New to money management. My Budget.

[MikeL]

Hey, everyone. I've been employed for almost four months now and the last three have been one big splurge for me. I bought a new tv, cell phone, clothes, exercise equipment, and I made my first credit purcahse: A laptop which I've yet to make a payment on.

Now, I'm not in bad shape. But I could have taken it easier and had more money saved up than I do right now. Having that kind of money was a new thing for me. But now I want to manage my money better and create a budget for myself.

I'm single, have no family to support, and make on average $1700 a month. After all my bills and necessities are paid for, (rent, phone, food, gas, laptop,insurance) I will end up with approximately $900 I can put in the bank.

I guess what I mainly want to know is, is that good? Does that sound safe for my living situation? (single, no family)

If the answer is yes, I have another question/concern for you.

I work swing shift on the other side of the neighboring city. I drive about 8 miles each way and I have to make the trip twice, or else I'll be spending anywhere from 3 to 5 hours in the city with nothing to do.

As you can imagine, this is really taxing on my gas budget. (Even though my car gets decent milage) So I've been toying the idea of getting a smaller 250cc motorcycle to commute, which would effectively cut my gas budget in half.

To buy a brand new bike for about $4000 would put me at a payment of something like $160 - $200 a month for about 2 years. (Lets say $200)

Now, adding $200 (minus $40 for gas so $160) that takes me down to $740 that I have to put away for the future or emergencies. (Plus insurance which won't be much coupled with several discounts I'm eligible for)


SO. I've you've made it this far in my post, my question is: Is $740 a month enough to put away in savings, given my living situation?


tl;dr - I want a motorcycle but not sure I'll be saving enough afterwards.


Sorry if I sound incredibly ignorant when it comes to this kind of stuff. It's because I am.

Any honest advice helps!

Mike

EDIT: I guess I should include a summary of my current monthly budget

Rent 350 (I rent a room from a friend)
Gas 80
Cell Phone 40
Netflix 7 (About to delete, actually)
Food 50 (I live with two other people and we all share food)
Car Insurance 66
Laptop 100

Total monthly: $693

1700 - 693 = 1007 (approximation because I don't always make a flat $1700. It is usually always within $100 though)

I don't have a monthly budget for things like clothes because I only buy them when I need them; which is not monthly.

[josetann]

I'm partial to two-wheeled vehicles myself (though I lean more toward scooters). Buying one for gas savings is almost always not a smart decision. Now if you're buying it just cause you want one...and have figured in the true cost of ownership (purchase price, maintenance, registration, insurance, fuel...then figure how much is "saved" on car maintenance and fuel...etc.), more power to you. Oh...I'm not sure where you live, but I'd check into parking costs. I have a scooter, and where we live we can park it about anywhere for free (allowed to park on the sidewalks as long as it's not blocking the flow of foot traffic, wife can park at work for free saving $4/day, etc.).

But I wouldn't finance a 250cc scooter/motorcycle. Pay off the debt you have incurred, save up, then buy a used one. It's summer there, so I imagine if you can wait just a bit longer, you'll be able to snap up quite a deal in 2-3 months (but keep looking in the meantime...a deal is more probable in the off season, but you never know). Last year I picked up a 2005 Aprilia Scarabeo 500 for $2,000 in June, had two hard saddlebags and a trunk; needed new tires and the stator went out ($20 or so part)...but still. Under $2,500 for a 400+cc scooter, tons of storage, pretty sweet ride. Brand new it cost quite a bit more, I'm sure. Just sayin'.

Ok, back to the budget. Do you have an emergency fund yet? Your current bills appear to be about $700/mo, correct? But elsewhere I think you had figured $800/mo. Well, I'd put at least $1,500 in an emergency fund (that's two months of living expenses), pay off the laptop, and when that's done I'd put that extra $900-$1,000/mo into a savings account. Once you have $1,500 (in your non-emergency fund), start looking for used scooters/motorcycles that cost $1,000 (you need a little extra for minor repairs, registration costs, heck do you even have a helmet or any riding gear yet?). Once you have $2,500, look at scooters/motorcycles that cost $2,000 and less. You might have to wait just a bit, but you'll be debt free, have the 2-wheeled vehicle you want, etc. It may not be the newest out there...but it'll be 100% yours.

I haven't really touched on other stuff...such as contributing to a retirement account (you should contribute at least enough to get the employer match, if they offer one). But stick to a budget, get out of debt before it gets worse...and by the end of the year you could be debt free, have that motorcycle, and be contributing a decent amount in your savings and retirement accounts.

[BMEPhDinCO]

Welcome! It sounds like you want to get serious about finances and so here's my advice.

1. Don't think about spending more right now. You CANNOT afford a motorcycle until you have no other debt. You should NOT think in monthly payments. Total numbers only - "out the door" as it's called is the only way to buy something.

2. Pay the laptop right now - I don't even see it built into your budget. If you have $900 left over every month, you should be able to pay for that within the next 2 months.

3. After you pay off all debt (laptop, any CC, etc), then you should build up an emergency fund. That's at least 3 months expenses (~$700) for a total of $2,100. If you do have $900 extra every month, put $700 of that aside each month for 3 months.

