Am I giving myself too much allowance?

[project15]

My wife and I (no kids, currently renting an apartment) give ourselves an allowance. We each get $400, so $800 total per month. We use the allowance for eating out, entertainment, gasoline, and any other things we want to buy for personal use. She normally uses her entire allowance each month and would probably complain if I cut down her allowance. I usually save my allowance for big purchases.

Are we giving ourselves too much? You can see below, it's labeled as "Personal". Also, any other suggestions for my budget?

Here's a percentage breakdown of what the paychecks go to each month:



By the way, we've been going by this budget for the past year and it's worked out great for us so far.

[sweeps]

Ultimately only you can answer that question, but my personal opinion is, yes, that is quite high. You have a chance to be saving much more than you already do.

At the very least, I would not lump everything into a "Personal" category. I would break it out because you may find that one or more subcategories are disproportionately large.

Out of curiosity, why are you saving for "Home Improvement", but not for a "Home"? Also, how are you getting by with paying only $10/month for both cable and Netflix??

[pearlieq]

Of course this is something only you can decide, but I personally don't think it's unreasonable. It's a matter of what you want from your money.

It would naturally be the first place you would look to cut if you wanted to accelerate your savings or reduce debt quicker. But you also have to enjoy your life now. You're obviously not in a position where you're living hand to mouth, and I see nothing wrong with enjoying some luxuries.

Not to be morbid, but you could get hit by a bus tomorrow. I'm all for financial responsibility, but in the end I don't think it's satisfying to live like a monk just to save more. There has to be a healthy balance.

Given that you're including gas in with that money, it's really more like about $500 - $550/month on entertainment (including eating out) and personal expenses (which, from looking at your budget, I'm assuming includes clothes/shoes, haircuts, and cosmetics.) It's really not that much for all it's intended to buy.

With that being said, I personally would re-evaluate some of your savings categories. Do you have an adequate emergency fund? What is your goal for the car replacement fund? $100/month isn't going buy you both replacement cards for cash.

[Scanner]

Your servicing almost $800/month in debt - you may want to accelerate that paydown by investing more aggressively and not balancing with bonds.

That is, instead of buying bonds in your portfolio (with let's say a Target T.Rowe Price fund) - pay down your debt. It's an immediate no-risk payback of 6-12%, whatever your interest rate is (or close to it). Then just pick a pure growth fund for your investments.

Something to consider.

But yes, I think $800 is reasonable, but it probably reflects a busy, urban or suburban lifestyle vs. a rural lifestyle.

[Scanner]

BTW, that's a kick-butt electric bill.

[project15]

Ultimately only you can answer that question, but my personal opinion is, yes, that is quite high. You have a chance to be saving much more than you already do.

At the very least, I would not lump everything into a "Personal" category. I would break it out because you may find that one or more subcategories are disproportionately large.

Out of curiosity, why are you saving for "Home Improvement", but not for a "Home"? Also, how are you getting by with paying only $10/month for both cable and Netflix??

The Investments category is the down payment for our house, so $333 of that goes to my Roth IRA, $300 goes into mutual funds, and $300 into EmigrantDirect. The mutual funds and the online savings account will be used as the down payment when we decide to buy.

We pay $9 for basic cable. It used to be for netflix, but we cancelled netflix and got cable. So it should be really only labeled as Cable.

[project15]

With that being said, I personally would re-evaluate some of your savings categories. Do you have an adequate emergency fund? What is your goal for the car replacement fund? $100/month isn't going buy you both replacement cards for cash.

We have our emergency fund up to 3 months in an online savings account and a full 1 month in our checking account which I'm satisfied with in our current situation.

The car replacement fund is for some sort of down payment on my wife's next car. She got into a lease prior to knowing me and it ends in a year. The $100 a month will be a small down payment on that since it's not going to be possible to NOT finance our next car. We're only 25 and 23, so we're still starting out in this whole thing called life. But yes, future goals in life would be to buy cars in cash.

But yes, I think $800 is reasonable, but it probably reflects a busy, urban or suburban lifestyle vs. a rural lifestyle.

Yes, we live in the chicago suburbs.

[project15]

Your servicing almost $800/month in debt - you may want to accelerate that paydown by investing more aggressively and not balancing with bonds.

