I’m looking for some feedback to my approach to budgeting. I feel like I’m in an OK place with things like retirement savings and debt, but 2018 has had it out for my emergency fund. I’m committed to rebuilding it, but it’s been several years since I’ve strictly budgeted (I know, I know), and I’m in a different place financially at 30 than I was the last time I was keeping close track of my spending, about four years ago.
I’m going to give y’all as much information as possible in hopes that I can do a little bit better in my 30s and start working toward our retirement goals.
About me: 30F, homeowner, quasi-joint finances with my roommate/BFF/partner – we’re not romantically involved, but two years ago, after a decade of living together as single women, we decided to combine our some of our finances two years ago. I know this is an unconventional arrangement, but it works well for us. I have the better job and own the home we live in, but I also have severe Crohn’s disease that’s been in active flare for most of the last three years. I manage the household finances and pay for her to have kickass health insurance through my work. She takes care of me when I’m sick. FWIW, I’ve done the estate planning to ensure she’s taken care of if something would happen to me.
Income: My annual salary is $47,500. I build our budget from what actually gets deposited into my bank account each month, after all deductions – health insurance, retirement contributions, HSA savings, etc. – approximately $2,750 per month (I get paid monthly). My partner puts $950 into our joint checking account every month.
Pass-through income: I own a 20 percent share in my family’s business but do not participate in the running of it. I have my accountant look at the books every year, but mostly I’m lucky my sister does a fantastic job. I typically net an extra $5,000-8,000 a year, though I try not to rely on this income and do not include it in my monthly budget calculations.
Debt: I owe about $125,000 on the house I bought for $175,000 in 2014. (The market right now is crazy where we live. Comps in our neighborhood have been selling for $240,000 to $275,000, but we’d rather have a house that’s paid off by the time we’re 40 than a fourth bedroom.) We paid off what was left of partner’s student loans last year, and we pay off our credit cards every month.
Retirement: I put in 3 percent of my salary for a 5 percent match, which works out to about $350 per month. I’m also required to contribute 1 percent to a pension fund as a university employee. Again, all that comes out before I start my budget calculations. But I’ve also maxed out my Roth contributions for the last few years, bringing the total to about 20 percent of my salary. Currently, I have about $21,000 in the Roth and $16,000 between my two work plans. I’m vested in both.
Partner makes her Roth contributions separately. We know she’s behind, but she’s been able to sock away $12,000 on crap wages over the last few years. She’s really frugal – way more frugal than I am – so she’s basically at a place where she if she wants to save more, she’s going to have to make more. I’m really optimistic that’ll happen this year, as her previously undiagnosed ADD is better controlled now.
Health insurance: We have amazing coverage through my employer with a family deductible of $3,000 (which we hit on January 1 this year). Our out-of-pocket max is $6,000 (which we usually hit in February or March). We have about $5,000 in our health savings account. As I’m on a specialty drug with a prescription benefits program that typically pays our deductible for us, it’s unlikely we’ll have to spend down the balance as soon as the new year starts. I don’t take it for granted, though, and continue to contribute $350 per month to our HSA.
Emergency fund: We’ve got about $6,500 cash on hand at the moment – $4,000 in her savings account, $1,500 in my savings account. It’s been a rough year, but some of the depletion couldn’t be avoided, as I’ve been guilty of “retail therapy to make myself feel better about being in the hospital” on a few occasions. I’d like to get my account back above $10,000. One of the questions I have is what a realistic timeline for getting that done should be.
Cars: I’m the primary driver on the 2017 Subaru Impreza (20K miles); she’s the primary driver on the 2011 Chevy Malibu (90K miles). The Malibu used to be mine. We sold her 15-year-old Honda CRV with over 200,000 miles on it when I bought the Impreza. My partner is responsible for repairs on the Malibu (it doesn’t come out of the household income), but I would pitch in if she needed me to. I paid cash for the Impreza and prepaid the maintenance through 2020.
