Some advice?

kn1216

I will be getting married in August and we are trying to plan out our budget for our married life. We combined bring home $6,800 after is 6% contribution to retirement. He has health insurance that when I am added will bring our income down to $6,600. I have an IRA with about $150 in it, that I have stopped contributing to to help pay for the wedding. We don't live together or have places of our own yet, so we don't know how much to budget for each thing. How should we allocate our $6,600 between home expenses, retirement, other savings (we don't have any besides wedding money right now), fun, and debt payoff (we are a combined $30,000 in debt, I don't know any of the interest rates)?

bparkhur

A little more background info would be helpful here, I think. What's the $30,000 is debt comprised of? Student Loans? Credit Cards? Cars? Something else?

If I understand you correctly, neither of you have a place of your own, so does that mean you currently live rent-free?

I'm wondering where the $6800 a month has been going already if you have no savings and don't live alone.

kn1216

I live with my parents and he lives with his, we just started our jobs with that income. The debt is his car and we both have a couple credit cards.

als1982

There are many ways to do this, my here is my suggestion:

Sit down and make a list of all your current bills and debts putting those into a spreadsheet or ledger.  Really think hard about everything including gym membership, cell phone, car insurance, student loan payments, etc.  Deduct that from the amount you make.  

Then, I'd create a line item for additional retirement in the amount of $612 which would bump your total contributions to healthy 15%.  Take that every month, divide it in half putting each half into a ROTH IRA for each of you.   Set yourself up now for future success.

From there, you can either decide if lifestyle or housing is more important to you.

If it's lifestyle, think about how much each of you need for a quality of life that is enjoyable.  Allocate buckets or line items of money for things like your fun money, his fun money (ex. H uses most of his for sports season tickets and buying his daily Monster, things I wouldn't do but since it's "his" money, I can't judge).  Also think about shared entertainment (eating out, date nights), things like cable TV (is that important to you, or an area where you can save money by just using a streaming service?), clothes (we use our fun money buckets for this, but you can do a separate line item or bucket) and food/toiletries ($100 a week is pretty doable here, unless you eat organic or have special dietary restrictions).

From there, whatever is left is the amount you have to spend on housing.  Do remember to including in this line items for gas, electric, water, sewer, trash and renter's insurance.  You may not have all of those utilities to pay, but it's better to prepare as if you will.

If housing is more important, start with the cost of your ideal apartment and an estimate of the above utilities, then take whatever money is left over and budget out the lifestyle line items.

We have also added a "miscellaneous" line in each budget of $150.  And of course, if you don't have an emergency fund, do make sure to allocate some money monthly to start building that up.  You'll find a variety of opinions on this board as to how much others hold in that, but we feel fine with just $1,000.

Since you're starting out, you may need furniture.  If it's a lot, I'd find a store with a 0% interest deal over a longish period (18-24 months or so) and do that.  Just make sure to add a line item to you budget for this payment, and absolutely make sure you have it paid off well in advance to avoid the avalanche of interest that will happen if you don't have it paid off by the deadline.

Erikan73

Start tracking your spending now, not counting wedding stuff. This way you can see what do you currently spend your money on. That will help you to figure out a budget. Go online and see what cable & internet run in the area. Talk to any famil and friends who live in apartments and ask them on average what do they spend on their different utilities. Here are different things to plan for

• Food
• Gas for Car
• Car Insurance
• License Plates (My annual cost is $60.00 per car so divide that by 12 and put that much away each month for it)
• Car payments (even if you don't have any now, it's good to leave room for it for the future. You can put the money away every month and when you need a car you'll have money saved up or you can use it for repairs when needed)
• Electric
• Cell Phones
• Cable
• Internet
• Renters Insurance
• Laundromat
• Clothing
• Memberships you may have
• Going out to eat (you know you will occasionally)
• Entertainment budget
• If you like to travel a monthly vacation budget so that you can save up for trips
• Pets if you have any

This isn't a complete list, but gives you some things to think about...Good luck!

hoffse

First, you need to find a place you can rent for relatively little money - with your incomes, I would look for a place that's less than $1,000/month.

Develop a budget for things you must pay for - food, gas, utilities, any prescriptions, etc. Keep it relatively bare bones for a couple months and see what that feels like.  Don't immediately sign up for things like cable until you see what your leftover income actually is.

As a married couple, H and I allocate about $600-$700/month for food, gas, toiletries, pet food, and paper products.  Gas prices have been great recently, but that's not guaranteed to stick around.  We also buy most of our food in bulk, so some weeks we spend very little and other weeks we stock up.  When it's all netted out, we rarely go over this budget.

