Author Topic: Please review my budget  (Read 7647 times)

EconDiva

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Please review my budget
« on: July 09, 2013, 12:04:19 PM »
Noob here :)

Please critique my budget.  The figures are monthly figures, and I get paid once a month.  My after tax income is my net with my 401k contribution of 229 added back in. 

after tax income:   3529
   
expenses:   
student loans   300
electric                     45
cell                     50
groceries                   300
train/bus card          100
prescriptions     30
laundry                     30
internet                     50
rent                   875
classes                   200
travel/charity   300
entertainment/clothes/eating out   150
total expenses   2430
   
savings (after tax income minus expenses)   1099
   
401k (5% of gross)   229



Does this budget seem fairly Mustachian at all...?  Based on the 1099 savings+229 retirement+300 student loan payments, looks like my budget is roughly 60% expenses : 40% savings/debt repayment.  Please note: this budget is a GOAL and I'm nowhere near this yet :(  To get here, I just cancelled my gym membership, started stocking up on groceries, have limited eating out, and next will trade in my Comcast cable for Netflix/Hulu as well as downgrade my AT&T iphone plan.

If I can stick to this budget through the rest of year, I have no doubt that within a year I could get closer to a 50:50 split.  In the meantime....thoughts/input?

Rebecca Stapler

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Re: Please review my budget
« Reply #1 on: July 09, 2013, 12:49:04 PM »
I am wondering what you have in savings as an emergency fund and whether it's hefty enough to start putting your $1000/mo savings into your student loans. What are the rates on your student loans and what are the rates on your savings?

lifepopsicle

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Re: Please review my budget
« Reply #2 on: July 09, 2013, 01:06:12 PM »
It definitely sounds like you live in an expensive area... I'm new to this too, but here's some tips  that maybe would help you:

- Do you throw away food often? Make sure you are freezing things or buying less at a time. Make a point to buy store brand or sale items when they are available. Are you spending $ on alcohol? If so, can you cut this back? If not, good for you!
- Shop at thrift stores to cut down on clothing cost--one huge benefit, used clothing is pre-shrunk so you know it will fit even after washing!
- I agree with Maigahane, it'd move to a cheaper apartment with a washer and dryer...or get a roommate if you don't already have one (or two, or three...).
- Travel and charity is high. Why? Can you donate time instead of money, at least until your loans are payed off?
- Can you find a job that has a tuition reimbursement program?
- When going out to eat, have a snack before so you can just order an appetizer, small salad, or just a (cheap) drink to save money. Then you're not missing out on the fun while at the same time saving $.

Kudos on canceling your gym membership and making changes to cut back; that's a really great first step! What you'll likely find is that by following this lifestyle you'll feel less guilty and more aligned with your life goals.

Eric

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Re: Please review my budget
« Reply #3 on: July 09, 2013, 02:02:33 PM »
What classes are you spending $200/mo on?  Is this something to advance your career so you can earn more?  If not, is there a way to learn this stuff for free?

EconDiva

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Re: Please review my budget
« Reply #4 on: July 09, 2013, 02:13:28 PM »
The only thing that really sticks out to me is the $300/month for travel/charity. That's 1/12th of your income....

You don't say but I'm assuming single with no kids, could you get a cheaper apartment? Maybe one with a washer and dryer?

I'm single, 34 years old, no kids.  I currently live in a 500 square foot studio that's about 8 miles from my job, or roughly a 45 minute trip to work one way via transit.  I will keep a look out for a cheaper place but my current spot is definitely pretty old and nowhere near luxurious.  But it's on a safe side of town.

EconDiva

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Re: Please review my budget
« Reply #5 on: July 09, 2013, 02:15:07 PM »
I am wondering what you have in savings as an emergency fund and whether it's hefty enough to start putting your $1000/mo savings into your student loans. What are the rates on your student loans and what are the rates on your savings?

$2k in savings with Capitol 360 mutual fund (formally ING Orange). Student loan rate is 4.25%.  Don't know the current rate on the mutual fund...need to check on that, but I'm sure it's way below 4.25%. 

