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 Post subject: Please Help Critique My Monthly Budget
PostPosted: Wed Dec 15, 2010 12:49 am 

Joined: Wed Dec 15, 2010 12:12 am
Posts: 1
Hello,

Having recently discovered this site, I am quickly and eagerly learning many new things about the world of personal finance. One of my goals this week was to put together a "spending plan" to help track and direct where my money goes.

I am captivated by GRS's enlightened and helpful audience, and would welcome and appreciate any analysis you can provide!

This is my monthly spending plan as a 23 year old recent college graduate starting on the career track.

Regular Monthly Income after Taxes, Deductions and Mandatory Expenses ($2630)

Monthly Fixed Expenses
Rent + Utilities $900
Internet Service $30
Fitness Membership $30
Total $960

Monthly Saving Transfers
Retirement Contribution $200
Cash Reserves $130
Brokerage Contribution $100
Educational Savings Contribution $50
Total $480

Monthly Discretionary Spending
Grocery/Household $200
Dining $140
Entertainment $150
Personal/Medical Care $40
Recreation $110
Transportation (Auto/Fuel) $150
Travel $300
Dry Goods (Clothing/Electronics) $100
Total $1190

Look forward to your comments. :D


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Wed Dec 15, 2010 7:51 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1776
Location: Ottawa, Canada
Quote:
Grocery/Household $200
Dining $140
Entertainment $150
Personal/Medical Care $40
Recreation $110
Transportation (Auto/Fuel) $150
Travel $300
Dry Goods (Clothing/Electronics) $100
Total $1190


This is where I have a concern about your budget.

Firstly, $200/month is not enough to feed a person. I would advise you to raise this to at least $300/month per person in your household.

You can make it work, if all you eat is Kraft Dinner and ramen noodles, but it's not healthy. And your fitness club membership suggests that health is important to you.

Secondly, you've also included "household" in that $200. I think you're underestimating the "household" costs. In our home, we have a separate category for "household" expenses, and it's $200/month all on its own. This is things like lightbulbs, garbage bags, paint, brooms, dish detergent, shampoo, gas for the lawnmower, having clogged drains cleared, and everything else. This adds up like you wouldn't believe.

Thirdly, why is "dining" separate from "Grocery" and "Recreation?" Why is "electronics" lumped in with clothing? How much "electronics" do you plan on buying each month, anyway? Why are "Entertainment" and "Recreation" separate categories?

These categories seem a little ambiguous. My wife and I simply have an "allowance" each month that we can spend on whatever we want. That would include things like the gym membership, clothing, dining, electronics, and entertainment.

Here's how I'd revise this part of your budget:

Code:
$   300 - Grocery
$   100 - Household
$    40 - Medical care
$   150 - Transportation
$   300 - Travel
$   300 - Personal
-------------------------
$ 1,190 - TOTAL


That $300 "Personal" category would encompass dining out, clothing, electronics, and entertainment. That's your monthly allowance. I just don't think you can afford to blow $500/month on dining out, entertainment, electronics, clothing, and recreation.

Just my 2 cents.


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Wed Dec 15, 2010 8:09 am 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1200
Quote:
Retirement Contribution $200
Brokerage Contribution $100
Educational Savings Contribution $50


What type of investments are these? 401k, 403b, IRAs, etc? Is the education money for you or someone else?

Quote:
Dining $140
Entertainment $150
Recreation $110


What exactly is this? Eating out, dating, or something else? Seems to me that this is $400 a month going to have a good time. I have to agree with Kombat that I don't think you can afford to blow this much. I'd reduce some of this spending & move it to retirement savings.

Also, is this $300/month on travel for pleasure or work?


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Wed Dec 15, 2010 9:53 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5395
No real debate with what kombat and tightwad have said.

The important thing is to clearly identify what each budget category means. I use "entertainment" and "recreation" as well and each has subcategories. I define entertainment as passive activities - movies, shows, concerts, magazines. Recreation is active - triathlon entry fees, gym membership, scuba diving, a new bike last year, that kind of thing. To me they are very clearly different and easy to differentiate. But, each person needs categories that make sense to them.

