Author Topic: Please critique my budget / savings plan. Starting from very little.  (Read 3766 times)

Cicada

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I'm 39 yrs old and have no retirement savings.  Single, no kids. 

I've only just gotten a non-retail job in the last couple of years. 
I'm currently working in administration making about 28k a year.

I share an apartment with a roommate for $400/ month each.
I bought a 2015 Nissan Versa last year for 13k and still owe 6k. 
I try to keep general spending down by buying clothes at Goodwill, not eating out, etc. 
No other debts besides car and I have about 10k total in savings. (just a savings account)
No 401k and my company doesn't offer one.  I should be eligible for a small pension of $200/ month from retail job.
No cable or smart phone.
I do spend on trips with friends in the summer, but try to keep it reasonable (splitting a mountain cabin 6 ways or renting a kayak for paddling trips)

Every month I try to put $100 in savings, $100 towards a trip I'd like to take, and $100 towards the principal on the car loan (in addition to the $200 car payment)  At this rate I will pay off the car completely in two years.

So...I don't think I'll ever be able to retire early, but would like to know any advice to get more on track with savings.   

Right now my plan is:

1. to find a better paying job and move to an apartment as close as possible to that job with the hopes that I can bike to work.  I still wont be able to go car less however, as I live in Raleigh, NC which is pretty car-centric.

2. Hopefully new job will offer a 401k so I can start one.

3. Start a Roth IRA and put even just $100 a month into it to start. 

4. Keep the car for 10 yrs or more if possible.

Any further advice, or critique of my plan?  Whats the best IRA provider when you are starting small?
Thanks!
Erin


Cicada

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Re: Please critique my budget / savings plan. Starting from very little.
« Reply #1 on: December 30, 2015, 08:12:13 AM »
Sorry, just realized I double posted with a similar question a moment ago!  Apologies!

OmahaSteph

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Re: Please critique my budget / savings plan. Starting from very little.
« Reply #2 on: December 30, 2015, 09:06:12 AM »
Well, I don't have any investment advice, but it sounds like a higher-paying job with benefits should definitely be a goal.

The brand-new car purchase may have been a less than optimal use of money, but I doubt you could get much out of it if you sold and bought a cheaper used car.

If you truly want to build up a retirement savings, the obvious path is to divert your travel money (or at least part of it) to a Roth. Also, car loans are usually pretty low-interest so you may want to divert your extra $100 per month into an IRA, as well. Crunch some numbers on that.

That's awesome that you're a saver, so rather than "just a savings account," try a high-yield one? Put half into a Roth? As MMM would say, make those 10,000 employees WORK for you!

Best of luck, sounds like you're headed in the right direction!

Vanguards and Lentils

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Re: Please critique my budget / savings plan. Starting from very little.
« Reply #3 on: December 30, 2015, 09:14:09 AM »
The spending part should be the most easy to critique so it might help if you detailed that. Right now I'm seeing

400 towards rent
100 in savings
100 towards trips
100 + 200 towards car loan

which only accounts for 900 from a take-home of around 2000/month (you can provide the exact number). These all seem reasonable so the missing ~1100 is where people could comment.

As for where to open an IRA, Wealthfront has a minimum of $500 and does not charge any fees until your accounts is over $10k (If you used this link, I think that number changes to $15k). What I like about Wealthfront is that they choose a balanced mix of low-cost ETFs for me, as opposed to the more haphazard way of picking and choosing that I was doing before.

As a last comment, I would suggest you put $2000 at the very minimum into an IRA over the whole year. You would be eligible for a $200 Saver's Credit on your taxes, which is an immediate 10% return.

EDIT: a review of wealthfront here. If you end up getting an account, you should use someone's (anyone's) referral link for the reason I stated above. As I've already received this benefit, it won't affect me further.
« Last Edit: December 30, 2015, 09:40:30 AM by supermatthew »

MonkeyJenga

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Re: Please critique my budget / savings plan. Starting from very little.
« Reply #4 on: December 30, 2015, 09:27:21 AM »
As for where to open an IRA, Wealthfront has a minimum of $500 and does not charge any fees until your accounts is over $10k (If you used this link, I think that number changes to $15k). What I like about Wealthfront is that they choose a balanced mix of low-cost ETFs for me, as opposed to the more haphazard way of picking and choosing that I was doing before.

