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Evaluate my budget, long
We are in the process of renewing our mortgage, got a great rate and increased our biweekly payments to pay it off sooner, so excited! But to be honest, we have next to nothing saved for retirement, so we asked our financial planner to help us figure out our retirement plan. She said to come back to her with a maximum monthly figure we plan to put away, and she'll help us figure it out from there. We've never budget, and I'm finding it impossible to plan it all out. Plus, we currently have no savings or emergency fund. So we'd like to put these into the new budget as well. Here's what I've got so far, any advice/tips would be greatly appreciated. (P.S. We're Canadian, if that makes a difference. Also, both 28 years old, planning to retire at 55, and have 3 kids (ages newborn, 2, and 5).
Total net monthly income: 6215
Re: Evaluate my budget, long
Also, your life, disability, critical illness seems very high- is your coverage appropriate? You are both young, so it doesn't seem like it should be this expensive each month.
Organic produce is another significant expenditure- that may be something you want to re-evaluate. Are you using everything that is delivered, or is there a lot of waste? Can you buy it at the local market cheaper than the delivery cost?
How frequently is your DH on the road for work? Is $100 for food for him reasonable, can he take sack lunches, or is this under-budgetted?
Other than that, I'm going to say quit saving for kids college and instead save that for your retirement. you can take out loans for college, you can't do that for retirement. I follow Dave Ramsey's financial advice and he always puts retirement savings before college for that reason exactly.
I'm not noticing anything missing, but other ladies probably will as they look and comment.
I second the PP suggestion to pause college savings until after retirement savings is started.
We also follow Dave Ramsey, and I would probably look in the following areas:
The activity budget for the kids seems a bit high considering they are only 5,2 and newborn. They probably won't remember if you cut back down so they can do more later. Also, does the 2 year old need to be in preschool? In the US preschool doesn't really start until 3 year old. But maybe that is child care? Also, the birthday budget seems high. Is that for your extended family or just household?
Can you just carry a landline and maybe internet? Do you need cable too?
Obviously, you can move retirement back by 10 years or so if it comes to that, but if your priority is to retire at 55 and be able to live comfortably, that extra $250 a month now into retirement with compounding interest will add up to a lot in the next 30ish years.
I'm American so I'm not sure what type of programs Canada has out their for its senior citizens- but if its anything like the unfunded/underfunded/can't depend on it surviving Social Security you may want to reconsider putting off retirement savings. You can always restart college savings when your income increases.
FIRST you fund your emergency fund
SECOND you fund your retirement (Kids can take out student loans if needed)
THIRD - pay off consumer debt (I see you have none - so good job on that!)
Here is Dave Ramsey's suggested division of income:
Housing: 30-45% (mortgage+taxes+insurance_HOA+utilities_maintenance
Transportation: 10-15% vehicle payment, gas, insurance,maintenance
Charitable giving: 10-12%
Food: 5-15%
Saving 5-10%
Medical/Health 5-10%
Clothing 2-7%
Debt: 5-10%
Miscellaneous 12-23%
adjust those as suits your needs/goals and priorities
Retiring at 55 seems a bit idealistic especially when you have 3 kids to raise
For eating organic, would having your own garden and canning be an option. It would allow you to eat organic all year round for less.
As a recent college grad I would recommend stopping the college fund. I saw too many of my classmates take advantage of their "free" college ride from their parents and goof off, barely graduating. I lived at home, worked part time and went to college full time, paying for my classes made me appreciate them. Yes I missed out on some of the social aspects of the college experience, but I graduated with a 3.9 gpa, two bachelors degrees, and no loans. Your kids will have access to all kinds of scholarships that they can start applying for as freshman in high school.
I have to echo the others about funding your retirement.
While I think it is admirable that you want to fully pay for your children's educations, you shouldn't be doing it at your own expense. Your kids can take out loans for school, but you can't take out a loan for retirement.
I'm very fortunate to have been able to have my schooling paid for, though I always worked for my own spending money. But, my parents funded that in addition to funding their own retirement. So they retired before 60 and still have enough money to live on comfortably. It doesn't sound to me like you are making those same provisions for yourself.
But that brings us to present day...currently my parents are in their early/mid 50s have very little saved in retirement and even less in personal savings (they maybe have $5,000 saved up total). Most of this is because they decided to spend money on our education instead of putting aside some money for their future, and they also are not great at making smart financial decisions (that's a whole different story that I won't bore you with).
Anyways, I would just say make sure to take care of yourself too, because you never know what will happen. I know it's just a matter of time before my parents come to live with us (that's ok with me, even expected as my family is latino, but still). Currently H and I don't have any kids but we are starting to save money for college for any little ones that come along, but we are also funding out retirement through work.