I don't think $200 a month is ridiculously low to eat. My wife and I don't spend a a lot more than that. We spend more eating out though because we are very busy. Between groceries and eating out we spend about $500 a month, only 50% more than the OP. We eat very healthy. Our groceries and household expenses are about $250 and eating out is about the same. We could probably cut out the eating out and only slightly increase our grocery budget. Healthy stuff just does not cost much. Meat is expensive but rice, veggies, and so forth are cheap!


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Sun Jan 09, 2011 7:38 pm 

Joined: Mon Sep 20, 2010 10:10 pm
Posts: 5
For a no-children house hold I think ~200 USD is a reasonable amount to spend on food.

I am a 26 female who lives with two friends and my boyfriend. We have a fairly communal kitchen and in Dec 2010 I spent 220.00 at grocery stores, this includes my portion of a trip to costco (which will be food we eat on for weeks).

And personally I think that number could be cut down greatly with actual meal planning.


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Mon Jan 10, 2011 2:07 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5395
internetJen wrote:
For a no-children house hold I think ~200 USD is a reasonable amount to spend on food.

And personally I think that number could be cut down greatly with actual meal planning.


We are a middle-aged couple with no kids. We have pretty high income and don't make any special effort to be frugal. We are both fairly athletic and work long hours. We try to eat healthy so we don't eat a lot of meat, just fish once or twice a week and chicken maybe once a week or less.

I can't easily figure out our grocery bill because we buy groceries at walmart and it gets combined with other household goods we buy. Separating groceries out is not a priority for us but I was looking at it in regard to this post. But my best estimate based on a typical menu is that we spend about $175 a month on groceries.

Now, we eat almost no prepared foods. We make almost everything from scratch from fresh ingredients. We live in an area with a low cost of living. We shop at walmart for groceries and almost never buy name-brand stuff. (We do however buy quality stuff.) We eat very little meat, cheese, or other rich, expensive ingredients. But as aI said, we are not trying to scrimp or be frugal.

So I think $200 a month for a single person or a couple for groceries is reasonable but not generous, especially if you choose to eat more meat and other expensive stuff.


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Tue Jan 11, 2011 6:12 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1776
Location: Ottawa, Canada
DoingHomework wrote:
I don't think $200 a month is ridiculously low to eat. My wife and I don't spend a a lot more than that.


Right, I admitted that it's possible, if you don't particularly care about your health. You can easily fill yourself with cheap, processed carbs for less than $200/month. Rice, pasta, noodles, and Kraft Dinner will get the job done for pennies, but it's not "healthy."

DoingHomework wrote:
Healthy stuff just does not cost much. Meat is expensive


OK, so we clearly have different philosophies on what constitutes "healthy," because to me, what you just wrote was a contradiction. How can "healthy stuff" be cheap if meat is expensive?

In my eyes, meat is healthy, but it is also expensive.

I eat very healthy. So it's important to me that every meal (yes, including breakfast) includes protein. My breakfast today is an English muffin sandwich, made with scrambled egg and honey maple ham. Supper last night was homemade cannelonis, made from ground beef, pork, and veal. Lunch today will be Turkey a la King, made with leftover turkey from Christmas.

These are all healthy, delicious, and expensive.

Well, certainly cheaper than buying pre-made, frozen, or restaurant versions of the same meals, but nevertheless, they cost a buck or two per serving.

DoingHomework wrote:
but rice, veggies, and so forth are cheap!


Right, but a diet comprised entirely of rice and veggies is not healthy. Is it cheap? Yes. Will it fill you up? Yes. Is it healthy? No.

DoingHomework wrote:
We try to eat healthy so we don't eat a lot of meat


Again, that just does not compute for me. That's like saying, "we don't like to be wet, so we spend a lot of time in the ocean." It just doesn't make sense.

Meat is healthy. It's an unbeatable source of protein. So build it into your budget and be healthy.


