New Grad's Budget

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
scarletngrey
Posts: 4
Joined: Fri May 01, 2020 9:06 am

New Grad's Budget

Post by scarletngrey »

Hi everyone. I'm starting my first job out of school as an engineer for a large company in MCOL. I start next week. I wanted to know what Bogleheads think about my budget. I was pretty limited with the housing options here for several reasons, but I finally found a place so hopefully my rent won't be criticized too much. I have little furniture from college so I have to spend money to furnish my new place. I've received a generous relocation stipend that I am using for the move, deposit on apartment, furniture, etc. Signing bonus will be used in ways TBD. Here goes:

5667 gross/3700 net estimated salary after HSA/6% 401k match contributions
1200 rent
160 phone/internet
160 utilities
278 car
87 car insurance
80 gas
200 estimated health insurance (???)
250 groceries
300 restaurants/bars
550 general savings
150 travel fund
495 misc (cat costs, target runs, other stuff)

Keep in mind I have not received pay stubs yet so I do not know for certain how my pre-tax deductions will affect my net salary. These are my best guesses. Maxing out HSA with $600 employer contribution. Putting in 6% to 401K so that employer matches that. I have 15k in taxable account, 6k Roth IRA, and 8k cash.
Thanks all
02nz
Posts: 5556
Joined: Wed Feb 21, 2018 3:17 pm

Re: New Grad's Budget

Post by 02nz »

So around $68K/year gross? No pension? If the 401k plan is good (low-cost options), you should max the 401k if at all possible ($19.5K/year). And fund a Roth IRA (you have until July 15 to make your 2019 contribution, assuming you had enough earned income last year). Don't invest in taxable before maxing out tax-advantaged accounts!

As for your budget, to me $160 for internet and phone looks high. Mint Mobile is $15/20/25 per mo for 3/8/12 GB, and you should be able to get internet for $40-60/mo. $250 is low for groceries. And when I add up your expenses and savings I get $3910, less than your estimated take-home pay of $3700.
smitcat
Posts: 6476
Joined: Mon Nov 07, 2016 10:51 am

Re: New Grad's Budget

Post by smitcat »

This is a simple tax calculator that you can utilize to estimate taxes with various deductions.
It will get you very close with not much effort and you can see what effects salary and deductions play in your situation.
https://smartasset.com/taxes/income-taxes
User avatar
FiveK
Posts: 10301
Joined: Sun Mar 16, 2014 2:43 pm

Re: New Grad's Budget

Post by FiveK »

Assuming (i.e., you should check these) you will be earning $5667/mo in 2020 for only the remaining months (so your 2020 income will be low compared with 2021 and beyond), and you were a full time student for at least part of five months (thus ineligible for the saver's credit), then you might prefer to use Roth 401k contributions instead of traditional ones.

As for your budget, try to keep track (Quicken, Mint, YNAB, spreadsheet, pencil and paper, however...) of your actual expenses. Spending patterns are personal, and reasonable ones can be widely varied.

See Investment Order and Prioritizing investments for some general suggestions.
runner3081
Posts: 3564
Joined: Mon Aug 22, 2016 3:22 pm

Re: New Grad's Budget

Post by runner3081 »

I think there are a number of areas where you should cut back:
Phone Internet
Car
Restaurants/Bars

Also, do you have clothing anf gifts in Misc?
Grt2bOutdoors
Posts: 23042
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: New Grad's Budget

Post by Grt2bOutdoors »

02nz wrote: Tue Jul 07, 2020 4:55 pm So around $68K/year gross? No pension? If the 401k plan is good (low-cost options), you should max the 401k if at all possible ($19.5K/year). And fund a Roth IRA (you have until July 15 to make your 2019 contribution, assuming you had enough earned income last year). Don't invest in taxable before maxing out tax-advantaged accounts!

