Author Topic: Thinking about next year's budget...Struggling with amount to save  (Read 7449 times)

camarijm

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Hey everyone! I'm looking for some guidance on my budget for next year. Here's some basic details about me:

Age: 23
Income: $26,500/year before taxes
Assets: ~$5000 in a Roth IRA (opened in October and maxed out for the year) and ~$1200 in an emergency fund
Debts: None

I've been looking at my spending for this past year and it comes out to around $18,000 (I'll admit, I'm not the most mustachian girl you'll every meet). I'm living below my means, but the problem that I'm dealing with is wanting/needing to save more. If I max out my Roth IRA next year, that will be saving 20% of my income, but there won't be much left for other savings for a future house or future car and that worries me.

I guess I want to know how you mustachians think I'm doing savings-wise. Should I decrease my contributions to my Roth and instead put them in my future house/car fund? I may be able to save an additional $100 a month, which is at least something, but it still feels inadequate. What would you do in my situation?

I'll add, there's no way I can increase my income since I'm a grad student for at least another 3 years.

dragoncar

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #1 on: December 19, 2012, 09:02:50 PM »
I'd definitely put all savings in the Roth.  If you need to, you can withdraw the contributions again. 

arebelspy

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #2 on: December 19, 2012, 09:53:48 PM »
I'd definitely put all savings in the Roth.  If you need to, you can withdraw the contributions again.

+1.  You can withdraw principal penalty free any time (and even interest under certain restrictions, like home purchase).  Max that Roth, then put the rest of your savings into a taxable account, IMO.

Good for you for being able to max a Roth at such a young age/salary.
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marty998

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #3 on: December 19, 2012, 10:01:39 PM »
I'd suggest your try and find your mustachian threshold. Try budgeting for $1500 of expenses in Jan, then progressively reduce it by $50 a month. i.e. $1350 for April etc.

The month you reach the point where you can't help but overspend will give you are target you can work on.

camarijm

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #4 on: December 20, 2012, 06:32:08 AM »
Thanks for the input. I guess I'll just put everything in the Roth.

Right now my budget is around $1400 per month. I want to stop drinking next year (which will remove $100 a month from my budget) and get more serious about crossfit, possibly to the point of competing. I really want to try to lower my total monthly expenses to $1200 a month so I can at least feel like I'm making progress in saving for large expenses in the future, but I'm not sure if that's entirely realistic right now, which is a little depressing :(

etselec

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #5 on: December 20, 2012, 08:06:39 AM »
If you'd like to post some more details of your living situation and your budget, I am sure there are folks who would be happy to give you specific advice on where you may be able to cut back.

As far as feeling like you can't save enough - think about your career and whether you might be in for some raises or promotions in the future, or whether you have some possible side-hustles you could take on. Mustachians tend to focus more on reducing expenses, but increasing income is the other side of the coin. For someone starting out with a relatively low income, I think it's important to look at possibilities on both sides.

RoseRelish

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #6 on: December 20, 2012, 08:25:19 AM »
Would also be helpful to know what field you're in - to better gauge future income potential.

arebelspy

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #7 on: December 20, 2012, 08:44:44 AM »
I really want to try to lower my total monthly expenses to $1200 a month so I can at least feel like I'm making progress in saving for large expenses in the future, but I'm not sure if that's entirely realistic right now, which is a little depressing :(

I wouldn't be too down.  Your current 18k isn't bad at all, and if you trim here and there it'll edge down.

The key will be keeping it at that level when your income rises.  If you can keep it below 18k (whether your 14k goal, or a midpoint, like 16k) for the next decade and improve your income in the meantime with no lifestyle inflation, you'll be able to save a good chunk.
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matt_g

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #8 on: December 20, 2012, 08:47:28 AM »
Congratulations on graduating college debt free, that is a huge step ahead of the rest of the world!!! I think your spending is already pretty damn low, I'd focus on increasing your income.  Can you get your degree sooner? Can you get a job bar tending on the weekends?