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Fri Jan 14, 2011 1:40 am 

Joined: Tue Jan 11, 2011 3:43 am
Posts: 31
I would agree $200/month for food seems rather sporty to me. That's $6/day, $2/meal if you eat 3 meals a day. The bread I buy at Costco costs $2/loaf. Each loaf is 2100 calories, or about what an average person should consume in a day in calories. So your food needs to cost, on average, roughly no more than bread on a $/calorie basis. And I would say bread is more on the cheap end of the spectrum of healthy food. Maybe food prices vary a bit by region? And of course buying for 1 person will cost more than buying for 2 or more, on a per-person basis.

Speaking of Costco, they offer a 24-hour fitness gym membership for $300 for 2 years. If you're committed to long term, regular gym use, you can't beat $12.50 a month! Several months ago they offered 3 years for $450 (briefly) and I jumped on it, since it's only good for 1st time members.

I also agree with an earlier post--more info would be good. What are the cash reserves for? Periodic surprises or long term liquid savings? What's the educational saving for?

$900 for rent/utils seems a bit high relative to income. A common rule of thumb is no more than 25% of gross income, but of course personal priorities (utility) will factor in.

What will you do about annual/semi-annual expenses? Vehicle registration, insurance premiums, etc? Will those come out of the cash reserves? I personally prefer to factor in hard numbers where possible, so I know exactly how much per month I need to set aside for such things. I have an "impound account" that gets an automatic payday transfer to cover property taxes, home insurance, car insurance, registration, vacations, vet visits (for our cats, not me!), car maintenance, and even large purchases (toys on my "wants" list). I know how much most of these will cost. Car repairs are the only real unknown (though it's mostly for parts since I do all the work myself), so I allow for a certain amount per month that is a padded long term average. I don't touch this impound account unless it's for one of those items on the list.

Do you already have an emergency fund that could get you through a bad surprise or 6 months without any revenue? If not, I would fund that before any retirement savings.

Seems like you're off to a very good start. You're starting earlier than I did, and I'm very satisfied with how my plan is working out after 12 years. Sticking to the plan is the hard part. Staying disciplined is the key. Stick with it and you'll be very glad you did.


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Fri Jan 14, 2011 5:57 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1776
Location: Ottawa, Canada
Daedalus wrote:
The bread I buy at Costco costs $2/loaf. Each loaf is 2100 calories, or about what an average person should consume in a day in calories. So your food needs to cost, on average, roughly no more than bread on a $/calorie basis.


So in your world, a healthy diet doesn't need to contain any protein? Or iron? Or fruits/vegetables/dairy?

Are you seriously suggesting that it's possible to be healthy eating nothing more than a loaf of bread per day? Have you ever heard of the "Food Pyramid?"


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Fri Jan 14, 2011 2:08 pm 

Joined: Tue Jan 11, 2011 3:43 am
Posts: 31
kombat wrote:
So in your world, a healthy diet doesn't need to contain any protein? Or iron? Or fruits/vegetables/dairy?

Are you seriously suggesting that it's possible to be healthy eating nothing more than a loaf of bread per day? Have you ever heard of the "Food Pyramid?"


No. Where did I say that? Please re-read what I posted. I was actually agreeing with you. I used bread as an example, and said I thought most foods on average, in a healthy diet, cost more than bread. Thus $2/meal isn't enough.


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Sat Jan 15, 2011 6:00 pm 
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Posts: 5395
Kombat,

This isn't a nutrition forum so I'll be brief.

If you want to eat a bunch of fat and protein that's your business. It's probably not too unhealthy. But a vegetarian diet can be very healthy and provide plenty of protein. A human can survive just fine on a mixture of beans, corn, and squash plus some starches. That's not my diet though.

And, in addition to being expensive and resource-intensive to produce, red meat is not very good for you! A steak now and then is not going to kill you but a little bit of research on your part would reveal that populations that live on a low meat diet generally live longer, healthier lives than similar groups of carnivores.

Back to finance, a meat rich diet is going to cost more than $200 a month. But a vegetable-based diet can be very healthy and could easily cost less than that for a couple.

