Budget Discussion

[Fast_Eddie26]

I've been working on managing my budget lately and so far this is what I've budgeted. I have have some expenses, such as the cable bill and only have internet. I have reduced my alarm bill from 47 to 37, but still not enough.

Mortgage/PMI/Taxes/Insurance - 1671.89 (should reduce by 90 dollars in April, 87 in PMI, 5%)
Cell Phone - 248
Garbage - 18
HOA - 75
Lawn Care - 35
Alarm - 38
Student Loans - 303, $100 extra each month
Car - 430, upside down on trade in hurt
Internet - 51, cancelled cable
Furniture - 28

Car Maintenance - 100, for emergency and maintenance
Medical - 20
Home maintenance - 100, for emergency and maintenance
Gifts - 25
Car replacement - 100, one car has 114k on it, will have to replace in a few years
Emergency fund - 100

Groceries/Toiletries - 450, want to reduce this
Tolls - 85, should start incurring this with new job next year
Dining out - 20
Gas - 200
Haircut - 15
Electricity - 150, average bill, last one came in under 80!
Water - 37
Work Snacks - 20, have really cut down here, and should eliminate it
Misc - 250

Total - 4574.89

I have a child on the way, and haven't really factored those costs in yet.

Income - 1028 net pay a week, average is 4400. Includes insurance, 401K and taxes.
Estimate tax refund - 5000 coming in 2013
Checking - 5400
Savings - 1538
401k - 49 K

I still contribute 8% to my 401K, which is matched at .5% per 1% up to 8%. I have also decided to not reinvest the dividends which should amount to an additional 800 per year after taxes. This should be temporary and I still have yet to get any payments since I changed this in the current week.

I will have a raise next year from 2-4%. Also, I will be at a job starting next year that pays overtime and I plan to work it as much as possible. I've also been working on starting a business and I'm hoping it could prove fruitful in 2013.

CC 1 - 5184 (next payment is 2303 to avoid interest, have always avoided interest, 12.48%)
CC 2 - 249, 0% (furniture payments, no interest until 2014)
CC 3 - 0, 0% got it for a backup for 18 months
CC 4 - 0, 0% got it for a backup for 15 months

Mortgage - 182K, 5%
Car - 29,310, 2.7%
Student Loan 1 - 5833, 6.5%
Student Loan 2 - 2780, 6.8%
Student Loan 3 - 1693, 6.8%
Student Loan 4 - 563, 6.8%

Planning on trying to refinance on home. I'm also planning on getting a cheaper cell plan. I might have to either cancel the alarm or at the very least reduce it. My grocery bill can be reduced as well.

I feel things could get very dire if I don't take care of the problem immediately.

[jonasmeier]

Funny cuz i did the same thing with cable Tv, some nice tips from your post thnx.

[bjl584]

A few observations:

You need to change your withholding status so that you stop getting a tax refund.

What do you mean you stopped reinvesting dividends within your 401K? Why did you do that?

You have an auto loan of nearly 30K. What is the payment? What is the car worth?

Why are you paying for lawn care? Do you have the ability to mow your own grass?

[gostumpy]

How much Equity in your home?

Everything I've read tells not to invest in your 401K until you've taken care of debts, the debts will cost you far more than your savings could ever give you... How much is that 8% into the 401K?

As well I noticed a 'Misc' category, which is fine, but I think $250 is about 5x as much as that should be.. that could be another ~$200 to knock down debt with.

As far as your student loans, what are the minimums on each? I assume $203 combined? Or is it $303 combined?

[Fast_Eddie26]

A few observations:

You need to change your withholding status so that you stop getting a tax refund.

What do you mean you stopped reinvesting dividends within your 401K? Why did you do that?

You have an auto loan of nearly 30K. What is the payment? What is the car worth?

Why are you paying for lawn care? Do you have the ability to mow your own grass?

I agree on changing the withholding status. I would gladly do so if the mortgage deduction and property tax deduction stays in place.

The stocks and funds I have with the 401k pay out dividends. I would pay capital gains on it if I pay myself out instead of reinvesting them back into the 401k.

The payment is 430 a month, and it's worth about 22 K. I put the upside car in the loan to drastically reduce the interest rates.

Lawn care is extremely cheap since I have over a 1/4 acre. It costs 17 bucks per cut with a minimum of two per month. At the moment, I don't have lawn equipment and my time will be very limited in about a month.

[Fast_Eddie26]

How much Equity in your home?

Everything I've read tells not to invest in your 401K until you've taken care of debts, the debts will cost you far more than your savings could ever give you... How much is that 8% into the 401K?

As well I noticed a 'Misc' category, which is fine, but I think $250 is about 5x as much as that should be.. that could be another ~$200 to knock down debt with.

As far as your student loans, what are the minimums on each? I assume $203 combined? Or is it $303 combined?

The estimated value on zillow has it at 221K, and the loan is about 182K. It looks like I'm up 35 to 40 K. If this is accurate, refinancing should be possible. Do you agree?