4. Open a RothIRA and put the other $200 a month (from #3) into this. Once you have the EF saved up, back off on that to around $400 into savings ($150 to EF, $100 to motorcycle fund, $50 to "**** happens" fund, $100 to vacation/fun/gifts/etc fund) and then put $500 into the RothIRA. You want to hit the max of $5k into the Roth if possible ($416.33 per month for 12 months, you are running a bit behind and hence the slightly higher amount).

As for the gas - can you get a book and read? Can you take online classes? What do you do with that time when you get home?

Hope that helps!

[bjl584]

One thing that does stand out to me, and someone else mentioned this, is that you are thinking in terms of monthly payments for the things that you are buying. That can lead to big trouble. You need to look at total cost and total cost of ownership not monthly payments. There is more to a motorcycle than a monthly payment. There is inspection, registration, riding equipment, maintainence, etc.

You should never put anything on a credit card that you can't pay off in full when the bill arives. Are you planning on paying off the laptop in full?

[mrpaseo]

Welcome! It sounds like you want to get serious about finances and so here's my advice.

1. Don't think about spending more right now. You CANNOT afford a motorcycle until you have no other debt. You should NOT think in monthly payments. Total numbers only - "out the door" as it's called is the only way to buy something.

2. Pay the laptop right now - I don't even see it built into your budget. If you have $900 left over every month, you should be able to pay for that within the next 2 months.

3. After you pay off all debt (laptop, any CC, etc), then you should build up an emergency fund. That's at least 3 months expenses (~$700) for a total of $2,100. If you do have $900 extra every month, put $700 of that aside each month for 3 months.

4. Open a RothIRA and put the other $200 a month (from #3) into this. Once you have the EF saved up, back off on that to around $400 into savings ($150 to EF, $100 to motorcycle fund, $50 to "**** happens" fund, $100 to vacation/fun/gifts/etc fund) and then put $500 into the RothIRA. You want to hit the max of $5k into the Roth if possible ($416.33 per month for 12 months, you are running a bit behind and hence the slightly higher amount).

As for the gas - can you get a book and read? Can you take online classes? What do you do with that time when you get home?

Hope that helps!

All good advice, allow me to add.

I wanted a Motorcycle my entire life, I just spent 20 years in the Army. I could not justify the purchase until I could afford it... I paid off my house, both vehicles and no debt... and only then, could I afford it. I was 38 when I purchased my first motorcycle.

That is a little extreme I understand but you are here for a reason, to get advice. You will receive advice that will not make sense to you because you WANT a bike, the math looks good enough for you and you want to do it. Take heed to what you read here, remember you came looking for advice, I beg you to either take what we say and apply, or ask a thousand questions until it makes sense to you. Many of us have been through the roller coaster of finances right now and you are just starting your journey, you are here for advice, we are here to offer advice to help you avoid the mistakes we made when we were starting out.

That said, you should do lots of learning, get a good base for finances and it will reward you for the next 80 years of your life. I would recommend starting with Dave Ramsey's Financial Peace University. It is a good base to start out on, you can learn enough free on line and from web casts or you could buy a book or the program for about 100 bucks.

You need to get a good understanding of a budget and an emergency fund. What happens if you got a loan for the bike, and then things do not work out at your friends house? Now you have a laptop loan and a bike loan and no where to live. Also, your budget is way off... there is no way someone can live on $60 per month in food. I recommend you get a pocket sized note pad and for at least 1 month, write down every cent you spend. To get a true picture, you will need to do this for three months but one month will give you a snapshot.

What do you use to keep your budget? Even though you do not purchase clothes monthly, you should budget money monthly even if it's only $10 dollars. This will ensure that when you do need clothes that there will be money there to purchase them. A budget will identify this.

With a budget you will keep track of money for different areas on paper but the money will all sit in the same account in the bank. You will just give each dollar a name (i.e. cloths, emergency fund, vehicle maintenance (oil changes and stuff) etc). Otherwise these things will pile up all at once and mess up your budget.

Best of luck and ask all the questions that you want.

Ray

[Joan.of.the.Arch]

Do you get health insurance through your employment, or do you need to get it privately? You can be insured under your parent's policy if you are 26 or under. However, as you are employed, you should probably pay your parent for your portion of the insurance.

[skydivingchic]

Everyone has given good advice. There are other things not in your budget right now like car maintenance. Even though clothes and car maintenance don't happen every month, you should be budgeting for them. You know you will have to but new pants at some point, you know your car will need oil changes and new tires, etc. Budget for those things. Other things that might be variable expenses like this are medical expenses, gifts, vehicle registration, etc.

Regarding the motorcycle. They are not money saving machines. The insurance for my bike is nearly as much as for my vehicle and that is being female with a flawless driving record. Maintenance on bikes is expensive - far more expensive than for cars. Tires have to be changed often. I get about 10,000 - 12,000 miles out of a tire and that is a LOT. Gear is not cheap either. And don't buy a new bike. You can find tons of very low milage bikes on Craigs List and Cycle Trader. If you want a bike for fun, fine. But understand that the bike will cost money, not save money.

[JohnBroderick]

The following are the basics of money management..

Set Goals
Get Organized
Track Spending
Build a Budget
Save Money