Budget/Spending Advice Needed

Submitted by DIY_Guy1520 t3_yhkm82 in personalfinance

Hello PF!

Throughout my life, I've never really had a good, planned out budget. I've always been a good saver and rarely spent money frivolously. Since I've been married for a couple years, I'm starting to find it more difficult to track spending. Also, we're really not saving as much as I'd like and I think we're overspending in some areas. I'm just looking to get some advice on this new budget I set up and get any pointers on how to better track spending and stay on track. Are there any glaring issues you see? Any big hitters I may be missing?

Details:

My wife and I are both 28 years old with a 1 year old child and a 2 year old dog. We both work full time and bring in about $161k gross annually (not including year-end bonus/company profit sharing). We both contribute about 15% each of our salaries in our 401k's and we are both maxing out our personal Roth IRAs through Vanguard each year. We live in a metro area in the Midwest (so not California COL, but also not rural Arkansas COL). We have a 20-year mortgage @ 2.325% interest.

Our monthly net income combined is $8,525.

Some notes before I get to the budget:

  • Net income above does not include my year end bonus/profit sharing nor does it include our annual tax return
  • Net income above is after we pay into our 401k's, HSA, and Health/Dental/Vision insurance through my employer
  • We currently have roughly a 6 month emergency fund built up, which I have no intentions on dipping into
  • My own Roth IRA contributions aren't shown in the budget below, as I usually make a lump sump max payment when I get my year end bonus every year.
  • The Costco expense in the budget includes items like food/diapers/formula/dog food/etc.
  • I know Amazon prime and music subscriptions aren't "necessary", but those are things we use very frequently and we aren't really looking to get rid of

Below is the monthly budget I just recently put together:

Monthly Net Income: $8,525
Mortgage & Escrow: $1,840
Car Payment: $627
Wife's Roth IRA: $500
Daycare: $1,300
College Savings 529: $150
Energy Bills: $240
Water Bill: $47
YouTube TV: $65
AT&T Phone: $136
Internet: $65
Car Insurance: $147
Groceries: $400
Toiletries: $75
Gas $500
Amazon Prime: $12
Music Subscriptions: $10
Costco: $300
Total Necessary Expenses: $6,412
Funds Left Over: $2,112
Savings/Personal Investments: $850
Restaurants/FF/Coffee: $450
Home Improvement/Auto Maintenance: $337
Shopping: $350
Extras: $125
Total Remaining Budget: $0

Any good apps for tracking your budget? Should I set up different accounts to allocate specific funds for specific things?

Thanks!

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AdditionalAttorney t1_iuej1e7 wrote

I really love YNAB as a budgeting tool. It’s ~$100 a year, which is steep for an app. But it’s the only thing that got me into actively engaging w my budget. Like you I also feel like I live frugally and save well

YNAB has allowed me to supercharge that.

The thing that jumped out at me is no set aside monthly sinking funds for vacation and for gifts (Xmas, bdays, etc)

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selryn1701 t1_iufq754 wrote

I would also recommend YNAB. As a naturally thrifty person it's allowed me to see what I can actually spend freely while saving for my goals.

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DIY_Guy1520 OP t1_iuen0z4 wrote

I’ll have to check out YNAB. But good call with the vacation/gifts totally forgot about that.

Also at this point in our lives, a ton of friends/family are getting married so we’ve been shelling out money left and right for weddings lol.

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AdditionalAttorney t1_iuenzfz wrote

Yep that’s another category.

Some people call it “life events”. For things like, weddings, baby showers, graduations, funerals, etc

YNAB really has an AWESOME system of how to think abt this stuff. Bc it forces you to amortize over time so that you’re saving bit by bit for things you KNOW will happen, you just don’t know when.

It has a bit of a learning curve and the tool is a glorified spreadsheet however for me it took using it for everything to click. And now I keep paying the subscription bc I like the sync w my bank and app access.

I highly recommend it. It really helps you not dip into things that are a priority for you. And let’s you pretty seamlessly move money between categories.

Like say in a given month you spent your eating out budget but your wife hits an amazing milestone at work and you want to celebrate. Before YNAB I’d just go and say “it’s worth it a $100 dinner isn’t gonna break the bank”. With YNAB I can get specific and say “it’s worth it, a $100 dinner isn’t gonna break the bank, I’m going to move $100 from the category where I was saving for a new TV and delay buying the TV”.

