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How can I optimize my budget?

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    How can I optimize my budget?

    Hi guys,

    I was wondering, how can I optimize my budget?

    I currently have a home loan for roof repairs (2.5 years left) and mortgage (12 years left). With a baby on the way, daycare is soon going to cost the same price as the roof payment, but since the interest rate of the roof loan brings the total cost of the loan to an extra 5k, I wonder if I should try to pay off my mortgage first (total cost of mortgage on top of borrowed capital: 50k)

    Anyway, regardless of that issue, do you think my budget is optimized?

    Thanks!!
    Attached Files

    #2
    Welcome to the site.

    I'm not sure we can answer your question without seeing your current budget. The pie chart is nice but can you post numbers?
    How much do you earn?
    How much do you owe on each debt and at what interest rate?
    How much do you anticipate daycare costing?
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

    Comment


      #3
      Your thumbnail doesn't have any actual numbers, and it's a little hard to make out some details... But I'm general terms, best way to optimize your budget (in my view, I see "optimize" as "accurate & effective") would be to track your expenses down to the penny for a few months. That would allow you to ensure your categories are in fact accurate for what you're spending, and it'll give you a way to analyze the spending to determine if there's any changes you want to make. You might find that your spend more on groceries than you would like, or so on.

      As for the mortgage vs. roof loan, I would suggest doing it based on interest rate. The mortgage is probably charging less interest than the roof loan. Plus, it's also the smaller balance, so you can clear it off faster, then you can attack the mortgage with a vengeance using the payments for both.
      "Praestantia per minutus" ... "Acta non verba"

      Comment


        #4
        the most important thing with budgeting is that your income is greater than your expenses.

        end sarcasm...
        Last edited by Jluke; 07-10-2018, 06:11 AM.

        Comment


          #5
          Originally posted by Jluke View Post
          the most important thing with budgeting is that your income is greater than your expenses.
          Obviously, and the pie chart shows a nice big slice for savings, so that's good. But as far as optimizing things, you really need to dig into the numbers, so just the pie chart alone isn't sufficient information.
          Steve

          * Despite the high cost of living, it remains very popular.
          * Why should I pay for my daughter's education when she already knows everything?
          * There are no shortcuts to anywhere worth going.

          Comment


            #6
            Sorry, wasn't sure how to include the numbers in the pie chart.
            This is the table the pie chart is based on. (I calculated per year, not per month)
            Attached Files

            Comment


              #7
              Great. Can you also tell us the balances and the interest rates on the mortgage and roof loan?
              Steve

              * Despite the high cost of living, it remains very popular.
              * Why should I pay for my daughter's education when she already knows everything?
              * There are no shortcuts to anywhere worth going.

              Comment


                #8
                roof: 17,178.30 left (I don't remember and can't find it on the breakdown they provided)
                mortgage: 319,432.32 left (interest & capital as per their breakdown) (at 1.8%)
                Last edited by marie132; 07-10-2018, 06:29 AM.

                Comment


                  #9
                  Originally posted by marie132 View Post
                  roof: 17,178.30 left
                  mortgage: 256,636.45 left
                  You said you've got 2.5 years left on the roof loan. Could you accelerate that either by cutting back in other areas or (and) dipping into savings?

                  The one thing you do want to be careful about is dipping into savings when there's a baby on the way. The standard advice is to hold tight until the baby comes and all is well with mom and baby. You want to have that nice full emergency fund just in case anything happens.

                  Once the baby arrives, though, and any related bills are taken care of, you might consider tapping savings to wipe out the roof loan quicker and free up that monthly payment so that the money can start going to daycare instead.
                  Steve

                  * Despite the high cost of living, it remains very popular.
                  * Why should I pay for my daughter's education when she already knows everything?
                  * There are no shortcuts to anywhere worth going.

                  Comment


                    #10
                    You've got almost 31% going to savings. That's fantastic, but also gives you room to play with. Maybe cut back the savings rate a bit and knock out the roof loan faster.

                    Also, will your insurance costs change when the baby comes? There will be some increased expenses overall. Does the insurance figure include copays and meds and things or just the actual premiums? Babies have a lot of doctor visits especially in the first year or two so make sure you account for that.
                    Steve

                    * Despite the high cost of living, it remains very popular.
                    * Why should I pay for my daughter's education when she already knows everything?
                    * There are no shortcuts to anywhere worth going.

                    Comment


                      #11
                      Originally posted by disneysteve View Post
                      You said you've got 2.5 years left on the roof loan. Could you accelerate that either by cutting back in other areas or (and) dipping into savings?

                      The one thing you do want to be careful about is dipping into savings when there's a baby on the way. The standard advice is to hold tight until the baby comes and all is well with mom and baby. You want to have that nice full emergency fund just in case anything happens.

                      Once the baby arrives, though, and any related bills are taken care of, you might consider tapping savings to wipe out the roof loan quicker and free up that monthly payment so that the money can start going to daycare instead.
                      When I asked the bank, they said that for the roof loan I couldn't pay extra installments, I could only pay the full amount that was left. I have the cash to do that now but that wouldn't leave me with much else, although I could rebuild savings at a rate of an extra 650 a month until daycare time in Jan, which will be the same price.

                      Also, sorry, I edited my previous message, copied the mortgage number from the wrong box XD

                      But basically, my 30k roof loan cost me 5k extra in interest (35k total). My 350k mortgage cost me an extra 50k in interest (399k total). Not sure if they apply repayment penalties on mortgages, I have to go ask them.

                      And yeah, I wanted that money to go to daycare instead but is it reasonable to pay off that much at once?

                      Comment


                        #12
                        Originally posted by marie132 View Post
                        When I asked the bank, they said that for the roof loan I couldn't pay extra installments, I could only pay the full amount that was left.
                        Ah, if there's no pre-payment option that ties your hands. You could consider getting a HELOC and using that to pay off the roof loan and then you can pay off the HELOC as fast as you want, but that's probably more trouble than it's worth.

                        I'd probably just keep stockpiling cash until I had enough to pay off the roof loan in a lump sum while still maintaining an adequate EF.
                        Steve

                        * Despite the high cost of living, it remains very popular.
                        * Why should I pay for my daughter's education when she already knows everything?
                        * There are no shortcuts to anywhere worth going.

                        Comment


                          #13
                          Originally posted by disneysteve View Post
                          You've got almost 31% going to savings. That's fantastic, but also gives you room to play with. Maybe cut back the savings rate a bit and knock out the roof loan faster.

                          Also, will your insurance costs change when the baby comes? There will be some increased expenses overall. Does the insurance figure include copays and meds and things or just the actual premiums? Babies have a lot of doctor visits especially in the first year or two so make sure you account for that.
                          I don't think the premium will change much if at all, and coverage is excellent, so I didn't even bother factoring that in, because it won't cost me much more than a couple dinners out on the town, which I will gladly forego if it comes to that.

                          Comment


                            #14
                            What would you consider a decent EF at this stage?
                            If I pay the roof off right now, I am left with roughly 7k in savings, which makes me a bit nervous. What do you think?

                            Comment


                              #15
                              Originally posted by marie132 View Post
                              What would you consider a decent EF at this stage?
                              If I pay the roof off right now, I am left with roughly 7k in savings, which makes me a bit nervous. What do you think?
                              25k would be a good EF. which if I am following your math is what you currently have.

                              some say 3-6 months of expenses if you want general terms...

                              Since there is a baby on the way, all debt payoffs should be off the table until a few months after baby arrives.

                              Comment

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