Author Topic: Breaking down my Budget  (Read 5548 times)

POINTS of ER

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Breaking down my Budget
« on: August 28, 2013, 08:21:41 PM »
Hello my fellow Mustachians,

Background Info:
I just recently found MMM have been very inspired on my journey to FI. I recently just graduated and this upcoming September I'll be starting a new job with a $53k starting salary.  I live in Santa Clara (Silicon Valley), CA. The cost of living here as some of you would know is way to high. I rent out a three bedroom house with two other roommates. That is why below I have utilities being shared and the expense listed here are my share of the utilities. I'm currently working as a intern right now but I'm moving onto a FT position this September.

I commute to work (25mi one way) and I roughly fill up once a week. I understand gas is a major consumption of my expenses but public transportation would equal in terms of cost and be more time consuming.

I'm an avid traveler and a big miles/points collector, that is why I budgeted a $250/mo savings for my guilt-free traveling excursions into a high yield savings account. This savings will help pay for any travel or food expenses that will occur during a trip.

All of my expenses are actually paid through credit cards so you may notice I have big debts on my high interest rate cards but I pay these off completely on a monthly basis. The one with a 0% interest rate I only pay minimum payment and use any leftover surplus money towards paying off my student loan.

Here is a breakdown of my monthly income and expenses.

Income
$53,000/year salary = $4,417/mo before tax

Monthly Expense
$870 rent
$60 cellphone
$150 groceries/toiletries (Shared expense with 2 other roommates, this is my share)
$20 electricity (my share)
$45 water (my share)
$15 garbage (my share)
$7 gas, pge (my share)
$37 cable & internet (my share)
$67 car insurance
$225 gas
$250 Guilt-Free Travel Savings
$85 High Deductible Health Plan
$25 CC payment to 0% interest card
Total = ~$1,860

Investment Vehicles
$1,300 High Yield Savings (.85%)
$6,800 401k (Traditional)

Debt
$2,980 Student loan (4.25%)
$2,200 Chase Freedom Credit Card (0% until May 2014)

Conclusion
4,417 Gross Income
(441) 10% pre-tax 401k
$3,976 income before tax
(994) 25% effective tax rate
$2,982 monthly income
(1,860) monthly expenses
$1,122 Remaining


I'm currently putting away 10% pretax income into a 401k account, should I only contribute the minimum of eligible matching with my company and use any extra funds towards my student loan? After I pay off my student loan, i'm going to save at least 40% of my income by maxing out my 401k and HSA. This will definitely help me drop into the lower 15% tax bracket, further boosting my saving potential.

Any advice towards my budget or strategy is greatly appreciated. Thanks in advance!
« Last Edit: August 30, 2013, 01:30:31 AM by JJtheTravelingFlea »

Another Reader

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Re: Breaking down my Budget
« Reply #1 on: August 28, 2013, 08:52:47 PM »
I'm not following the money here.  You have $2,140 on two high interest credit cards.  Are these the two that you put your expenses on and pay off monthly?  If so, something does not make sense.  Your total expenses, including savings, are budgeted at $1,750.  Would you provide more detail on your expenses and where the remaining salary is going?

Depending on where the money leaks are, in your shoes I would skip the travel savings for awhile and get rid of the debt.  With the new salary and a reduced budget, you should be able to knock out the student loans and the cards quickly.

POINTS of ER

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Re: Breaking down my Budget
« Reply #2 on: August 28, 2013, 09:52:34 PM »
I'm not following the money here.  You have $2,140 on two high interest credit cards.  Are these the two that you put your expenses on and pay off monthly?  If so, something does not make sense.  Your total expenses, including savings, are budgeted at $1,750.  Would you provide more detail on your expenses and where the remaining salary is going?

Depending on where the money leaks are, in your shoes I would skip the travel savings for awhile and get rid of the debt.  With the new salary and a reduced budget, you should be able to knock out the student loans and the cards quickly.

Sorry for the confusion. I forgot to include an important piece that all of my roommates utilities/groceries are actually paid using my credit cards. They provide me additional income to cover their expenses which are allocated on my cards.

Breaking it down:
Current salary income (Not the $53k salary) is around $2,250 after taxes and 10% pre-tax 401k contributions.

$2,982 income + ~$525 roommate share
$1,860 for monthly expenses + ~$525 roommate shared expenses
$1,122 to put towards student loan

I had to revise my budget. So I hoped that cleared up some thing. Especially the discrepancy of why my credit card debt seems to be higher than my regular income.