I was wondering about this as well...should I dump all of the savings into the student loan?  Or do half to max out a Roth IRA and put the remaining half towards the student loan?

EconDiva

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Re: Please review my budget
« Reply #6 on: July 09, 2013, 02:24:33 PM »
It definitely sounds like you live in an expensive area... I'm new to this too, but here's some tips  that maybe would help you:

- Do you throw away food often? Make sure you are freezing things or buying less at a time. Make a point to buy store brand or sale items when they are available. Are you spending $ on alcohol? If so, can you cut this back? If not, good for you!

-I do throw away food often.  I'm trying to get better at this.  I'm going to start by limiting my budget for eating out, and cook in more often.  And only buy food once the food in the fridge has been used up/eaten.  I probably drink 2-3 drinks out a month and buy a bottle of wine once a month.  Cutting this out completely would be easy.


- Shop at thrift stores to cut down on clothing cost--one huge benefit, used clothing is pre-shrunk so you know it will fit even after washing!

-I'm already the Goodwill and Ebay queen for clothing and shoes, so I think I'm set in this area ;)

- I agree with Maigahane, it'd move to a cheaper apartment with a washer and dryer...or get a roommate if you don't already have one (or two, or three...).

-Would be hard to have a roommate in a 500 square foot studio I think.  This is the one area I was hoping I wouldn't have to cut.  I live in Chicago; moved here last year.  Took me 4 months to find this place.  I've moved 9 times in the past 10 years.  I'm willing to do it again for a cheaper place but the first spot I was in when I first got here, which was 1.5 miles from my job was a 430 square foot studio and it was $1300/month.  I did check out another studio before the one I'm currently in that was $775 a month, about a half a mile from where I live now, and it was definitely not a less safe neighborhood.  I think something similar to what I  have now but cheaper would add around 30 minutes each way to my commute.  Or, I'd have to rent a room.

- Travel and charity is high. Why? Can you donate time instead of money, at least until your loans are payed off?

-I'm willing to cut back here.  My mom lost her job a few months ago, so the charity is any money I'd send to her.  The travel is high just because I feel entitled to it.  I'm being honest here.  I worked a while to get to the pay I'm at, which isn't that high, and I don't go out much or drink much or spend alot on clothes or have a car, so I was hoping I could leave travel as an option in my 30s/40s as something I could enjoy while I still have time to do so.  With that said, yes, I can cut this down though.  I know I need to...just would feel 'slightly' deprived...

- Can you find a job that has a tuition reimbursement program?

-My job does have tuition reimbursement.  The actual cost per class is $1000; I pay $150 plus about ~$50 for the book.

- When going out to eat, have a snack before so you can just order an appetizer, small salad, or just a (cheap) drink to save money. Then you're not missing out on the fun while at the same time saving $.

-Good idea.

Kudos on canceling your gym membership and making changes to cut back; that's a really great first step! What you'll likely find is that by following this lifestyle you'll feel less guilty and more aligned with your life goals.


-Thank you...any/all input is greatly appreciated!

EconDiva

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Re: Please review my budget
« Reply #7 on: July 09, 2013, 02:28:20 PM »
What classes are you spending $200/mo on?  Is this something to advance your career so you can earn more?  If not, is there a way to learn this stuff for free?

Project management classes to prepare/sit for the PMP (Project Management) Certification.  I honestly thought this would be the next best step to get a new skill on my resume.  I considered doing this first over an MBA, which would cost much more.  I figured I'd take a chance and see what kind of prospects I get with the certification, and if that doesn't work, then I'd go for a Masters.

However, the real goal is to get the PMP, and get another job with a 15-20% bump in a company that pays even more towards a Masters than my current employer.

Rebecca Stapler

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Re: Please review my budget
« Reply #8 on: July 09, 2013, 03:00:50 PM »
I am wondering what you have in savings as an emergency fund and whether it's hefty enough to start putting your $1000/mo savings into your student loans. What are the rates on your student loans and what are the rates on your savings?

