Hello,

I'm new to this forum and have recently been budgeting and better tracking my spending. I'm 29 years old and have recently been listening to the "Millionaire Next Door" audio book - I LOVE IT... its been motivating me to budget appropriately but would love additional guidance from the pro's on this forum.

I wish I would have done this 3 years ago as I would have had way more cash saved, but it's better late than never and I'm still very excited and motivated to move forward and save save save.

So I have a question about how I should prioritize my payments....

Here is my monthly budget:
Mortgage $1,250.00
Food/Gas/Fun $1,000.00
Truck $447.29
Electric $120.00
TWC $120.00
Phone $117.00
Godaddy $72.00
Gas $50.00
Server $20.00
Netflix $16.54
Total Expenses $3,212.83


Monthly Income:
I earn exactly $60,000/year (as a contractor PRE-tax) through one job. I get paid almost exactly $2300 every pay period. So rough math puts me around $4600/month - although some months with an extra pay period are higher

Day Job: $4,600
Payments for a Business I Sold: $2,000

I occasionally do side work in which I can make anywhere from $2,000 to $10,000/month extra - however I'm not including that as it is not consistent as the income above.

Every month I put $2,000 (from the biz payments) into a bonds investment.

Investments:
Mutual Funds: ~$26k
Municipal Bonds: ~$10k
CD: ~$3k

Mortgage:
Total Owed: $132,000
Recently refinanced this past month to 15 year 3.5% rate.

Truck:
Total Owed: $21,000
My rate is 2% at 4 years

Current Account Balances:
Checking Account (All Combined): $15,600

Credit Card Debt:
$0

Ok.. I think that is all, sorry for dumping so much info but I just wanted to give you all the details I could so I could get better insight on the best route for me to take...

So here are my thoughts... Should I stop investing money and start paying off my Truck OR dumping all that money into my mortgage? I'm not sure whats the best thing to do - my interest rates are very low however I'm not sure whats best and would truly appreciate any advice that can be given.

Also - if anyone see's something that they would change were they me please let me know - I'm still really new to budgeting and money management and it's all very exciting to me so I'm dying to learn anything and everything I can.

How about dumping the truck? $450 a month for a vehicle payment? Really?

Other than that you aren't in too bad of shape. You mentioned being a 'contractor', is that a temporary gig? Or something else?

You also have gas listed twice!

Actually the truck is $407/month but I put extra on it every month.

I know this is still pretty high, but I really do love the truck and I feel make enough to justify the expense, however I will consider your recommendation.

The contractor gig isn't temporary - its as permanent as a full time employee job would be.



Yea - one gas in the food is for vehicle - the other gas (listed separate) is for heating my home.

Thanks very much for the advice.

What does food have to do with gas, that has to do with fun?

It's probably about right
Food $600
Gas: $300
Fun: $100

$447.29 for a truck payment, normal, but PAINFUL!

Honestly at a 30% savings rate (1388/4600 ~= 30%) you're doing really good and you don't NEED to change anything, but you might WANT to change some things. You know, things like cut the cable and reduce the phone bill. Stuff like that.

Besides that, here's what I would do

#1 Take the 23k from the mutual funds and pay off the truck. Then start saving $447.29 a month for your next vehicle.

#2 Consolidate the rest of your investments into something a little more liquid than CD's and muni bonds.. when you're able to.

#3 Open up a Roth IRA and do your investing there. Max 5k a year so about $420 a month which should leave you with about $968 to put elsewhere.

#4 You'll probably want to get to about 30k is liquid savings (an emergency fund). Assuming you have 16k after paying off the truck that's another 14k to save.. or about 15 months.

#5 After the 15 months start paying the extra $968 towards the house.

Thanks!

Couple more questions...

The mutual funds are an IRA - just not a Roth - i'm sorry i didn't specify that.

I think I would be penalized if I take from the Mutual Funds - the muni bonds are very liquid as I can pull from them anytime without penalty - should I take from the muni instead of the mutual funds?

The CD sucks, the rate sucks, I don't even know why I set it up - I may just cancel it and take the money from that and put it into the muni bonds - what do you think about this? The only penalty from cancelling the cd is i lose some of the interest earnings gained which are TINY as it is.

If that's the case then under no circumstances should you touch those mutual funds! Certainly not for a car payment at 2%.

As far as taking the money from your non-retirement investments and putting it toward paying off the truck payment I still would. You could just choose to call this your emergency savings and start making double payments on the truck.



You're right about those CD's, banks are just not giving savers ANY reason to put their money into them right now. I'd probably pull the money out of the CD's if only to protest such a raw deal.

You say you are a contractor and make $60,000 pre-tax; does that make you a 1099 employee? Assuming that is true, how do you account for taxes? Your day job income appears to be pre-tax so that $4,600 figure should be lower after all taxes are accounted for.

Depends upon what his contractor work is, it may require a truck as part of the work for whatever reason.

I agree the truck sucks. But, as all my coworkers call me cheap and tight, I always respond with, "the money gets spent, just in different ways". So, if that is your guilty pleasure, have at it. Let it be known, it is an expensive guilty pleasure.

I would dump zero extra dollars into both the mortgage and truck payment. You need a cash cushion. I recommend 5 yr CD's (admittedly, the rates aren't the best) which have a minor penalty for getting out early. Ally bank is who I use. And/or Ibonds (the money cannot be taken out for the first year).

You also need some type of 401k plan. IRA's alone will not get feed your expensive truck affinity in retirement. There are plans for self employed peoples.

Also, I'm not sure if you are a salaried employee or self employed. My father was a contractor, but received a salary from the contracting company he worked for. If you are self employed, you are severely misunderstating your future tax liability.