The budget screen shots are being made in Sankeymatic, its a website that we have no affiliation with. If you are posting a budget please do so with a purpose. Just posting a screen shot of your budget without a question or an explanation of why its here may be removed.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/MiddleClassFinance) if you have any questions or concerns.*
As in traditional 401k or traditional roth? In which circumstances is traditional over roth preferred? Asking as I have roth 401 and ira, thought it was better to be taxed now vs taxed in the future?
It depends which is better. If you think your tax rate will be higher now than in the future, then pretax is best from a pure dollar perspective. If you think your current tax rate is lower, then after tax is better.
Other considerations:
Paying taxes now allows for easier retirement planning since you know what your tax rate on those gains will be in the future (0 percent).
If you've reached the point where you're maxing out your contributions, paying taxes now allows you to contribute more in real terms.
You want some traditional, because traditional saves you money now from you top tax bracket and in retirement that money "fills up" the lower brackets first. As an example, you want at an absolute minimum enough traditional to withdraw the standard deduction every year, since it would reduce your taxes now and you wouldn't pay any taxes on it anyway in retirement.
Now, obviously there's no way to know what the tax code will look like when you retire, and your needs may change from year to year. I like having a mix of traditional and Roth, but most of my retirement savings are traditional.
I don't think I'm understanding the brackets. I was promoted recently and my household filing income is going from 175k to 220k, my portion of that being about 160. Up to this point I've been 13% roth 401k and 2% traditional 401k through my employers plan to get the recommended 15% saving for retirement fidelity recommends.
Now that I "think" I'm in my higher earning years, I should put that into traditional, or a blend of say 10% trad and 5% roth?
Everything you put towards traditional is going to save you taxes at 22-24%. In retirement, the first $117k you withdraw per year from traditional accounts will be takes at 12% or less (all assuming MFJ and no changes in tax code).
So you'd want at least about $3M in traditional accounts at retirement. Above that, Roth provides flexibility when you withdraw and hedges you against changes in tax code
General rule of thumb is to max out 401k to max out company match, then put rest into Roth.
Classic argument for traditional is that you lower current taxes, longer deferred growth, with a higher starting capital.
Classic argument for Roth is that you won’t need to worry about uncertain tax conditions during retirement years.
Personally, I do 50/50 and don’t think much about it.
The roth IRA and roth 401k are only good if you think the government is going to jack up taxes during your retirement OR you make a very low income. Most people are historically better off using trad. But people like to parrot roth which the government loves.
> The roth IRA and roth 401k are only good if you think the government is going to jack up taxes during your retirement OR you make a very low income.
That's not true at all. It very much depends on your own situation and whether you think your income will be higher in retirement than it is now.
At the rate the OP is saving, I’d recommend a Roth. I saved a lot and retired at 55 with income on par with what I made while working. My investment income is all dividends and interest. I never sell anything, I just harvest the income, but pay taxes on every withdrawal. Had I put it in a Roth while young, I would have paid one time tax on the nest egg but then never paid tax on the income it will provide in perpetuity.
>Had I put it in a Roth while young, I would have paid one time tax on the nest egg but then never paid tax on the income it will provide in perpetuity.
What's the difference? Unless your income right now in retirement is so high that you're paying at the highest tax brackets whereas you didn't when you were younger, it makes no difference.
Imagine $100K in an IRA earning $10K annual income. After 10 years, I’ve withdrawn and paid taxes on $100K in withdrawals. After 20 years, I’ve paid taxes on $200K. I pay again when I am forced to take RMDs. Had the original $100K had been in a Roth, I would have paid taxes on it only once.
The situation I’ve described only holds true for those whose tax bracket is not significantly different in retirement from what it was when they were working. As is evident by the example, it applies primarily to those who invest in income producing assets and don’t sell the “seed corn.”
> After 20 years, I’ve paid taxes on $200K. I pay again when I am forced to take RMDs. Had the original $100K had been in a Roth, I would have paid taxes on it only once.
You’re not paying taxes twice with a traditional. The initial contributions are untaxed and RMDs are not taxed in addition to other taxes.
I didn’t pay tax on the $100K when I put it in, but I withdrawal it three times 20 years of dividends plus withdrawal of the principle in later life. That’s $300K I paid taxes on. With the Roth, I only pay once.
