Getting married soon - Rate our budget?

[Skalm]

Hello! I am getting married in a few weeks and the to-be and I sat down and worked out a budget for after we get married.

The framework is that we will have a shared checking account to pay bills, a shared savings account split into virtual accounts for emergency fund, short-term savings, and long-term savings, and a separate checking account for each of us for "personal" money - money where we don't have to explain what we bought to the other (things like Netflix, grabbing fast food, or buying something for a hobby). Anything relatively expensive we'll talk about on a case-by-case basis after we get out of debt (replacing/upgrading computers, tattoos, etc.)

We are both in school, her for auto tech, me for civil engineering. One of the benefits at my job lets us take our classes for free, up to 9 credit hours each per semester.

Our monthly budget looks like:

Income, gross - Her, $9/hour ($18,720), Me, $10/hour ($20,800), combined $39,520. I think we will need to adjust our withholding because our net yearly is $27,576 which is a fairly large discrepancy. She worked half a year last year and received all income tax back ($600), I used a tuition tax credit and received a lot of income tax back ($1.7k)
Pre-tax deductions - $120 from my check for health insurance, ~$96 for mandatory state pension plan.
Taxes... not sure on the specifics of this yet, I'll have to find some older paystubs to get a full picture.

Income, net - $2296

Rent (includes WST) - $595
Electric - $60 (varies, but this is the high end of average)
Internet - $40
Phones - $50 (high end of average)
Food - $250 (for two people)
Insurance - $110
Fuel - $80
Misc - $50
Short Savings - $250
Long Savings - $600
Personal Allowances - $200 ($100 each)

Total outflows: $2285

Assets:

Starter emergency fund of $1000
Car worth $2800
Buffer in checking account, $500

Debt:

CC - $2000
Motorcycle - $4200
Student Loan - $5000

The plan is to cut our personal allowances in half and put short and long term savings towards debt ($800/mo.), putting us debt free August of next year. Any windfalls go to debt. Anything left over at the end of the month over the emergency fund goes to debt. Debt is paid off avalanche style, CC (24%), then motorcycle (3%), then student loans (0%/5%). If time permits, I may pick up a part-time job for the weekends to help pay this down faster and any overtime she gets goes to debt, then to savings.

We haven't looked at investments yet, but I imagine we'll just start up a Vanguard account when we have a fully funded e-fund and are feeling comfortable.

Edited to add case study elements, reduced misc spending, increased short savings.

[MDM]

Assets:

Starter emergency fund of $1000
Buffer in checking account, $500

Debt:

CC - $2000


Debt...CC (24%)

One could make a very good case for depleting your current e-fund and as much of your checking buffer as you can to get rid of the CC debt.

Are your savings going into traditional, Roth, or taxable accounts?

"Misc. + personal", at $300 out of $1445, is over 20% of your spending (excluding saving).  Probably some nuggets to mine in there if you track with more detail.

Some thoughts from the case study sticky (might be more that also apply):

 - Start with Gross Salary/Wages (before any deductions)
 - Show line item Pre-tax deductions: 401k, HSA, FSA, IRA, insurance, etc. - whatever you have
 - Adjusted Gross Income: This should equal the additions and subtractions above.
 - Taxes: Line items for Federal, state/local, and FICA.  These should be consistent with your AGI and Life Situation - understanding how marriage will affect your opportunities to minimize taxes could have significant benefits for you.
 - Current expenses: Provide breakdown and relevant details.  Aim to have “Miscellaneous” somewhere ~2.5%.  Much lower and you may be providing too much detail, much higher and you have an obvious problem of not understanding your spending.

[Skalm]

Assets:

Starter emergency fund of $1000
Buffer in checking account, $500

Debt:

CC - $2000


Debt...CC (24%)

One could make a very good case for depleting your current e-fund and as much of your checking buffer as you can to get rid of the CC debt.

That is a good point, I'll bring it up with the SO to make sure we should be safe. I feel a little uncomfortable without that buffer there in case something bad happens. Otherwise the CC will be paid off in three months, so either way it shouldn't be too bad.

Are your savings going into traditional, Roth, or taxable accounts?

Our original intention was to put savings into a boring savings account at our local CU. Our short-term savings once it's built up will be for purchases of things like furniture, appliances, vehicle replacement, and the like, long-term savings for things like down payment on a house. Our timeline for a house is still well out there, so it wouldn't be a bad idea to find a low-risk investment. I haven't the slightest on how to start with that without shooting myself in the foot with taxes and volatility though.

