Revamping the budget
Here are some things I'm thinking about WRT the budget:
(While these are in no particular order, the more pertinent stuff is on top.)
1. 10% giving - I may bump this down to 5% depending on what I want to do with the rest of the budget, but we'll see.
2. Full 401k investment - I think my new/old company matches up to 5 or 6%, so I'll contribute that.
3. Fully fund Roth IRA - I also want to move it to a better place. It's with Merrill Lynch because that's where I opened it when I was 18(!), but I haven't been so happy with it's performance.
4. 5-10% fun money - I tend not to enjoy my money, but with me working my tukus off as much as I will in my new job, I will need to. I promised my gf that either I would budget for fun stuff or she gets control of it. Not sure if this will include vacation money or if that will be separate. Knowing me and my cheap ass spending habits, I'll just combine these.
5. E-Fund - (AKA Fuck you fund) This will be very impt to me, esp with my history at the job. I stayed there far too long the first time because I didn't have an e-fund. So, I am going to figure out how much I need for 3-6 months and bust my ass to fill it. Even if I don't need it for a potential "Fuck You," it will be good to have when I either go for my PhD or for a new job.
6. Pay off the credit mofos! - I am so happy that I will have the money for this.
7. Increase my non retirement investments - I own a few stocks and I may increase my holdings. I also think some sort of Index fund would be a good idea, too.
8. Save for a down payment on a house - This is a low priority for me as we are not expecting to be in any one place for long enough to reap the benefits, but it would be nice to have some saved up for when we are ready.
9. My gf gets some money each month (long story) - we have to figure out where to put it - stocks, retirement, student loan payments, etc.
10. Prepay the car payment - the loan will be at 10%, so this is important to me.
11. Start the student loan payments - this is only nec if I want to get the debt monkey completely off my back. This is not a big priority.
12. Save for tuition payments - now that the tuition benefit is gone and I don't want to take loans, I'll need to save for tuition.
13. Insurance payments - I am considering paying for COBRA instead of taking the insurance offered. I'll look at the plans.
As you can see, there are a lot of things I would like to do with my money. Tentatively, my take home pay will double (I guesstimated with Paycheck City.), so I'll have an extra 1500+ per month. But, there is still a limit.
First thing I need to do is prioritize and take it from there. Any suggestions?
Clink
8 comments:
I think you are looking at this huge income increase logically. The fun fund is a big thing. Trust your gf, she is right. Money is not everything - living is.
I think I would pay off all debts, less the tax deductible ones (student loans) first. Then crank up the e-fund, then continue with the disbursements like you have planned.
You are on the right path. Hopefully, the job is something you can learn to enjoy and look forward too. Save your nickels today, just in case. For happiness is priceless.
Agree with d, I would reprioritize a bit.
First of all, sit down with a spreadsheet and do some planning(if you're adept enough to do a blog I'm guessing you know how to use Excel). Map out a plan to reduce debt and build up your emergency/f-you funds, assuming you are maxing your 401K enough to get the full match. Remember, within a certain period of time, you want to be in a position to move on to the next thing (school, etc.).
Have some fun too, like you said that is important. Enjoy yourself a bit - but set a strict budget for that so you don't regret it later. I find that if you budget the fun money, then you don't feel guilty about spending it, and so you can enjoy it that much more.
FYI, your gross income may be doubling, but don't forget about the tax man. I wouldn't be surprised if you just got knocked into a whole new tax bracket.
Good to know both of y'all are in agreement wrt the fun money. So often I chide myself for wanting to spend too much fun money (and it seems like other pf bloggers do to). Hopefully, when it's built into the budget, it will seem like less of a guilty pleasure.
@ Miguel - I'm def worried about the tax man. That's why I went to the guesstimator, so I can do a rough budget. I have a tendency to let the money drip away without at least a rough idea. But, I plan on refining it once I actually get my check.
I can def agree with you regarding building an e-fund and reducing debt.
Oh, and D, good call on reducing the nondeuctable debts first. I hadn't thought about that.
I bet you are in a higher bracket now, so reduce your income. If you contribute to you 401k and find some other Pre-tax investment options, there will be less taxable income at the end of the year.
Aside from that, I think you should make paying off debt a priority because the finance charges and interest you pay will eat into your investment returns.
There seems to be a constant debate in the PF community between paying off debt or establishing emergency savings. Long time ago, when faced with this question, after setting aside about a month of living expenses, I focused on paying off CC debt 1st. Bad as it sounds, I figured the CC's could get me thru most emergencies, except for a job loss. But when you're young and don't have too many responsibilities, you can downsize very quickly in case of job loss, and also look to friends and family for short-term help. So, the debt redux was the priority. Then after, eliminating the CC stuff, I started focusing on saving. My one regret is that I wish I had started putting $$ in my 401K earlier, maybe even before the CC pay-off. Later in life, I'm discovering that the contribution limits for 401K's & IRA's are very limiting in terms of what I wish I could contribute - these days I have the money but the limit forces me to put most of it in after-tax accts. If I had started earlier, my pre-tax savings would be much larger.
Anyhow, along with building up the savings for retirement, as well as for a home, I accelerated paying down the student loan - even though it was relatively low-interest, it was a large amount of debt that I just needed to be done with - and it felt great to make that final last payment and finally be free of that yolk. Of course, now I have a jumbo mortgage many times the size of the student loans and it'll be a long time yet before that's gone.
@ DH - Interesting re reducing the income. I've been so low in that category that it never mattered b4. Sounds like a good strategy to me.
@ Miguel - I flip-flop as well. It almost always depends on how antsy I am. If I am just fed-up with where I'm at, I want the debt to be *gone*, but if I'm happy, then I look toward my future. I think a good balance is going to do it for me. My cc debt is at 0% for now, so it's not that much of a worry. But I have minimal efund and retirement savings. So, I think those are going to come first and the debt next. Plus, I want to prepare myself for when I might not be able to make as high contributions (school, low pay in new career).
I had never thought about the contribution cap in later years. Just shows how small my tangible dreams have been.
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