Are we saving enough in the right place?

[wikiwiki]

We recently paid off a student loan and are wanting to increase EF savings while also making sure we are saving enough for retirement, as we are a little behind. Currently we have $2k in EF and want to increase that. We are a family of 2 adults, 3 kids. This is what we had planned to do:

DH monthly take-home $5000
(after 401k retirement 9%, medical, taxes)
My monthly take-home $1500

Monthly expenses:
mortgage $1260
utilities/household $600
car payment / insurance $400
school/sports $250
cell $45
groceries $800
gas $340
dining out $100
misc expenses $300

Monthly savings
kid savings $300
DH Roth $450
My Roth $450
travel $300
Short Term savings $300
EF $400

Any suggestions?

[bjl584]

You will want between 3 and 6 months in an EF. So that would be between $12K and $24K in your case. Your expenses are $4095 a month.

If I were you I would look at trimming expenses so that you can increase your savings a bit. What is the $300 a month in misc. expenses? Also, how much longer is left on the car loan?

[disneysteve]

I wonder what is included in "utilities/household". What does that include besides utilities?

I also wonder about the $300 miscellaneous category.

[kork13]

I agree that you should look at how you can reduce your monthly expenses ... $800/mo in groceries for a family of 5 seems a bit high, though not terribly so. Auto gas is definitely high, you should look at how you can combine trips & reduce your driving. "Utilities/household" is just a little non-specific, so look at what you can trim from that. The $300/mo in "miscellaneous" is notable & you should try to control those random little expenditures throughout the month, but honestly, $300/mo is a relatively small portion of your gross income (3-5%), which I would consider fairly reasonable.

In general, your savings picture seems fine, though you do definitely want to get your EF up to the $12k-$24k that bjl mentions. You're saving about 15% (-ish) of your gross income (I'm estimating this to be around $7,500-$8,000?), and 25-30% of gross toward total savings. Those are both healthy, ongoing amounts.

The question, however, is this: What does your retirement picture look like? You don't give your ages or current level of retirement savings. I can make some guesstimates about your ages (35-40 y/o?), and with that guess & your current income/expenses, say that you probably would want to have between $220k-$300k currently saved toward retirement. Am I close? Those numbers are based on guesses. If you're in that range, you're probably well on your way to a comfortable, well-funded retirement. If you're below that (likely the case, since you say you feel behind on retirement), you should probably try to reduce your spending, and increase your retirement savings.

Consider, perhaps, prioritizing your savings. What is most important to you right now? Both Roth IRA's & DH's 401k should probably be #1, with the EF as a very close #2. What are the "kid savings"? Could you manage with a lower travel budget? Are the short-term savings intended for anything in particular? My first thought would be to cut all three of those in half, immediately giving you another $450/mo to save toward your top 2 priorities (retirement & EF). Send an extra $200/mo to retirement, and $250/mo to the EF. Plus, any spending reductions you make can also go to those. Once your EF is up-to-snuff, then you can bump up your retirement savings a bit more, and start saving more back toward the short-term/kids/travel savings goals.

[Augustine]

Your total income is $6,500
Your total expenses are $4,095
Your total savings are $2,200
So there is $205 that is not accounted for.
$6,500 - ($4,095 + $2,200) = $205

Add this $205 to your EF because this should be your first priority.

As long as you keep monitoring your expenses, you can reasonably predict how long it will take you to build your EF to at least 12k to 24k as has been suggested.

I would also put a hold on the Kids' savings and short term savings and add that to the EF.

So in total, $1,205 ($400 + $205 + $300 + $300) would go towards the EF for the next 10 to 20 months. Cutting some of your expenses may also get you there faster.

[klarose]

I'd move the kid's savings to the EF.

I'd also cut down the short term savings to like $100 and send the other $200 to the EF. Really that should come first.

[JoeP]

Unless you've done so in the past 3 years, I'd recommend getting new insurance quotes on your home and auto. Also, if your state offers discounts for having taken a safe driver course, this is something that is recommended as well.

[asdf]

Your total income is $6,500
Your total expenses are $4,095
Your total savings are $2,200
So there is $205 that is not accounted for.
$6,500 - ($4,095 + $2,200) = $205

Add this $205 to your EF because this should be your first priority.

As long as you keep monitoring your expenses, you can reasonably predict how long it will take you to build your EF to at least 12k to 24k as has been suggested.

I would also put a hold on the Kids' savings and short term savings and add that to the EF.

So in total, $1,205 ($400 + $205 + $300 + $300) would go towards the EF for the next 10 to 20 months. Cutting some of your expenses may also get you there faster.

Augustine nailed it. This is exactly what I would do. I would also add that I feel that a good EF to aim for would be $15.5k. This number represents what it would take to cover six months of expenses if your DH were to lose his job. You could accomplish this in 13 months under the formula Augustine gave above, or in less time by cutting back on other expenses as suggested by others.

I'd also consider cutting back on the 401(k) contributions in favor of the EF, but only, of course, if you aren't getting a match on a portion of what you put in.

[wikiwiki]

I should have provided more info so here goes:

-We are aged 35 and 38 (DH).
-Current retirement savings for DH is 70k in 401k, 3k in Roth (just opened this year), $30k in overseas retirement account. I have 3k in Roth and $25k overseas. So we are not where we should be yet. DH gets a 3% match.
-Combined gross monthly income before any tax, med, 401k is taken out is $8500.
-Car loan has 10k left, we are paying $100 more than required a month on it (would like to increase that once EF gets to 10k).
-Misc expenses are things that come up with kids - for example, school pictures, school classroom needs, new shoes, friend birthday gifts, etc. It's not always $300 a month. Not sure if there's a better way to budget for those. I put money into the short term savings each month for things such as property tax, life insurance premiums, haircuts, kids sport fees.
-Utilities/Household is Utilities, satellite, HOA, cell, lawn needs

I am trying to cut down on expenses, like groceries and the misc expenses. The travel savings could be cut too, but we will need to travel overseas at some point to visit DH's family so we are trying to save for that.

Not sure if the additional information changes any advice. I appreciate it!

[wikiwiki]

Unless you've done so in the past 3 years, I'd recommend getting new insurance quotes on your home and auto. Also, if your state offers discounts for having taken a safe driver course, this is something that is recommended as well.

Thanks for that tip! We've just found $500/year in savings by switching!

[JoeP]

Thanks for that tip! We've just found $500/year in savings by switching!

I had similar savings. Everyone should get a quote every few years!