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Financial Advice
Backstory:
Our combined income before taxes is $145K, plus approximately $30-40K in bonuses. I don't budget with the bonuses because it's not a guarantee. I also make approximately $6000k on a contractor photographer job I have that I don't include in the budget, it flucuates month to month. We spend too much and don't necessarily watch every penny like we should. We are trying to be better, it's a slow process.
Below is our budget, what should I do with the leftover $$$?
Second is monthly payment, 3rd is balance.
DH contributes $500 to 401K and I can contribute $400 a month to 403b through our employers. We both have approximately $30K in the employers retirement funds. We have private Roth IRAS that have only $2K a piece in them. We only contribute $100 a month to each.
We should have all of debt paid off this year, not including the car. That'll give us an extra $1150 a month. Currenlty, we don't have but $7K in our emergency fund. Below is our budget.
DH Bring home (minus- insurance, 401K contributions,etc...): $4300
My Bring home (minus-403B contributions etc...) $3200
Second Column-Monthly Payment
Third Column-Balance
Fourth-pay off date
| Mortgage | $ 1,850.00 | $ 326,000.00 | Oct 2042 |
| Power Bill | $ 235.00 | ||
| Taxes | escrow | ||
| HOA | $ 80.00 | ||
| Cable | $ 75.00 | ||
| AT&T | $ 50.00 | ||
| Insurance | escrow | ||
| Bug Man | $ 30.00 | ||
| Water | $ 100.00 | ||
| Trash | $ 30.00 | ||
| Phone | $ 90.00 | ||
| Entertainment | $ 500.00 | ||
| Food | $ 300.00 | ||
| Cleaning Lady | $ 150.00 | ||
| Daycare | $ 720.00 | ||
| Gas | $ 150.00 | ||
| Car Payment | $ 640.00 | January 2019 | |
| Student Loan | $ 150.00 | ||
| CC | $ 400.00 | $ 5,800.00 | 9 months |
| Room2Go | $ 250.00 | $ 1,000.00 | 4 months |
| Robbie | $ 500.00 | $ 2,500.00 | 5 months |
| IRA | $ 200.00 | ||
| $ 1,000.00 |
Re: Financial Advice
I guess I am full of posts today, lol.
Honestly, the first thing that stands out to me before anything else is the very small amount you are contributing to retirement, given your incomes. Unless you have pensions, please double (at least) your 401k contributions immediately.
I would use the extra money to pay off your debt faster. If you put the extra money toward your CC debt, you can have it all paid off within the next 4-5 months.
What is the interest on your car loan? That is a long loan for a car. I might pay down that next if it has a high interest.
Once the debt is gone, split the leftover money between beefing up your emergency fund and retirement savings.
I'm glad you agreed on the 401K or other retirement savings options. That was going to be my recommendation. Even if you have a pension, when companies are sold/bought, or close, there can be changes to pension plans and it may not be what you think it's going to be when you are ready to take it.
Holy car payment Batman! What in the world do you drive that you have that type of payment for that long of a term?
I agree with pps abt your retirement savings. From there I might increase my e-fund by a couple of months of expenses.
I don't see line items for co-pays, fun money, gifts or vacation.
Haha, I know it's high. I have a Lexus Hybrid, that is actually saving me $400 in month from gas. I had an Acadia and traded because I was paying almost $600 in gas a month. So in the long run, we are saving money. I financed for 6 years.
I don't included co-pays and/or vacation. Fun Money is entertainment. But there is anywhere from $3000-5000 of extra income that I don't allocate anything to. We mostly save it now. We were saving for a year, because we just bought a house, completely furnised it, landscaped it and bought new TVs. We have nothing else to buy, so it's all going into Mutual Funds, E-Fund and Retirement.
Just to clarify, what do you mean you don't watch every penny and spend more than you should? Do you mean that you are spending more than what you bring in?
There are always ways to reduce your power bill, like turning down the thermostat, unplugging unused appliances, and only having lights on in the house when you need them on.
"Bug Man"? Like, a guy who comes by every month and does some extermination work? Why do you need this every month? And why do you have to have a cleaning lady?
What's a Robbie and why do you need it?
I see you budget for AT&T and Phone. Is one for cell phones and another for a home phone? Or is AT&T an internet provider? Personally, I wouldn't have a home phone AND cell phone...it seems like a waste of money IMO.
$500 just for entertainment? What are you doing each month? If you're really serious about getting out of debt and saving, you should cut this.
And yes, your car payment is ridiculous. You can't do much now unless you sell the car (which by the sound of your other post, you're not willing to do), but buying new cars is dumb unless you're rich. Your car will lose 60-70% of it's value in about 4 years, and you'll STILL be making the ridiculous payments. Not to mention that you will have paid thousands of dollars more than what it was originally worth due to interest payments. Furthermore, if you invested that money every month for just 6 years (and averaged out to 4% interest every year, which if you invest correctly is low), you would have saved almost $53,000. Do you want to know how much that would be in 20 years (that's assuming you always end up having a car payment for that amount 20 years...which is dumb)? That's $237,000. Hope you like your car.
If you're serious about setting a strict budget, then cut up your credit card(s) and use cash for everything. In other words, go to the ATM and withdraw what you budget for an item (e.g., food, entertainment) and stick with it. Planning and executing a budget takes practice, so you won't get it right the first time or even the second time. You don't need to be able to do math to set a budget, you just have to be willing to change your behavior.
