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KoolLady2015 · September 2015

Hi , I'm Amy and I am new to this board. My Hubs and I just starting 'BUDGETING", trying to get our finances in order. We life in a LC area down south and here is what our budget look like

mtg ( insurance and taxes included)- 1250.00
car note- 249
life insurance- 20.00 ( kids)- we have 2
water- 60
electric- 170
cell- 123
cable/internet- 100
groceries- 400
toiletries- 100
savings 700
gas 400
total about 3570
income 4000
where would you all put the extra money?
i am also realizing that the year is almost coming to an end and i am thinking about revamping my budget and seeing where we can save or cut down on.
please share your budgets and will you use your same budget next year or keep the old one?

brij2006 · September 2015

Welcome!

What is the balance on the car loan? I'm anti-debt, but that's where I would put the extra money.

simplyelise · September 2015

Welcome! Your mortgage is the only thing that really made me pause. That is a lot of house for a low cost of living area on 4000/month income. Are you on a 30 year or 15 year note for the house?

I have several questions...

Is this reflective of your actual expenses, or just your hopeful plan? ...You don't have any entertainment money in there and $400 for a family of 4 would be very tight. So I'm inclined to believe this isn't what you actually spend in a month.
Do you have any debts beyond the car?
How much do you owe on the car?
Are the life insurance policies ON the kids, or on you and your husband with kids as beneficiaries?
Are you contributing to retirement? If so, what % of gross income?
How much do you have in your emergency savings?
Are you 1 income or 2 income family?
Do you have college savings plans started for kids? If not, do you plan to help with college?

My answer to your question about where to put the extra money is to put it all at the car note until you are debt-free besides your house. But after that, I am not sure until we get more info

As for our budget, we make one every month based on the needs of that month. We've got a bonus paycheck month in October, so we're using some of that to save for Xmas gifts. The fixed expenses are easy, but we adjust from month to month.

Here is our general budget:

INCOME: $5112

Tithe: $512

New Car Sinking Fund: $100

Gym Sinking Fund: $20

Rent: $690

Utilities: $150

Cell: $121

Life Insurance: $16

Car Insurance: $125

Fuel: $200

Food: $340

CoPays: $15

Blow Money: $120

Date Night: $50

Toiletries: $20

Haircuts: $12

Netflix: $8

MISC: depends on the month

Student Loans: everything left, usually around $2500

AprilZ81 · September 2015

What about car insurance? Clothing/hair cuts? Activities for the kids? Do you have any fun/entertainment money? How do you pay for gifts (kids birthdays, anniversary, Christmas, etc.)?

Are you saving for retirement? If so, what percentage of your income and are you doing 401(k) or ROTH (or both)?

How much is left on the car loan and what is the interest rate? I'm not totally anti debt, but if everything else is in order I would vote that extra money goes towards the care note.

Xstatic3333 · September 2015

Welcome! I had a few questions to ask about your budget but @simplyelise beat me to them all. I am assuming you have car insurance but just didn't put it down. My next priority would be getting term life policies for you guys, and I probably wouldn't bother with kids life insurance. Instead, I'd take that money and put it in a 529 or ESA for their college.

I don't have my budget on me right now, but we also make a new budget every month. For example, next month we won't be putting much to savings because we are cash flowing annual vet appointments, a dental filling, my yearly eye appointment, and new contact lenses to the tune of $500-$600 total. Most months we don't have those expenses and have extra money to put towards our goals or some fun (an area where we tend to be spendier than most around here).

Categories we have in our budget that you do not include "fun money," which includes eating out, movies, and any alcohol; car/home maintenance (although we don't contribute as consistently as we should there, which I discussed with the board a few weeks ago); car insuranc;, life insurance; Netflix/hulu;, a small charitable donation that is set on autodraft; church collection; my Roth IRA contributions; and sewer (though that may be wrapped into your water bill). We cash flow most occasional annual expenses like Christmas and wedding gifts, AAA, etc.