When life gets complicated w kids and tons of transactions it’s really hard to see that granularity and make that call. Anyways, try it out, it’s really made me feel like I can spend more, save more, without actually making more. The sub is great too r/YNAB

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DIY_Guy1520 OP t1_iueocmm wrote

That’s exactly the type of thing I’m looking for! Thanks again

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Narsil86 t1_iuef3wu wrote

long post incoming! But I have a lot of thoughts, this is just my two cents and you can ignore any or all of it if you want haha.

I'll start by saying that this is all preference and your own experience and risk tolerance and all of that are different from mine.

You and I are in a relatively similar position, about the same income and expenses, a kid, etc.

I used to be pretty poor, I used the simple bank to manage my expenses pretty tightly, when they sold and died I went to another bank with very tightly controlled budgeting tools. I would recommend one finance or Ally if you want a little more control over your spending and want to use virtual accounts do that.

That being said, you and I are kind of in a position to be beyond basic budget tracking tools. I kind of felt like I "graduated" when my wife and I finally got to our real careers and started making good money.

Longer thoughts incoming...

I prioritize my money this way, zero: pay all bills on time monthly, one: make sure I have a solid plan for retirement, two: make sure I can help pay for my child's education, three: keep enough money liquid that we can survive in an emergency and go on vacations and stuff on a yearly basis, four: any money left over after that I have, I just used to live my life.

It kind of seems like you're in this boat too, if you want to trim some fat here and there you can. Go to restaurants less, find cheaper meals to make at home, maybe the next time you buy a car go for one that's a bit cheaper. You can try to reduce long-term costs by getting solar for your house if you're in an area with good sun, but all of these things are going to lead to maybe a few hundred dollars total. Your biggest expense that will eventually go away is childcare. Maybe in the meantime you can reduce the amount of child care you need by utilizing family and friends? But that is entirely based on your family/friends dynamics, it's silly to even suggest that because of course you probably already thought about it.

When I was poor, a few hundred dollars was a difference between making rent or not. Nowadays it just depends on how much I put into savings, and when savings gets too big I put more money into my retirement account, or spend a little extra on our vacation. We already put in 30% of our income to our retirement account so it's not a big deal if I don't add extra regularly.

Again it's all about personal preference and risk tolerance and goals, but to me it seems like you have a solid retirement, a healthy emergency fund, enough money to live happily day-to-day, there just isn't much left after that. If you want to free up some funds so that you can add more to retirement, I guess that makes sense, but just know that in the meantime you deserve to live your life too.

If you want to free up funds to invest in other high risk high reward ways, I wouldn't put too much money towards that, but that is possible. But unless you want a second job, I wouldn't get into real estate or day trading or anything.

It took a long time for me to mentally let myself be a little bit free with my money. I bought a gaming pc, got into vr, I have a home gym, and now that we have a baby a lot of those hobbies have slowed down, but that's okay. I don't go around buying frivolous things, but when I need something, I buy it. I'm a lot harder to shop for Christmas gifts nowadays haha.

I had a couple suggestions in there so I could answer your question more directly, but I really wanted to say that I don't think you really need to change anything unless there's more to the story than just the budget you put forward. And that's fine, not everybody wants to put everything online. But in this case, I don't think you have to worry about growing your savings much more. Eventually your children will be older, you won't need child care, but then you'll spend money in other ways, unless you feel like things are getting ahead of you, you are fine.

I think checking in with your finances once a month like you're doing, putting it into a spreadsheet or something, it's perfectly fine. That way when some expense blows up you realize it before it goes on for months.

Again just my thoughts!

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DIY_Guy1520 OP t1_iuemr1n wrote

Hey thanks a lot for that write up, some really good thoughts in there and good to see in another perspective.

I think you’re spot on with the childcare. Its a big money hitter. My wife and I would love some help from friends/family, but it just isn’t possible as we leave 4 hours away from them. I think I just may be used to how our life used to be financially before we had a kid (they are expensive! Lol).

I also think you make a good point with checking more frequently. I’m going to plan on doing a deep dive monthly to keep track.

Thanks!

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