Budget: How to?

Tandem21's picture
Rank: Gorilla | 687

Hey guys, I've been on a bit of a thread posting spree here lately, my apologies, but I do have some burning questions. I need to learn how to budget, this sounds horrible but I have never really had to, and both of my parents have really never lived on a strict budget that I have seen. Come January, I'm a December graduate, I will be completely independent from my family, they will obviously help if needed, but for all intents and purposes, I will be completely on my own. I would like them to be able to finally use their finances on themselves as their sole focus.

I recently got my first job offer and it will pay ~65-70K +15% bonus potential based on deal/business origination. I haven't accepted it, but there is a high likelihood I will. I will be in Houston.

With the above salary, lets go 67k, which is $5600 a month before taxes, what percentages should be placed where?
- Savings, how much or percentage?
- What is a reasonable car payment to aim for? (Already make my payment, might as well pay for what I like)
- How much should be spent on rent? Nice places are anywhere from $1200-$1500 in Houston.
- Student Loan payments? How to work your payments?
- Leisure, percentage?
- Insurance: health and car $540ish? I may be way off base here with insurance costs but I am just speculating.

I know there are other expenses to be accounted for but I would really like to just get a feel for what you guys are thinking. This may seem ridiculous, and is a bit embarrassing but through all the calc/econ and other quantitative courses I took in college, I was never taught personal finance.

Thanks for all the help.

Comments (32)

Aug 2, 2017

Personal preference on a lot of your above questions, but definitely find out about your employer's 401k and match program. Set up auto payroll contributions so that you can fully max out the employer match. If you forget to do this you're missing out on free money.

Aug 2, 2017

I'll have to look into that for sure, I will be with a 25 man operation so I am not sure if they will offer the 401k match.

I would like to start a Roth IRA, but again, I am not entirely educated on them.

Aug 2, 2017

On My Own Two Feet (yes, it's written for women, but it's still an excellent personal finance book)
r/PersonalFinance
YNAB (no personal experience, but this budgeting software is always highly recommended)

Aug 2, 2017

don't buy stupid shit, live below your means, save as much as possible, invest everything, track monthly income/expenses in excel, do monthly analysis, marry someone who's on the same page and contributes

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/

    • 8
Aug 3, 2017

I agree with the fuckers list. +1

    • 1
Aug 3, 2017

Learn to budget by blowing all your money and being broke, then cry and budget!

    • 1
Aug 9, 2017

Worked great for me. Blew my money and went broke right out of college, now I've got a job and learned good financial habits.

    • 1
Oct 11, 2019

hi there, you may want to check out the Nummo app to get started. You can add all your credit cards and bank accounts (electronically or manually) to get a complete overview of your finances. Also, you can create a budget with the relevant categories to keep track of where your money really goes.

Oct 11, 2019

This, trial by fire

Aug 3, 2017

Although in general, I disagree with the idea of a budget. That's a scarcity mindset. I try to live in an abundance mindset. IMO, if you're a productive person with a high capacity who's generally good at whatever they want to be good at, your energy is better spent figuring out how to make more money rather than how to save it. Get more streams of income and work on them. Take that money and invest it into passive/semi-passive investments. Don't say you get/need to spend a certain percentage of your income on X every month. That's setting you up to scale expenses with income linerally, which is a trap of capitalism. Study capitalism and use it as a tool to escape the rat race and gain financial freedom while you're young and healthy.

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/

    • 3
Aug 3, 2017

I'd like to invest the savings in a mutual fund, or ETF type deal at first. It may take a little while before I am looking to bring in other sources of income while I just start my career.
'Investing' in a restaurant seems cool, but I have the personality that I would want to be there all of the time overseeing everything, even though I know nothing about restaurants and how to run them.

Aug 3, 2017

index funds/ETFs are the move until you learn more about better/alternative investments (real estate, 3 acres of a cacao farm in belize, 5 acres of a cacao farm in panama, notes, etc.)
Just don't lease a fucking maserati

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/

    • 1
Aug 3, 2017

Agreed with the above posters that a lot of this is personal preference. I would first signup for something like Mint just to see where your money is going then work out a budget from there.

