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Tracking a budget, meeting a financial planner, etc.
Improvolone
Registered User regular
Registered User regular
My fiance and I have been tracking out income and spending for awhile, but we've never really kept good track of it. We would look ahead for the next fwe months, say "this is what it will cost us". We never keep track of our spending throughout those months, we just try to be mindful of spending money on frivilous things.
That is coming to a stop. We've developed a budget that we're comfortable using for awhile, and we want to get our financial futures on track. This is out budget right now for one month.
Food - 700 (we try to eat as fresh healthy foods and I really don't think this can be cut down much. We try to use coupons when we get them in the paper, but there are only so many for the healthy foods. We are also looking to buy a water filter to counter the cost of bottled water)
Rent - 1000
Electricity + Water - 160 (I try to be mindful of useage, she not so much. Still, I think we're doing pretty well.)
TV + Internet - 100
Gas - 300 (we've only been using 1 car lately, when she goes back to work this will go up)
Baby - 300 (diapers, clothes, etc. This will go up as he gets older)
Dining out - 250 is what she wants, I think we can cut it to 100.
Entertainment - 150 is what she wants, I think we can cut it to 100.
Her monthly costs - 100 (gym and tanning salon)
Extras (toiletries, medicine, a pair of pants, cleaning supplies, etc) - 600 (I think this is out biggest expense that we can cut down)
I've signed up with Mint.com, but none of my accounts seemed to have connected properly. Is there a software solution that I could be using in order to help try and track and classify every dollar I spend? I want to take the time to do this money mangement thing right.
Here is our situation.
She's 22, I'm 21, and we have a four month old son. She will be getting a full time job within a month, and it'll be the first real income we've had in a while. We've been paying for everything else out of the money that has been set aside for me to use in college. I'll be getting full access to this trust fund when I graduate in December (which is when I'll have time to work full time). Her grandfather set up a similar situation for her, but since she didn't finish college, the money will be available to her when she gets married. This will happen sometime next year. What I want to speak to the financial planner at Schwab about (which is where my mutual fund is) is how to prepare for our own future, as well as how to manage the money that I'll be getting, and on top of that how to give my son the kind of head start I got by the time I came to college. Do you have any suggestions as to what I should ask the planner, or anything else I should know about in this field? I think there will be about 100k by the time I graduate in my account. My initial guess is to put X of that immediatly into a mutual fund for my son, and to continually add to that when I can as he grows older.
We also realize that renting is throwing money away, and are interested in buying a house. Since the market is fairly weak in our area, the next few years will be great for buyers.
That is coming to a stop. We've developed a budget that we're comfortable using for awhile, and we want to get our financial futures on track. This is out budget right now for one month.
Food - 700 (we try to eat as fresh healthy foods and I really don't think this can be cut down much. We try to use coupons when we get them in the paper, but there are only so many for the healthy foods. We are also looking to buy a water filter to counter the cost of bottled water)
Rent - 1000
Electricity + Water - 160 (I try to be mindful of useage, she not so much. Still, I think we're doing pretty well.)
TV + Internet - 100
Gas - 300 (we've only been using 1 car lately, when she goes back to work this will go up)
Baby - 300 (diapers, clothes, etc. This will go up as he gets older)
Dining out - 250 is what she wants, I think we can cut it to 100.
Entertainment - 150 is what she wants, I think we can cut it to 100.
Her monthly costs - 100 (gym and tanning salon)
Extras (toiletries, medicine, a pair of pants, cleaning supplies, etc) - 600 (I think this is out biggest expense that we can cut down)
I've signed up with Mint.com, but none of my accounts seemed to have connected properly. Is there a software solution that I could be using in order to help try and track and classify every dollar I spend? I want to take the time to do this money mangement thing right.
Here is our situation.