Look, I'm not trying to be harsh about your car, but you shouldn't be buying things you can't afford to pay IN FULL for. It frustrates me when I hear people complain that they just can't seem to save money or get ahead, but they rack up credit card debt and purchase brand new cars that they take large loans out for. Of course you can't seem to save, because you're being stupid with your money. Children want things they can't have and adults save for what they want. Did you know that the vast majority of millionaires in this country don't even own or purchase luxury vehicles? In fact, the most popular cars among millionaires are Toyota and Ford, and they only buy new because they are MILLIONAIRES and have the cash for it, and for them it's only a drop in the bucket.
My advice (since you're likely not going to sell your car) is to pay your Room2Go and Robbie (or sell the Robbie, whatever it is), then snowball those minimum payments in to your credit card to get it paid off. That should only take you a few months. Then snowball all that money and pay your car off fast! Then you can start investing most of that money and actually be on a good path to setting yourself up for retirement. In the future, you stop buying new cars and pay cash for a gently used one.
GL.
Really, it's impossible to give full advice without interest rates. The idea of a 6 year car loan horrifies me, but if it's at 0%, meh.
Can you repost with interest rates?
Thanks for the advice. But I'm not sure I gave you enough information. The last year we paid over $80K in cash to our house that we saved in 2 years on top of saving for retirement, investments and starting a business. Robbie, is my business partner and it's just labeled as that so I know where that $500 goes every month, I didn't think to clarify. In the past 4 years, I've saved $42.5K for start up of opening a wedding venue, and I have $2500 to go. We are opening next Spring. We don't necessarily have a saving problem, but we tend to save more than we should apply to our debt.
I understand that I can not have a car payment--but I guess I'm a child because I probably alway will. And yes I love my car. The car loan is at 0%. I was not complaining that I can't get ahead or that I can't seem to save, I simply asked what I should do with the leftover $$$ each month.
AT&T is for the internet, Phone is one Verizon Cell phone. Cable is DirectV. I live in the sticks and I can't get cable, so everything is a different bill. I do get a $10 for using AT&T for internet from Diretv. Cell phone must stay verizon for minutes. My entire family is Verizon, so it would cost me more to switch. I get free verizon to verizon minutes. Our power bill is so high, because of our house. It's big and the celings are high. We already do the things you mention above regarding the electricity.
Yes, we have a monthly extermation service. It's standard where we live. Everyone I know, has one. My cleaning lady is my most important expense, she comes bi-weekly. I'm busy, I have a two year old, work full-time, contract photographer and opening a wedding venue. I don't have time to mop floors. I barely get laundry done.
Entertainment is very important to us. We go out alot, take mini vacations, spas, golf, zoo, museums etc... We have a boat, we take that out alot on the lake in the summer. Gas is costly.
We weren't asking for budget advice, we budget but we aren't very strict. I don't track every single latte to the dime. however, your advice was excellent.
We actually went to see a financial advisor yesterday with our past, present and future finances. Luckily, we filed our taxes and we will be paying off the credit card, and Rooms2Go and putting $1000 towards "Robbie." Robbie will be paid off by our first quarterly bonus. The wedding venue will be added income that we currenlty do not have or need, we have decided to put 90% of net profits into a investment and retirement account. According to our business plan and extensive market research, we are projecting a profit of $40K our first year. After 5 years, our business loan will be paid and we will be pocketing much more. Also, we are increasing my husband's 401K contributions to 18% of his income and mine to 10%. Also, 40% of all of our bonuses will go into Roth IRAs, and 20% to investments. Only when our daughter is old enough to start school, we may have to switch some things around, since we want her to attend private school. But I'm not sure we will.
I appreciate the advice, I posted here before meeting with our financial advisor because I wanted to see if we were going to get fussed at by her. Truthfully, she said we were in great shape to be 25 and 27 and on the right track. She didn't mention our car. :-)
Yes, apparently car loans are bad. :-) Car loan is 0%. House is 3.75%, CC 8.89%, SL 5.37% and Rooms2Go 0%.
I largely agree with her, but I do NOT think your retirement is in decent shape, let alone great shape. Did she really think your retirement savings were adequate and on the right track? If you continue on the retirement track you are on, you are headed for disaster.
I quite agree with this. Additionally, money is so cheap right now I don't really understand why anyone would pay cash for a car (or really anything). The opportunities are too great in the market as compared to the interest rates on debt.
Yes, she said we were on the right track. We have approximately $60k in retirement and are increasing our contributions next week after our discussion with her.
Thank you! I agree, we certainly don't live beyond our means but we don't watch everything like crazy. You work to have money in order to enjoy it; while I do believe in saving and investing; you have to live a little too! :-) Thanks, we are very excited about the business!
I understand what your saying, but she advised us toinvest 90% of my future business profits (of course after all business expenses, re-investment into the busineess, etc...) in retirement and/or investment, 20% of my husbands current salary, 10% of my salary, and 60% of future bonuses in investments/retirement.
So for this year minus my busineess (does not open until Spring 2014)- $47K in retirment
2014- approximately 75K
How much more do you think I should invest in retirement/invest? Seriously, are we missing something?
You should come over to the GBCN Money Matters. They allow car loans and don't think much of Dave Ramsey.
Out car is at 1.9%, and my SLs are 6.05%. We overpay my SLs, because I don't care for any debt above 5%, but they're not high balance, so we're not really concerned about them. I'd rather invest at the rate we are. Our car loan has 3 more years, and while we'll keep it after it's paid off, no way will be pay it early.
$47k and $75k contributed per year are horses of an entirely different colors, lol.
In my view, the certain $500/month (wasn't sure about your $400) wasn't going to get you to $4,000,000 by age 65, which is what you would need to live off of the 4% interest (fairly conservative estimate) and roughly replace your incomes.LOL! Ok. No I do contribute now. But like I said we are increasing our percentages. Thanks, I thoughh, "my gosh, I'll never be able to retire."