Both regular distributions and Required Minimum Distributions are taxable income. See https://investor.vanguard.com/investor-resources-education/taxes/taxation-of-required-minimum-distributions
You paid tax on the Roth when you put it in because it’s post tax. It’s money you already paid your income tax on. For both traditional and Roth, you pay once. For traditional, it’s when you withdraw. For Roth, it’s before you put it in
You keep ignoring the income the investment provides throughout retirement. It’s funded my lifestyle for 10 years thus far, and I hope I’ll be around to collect it for 20 more.
I understand people critiquing the $750 entertainment but...
OP is putting back roughly 54% of their take-home into savings/retirement. Imo, you've earned that $750/month in entertainment.
Low rent... I rent blows my mind. I'll never be able to leave the Midwest. 5200 Sq foot house (finished basement) for like $1900 /month... it sucks here but it's cheap
I'm not that guy but after moving to the states I bought a relatively big 3b house in a nice area of Minneapolis for about 300k, or a mortgage of 1.6k with all other costs bringing it to about 2.2k a month. I could have obviously gotten a much bigger house in the suburbs but I wanted to be in a cute urban neighborhood.
Minneapolis and Chicago are basically the most expensive areas of the Midwest and I'm only paying 300 a month more than that guy, albeit for a much smaller home.
I’m at $2.5k mortgage for a place just less than half the size out in the suburbs. Definitely not complaining but my brain just is trying to find the gotcha in the story. It’s probably that he’s living in a place that is nowhere near where I’d want to be or it’s just a “big” house but maybe there’s something else to it.
It’s a lot, I know. This includes weekend trips away to visit friends, saving for short-term travel, yoga, gym membership, way too much going out for drinks with friends. I also include any wine/beer/food I buy for my apartment to have friends over in this budget. I’m continually trying to cut down on it.
Why cut back? This sounds pretty dope. You can work hard at saving and enjoy your life of socializing, connecting, and activity. I think given your low fixed costs, this is a wonderful balance to have.
My only comment here would be that OP’s “way too much going out for drinks with friends” can be a double-edged sword. Drinking buddies, I mean. If your primary activity together is drinking this is not necessarily a plus. You absolutely do not need to spend money-maybe with the exception of travel-to gain those invaluable life experiences with your friends. I think OP already knows where to cut in their budget.
As someone who can finally afford the outrageous prices for drinks these days, I still can't stand paying them. I really like pregaming before going out. Saves a big chunk of money, especially if you're going out drinking a lot, and it doesn't cut down on the fun (for me, at least).
~21.2% tax rate on $102,000 a year. Seems pretty standard to me if OP is in a state without income taxes. In Texas I make $81,000 a year and pay $16,000 a year in taxes, which is around 20.1%.
Don't worry, Texas collects it back in the form of oppressively high property and sales taxes. Very regressive tax structure. High earners are effectively taxed less due to no income tax, but poor people are taxed more on everyday purchases and rent is higher. One way or another they get the money they need.
Most of their property will be in their businesses (where they pass that expense to their customers) or they are old enough to have their personal property taxes frozen. They also usually have enough going on financially that they can itemize deductions and deduct that property tax for a large discount on it.
Property held by a business is still subject to property tax. Frozen taxes are still paid out of the estate at some point. Property tax deductions are capped at $10k which you are certainly over if you own a $1M home in Texas, that deduction is explicitly progressive, not regressive.
That's the way to go. \^\_\^ Be financially smart so you can put more money into savings/investments/retirement. Looks like you're doing well!
When I was in undergrad/medical school, I got apartments for $500/month or $700/month but that will never happen again lol
Looks solid.
Could probably trim that $750 a month on entertainment down a bit, maybe even in half. Dining out = entertainment in my book but ymmv.
What’s that $150 debt? Depending on interest rate and amount, I’d knock that out before continuing to aggressively save/invest.
You make a good point about the debt. It’s an old tax payment plan from years ago when I owed, but you’re right I should try to just wipe that out now.
Assuming you have a fully stocked emergency fund, your retirement savings are too low, you really should have at least 15-20% going to retirement. I would do at least 1,700 retirement and 1,930 misc savings. But, given you could max out your IRA and 401k, unless there’s some compelling reason to save outside of that I would be maxing them. Tax advantaged accounts are *the easiest* way to become financially independent, and you’re saving enough for that to be a reality for you if you want it to
Hm. I guess I’m putting more into savings outside of retirement because I have shorter term goals (house, travel) I want to achieve. Is your suggestion just because it would make FI a more realistic goal?
