Author Topic: new what to do  (Read 6864 times)

blackjack

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new what to do
« on: August 09, 2013, 04:07:03 AM »
My girlfriend and I just moved out and got new jobs. (maybe first mistake, we should have lived at home and saved money) I didnt really get a chance to save with my new job. Were just starting to save and invest.
we are in our mid twenties.

I make 40,000  (Next year I will be be making 90,000 a year)
Wife makes 45,000 a year.
We have no debt of any kind. She does contribute in to a 403b
I don't contribute in to any type of retirement right now. I have 4,000 cash savings. My company doesn't match 401k plan

This is for two people.
Amount per month   
rent   955   
car   202.49   
electric   80   
gas (UGI)   20   
water   44   
cable   90   
insurance   130   
cell phone   200   
groceries   475   
gas   20
charity 50   
supplements 150   
household items   50   
entertainment   50   
gym   75   
eating out   50   
miscellaneous   200   
      
      
      total for month; 3021.49   

Right now we are saving for a house I think our price 200,000 - 275,000 for a home. We want to buy a home in the next year or two.
What do you think of my budget and plan to buy a home next year?
I also need to look into starting a Roth or 401k soon
« Last Edit: August 09, 2013, 04:13:15 AM by blackjack »

gooki

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Re: new what to do
« Reply #1 on: August 09, 2013, 04:14:26 AM »
Cell phone, insurance, supplements, groceries, and cable, all look like prime targets for cut backs. Should be able to trim $300-$400 a mouth just there with no noticeable difference to your quality of life.

blackjack

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Re: new what to do
« Reply #2 on: August 09, 2013, 04:16:42 AM »
thx... I'm trying to cut back on some of those. The girlfriend is kind of on board but not there yet.
An additional 300 a month would be huge.

MissStache

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Re: new what to do
« Reply #3 on: August 09, 2013, 06:29:58 AM »
Your groceries are really high for two people, but kudos on that eating out budget!  I'm guessing that means one/both of you like to cook?  You can get that grocery budget down a lot if that is the case.   My household of two has a $250/month grocery budget, which includes the occasional bottle of wine and/or 6 pack.

What are your miscellaneous expenses?  Take a closer look at those, because that is a lot!  Try to figure out how those expenses fit into your other categories.

What is your car situation?  What kind, how much owed, loan rate, etc. 

The girlfriend is kind of on board but not there yet.

Keep working on that- it's huge!

mpbaker22

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Re: new what to do
« Reply #4 on: August 09, 2013, 07:22:02 AM »
Watch out with the home purchase.  $250,000 would be a $1342.05/month mortgage at 5% interest, and that doesn't include taxes and insurance.  While the numbers might work out for you, that's $450 higher than your rent before taxes/insurance.  The point is run the numbers carefully, and decide if the house is worth it.

I would contribute to some sort of retirement plan.  Even if it's not matched, at least use a roth IRA.  You can withdraw contributions whenever you want without penalty, and the earnings are tax-free.  The only downside is I'm not sure if you can invest in lower-risk assets within an IRA, so it might not be good for saving a down-payment.

Now on to the expenses:

Is the car line a car payment?  What's the car worth?  It might make sense to sell it and get something else.  If your gas expense is $20/month (assuming $4/gallon gas and 40 mpg), you are driving 200 miles per month.  If this is concentrated evenly, that's 6.6 per day.  Might be worth selling the car and not buying another, but these are obviously some big assumptions.  Essentially, if the 40 mpg assumption is correct, and your numbers are accurate, you're paying $1.75/mile to drive your car.

cable - cut it.

groceries/eating out can be cut, but I'm not sure how since I'm always at $300.

Think about cutting the gym - look for alternatives.  Especially when you buy a house, you can start making a home gym.

What are supplements?  Like health supplements?  These might be good for you, but much of that industry is a scam (could go either way).

Cell phone - should be cut to maybe $100 total, not $100 each.

Insurance - what all insurance does this include?  It's a little over twice my car insurance, so it seems high if you get a discount per driver and because you don't seemingly drive much.  I'm not sure, but it might be worth shopping around.

MsSindy

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Re: new what to do
« Reply #5 on: August 09, 2013, 07:38:31 AM »
Here's my thoughts:
 - Is she your wife or your girlfriend - you say both.  If gf, then are you planning on a wedding (more expenses)?  If gf, be very careful about entering into purchasing a house.