As for your budget, to me $160 for internet and phone looks high. Mint Mobile is $15/20/25 per mo for 3/8/12 GB, and you should be able to get internet for $40-60/mo. $250 is low for groceries. And when I add up your expenses and savings I get $3910, less than your estimated take-home pay of $3700.
Tough crowd - 29 percent savings rate in the 401k for a new grad. How about this instead? Collect the match, put 15% in the plan instead of 6%, then open a ROTH Ira and shove the $500 in general savings there. It will grow tax free and if you really need the principal you can withdraw it without penalty but not the gains.

You 21 or 22, go visit the bars and restaurants, get it out of your system now! YOLO!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
runner540
Posts: 1326
Joined: Sun Feb 26, 2017 5:43 pm

Re: New Grad's Budget

Post by runner540 »

Grt2bOutdoors wrote: Tue Jul 07, 2020 5:03 pm
02nz wrote: Tue Jul 07, 2020 4:55 pm So around $68K/year gross? No pension? If the 401k plan is good (low-cost options), you should max the 401k if at all possible ($19.5K/year). And fund a Roth IRA (you have until July 15 to make your 2019 contribution, assuming you had enough earned income last year). Don't invest in taxable before maxing out tax-advantaged accounts!

As for your budget, to me $160 for internet and phone looks high. Mint Mobile is $15/20/25 per mo for 3/8/12 GB, and you should be able to get internet for $40-60/mo. $250 is low for groceries. And when I add up your expenses and savings I get $3910, less than your estimated take-home pay of $3700.
Tough crowd - 29 percent savings rate in the 401k for a new grad. How about this instead? Collect the match, put 15% in the plan instead of 6%, then open a ROTH Ira and shove the $500 in general savings there. It will grow tax free and if you really need the principal you can withdraw it without penalty but not the gains.
New grad, you are way ahead by having a good job, and making a budget that includes savings. I made a similar amount inflation adjusted a decade ago, In a big city and maxed my 401k and Roth IRA every year - a decade later I am so glad I did.

How did I do it? I actually paid a similar amount in rent, but no car, cats and a lot less paid-for fun. Just a challenge for you to consider. I encourage you to include giving in your budget now - like saving, it’s a habit to build.
Flyer24
Moderator
Posts: 2095
Joined: Sun Apr 08, 2018 4:21 pm

Re: New Grad's Budget

Post by Flyer24 »

Congrats on the graduation! I would try to do some trimming on the budget (restaurants seem high for me). Your outflow adds up to $3910 but your income is $3700. Try to knock at least $200 off the budget. Do you have any other debts from college?
User avatar
geerhardusvos
Posts: 1129
Joined: Wed Oct 23, 2019 10:20 pm
Location: heavenlies

Re: New Grad's Budget

Post by geerhardusvos »

scarletngrey wrote: Tue Jul 07, 2020 4:49 pm Hi everyone. I'm starting my first job out of school as an engineer for a large company in MCOL. I start next week. I wanted to know what Bogleheads think about my budget. I was pretty limited with the housing options here for several reasons, but I finally found a place so hopefully my rent won't be criticized too much. I have little furniture from college so I have to spend money to furnish my new place. I've received a generous relocation stipend that I am using for the move, deposit on apartment, furniture, etc. Signing bonus will be used in ways TBD. Here goes:

5667 gross/3700 net estimated salary after HSA/6% 401k match contributions
1200 rent
160 phone/internet
160 utilities
278 car
87 car insurance
80 gas
200 estimated health insurance (???)
250 groceries
300 restaurants/bars
550 general savings
150 travel fund
495 misc (cat costs, target runs, other stuff)