DoubleDown

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #9 on: December 20, 2012, 08:56:39 AM »
Don't be hard on yourself, you're already well ahead of the game by having no loans, low expenses, and any kind of investments at all. You ARE already investing heavily at the moment -- in your future earnings by going to grad school!*

*I'm assuming you're pursuing an education that will, in fact pay decently well for all the time and effort you're putting in. If not, well, then time to reconsider what the hell you're doing ;-)

camarijm

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #10 on: December 20, 2012, 09:20:45 AM »
I'm working on my PhD in biochemistry. I have no idea when I'll graduate since that's dependent entirely on my project and my committee. I can't get a second job because we're not allowed to due to how we are funded. I also work at least 65 hours a week, so I can't imagine working more. I currently plan on going into environment toxicology consulting, which would have a starting salary of ~$80,000. I still have a long time before I graduate, so my future career plans may change.

As for my budget, here's how it all breaks down. The number in parenthesis is the average of what I've paid for the past year:
Rent   405   (405)   
Utilities 80 (73)   
Gas 100 (62)   
Movies 20 (16)   
Amusement 30 (29)   
Alcohol 100 (67)   
Fast Food 40 (22)   
Groceries 200 (133)   
Restaurants 100 (117)   
Gym 125 (125)   
Pharmacy   10 (10)   
Hair   50 (36)   Haircuts and waxing
Cash   50 (27)   Laundry, Meter Parking, etc
Shopping   100 (58)   Includes anything bought at Target (household stuff) and clothes
Total   1410 (1180)

In addition to these numbers, I also automatically save $300 a month for "recurring expenses" (paid once or twice a year, which includes taxes, car and renters insurance, campus parking, travel home, etc. This brings my total monthly spending to an average of $1480. This year I also had some health problems, so I spend ~$1000 on that that isn't included in the budget.

SwordGuy

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #11 on: December 20, 2012, 09:35:58 AM »
I'm working on my PhD in biochemistry. I have no idea when I'll graduate since that's dependent entirely on my project and my committee. I can't get a second job because we're not allowed to due to how we are funded. I also work at least 65 hours a week, so I can't imagine working more. I currently plan on going into environment toxicology consulting, which would have a starting salary of ~$80,000. I still have a long time before I graduate, so my future career plans may change.
You're doing great!

Once you are working in your field at that kind of salary, if you keep your current expense level, a $150,000 house fully paid for is just a few years of work!  :)  Then you'll be socking away money like crazy for early FI.

Sunflower

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #12 on: December 20, 2012, 10:05:14 AM »
Hi Camarijm!

I'm also a grad student with a very similar salary. I agree with everyone else to keep maxing out your Roth and worry about other savings later. I also understand how hard it can be to work the long hours of graduate school and still feel like you have the time/energy to do simple money saving techniques but here are a few tips if you want them.

1. Do everything you can to make your own lunches and bring them everyday. Try making a weekly grocery trip and preparing everything in advance (a big pot of pasta or pre-assembled sandwiches or whatever you most like to eat) so that you can just grab-and-go in the morning. For me, lunch is a social time but I just bring mine along to wherever my friends are eating that day.
2. Similar to above, try to have easily prepared food around for dinners so that you're not tempted to drive through fast food on the way home. Make food in big batches and freeze in individual portions so you can pop something into the microwave when you get home.
3. Biking to work will decrease your gas/parking expenses and add to your exercise. You'll probably resist this advice but consider free exercise for the next couple years instead of paying for crossfit. IMO, one of the craziest things my classmates do is to pay for gym classes when we're all students and have access to the free gym. Start biking into work and try to get some friends together to go to the gym at a certain time to life weights or whatever if you enjoy the social aspect. Or join a free intramural grad student team. $125/month is an absolutely huge expense at our salaries. If you don't live close enough to bike then think long term and consider finding someplace closer when your lease is up.
4. Haircuts and waxing is also pretty high. Get a low maintenance haircut from someone you trust 1-2x per year or buy some clippers/scissors/waxing supplies and learn to DIY.
5. Try to lower your clothing budget by being aware of what you're buying and whether you really need it. You're spending hours and hours in lab everyday....no need to have a different outfit for every day of the month. It's ok to look like a graduate student. If you're really into clothes/fashion then try shopping at thrift stores.
6. Try to limit restaurant purchases by planning ahead with dinners or keep snacks in lab so that you can still go out for the social aspect but can choose to get a appetizer or just a drink instead of paying for a whole dinner. If restaurants are mostly weekend activities, try moving the venue to a pot-luck at someone's house.

