Am I missing anything in my budget?

[johnbensin]

I'm about to finish college in Chicago, IL with a bachelor's degree, and I'm creating a budget based on the starting salary for my job (upon graduation) and my expenses. After significantly overestimating my expenses, my salary is completely gone, but I still feel that I must be missing something. Here is my monthly budget so far:

Gross monthly income: 3750 (gross annual salary, 45000)
Rent:                 700
Electricity:          50
Public Transport:     100
Internet:             50
Total Taxes:          1166.67 (30% of my gross income)
Insurance premium:    200
Food:                 450
Other:                200 (Clothing, entertainment, etc.)
Charitable donations: 20
Roth IRA:             416.67 (the maximum $5,000 per year contribution)
401K:                 225.00 (6% of my gross income, the maximum my employer will match)
Savings/emergencies:  170

Remaining:            1.67

I realize that these expenses are quite high, but I wanted to overestimate so I could have some cushioning. I didn't include the following expenses, for various reasons:

Heat, water, or cooking gas. These are included in my rent.
Car-related expenses. I don't own a car and I have no plans to purchase on
Family expenses. I'm single with no plans to start a family
Home ownership expenses.
Phone expenses. My workplace covers all of these.
Cable/satellite TV bills. I don't own a TV.
Outstanding credit card debt. I have none.
Outstanding student loan debt. I have none.
Costs of furnishing my new apartment. These are already covered by my savings.

What other expenses should I include?

EDIT: For some reason this was posted twice, and the spacing is messed up even though I wrapped everything in Courier New tags. Sorry about that. I'm not sure how to remove the duplicate post.

[MakeAStash]

Also budget for maintenance / replacement as stuff, such as the microwave oven, breaks. Taxes and food seem especially high.

[LuckyRobin]

I don't see a fee for garbage disposal. Is that covered by your rent? Otherwise it looks pretty good to me, since you have no outstanding debts. You might consider having a vacation fund that you put a bit into every month unless you get paid vacation with your work. Or a computer replacement fund.

[kork13]

A few immediate thoughts:
- Your taxes estimate seems excessively high considering your anticipated income. I've been grossing about $45k/yr for the last 3 years, and my federal taxes (as filed) have always been less than 10% of my total annual income. Social Security and Medicare taxes add another 7.65% (assuming the payroll tax holiday is not extended, which is anybody's guess at the moment). Based on a quick estimate (you can try it yourself here), Illinois state taxes should add probably no more than 5%. All told, you can potentially expect to pay 20-22% of your total income in taxes (this is still probably estimating on the high side).
- Food expenses (assuming you're single living alone) probably shouldn't be that high. A more reasonable amount would probably be closer to $200-$250/mo.
- I'm glad to see you maxing your 401k match and wanting to max your Roth IRA -- both are very smart moves. Just for accuracy's sake, starting 1 January 2013, the Roth IRA's maximum contribution is going up to $5,500/year ($458.33/mo).

You mention savings that you already have... how much is that? Is it already a sufficient emergency fund for you (4-6 months' expenses)? If not, you might consider directing some of your available funds (from your tax and food overestimates) toward additional savings. Especially when you first start out, there are alot of seemingly random expenses in life that always come up, so the more cash you have available, the better.

Otherwise, I think you're doing great to plan out what you can expect. Most of your estimates are probably fairly good ones, and I don't really see anything missing from your budget. You're clearly quite smart with your money, so just keep doing what you're doing, and I'm certain you'll be able to do very well for yourself.

As a tip for the future, a practice that I've found to be very good is that every time you get a bonus or a pay raise, save 50% of the amount, and use the other 50% for improving your way of life -- basically, use it as discretionary funds to enjoy as you like. Doing so helps maintain balance in your life while still taking care of yourself.

[johnbensin]

I don't see a fee for garbage disposal. Is that covered by your rent? Otherwise it looks pretty good to me, since you have no outstanding debts. You might consider having a vacation fund that you put a bit into every month unless you get paid vacation with your work. Or a computer replacement fund.

I assume garbage disposal is covered indirectly by my rent, because it's covered by property taxes which carry through to my rent. I've never paid a fee for it while I've lived in the city, since we always put our garbage in the dumpsters in the alley and it's taken away.

A few immediate thoughts:
- Your taxes estimate seems excessively high considering your anticipated income. I've been grossing about $45k/yr for the last 3 years, and my federal taxes (as filed) have always been less than 10% of my total annual income. Social Security and Medicare taxes add another 7.65% (assuming the payroll tax holiday is not extended, which is anybody's guess at the moment). Based on a quick estimate, Illinois state taxes should add probably no more than 5%. All told, you can potentially expect to pay 20-22% of your total income in taxes (this is still probably estimating on the high side).

I wasn't entirely sure on the taxes because I found conflicting sources, I'll probably reduce my estimate to 25% just to be safe (until I start earning the money and actually know, among other things, the taxes taken out of each paycheck).

- I'm glad to see you maxing your 401k match and wanting to max your Roth IRA -- both are very smart moves. Just for accuracy's sake, starting 1 January 2013, the Roth IRA's maximum contribution is going up to $5,500/year ($458.33/mo).

I wasn't aware of the increase, but I'll certainly increase my maximum IRA contribution to $5,500. In addition to the 6% matching, my employer contributes another 2% automatically, regardless of what I invest, so why not contribute as much as possible early on?

