Author Topic: Reader case study: 2014 Budget and Goals  (Read 5118 times)

EconDiva

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Reader case study: 2014 Budget and Goals
« on: December 12, 2013, 03:16:54 PM »
So I've got a lot of goals currently and am feeling like I'm overwhelming myself and not able to do all of them.

Here's what I want:

-Individually save 15% of my gross income in my 401k (Currently saving 10%...my company also puts in 10%, so I need to do 5% more myself.  Current 401k balance: $20k)
-Max out my ROTH IRA (Opened one two months ago..currently doing 200/month...plan is to raise it to 416/month starting 2/2014)
-Save $20k for a house (or condo) ($15k would be downpayment on a home around $65k with a 15 year mortgage, plus an additional $5K for closing costs and initial furnishings).  Plan is to have a roommate once purchased to pay the majority of the mortgage. Currently have $0 saved for this.
-Save to buy a car cash (10k) - Currently have $0 saved for this.
-Have an emergency fund equal to 6 months of expenses, which is $7k (Currently at $1k)

Here is what my revised budget will look like in order to get me to these goals IN 36 MONTHS, which is my preferred timeframe:

student loans        300
electric                        40
cell                        50
groceries/household     150
transit card                  100
laundry                        30
extra 5% into 401k        250
rent+gas                       873
car                       275
house                       550
me                       150
travel                       150
roth ira                       416
emergency fund        166
   
Total: 3500 (Net monthly income: 3500)

A couple of notes:

-Single, age 34 (turning 35 in two months), no kids, no car currently
-Living in Chicago area...planning to move back to Atlanta suburbs in about 3 years (would need a car there)
-Currently renting a 500 sq ft studio that's about a 45 minute commute to work
-"Me" category is for things like: eating out/drinks, going out with friends, cab fare, hair appointments, gifts (usually at work), clothes, etc.
-This is a planned budget, so to get to this the cut backs I'd still have to make at this point would include reducing cell phone plan, cancelling my cable, cutting grocery expenses in half, and limiting travel to once a year holiday visit to my family in South Carolina

A couple of questions:

-Does this seem like a realistic budget?
-Between the 15% to the 401k and maxing out the ROTH IRA, am I putting enough towards retirement?
-Should I save more than $5k out of the $20k for house-related stuff (furnishings, closing costs, unexpected expenses, etc.?)
-If in 3 years when I'm ready to purchase a home, I would like to put more down than the $15k I've saved, would it be wise to use funds saved from my ROTH IRA or 401k by chance (feel free to slap me for asking this question lol)?


« Last Edit: December 12, 2013, 03:20:43 PM by EconDiva »

gooki

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Re: Reader case study: 2014 Budget and Goals
« Reply #1 on: December 13, 2013, 12:55:00 AM »
1 yes, but I'd look at buying a cheaper car.
2 yes, but what are your retirement goals.

What rate are your student loans at?

MissStache

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Re: Reader case study: 2014 Budget and Goals
« Reply #2 on: December 13, 2013, 07:17:39 AM »
Where on earth can you buy a house/condo for 65K?!  Is that possible in Chicago and/or Atlanta?


mlipps

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Re: Reader case study: 2014 Budget and Goals
« Reply #4 on: December 13, 2013, 10:03:20 AM »
Where on earth can you buy a house/condo for 65K?!  Is that possible in Chicago and/or Atlanta?

Lots of 1 and 2 br condos in Chicago on the far northside in the $75-$100k range. Price have doubled in the last year though from being closer to $50k in 2012.


EconDiva

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Re: Reader case study: 2014 Budget and Goals
« Reply #5 on: December 13, 2013, 10:41:49 AM »
How much cheaper were you thinking?

Catbert

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Re: Reader case study: 2014 Budget and Goals
« Reply #6 on: December 13, 2013, 12:13:22 PM »
How large are you SLs and at what interest rates?  I'd kill them off before buying a house or condo.

Don't buy a residence in Chicago if you plan to move to Atlanta with a few years.  (It was unclear to me whether you were planning to wait until after the move to buy.)

You say "rent + gas" is $875 but you also have a line item for "house 550"  Is this latter entry your savings for a house or something else?

I would let my house savings fund double as an e-fund. 

When your budget exactly = your income either you are very disciplined or your headed for a budget melt down.  You need a bit more wiggle room for whatever it is you've forgotten.

madmax

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Re: Reader case study: 2014 Budget and Goals
« Reply #7 on: December 13, 2013, 12:45:22 PM »
-If in 3 years when I'm ready to purchase a home, I would like to put more down than the $15k I've saved, would it be wise to use funds saved from my ROTH IRA or 401k by chance (feel free to slap me for asking this question lol)?

You can't put money back into an IRA/401K once you take a distribution so this is a really bad option. Plus you get hit with taxes (in the case of 401k and gains on a Roth IRA) and a 10% penalty. Some people take out loans from their 401K for downpayment but if you lose your job, it has to be paid back at once. I think that's pretty risky to depend on your employer for a paycheck AND a roof on your head.

MissStache

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Re: Reader case study: 2014 Budget and Goals
« Reply #8 on: December 13, 2013, 01:27:06 PM »
Where on earth can you buy a house/condo for 65K?!  Is that possible in Chicago and/or Atlanta?

Lots of 1 and 2 br condos in Chicago on the far northside in the $75-$100k range. Price have doubled in the last year though from being closer to $50k in 2012.

God, I have got to get out of the DC area. 

EconDiva

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Re: Reader case study: 2014 Budget and Goals
« Reply #9 on: December 13, 2013, 02:34:39 PM »
Will your 401K be vested?

I agree about looking for a cheaper car. I am budgeting that amount for a great minivan, so I believe you can go a good deal less for a car as they are cheaper.

I would do emergency fund, car fund, and house fund all into one bucket since it's three years until you plan to use those to buy.

Yes, it'll be vested.

What do yo umean by putting the e-fund, car fund and house fun all into bucket?  You mean into the save type of saving vehicle/account?  If so, what purpose will that serve? 

mlipps

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Re: Reader case study: 2014 Budget and Goals
« Reply #10 on: December 13, 2013, 02:48:40 PM »
Where on earth can you buy a house/condo for 65K?!  Is that possible in Chicago and/or Atlanta?

Lots of 1 and 2 br condos in Chicago on the far northside in the $75-$100k range. Price have doubled in the last year though from being closer to $50k in 2012.

God, I have got to get out of the DC area.

Exactly what I did last year, traded DC for Chicago! Miss the weather though.