"Misc. + personal", at $300 out of $1445, is over 20% of your spending (excluding saving).  Probably some nuggets to mine in there if you track with more detail.

You're not wrong, it is high. Misc is for things like when we need clothes, I don't know how to set aside a budget line item for that because I usually only buy clothes when I absolutely can't go another day without getting something, and she only buys them rarely if ever. I'm not really sure what else would fit into that category so I left it a little large for slush, and to put the excess into savings if there is any.

The personal spending was our compromise of her concern that she wouldn't be able to buy anything without consulting me first, it would be $25/week ($12.50 in debt paydown) transferred to our personal checkings for stuff like Netflix, fast food, hobbies, haircuts, and anything else that doesn't fit in the regular budget that we don't have to justify to each other to avoid fights about petty things like she likes getting pretzels at the mall or I like buying RPG miniatures. I don't really spend a lot so I would be fine stockpiling that money and then dumping it into savings when it starts getting too high, I don't know about her.
We may not be at an income level to justify an allowance this high, but I don't know.

[neo von retorch]

Paying off your CC means your CC is paid off.... which means you have available credit. That's not to say there could never in the whole universe and span of time be an unexpected emergency that requires cold hard cash, but most things you need to buy during an emergency situation accept credit cards. So, your buffer is still there. :)

For short-term savings, consider online savings (Ally, GE Capital Savings, etc) for around 1% interest.

[Skalm]

Paying off your CC means your CC is paid off.... which means you have available credit. That's not to say there could never in the whole universe and span of time be an unexpected emergency that requires cold hard cash, but most things you need to buy during an emergency situation accept credit cards. So, your buffer is still there. :)

For short-term savings, consider online savings (Ally, GE Capital Savings, etc) for around 1% interest.

My original intent when I started getting serious and paying down debt was to get rid of all my cards (so far I've paid off three cards with a total of $4k and cancelled them) but I can keep this one open. It has no benefits so I just won't use it unless it's an absolute emergency.

How does Ally compare to say, a Money Market account at a CU? And I can just open the Ally savings and then make interbank transfers with no fees?

[neo von retorch]

I use GE rather than Ally, but yes - I can transfer in and out between my credit union and GE. It's pretty quick - about one day turnaround.

[sleepyguy]

Assets:

Starter emergency fund of $1000
- use this to play of your CC loan immediately.  No point in investing if you carry CC loans (unless leveraged with 0% interest)

Car worth $2800
Buffer in checking account, $500

Debt:

CC - $2000
- kill this ASAP

Motorcycle - $4200
- do you 'need' two vehicles?

Student Loan - $5000


Rest looks fine, although I would say you have a lot of headroom to improve your income situation... although I see you are both still VERY young and students.  Your salarys will definitely vastly improve over time.  Your expenses are quite low and hopefully will stay that way.

[rubybeth]

This is actually pretty good! Any chance of incomes going up so you can save more?

I think keeping some small amount of "fun money" while paying off debt is good. I did this and saved up my fun money for larger purchases, while DH usually bought food or coffee. We did this 'budget' with cash for a while to help with not overspending it, and it really worked. If you're the type to 'save' your fun money, I'd say do that and if you feel you'd rather pay off the debt with it, go for it. I also did that when our debt was getting down to the point where I could see it totally going away, and I had about $1,000 of fun money saved up. I figured I could buy something really fun once the debt was gone, if I wanted to.

I also think you could break out the misc category into personal care (haircuts), clothing, and actual misc expenses. Once you see how much is actually being spent on these categories, you may get creative about trimming them to get out of debt (learn to cut your spouse's hair or your own hair--I've done both!), or go on a no clothing diet for a few months (unless something essential falls apart), or whatever.

And I also understand the feeling of wanting a small emergency fund even while in debt; stuff happens, and you don't want to put things on a credit card and be in more debt. Maybe use $500 to pay off higher interest debt?

Another plus for Ally--I've used it for years and it's very easy to transfer between my regular checking and the Ally money market account.

[Kris]

One important thing to add: you're both in school,which is hood, because it is likely your incomes will go up significantly as a result.

The trick is, to keep your spending the same when your income goes up.  Invest the rest, and you will see a wealth explosion.

[john6221]

Just a thought: Until debts are paid off, maybe reconsider the fun money. My wife and I get $75 each, which is 2% of our net monthly income. Your $200 is just under 9%. If you can, I'd cut this and at least focus on the CC debt.