Good luck!

camarijm

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #13 on: December 20, 2012, 11:00:19 AM »
Thanks Chemistay! Glad to see another grad student out there!

As for your tips:
1. I always bring my lunch with me to lab. Maybe once a month I will by a salad from the cafeteria, but that will only be because I went to a seminar that had free lunch but they ran out. Free food is one of the perks of being a grad student.
2. I usually do make my own dinner. I eat a mostly paleo diet, so I don't eat anything with gluten or processed foods. Granted, I'm not perfect, so I do eat out about once every other week. Sometimes I go to brunch on Sunday if I have to go into lab, but I decided to cut that out a month ago. I will add, restaurants does include any alcohol with those meals, so if I do stop drinking, that will lower my overall restaurant spending even if I keep eating out twice a month.
3. As for crossfit, that's not something I'm willing to give up. I just started in September and absolutely love it. It's a much better environment than the rec center on campus. I also want to complete at some point in the future, so it's become more of a hobby for me. I'd cut from other areas of my budget to avoid giving it up. It is because of crossfit that I don't bike to campus, since I'm too tired after workouts to bike. I may start taking the bus to campus on the days that I don't have to go to the gym, but with how unpredictable my schedule can be everyday, it's easier to drive.
4. I only get my hair cut 3-4 times a year. I don't color. I do have bangs, which makes fewer haircuts impossible (I've tried cutting them myself at it doesn't end well). The waxing is a necessary evil. I try to only do it every 1.5-2 months. I have very thick brows that aren't effectively tweezed and require good wax that I haven't been able to find in a store. I'm also a single 23 year old, so I like to look decent :)
5. Once I looked into the expenses in my shopping budget, it looks like I've only spent $200 on clothes this year, which I think is pretty good. Everything else in the shopping category is from Target, meaning it's either household items (toothpaste, toilet paper, foil, etc.), or food from Target, since I don't split those out into the grocery budget.
6. Eating smaller meals when I go out is probably a good idea. I do often go to restaurants when I'm starving. Maybe I'll start keeping nuts in my car to munch on if I'm going out.

I think I really need to focus on the alcohol/eating out area. If I cut out alcohol, that will save me at least $100 a month. It will also decrease my restaurant and fast food spending if I don't have the drunk munchies. Thanks for the advice!

jnik

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #14 on: December 20, 2012, 07:24:32 PM »
I have no idea when I'll graduate since that's dependent entirely on my project and my committee.
Don't let it be too much that way. I eventually had to lay down the law with my advisor and say "I know there's lots of things you'd like to see me do. But I think I have a PhD here and I'll see you at the defense." It did, indeed, work.

It's easy in grad school to get settled into the routine, just show up and get something done. Better to keep your eye on the prize, have a plan for getting done, and make sure 90% of what you do goes to that end. (10% for keeping the advisor happy projects!)

icefr

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #15 on: December 20, 2012, 10:26:20 PM »
4. I only get my hair cut 3-4 times a year. I don't color. I do have bangs, which makes fewer haircuts impossible (I've tried cutting them myself at it doesn't end well).