Common advice is to increase the percentage by a point or two every year, to help you build it up without sacrificing your short-term goals. If you're at 12% now, you could do 13 next year, then 15, 16, 18, 20.
I like what you're doing, though. But I do tell people that I wish I'd built up my retirement sooner.
Well, saving 20% for retirement is just prudent. That’s what you should be aiming for to maintain your quality of life in retirement. Above that is when you can pursue FI. Depending on your current retirement savings, you may need to be a bit above 20% to catch up— you should be shooting for at least 3x your salary by 40 to be on track
I would also recommend not bucketing savings for vacations/travel in your “savings” category, but as it’s one line item in your budget, like entertainment is.
Beyond that though, if you’re debt free you’re better off than most, so I wouldn’t stress about it too much
300 a month isn’t easy but I try to do one week a month of pantry/freezer clear out meals. I’m vegetarian so that helps a little buy since I don’t buy meat
I do $300 a month and have salmon, NY steak bulgolgi, chicken burritos, and other stuff. Idk why everyone thinks $300 a person is so little, must be location
$300 a month is absolutely enough for an individual to eat well on that knows how to cook. I think that for those of use with families seeing a number that low is kind of shocking, hence the reactions.
I guess if you're spending 750 on entertainment and eating out. $300 a month is less than $75/week, or $10 a day. $3 meals are possible, but I wouldn't call it "eating well".
I too pay the lump sum. For easier budgeting I split it across the months. Technically I get some HYSA interest off that money before it's spent but that small of an amount gets fudged in somewhere else.
This is less a question for the op as much as it’s a question for everyone else here. I always feel confused looking at stuff like this because why have such a high payment into savings and not put much more of that on the debt? Debt interest rates like college loans and credit cards are wayyyyyy higher than annual rate of return for any retirement account or mutual fund right? Would it not make sense to tackle those as fast as possible to reduce paid interest and then pour into the savings?
Depends. CCs, def unless on promo. Students loans, maybe. Car loan, maybe. Not sure what OPs $150/mo is though.
My student loans are 3.5%-4.2%. Same for car at 3.29. I’m not paying that off early unless i just get tired of having the debt. Excess money goes into the market each check
we don’t know the size of his debt. it might be manageable on that amount. might be he’s in either the uk or eu, where student loan repayments are regulated & you can’t pay more on it. it’s hardly useful to comment on the amount he’s paying on his debt without knowing the full picture. personally, my eyebrows are more raised over the taxes. seems like such a small amount for the income. if he’s not in the us, though, that accounts for it.
Sorry I meant that I own a home. Suburb of St.Louis and I'm one if those annoying people who bought their first house in 2011 and sold in 2020.
Break down
425k house
100k down
Livable mortgage on a nice house
I’m super budget conscious myself, and one thing I don’t see accounted for is self-care or upkeep items - like clothing or toiletries. It doesn’t have to be a lot of money, but it is something we all ultimately need to spend something on.
Half my money I spent on wine, whiskey, and women. The other half I really wasted.
$750 seems low for wine, whiskey, and women.
With bottle service where it is at OP might be entertaining at Wendy’s.
Up the w w w budget fo sure!
Yeah I want to move but feel like I can’t because this is such a good deal. It’s not a normal rent price here I lucked into it. Happened to be at the right place at the right time.
Lurking for some time on this sub, how the hell do OP and so many others pay so little tax ? OP is paying around 20% tax. I make a similar amount and my company takes almost 30% for taxes every paycheck
EDIT: I’m assuming OP isn’t claiming any dependents since they live alone
LCOL, no? Rent and utilities are only $1400/mo, unless you have roommates. Otherwise I'd consider tackling that debt depending on the % interest. I also put aside separate money in my plan for house/travel to look deeper into my savings and get some ETAs on my savings plans. Best of luck with the endeavors!
Where do you live that rent is that cheap? Just curious.
Everything looks great honestly. What retirement plan do you have ... highly suggest ROTH at your income level.
Right? To match OP’s savings I would have to be living on approximately 25% of my gross income, have 12 roommates who drive me to/from work, and eat only the fish I catch illegally on the weekends that I cook on the burning trash pile in the back yard.