[Apocalyptica602]

I'd lower the fun money quite a bit, especially while you have CC debt.

Not saying eliminate it entirely because for some it definitely helps provide an 'outlet' when you're scrimping by trying to put out your hair on fire, but $200 is a LOT.

My fiancee and I get about $200 each per month for 'fun money'... but we gross just over $200K and are debt-free.

Get that CC debt down even if you gotta dip into your emergency fund, because it's an emergency. Alternatively see if you can balance transfer to a 0% interest for 12-month card and then pay it down.

I'd echo the sentiment that once you've both graduated you should see your income rise dramatically but don't inflate your lifestyle. You should be happy and proud that you're both in school in good fields with actual job opportunities and you're able to take up to 9 credits for FREE!

Being aware of things this at this stage in the game will set you up for a lifetime of wealth, so keep focused and keep it up.

[AlwaysLearningToSave]

Get that CC debt down even if you gotta dip into your emergency fund, because it's an emergency. Alternatively see if you can balance transfer to a 0% interest for 12-month card and then pay it down.

I second idea of looking into a balance transfer to a 0% interest card, if possible.  This could avoid the very high interest rate on credit card while allowing you to keep your modest $1,000 emergency fund for breathing room.  I would still pay this debt off first even after the transfer.

[Skalm]

Message heard on the CC - talked to the lady and she's fine with using e-fund to pay it down within the next month and then keep it in a drawer out of sight for emergencies until our e-fund is replenished.

Motorcycle - $4200
- do you 'need' two vehicles?

Technically no, I have a bus pass (also for free through my job), and a bicycle, and I'm in walking distance to my job, so we really only use the motorcycle once a week or so when I go play RPGs at a friend's house across town (might be able to get a ride from a friend who lives kind of close by), or when we have some free time and just want to go on a joyride. If I get a part-time job that isn't close by that conflicts with her schedule it might be "necessary", but that's a lot of ifs and it's kind of reaching to keep it.

I'm at right about the break even point if I wanted to sell it, and I brought it up to SO, but she is very attached to it and loves riding it. I said that it would help greatly with debt paydown and she said she doesn't care, she's fine with paying it. I'm not opposed to getting rid of it although I also like riding, it would free up $104/mo. in payment and $50/mo. in insurance, as well as the maintenance costs, but she really likes it.

I'll revisit fun money with her again tonight and see if we can cut it down - maybe something like $40/mo/ea is more reasonable, and the extra goes towards debt, and then raise it a bit when we're debt-free.

Once we graduate we wouldn't mind inflating lifestyle slightly - eventually we want a house (although I'd love to pay it with all cash, that would be great) and a dog and maybe a kid, but we agree that we don't inflate lifestyle to match our income increases, we inflate savings more than spending.

[Skalm]

Get that CC debt down even if you gotta dip into your emergency fund, because it's an emergency. Alternatively see if you can balance transfer to a 0% interest for 12-month card and then pay it down.

I second idea of looking into a balance transfer to a 0% interest card, if possible.  This could avoid the very high interest rate on credit card while allowing you to keep your modest $1,000 emergency fund for breathing room.  I would still pay this debt off first even after the transfer.

After the dust settles, I think we'll have about $1,600 including e-fund and some of the buffer, not including any wedding dosh we might get (her side of the family asked us what we wanted off our registry, we said we didn't have one, they asked if cash is ok, we said yes, so we might be getting some cash - my side of the family is unloading some used furniture to fill out our apartment which is also great), and then next month we would have enough excess to pay off the remaining $400, and an additional $400 to start replenishing the e-fund. Would that be acceptable?

[AlwaysLearningToSave]

Get that CC debt down even if you gotta dip into your emergency fund, because it's an emergency. Alternatively see if you can balance transfer to a 0% interest for 12-month card and then pay it down.

I second idea of looking into a balance transfer to a 0% interest card, if possible.  This could avoid the very high interest rate on credit card while allowing you to keep your modest $1,000 emergency fund for breathing room.  I would still pay this debt off first even after the transfer.

After the dust settles, I think we'll have about $1,600 including e-fund and some of the buffer, not including any wedding dosh we might get (her side of the family asked us what we wanted off our registry, we said we didn't have one, they asked if cash is ok, we said yes, so we might be getting some cash - my side of the family is unloading some used furniture to fill out our apartment which is also great), and then next month we would have enough excess to pay off the remaining $400, and an additional $400 to start replenishing the e-fund. Would that be acceptable?

