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Hello!
We just moved to Pittsburgh from Texas, I landed a job, same line of work i've been in for the past 3 years, but now instead of contract, i'll be a company man! great benefits, stable income, and paid holidays/vacation!
I'de like some advice/suggestions to our new budget I'm working on...
Our situation:
We have a 19 month old daughter, and a boy due in early March!
Mom stays at home with kids, no daycare...yaaayeee!
Income: $4000/month - Net
I'm trying to establish a conservative % of my income to allocate here:
Current Bills/Debt:
Rent: $1000/month - we plan to buy within the next month, I have a house for sale in Texas.
Debt: $268/month (2002 toyota highlander, 2years left on note)
Groceries: $600/month (sounds steep, but i've included a night or two of eating out and a small allowance for spending cash)
Gas: $400/month (pretty conservative here)
this leaves $1000/month
I'm currently contributing 1% of my income to 401K, and plan on increasing once the car is paid off, my company matches up to 6%, so that's where I'll do when it's time.
We went through our savings moving up here, so no real cushion at the moment.
I'de like suggestions on how to allocate the $1000/month left over, and also would like to hear what you'de think a conservative mortgage payment would be for a family in our situation.
also, any critiques of my current budget would be welcomed!
any proceeds from selling your place? i'm guessing that'll be your downpayment for the new place you're planning on buying in a month...if not, where is the dp coming from?
my suggestions:
put the 1000 extra in an emergency fund. yes, all of it. with one kid, and one on the way, you need to be EXTRA secure. especially since this is a new job.
put off buying! yes, put it off for a year or so. here are my three main reasons:
1. you'll save up and build your emergency fund. (not to be confused with saving for down payment)
2. any house that you 'buy' will most likely have a higher monthly payment...so your "1000 extra money" will most likely be even less.
3. you will buy in the winter time (december 2010 or jan 2011) when the markets are typically even lower due to lower activity
Congratulations on the new job. Pittsburgh is a nice town, I grew up in that area many years ago. Winter can be a bit blah but generally bearable. The general area has a lot to offer what I assume is a younger family and the cost of living is pretty decent. First a couple of questions and observations:
1) How old are you and what is your general FICO score/credit history?
2) Is any of the $700 monthly debt for credit cards and if yes, what are the balances owed?
3) Buying a new home immediately with a new job is a bit risky. The great deals on housing won't disappear over the next year and unless you are already familiar with the area, you might want to spend more time scoping it out before you buy. I would not rush out and buy the house just yet.
4) Your vehicle is getting a bit old, planning/budgeting for replacement might be advisable. Two-three year old units are usually your best deal.
5) What is/are the balances in any 401K retirements accounts?
6) My suggested 1st order of business is to save up an emergency fund. Six months minimum, although I prefer a year just in case.
7) My conservative approach to housing has always been 25% of my net for PITI (I've never paid mortgage insurance) and basic utilities. You stated that you've no savings reserves, I assume that also means you're not looking at a 20% down mortgage situation. I strongly dislike paying mortgage insurance and suggest you revisit your buy decision until you can do a 20% down deal.
My comments are based on my very conservative approach to family budgeting. It has served me well over the years. JMO
Congratulations on the new job. Pittsburgh is a nice town, I grew up in that area many years ago. Winter can be a bit blah but generally bearable. The general area has a lot to offer what I assume is a younger family and the cost of living is pretty decent. First a couple of questions and observations:
1) How old are you and what is your general FICO score/credit history?
2) Is any of the $700 monthly debt for credit cards and if yes, what are the balances owed?
3) Buying a new home immediately with a new job is a bit risky. The great deals on housing won't disappear over the next year and unless you are already familiar with the area, you might want to spend more time scoping it out before you buy. I would not rush out and buy the house just yet.
4) Your vehicle is getting a bit old, planning/budgeting for replacement might be advisable. Two-three year old units are usually your best deal.
5) What is/are the balances in any 401K retirements accounts?
6) My suggested 1st order of business is to save up an emergency fund. Six months minimum, although I prefer a year just in case.
7) My conservative approach to housing has always been 25% of my net for PITI (I've never paid mortgage insurance) and basic utilities. You stated that you've no savings reserves, I assume that also means you're not looking at a 20% down mortgage situation. I strongly dislike paying mortgage insurance and suggest you revisit your buy decision until you can do a 20% down deal.
My comments are based on my very conservative approach to family budgeting. It has served me well over the years. JMO
Thanks you so much for the input!!
1) i'm 33 years old, credit history is great, no late's...probaby score in the 700's...