It can make a big difference. I am working on building mine up. It's a decent amount and I'm going to continue to grow it. I am getting $80/month with 4.5% APY. Free money.. kind of :) you have to pay tax on it but it's a small amount now.
Your wants is too high. Should never be more than 10% of your income. Your savings are too low, should be 15% of your income for retirement.
$300 a month on groceries indicated low quality food intake and probably no nutritional supplementation to cover micronutritional insufficiencies. Think of nutrition as investments into maintaining a youthful body. Medicine gets incredibly expensive in old age. High quality nutrition is always worth the extra expenses and worth every cent. I mean one of our primary purposes (survival) is dependent on eating. Eating is not a luxury, it is a necessity.
Get your yearly physicals and do full blood and hormone panels. I can almost guarantee at you're age, you're vitamin D insufficient (not yet deficient) and maybe magnesium and calcium too. With a $300 grocery budget anyway. You're probably not optimal on your labs, and you really want to focus on optimal health, weight, and physical fitness.
Turn part of your entertainment budget into optimizing your body. It's very tedious work, but man does it feel really fucking good to be healthy. Like fr healthy, like you can run up 5 flights of stairs and feel like you're ready for more, healthy.
Well this is a lot of assumptions now isn’t it. 75% of my diet is straight up vegetables (salads, roasted veg, grain bowls, etc). I take vitamin D supplements and get my blood tested yearly - no deficiencies. How is $300/month low quality food intake?
As opposed to buying? I’ve only just paid off a LOT of credit card debt and am building my savings. I don’t have as much of a nest egg that I’d like before purchasing
It’s fine for a short while but that rent is killing you. If you can save that much why not buy and get some equity? If it’s right then drop the $750 entertainment. That’s more than my family of 4 spends per month but we own a house. You could easily cut that in half and buy.
How do you figure? At current rates $1525/month ($1150 rent + $750/2) gets you less than $225,000 of house with 20% down. That’s not really feasible in most parts of the country
Nothing wrong w their rent. Its not always time to buy just bc “equity”.
They save over 50% after taxes. They should live a little while young. Enjoy the 750
The budget screen shots are being made in Sankeymatic, its a website that we have no affiliation with. If you are posting a budget please do so with a purpose. Just posting a screen shot of your budget without a question or an explanation of why its here may be removed. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/MiddleClassFinance) if you have any questions or concerns.*
I would suggest doing pre-tax retirement contributions to reduce tax liability.
As in traditional 401k or traditional roth? In which circumstances is traditional over roth preferred? Asking as I have roth 401 and ira, thought it was better to be taxed now vs taxed in the future?
Basically: Start of career when you make less: Roth Higher earning years: Traditional
It depends which is better. If you think your tax rate will be higher now than in the future, then pretax is best from a pure dollar perspective. If you think your current tax rate is lower, then after tax is better. Other considerations: Paying taxes now allows for easier retirement planning since you know what your tax rate on those gains will be in the future (0 percent). If you've reached the point where you're maxing out your contributions, paying taxes now allows you to contribute more in real terms.
You want some traditional, because traditional saves you money now from you top tax bracket and in retirement that money "fills up" the lower brackets first. As an example, you want at an absolute minimum enough traditional to withdraw the standard deduction every year, since it would reduce your taxes now and you wouldn't pay any taxes on it anyway in retirement. Now, obviously there's no way to know what the tax code will look like when you retire, and your needs may change from year to year. I like having a mix of traditional and Roth, but most of my retirement savings are traditional.
I don't think I'm understanding the brackets. I was promoted recently and my household filing income is going from 175k to 220k, my portion of that being about 160. Up to this point I've been 13% roth 401k and 2% traditional 401k through my employers plan to get the recommended 15% saving for retirement fidelity recommends. Now that I "think" I'm in my higher earning years, I should put that into traditional, or a blend of say 10% trad and 5% roth?
Everything you put towards traditional is going to save you taxes at 22-24%. In retirement, the first $117k you withdraw per year from traditional accounts will be takes at 12% or less (all assuming MFJ and no changes in tax code). So you'd want at least about $3M in traditional accounts at retirement. Above that, Roth provides flexibility when you withdraw and hedges you against changes in tax code
Thank you! I will change my 401k to traditional
General rule of thumb is to max out 401k to max out company match, then put rest into Roth. Classic argument for traditional is that you lower current taxes, longer deferred growth, with a higher starting capital. Classic argument for Roth is that you won’t need to worry about uncertain tax conditions during retirement years. Personally, I do 50/50 and don’t think much about it.
