Reader Case Study -- Does this Budget Work

[multi-vitamin]

EDIT February 25th  I made some changes to the budget below based on recommendations from all of you. I live for $100/month at my parents place, which is located 22 miles from School and 16 miles from work.  I am attending a state university, so tuition is as cheap as possible.  The new plan is to pay off the Car Loan in 9 months time, and save $537.91 each month.  When the car is paid off, then I will trade it in and put some of that savings to buy a fuel efficient MMM Car.  Looks like I'll need to spend somewhere around $10k  to get a small hatchback that will have about 100K miles on it.  My tade in should be worth about $7500 - $8000 according to KBB.  I found a 2008 prius(130K miles) on Auto Trader for $7,995. Should I just trade it for that and not pay anything extra? Doesn't the maintenance bill go way up after you break $100k miles? 

Anyway, it would be great if I didn't have to spend any money on the vehicle and that savings of $537.91 could go to build up 5K in an emergency fund and then focus on investments. My savings account/emergency fund has $450 now and my checking has $1200.

I updated the numbers in the budget below.



February 24th.
Background:  I am 28 year's old and going back to university -- looking to change careers. I currently work full time in the non-for profit industry , and have reached the ceiling at my job making $44,000 per year.  More importantly, I no longer enjoy my job and need  a change.  Another note, I'm living at my parent's place while I attend school

Income after Taxes and 3% deduction to Work's Simple IRA: $2,536.24 per month

Expenses: Car payment $800/month (Should pay off car loan in 9 months)
                            car insurance $104/month
                            School books $25/month
                            Rent to Parents $100/month
                            Tuition: $659.33/month  ($989 per 3 credit hour course, and take 8 courses per year)
                            Gas $140/month (I have been doing a lot of pointless extra driving, if I go straight from school to work that saves 78
                                                         miles per week)
                            Car maintenance - $20/ month (it costs $90 for oil change and inspection, and I can get that done every 4.5 months)
                                                           
                            Company pays for phone $0/month
                            Food for me only (no family): $150/month (This has been higher around 300 to 500 per month, I can drop it lower by not eating at fast food and other restaurants)
                Total: $1,998.33  Money not accounted for: $537.91

Assets:  2012 Chevy Impala worth $8,700
                        $1554 in Simple IRA - Vanguard Target Retirement Fund for 2055
                        Savings Account $450
                        Checking Account $1200
                 Total: $ $11,904

Liabilities:  Car Loan at 4.89%, still owe $7083

Question( from February 24th): Should I pay off the car loan as fast as possible? or save for school? or invest in index fund? What is the best way to handle the unaccounted for money.  Does my budget make sense?  Any advice would help.

[cshaw]

A couple of observations:  that’s a big car for driving one person too and from work and school.  If you are not underwater on the vehicle I’d consider trading it for something that gets 30+ MPG.  Any driving you can eliminate is money in your pocket.  Is biking or public transportation an option for work or school?  If you decide to keep this car, yes make it a priority to pay it off as soon as you can, that should be one of your highest priorities.
You are changing your oil time based.  What kind of miles are you putting on it in 3 months?  I typically change my oil every 4-5000K miles depending on the vehicle and kind of driving I do.  I can change the oil and filters in all three of my vehicles for less than $90: consider doing this yourself.   

[Cwadda]

Car payment $300/month
 Gas $175/month

How good is your car on gas? And is it reliable?

it costs almost $90 for oil change and inspection,

That really shouldn't be the case. It should only cost $30 for an oil change and inspection.

Food $300/month

For just yourself? How often are you eating out and does this include alcohol?

[Travis]

I'm a little confused. You include school costs in your budget, but you're asking whether or not you should save for school. If looks like you can afford school, so I'm going to look at your overall financial situation.

You're paying $300 a month for a car worth $8700?  Is this a 3 year loan?  According to your budget you have enough extra at the end of each month that you could pay it off in 7 months. DO IT.

Where are you driving that requires $175 a month?  Doing some rough math that works out to you driving your Impala 50 miles a day every single day.  And why are you spending $90 for an oil change? The oil for a sedan should only cost you half that at the most.  Every 3 months is wasteful both for your wallet and the environment.  Check your owner's manual and get the oil changed according to that schedule (usually 5000 miles or more).

What are you eating that costs $300 a month?  Does that include eating out? 

I'm also concerned that you don't understand what you have in savings.  You have a loan out on a car.  That is not an asset.  That is a liability.  That car will decline in value every year. Do not count it as a monetary asset even after you pay it off.  According to your current budget you have an extra $1000 a month you're not sure what to do with, and cutting your food, fuel, and car maintenance to reasonable levels should free up a couple hundred more.  After your car is paid off add another $300.  Save this money. Invest it.  You're looking into changing careers which puts your income in question and you have liquid savings equal to about a month of spending.

