we did know this when we bought it. We got the house for a steal, and did get the estimates and inspection before we bought it.

We have already done a HUGE amount of work. Siding and windows were not "must haves" last year. So we are going to save over time and replace them. But now I see that some of the windows are really needing replaced asap.

$5,000 is what we will need in addition to our mortgage to do a big basement repair that we'd like to do in the next 5 years or less preferably.

Thank you to bjl for posting my budget.

I'm just wondering how you pick what comes first with savings.

Besides retirement... That comes first to me.

[disneysteve]

now I see that some of the windows are really needing replaced asap.

$5,000 is what we will need in addition to our mortgage to do a big basement repair that we'd like to do

I'm just wondering how you pick what comes first with savings.

I think you really have to prioritize. WANTS over NEEDS. A broken, leaking window needs to be fixed (although not necessarily replaced). A basement remodel that you'd "like to do" can wait, possibly for years or indefinitely if other NEEDS take priority.

We would love to do some work on our home. We've been here 20 years and there are things we talked about doing when we bought it that we still haven't done. But none of it is a NEED. Saving for retirement, saving for college, taking our annual vacations, are all things that we put a higher priority on.

[LivingAlmostLarge]

Actually the basement remodel is a need because if you don't the foundation will falldown? It's already cracked?

How to balance all your savings? Good job on buying a home, saving, etc. But I hate to point out one small flaw, most financial people and people on here say buy with 20% down payment, then a 6 month EF, then you buy.

So did you buy your home with a 6 month ef? Then had extra cash savings to pay for all the needed repairs until now? I would not count on interest rates at 3% next year or that your credit will be stellar enough in 2 years to get that low. Plus you are upping your mortgage from $52k to $82k right? And the taxes should be going up on your newly remodeled home? So just the little things will keep creeping up for PITI in your budget.

Leaking windows are definite needs. Anything that can further damage the home or put you in jeopardy is a need. You are protecting an investment and yourself. Did you check if the insulation needs to be replaced and no mold? Did you dry it with fans and cut away the drywall?

I don't get how your propane is $100/month or $200 Electric but you said it was $500/month in winter? And 65 is warm I can't heat my house past 55 really on the bottom floor without space heaters because the furnace is in the attic in a 3 story townhouse that was a converted 1880s victorian. So I get your pain!

I think sometimes people rush into home buying without considering all the added expenses that come along with it. After you buy a home is when you need an EF even more than before in some ways.

[klarose]

Actually the basement remodel is a need because if you don't the foundation will falldown? It's already cracked?

How to balance all your savings? Good job on buying a home, saving, etc. But I hate to point out one small flaw, most financial people and people on here say buy with 20% down payment, then a 6 month EF, then you buy.

So did you buy your home with a 6 month ef? Then had extra cash savings to pay for all the needed repairs until now? I would not count on interest rates at 3% next year or that your credit will be stellar enough in 2 years to get that low. Plus you are upping your mortgage from $52k to $82k right? And the taxes should be going up on your newly remodeled home? So just the little things will keep creeping up for PITI in your budget.

Leaking windows are definite needs. Anything that can further damage the home or put you in jeopardy is a need. You are protecting an investment and yourself. Did you check if the insulation needs to be replaced and no mold? Did you dry it with fans and cut away the drywall?

I don't get how your propane is $100/month or $200 Electric but you said it was $500/month in winter? And 65 is warm I can't heat my house past 55 really on the bottom floor without space heaters because the furnace is in the attic in a 3 story townhouse that was a converted 1880s victorian. So I get your pain!

I think sometimes people rush into home buying without considering all the added expenses that come along with it. After you buy a home is when you need an EF even more than before in some ways.

When we bought the house we thought the basement would have to be replaced asap. After an inspection we found out it is actually better than we thought. And it is in no way about to fall down and it's not cracked. But a part of the sillplate is rotten, and the crawlspace is so small that the heating ducts are literately sitting on the ground and slowly rusting through.

So while it's not a NEED today, it will NEED to be replaced in the upcoming years. The reason we'd rather do it sooner is because we live in tornado alley and Husband is scared to have children without a basement. I'm not too worried about it. My family has lived without a basement for years.

We did have the 20% down payment, and a small EF. But we have used most of it to do repairs because we didn't feel like we needed that big of one at the time.

We would get a loan for $75,000. And save the rest needed. We are now hoping for 4% interest, but I know that there is no way to guarantee. Right now our bank is in the 2.5-4% range depending on your credit score and loan life. The taxes are pretty high right now because there was renters in it. It will be dropping next year. And if we added a basement it will go up a little, but still not as much as we are paying now. So that's not a problem. One of the main reasons we bought an old house is for the low taxes and we have already got all the figures from the court house.

In the winter the propane bill was $500 a month. So we are saving $100 a month all through the year to get enough for winter. Our electric bill is usually right at $100. But if we use space heaters it goes up to $200 a month, but that also lowers the Propane bill. I believe using the space heaters lowered the propane bill to $200 or 300$ a month.

I would be fine putting the basement remodel on hold. But we'd really like to get the money when we refinance next year. While we have the chance at the low interest rates. Our payment would be around the same as now, so it won't add any strain. Would it be crazy to get that money and put it in a saving account or invest it for a couple years until we save up the rest?

[stoney508]

I am sorry but the basement should have been the first repair made then electrical, plumbing, and heating as well as all windows and doors, and finally roof. All those repairs include dealing with the walls opening up so the basement being lifting would not matter about drywall or plaster cracking(will almost always happen when raising a house). Then after the necesities were taken care of finish the interior.