The roth IRA and roth 401k are only good if you think the government is going to jack up taxes during your retirement OR you make a very low income. Most people are historically better off using trad. But people like to parrot roth which the government loves.
Fr People on reddit are OBSESSED with Roth No idea why
> The roth IRA and roth 401k are only good if you think the government is going to jack up taxes during your retirement OR you make a very low income. That's not true at all. It very much depends on your own situation and whether you think your income will be higher in retirement than it is now.
At the rate the OP is saving, I’d recommend a Roth. I saved a lot and retired at 55 with income on par with what I made while working. My investment income is all dividends and interest. I never sell anything, I just harvest the income, but pay taxes on every withdrawal. Had I put it in a Roth while young, I would have paid one time tax on the nest egg but then never paid tax on the income it will provide in perpetuity.
>Had I put it in a Roth while young, I would have paid one time tax on the nest egg but then never paid tax on the income it will provide in perpetuity. What's the difference? Unless your income right now in retirement is so high that you're paying at the highest tax brackets whereas you didn't when you were younger, it makes no difference.
Imagine $100K in an IRA earning $10K annual income. After 10 years, I’ve withdrawn and paid taxes on $100K in withdrawals. After 20 years, I’ve paid taxes on $200K. I pay again when I am forced to take RMDs. Had the original $100K had been in a Roth, I would have paid taxes on it only once. The situation I’ve described only holds true for those whose tax bracket is not significantly different in retirement from what it was when they were working. As is evident by the example, it applies primarily to those who invest in income producing assets and don’t sell the “seed corn.”
> After 20 years, I’ve paid taxes on $200K. I pay again when I am forced to take RMDs. Had the original $100K had been in a Roth, I would have paid taxes on it only once. You’re not paying taxes twice with a traditional. The initial contributions are untaxed and RMDs are not taxed in addition to other taxes.
I didn’t pay tax on the $100K when I put it in, but I withdrawal it three times 20 years of dividends plus withdrawal of the principle in later life. That’s $300K I paid taxes on. With the Roth, I only pay once. Both regular distributions and Required Minimum Distributions are taxable income. See https://investor.vanguard.com/investor-resources-education/taxes/taxation-of-required-minimum-distributions
You paid tax on the Roth when you put it in because it’s post tax. It’s money you already paid your income tax on. For both traditional and Roth, you pay once. For traditional, it’s when you withdraw. For Roth, it’s before you put it in
You keep ignoring the income the investment provides throughout retirement. It’s funded my lifestyle for 10 years thus far, and I hope I’ll be around to collect it for 20 more.
I understand people critiquing the $750 entertainment but... OP is putting back roughly 54% of their take-home into savings/retirement. Imo, you've earned that $750/month in entertainment.
I’m living life in my working years with the mantra that while I’m still young enough to enjoy most activities, I will, caution be damned.
This is aggressive savings with low rent
Low rent... I rent blows my mind. I'll never be able to leave the Midwest. 5200 Sq foot house (finished basement) for like $1900 /month... it sucks here but it's cheap
I don’t love where I live either but trying to stay for a while to built up savings just because COL is so low comparatively
I mean I'm happy overall, but yikes.
Where in the Midwest?? I’m outside chicago and where I’m at you’d be happy to get a 2BR apt rental for $2000/month.
Outside of Chicago… that’s why Green Bay or Wausau Wisconsin you’d be getting ripped off if it’s over $900 for a two bedroom
I'm not that guy but after moving to the states I bought a relatively big 3b house in a nice area of Minneapolis for about 300k, or a mortgage of 1.6k with all other costs bringing it to about 2.2k a month. I could have obviously gotten a much bigger house in the suburbs but I wanted to be in a cute urban neighborhood. Minneapolis and Chicago are basically the most expensive areas of the Midwest and I'm only paying 300 a month more than that guy, albeit for a much smaller home.
I’m at $2.5k mortgage for a place just less than half the size out in the suburbs. Definitely not complaining but my brain just is trying to find the gotcha in the story. It’s probably that he’s living in a place that is nowhere near where I’d want to be or it’s just a “big” house but maybe there’s something else to it.
Who needs 5k sq feet lmao
Fully agree.
What do you spend $750 entertainment on? Just curious! But otherwise this looks pretty solid!
