Another budget post: tell me how I'm doing (HHI=$145k)
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Anonymous
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I just have no idea if I'm saving appropriately or how to delineate savings for retirement, college, and extras.
We are early 30's with one DC. Monthly net is ~$8500. Budget: - 2500 mortgage - 1000 food/groceries including paper goods - 1300 daycare - 500 utilities, cell phones, life insurance - 100 home depot or similar - 160 biweekly house cleaner (necessary for sanity) - 200 car insurance + gas, etc. - 400 gifts and shopping (target, clothing...) - 200 gyms and health expenses - 150 diapers/supplies, etc. for DC - 500 extra (usually a big purchase or a vacation expense) Current savings = $60k emerg savings, $15k 529, $60k in retirement (we only contribute up to the match at each employer right now at 6% total) We usually spend a little over $7k a month and have almost $1500 left over. What should I be doing with it? |
Anonymous
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We have a similar HHI and are early 30s too, but two kids in daycare for a total of $2400 a month. This is really hard on our finances. You are in better shape than us, although we have more in retirement accounts ($120k).
Any debts? I don't see car payments or loan payments. Assuming you don't have any debts, I would open up Roth IRAs and try to contribute the $5500 max per year for both of you. How much do you contribute to the 529 account per month? |
Anonymous
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OP here. no debt other than mortgage. We have been contributing ~$500 a month to a Roth and ~$500 to a 529, but I'm not sure if we should increase our retirement savings?
I feel like we're doing fine but worried about the lack of investments, IRAs, etc. We don't have long-term care insurance. Is there something else I should be doing that I'm missing? |
Anonymous
| I would definitely up your retirement savings more. You should max out your 401k AND each open up an IRA. Are you planning on having a second child? |
Anonymous
OP again. Yes hoping to have a 2nd DC, likely not more (not at this HHI at least  )
What is the "max" for employer retirement accounts? Not sure we can do that + max out Roths. |
Anonymous
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You are saving $500 each into a Roth IRA or $500 total? If it's $500 total for both of you per month, I would try to up that to $500 each per month. If you are already doing that and want to save more then increase your 401k contributions.
$500 a month into the 529 seems reasonable. Definitely increase your retirement contributions before you increase 529 contributions. Long-term care insurance is typically recommended in your late 50s. Disability insurance might be something worthwhile to look into, if you are not covered by a work policy. |
Anonymous
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You should max out Roth IRAs first. Limit is $5500 per year for under 50 years old.
401k max limit is $17,500 for under 50. The employer match can be above this. |
Anonymous
If you can't max your 401Ks right now then keep with the 401k up to the match and add an IRA (many like a Roth, including me). 401K max is $17.5K but some companies only allow a % of your income like 15%. But also sit down and do a "how much will I need in retirement" calculator. It seems far off, but the earlier you save, the more time you have for it to compound. It's good to at least be aware of your future needs. General advice is to save 15% of your income each year for retirement. If you make $140, then you should be saving about $21K per year. With the 6% you are saving now, an additional $11.5K in a Roth will put you very close to the 15% mark. You might also try to up your 401K by a % point each year, so try to do 4% this year, 5% next year, etc. In addition to retirement savings, I also like haivng a general savings account (not just an emergency fund). Think about what your expenses will be in the next few years and save for them - another car, household repairs, living expenses when you take off work to have a second child, etc. The emergency account should truly just be reserved for emergencies (loss of job, illness, major house damage, etc.). Things like a new car or a new roof are predictable expenses that should be saved for. |
Anonymous
| That's a great idea, PP. How much would you recommend in a "planning for upcoming expenses" account? |
Anonymous
| Increase your 401K. I'd also look at some mutual funds that could be used for college, or if not needed, used for retirement. I also think you want a general savings account. Start with $500 a month for now. But think about your next car - will it be a $20k or a $40k car? |
Anonymous
| We have a similar income, and similar expenses, but two children in daycare. We've had to cut out gym memberships (exercise at home), and spend less on gifts/shopping and groceries than you budget. If a second child is on the horizon anytime soon for you, you might want to scour your budget for ways to cut back now so you'll have a bit more cushion once the second comes along. It was a bit of a shock to us how quickly we went from feeling like we were doing okay financially to worrying about not being able to put anything extra into savings at the end of the month and having to carefully weigh whether small things like a weekend driving trip to visit relatives was too big an expense to take on. |
Anonymous
Increasing your 401K contributions, saving up for large home maintenance/repairs, try cutting $100 from your food budget. |
Anonymous
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I say yoour budget looks fine, except for retirement, as others have said. One thing I would do is see if you can cut Target/shopping 1 month. Your food budget looks very reasonable to me.
We have 2 savings account. One is linked to our checking for "oh shit" moments and for housing maintenance Our other account is more long term and is not as accessible. We put about 500 a month into the latter account and transfer money to the first account if there is enough if a cushion in checking. |
Anonymous
| I would max the 401k for the tax break but wouldn't do a Roth. |
Anonymous
I think it totally depends on what you think you will be buying in the next few years. If you think you are 3 years away from needing a minivan for your growing family, and you expect the minivan to be $36K, then try to put $12k per year or $1K per month into a savings fund. If you think you will need a new roof in 2 years at the cost of $12K then put $500 per month into a savings fund. Or do a combo based on multiple needs. I would sit down and write out some goals for the next 5 yeasrs and 10 years. Those could include wants (such as a big family vacation) and/or needs (such as a new roof). By planning ahead for big expense items, they won't surprise you or make you go into debt when the costs come up down the road. |