I'll also say that your grocery bill seems pretty ambitious for a family of four. If it's accurate, then rock on! If not, I'd adjust it so you're budgeting accurately.

lbonga1 · September 2015

It seems like your budget is missing a few categories. Things that I can think of that might be missing are entertainment, eating out, car insurance, sinking funds for gifts (b-days, holidays), clothes/shoes. Are you contributing to retirement? After those are budgeted for, I would use extra money to pay the car off, bump up retirement savings (depending on how much you're currently contributing), and put some towards your kids' college. For fun, I would budget for traveling, but that's just my preference.

Your toiletries budget seems high to me. Toiletries are the easiest things to coupon for, and you can usually get them free or very cheap. And if you're looking to save a bit more, you could cut the cable and switch to Netflix/Hulu.

KoolLady2015 · September 2015

@simplyelise this is 2 incomes and i do not budget entertainment or eating out because we find things to do for fun that is free and if we do eat out, i will budget it in that particular month. like next month is my hubbys birthday so i will budget eating out. i do our budget month to month. car and mortgage is our only debt, our mtg is 15 years and we both contribute 5%of our pay to 401k plan.car note is 3 years interest rate is @3.5% my hubby cuts our boys hairs so we dont spend money on that. Life insurance is on the kids and they have a 529 plan as well

AprilZ81 · September 2015

Also, what kind of savings do you have? Do you have an emergency fund? A general savings account? College savings plans for the kids?

If you don't have any savings and if your car is your only debt I would use any extra money to build up a savings account in case you need a big home/car repair. Don't rely on homeowners insurance or car insurance to make basic repairs because your rates will just go up. Save those for major events like a big fire, flood or a tree fell on the roof type repairs.

KoolLady2015 · September 2015

@aprilz81, sorry i forgot about car insurance . its through all state @ 108.00 per month

Xstatic3333 · September 2015

KoolLady2015 said:

@simplyelise this is 2 incomes and i do not budget entertainment or eating out because we find things to do for fun that is free and if we do eat out, i will budget it in that particular month. like next month is my hubbys birthday so i will budget eating out. i do our budget month to month. car and mortgage is our only debt, our mtg is 15 years and we both contribute 5%of our pay to 401k plan.car note is 3 years interest rate is @3.5% my hubby cuts our boys hairs so we dont spend money on that. Life insurance is on the kids and they have a 529 plan as well

How much is your car insurance? What about life insurance for you guys? I would get that in place ASAP if it isn't yet.

AprilZ81 · September 2015

KoolLady2015 said:

@aprilz81, sorry i forgot about car insurance . its through all state @ 108.00 per month

I would call around and see if you can get that lowered. Two cars in a LCOL area shouldn't be that much. Ours is with Erie Insurance and two cars (a 2006 SUV and a 2011 sedan) are $66/month total. I think our deductible is $250 or $500 so not super high.

formerlyGDaisy09 · September 2015

I think life insurance on the kids is probably unnecessary, I would however make sure each of you have enough life insurance. and make it a goal to up retirement contributions to 15%.

simplyelise · September 2015

If you've got a secret for how to provide 3 meals a day for a family of 4 on only $400/month with no eating out supplementing that at all, feel free to share!

Here's my plan on what we know so far:

Put all extra and your current savings amount towards paying off car note. What's the total note? 3.5% is pretty rough for a car loan, especially considering vehicles depreciate 15% each year. Others will probably have different views here, borrowing for cars has many opinions around here.

When that is done:

Bump up retirement contributions to 15% of each of your gross incomes
Put everything else extra towards beefing up emergency fund. I would do at least 6 months in your situation, because if one of you loses a job, your mortgage will be strangling you.
Once emergency fund is done, figure out what you need to contribute for kids college funds each year and start adding that in.
Then, look ahead to necessary home repairs or vehicle replacements and set target savings for those future needs.

als1982 · September 2015

My questions:

How old are you?
How much do you have saved for retirement?
How much is left on your car loan?

I'm personally very debt averse, but not at the sake of saving early for retirement in order to maximize compounding interest.