She's 22, I'm 21, and we have a four month old son. She will be getting a full time job within a month, and it'll be the first real income we've had in a while. We've been paying for everything else out of the money that has been set aside for me to use in college. I'll be getting full access to this trust fund when I graduate in December (which is when I'll have time to work full time). Her grandfather set up a similar situation for her, but since she didn't finish college, the money will be available to her when she gets married. This will happen sometime next year. What I want to speak to the financial planner at Schwab about (which is where my mutual fund is) is how to prepare for our own future, as well as how to manage the money that I'll be getting, and on top of that how to give my son the kind of head start I got by the time I came to college. Do you have any suggestions as to what I should ask the planner, or anything else I should know about in this field? I think there will be about 100k by the time I graduate in my account. My initial guess is to put X of that immediatly into a mutual fund for my son, and to continually add to that when I can as he grows older.
We also realize that renting is throwing money away, and are interested in buying a house. Since the market is fairly weak in our area, the next few years will be great for buyers.
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Improvolone on
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I don't see why an excel spreadsheet or a google apps one wouldn't do what you're looking to do for your budget thing.
87.50 a week is more than you spend on food?
For child health care, he is on Florida Kid Care, which is like $15 a visit. At the moment, we don't need a daycare service, and if we do it will of course be figured it.
I'm sorry, I must not have been thinking right. That does seem perfectly reasonable for 2 people.
edit: I made more mistakes!
Yes. My wife and I spend about $300-350/month on food for the two of us. You can certainly cut down in that area. Do you buy pretty much everything pre-made, ready-to-eat stuff, or do you do your own cooking? If you don't cook/prepare your own meals you may want to consider starting, as raw materials for meals will cost significantly less than prepared items.
Edit: I actually made a mistake, baby food is included in the food budget. His food is about $100 a month. SO lets see, $700-$100=$600/2 people=$300/4 weeks = $75 a week.
In terms of savings, someone suggested a Roth IRA, and you should look into that. For your savings account you should look into some of the online offers banks have. I haven't looked recently, but I know that a couple months ago you could get savings accounts with 4-5% interest which is nice to have if you're going to have the money in savings anyway. I'm not very familiar with stocks/mutual funds/etc, so I can't make any recommendations there.
I'd say you should definitely consider buying a place, because like you said, rent is pretty much money being thrown away. Try to keep your monthly mortgage/taxes/etc to a similar amount as your rent so you don't end up paying a lot more and straining your living budget.
Your electric+water bill also seems a bit high. How big is your apartment? My electric runs around $35/month, and we don't pay water but friends in the area pay around $40-50/month for water. But that may just be an effect of different utility prices where you are.
I'd suggest what Cauld said and just set up a spreadsheet and balance it like you would a checkbook and keep closer track of the budget. Overall it seems like you're in a decent position money-wise.
We use between 3000 and 3500 gallons of water a billing cycle, and 800-900 kWh of electricity.
My wife and I use Quicken. It's very easy to use.
We cut down from almost $80/week eating out to ~$40/week without much fuss. You'd be surprised how much you can cut out without too much effort once you start to actually track stuff.
Mostly movies and video games. I rationed with her that we actually rent movies so rarely and that we buy games so rarely (usually, the Wii stuff has been nuts the past few months) that we could lower that part of the budget and allow it to carry over to buy more desired frivilous goods. I try to keep dining out to as low as possible. Since I'm the one who is paying, it's a bit easy to do that. Still, if we do go out, we try to go some place nice. If we were to go out to dinner, I'd expect to spend ~$50. Add in grabbing something quick because we're busy (like at a Panera), and I think my $100 is pretty reasonable. But yea, I fully agree on the dining out part of this.
Keep in mind that a financial planner's interests may not line up with your own. I don't know anything about Schwab's financial planners, but there's a chance he'll recommend you put your money in whatever Schwab funds gets him the biggest commission.
I also want to repeat what others have said that you need to cut down on frivolous expenses such as eating out. Once you really start tracking your spending you will be shocked at how much money you waste every month on stuff like this.
Your financial planner really should have told you about IRAs and 529 plans and such. Do you happen to know what is the commission he's making from those funds he put you into? What's the expense ratios, 12b-1 fees, load fees, etc? If he is reluctant to tell you these things I recommend finding another financial planner.
If you are serious about investing I can type something up to help get you started. The short answer is to put your money into low cost index funds, buy and hold, dollar cost average, and set up a good asset allocation for your amount of risk.
