I’ve heard from everyone and their dog that you should be saving 10% of your income. For the past several months, I have been putting $417 into my Roth IRA (to max it out at $5000 per year) and an additional $320 (or close to it) into my short term savings account, which is sitting pretty low right now. As you can see on my Means page, I have $8,000+ in long term savings for whatever might arise. I would prefer to never spend it and let it gather interest for retirement.
My question:
10% of my income is $350 or so each month. I’m already putting more than that into the Roth. If I put $320 into short-term savings as well, I have to keep the rest of my spending fairly lean at $400 (in my humble opinion, up for debate, challenge me!) because I’m also paying a ton towards my student loans each month, almost $1000 whenever I can. I’m so curious to know how you would operate my money. If you have time, would you please take a peek at my budget/income and tell me how you would change it. I know I need to be more frugal, as evidenced by my out-of-control spending. But am I allotting too much or not enough towards my savings and student loans? Are my loan payments too aggressive? They want around $164 per month and I just paid my usual $1,000 payment. Tired of being manhandled in interest, you know?
My dream self would not only contribute $350 to short term savings every month, she would also have money left over each month to stick in there as well. 2012, let’s make this happen!
Give me your two cents please?
Welcome to the pf blogging world! Yep, 10% is the starting amount, but, like you, I go over the 10% mark and keep going! What’s the interest rate on your loans? And when do you plan to use your “short term savings”, and how much will you need? I see that it’s separate from your long-term savings.
As for budget, what’s your “allowance”? Is that just the “leftover” amount after you’ve paid all the other expenses?
Looks like you’re on a good path already. That’s the two cents I’ve got for you so far…
Thank you, Stephanie! I have several loans – the biggest one sits at 6% and the others are all at 2.3% to 2.5%. I feel guilty that I don’t have the 6 months of living expenses saved that everyone always espouses as important to have.
My allowance is pretty much the leftovers, yes. Although I just realized I need to update the page as my allowance is now $400 and not $117.
Adding you to my blog reader! Thank you so much for reading!
I do 10% of gross income, which is currently going towards building my Emergency Fund. It sits at around $2500 right now and I’m going to keep contributing to that until it hits $10,000. By the time it gets to that, I’ll flip that contribution over to retirement savings.
On top of that, I contribute about 6.5% to “short term savings” which covers things like trips and gifts and minor car repairs. Then I allot 15% for “life” food and entertainment, 15% for transportation, and the rest to debt repayment!
I think you are on good path, but it depends on your short term goals. If your goal is to become debt free like mine is, than by all means keep throwing money at your loans as long as you can stand it. If your goal is to build up a savings account, then maybe take a look at how you are allocating your money with respect to debt payments/savings.
You are correct with your first guess- I want to be debt free! The loan’s pesky interest rates are making my small college education an ivy league expense.
I don’t think loan payments can ever be too aggressive. The best thing to do when you’ve got the cash is to work on wiping out your debt, so I think you’re kicking butt there!
If your rent is $573, what’s the other $250 “apartment” for? And what’s covered under your allowance? I would say your numbers look good and it’s up to you to find where you’re comfortable cutting back on. That’s what makes personal finance so personal.
I guess I should have clarified! The $250 is for new furniture / cookware / various essentials that we didn’t have before. M. and I both have had kind of lame post-college crap and only recently decided to start buying pieces we want to keep forever that will last. Little by little. We’re not big on “stuff” but we want things that we come home to and love to see, like a nice bookshelf or Cuisine Art (I can’t spell that!) cookware etc.
Thank you for the encouragement!
Hello! I’m liking the blog. I think you are doing pretty well. If you can afford paying $1000 a month to your student loans, that’s great. The only $$ I would move is the apartment fund. I would stick $100 in that account, and move the leftover $150 to savings. That’s my two cents. In the end, it’s your money and sometimes you gotta do what makes you happy! I look forward you reading your posts in the future.
Thank you! I appreciate the feedback.
Great job living well within your means while you get rid of the student loans! I agree w/ the consensus and would pound down on the student loans, too. While I’d say 10% is bare minimum to save generally, while in debt maxing out the ROTH is most likely all I would do if I were in your shoes. I’d pay the rest towards the student loan, while keeping a relatively small emergency fund.
By the way, between your short- and long-term savings it looks like you’ve got a decent starter emergency fund for your expenses. If you had an “emergency” like job loss or whatever you could cut your student loan payment, savings and apartment savings, which would reduce your minimum monthly expenses by 1400 to 2100. Subtract the ROTH if it is a real emergency and you’re down to “minimum” monthly costs of $1700. All that and you have over 5 months of minimum expenses saved between short- and long-term savings. So don’t feel too bad. Also, I’m sure Mr. BHM would say you don’t need the makeup either – another $20 in your pocket
But until then, I’d knock out the student loans if I were you. The real money is made when debts are paid off and you keep making the payments, but to yourself (mutual funds, etfs, down payment fund) while keeping your standard of living low. Great, great job!
This is all wonderful advice. I can’t believe I waited so long to start PF blogging! This is the most supportive, kind community I’ve ever been a part of online. As for the $20 makeup, it’s mostly expensive sunscreen and mascara- nothing crazy! Maybe she’s born with it, MAYBE IT’S MAYBELLINE! …I was born with it.
Agree with Cait – I don’t think you can be too conservative with loan repayments.
Heading over to check out your budget now.
I make slightly less than you a month (though I can’t remember if your 3500 is post or pre tax)?
I put 4% pre tax toward retiremen (taken out post tax, that’s how it works here). I then aim to save 40 percent of my take home, which doesn’t always happen. My EF is funded at 10k so savings is now going toward wedding and travel funds.
However, I have no debt, so take from that what you will.
Do you have your budget posted anywhere? I would love to take a look at yours.
I don’t really budget as such, but you can see my monthly spending roundups on my blog (Finances tab up the top, or the ‘money’ tag).
Thanks! I shall go investigate after work today.