The 8% is about 120 a week. After being taxed on it and no company matching it may result in quite a big hit. But, it might be worth it in the short term.

I believe you are right on the Misc, but since I just made the budget, I'm testing how accurate it is. Any thoughts on this?

Student loan payments is 203 minimum.

[gostumpy]

You having savings, it's great that you don't have to save up for a $1000 emergency fund

Think of how fast you could pay down debt if you didn't pay the 8% to the 401K... It's a temporary solution to a temporary problem. You need to attack this debt that is holding you back.. you may not even realize how much it's holding you back... Figure you're probably paying $730 on just the car/student loans, not counting CC debt... you could built a lot of wealth with that amount of money!

I think you're a perfect candidate for the debt snowball:

Get Out of Debt with the Debt Snowball Plan - daveramsey.com

Do you know what your individual minimum payments are to your Student Loans? When do you have to pay the CC bill of $2300, and where is that money coming from?

Above all, congrats on taking control and working towards a solution, you're already leaps and bounds ahead of average!

[bjl584]

The estimated value on zillow has it at 221K, and the loan is about 182K. It looks like I'm up 35 to 40 K. If this is accurate, refinancing should be possible. Do you agree?

The 8% is about 120 a week. After being taxed on it and no company matching it may result in quite a big hit. But, it might be worth it in the short term.

I believe you are right on the Misc, but since I just made the budget, I'm testing how accurate it is. Any thoughts on this?

Student loan payments is 203 minimum.

A Refi should be possible.

You need to dive into exactly what misc. spending is and cut back wherever possible.

[bjl584]

The stocks and funds I have with the 401k pay out dividends. I would pay capital gains on it if I pay myself out instead of reinvesting them back into the 401k.

There shouldn't be any tax consequense to the 401K until you start to draw on it in retirement.

[Petunia 100]

I would not stop the 401k contribution. You are getting a guaranteed 50% return on your contribution, before tax savings and any growth. In my opinion, it would be unwise to pass that up.

If you are expecting a 5k tax refund, that means you are paying $400 per month more than necessary, while paying interest on debt. Stop doing that. Change your withholding and put that money towards your debt each month.

I don't understand what you are aaying regarding your reinvested dividends inside your 401k plan. You are going to stop reinvesting them and instead withdraw them? That would be an unqualified distribution, subject to ordinary income tax and penalty. Does your plan allow you to make withdrawals while still employed and still contributing? Will you please clarify?

[Fast_Eddie26]

I would not stop the 401k contribution. You are getting a guaranteed 50% return on your contribution, before tax savings and any growth. In my opinion, it would be unwise to pass that up.

If you are expecting a 5k tax refund, that means you are paying $400 per month more than necessary, while paying interest on debt. Stop doing that. Change your withholding and put that money towards your debt each month.

I don't understand what you are aaying regarding your reinvested dividends inside your 401k plan. You are going to stop reinvesting them and instead withdraw them? That would be an unqualified distribution, subject to ordinary income tax and penalty. Does your plan allow you to make withdrawals while still employed and still contributing? Will you please clarify?

My 401K allows me to either reinvest the quarterly dividend back into the 401k or to accept them as income. Not a withdrawal from my 401k, but it's more of an option of what to do with that money at the end of each quarter.

For now, I'm going to wait and see on the overtime situation next year before I consider dipping into my 401k savings.

[Fast_Eddie26]

You having savings, it's great that you don't have to save up for a $1000 emergency fund

Think of how fast you could pay down debt if you didn't pay the 8% to the 401K... It's a temporary solution to a temporary problem. You need to attack this debt that is holding you back.. you may not even realize how much it's holding you back... Figure you're probably paying $730 on just the car/student loans, not counting CC debt... you could built a lot of wealth with that amount of money!

I think you're a perfect candidate for the debt snowball:

Get Out of Debt with the Debt Snowball Plan - daveramsey.com

Do you know what your individual minimum payments are to your Student Loans? When do you have to pay the CC bill of $2300, and where is that money coming from?

Above all, congrats on taking control and working towards a solution, you're already leaps and bounds ahead of average!

Thank you for the link, I will check it out. My cc bill is due the 8th every month.

[Fast_Eddie26]

I've been thinking about not contributing to my 401k all day.

I've decided to not contribute it in the short term. I just pulled my credit report and I have too high of a balance on my revolving accounts. I plan on applying for a refinance in the next 1-2 months. This additional money will go a long way in helping improve my credit score because I can pay down my balances. Once, I am approved for the refinance I will go back to contributing my normal amount of 8%.

Also, I changed my withholdings and should see a nice increase in my weekly salary.

Thanks to everyone for their input.

[esb3357]

Honestly I would have an 1000 emergency fund and cut.the car fund amd other accounta until.your dedt is paid off.

[Fast_Eddie26]

I guess for the time being I shouldn't worry about the car, but I don't feel comfortable with just 1000 for emergencies. I think a more reasonable number is 3000 in my situation. I think of it as buying a little more insurance on my assets.

I think if you are single with no responsibilities, or house, then by all means save 1000 for your emergency fund.