And, you eat veal? Ewww! You know that's innocent baby cow right?


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Sat Jan 15, 2011 6:05 pm 
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kombat wrote:
Have you ever heard of the "Food Pyramid?"


I honestly don't know if you have the same pyramid in Canada. But the pyramid in the US is fairly controversial. For example, the recommendation to eat meat and dairy is generally considered to persist because of political influence of the dairy and ranching industries.

Personally I don't have any problem with people who choose to eat meat. I like my occasional beef burrito. But to suggest that a healthy diet must include meat is simply wrong.


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Sat Jan 15, 2011 6:16 pm 
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Daedalus wrote:
I used bread as an example, and said I thought most foods on average, in a healthy diet, cost more than bread. Thus $2/meal isn't enough.


No way! Bread is fairly expensive. You are paying for the ingredients and the preparation.

Tonight I made a stew that will last us at least 3 days with some rice. Total cost is probably about $5-$8.

As I said before, we make no special effort to eat cheaply. But it's not that hard and can be very healthy. I don't see any problem with the $200 a month number.


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Sat Jan 15, 2011 11:07 pm 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1776
Location: Ottawa, Canada
Daedalus wrote:
Thus $2/meal isn't enough.

Sorry, I was reading that as saying that nothing should cost more than bread. In my world, protein-rich meals cost more than bread.

DoingHomework: obviously, some meals cost more than others. But in my experience, the cheapest meals (Kraft dinner, ramen noodles, etc.) were mainly instant foods with a ton of salt, and almost no protein. I choose to be healthier than that.

I sincerely believe that meat is an essential part of the human diet. Sure, you CAN get by without it, but in the end, you're just trying to fill in the holes that were dug by nature a million years ago. Man was designed to eat meat. Why fight it? Embrace it!


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 Post subject: Re: Please Help Critique My Monthly Budget
PostPosted: Sun Jan 16, 2011 10:30 am 
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kombat wrote:
DoingHomework: obviously, some meals cost more than others. But in my experience, the cheapest meals (Kraft dinner, ramen noodles, etc.) were mainly instant foods with a ton of salt, and almost no protein. I choose to be healthier than that.

I agree 100%. No one should subsist on ramen and mac 'n cheese. They are nutitionally poor, full of fat and salt. But I specifically said we avoid processed foods and use mostly fresh ingredients. I see nothing wrong with the occasional cup-of-noodles for lunch but I don't think it's healthy, just a convenience.

kombat wrote:
I sincerely believe that meat is an essential part of the human diet. Sure, you CAN get by without it, but in the end, you're just trying to fill in the holes that were dug by nature a million years ago. Man was designed to eat meat. Why fight it? Embrace it!


I sort of agree with you on this but I think the science is complex and poorly understood. Humans have teeth, stomachs, and body organization of carnivores. It seems clear that we evolved to eat meat. But we also know that native cultures around the world lived on a diet that did not have much meat. In the US southwest where I live there is a lot of study on the native Americans here. Historically they were a healthy, long-living culture. Now diabetes, heart disease, and similar maladies have caused the life expectancy to plummet. Most researchers believe this is related to diet, not necessarily meat consumption though.

I was curious so I went and looked. The "food pyramid" recommendation in the US issued in 2010 is for adults to consume 0.8 g of protein from all sources per kg of body weight. For a 180 lb person that is about 2 oz per day! And the recommendation is for most of that to come from nuts, beans, and other plant sources. A little bit of fatty fish (e.g. salmon) is also suggested because of the omega-3 oils but those can also be obtained from nuts.

The bottom line though is that I don't want to tell you or anyone else what to eat. I actually believe humans can thrive on a wide range of diets as long as they match their environment and activity level. But from the finance side, which is where this discussion started, I think it is entirely possible to eat a healthy, delicious diet on $200 a month. If one chooses to spend a whole lot more and eat steak and lobster every night (with adequate vegetable sides), that can also be perfectly healthy but is not going to fit within the budget.


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