Author Topic: Discretionary income - help a guy out.  (Read 4365 times)

MrBuckBeard

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Discretionary income - help a guy out.
« on: October 27, 2014, 12:47:49 PM »
I'm doing my best to be Mustachian.  Well, not my best, but I am trying.  I get better every month.

My income is 3100/month take home.  This is after 401(k), insurance, and taxes.

I've lowered my bills to under 50% of my income.  They come to $1425 per month.  I've sold my car and for the last year I've been taking public transit to work.

In addition to the $1425, I'm paying $400 on student loans (this is about 4x the minimum payment).  This brings my monthly bills and debt to $1825.  I deposit $2100 into a "For Bills" checking account.  This way, I'm covering my bills plus $275 for any items that may come up (renewing my license this month as an example.  I may not drive, but I keep this in case I drive my gf's car.  That's $150 for the renewal).

All this to say, I'm putting $1000 into a different account.  This is my "spend 'n save" account.  This way, what I spend never gets in the way of bills.  It also represents the total amount of money I have available to save.  If I spend $0 on food, going out, etc, then I am able to save $1000 (not realistic, but you get the idea).  At the end of the month, I'll deposit $1000 into checking, and take whatever is left from last month and roll it into a savings account.

What do you think I should aim for in terms of this money?  I live in a pricey city (Boston).  I don't buy a lot of material goods, but I do enjoy going on dates with my gf.  I probably spend about $150 a month doing that.  Groceries cost about $90 - $180 a month, depending on if we go once or twice to the store (average is about 1.5 trips). 

I welcome any advice you guys have.  In addition to limiting my expenses (such as not having a car, lowering my cell phone bill, etc) I've also taken on a part-time job and done a bit of freelancing.  It's not regular enough to put into the budget yet, but so far this month I've earned an additional $260.

ADK_Junkie

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Re: Discretionary income - help a guy out.
« Reply #1 on: October 27, 2014, 01:57:51 PM »
So, your "bills" excludes food and student loans... 

I think you need to set up a budget, spell everything out.  Then, you (we) can see where your money is going.  With no car, no groceries, your "bills" are extremely high, even for Boston (I lived in Coolidge Corner for many many years).  Though they aren't high for a non-mustachian lifestyle in Boston.... still, you can make significant gains here.

As for your savings, you really need to "pay yourself" first.  It looks like (without any adjustments) you "can" save $1000 minus $350 (food and dates) = $650.   Instead of sweeping the leftovers into Savings/Investments, send that $650 out the day your paycheck hits your bank account (pro rata as needed).

MrBuckBeard

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Re: Discretionary income - help a guy out.
« Reply #2 on: October 27, 2014, 02:24:31 PM »
Here's the break-down on my bills, including student loans:

650 - Rent
150 - Last semester of college (directly to the school @ 0% interest)
90 - Cell phone
35 - Gym
175 - Utilities (flat rate per month as part of rental agreement.  This is electric+gas+water+sewer+trash)
325 - Monthly payment to current school for Master's Degree (0% interest, avoids taking more student loans).
400 - Monthly payment to student loans (I took those out previously for my 4 year degree).

I looked into Republic wireless but there is no coverage in my office, where I spend a good 10 hours of my workday.  The 325 payments for my master's will only be for 8 more months, and at that point I graduate.  That'll free up quite a bit of income.  I've already been promoted at my current job in lieu of completing this degree, to the tune of an additional 5k per year.  The 150 I'm paying to my old school has exactly 12 months left.

So that's the bill break-down.  I'm open to any suggestions there, but I do think that realistically most of the money I can save will come in the form of discretionary spending and in boosting my income from my side jobs.  At least until the educational stuff is out of the way.  I'd pay that off sooner, but at 0% interest I really can't justify doing so.


coope01s

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Re: Discretionary income - help a guy out.
« Reply #3 on: October 27, 2014, 02:46:57 PM »
What kind of 401k contribution are you making?  As ADK_Junkie mentioned, you should always pay yourself first.  Increasing that 401k contribution percentage would allow for increased savings and at the same time remove some of that temptation to spend money on fun things and not roll it over to your savings account. 

I was in a similar situation before discovering MMM.  I had two separate accounts and noticed I was frequently raiding my savings for fun spending.  Now, I max out the 401k and save first.




MrBuckBeard

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Re: Discretionary income - help a guy out.
« Reply #4 on: October 27, 2014, 03:05:27 PM »
I'm at 6%, which is the ceiling for the 50% corporate match. 

