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Hey everyone! Welcome back to another episode of Budget Friday. This is seriously my favorite part about personal finance, the chance to help others get on a budget, get out of debt and reach their financial goals. I love showing the power of a well-thought out budget plan, and the long term results they can have.
Today’s budget is an anonymous submission by Adam.
Background: Adam is a graduate student working his way through school (GO ADAM!) and reached out to help get his budget sorted out so he can move to a better locale and not have to take on any debt to do so. I know it’s common to use student loan money to live off of during graduate school, so I commend Adam for taking this on.
- Emergency fund – $3000
- Replacement Car fund – $2700
- Roth IRA – $9000
- Other Investments – $700
- School is paid for
- Credit Card – $450, but should be paid off by the time I post this.
- $5,000 Emergency Fund
- Continue saving for replacement car
- Max out Roth IRA (if possible)
- An avid tea drinker (costs about $50 a month)
- To be able to order take out or hit up a bar once or twice a month without blowing the budget
Here is his budget:
|Starting Balance||$ –||$ –|
|Total Income||$ 1,990.00||$ 1,990.00|
|Total Expenses||$ 1,060.00||$ 1,700.00|
|Projected Ending Balance||$ 930.00||$ 600.00|
|Monthly Income||$ 1,240.00||$ 1,240.00|
|Misc||$ 750.00||$ 750.00|
|Total Income||$ 1,990.00||$ 1,990.00|
|Rent||$ 470.00||$ 640.00||Rent will be increasing when moving to the new place.|
|Utilities||$ 80.00||$ 80.00|
|Cell Phone||$ 40.00||$ 40.00|
|Cable/Internet||$ 85.00||$ 45.00||Cut the cord! Do it, and I promise you will not miss it. If there’s something on cable you ABSOLUTELY need to watch, I’m sure you can see it at a friend’s place 🙂|
|Total Bills||$ 675.00||$ 805.00|
|Groceries||$ 125.00||$ 150.00||Let’s cut the fast food down and adjust the groceries up a bit. I used to live on $120 a month for food when in college, but I don’t think it was SUPER healthy, so let’s do $150.|
|Restaurants||$ 80.00||$ 40.00||It’s tit-for-tat, but I suggest making some of this money “spending cash” so it doesn’t always have to be spent at restaurants. I have found sometimes that making a budget for a category makes you think you need to spend it there, and I suggest lowering this one.|
|Fast Food||$ 40.00||$ 15.00|
|Tea||$ 50.00||$ 50.00|
|Auto Expenses||$ 90.00||$ 90.00|
|Spending Cash||$ 40.00||This is cash to spend on whatever you want. This helps keep things loose so you don’t feel too constrained and then end up blowing the budget all the time.|
|Total Necessities||$ 385.00||$ 395.00|
|Replacement Car||$ 100.00||If you see a newer car needed in the next year or so, I’d keep funding this at $100 a month. Should put you around $4,000 in another year. Enough for a great used car.|
|Roth IRA Monthly Contribution||$ 0.00*||Unfortunately, not working in the summer means you can’t quite max this out, but if you find that you’ll have summer income, you can bump this to $450 a month.|
|Emergency Fund||$ 100.00*||If things stay as they are, you might have to drain most of your EF to get through the summer. See notes below for strategies to combat this.|
|Total Other||$ –||$ 500.00|
|Total Expenses||$ 1,060.00||$ 1,390.00|
Nice work on being debt free and building up almost $10k in investments while still in school. That is truly impressive!
Not much to say here. You’re debt free. JUST KEEP IT THAT WAY!
1. $5,000 Emergency Fund
* This is an awesome goal. I think with the volatility in your income you SHOULD have a larger emergency fund until you’re out of school and have stable income. Unfortunately, not working during the summer means you’ll probably have to drain all the money you save in here unless you can find an opportunity to make some extra income. If you need any ideas on that, I just had a recent post on here listing 20 ways to make extra income.
2. Continue saving for replacement car
You stated in our emails that your car is over 10 years old and is showing signs of it’s age. I commend you for saving ahead of time. I say keep throwing money into this fund a little at a time, because the worst thing that could happen is have it die on you and leave you stranded with no vehicle and not much money to fix or replace it. With no income in the summer, this savings bucket will be very important.
3. Max out Roth IRA (if possible)
* When I was 18, I put $6,000 in a Roth IRA (max that year). I then put $5,000 in it the next year. I haven’t been able to fund it since (mostly because I blew all my money), and am pretty bummed about that. Just playing with retirement calculators shows me the potential of maxing out this IRA. But a Roth IRA won’t pay your rent if you don’t have any income during the summer. If you can find a way to earn some summer cash, you can throw it all at this, and even recommend that you do!
* I suggest saving that $600 a month to carry you through the summer. You have about $1,400 of expenses per month, and will need $4,200 to make it through the summer. Once summer it over, you can save up another $4,200, and then throw the rest at your Roth IRA until summer hits again. Sound good?
You’ve got a frugal head on your shoulders (not that your head is inexpensive….I’m sure it would cost a lot to replace…I more mean your brains…but not like a zombie….uhhh…nm). You obviously are on your way to building a bright financial future, and you are in your Great Depression college broke years. Sticking to a budget now will build in some AMAZING habits before the money comes rolling in, allowing you to approach your finances with a clear plan.
With the summer months up in the air in terms of income, it’s hard to set solid plans except to expect that the money won’t be there and save for it. Also, this still allows you to move, save for a car, have some spending cash, and keep on sippin’ when the hot water’s a drippin’! (wow, that was terrible. I apologize for that). I always air on the side of caution, but if you end up with more cash, you know where to put it 🙂
Comments: So, what do you think? Is there anything you would have changed about my proposed budget? I’d love to get some reader feedback on what you would do. Adam is on a tight budget, but isn’t that what college is for? I think he can find odd summer jobs to help max out that Roth, and he is going to be MILES ahead of the competition financially when he enters the workforce. Serious potential here, and I’m super pumped for him. What about YOU?