 - House: Remember, in addition to the actual payment, there is interest and real estate taxes.  But the big expense comes in at home maintenance, depending on the condition of the home and your DIY capabilities.  And of course, you're going to want to buy furniture and drapes, new dishes, a lawnmower, etc.  It can get damned expensive, esp if wife/gf is not on board.  Plus you get locked into a geographic location which makes making job/career changes more difficult.

 - Really decide what you want your life to look like - do some dreaming.  Do you want to do the typical thing: buy a house, have babies, go visit grandma once a month?  Or do you want to have more flexibility and do some traveling or go very deep into your hobbies.  There is no right answer, just what is really important to you.  Right now you have the opportunity, before you get financially committed, to design a life you really want (not what others think you should have). 

You can have it all, just maybe not all at once.

Rebecca Stapler

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Re: new what to do
« Reply #6 on: August 09, 2013, 08:22:04 AM »
There are things to cut in that budget, but my concern is where is the leftover $2k/mo going?

Given those expenses, and my guesstimation on your take-home pay (unless I missed that, and you posted it?), you should have over $2,000 per month left over. Where has that gone? If you don't have a handle on where that's going, you need to understand -- and remedy it -- quickly. Then set up an automatic savings transfer so you never see the money -- except when it hits your savings account and you can see it go up.

Saving $2k/mo will get you a 20% down payment on that $240k house in 2 years. If you have zero lifestyle inflation when you get a raise, bank the entire raise -- all $37,500 (after taxes) of it -- and you will have a 20% down payment in a year (if you're also still saving the $2k). Reaching 20% is key for avoiding paying PMI, which can cost you hundreds of dollars per month in addition to your mortgage payment. Even with a 20% down payment, you will need to pay $400 more in mortgage payments than you're paying in rent.

That said, if you wish to buy a house before you are married, I highly recommend you consult with an attorney to navigate the legal pitfalls of joint ownership. No one thinks that they're breakup, and thinking about it is a downer, but it is a reality. Another reality is the possibility that one of you passes away; and intestate succession would give half of the house to that person's family, who could move in with you or force you to sell, etc. (their rights vary with state law).
« Last Edit: August 09, 2013, 08:35:14 AM by stan »

mpbaker22

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Re: new what to do
« Reply #7 on: August 09, 2013, 08:25:45 AM »

Saving $2k/mo will get you a 10% down payment on that $240k house in 2 years.


Agree with everything else you said, but won't $2k/mo get you a 10% down-payment in 1 year?  Or am I doing something incredibly stupid with my math?

Rebecca Stapler

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Re: new what to do
« Reply #8 on: August 09, 2013, 08:34:53 AM »

Saving $2k/mo will get you a 10% down payment on that $240k house in 2 years.


Agree with everything else you said, but won't $2k/mo get you a 10% down-payment in 1 year?  Or am I doing something incredibly stupid with my math?

No, yeah, you're right. Sorry! I changed one of those numbers when it looked funny and I should have kept it exactly how it was! I'm editing it to avoid confusion.

MrsPete

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Re: new what to do
« Reply #9 on: August 09, 2013, 08:56:04 AM »
Three things jump out at me: 

You expect to double your income next year.  This isn't something that happens to many of us.  Are you SURE of this?  If this does happen, the answer to the question, "What should I do?" is obvious:  You're living a comfortable life now.  Continue to live the same comfortable life -- that is, just say no to lifestyle upgrades in the form of new furniture, nicer car, more meals out, etc. -- and bank the difference.  It won't take many years to accumulate significant savings, and then you can loosen the financial reigns a bit. 

You called your significant other both wife and girlfriend.  There's a big difference.  Don't mix your money, especially in a real estate transaction unless you're married.  Sure, right now you can't see any problem, but loads of living-together situations go from hunky-dory to splitsville seemingly overnight (which is one reason I don't think they're a very wise choice), and if your finances are merged, it's harder.  Marriage gives you both a number of legal protections that are very worthwhile.  If you two are committed to a lifetime relationship, go ahead and get married. 

Finally, even if they don't "match", investigate your company's 401K plan.  Of course, it's best if you get a match, but the tax savings are still very real even without that perfect scenario.  If indeed your salary doubles next year, you'll absolutely need a tax break, so go ahead and learn about your options now.

blackjack

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Re: new what to do
« Reply #10 on: August 09, 2013, 06:59:53 PM »
i drive a honda civic thats payed off for a few years now.. wife's car will be payed off next year

we are engaged and getting married next year... we are going to buy a home after the wedding
Yes I will be easily doubling my salary.