We go out to eat once a week to a casual restaurant and spend $25 - $40. I wouldn't suggest cutting it out entirely since I'm sure you and your fiance appreciate the break from cooking and its a nice way to treat yourself and relax. $100 dinners for us are usually Valentine's or anniversaries.
As for savings account, you should keep between 3 - 6 months of living expenses. Unfortunately, interest rates, even at the online banks, have dropped to ~3% (thank the Fed). However, you should never take any gambles (like stocks, bonds, mutual funds) with that money.
As for any money beyond that, it depends on what your plans are. The usual guideline is that money that you plan on spending in the next 5 years should not be invested in stocks or bonds.
I agree with using a program like Quicken. I actually use Microsoft Money because it came free on my computer. It's crappy but it lets me quickly see how much money I have coming in and how much is going out and it downloads the information from all my accounts automatically.
As for buying a house, don't automatically assume you're throwing money out by renting. There is plenty of money you throw out when you buy a house. It's called mortgage interest and property taxes. They're income tax deductible so you essentially get a portion of it back, but in some locations it might not be enough to make up the difference. The gap between renting and buying is too wide in some places. For example, my mortgage is about $1200/month. About $1000 of that is interest. After the tax deduction, its still about net $750/month being thrown away. In some places that's more than the rent for a similar living space.
Buying a house isn't simply about not throwing money away. In today's market, you should be ready to live in that house for at least 5 years to ensure that you don't lose money after sales fees and closing costs (6 - 8 % of your selling price). There's also the fact that you have to be ready to do and pay for your own maintenance. There's no landlord to call when your washing machine breaks 6 months after moving in (learned this one myself).
I'm not trying to dissuade you from buying a house. I bought this one myself last year. There's a lot plusses to homeownership that can't be quantified in dollars, too. Sorry if I went on a rant, but one of the reasons for the current housing slump (in addition to irresponsible lenders) is people rushing to "not throw money away" without fully understanding the responsibilities and committments that came with it. There are plenty of Rent or Buy calculate on the internet to figure out the financials of it.
PS. Congratulations on taking responsibility for your financial situation at such a young age. I'm 26 and I have plenty of friends that are my age or older that are baffled as to why they're broke all the time and going deeper into debt each month. But instead of making a budget they just go out and blow $100 at the bar every night
I notice you don't have insurance costs written down there, btw. If you've got a kid, you need life insurance, and so does your fiancée.
As far as entertainment goes, you could probably cut down on both video rental and video game rental if you joined a Netflix/Gamefly-style program (if you spend enough to justify this, it's probably worth it).
And yes, I forgot about payments for car insurance and health insurance. I actually already have a life insurance plan that my dad took out for me when I was born. I just need to make sure the benefits are my finance and son. She doesn't have life insurance, I'll have to talk to her about that.
I just bought the "basic" version for 25 bucks and its amazing. Best 25 I've spent. It ranks right up there with excel in my opinion as most useful software ever.
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I used to be a financial planner for American Express (before they split off to become Ameriprise), so I'll echo someone else's advice about being careful where you go. At this point, you haven't accumulated enough assets to really justify a financial planner in my mind (and really, "financial planner" is a term that gets used very loosely in the industry). Plus, there's a lot shady planners out there that'll try to shuck you into universal life insurance plans or annuities right off the bat.
I strongly advise you to stay the hell away from Primamerica and the like. Bank-based financial planners are only a few steps up from the bottom. (You wouldn't believe the crap plans I've had to review from former clients of Washington Mutual, for example.) Life insurance-based planners will tend to recommend a bevy of investment/life insurance vehicles that generate the big bucks for them, but make absolutely no sense for anyone without a great deal of disposable income. I could go on and on.
Your best bet is to look around for boutique firms that aren't tied to any particular company. These firms tend to take a much more holistic view of your financial situation, rather than pigeon-holing you into a specific set of company-branded products. Boutiques are usually fee-based with a smaller retainer for continuous annual service, but you get the added peace-of-mind that the advice you're getting is more objective than solely commission-based planners. The Garrett Planning Network has a very good reputation for helping people with lower incomes get their financial lives in order, plus they charge by the hour, so it makes the fee much more palatable.