2) No credit card debt or personal/student loans
3) not opposed to waiting...although, our current living situation really sucks
4) both cars are in really good shape, although high mileage, i think we're good for the next few years at least...
5) balance of 401K is embarrasingly about $1k...need work here!
6) i like the idea about an emergency fund, 6 months living expenses seems overwhelming!! not to mention a year...
7) i'm not really counting on any equity being carried over, although if it sells soon, i could see around $5k equity.
IMMEDIATELY up your 401K contribution to 6%. You're leaving FREE money on the table every pay day!
Take the balance of the $1000 and start an emergency fund. Once that reaches a balance that would cover your living expenses for 8 months, channel those funds into other things. Maybe save for a down payment on a house, a College Fund for the kids or fund an IRA.
it seems my number one priority right now would be to get my emergency fund up to at least 6 months living expenses...which for us would mean roughly $20,000!
am i alone in thinking this is very overwhelming?? if i were a single guy, i don't think i would feel so overwhelmed, but i have a wife, a kid, and one on the way! obviously, we have the money to start putting back, it just seems like every other week, there's something we "need"...which brings up my first delima...
i wouldn't catagorize my wife as an outright over spender, but her and i have a difference of opinion on what a "need" is, and what a "want" is...i'm very comfortable with living meagerly, and getting by with what we have...but it seems like she is falling into this "consomer" mentality...we'll have to get on the same page, and i'll start that tonight by having a sit down and put the pencil to paper...we'll get it figured out...
so, with what seems to be $1000/month left, i can see us putting a good chunk of that into the emergency fund on a monthly basis...even at $1000/month, it would take us almost 2 years to get the $20k!! how long would you set as a goal to achieve this?? 2.5 to 3 years??
that would mean renting for the time being untill the emergency fund is set, then saving additionally to get a solid down payment on a home! am i being overdramatic??
it seems my number one priority right now would be to get my emergency fund up to at least 6 months living expenses...which for us would mean roughly $20,000!
am i alone in thinking this is very overwhelming?? if i were a single guy, i don't think i would feel so overwhelmed, but i have a wife, a kid, and one on the way! obviously, we have the money to start putting back, it just seems like every other week, there's something we "need"...which brings up my first delima...
i wouldn't catagorize my wife as an outright over spender, but her and i have a difference of opinion on what a "need" is, and what a "want" is...i'm very comfortable with living meagerly, and getting by with what we have...but it seems like she is falling into this "consomer" mentality...we'll have to get on the same page, and i'll start that tonight by having a sit down and put the pencil to paper...we'll get it figured out...
so, with what seems to be $1000/month left, i can see us putting a good chunk of that into the emergency fund on a monthly basis...even at $1000/month, it would take us almost 2 years to get the $20k!! how long would you set as a goal to achieve this?? 2.5 to 3 years??
that would mean renting for the time being untill the emergency fund is set, then saving additionally to get a solid down payment on a home! am i being overdramatic??
tell your wife to get a job and you'll solve 2 problems:
1. more money coming in = less time it takes to save
2. she'll understand better the value of money!
suggestion: how about a home daycare? she'll get to stay with her own kids while making money.
I would agree with the other poster to get the maximum matching you get for the 401K. I'd rather give up some luxuries in the short term to get essentially thousands of free $$ pumped into your retirement. Try to trim your budget wherever you can, put everything leftover into an emergency fund. Frugality is a lifestyle not everyone is ready for, but once both of you can be on that same page, it's amazing how nicely you can live your life without the latest newest stuff all the time, but also buy that occasional big ticket item without worrying about your budget.
You are fortunate not to have daycare expenses, we were paying $1k per month per child! Now at least one is in elementary school, woo hoo!
kleenex,
home daycare is a great idea...we'll look into that!
moonwalkr,
you hit the nail on the head...it's weird, b/c neither one of us growing up had parents that overspent, her parents were on the poor end of the spectrum, and my parents were VERY conservative with their money...i think once we started making money, we just got caught up with spending it rather than saving...i guess we did good not to live with debt, but we definitely need to buckle down and start getting an emergency fund up and running...
my goal is to get the car paid off, and build the emergency fund up to 6 months living expenses minimum before i bump my 401K to 6%...hopefully, within the next 3 years we'll be up and running!
I think that the only reason to rent is if you know your not permanent. Interest is low, it's still a buyers market. I'd say, invest in a house, knowing you'll upgrade within 5-10 years so buy low in a good neighborhood, knowing you'll be selling eventually, and keep your living expenses to 25% income. That includes utilities and mortgage. Your concern may lie with lowering your gas usage. Pennsylvania may be cheap on property taxes, but they make up for it with outrageous gas prices. It could be a major expense. Good luck!
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