I would absolutely get rid of the children's life insurance policies.

short+sassy · September 2015

Sounds like you all are already doing some positive things...low interest and short car loan, 401K contribution, contributions to savings. You spend less than you bring in.

If I were you all, I'd focus first on a healthy e-fund (emergency fund). People on here differ a bit on what a healthy e-fund is...plus it will also differ based on each family's situation. Considering you own a home and have two children, if it were me, I would want a 6-month e-fund. Basically, six months of your expenses saved.

I also recommend you all get life insurance for both you and your H...STAT!!! A term policy. Assuming you are both in decent enough health to get a fairly cheap one.

You also did not include medical expenses as one of your categories, but I'll assume if you have to pay something for the premiums it already comes out of your paycheck(s). And hopefully you don't have recurring prescriptions.

I do budgeting a little different than most people. I just include my fixed expenses and basic variable expenses (ie utilities/groceries). I don't budget for entertainment/eating out/gifts/clothing/etc. Though, on average, I don't spend much on those categories anyway. I also don't change my budget at all, unless one of my bill amounts or income amounts change. Here is about my budget:

Net Income: $5,000

Mortgage (includes insurance/taxes): $725

HELOC (min. payment) $540

Car Payment (paid off at year end): $290

Car Insurance (yeah, it's really this high) $210

Cable/internet $55

Water/Trash $60

Electricity/Gas (lower in fall/spring) $100

Cell Phones $95

Food (grocery) $400

Medication/Dr. visits $250

Total Bills: $2725

Extra Income: $2275 - primarily use this to pay off my HELOC (Home Equity Line of Credit). I also have some credit card debt, but it is at a zero percent interest until 2017. I think the min. payment is $25, but I pay about $100/month toward it.

I have a $140K life insurance policy that my mom pays for (it was one of those Gerber deals she got when I was a baby), plus a small term policy through my work. My H, unfortunately does not have life insurance. He is a smoker and it was a shocking fortune to buy him even minimal insurance. I don't rely on his income...which is currently zero anyway...so I didn't see the point.

hoffse · September 2015

I would prioritize retirement because 5% isn't nearly high enough. Depending on what you have saved already and your ages, you need to be in the 15-20% range of your gross (pre-tax) incomes to retire on time.

Your emergency fund is also very important. If you can't afford to live on just one of your incomes, then you need to fund potential job loss in addition to things like insurance deductibles. I agree that your mortgage is on the high end of your incomes, and you don't want to lose your house if one of you loses a job.

For the car note, the payment isn't all that bad for your incomes, but it's still not great. I would make this call based on the value of the car and the term of the note. If you only have a couple payments left, go ahead and knock it out. If you have years left, then I would put this after retirement because the most valuable thing you have with retirement contributions is time.

For life insurance, you're being ripped off paying that much for kids. Do you have Gerber whole life? If you do, cancel it.

Instead, take out term life on you and your H. That is FAR more important than life insurance on your kids. When figuring out how much you need, take into account things like debt, childcare, and even college. H and I each have $500K policies (no kids), and we pay less than $15/month for each of them. We are both 28, and H has a history of smoking.

Unfortunately, college savings comes last. I'm a huge proponent of parents helping with college, but parents need to take care of themselves first. That means retirement contributions at appropriate levels, emergency fund in place, and a debt payoff plan in the works.

short+sassy · September 2015

Oh! I forgot I also average a few hundred a month mystery shopping, but I just chalk that up to bonus money. It can vary a lot from month to month, so I don't include it in my budget at all.

hoffse · September 2015

Oh I meant to add - there are a few things we are changing in our budget next year. We're expanding our sinking fund to take into account charitable contributions in addition to annual dues. We tend to make contributions in a lump sum, rather than on a monthly basis.

I am also starting a sinking fund for clothing and gifts. We don't shop for those often, but they never fail to blow up our budget when we do.