I was thinking of using my high yield savings to knock off the student loan debt even more. That way by the end of this year I can finish that student loan and start knocking down that $2,200 (0 interest) CC debt.
« Last Edit: August 29, 2013, 02:41:08 AM by JJtheTravelingFlea »

Nudelkopf

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Re: Breaking down my Budget
« Reply #3 on: August 29, 2013, 12:45:28 AM »
You listed: Rent, phone, groceries, bills, insurance, gas, travel. Do you socialise? Play sports? Buy clothes? Go to the doctor? Dentist?  These are some items that I have in my budget that are missing from yours (although that may be legit and not an omission).

I'd probably use your "high yield savings" (0.85% is high???) to pay off those credit cards. I'm not sure if you answered Another Reader's question whether you pay off your credit card monthly?

Rangifer

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Re: Breaking down my Budget
« Reply #4 on: August 29, 2013, 01:26:34 AM »
I'd go ahead and allocate 10% of your new salary in the following manner:

5% = Entertainment, clothes, going out to eat, hot dates, etc.
5% = ??? aka the 'oh shit' fund. This should take care of things like taking your car to the mechanic, doctors visits, etc. Things that don't happen very often but need to be taken care of. At the end of each year you can move excess funds to savings/ira/something else.

POINTS of ER

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Re: Breaking down my Budget
« Reply #5 on: August 29, 2013, 01:53:02 AM »
Thanks for the comments!

You listed: Rent, phone, groceries, bills, insurance, gas, travel. Do you socialise? Play sports? Buy clothes? Go to the doctor? Dentist?  These are some items that I have in my budget that are missing from yours (although that may be legit and not an omission).

I'd probably use your "high yield savings" (0.85% is high???) to pay off those credit cards. I'm not sure if you answered Another Reader's question whether you pay off your credit card monthly?

While in college was living off the medical benefits that my college provides. Currently, I do not have a medical plan in place for emergencies. Luckily, any medical advises I ask my roommate who is a paramedic for 911. However, with my new job in place I'll be picking up a High Deductible Health Plan eligible with a HSA. I'll be paying roughly $85 for medical, dental, and eye with my new plan. I've edited my budget to include the new medical plan.

For my social life, since my roommates and I have gotten our own house. This house has actually been the hang out place to go to and we usually tell friends to Bring Your Own Beer/Bottle (BYOB).

Personal expenses such as clothes or other items, I don't spend on them unless I need them. I tend to ask myself every time before I purchase something, is it a want or a need.

Haha .85% isn't a high interest that's just what the money taking banks name it. I only got this account because it's easily accessible.

As for the credit cards, yes I pay the full balance monthly except for the 0% interest card which I pay the minimum of $25.

I'd go ahead and allocate 10% of your new salary in the following manner:

5% = Entertainment, clothes, going out to eat, hot dates, etc.
5% = ??? aka the 'oh shit' fund. This should take care of things like taking your car to the mechanic, doctors visits, etc. Things that don't happen very often but need to be taken care of. At the end of each year you can move excess funds to savings/ira/something else.

I would consider my Guilt-Free Travel Savings as part of my entertainment/emergency fund. If need be I'd use this savings as my funds to pay off any extraordinary expenses.
« Last Edit: August 29, 2013, 02:02:01 AM by JJtheTravelingFlea »

icefr

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Re: Breaking down my Budget
« Reply #6 on: August 29, 2013, 09:55:59 PM »
As for the credit cards, yes I pay the full balance monthly except for the 0% interest card which I pay the minimum of $25.

Then you shouldn't list it as debt if you're not paying any interest. It's just a way of cash flow. I pay off my credit cards monthly and I just see them as an extension of my checking account.

POINTS of ER

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Re: Breaking down my Budget
« Reply #7 on: August 30, 2013, 01:30:19 AM »
As for the credit cards, yes I pay the full balance monthly except for the 0% interest card which I pay the minimum of $25.

Then you shouldn't list it as debt if you're not paying any interest. It's just a way of cash flow. I pay off my credit cards monthly and I just see them as an extension of my checking account.

Understood. I revised my budget. Should I still include the $2.2k as part of my debt even though I'm not accumulating interest on that as well?
« Last Edit: August 30, 2013, 01:32:35 AM by JJtheTravelingFlea »

gooki

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Re: Breaking down my Budget
« Reply #8 on: August 30, 2013, 01:47:48 AM »
Yes.

Nudelkopf

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Re: Breaking down my Budget
« Reply #9 on: August 30, 2013, 08:18:05 PM »
However, with my new job in place I'll be picking up a High Deductible Health Plan eligible with a HSA. I'll be paying roughly $85 for medical, dental, and eye with my new plan. I've edited my budget to include the new medical plan.
Good to see you've edited your budget for medical stuff :)