Future Lazy

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Re: Discretionary income - help a guy out.
« Reply #5 on: October 27, 2014, 03:09:14 PM »
Hmm.. This is how I see your breakdown

+ $3100
-  $1425 (Bills - doesn't this include groceries?)
-  $  400 (Debt)
-  $  275 (Spending...)
-  $150++? (.... More open ended spending??? Assuming you're saying 'food' is like eating out, and not groceries)
__________________________
     $850 or less in the green each month, yay in the green!
$850 x 12 months = $10200 saved a year... Or less. Uh... About that:

Why are you spending $425 (or more) per month? And what on?
Having a buffer for bills is nice, when they might inflate unexpectedly or whatever, but hopefully you've killed any bills that might do this. Overages or whatever - crack down on bills that fluctuate. A successful budget is as static as possible, imo.
Having some money to take your lady out is also super nice, I know. Being taken out is awesome...

Yet, $425 pays for a lot of steak dinners, movies, cute undies (or whatever she likes) and junk.
$425 x 12 months = $5100 in a year in savings that you're missing out on.

Try getting a room mate. Even if you've just got a 1 bed. apartment, people in very dense areas (like Boston) might be willing to rent your living room on the cheap. Always explore creative options.

As ADK pointed out...

So, your "bills" excludes food and student loans... 

Debt is a bill.
Also, groceries and food are a bill, so if you're not counting ALL eating (even and especially eating out) as part of your bills, you haven't really cut your bills to less than 50%..
I don't see public transportation on your bills list. Just like gas or car insurance would be on your bills list, this should be too. Transportation is a bill.

I looked into Republic wireless but there is no coverage in my office, where I spend a good 10 hours of my workday...

Does your office have wifi you can piggy back off of? Republic defaults onto wifi whenever possible anyways, for phone and text as well as data... Otherwise, look at other frugal options that use a different network (not Sprint based)?

The 325 payments for my master's will only be for 8 more months, and at that point I graduate.  That'll free up quite a bit of income.  I've already been promoted at my current job in lieu of completing this degree, to the tune of an additional 5k per year.  The 150 I'm paying to my old school has exactly 12 months left.

Obviously paying for schooling cannot be cut, but that's totally okay. It seems you've made wise educational choices, since you're already earning more on the back of a degree you haven't even completed yet. These bills will go away with time, just don't replace them with more spending when that time comes.


So, currently, I suggest: Rebuild your budget to include food and a small amount ($50 max) of luxury spending, and then pay down school debts asap. If they'll let you, pay the school ahead of time and see if you can prepay as much as possible of your degree. Maybe there's a discount for this? ...

As for your savings, you really need to "pay yourself" first...

I also want to echo this. My budgeting equation looks like: Pay - Bills - $50 fun money/bills buffer = Savings, transfer immediately. Saving my money is literally  the first thing I do on payday morning, right after coffee.

And, the biggest thing, after those school bills go away, don't inflate your spending just because you can.

Really, you're doing a great job so far!

MrBuckBeard

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Re: Discretionary income - help a guy out.
« Reply #6 on: October 27, 2014, 03:13:42 PM »
Thanks, I'll take a long look at what you've wrote.

Just to clarify, transportation isn't on my budget for a reason.  My monthly T pass (covers bus and train) is paid for by my employer.  So it's not an expense I ever pay for (which really helped me when I decided to sell my car).

Future Lazy

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Re: Discretionary income - help a guy out.
« Reply #7 on: October 27, 2014, 03:14:38 PM »
Thanks, I'll take a long look at what you've wrote.

Just to clarify, transportation isn't on my budget for a reason.  My monthly T pass (covers bus and train) is paid for by my employer.  So it's not an expense I ever pay for (which really helped me when I decided to sell my car).

Win! :)

ADK_Junkie

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Re: Discretionary income - help a guy out.
« Reply #8 on: October 28, 2014, 07:53:44 AM »
MrBuckBeard,
  From the looks of your budget, I think you are doing well, fairly low costs on everything... and I think $650 is reasonable for rent in Boston, you might be able to shave $50 to $100 off that if you really looked, but it is probably not worth the hassle (and the unknown). 

Again, sweep the "savings" into investments the moment you are paid.  Your school/debt payments total $875/month.  So, just be sure as you finish school and pay off your debts that you sweep those "bumps" into investments.  I'd also increase your 401(k) contributions, over time (or when your bonus/raise hits) so that you reach the max allowed by law.  Finally, and just because I love to tout these things, be sure you are maxing out your Roth IRA with your savings cash flow.

Keep it going and good luck!!