College savings: I have five nephews and two nieces, and I want them to have the help I did funding my education (no student debt). I contribute $60 quarterly to a 529 plan for each of them, which works out to $120-180, depending on the month. I’ve put aside $6,300 for them over the last five years. I anticipate that there will be at least one more niece/nephew in the next couple of years.
Short-term financial goals:
- Build emergency fund back up to $10,000
- Save $3,000 for an already-booked transatlantic cruise in November 2019
- Set up separate savings accounts for future travel and Christmas so I’m not tempted to dip into emergency funds
Long-term financial goals:
- Pay off the house by the time we’re 40 (extra $100/month, starting in January)
- Continue to max out Roth contribution until no longer eligible (this could be as soon as 2020, if the family business continues to do well)
- Increase contributions to kids’ 529 plans
- Build a modest second home on property we already own at a nearby recreational lake (this might not be possible until we’ve paid off the house in the city, but I’d love to break ground sooner – this is where we plan to retire someday)
How I build the budget: I subtract out fixed expenses first (mortgage, utilities, gas etc.), then regular recurring expenses (like my yoga studio membership), followed by annual membership fees that need to be paid that month (Costco, Amazon Prime, etc.). From there, I determine how much we still have to save/spend. In order, I’ve been allocating money for retirement savings, college savings, groceries, gifts, dining out, entertainment and personal expenses, like clothes. Obviously I need to start saving into the emergency fund again, but I know my spending habits well enough to know I’ll fail if I’m too restrictive in quality-of-life categories, like dining out or entertainment.
So I’ll give you my August budget, minus savings for retirement/emergency fund, as that’s the piece I’m trying to figure out:
INCOME: $3,700
Housing: $1,372 ($1,015 – mortgage/taxes/insurance; $188 – electric; $30 – gas; $65 – water; $74 – mowing, as I’m not physically able to do it anymore)
Groceries/supplies: $150 (we have an incredibly well-stocked pantry that we’ve decided to eat down over the next couple of months as we try to save)
Subscriptions: $120 ($11 – life insurance on my partner; $50 – Southwest Visa upgrade fee; $14 – monthly contribution to my NPR member station; $3 – extra Apple storage; $12 – web domain renewal; $30 yarn-of-the-month subscription)
Self-care: $199 (this is actually low, as I’m still on surgery restrictions and can’t exercise at the moment – usually it’s $278, which includes $99 for doctor-recommended laser hair removal, $95 for unlimited yoga classes, $84 for a monthly massage plus tip)
Dining: $400 (high this month because I always take my interns out at the end of the summer, and I’m going to Cleveland to visit a friend this weekend)
Entertainment: $150 (high this month because I need to buy gala tickets for the museum where I’m on the young friends board)
Dog: $0 (he’s really small, so we only buy a big bag of his food every other month, flea collars twice a year, annual check-up in February)
Personal: $35 (I’m swearing off new clothes at least through the end of the year, but I managed to drop my Jackery phone charger in a puddle last month)
Travel: $23 (airport parking for my Cleveland getaway)
Transportation: $245 ($100 – gas; $145 – insurance; I also try to account for any Ubering we plan to do in this category, but there isn’t anything on the calendar this month)
Gifts: $50 (I budget $25/kid for the nieces and nephews for a book and an educational toy)
College savings: $120 (sometimes $180)
ALLOCATED: $2,864
That leaves me about $800-850 to put into savings/retirement, and that’s really where I need your help: Should I be prioritizing the emergency fund, to hell with maxing out my Roth contribution? Or, since I probably only will be able to put money into my Roth for a few more years, should that still be my priority? I’m not *counting* on earnings from the family business, but if I get $5-7K next spring, obviously I can use it to fully fund 2018 (I’ve only been able to put in $2,000 so far this year, stupid Crohn’s) and maybe part of 2019.
I just want to know if I’m doing OK or fucking everything up. I grew up with a lot of privilege, but I didn’t want to go into our family business and took a lower-paying public service job. I LOVE what I do, but I need to make sure my/our lifestyle matches my income, even if it means a reality check.
Submitted August 16, 2018 at 05:43PM by notricktoadulting https://ift.tt/2OHQsYh