$2k in savings with Capitol 360 mutual fund (formally ING Orange). Student loan rate is 4.25%.  Don't know the current rate on the mutual fund...need to check on that, but I'm sure it's way below 4.25%. 

I was wondering about this as well...should I dump all of the savings into the student loan?  Or do half to max out a Roth IRA and put the remaining half towards the student loan?

Do you mean a money market with Capital One 360? If that's the case, I don't think it's over 1% at this point.
There are a few questions you should answer for yourself before determining whether to pay off the SL or split the difference, etc.: (1) How much E Fund are you comfortable with? With a stable job, a CC that doesn't have a balance, and a Roth IRA with 6 months' expenses, I feel like that's enough E Fund for me to feel stable. (2) Is your savings goal to sock away money and make it work most efficiently for you or is it to rid your life of debts that require you to earn a certain amount of $$ now to pay them off? Or something else? For me, I want freedom from the debt shackles, so although I know I'll make more on average if I invest the money, I would prefer to get rid of the SLs and pay them off.

I think it's a good idea to max out your IRA each year, especially b/c you're in your 30's. At $5500/year, with a $1099 savings rate per month, that leaves you 7 months of savings to put towards your SLs or E Fund. (some people, me included, count IRA principal as E Fund because it can be withdrawn without penalty but that would be in a true emergency) In some senses, just saving $1k/mo gives you an emergency cushion -- if something comes up, you have $1k to put towards it without dipping into any account.

EconDiva

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Re: Please review my budget
« Reply #9 on: July 09, 2013, 03:27:23 PM »
I am wondering what you have in savings as an emergency fund and whether it's hefty enough to start putting your $1000/mo savings into your student loans. What are the rates on your student loans and what are the rates on your savings?

$2k in savings with Capitol 360 mutual fund (formally ING Orange). Student loan rate is 4.25%.  Don't know the current rate on the mutual fund...need to check on that, but I'm sure it's way below 4.25%. 

I was wondering about this as well...should I dump all of the savings into the student loan?  Or do half to max out a Roth IRA and put the remaining half towards the student loan?

Do you mean a money market with Capital One 360? If that's the case, I don't think it's over 1% at this point.
There are a few questions you should answer for yourself before determining whether to pay off the SL or split the difference, etc.: (1) How much E Fund are you comfortable with? With a stable job, a CC that doesn't have a balance, and a Roth IRA with 6 months' expenses, I feel like that's enough E Fund for me to feel stable. (2) Is your savings goal to sock away money and make it work most efficiently for you or is it to rid your life of debts that require you to earn a certain amount of $$ now to pay them off? Or something else? For me, I want freedom from the debt shackles, so although I know I'll make more on average if I invest the money, I would prefer to get rid of the SLs and pay them off.

I think it's a good idea to max out your IRA each year, especially b/c you're in your 30's. At $5500/year, with a $1099 savings rate per month, that leaves you 7 months of savings to put towards your SLs or E Fund. (some people, me included, count IRA principal as E Fund because it can be withdrawn without penalty but that would be in a true emergency) In some senses, just saving $1k/mo gives you an emergency cushion -- if something comes up, you have $1k to put towards it without dipping into any account.

Yes, I did mean a money market account with Capitol One 360.

Efund-wise, I was comfortable with just the $2k honestly for now, IF I start maxing out a Roth IRA.  The student loans I'm only concerned with because having them increases my debt to income ratio.  I'm not sure I'd feel comfortable throwing all of my money towards them and not having a bigger Efund Roth IRA-wise...

Gerard

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Re: Please review my budget
« Reply #10 on: July 10, 2013, 07:30:13 AM »
Hard to give advice on a budget that's a goal, rather than a reflection of what you're actually spending (I think we're used to saying things like "you're spending too much on X!"). But a few things strike me:
1. You don't have to share a studio, right? Would three or four people splitting a large apartment or small house cost less than your current solo studio?
2. Is your sense of neighbourhood safety empirically supported? I mean, obviously you don't want to live somewhere that you don't feel happy, but have you looked at crime stats etc. when considering neighbourhoods, or is it all "feel"?
3. The more you travel, the better you get at it, and the more you become comfortable with some of the cheaper options out there. Ten years ago, staying in hostels would have been completely bizarre to me, but now I do it all the time and I'm busy converting my friends and relatives.