Aug 3, 2017

Mint was such a PITA to try to link everything to, it couldn't find my address in Zillow, couldn't find my Capital One card (not even some obscure shit), all kinds of bullshit. Google Sheets all the way... simplicity, I like

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/

Aug 3, 2017

Agree that it was a pain to set up. Also was somehow calculating my portfolio holding incorrectly. But once its running, all it takes is a couple of monthly tweaks and it aggregates everything into one source.

Aug 6, 2017

Cool tip that I heard for building credit.

Make one small purchase with your credit card a month. Then, attach cash (amount of small purchases) to your credit card via rubber band and bury the card/cash in an out of sight spot. At the end of the month, deposit the cash into your bank account and begin the process again.

This will keep you from spending beyond your credit means a the beginning of your career. I would use a debit card at the moment, which I understand means missing out on cash back perks, but I think this is a better alternative than pilling up credit card debt early on.

Aug 10, 2017

JCR10 - please for the love of god, don't do this. If you want to adhere to the underlying concept of your 'tip', just set it aside in a sock drawer or buy a time locked safe - if you're running around burying your credit card and a wad of cash in the ground, you're going to get robbed and have your identify stolen.

Best Response
Aug 9, 2017

at least 10% to 401k (I prefer Roth), maybe more. set your bonus to pay 50% to your 401k.

find roommates, keep your rent payments to <20% of your pretax income

buy a car that's a few years old (likely coming off lease), or lease a car. for example, you can save 50% on an audi a4 by just buying a 2014 instead of the brand spanking new one. my car payment is less than half of my rent payment (and I abide by the 20% rule). if I were in your shoes though, I'd just get something to get me from point a to point b, like a honda accord (or if you're the adventurous type, an old SUV).

for your employer health insurance, assuming you're a normal healthy 22 year old, get the HDHP with a HSA, defer at least $500 per year into this, more if you can afford it.

just did a quick calc assuming single filing status with no allowances, 10% to Roth, $100/mo in medical (insurance), and came up with ~3500/mo after tax. (http://www.symmetry.com/wells-fargo-paycheck-calcu...)
say rent is $1k, car payment is $350, car insurance $200, you have $1950 left to dick around with. put at least $300/mo into a rainy day fund (this could help fund new tires, vacation, a bunch of gator tails for labor day, whatever).

get a credit card with no annual fee and great points (like quicksilver, BoA cash rewards, etc.), put everything on there and have it set to autopay every month.

learn to cook, spend less than $200/week on food. cook breakfast lunch & dinner when you can, go out to eat sparingly but don't be a miser.

spend less than $100/month on the gym. you don't need equinox, you just need some girls in tight pants and some barbells.

now you're down to $750 left (1950 less rainy day, food, gym). add back the rainy day and that's over $1k a month you have at your disposal.

you have a choice: YOLO, or be smart.

let's say you choose the fun route. something small like taking care of the mimosas at a boozy brunch can ensure you get some attention from ladies (or bros if that's your thing) and it's nowhere near as expensive as bottle service.

if you choose the responsible route, you can still keep that $300 going to rainy day, and put $500 towards another account. if I wasn't in PWM, I'd invest with Vanguard, and if I were you, I'd just put it into VT (ETF form) or VTWSX and just have it automatically purchase every single month.

that leaves you with $250 left for student loans, drugs, a morning after pill 5x a month, additional savings (boring), or a couple nice tindates.

I realize I left out cell phone, cable, internet, utilities, this will depend so much on what you get. if you can stay on your parents' cell plan, awesome. cable is overrated, get sling TV, netflix, and maybe HBO if you like Thrones, split it with your roommates, and those costs will be negligible.

you're on a good path, but remember keep your fixed costs low and you'll have a lot of flexibility. you can ruin yourself if you buy a brand new car and rent a place at the upper end of that range with no roommates.

    • 14
Aug 9, 2017

Wow, can't thank you enough for this. This is exactly the kind of direction I was looking for, really appreciate it.

    • 1
Aug 9, 2017

To provide a little more detail, I already pay around $330 a month for a car, it's a Kia, a year and a half ago my parents told me they weren't going to pay my truck payment anymore ~$460/mo so I went to the Kia dealership that day and traded it in, I am looking to move to a 2014 4runner if possible but all things considered with what you just posted I may re-think this. I will need to curb my want to constantly eat out for lunch/dinner it's just so easy.