Many hair salons will do a bang trim for free. That could half your hair cut frequency. You could also try a hair school. They could be cheaper, if you're willing to risk a student working on your hair!

camarijm

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #16 on: December 21, 2012, 07:29:23 AM »
Quote
Don't let it be too much that way. I eventually had to lay down the law with my advisor and say "I know there's lots of things you'd like to see me do. But I think I have a PhD here and I'll see you at the defense." It did, indeed, work
My boss is very good about getting us out. The majority of his students are done in 5 years or less. I am just a second year and just joined the lab in May, so I still have a long way to go.

Quote
Many hair salons will do a bang trim for free
The girl I go to charges $10 for a bang trim. My hair grows so fast that even getting it cut every 3 months it's already grown ~3 inches. I've debated a hair school, but I still haven't had the courage to do it. If they mess up bangs there's really no way to cover that up.

Self-employed-swami

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #17 on: December 21, 2012, 07:42:39 AM »
I'm not a 'poor student' and I still frequent the hairdresser schools for my haircuts.  I do still indulge in colouring my hair 3 times a year as well, and it cuts the expense way down.

Good luck with your journey, and like others said, try not to be so hard on yourself about the amount you are saving.  You are living very frugally already, and the biggest thing is that you have no debt!

:)

HighOrderGuiltComplex

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #18 on: December 21, 2012, 12:34:21 PM »
I know you love your crossfit but I do want to point something out.  The crossfit is really costing you at least $260 a month. $125 for gym membership + $62 in gas b/c too tired to bike thus driving + ~$50 in insurance + ~$30 parking on campus/meters. 
So one way of looking at it is do you love crossfit enough to shell out $260 a month/ $3120 a year/ 11% of your Gross income?

Besides the extremely high amount you spend on food (I feed myself and boyfriend on the same amount you spend on just one person) you seem to be doing really great!

I also agree with putting the savings into ROTH.

jnik

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #19 on: December 21, 2012, 01:56:50 PM »
I know you love your crossfit but I do want to point something out.  The crossfit is really costing you at least $260 a month.
Seems there are a lot of Crossfit addicts around. You do all know that the WOD is posted online, right? And for what you're blowing in gym membership you can pretty easily kit up with chinning bar and some freeweights?

CF's about badassity and full-body functional moves instead of persnickity different toys for every single possible motion. So why do so many keep on shelling out for the gym? Professional guidance is fantastic for getting started and occasional pointers, but for every workout?

camarijm

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #20 on: December 26, 2012, 03:35:41 PM »
So why do so many keep on shelling out for the gym?

It's really a lot more than just having a coach who makes sure you're going everything right. There is a lot of equipment that my crossfit gym has that a regular gym doesn't (like kettlebells) and we don't follow the main site WOD because some of the workouts don't seem beneficial. I mostly continue CF because of the community. I work out with people that are serious about living healthy lives. We cheer each other on in the WOD, we have paleo cookouts together, and we push each other to be healthy and strong. For me, that's more than worth what I pay and not something I could get from working out alone.

I think I'm going to start biking everyday. My gym is only about 1.5 miles from my house, so I'll just rally and make myself bike that home since it's not too far.
« Last Edit: December 27, 2012, 03:58:31 PM by camarijm »

cbr shadow

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Re: Thinking about next year's budget...Struggling with amount to save
« Reply #21 on: December 27, 2012, 01:30:25 PM »
jnik has obviously never been to a good crossfit gym before where the workout isn't just grinding through a bunch of movements in your basement..  A nearby crossfit gym was offering "crossfit personal training" which was 1-on-1 with a trainer for $125/month.  He almost went out of business when he realized people dont WANT to workout alone - you're there cheering on everyone else and have everyone get in shape together.  It's hard to understand if you haven't participated, especially if you're only looking at the bottom line and trying to cut cost.  It beats the hell out of working out alone.  Even Mrs. MM is part of a crossfit gym, and MMM recently joined if I'm not mistaken.