This, of course assumes you are able to qualify for a 0% card.  If you are able, you will have to evaluate the hassle of looking for a new 0% CC, applying, transferring the balance, etc. versus the likelihood you will pay it off in a very short period of time.  From what you describe it looks as if you will be able to pay it off quickly, so it may not be worth the hassle.  Just keep in mind that the interest cost to carry $2,000 in debt at that rate is $40.00 per month.  Your goal should be to pay as little interest on that debt as possible, whether by paying it off immediately or transferring the balance to a 0% card.

I'm a fan of keeping a small cash cushion.  Some mustachians would disagree, arguing that you should apply any available resources to pay down the high-interest debt.  I think 0% balance transfer is the best of both worlds, avoiding interest cost giving you time to pay the debt while maintaining your e-fund.  If you use the e-fund to kill the debt, just be aware that you (likely) cannot pay rent with a credit card.  You have to make the call on how comfortable you are without a cash emergency fund based on how stable your job and income are and the availability of alternatives (like moving in with family or financial help from family) if the worst-case-scenario were to play out.  Some are confident in the stability of their situation and would take this risk without thinking twice.  Others might be less confident and want to be sure they have the cash cushion. 

[expectopatronum]

Paying off your CC means your CC is paid off.... which means you have available credit. That's not to say there could never in the whole universe and span of time be an unexpected emergency that requires cold hard cash, but most things you need to buy during an emergency situation accept credit cards. So, your buffer is still there. :)

For short-term savings, consider online savings (Ally, GE Capital Savings, etc) for around 1% interest.

I agree with paying off a 24% APR card for this reason right here. You can view the cash as the e fund or you can view the credit as the e-fund, only you'll pay out the nose for one and not the other all for some peace of mind(?). It's good that you guys are on board with this. Also, I don't know your situation with parents, siblings, etc, but my parents would probably be understanding of a one-time loan if I paid off my CC debt and then got hit with an $800 cash-only bill. I'm not suggesting mooching or truly relying on them - but it's just an added safety net when you're putting out your debt emergency.

Also wanted to mention that if you are saving for a house, a good credit score will only help you. Credit history is one of those things that factors into your score, along with credit utilization. It's fine if you want to pay it off and pretty much forget about that card, BUT I'm one of those ppl who thinks it's wiser to keep the credit history.... That is, unless you're paying a CC fee annually?

Paying off your CC means your CC is paid off.... which means you have available credit. That's not to say there could never in the whole universe and span of time be an unexpected emergency that requires cold hard cash, but most things you need to buy during an emergency situation accept credit cards. So, your buffer is still there. :)

For short-term savings, consider online savings (Ally, GE Capital Savings, etc) for around 1% interest.

My original intent when I started getting serious and paying down debt was to get rid of all my cards (so far I've paid off three cards with a total of $4k and cancelled them) but I can keep this one open. It has no benefits so I just won't use it unless it's an absolute emergency.

[Heckler]

It's already been said, and I'm glad you heard it, but here's another look at $2000 @ 24% for 3 months.



$693.51 x 3 = $2080.53 for $2000 of "stuff". You'd be working a day and a half extra just to keep your $1000 stash. Kill the CC, then freeze it.  In the freezer.


Speaking of which, I have a Home Depot CC I can't remember where I hid the damned thing. 

[Heckler]

Great work killing the other three cards!  You're well on you're path to freedom.

Just don't get sucked into the consumerism once you get out of school and start pulling in the big bucks. 

[mxt0133]

My original intent when I started getting serious and paying down debt was to get rid of all my cards (so far I've paid off three cards with a total of $4k and cancelled them) but I can keep this one open. It has no benefits so I just won't use it unless it's an absolute emergency.

I would keep two cards each for the both of you, assuming you can control yourselves and not use it, just stick it in your safe.  You need credit cards for real emergencies so I recommend you try and build your credit limit up to like 10k each.  You also need a long credit history with no late payments and some usage paid in full every month.  You will need it when you apply for loans such as a house, ect.  More importantly most employer now pull your credit report/score when being considered for employment.

So keep your oldest credit card, make sure it has no annual fees, use it from time to time and if the limit is below 10k ask for a credit increase from time to time to get it up.  You can even sign up for bonus points and get free travel if you are responsible enough in a few years.