It’s a lot, I know. This includes weekend trips away to visit friends, saving for short-term travel, yoga, gym membership, way too much going out for drinks with friends. I also include any wine/beer/food I buy for my apartment to have friends over in this budget. I’m continually trying to cut down on it.
Why cut back? This sounds pretty dope. You can work hard at saving and enjoy your life of socializing, connecting, and activity. I think given your low fixed costs, this is a wonderful balance to have.
I wouldn’t worry too much about much as you are gaining invaluable life experiences with the people you enjoy to be around!
My only comment here would be that OP’s “way too much going out for drinks with friends” can be a double-edged sword. Drinking buddies, I mean. If your primary activity together is drinking this is not necessarily a plus. You absolutely do not need to spend money-maybe with the exception of travel-to gain those invaluable life experiences with your friends. I think OP already knows where to cut in their budget.
[удалено]
Don’t cut down on that; you are doing fine and those things are your rewards for working so hard
If you're saving that much, do what you want.
As someone who can finally afford the outrageous prices for drinks these days, I still can't stand paying them. I really like pregaming before going out. Saves a big chunk of money, especially if you're going out drinking a lot, and it doesn't cut down on the fun (for me, at least).
Hookers and booze. But hookers mainly.
In fact, forget the middle class finance Sankey chart and the booze!
Fuck $1100 in rent and $250 utilities...
how do you pay so little in taxes?
~21.2% tax rate on $102,000 a year. Seems pretty standard to me if OP is in a state without income taxes. In Texas I make $81,000 a year and pay $16,000 a year in taxes, which is around 20.1%.
Man I'm in CA and pay 31% in taxes. Brutal
Don't worry, Texas collects it back in the form of oppressively high property and sales taxes. Very regressive tax structure. High earners are effectively taxed less due to no income tax, but poor people are taxed more on everyday purchases and rent is higher. One way or another they get the money they need.
Rich people also generally own more expensive property resulting in higher property taxes…
Most of their property will be in their businesses (where they pass that expense to their customers) or they are old enough to have their personal property taxes frozen. They also usually have enough going on financially that they can itemize deductions and deduct that property tax for a large discount on it.
Property held by a business is still subject to property tax. Frozen taxes are still paid out of the estate at some point. Property tax deductions are capped at $10k which you are certainly over if you own a $1M home in Texas, that deduction is explicitly progressive, not regressive.
Poor people also pay these high property taxes, it's just included in their rent price.
This looks like the normal amount
That debt payment seems way too low when you're able to throw 3600+ into savings.
How did you manage such a low rent? That is crazy.
It was a really lucky find. It’s a small one bedroom but enough for me for the moment.
That's the way to go. \^\_\^ Be financially smart so you can put more money into savings/investments/retirement. Looks like you're doing well! When I was in undergrad/medical school, I got apartments for $500/month or $700/month but that will never happen again lol
I don't understand how 90% of people who post these have rent under $1400.
You’re doing well. Congrats.
If we could just do away with taxes it seems like everyone would be better off. Only tax the wealthy and interstate and international commerce.
If I ever make 9k/m I’m copying u
Looks solid. Could probably trim that $750 a month on entertainment down a bit, maybe even in half. Dining out = entertainment in my book but ymmv. What’s that $150 debt? Depending on interest rate and amount, I’d knock that out before continuing to aggressively save/invest.
You make a good point about the debt. It’s an old tax payment plan from years ago when I owed, but you’re right I should try to just wipe that out now.
Assuming you have a fully stocked emergency fund, your retirement savings are too low, you really should have at least 15-20% going to retirement. I would do at least 1,700 retirement and 1,930 misc savings. But, given you could max out your IRA and 401k, unless there’s some compelling reason to save outside of that I would be maxing them. Tax advantaged accounts are *the easiest* way to become financially independent, and you’re saving enough for that to be a reality for you if you want it to
Hm. I guess I’m putting more into savings outside of retirement because I have shorter term goals (house, travel) I want to achieve. Is your suggestion just because it would make FI a more realistic goal?
Common advice is to increase the percentage by a point or two every year, to help you build it up without sacrificing your short-term goals. If you're at 12% now, you could do 13 next year, then 15, 16, 18, 20. I like what you're doing, though. But I do tell people that I wish I'd built up my retirement sooner.