I would also start with maybe $100-$200/month for "fun" money - that's for things like eating out, buying clothes, even buying gifts for other people.  Make yourselves be strict with this.  

Finally, another suggestion is to sit down with your FI and add up all of the annual dues you guys have to pay - think about things like car insurance, life insurance (if you don't have life insurance, look into getting a term life policy for each of you), memberships (ie: Costco, Amazon prime, etc.).  Add it all up and divide by 12.  Put that much away each month in a short-term savings account so that when those dues pop up your budget is not derailed.  H and I personally put away $200/month in our "dues account."  This covers all of our annual fees and our professional/licensing dues for our jobs that aren't covered by our law firms.  We also make a point to save an extra $500/year in this fund for things like tires or other car maintenance.  Some years we spend that $500, other years we don't and we just let it roll over.  We also drive newer cars - if you drive older cars, you might want to save a little more than that for car maintenance.

I would then allocate your extra income in the following order:

1) Small emergency fund - if you are renting, you probably don't need much, but you need to make sure you guys can afford to pay for things like insurance deductibles in case one of you is in an accident.  Put that amount aside.  Some on this board will likely suggest starting with $1,000.  I personally would want a little more than that to start.

2) Any credit card debt - it's extremely high interest.  Don't use credit cards if you can't pay them off in full each month.  Many on this board work credit cards for points (I'm one of them), but most of us also don't pay a penny in interest to use them.  If you or he are carrying a balance on a credit card, cut up the cards and switch to cash.

3) Retirement - combined, you and he need to work to get up to 15% of your GROSS income.  Gross income is your stated salary, before taxes, insurance, etc. are taken out.  I'm assuming you are in your 20's (correct me if I'm wrong).  If so, make it a goal to be up to 15% before you turn 30.  If you can do that, then retirement can become one of those things that you set and forget.

4) 3-6 months emergency fund - figure out what you guys spend per month in a bare-bones scenario, and put away that much away.  This is designed to protect you from things like job loss.  If you guys find you can afford to live on either one of your incomes, then that in itself is a built-in emergency fund.  If you need both incomes to meet your bare bones expenses, or if your jobs are not particularly stable, then I would probably shoot for 6 months or more.

5) Low interest debt - It's important to pay this off, but if it's low interest then I personally don't have a problem paying minimums while you're getting the rest of this sorted out.  That's a personal decision.  Others on this board would make this a higher priority.

brij2006

I try looking at these as if my H and I were talking to our former engaged selves, and what we would recommend to them.  So, pick up a copy of Dave Ramsey's "Total Money Makeover" book and live by his teachings.  Get yourselves set up now for financial success.  Don't get caught up in 0% cards on things you don't need, and get the debt paid off so you can have that much more flexibility with your incomes.

simplyelise

This is a really big question and I hope you and your husband-to-be are taking plenty of time to talk about your views on money and budgeting now. If you don't have pre-marital counseling that deals with finances, I highly recommend you attend Financial Peace University. Even if you don't come away planning do follow Dave Ramsey's advice exactly, it will force you two to look at your finances now, learn to budget, and plan for the future.

We don't live together or have places of our own yet, so we don't know how much to budget for each thing. You're getting married in August, so where will you live then? If you haven't already, you need to find a rental asap to make sure you can move in around the wedding. Just because you guys got your big adult jobs and salaries does not mean you have to jump right in to the biggest thing you can afford. I'd recommend 20% or less of your takehome going to base rent. 

Rent: You'll know this when you find a place. Don't forget you'll probably have to pay a deposit and first months rent all upfront. 

Utilities: You can most likely call the utility company that services your rental and get historical pricing information to know what that property's utilities usually cost. Your apartment/landlord will let you know the provider(s). If that information is not easily available, I'd just start your estimate at $200/month for electric/gas/water/sewer and then adjust your budgeting as you get a feel. You will also likely have deposits that you have to put down and you could have turn-on fees on your first bills.

Cable/Internet: You will be able to get information on these costs once you know where you're living and which providers you can pick from. I went four years after college graduation without cable and only netflix and an antenna and it was just fine. But if you guys want to go for cable, you should call the different cable providers and see what deals you can get. You will definitely have a deposit and set-up fee for this service.

Emergency Fund: I'd say this is your first priority. You want to figure out how much you need in savings in case of emergency. Maybe you want enough in there to cover both car deductibles and your health insurance deductible and an extra $1000. Eventually, we all recommend you get this to 6 months of expenses, but you might not want to do that until you meet other priorities.

