Budget Help

[FarleyBomb]

Hi all,

I've been mostly a lurker up to this point.  However, I think I'm finally at my wits end and ready for some honest feedback to get me on track. 

The long and short of it is that despite my efforts, I still feel like I'm living paycheck to paycheck.  I work a job about 45 minutes from home (will be 20 min) by end of year, making about $65-70 K per year, and we rent the top two floors of our house for a rental income of $20,700/year.  In total, my income becomes appx $85 K pre tax when all is said and done.  We bought a bit high a few years back, so the rental income only pays our mortgage.  My wife is a stay at home Mom, with our two kids and a 3rd due about a month from now.  We have the typical student loan debt, totaling about $30K, and credit card debt of about $2 K.  Below is a list of what I put away monthly. I try to put away a little extra in each category, for varying costs.  Please give me some honest advice on how I can start saving. 

Heat                         250
Auto Insurance              106
Life Insurance         78
Cable/Internet         136
Electricity                  90
EZ Pass (Tolls)         50
Gas                         340
Grocery                 660
Cash                         400 * For extra costs that come up during the month
Cell Phones         100
Student Loans         252
CoPay/Med                 60
Terminex                 42
Gym                         10
Streaming (Netflix etc)   26
Trash                         36
X-Mas                 100
Car                         200

[Jaayse]

Hey Farley, welcome!  I'll take a stab at a few things...

$500 a year seems like a bit much for Terminex.  If you don't have a current insect issue inside your house every year, I would consider skipping a year if this is preventative.  Then if anything does actually pop up you can either take care of it with items from the store or look for a local exterminator that might have cheaper costs.

$1200 for Christmas can be cut down.  For example, growing up my family would always give items like toiletries and candy in stockings, and clothes and one big gift per year per kid with maybe a few small ones under the tree.  This could lower your overall cost while still having a full stocking and a big wished for item.

$100 per month for cell phones is commonly addressed with services like Republic Wireless to cut that in half.

$120 a year for gym membership is a good price if it keeps your sanity, but if you don't use it regularly it can be cut.

$340 on gas and $50 on tolls is a huge expense, do you commute far or is your job dependent on travel?

Cable can be cut since you have streaming services, or if you're not yet comfortable with that you can cut the streaming services first.

Shopping around for insurance can sometimes find you some savings and is worth a look.

Groceries are also a big expense for your that can probably be trimmed with some effort.  Maybe set a goal to spend only 550 next month and see if you can beat that.  Buy deals and plan your meals around them rather than going with a set grocery list.

Hope this helps.

[Cranky]

Is Terminex for general bug control, or for a termite contract? If it's just general bug control, you can probably manage that cheaper.

You live someplace very cold? You have oil heat? $250/month seems like a lot, but I have a gas furnace and it runs me about $60/month.

Take a look at where that $400 worth of "extras" is going, and why.

[Sydneystache]

Can you break down your grocery expense so people here can pinpoint the areas where you can potentially save.

[MDM]

The long and short of it is that despite my efforts, I still feel like I'm living paycheck to paycheck.  I work a job about 45 minutes from home (will be 20 min) by end of year, making about $65-70 K per year, and we rent the top two floors of our house for a rental income of $20,700/year.  In total, my income becomes appx $85 K pre tax when all is said and done.  We bought a bit high a few years back, so the rental income only pays our mortgage.  My wife is a stay at home Mom, with our two kids and a 3rd due about a month from now.  We have the typical student loan debt, totaling about $30K, and credit card debt of about $2 K.  Below is a list of what I put away monthly. I try to put away a little extra in each category, for varying costs.  Please give me some honest advice on how I can start saving. 

If "the rental income only pays our mortgage" and you are taking all the deductions (including mortgage interest and depreciation) allowed for Residential Rental Property, do you have a significant amount on line 17 of Form 1040?

If not, then ignoring the rental you have ~$66K/yr income.  Putting $18K into a 401k leaves $48K.  Filing MFJ with 3 children, it appears the IRS will owe you ~$3200 due to the saver's, earned income, and child tax credit.  With SS, Medicare, and assuming ~5% state income tax, that leaves $44,800.

Expenses listed total $35,232/yr.  Are you saving the $9600/yr difference?  That is in addition to the $18K 401k assumed, and could be even more because rental depreciation is a non-cash expense.

[Laura33]

With SS, Medicare, and assuming ~5% state income tax, that leaves $44,800.

Expenses listed total $35,232/yr.  Are you saving the $9600/yr difference?  That is in addition to the $18K 401k assumed, and could be even more because rental depreciation is a non-cash expense.

I would look at your budget with this in mind.  E.g., that $400 "cash" catch-all adds up to over 10% of your take-home income; your car expenses (gas/"car"/insurance/tolls) are 15-20% of your take-home.  If you can cut those in half, you will free up 10-15% of your net income to save.  E.g., if you have to commute that far, what about trading in whatever you have that is costing you $540/mo in gas and maintenance alone for something that is cheap, reliable, and fuel-efficient?

I think the answer is really to track your expenses, in great detail.  Based on the listed budget, it looks like you already have the ability to save over $27K a year.  Clearly, that isn't happening now, or you wouldn't feel like you are not able to save.  That means that the problem isn't necessarily what is on this list, but all the stuff that is not on it -- all the money that just disappears somewhere between your pocket and your bank account.

[FrugalToque]

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https://forum.mrmoneymustache.com/ask-a-mustachian/new-to-this-help!/msg1530112/#msg1530112