Garrett website
Quicken is definitely your friend. As people in this thread have said, once you've got your finances mapped out in front of you, it becomes easier to keep control of your cash flow, and much easier to cut away the chaff.
Finally, Than is right on the money here. You can definitely pare away from those food expenses - that's a big red flag. How much life insurance do you have in total? You'll want to make sure that, should the worst happen to either one of you, that the life insurance payout can act as a replacement for the potential future income the deceased would have generated for the family. You'll also want to add in college education costs for the kid as well. If your calculations show that you're short, this is where a term life insurance policy makes the most sense - they're faaaaar cheaper than permanent insurance, plus you can usually purchase a rider that allows you to convert to permanent insurance in 10-15 years when you have more cash to go around, without needing a medical checkup. (God forbid you get nailed with diabetes in the next few years, which would make it incredibly difficult to secure insurance.) As always though, load up on insurance what you can through your company first - it's usually cheaper, but unfortunately, it's usually not something you can take with you.
And don't forego disability insurance. It's very important for younger people to have that in place, because you're less likely at this age to have a substantial cash reserve to tide you through any extended leave of absence due to injury and such.
Make sure you build up your cash reserves first, before thinking about investments. Have that 3-6 month cushion first, and then start building up funds for shorter term goals (like a house), medium term goals (college education) and longer term ones. (Consider ramping up your 401(k) contributions and other retirement-funding vehicles.) If your company matches contributions to your 401(k), consider raising your contributions to the maximum allowed for that match, even if it hurts a bit in the interim - that's free money right there that'll really adds up later on.
Oh God, sorry for rambling. Glad to hear you're taking charge of your finances, and good luck!
I agree that his food expenses seem high but Publix is not an expensive boutique store. In FL, Publix is essentially the Safeway equivalent. They're no more expensive than Albertson's. I would look into CostCo, however. It depends if you have the abililty/desire to buy in bulk.
EDIT: Another thing that might help is on "grocery day" scanning all the supermarkets' websites. They have their specials on the website, so you can devise a gameplan to get the most for your money.
And sorry for jumping to conclusions about your food expenses, but that is a really huge amount of money. I realize the price of food has gone up recently, but it hasn't gone up that much. You should really be paying no more than 50% of your rent in food expenses, and that raises some very substantial red flags.
Also, what is up with your gas expense? How much driving are you doing for it to be so high? My husband is a private tutor and has to drive all over town to meet with students, and we still don't get close to that number. You might want to look into cutting back on the number of trips you guys make per week; say, try to go to stores when you are already in the area for some reason, or try to run all your errands at the same time so you don't keep going back and forth.
Expenses that you appear to be missing from your budget (some may not be applicable):
Phone (cellular, home)
Insurance (car, medical, life)
Car payment
Future student loan payment
For your son, look into the Florida Prepaid College Program. I'm not sure if they're accepting new applications, but that's the way to go if you want to take care of his college expenses now. If he goes out of state, you can cash it out and give it to him then. You can do other stuff besides this, but I highly recommend it, as it served me well.
Thanatos is all about the tough love.
The price of food is pretty steadily climbing -- though it echos most of the things said here, the less-prepared you can get food, the more financially efficient it will be.
(This statement is, of course, hypocrisy on my part. I can't say I've done any proper cooking since my move.)
*smacks forehead* I totally forgot about state 529 plans and other similar vehicles. Kudos to Quoth for bringing this up - take a look into what your state offers in terms of college saving investment vehicles. When I have some more time, I'll see if I can find the old reference sites I used to use when planning out this stuff.
Thanatos nailed this - an average of $700 grocery+$250 for eating out per month every month is massively high for 2 people and an infant. My wife and I spent about $320 for our food this month (plus a couple times eating out at $30-40 each). Even the times we really splurge, I don't think we get above $500 or so a month, plus a few times eating out - certainly not that high every month though.