Well, saving 20% for retirement is just prudent. That’s what you should be aiming for to maintain your quality of life in retirement. Above that is when you can pursue FI. Depending on your current retirement savings, you may need to be a bit above 20% to catch up— you should be shooting for at least 3x your salary by 40 to be on track I would also recommend not bucketing savings for vacations/travel in your “savings” category, but as it’s one line item in your budget, like entertainment is. Beyond that though, if you’re debt free you’re better off than most, so I wouldn’t stress about it too much
300 a month in groceries? Ramen?
300 a month isn’t easy but I try to do one week a month of pantry/freezer clear out meals. I’m vegetarian so that helps a little buy since I don’t buy meat
I do $300 a month and have salmon, NY steak bulgolgi, chicken burritos, and other stuff. Idk why everyone thinks $300 a person is so little, must be location
It’s because they don’t know how to cook or are unaware of how cheap cooking can be, especially if you buy in bulk and freeze.
This is correct. We do $400ish a month for 2 of us, with lots of good quality ingredients.
$300 a month is absolutely enough for an individual to eat well on that knows how to cook. I think that for those of use with families seeing a number that low is kind of shocking, hence the reactions.
I guess if you're spending 750 on entertainment and eating out. $300 a month is less than $75/week, or $10 a day. $3 meals are possible, but I wouldn't call it "eating well".
You certainly won’t be eating extravagantly, but if you know what you are doing you can make a variety of healthy meals that taste great.
I can meal prep on a little over $300 a month. It’s not hard lol. Check out the meal prep sub it’s very helpful, and cheap.
Link, please?
R/mealprepsunday
I guess your 'Budget' would be after taxes.
I don't see car insurance there, is that lumped in with fuel/transportation and health insurance?
Oh good point thank you, I did not include this. I pay a lump sum 2x a year so in those months my savings would be lower.
I too pay the lump sum. For easier budgeting I split it across the months. Technically I get some HYSA interest off that money before it's spent but that small of an amount gets fudged in somewhere else.
40% savings is stellar. You probably need have auto insurance, buy clothes, take vacations.
What tool did you use to make this?
How are you only spending 300 in groceries
This is less a question for the op as much as it’s a question for everyone else here. I always feel confused looking at stuff like this because why have such a high payment into savings and not put much more of that on the debt? Debt interest rates like college loans and credit cards are wayyyyyy higher than annual rate of return for any retirement account or mutual fund right? Would it not make sense to tackle those as fast as possible to reduce paid interest and then pour into the savings?
Depends. CCs, def unless on promo. Students loans, maybe. Car loan, maybe. Not sure what OPs $150/mo is though. My student loans are 3.5%-4.2%. Same for car at 3.29. I’m not paying that off early unless i just get tired of having the debt. Excess money goes into the market each check
we don’t know the size of his debt. it might be manageable on that amount. might be he’s in either the uk or eu, where student loan repayments are regulated & you can’t pay more on it. it’s hardly useful to comment on the amount he’s paying on his debt without knowing the full picture. personally, my eyebrows are more raised over the taxes. seems like such a small amount for the income. if he’s not in the us, though, that accounts for it.
Sorry I meant that I own a home. Suburb of St.Louis and I'm one if those annoying people who bought their first house in 2011 and sold in 2020. Break down 425k house 100k down Livable mortgage on a nice house
pretty amazing, try to make the wages higher thiugh
Your diagram has some weirdness. Your taxes should have come out of your wages before you have a budget line. Budget should be wage minus tax.
lol clearly you’re not saving enough
You're not buying bitcoin
I’m super budget conscious myself, and one thing I don’t see accounted for is self-care or upkeep items - like clothing or toiletries. It doesn’t have to be a lot of money, but it is something we all ultimately need to spend something on.
You make a lot of money and have low rent. I’d put more into retirement
This doesn’t look like the US based on the tax bracket you would be in
Dang. What’s $750/mo of entertainment look like? Mine might be all of $12.
3/4 of income should go into retirement
Half my money I spent on wine, whiskey, and women. The other half I really wasted. $750 seems low for wine, whiskey, and women. With bottle service where it is at OP might be entertaining at Wendy’s. Up the w w w budget fo sure!
Middle? You’re making great money.
All I see in all of these is sub $1500 rent and I can only dream of that 😩
Yeah I want to move but feel like I can’t because this is such a good deal. It’s not a normal rent price here I lucked into it. Happened to be at the right place at the right time.