That is, instead of buying bonds in your portfolio (with let's say a Target T.Rowe Price fund) - pay down your debt. It's an immediate no-risk payback of 6-12%, whatever your interest rate is (or close to it). Then just pick a pure growth fund for your investments.

Something to consider.

But yes, I think $800 is reasonable, but it probably reflects a busy, urban or suburban lifestyle vs. a rural lifestyle.

The student loans are at 2.25%, so i'm not worried about paying them off ahead of schedule. My car loan is at 6.25% and her lease is just an expense. I have thought about paying all these things off, but I guess I'm not too concerned with these payments since my main goal is to save a down payment for a house in a few years.

[Ima saver]

$800 seems a bit high, but every thing else looks real good. looks like you have a good workable budget!

[nanamom]

If it works for you then keep it. You are saving and paying down debt. Personally I don't know how I would spend 400 a month even in Chicago but I am also alot older! Have you considered saving for kids?Even if you don't make the jump to one salary it is still a big budget item.

[project15]

If it works for you then keep it. You are saving and paying down debt. Personally I don't know how I would spend 400 a month even in Chicago but I am also alot older! Have you considered saving for kids?Even if you don't make the jump to one salary it is still a big budget item.

I'm 23, she's 25. She mainly spends it on clothes - she likes to go on $100 splurge's maybe once every two months, but other than that, I think she just spends it on eating out for lunch (I suggested packing, but the reason for the allowances is that I have no say over how she spends her cash).

I spend mine mainly on larger purchases. I just saved up for a $900 road bike, I've saved up for $200 for a guitar and $200 for an effects processor. Yes, I can do without these things, or buy cheaper things, but I feel like I should be happy in life right now since I'm still comfortable in my finances.

We have thought about a baby fund, but we're planning having one after we're in a house. Priorities.

[disneysteve]

You list expenses of 50%, taxes of 20% and savings of 24%. That's only 94%. Where is the other 6% of your income going?

I'd like to see the "Personal" category with gas taken out since that really isn't discretionary spending. What is the actual figure if you do that? I suspect it wont be an unreasonable number.

You are in your mid-20s and saving 24% of income. I think that's great! Could you be saving more? Probably. But I think you are doing better than the vast majority of people your age, or any age for that matter.

[scfr]

I get a total of 104% (50+20+24+10) ... Is that because of an employer match on a 401K?

Since you asked for opinions, I would say that yes, $400 per person for a monthly allowance seems high to me, but as many others have already said, it really is a matter of personal choice.

I am going to quibble with one thing that you said tho, which was that it won't be possible for you to NOT finance your next car. On that point I definitely disagree. You have $1,200 already in your "next car fund." If you were to each cut your allowance by $50 per month and save $200 per month instead of $100 per month for the next year, that would bring you up to $3,600 ... Or if you each cut your allowance by $100 per month you could save $300 per month and bring the total up to $4,800. For that amount of money, you could find a nice used car that still had plenty of life in it and avoid financing.

[humandraydel]

You are in your mid-20s and saving 24% of income. I think that's great! Could you be saving more? Probably.

At first, I didn't have a problem with $400 per person - my mad money is $300 a month (not including gas). However, once I started dissecting the numbers a bit more, I (personally) wouldn't be okay with spending that much. Not because it's too much, but because you aren't saving enough.

The problem as I see it is you aren't REALLY saving 24%. I don't consider vacation, TV, or car maintenaince to be savings categories. They should be listed under expenses. Why are you contributing only 2% to the 401k? Also, how soon do you want a house? You are only saving $3600 per year for a downpayment. So in 10 years you'd have $36k which probably still isn't enough for 20% down on a house in Chicago? Of course, $36k would probably be 20% down on a house in a lower cost of living area. But do you want a house sooner than 10 years?

[project15]

I'm only giving 2% to the 401k because my employer matches 100% up to 4% and the total income includes my wife's salary - she doesn't get 401k options yet at her new job. So I'm actually contributing the 4% with my salary, but with her income, the total comes to 2% of our total income.

Yes, I know, we're not REALLY saving 24% for retirement, but if anything huge comes up, those vacation, TV, etc... funds will be used rather than funding their respective goals. But I do have about 10% strictly reserved for retirement.

I've talked it over with the wife and we've taken out gas from our allowance and lowered it to $200 each per month - so $400 total for personal allowance. We've started a baby fund and also moved some other money around. I'll post a new graph after work tonight.