Finally, I tend to budget for high-dollar things a year in advance (vacations, home improvements, etc). So I budget in 12-18 month cycles. That's great, except it lets me see exactly how much we should have available to put into savings in total, and then I tend to get aggressive with savings goals, and I earmark every penny. That has really stressed me out this year, so next year I am determined to leave a few thousand unallocated. We would like the flexibility to be able to jump on a great deal for furniture or snag a last-minute trip or something at the end of the year. The high priority goals are still going to happen, but I have learned the hard way that I overbudget. I need to give us some breathing room for more financial spontaneity.

formerlyGDaisy09 · September 2015

hoffse said:

Oh I meant to add - there are a few things we are changing in our budget next year. We're expanding our sinking fund to take into account charitable contributions in addition to annual dues. We tend to make contributions in a lump sum, rather than on a monthly basis.

I am also starting a sinking fund for clothing and gifts. We don't shop for those often, but they never fail to blow up our budget when we do.

Finally, I tend to budget for high-dollar things a year in advance (vacations, home improvements, etc). So I budget in 12-18 month cycles. That's great, except it lets me see exactly how much we should have available to put into savings in total, and then I tend to get aggressive with savings goals, and I earmark every penny. That has really stressed me out this year, so next year I am determined to leave a few thousand unallocated. We would like the flexibility to be able to jump on a great deal for furniture or snag a last-minute trip or something at the end of the year. The high priority goals are still going to happen, but I have learned the hard way that I overbudget. I need to give us some breathing room for more financial spontaneity.

+1 to the balance of savings and sanity!

hoffse · September 2015

formerlyGDaisy09 said:

hoffse said:

Oh I meant to add - there are a few things we are changing in our budget next year. We're expanding our sinking fund to take into account charitable contributions in addition to annual dues. We tend to make contributions in a lump sum, rather than on a monthly basis.

I am also starting a sinking fund for clothing and gifts. We don't shop for those often, but they never fail to blow up our budget when we do.

Finally, I tend to budget for high-dollar things a year in advance (vacations, home improvements, etc). So I budget in 12-18 month cycles. That's great, except it lets me see exactly how much we should have available to put into savings in total, and then I tend to get aggressive with savings goals, and I earmark every penny. That has really stressed me out this year, so next year I am determined to leave a few thousand unallocated. We would like the flexibility to be able to jump on a great deal for furniture or snag a last-minute trip or something at the end of the year. The high priority goals are still going to happen, but I have learned the hard way that I overbudget. I need to give us some breathing room for more financial spontaneity.

+1 to the balance of savings and sanity!

It's so true. While I'm a believer in a $0 budget, I really take it too far when I'm budgeting 12 months in advance. I need to let a few things go and just roll with it a bit more next year, instead of keeping such a stranglehold on our budget. The real challenge this year is that we essentially funded our Roths twice. We did the 2014 Roths in March (because we bought our house last fall and spent down our savings), and we're doing our 2015 Roths in December to get back on schedule.

I don't regret that decision, but the last few months have been very tight. Next year should feel much easier.

short+sassy · September 2015

Like @hoffse said, I'll start out by saying almost everyone on this board and most financial advisors bad mouth the Gerber whole life policies for children. Because, the majority of the time, they are a rip-off. Overall, whole life policies for anyone are a rip-off.

But then, like any insurance, you never know what is going to happen. For me personally, the fact that my parents bought a Gerber life policy for me when I was an infant was a GOD SEND. I was diagnosed with a major, lifelong medical condition when I was only 20. Many companies won't even give me a quote for life insurance, much less sell me a policy. And the ones who will sell me life insurance want crazy money for even a small term policy. The last time I checked was five years ago. I was 35, non-smoker, and quoted $135/month for an $80K 10-year term.

But, because I was "locked in" with Gerber years before my diagnosis, I can keep the same policy with premiums that are no different than a healthy person of the same age. I wouldn't have life insurance at all, if it wasn't for that policy.

I'm not even necessarily saying you all should keep the kids' policies, most people would say no. It is exceedingly unlikely either of your children will pass away or be diagnosed with a major illness. But I at least wanted to show you what the ugly side of that coin can look like.

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