Hi supermatthew. It's etiquette on these boards to explain when you're providing a referral link, and to provide a non-referral link option as well.

Erin, I think you'll get the most useful feedback if you fill out a case study. This thread explains how: http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/

lbmustache

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Re: Please critique my budget / savings plan. Starting from very little.
« Reply #5 on: December 30, 2015, 11:00:44 AM »
Is the $28k before or after taxes? I agree with the others - you've only provided about $900 of expenses, which means there's a good chunk of money... going where? Credit cards, groceries, car insurance...???

I don't know the details of you car (mileage, sedan/hatchback, good condition?) but it looks like, in theory, you could sell the car for around $10k, pay off the loan, and then buy a used car for $5-$6k - you'd dip into your savings a bit.

However, assuming you don't have any other debt or financial emergency you might as well keep the Versa since it's an economical and reliable car that will last a long time.


Cicada

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Re: Please critique my budget / savings plan. Starting from very little.
« Reply #6 on: December 30, 2015, 12:52:53 PM »
Thanks everyone,

I will look into starting a Roth this year and get to work putting together a case study for myself.
The 28k is after taxes so yeah I should be able to save more.  I probably don't spend it all, but any extra is just accumulating in checking.  The majority of the rest of my spending is utilities, car insurance, health insurance and I have two cats. 

I'd prefer to just pay off the car and drive it for as long as possible.  It gets double the mpg of the '94 Toyota Camry I had been driving.  My thinking for paying off car loan with a 4.5 interest rate is it will save me both interest rate and extra insurance I'm required to have while it is financed but perhaps that is worth looking at again. 

Thanks again!

lbmustache

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Re: Please critique my budget / savings plan. Starting from very little.
« Reply #7 on: December 30, 2015, 05:43:01 PM »
Thanks everyone,

I will look into starting a Roth this year and get to work putting together a case study for myself.
The 28k is after taxes so yeah I should be able to save more.  I probably don't spend it all, but any extra is just accumulating in checking.  The majority of the rest of my spending is utilities, car insurance, health insurance and I have two cats. 

I'd prefer to just pay off the car and drive it for as long as possible.  It gets double the mpg of the '94 Toyota Camry I had been driving.  My thinking for paying off car loan with a 4.5 interest rate is it will save me both interest rate and extra insurance I'm required to have while it is financed but perhaps that is worth looking at again. 

Thanks again!

I urge you to take a closer look at your finances - the case study will help. $28k over 12 months is about $2300. You've given us $900, and I would hope that car insurance, health insurance, utilities, and cat stuff would not equal $1400 :O

MDM

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Re: Please critique my budget / savings plan. Starting from very little.
« Reply #8 on: December 30, 2015, 07:02:21 PM »
Right now my plan is:

1. to find a better paying job and move to an apartment as close as possible to that job with the hopes that I can bike to work.  I still wont be able to go car less however, as I live in Raleigh, NC which is pretty car-centric.

2. Hopefully new job will offer a 401k so I can start one.

3. Start a Roth IRA and put even just $100 a month into it to start. 

4. Keep the car for 10 yrs or more if possible.

Any further advice, or critique of my plan?  Whats the best IRA provider when you are starting small?
It is a good plan - now go execute it!

Consider taking $2K from savings and putting $1K into a traditional IRA and $1K into a Roth IRA.  You could use Vanguard and choose fund VTTSX for both IRAs.  Other choices are also defensible.

My crystal ball is a little cloudy today, but it is likely that some combination of traditional and Roth accounts will be best for you in the long run.  For now, putting 1/2 in each is a reasonable guess.

Erin, I think you'll get the most useful feedback if you fill out a case study. This thread explains how: http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/
+1

Do take advantage of the spreadsheet in that link, if only to help you organize your own thoughts.  It might also help you organize the case study post.

 

Wow, a phone plan for fifteen bucks!