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Dear Wendy
Dear Wendy

I’m about to move out but my budget makes me scared. Can you help me?

Home Forums Advice & Chat I’m about to move out but my budget makes me scared. Can you help me?

  • This topic has 85 replies, 3 voices, and was last updated 1 week, 3 days ago by WhyDoWeExist?.
Viewing 12 posts - 1 through 12 (of 88 total)
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  • #1112567 Reply
    TacoTuesday
    Guest

    I’m not sure if this is the kind of advice you give here, but I figured I’d try.

    I make $3200/month after taxes. Health insurance and retirement covered by my job.

    Rent: $1300 for 650 sq ft., 1-bedroom apartment
    Phone: $40 (I have a cheap Cricket Wireless plan.)
    Car Insurance: $130
    Renters Insurance: $15
    Food: $400
    Toiletries (Hair/Skin products, soap, toothpaste): $100
    Gas: $250
    Internet: $50
    Water: $40 (I estimated high-end.)
    Electricity: $70 (I estimated high-end.)
    Savings: $250

    Expenses Total: $2645/month
    Funds Remaining: $555, which means…
    Fun (gifts, movies, clothes, beauty treatments, supplements, dates): $138/week

    Do you think this is a realistic budget?
    Are there any items I am missing?

    #1112570 Reply
    Kate
    Keymaster

    I’d look for a shared apartment.

    Does your after-tax factor in contributions made to a retirement account? It definitely should, you should start investing right now if you haven’t already.

    And $250/month savings is a bit slim. I’d aim for 10% of your after-tax to build a good emergency fund. You’ll want to save 3-6 months worth of living expenses.

    Finally, your rent is over 40% of take-home and will keep increasing. A roommate situation could get that back down to more like 30%.

    #1112571 Reply
    Kate
    Keymaster

    You say retirement is covered by your job, okay, are you contributing at least as much as they match? Ideally more.

    And if you already have 3-6 months living expenses saved in cash or Roth or something, that looks better for your planned $250/month savings, but my concern would be that money never really gets saved because stuff keeps coming up that you want or that costs more than you think.

    #1112572 Reply
    TacoTuesday
    Guest

    Yep, I’m putting $100/month into my retirement which my job matches.

    By time I move out, and after deposits/fees/furniture/appliances/stocking my home, I project I will have 10K still in my savings.

    For several reasons, I can’t do a roommate situation. There *is* a place that has rent for $1170, just more bad reviews than the $1300 places, but okay. Hopefully living there is okay…

    #1112573 Reply
    Kate
    Keymaster

    Ok, I’m not trying to be a dick, but I think you need to be saving more than $200 a month for retirement. What do they do, a 3% match? If you make $70k, that’s $175 a month, so you should at least contribute that…

    But if you’re 25, want to retire at 65, and let’s say you already have $5k in your retirement account, you would need to save about $780 a month in your 401k and you’d have 1.5M at age 65, which this online calculator came up with assuming you make about $70k now. And assuming social security still exists. So almost $10k a year, which is only half of the max you can contribute.

    That’s retirement, and then your cash savings, you already have 3 months, which is great, but you will need to keep adding to that as things come up. And it is possible that layoffs are coming.

    I would be concerned that your rent keeps going up, you don’t invest enough, and unexpected expenses eat into your savings. On paper it basically works, but I think you always need more than you expect.

    #1112574 Reply
    Kate
    Keymaster

    For perspective, I started my first real job at 26, making like $40k. I contributed probably the minimum to get the match, but kept increasing it, and was maxing out the 401k each year by age 32 or something. I have been maxing it out every year since then. Right now my 401k is worth around $525k in total, and I’m 47 and would like to retire in 15 years. That’s nowhere near enough to retire the way I would want. It is just my 401k though, I do have other investments and savings, but just trying to illustrate how much you really need to invest and it’s so important to start now.

    #1112575 Reply
    TacoTuesday
    Guest

    That makes sense. But right now, I only make 41K after taxes though, and this is also my first real job at 25. I could put more in my retirement, but then that’s less money for my monthly expenses, so I think I’m stuck at my current amount for right now.

    #1112576 Reply
    TacoTuesday
    Guest

    Forgot to mention they do a 5% match.

    #1112577 Reply
    Kate
    Keymaster

    Then I would really recommend you hop jobs for a good raise ASAP. $40k is great money if you’re living with others, but unfortunately with rising costs it’s not necessarily solid enough to be a comfortable solo living, depending on where you live.

    See how you do with sticking to a budget, but if you start carrying credit card balances or dipping into your savings, that’s a sign you need a higher salary or a roommate.

    #1112578 Reply
    Anonymousse
    Guest

    Is there a way with location/public transport you could cut costs? I think at 25, if you know you’re in a tight spot and need to start saving more, than you can focus on that and make this work. Not everything is forever, this is temporary. There are a million sites with tips on how to exist on a budget. I think a roommate, cheaper place in a closer location to work, etc could be helpful.

    #1112579 Reply
    Kate
    Keymaster

    Oh and a 5% match is really good! If you don’t contribute at least 5% then you are throwing money away / leaving free money on the table.

    #1112580 Reply
    TacoTuesday
    Guest

    I work from home! Unfortunately, even with that, I still think gas prices are going to be $250/month. As you know, gas prices are stupid crazy right now. It takes me $65 to fill up my tank, which happens about once a week with just errands and going out to a few social events a week. Ugh!

    Where else could I save? Taking all suggestions! I should mention that I also often have down-time in my main job that I sometimes do tutoring on the side, which if consistently done, can bring in another 100-200 a month.

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