David Bach says: "Pay yourself first," eh?
All right, then. Here's my new monthly budget plan, based on his advice. I know that he thinks that budgets don't work, but I probably wasn't the type of person he had in mind. I 'budget' all the unavoidable expenses so that I know exactly how much I can pay myself with afterwards. It's not like I need a budget to help me limit my spending.
Okay, let's start off with income.
At $16.15/hr and 37.5 hr/wk, I'm making a gross of $2600/mo. Furthermore, my gross income for 2006 will total around $17,400.
I still don't know how much taxes I'll owe, but my father is sending me last year's tax software Any Day Now. He also says that after plugging my figures, I should not owe more than $900 in taxes for 2006.
So that gives me around $2350/mo to work with. I think. I hope.
Paying others (boo):
Rent: $500 (sigh)
Utilities: no clue yet, guestimate $100 total?
I try to save by not plugging in my second and third computers, and turning off the one I do use when I'm away at work, but sometimes, I wonder why I even bother. My roommate has tons of electronics, runs the AC all day/night even when it's not hot, and wastes gas by burning his food by leaving the stove on for an hour.
Even though I don't spend more than $60 most months, I always allow myself $100, because skimping on food seems... unwise and unnecessary. And I might actually end up accidentally starving myself if I don't cut myself some slack here (I've actually lost weight... which is NOT GOOD). But I can make an effort to take the extra $40 that I never spend and put it towards paying myself at the end of the month.
Student loans: $134
That's the amount due for Stafford, starting September, which I've put on automatic debit (yeah, automation! Reduced my interest rate by 0.25%, too!). I still haven't decided if I want to accelerate repayment on this because I've been hearing mixed reports. But at least the interest is tax-deductible!
Union dues: $40
I get free health insurance and dental thanks the our union. I fully support them, and don't begrudge them their dues. I just have to turn in my member registration form!
Now, for the good stuff. Paying myself (in approximate order of importance):
Roth IRA: $333.33/mo
This will max out the $4000/year contribution limit over the course of 12 months. My father says he'll make up the rest if I don't make it to $4000 this year, but I think I can do it on my own.
I currently have $8262.09 in two Roth IRAs in Bank of America. These were deposited by my father for me a few years back when I was still young and naive and had no idea what he was doing and thought it was all quite silly to start saving for retirement so early. *whacks younger self in the face repeatedly with something smelly*
Anyway, the rates suck, so I want to roll it over to Vanguard. Except Vanguard requires a minimum balance of $5000 to waive the maintenance fee. And while one of my BoA Roth IRAs has matured (the one worth $6000, so I can satisfy Vanguard's minimum), the other one does not mature until next March. But if I move the matured Roth IRA, I'll be hit with a charge from BoA for dropping below its minimum.
I'm still trying to figure out how to resolve this mess. This is why I haven't signed up for a Vanguard Roth IRA yet. But when I do, I will AUTOMATE the $333.33/mo transfer.
403(b): 20% (~$520 pre-tax)
In order to max out the $15,000 yearly contribution, I'd have to deduct $1250 per month. While I'd love to do max this out as well, I don't think I can handle a >50% paycheck reduction.
David Bach recommends at least 10%, which would be around $260 for me. But I think I can handle 15%, which is why I made it 20%, or $520.
Now, I just have to GET OFF MY LAZY ASS AND FILL IN THE VANGUARD FORMS AND TURN THEM IN. *cracks whip*
Car fund: $400
My car fund has a target goal of $5000 in 12 months, or about $400/mo. I may not end up spending it in a year, but it'll be good to have this around when I do finally get around to buying a car.
House fund: $40
Although a house down payment is many, many years down the line, I feel like I should start saving for it now. Can't hurt, right? The car fund gets priority for now, but once the car fund is fulfilled, that money will probably go here. And in the meantime, I think this is where I'll plop my excess grocery money.
Emergency fund: $100
If I should have at least 3 months worth of expenses in it, then $3000 is my target. I'm going to keep this conservative for now.
Savings: whatever is left
I'm terrified that I won't have anything left to go here at the end of the month, though. This is so weird for me, because I'm used to putting *all* of my unspent money into savings, which amounts to half (or more) of my paycheck. But now, I'm "paying" myself so much that I'll hardly have anything left!
And my savings will need to fund any shortages to my Roth IRA maximum, as well as any unforeseen expenses, such as clothing, public transportation fares, and dental co-pays (I'm in serious denial about the existence of cavities). And this will probably also need to supplement my various funds (car, house, emergency).
I know this should be right, but why do I feel so panicky? Am I cutting it too close? Doing too much too soon? What if I can't handle this? I do have a father-supplied savings buffer, but I don't allow myself to see it as touchable. If I end up dipping into it, then I'll have to re-evaluate this budget.
I know I still need to discuss cash flow, but I think I'll put it in a new post. This one is overwhelming enough as it is.
My new David Bach-inspired budget
David Bach says: "Pay yourself first," eh?