Rebecca Stapler

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Re: Please review my budget
« Reply #11 on: July 10, 2013, 07:50:24 AM »

Efund-wise, I was comfortable with just the $2k honestly for now, IF I start maxing out a Roth IRA.  The student loans I'm only concerned with because having them increases my debt to income ratio.  I'm not sure I'd feel comfortable throwing all of my money towards them and not having a bigger Efund Roth IRA-wise...

I don't think there's a right and a wrong with this question, and I don't think you go wrong by maxing out your 2013 IRA contribution ($5500) and then putting the rest towards your loans.

You could do $500/mo to each, and keep that steady until your loans are paid off (it would take 10 months to max out your IRA if you contribute $500/mo. If you start now, you can max out 2013 by April 15 and then direct your IRA contributions to your 2014 allocation). Or, for the next 4 months direct the savings to your IRA and switch it over to the SLs in month 5. In January, throw all the savings to your IRA for 4 months, and then towards the SLs the rest of the year.

Again, it depends on what feels comfortable to you. I personally love throwing all our $$ at SLs and seeing the balance go down. You might like to throw $$ into your IRA and see the balance go up. Or, you might like the habitual nature of "setting and forgetting" -- set up the $500/mo IRA contribution and the $500/mo SL payment and that setup can last for years before you need to tweak it.

EconDiva

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Re: Please review my budget
« Reply #12 on: July 11, 2013, 04:31:12 PM »
Hard to give advice on a budget that's a goal, rather than a reflection of what you're actually spending (I think we're used to saying things like "you're spending too much on X!"). But a few things strike me:
1. You don't have to share a studio, right? Would three or four people splitting a large apartment or small house cost less than your current solo studio?
2. Is your sense of neighbourhood safety empirically supported? I mean, obviously you don't want to live somewhere that you don't feel happy, but have you looked at crime stats etc. when considering neighbourhoods, or is it all "feel"?
3. The more you travel, the better you get at it, and the more you become comfortable with some of the cheaper options out there. Ten years ago, staying in hostels would have been completely bizarre to me, but now I do it all the time and I'm busy converting my friends and relatives.

1.  Yes, I could do that.  Not sure I want 3 or 4 roommates at the age of 34 though.  And I moved here without knowing anyone so they'd all probably be strangers to me...guess I'm kinda scared/apprehensive about it.  Not 100% against it though.  However, I did look into some other apartments this week and I think I could get the same size studio not too far from my current neighborhood for about $200 less.  I'd easily be willing to do that....
2.  No stats, this is from my coworkers who have lived here longer than me.
3.  True...I do plan on doing my next vacation much cheaper than the last one...

EconDiva

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Re: Please review my budget
« Reply #13 on: July 11, 2013, 04:33:05 PM »

Efund-wise, I was comfortable with just the $2k honestly for now, IF I start maxing out a Roth IRA.  The student loans I'm only concerned with because having them increases my debt to income ratio.  I'm not sure I'd feel comfortable throwing all of my money towards them and not having a bigger Efund Roth IRA-wise...

I don't think there's a right and a wrong with this question, and I don't think you go wrong by maxing out your 2013 IRA contribution ($5500) and then putting the rest towards your loans.

You could do $500/mo to each, and keep that steady until your loans are paid off (it would take 10 months to max out your IRA if you contribute $500/mo. If you start now, you can max out 2013 by April 15 and then direct your IRA contributions to your 2014 allocation). Or, for the next 4 months direct the savings to your IRA and switch it over to the SLs in month 5. In January, throw all the savings to your IRA for 4 months, and then towards the SLs the rest of the year.

Again, it depends on what feels comfortable to you. I personally love throwing all our $$ at SLs and seeing the balance go down. You might like to throw $$ into your IRA and see the balance go up. Or, you might like the habitual nature of "setting and forgetting" -- set up the $500/mo IRA contribution and the $500/mo SL payment and that setup can last for years before you need to tweak it.