Car Debt: That's a lot of debt for a car, especially just starting out. Did he just buy that vehicle recently? Personally, I'm opposed to financing vehicles because you are very frequently underwater in car loans as the car value goes down a lot more quickly than you pay off principle. You guys need to make a decision about how you want to handle that. Just as a plug, we started with 55k in debt when we got married last october and we're already down to 37k and we take home almost 1500 less than you guys. You could probably knock out your debt in about 10 months if you were focused. Then imagine all that extra money you'd have to put towards retirement and savings (maybe for a down payment?? or travel?).

Credit Cards: I am pretty sure that all on this board would say that eliminating your credit card debt is something you need to tackle pretty quickly. It sounds like maybe credit cards are not a great idea for you guys right now, so maybe you can decide together to stop using them for fun or impulse purchases. You could do something where you have a fixed and budgeted cost that you put on a card each month then pay in full (I do gas fill ups on CC then pay off the same day). 

Budgeting: It takes a couple or few months to really get budgeting down. The key for many people is being realistic not optimistic. Your budget is not a goal, it's the plan for your money. The number one important thing here is that you guys have to work together on it. Even if you keep some of your money separate after marriage, you still have to create a plan together. Here's a simple budget form to get you started thinking about individual line items: link

As for groceries, we do $340 for two people but we are really on top of sales. I'd probably start at $400 and see if you can cut that down or not after a few months. Fun money varies wildly. We do $60 each a month, but we're in debt payoff mode at the moment to get rid of student loans. I think I'd recommend $100 or less each for sure.

I looked around a bunch and this is the best link I found for questions you guys can review together about money. Pop open a bottle of wine and start talking: http://www.thecentsiblelife.com/2012/05/50-money-questions-to-consider-before-marriage/

Sisugal

I definitely disagree with furnishing an apartment with MORE credit - even if it is 0%.  SAVE first - they buy piece by piece.  You can put your mattress on the floor to start if needed and buy lawn furniture to use indoors until you can afford something better.

2 good books to read
Total Money Make over by Dave Ramsey - (motivating and helpful for getting out of debt)
Smart Couples Finish Rich by David Bach (great for working with your partner to establish a financial plan that works for you both - using your money to meat your goals)

MommyLiberty5013

1. Find a rental. Ditto PPs who talked about paying deposits and first and/or last months' rents ahead of time. The general housing rule is to spend no more than a given percentage of your pre-tax income on housing. If you're in a low cost of living (LCOL) or high cost of living (HCOL) area your percentage is different. For low it's 25% and for high it's 30%. For example, if you make $80k before taxes, and you're in a LCOL, then 25% or $20,000 annually or $1,666 monthly should be your TOP housing cost. This cost includes rent, gas, trash, water, sewer, electricity, and renter's insurance. Caveat: If you can find a less expensive place, even lower than 25%, that is close enough to work for both of you and in a safe place, but is lower frills then go for that versus a rental that costs $100-$300 more and has higher-end finishes and a pool, for example. When DH and I started out, we had a 2 bedroom basic apartment. At that time, it was normal to have an "office" (our 2nd bedroom) as this was pre-wifi days (can you imagine). If we did our newly-wed apartment again, we probably would have opt for a 1-bedroom and just pay for wifi.

2. Property insurance: You hopefully have auto policies. When you marry you will have an option to switch your insurance to one company. You just need to compare the policies and the customer service. Renter's insurance...you need this. Your landlord is not responsible for loss or damage to your belongings like your clothing, electronics, furniture, etc. due to natural disaster, theft, or structural damage like fire. Renters' insurance covers your belongings. You may get a better deal on your insurance package if you bundle the renters' with your auto. Depending on how valuable your e-ring is, you may wish to add a personal article floater to your renters policy. It's an insurance rider that gets added to your base renters policy (for a fee) and specifically covers your e-ring. Some MMer's here have these riders, others do not.

3. E-fund. Another priority for you. The PPs did a good job of explaining it. I'd start with $1,000 and then work up to 3 months living expenses and do that STAT. That's just MHO.

4. CCs and car loan. Know your rates and your terms. Once you know this you can create a plan for paying off the debts.

5. Buying stuff...it's a big thing that happens to newly-weds. You're excited to build a nest together and you splurge. With renting, your largest expenses will likely be furniture. However, you can find AWESOME deals on Craigslist for gently-used things that will last. Case in point, I just bought an antique dresser with hand carving on the drawer fronts for $90 cash because the seller has to have back surgery and needed extra money to pay co-pays for the doctors! It's stunning! Cheap too considering what it is and anything like it in a real store would be $$$$. I think really the only thing I wouldn't buy used is my mattress. But when you buy a mattress DO splurge on one of the $100 waterproof mattress protectors for it that they will attempt to sell you. SO worth the expense (pets, illnesses, pregnancy [going into labor], kids...all reasons to protect your mattress). You will likely get a lot of nice gifts for your shower and wedding, but anything you don't receive that you do really need, you may be able to find for less money on Craigslist or eBay.