[Monkey Uncle]

A couple other observations:

Shop around for cheaper car insurance and/or review your coverage.  I pay a little less than $100/mo to insure 3 cars and 3 drivers, one of whom is a 21 y/o male.  Of course, if you have blemishes on your driving record, you may not be able to get a better deal.

Do you have other options for school?  $12,000/yr for tuition seems pretty high (sounds like an expensive private school).  Are there state-run or community college options?

[terran]

Wouldn't 12 classes per year at $975/class mean you need to save $975/month to save up for the next year/semester?

[druth]

You may be able to cut your book budget back either by using a site like bookfinder.com, or searching yourbook filetype:PDF in google or torrent(less legal, your decision).

That is a whole lot of money for food.  It should probably be closer to 150.  Are you buying it for your whole family?

Learn how to change your own oil.

[KCM5]

You may be able to cut your book budget back either by using a site like bookfinder.com, or searching yourbook filetype:PDF in google or torrent(less legal, your decision).

Also, for books they are often available at the school library, which you can renew online for the entire quarter/semester. Check that out, too.

[Travis]

You may be able to cut your book budget back either by using a site like bookfinder.com, or searching yourbook filetype:PDF in google or torrent(less legal, your decision).

Also, for books they are often available at the school library, which you can renew online for the entire quarter/semester. Check that out, too.

Regarding books, I just finished my Masters and in two years only bought two books from the school bookstore because they were so new and specialized nobody else carried them.  For every other book I bought it used for pennies on the dollar.  The school wanted $75 for a new book and $45 for it used.  I found it on Amazon for $10 and it had just a couple margin notes from the previous owner.  One book I bought for a similar outrageous discount and it had never been opened and shipping cost more than the book itself.  Shop around.

[KCM5]

You may be able to cut your book budget back either by using a site like bookfinder.com, or searching yourbook filetype:PDF in google or torrent(less legal, your decision).

Also, for books they are often available at the school library, which you can renew online for the entire quarter/semester. Check that out, too.

Regarding books, I just finished my Masters and in two years only bought two books from the school bookstore because they were so new and specialized nobody else carried them.  For every other book I bought it used for pennies on the dollar.  The school wanted $75 for a new book and $45 for it used.  I found it on Amazon for $10 and it had just a couple margin notes from the previous owner.  One book I bought for a similar outrageous discount and it had never been opened and shipping cost more than the book itself.  Shop around.

And make sure to sell them on half.com or some other site when you're done with them.

[multi-vitamin]

I edited the original post to answer some questions, and to retool the budget. There are also two questions about cars.

Thanks for the help!

[Cwadda]

Looks like I'll need to spend somewhere around $10k  to get a small hatchback that will have about 100K miles on it.

That's probably a bit too much unless you're getting a Prius which will cost more in the $10k range (after maintenance). The biggest thing to check in terms of maintenance is the Hybrid battery. I think these can cost up to $1000, but I've never owned a Prius.

You have other options for cars too http://www.mrmoneymustache.com/2012/03/19/top-10-cars-for-smart-people/. I bought an '07 Mazda3 sedan for $6650 ($8000 after new tires and one bearing repair). It gets 30 MPG. Not going to get the 50-60 MPG hybrid fuel economy, but I wanted a car that goes fast and I enjoy driving, but still is good on gas. For hatchbacks other than Prius, I would look Honda Fit and Mazda3 as well.

Car maintenance - $20/ month (it costs $90 for oil change and inspection, and I can get that done every 4.5 months)

Where are you going that charges you $90 for an oil change? That's outrageous. An oil change should be $30. If you budget $20/month for all car repairs (brakes, oil change, minor repairs) then that's more reasonable.

Food for me only (no family): $150/month (This has been higher around 300 to 500 per month, I can drop it lower by not eating at fast food and other restaurants)

I think $150/month including alcohol is a great starting budget for you.

[Monkey Uncle]

Depending on where you live, you should be able to find a good car in your mileage range for less than $10k.  For example, I ran a hypothetical 2010 Toyota Corolla with 100k miles through Edmunds' appraiser and came up with about $7k - $8k for a purchase price (varies depending on whether it's a private party sale or dealer sale).

[justajane]

Look into a Kia sedan. They don't retain their value (good for you buying it used) as much as Toyotas and Hondas, and they are good cars. You should be able to shave a couple thousand off that number. And don't let people convince you that Kias are crap. Perhaps they were in earlier decades, but they aren't anymore.

[KD]

That car is eating your lunch (and your FUTURE)!!!  Seriously???? 

too Too TOO much car expenses!!!  *HEAD EXPLOSION*

Why I oughta face punch ya!!!