Thanks for the input.  I agree; I think there's no right or wrong answer to this as well.  The 'hybrid method' I think is going to mentally give me the best of both worlds...being able to see the SL balance go down while my savings goes up.  So for now, I think I'm leaning towards that....

lifepopsicle

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Re: Please review my budget
« Reply #14 on: July 22, 2013, 02:48:02 PM »
Hi again, It sounds like you've done your best to find a cheap place (even though it seems high to those of us who don't live in a major city.) And, I don't blame you for not wanting roommates at your age--I honestly don't think it'd be worth the extra money to compromise in that area or on safety. It's very admirable that you're contributing money to your mom, I'm not sure what to tell you there except that I hope she can find employment soon.

I think you know what to do: cut down on travel and food, and put the extra money saved towards your loan and investments. Once you become financially independent, you'll have ton of time to travel :) Even though it's expensive, you're fortunate to live in an area with high culture, so utilize all of the free things that Chicago has to offer instead of traveling elsewhere.

As for what to do with your savings, it's simple math. If your loan is 4.25% but you're making 7% on your IRA, pay the minimum on your loan and put more in your IRA. If you aren't, or if you're very risk adverse,(honestly you should choose a different fund because 7-8% is an average return) then put all of your savings towards your student loans.

You're doing a really good job! Don't be too hard on yourself, I think there are simple ways to cut back and still enjoy life--or maybe enjoy it even more :)

Riceman

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Re: Please review my budget
« Reply #15 on: July 22, 2013, 03:04:46 PM »
300 seems high for groceries if you're spending 150 on restaurants, even in a city like Chicago.  I highly recommend learning how to cook indian food.  The taste/cost ratio is fantastic, you'll impress friends if you them over for dinner, and you can order a lot of dry ingredients online, in bulk.  And Indian leftovers taste as good if not better than the originals, which is critical if you're cooking for one.

I recommend any of the books by madhur jaffrey, particularly her Flavors of India book. Sambar with your choice of sauteed vegetables and rice on the side should be on everyone's weekly recipe list.

EconDiva

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Re: Please review my budget
« Reply #16 on: July 29, 2013, 02:34:55 PM »
Hi again, It sounds like you've done your best to find a cheap place (even though it seems high to those of us who don't live in a major city.) And, I don't blame you for not wanting roommates at your age--I honestly don't think it'd be worth the extra money to compromise in that area or on safety. It's very admirable that you're contributing money to your mom, I'm not sure what to tell you there except that I hope she can find employment soon.

I think you know what to do: cut down on travel and food, and put the extra money saved towards your loan and investments. Once you become financially independent, you'll have ton of time to travel :) Even though it's expensive, you're fortunate to live in an area with high culture, so utilize all of the free things that Chicago has to offer instead of traveling elsewhere.

As for what to do with your savings, it's simple math. If your loan is 4.25% but you're making 7% on your IRA, pay the minimum on your loan and put more in your IRA. If you aren't, or if you're very risk adverse,(honestly you should choose a different fund because 7-8% is an average return) then put all of your savings towards your student loans.

You're doing a really good job! Don't be too hard on yourself, I think there are simple ways to cut back and still enjoy life--or maybe enjoy it even more :)

Thanks for the words of encouragement!  I really needed this today! :D

EconDiva

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Re: Please review my budget
« Reply #17 on: July 29, 2013, 02:36:03 PM »
300 seems high for groceries if you're spending 150 on restaurants, even in a city like Chicago.  I highly recommend learning how to cook indian food.  The taste/cost ratio is fantastic, you'll impress friends if you them over for dinner, and you can order a lot of dry ingredients online, in bulk.  And Indian leftovers taste as good if not better than the originals, which is critical if you're cooking for one.

I recommend any of the books by madhur jaffrey, particularly her Flavors of India book. Sambar with your choice of sauteed vegetables and rice on the side should be on everyone's weekly recipe list.

I will look into this...I'm currently doing a major stocking of groceries/staples...

I'm also still keeping an eye out for cheaper studios...