I want to retire and start doing hobbies and live a nice frugal life stress free but i still want to travel and buy some stuff.... Earlier I can quit my job the better but I'm willing to work hard and get as much as I can....

I will receive a pension through my company.. They give me $60 a month for ever year of service, so far i'm at 8 years

we spend a lot on food because we buy good organic food and the extra goodies (like organic drinks and desserts, etc) we cook nearly every meal
were trying to cut back
« Last Edit: August 09, 2013, 07:04:32 PM by blackjack »

oldtoyota

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Re: new what to do
« Reply #11 on: August 09, 2013, 07:17:42 PM »
My girlfriend and I just moved out and got new jobs. (maybe first mistake, we should have lived at home and saved money) I didnt really get a chance to save with my new job. Were just starting to save and invest.
we are in our mid twenties.

I make 40,000  (Next year I will be be making 90,000 a year)
Wife makes 45,000 a year.

Wait. You have a girlfriend and a wife?

blackjack

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Re: new what to do
« Reply #12 on: August 09, 2013, 07:34:39 PM »
Sorry no I have a fiance (aka girlfriend)


blackjack

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Re: new what to do
« Reply #13 on: August 11, 2013, 08:09:07 AM »
The plan is to save 90% of my income.... In 5 years I figured I can make around 125,000 - 140,000 a year. (This is based on working 50-60hrs)
This should set me up to retire by age 40-45...
I still need to figure out where I want to stash my savings, I know i want to pay off my future house asap.

The goal is to hit 1,000,000... Then when I hit 65 I will start getting my pension (should be about 1500 a month)
« Last Edit: August 11, 2013, 08:15:18 AM by blackjack »

mpbaker22

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Re: new what to do
« Reply #14 on: August 11, 2013, 09:23:54 PM »

I will receive a pension through my company.. They give me $60 a month for ever year of service, so far i'm at 8 years


Is this absolute?  My company does $50, but they cut it by a percentage for every year you retire early (I think 55 is considered the earliest normal retirement.).

blackjack

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Re: new what to do
« Reply #15 on: August 18, 2013, 05:52:25 AM »
I'll be getting a pay increase to  (nexy pay raise will be to 31, currently at 20.5)  then final increase to $37 / hr with the ability to work 20hrs OT a week
40hrs, which = 1 year salary of about 76k
20hrs, $55.5 = 57k
total salary = 133k

as long as I dont get fired or injured the above is certain

IF anyone cares i am a UPS Delivery driver. ( UPs offers a very impressive pension)
We just had a guy retire with 33 years and hes geting 3600 a month
« Last Edit: August 18, 2013, 06:02:18 AM by blackjack »

sleepyguy

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Re: new what to do
« Reply #16 on: August 18, 2013, 09:52:53 PM »
At first glance.  Although living at home is nice to start snowballing the nest egg early, I say getting out as young adults and living independently is worth it.  I did it pretty late at 23 and kinda regret not doing it early.

This is for two people.
Amount per month   
rent   955   
car   202.49   
electric   80   
gas (UGI)   20   
water   44   
cable   90   (This is WAY too high, go OTA+netflix for a cheap $10/mth alternative))
insurance   130   
cell phone   200   (OMG, nothing to say here... but this can/needs to be greatly reduced!)
groceries   475   (Probably could be lower but that depends obviously on your taste)
gas   20
charity 50   
supplements 150   
household items   50   
entertainment   50   
gym   75   
eating out   50   
miscellaneous   200   
« Last Edit: August 18, 2013, 09:54:33 PM by sleepyguy »

dorkus619

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Re: new what to do
« Reply #17 on: August 19, 2013, 07:33:57 AM »
I know you repeatedly say that you KNOW you will be getting these raises and you KNOW you get 20hr OT, but I agree with all above. Plan for the worst (same salary, losing OT, losing job altogether?) Hope for the best (as you stated).
I work at a manufacturing facility where these guys have worked here 30 years with "guaranteed" OT. A month ago the business manager ruled 'NO MORE OT' until further notice as the company is saving (projected) a million $ a year by cutting the plant's OT
You just never know when things could completely change