You mention savings that you already have... how much is that? Is it already a sufficient emergency fund for you (4-6 months' expenses)? If not, you might consider directing some of your available funds (from your tax and food overestimates) toward additional savings. Especially when you first start out, there are alot of seemingly random expenses in life that always come up, so the more cash you have available, the better.

Once I invest in a few furniture items for my new apartment, my total savings will be down to about $2000. Including rent, that doesn't even cover two months of my expenses, so I'll surely need to direct more savings towards an emergency fund.

As a tip for the future, a practice that I've found to be very good is that every time you get a bonus or a pay raise, save 50% of the amount, and use the other 50% for improving your way of life -- basically, use it as discretionary funds to enjoy as you like. Doing so helps maintain balance in your life while still taking care of yourself.

Sadly, I'm not sure my employer provides any bonuses, at least not to entry-level employees like myself, but this is a great tip for the future! I was raised in a household where my parents either invested their entire bonus or donated it to charity, the idea being that we were living very comfortably without it so if every few years we gave it away, it wasn't a problem. Ideally I'll be in such a lucky situation one day.

[jpg7n16]

Your taxes estimate seems excessively high considering your anticipated income.

Agreed.

Using 2012 federal income tax estimator | Calculators by CalcXML as a quick estimate, your Fed tax due would be roughly $4,400-4,500.

That's like 10% maybe. Plus SSI taxes of 7.65% + Illinois 5% state (max) = 22.65%

The difference between that and your 30% estimate is $3307.50/year or $275/month. That's a pretty big overestimate. The 25% estimate is still on the high side by nearly $90/month, but probably a better figure for paycheck planning, as they may withhold a bit too much at first (you'd get a refund).

IRS Withholding Calculator


Also worth looking into whether your new company has a transportation reimbursement program. Some firms will pay for public transportation passes, some won't. Worth investigating.

[snafu]

Should you need to 'outfit' an apartment, I suggest checking out some of the thrift shops like Goodwill or those military supported, Craig's List or local Buy 'n Sell for gently used merchandise. You can always re-sell when you know what you want and have established your style and needs.

[nimisht]

I am assuming the "Internet" category includes phone bills as well. Have you included your cell phone?

[johnbensin]

Agreed.

Using the federal income tax calculator as a quick estimate, your Fed tax due would be roughly $4,400-4,500.

That's like 10% maybe. Plus SSI taxes of 7.65% + Illinois 5% state (max) = 22.65%

The difference between that and your 30% estimate is $3307.50/year or $275/month. That's a pretty big overestimate. The 25% estimate is still on the high side by nearly $90/month, but probably a better figure for paycheck planning, as they may withhold a bit too much at first (you'd get a refund).

Also worth looking into whether your new company has a transportation reimbursement program. Some firms will pay for public transportation passes, some won't. Worth investigating.

I believe my firm lets me set aside money for public transportation expenses pre-tax, so even though they won't pay for it, I still derive from some benefit. Thank you for the links to the tax calculators as well; it's always helpful to have more resources on that aspect (since clearly my estimates are not always spot on).

I am assuming the "Internet" category includes phone bills as well. Have you included your cell phone?

Per my original post, my workplace covers all of my phone expenses, which includes my cell phone.

[RickLeibo]

more savings!

You are not figuring enough for savings. You must be able to put away 10% In my humble opinion.

[jonasmeier]

This seems a pretty good plan to me but i am afraid you won't make it with only 200 in entertainment sector

[gostumpy]

Looks pretty good for sure! If your taxes end up being lower, you can put the rest into your savings.

What are you using to track your expenses currently? Excel?

[johnbensin]

You are not figuring enough for savings. You must be able to put away 10% In my humble opinion.

I assume you're talking about savings that don't include my IRA and 401K, correct? The firm agreed to raise my starting salary to $56,500, so I'll funnel the rest into non-retirement savings.

Looks pretty good for sure! If your taxes end up being lower, you can put the rest into your savings.

What are you using to track your expenses currently? Excel?

Yes, I currently use Excel, and I track patterns in my daily expenses using Stata as well.

[ua_guy]

Some things you might want to consider:

I see clothing was lumped in with entertainment. In my world, that's generally not the case...the best entertainment is had without clothing. But I digress... If you dress up for work, or have outdoor hobbies, this can be a considerable expense and is not the same as having a drink after work with a friend. Which, sometimes in a blue-moon, if you go anywhere nice, that can chop your entertainment budget in half in a single evening, or worse. 'A' drink turns into 3, drinks turn into dinner for two, and suddenly your portion of the tab is $100 including tip. Obviously that's not a once/weekly thing (maybe for some it is) but I have a strong feeling your entertainment budget will be small or great some months, but $200 seems optimistic unless you are a complete shut-in (which is okay, too).

Speaking of which, do you have any hobbies? You might want to include a line item for it. Also, there doesn't seem to be any room for all those annoying expenses like...birthday gifts. Especially if you have siblings, lots of friends, or relatives. Those little things creep up.

Do you plan to travel at all for fun? Will that come out of savings if/when you do?

What about your housing situation? Do you ever plan to buy a home? Or will you rent for a long, long time?

These are just things to think about... otherwise you've done good by putting some thought into it.

[scfr]

Medical/Dental/Vision
Personal Care (haircuts, TP, toothpaste, laundry & dry cleaning, etc)
Household Maintenance (cleaning products, light bulbs, etc)