Consider saving the organic (and unfrozen, i'm assuming?) chicken for special occasions or at least every other trip or so - at most stores you should be able to get bags of individually frozen skinless chicken breasts or thighs that will get you as much or more meat as the fresh packs for less money.
Further, just because something's already not organic doesn't mean there's not still a way to save money - unless they taste absolutely awful, buy store-brand stuff, especially for things like the multigrain pasta or whatnot where any slight differences will be covered by whatever sauce/side dish you're having anyway.
I know you said you already try to eat healthy, but depending how successful you are at that....Evaluate how often you're buying ready-made/instant/quick/etc. foods rather than getting raw ingredients, like buying pre-made hamburger patties when you could just buy a big pack, make them yourself, then split up and freeze the rest. Not that we always do this ourselves, but the more you can, the more you save.
According to what I could find atm, the average gas prices in Florida atm are about $3.88 per gallon or so for unleaded. So you're using about 77 gallons of gas for one car per month...What and where are you driving that is using that much gas?
Cut out the tanning salon. Seriously. Remind her she lives in Florida. If she wants to brown her skin, at least do it the natural way with slightly less risk of developing skin cancer.
This also seems very high - unless you have horrible/no health insurance, i'd have to agree that there's gotta be stuff you can cut down from here.
I'm in a similar situation, my living expenses will drastically change next month and I'm not entirely sure how much things will cost. I'm confident I'll have enough income to cover the changes, and have built up a savings to help any transition. But I plan on watching how I spend my money and then adjusting my budget. Also by keeping track of things you'll quickly realize how much of a waste some things are.
In another few months my budget is looking to get even tighter, as my expenses will again increase. So I plan on watching how I spend and trying to save a little more each month.
For example I can buy lunch here for around $7/day, and that adds up (~20 lunches/month on average). But buying one beverage a day or some other snack is only about $1/day and I think that might be worth it.
I had friends in school who were in a similar living off trust fund situation, though they both dropped out, and things did not end up well for them after they ran through their reserves. Are your school expenses being paid out of the same source or do you have student loans? If you've got student loans, they'll start to hit you pretty hard after you graduate.
I own my Nissan Extra outright, so I make no payments on it. She also owns her Ford Focus out right, but that thing is on it's last legs so we're trying to keep it up on all of its maitenance so that we can avoid it dying on us. I get like, 18mpg. So based on what I spent last month on gas, I plus she drove about 1300 miles. We did take a trip to the Disney area to meet some of my friends on vacation, as well as drive down to my dads a couple hundred miles away, so that figure may be abnormally high. I'll be sure to keep track of it so I can figure it out for the future.
I do not have any student loans.
I tell her constantly how stupid it is to go to a tanning salon in Florida, but she's locked into the contract so she might as well finish it out.
At this time, neither of us have health insurance. I will be renewing my policy (recently expired) though school, and we really need to figure out what to do for her. We're both in entertainment, and hopefully a full time make up artist position will open up for her at the theme park she works part time at (she already works there, they just need a spot for her full time).
As for the Florida Pre-paid, I'm hesitant to do this because it would lock him into a Florida state school.
I lived so cheaply before women...
I wasn't in the program but most of my friends were in it and it served them well. There are several decent schools in FL, anyway. My friends and I all went to UF and all of us have good, solid jobs and incomes. It's definitely something to look into.
However, as selfish as it might sound, it is usually advised that you save for your own future (house, retirement, etc) before your child's. Your child will have a number of opportunities (scholarships, grants, loans) to pay for school. You can't wait until he is off on his own to start saving for retirement (as you'll be in your mid 40s).
It won't. When the time comes, I believe you can cash out the policy for its original value. Then he can use that money for whatever school he wants. And if he does stay in Florida, he's set. But you'd want to do a bit more research on that before getting it.
Here's the website, if you want to start looking into it.
Edit: It looks like you can only recover the amount you initially invested, but I'd still call it a good idea. You can always invest more money elsewhere to allow for the chance that he would want to go out of state.
What percent of income should be put into savings, 20%?
If you put $10,000 in there now, losing all but your initial investment would probably be a loss of somewhere around $35,000.