I am staying on the parents cell plan, and for the next year and a half, before I turn 26, I am staying on my moms healthcare, just paying her for my part of it. Pretty cheap because she is a gov. employee. One beautiful thing is my parents love TV/Film as much as I do, their cable package offers them subscriptions to HBO/SHO/ESPN etc so I'll mooch of those accounts, and my mom buys things from Amazon Prime like it is her job so they have that and Netflix, the only thing I will truly miss is the NHL Network :(, but I can always stream games, but as long as I have The Office I'll survive.

Thanks again for all of your help, I can't tell you how much I appreciate it.

    • 1
Aug 9, 2017

do not upgrade if your truck already costs 460/mo, that'd be ridiculous. unless you're a RE broker, IB MD, or in PWM, your car does not matter. if you want to upgrade, remember how I told you to put 50% of your bonus towards 401k? well you can put the rest in a piggybank and either stash it for a fat down payment on another truck or pay down/off your current car loan.

as for food, get into a routine. what do you like to eat for breakfast? are you a bacon & eggs guy? great! that's easily cooked every day and super cheap. or, do you like fancier stuff like omlettes and wraps. pro tip: make the fillings in advance, so all you have to do is scramble some eggs in the morning. if you like fancier shit than that, then either wake up earlier or change your taste.

lunch? plenty of options. my personal favorite is leftovers, either bring to the office and heat in the microwave (unless it's curry or seafood, in which case don't), or bring the stuff to make a cold lunch (cold cuts, veggies in a sandwich/wrap or a big salad).

and dinner, you need to learn to cook. find a couple of staple items you like to eat and just pivot off of that. I love asian food, so I'll make rice a couple times a week (the best rice is day old rice, doesn't turn into a weird paste). this can be used for something simple like beef & broccoli in the crockpot, thai basil chicken, or something a little more complex like a home made curry or soup with rice on the side. you like italian? great! pasta is cheap af. keep frozen veggies on deck (scientists have proven the nutritional content is identical to fresh and it's cheaper), pick out your meat, and go from there. my postgrad roommates were big on chicken breast, and would just spend monday evenings grilling a few breasts which they'd then repurpose into multiple different things. take two breasts, turn into cutlets, heavily season for a couple of dinners. take two others and chop them up for either a healthy chicken salad, wraps, or a snack.

the point is your weekday meals need to be by and large leftovers or prepared at home in order to save money. when I was newly postgrad, I'd treat myself to quick takeout once or twice a week if I had a long day or didn't feel like shopping, but otherwise I was eating leftovers and cooking. same goes for weekends, I'd decide on how much I wanted to spend on a given night (food, cabs, pregame booze, bar tabs), and then go from there. if I cooked at home and brought beer from the house, that's more money to blow at the bar. if we went out to dinner as a group and racked up a nice bill,, I'd spread out my drinks and probably not buy a round of shots for the boys that night. you can still have fun while being frugal, you just need to pay attention to where your money goes and grow up a little bit (like learning to cook).

a bonus of learning to cook: bitches love that shit. you get the apartment to yourself one night or if you have a private-ish patio, cook a dinner for a girl and get a nice bottle of wine (don't spend more than $20), and you'll put in way more QT plus you already have her at your place, so closing is nearly a guarantee. same result from a night on the town but with way better sex and a lower credit card balance.

pro tip: do NOT have steak and potatoes on the menu, she won't be a good lay on a full stomach (and neither will you). stick with something like a nice salmon filet, some veggies (stay away from brussels sprouts and asparagus, it'll make both of your sets of fun parts taste terrible), maybe a side of rice or spuds au gratin.

    • 7
Aug 9, 2017

You'd think posters on a Finance forum could set up a simple personal budget.

Aug 10, 2017

I would certainly not spend more than $1200 on rent in Houston. I lived in a nice place in midtown 2 years ago with a roommate and was only paying $1000.

Aug 10, 2017

this is the biggest mistake young people make, finding a swanky 1br and spending 1200 on rent and then bearing the brunt of all utilities alone. leaves you next to nothing left in fun money, which will lead to alcoholism, depression, rabid swiping right, herpes, a kid, and then death.

not a good recipe for success...

Aug 10, 2017

If you want a decent one person bedroom expect it to be 1200-1300 a month. Roommates are for sure the way to go.

Aug 10, 2017
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"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Aug 10, 2017
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heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/

    • 1