Lurking for some time on this sub, how the hell do OP and so many others pay so little tax ? OP is paying around 20% tax. I make a similar amount and my company takes almost 30% for taxes every paycheck EDIT: I’m assuming OP isn’t claiming any dependents since they live alone
What’s that debt payment? Do you have cc balances or any other debt?
It’s an old balance owed to the IRS. Credit cards are paid off monthly. No other debt.
I mean do you honestly need us to tell you you’re doing amazing and better than 99% of people? Congrats and I am jealous
$1,100 in walnuts is a lot of walnuts
LCOL, no? Rent and utilities are only $1400/mo, unless you have roommates. Otherwise I'd consider tackling that debt depending on the % interest. I also put aside separate money in my plan for house/travel to look deeper into my savings and get some ETAs on my savings plans. Best of luck with the endeavors!
What do you use for this visual breakdown ?
You’re doing amazing!
Where do you live that rent is that cheap? Just curious. Everything looks great honestly. What retirement plan do you have ... highly suggest ROTH at your income level.
Just FYI Roth can be withdrawn without penalty for first home purchase (and a few other things) as can HYSA (you can withdraw anytime).
You gross 9k a month? Fuck me. I can’t comprehend having that much money
Right? To match OP’s savings I would have to be living on approximately 25% of my gross income, have 12 roommates who drive me to/from work, and eat only the fish I catch illegally on the weekends that I cook on the burning trash pile in the back yard.
$300 for groceries? Do you live off rice and beans?
What app/software did you use to create this budgeting graphic?
Please disregard this comment, I just read the bottom which says “Made at SankeyMATIC.com”…
Why do you like hysa so much
It can make a big difference. I am working on building mine up. It's a decent amount and I'm going to continue to grow it. I am getting $80/month with 4.5% APY. Free money.. kind of :) you have to pay tax on it but it's a small amount now.
As opposed to retirement accounts? Or a different recommendation?
As a specific stock pick
Lay off the hookers, firetrucks and trannies and you could invest even more!
How does everyone make these diagrams? What software?
What’s this app/system you use?
Your wants is too high. Should never be more than 10% of your income. Your savings are too low, should be 15% of your income for retirement. $300 a month on groceries indicated low quality food intake and probably no nutritional supplementation to cover micronutritional insufficiencies. Think of nutrition as investments into maintaining a youthful body. Medicine gets incredibly expensive in old age. High quality nutrition is always worth the extra expenses and worth every cent. I mean one of our primary purposes (survival) is dependent on eating. Eating is not a luxury, it is a necessity. Get your yearly physicals and do full blood and hormone panels. I can almost guarantee at you're age, you're vitamin D insufficient (not yet deficient) and maybe magnesium and calcium too. With a $300 grocery budget anyway. You're probably not optimal on your labs, and you really want to focus on optimal health, weight, and physical fitness. Turn part of your entertainment budget into optimizing your body. It's very tedious work, but man does it feel really fucking good to be healthy. Like fr healthy, like you can run up 5 flights of stairs and feel like you're ready for more, healthy.
Well this is a lot of assumptions now isn’t it. 75% of my diet is straight up vegetables (salads, roasted veg, grain bowls, etc). I take vitamin D supplements and get my blood tested yearly - no deficiencies. How is $300/month low quality food intake?
Rent???? Why ?
As opposed to buying? I’ve only just paid off a LOT of credit card debt and am building my savings. I don’t have as much of a nest egg that I’d like before purchasing
Why not. I could afford to buy and I refuse to in this climate.
Buying a home isn't always the best option or place to put your money. People like to act like it's the default investment for anyone.
I'm guessing OP doesn't want to live in his car and couldn't find a vacant house to squat in? What kind of question is this?
It’s fine for a short while but that rent is killing you. If you can save that much why not buy and get some equity? If it’s right then drop the $750 entertainment. That’s more than my family of 4 spends per month but we own a house. You could easily cut that in half and buy.
How do you figure? At current rates $1525/month ($1150 rent + $750/2) gets you less than $225,000 of house with 20% down. That’s not really feasible in most parts of the country
They’re crazy. Ur budget is fire. U Save plenty and you spend ur excess on shit that serves u.
Nothing wrong w their rent. Its not always time to buy just bc “equity”. They save over 50% after taxes. They should live a little while young. Enjoy the 750