6. You two are making great money right now and living rent free for the next few months, so my next advice is to just be reasonable with the wedding expenses. Seriously. Don't go into debt over your wedding. It's just not worth it. If you can, set a savings goal for the next few months prior to your wedding date that you save $x. Maybe you attempt to save that 3 months of living expenses! And, you seriously could do that since you have no rent costs.

7. During the first 6 months of marriage, meet with an attorney and get proper wills and power of attorney documents drawn up including medical power of attorney. Also, do living wills/health care directives. This may cost you a few hundred bucks, but it will aid your spouse and/or family if something should happen to one or both of you and you die or are incapacitated.

Xstatic3333

PPs have had great advice! I'll add that for your first rental, I highly, highly recommend spending even less than the ratios given unless you live in a very HCOL area. We make about what you guys make, and lived in MA, which is on the expensive side, and our rental was $875. This was very helpful in saving up our DP.

In terms of priorities, I'd save a $1000 e-fund (wedding gifts may take care of this for you!), then pay off the CCs, then raise the e-fund to $3000-$5000. At that point, you can decide on your next priority. For us, we are ok with low-interest car debt and worked on our DP once our CCs were paid off.

For furniture, I'm on team "cheap furniture you pay for in cash." Since you're renting, you may end up in a situation down the line where pieces you buy now don't work or fit in a future home. We got a lot of our furniture from Ikea, and also scored free couches off family who was moving. Craigslist is also great, though I only trust it for "hard" pieces, nothing upholstered. Now that we own we are slowly replacing things when money becomes available.

Finally, definitely get in the habit of talking money with your FI. Whether you work through "Smart Couples Finish Rich", go to FPU, or just read this thread together, this is so important. My H had a family taboo against talking about money, and breaking it was tough but important.

abrewer5

 

Xstatic3333 said:

PPs have had great advice! I'll add that for your first rental, I highly, highly recommend spending even less than the ratios given unless you live in a very HCOL area. We make about what you guys make, and lived in MA, which is on the expensive side, and our rental was $875. This was very helpful in saving up our DP. In terms of priorities, I'd save a $1000 e-fund (wedding gifts may take care of this for you!), then pay off the CCs, then raise the e-fund to $3000-$5000. At that point, you can decide on your next priority. For us, we are ok with low-interest car debt and worked on our DP once our CCs were paid off. For furniture, I'm on team "cheap furniture you pay for in cash." Since you're renting, you may end up in a situation down the line where pieces you buy now don't work or fit in a future home. We got a lot of our furniture from Ikea, and also scored free couches off family who was moving. Craigslist is also great, though I only trust it for "hard" pieces, nothing upholstered. Now that we own we are slowly replacing things when money becomes available. Finally, definitely get in the habit of talking money with your FI. Whether you work through "Smart Couples Finish Rich", go to FPU, or just read this thread together, this is so important. My H had a family taboo against talking about money, and breaking it was tough but important.

I agree with all of this and the other PPs, the only thing I want to add is that you need focus on retirement savings as soon as possible. Get your credit cards paid off and then start putting at least 10-15% of your income away for retirement. You will thank yourself later. Once you have your retirement contributions squared away then I would focus on other goals like paying off the car loan, saving for a DP, etc.

ETA: I would also steer clear of 0% offers on furniture, and get some cheaper/slightly used stuff for now. I don't know about your area but in my area there a ton of facebook swap groups including those dedicated to only furniture and you can find some really good deals. My sister scored a couch she was looking at the store priced at $800 for $150 and hardly ever sat in on one of the swap sites.

short+sassy

Sisugal said:

I definitely disagree with furnishing an apartment with MORE credit - even if it is 0%.  SAVE first - they buy piece by piece.  You can put your mattress on the floor to start if needed and buy lawn furniture to use indoors until you can afford something better.

2 good books to read
Total Money Make over by Dave Ramsey - (motivating and helpful for getting out of debt)
Smart Couples Finish Rich by David Bach (great for working with your partner to establish a financial plan that works for you both - using your money to meat your goals)

Ditto on the other PP suggestions of used/thrift store furniture for now (though nothing upholstered).

A cheap option for a bed is to use a Hollywood frame.  It is basically a plain, steel bed frame.  I think they are $60 or $70 at Walmart.  You might even be able to find one of these used!

The general rule on housing is you don't want to spend more than 30% of your gross income on housing.  Most landlords won't even rent to you if you earn less than that anyway.  Of course, LESS is always better! 

Sisugal

Actually I like to look at NET income, since you cannot spend GROSS amount.