Keep in mind I have not received pay stubs yet so I do not know for certain how my pre-tax deductions will affect my net salary. These are my best guesses. Maxing out HSA with $600 employer contribution. Putting in 6% to 401K so that employer matches that. I have 15k in taxable account, 6k Roth IRA, and 8k cash.
Thanks all
The best thing you can do is increase your income dramatically over the next 5 to 10 years. You can do that by continuing learning, changing employers, getting a promotion, etc. Your budget seems fairly common and not necessarily lean for where you’re at. It depends on how you want your career and life to go. What are your retirement goals? What kind of lifestyle do you want to have in retirement? Especially if you don’t have a family yet and you have a nice corporate job, I would give the advice to myself when I was 22 years old to save/invest 50%+ of my income each month. These are your most crucial investing years, and you don’t have very many responsibilities. So I would personally lose the fluff, move in with roommates, and get this investing party started. You’re off to a great start, and your goals might be different than mine, but you never know what the future will bring so I always say be conservative and invest as much as he can as early as you can. Max out retirement accounts, and then put the rest in VTSAX in the taxable account. And don’t buy a house anytime soon, keep expenses low and have roommates or rent a cheap place. Best wishes! :beer
Last edited by geerhardusvos on Tue Jul 07, 2020 5:21 pm, edited 2 times in total.
VTSAX and chill
User avatar
lthenderson
Posts: 5209
Joined: Tue Feb 21, 2012 12:43 pm
Location: Iowa

Re: New Grad's Budget

Post by lthenderson »

scarletngrey wrote: Tue Jul 07, 2020 4:49 pm I have little furniture from college so I have to spend money to furnish my new place. I've received a generous relocation stipend that I am using for the move, deposit on apartment, furniture, etc. Signing bonus will be used in ways TBD.
My advice would be to not go out and buy an apartment full of furniture. At that stage in my life, I couldn't afford quality stuff anyway so it generally just fell apart with every move. Then later as my wealth increased, I was able to get better quality stuff only to have it sold at a garage sale for pennies after I got married. Now my kids are older and my wife is replacing that furniture with more sophisticated stuff. Furniture will come and go in your life so just buy the bare essentials for the time being and gradually add to it as your life progresses.
oldfort
Posts: 1735
Joined: Mon Mar 02, 2020 8:45 pm

Re: New Grad's Budget

Post by oldfort »

$500/month is a lot for miscellaneous expenses on your budget. Try to figure out where this money is going. I'm only half joking when I suggest getting roommates or a SO to split housing costs with.
pseudoiterative
Posts: 68
Joined: Tue Sep 24, 2019 6:11 am
Location: australia

Re: New Grad's Budget

Post by pseudoiterative »

You can usually save a fair bit of money on rent and utilities by living with at least one other person. Shared housing is a lifestyle tradeoff but one many people find is a net win. I've done both, I'd probably be paying +50% more in annual housing and utility expenses by living in a place by myself instead of sharing with one other person.

You can potentially save a lot on transport expenses if you can arrange where you live and work so that you don't need to own a car. Again, lifestyle tradeoff, location & work dependent. Where i live if i use the decent public transport system all year it'd cost about one quarter of the cost as that budgeted car expense. If instead of public transport you can arrange your home and work to travel on foot or by bicycle most of the time you can reduce transport costs to a few hundred bucks annually (amortised bike parts & maintenance + a budget for paying for travel when the bike doesn't cut it). It can make sense paying a few thousand bucks a year more to rent in a walkable neighbourhood close to work if it lets you eliminate the car expense.
Mr. Rumples
Posts: 1068
Joined: Sun Aug 25, 2019 7:16 am

Re: New Grad's Budget

Post by Mr. Rumples »

I have one suggestion regarding pets. It has served me well over the decades. Put aside a fixed amount, for example $50 per cat, each month. Let it be their savings account, self insured as it were. Over time you will have to make some decisions regarding care and expenses and it helps to have a reference point. My cats are now 17 and are for their age pretty healthy, that was not the case with one of my previous cats, expenses added up after multiple surgeries.

I would also get a handle on the $495 as mentioned above. I handled our budget for decades and periodically would record every penny spent, I mean every penny. Just the sheer keeping a record of it made us cut down on spending.

(BTW, cat litter can be expensive. I have had cats my entire life and the best cat litter I have ever bought is from Walmart at $1.26 a bag; sure beats $4 and $5 a bag.) https://grocery.walmart.com/ip/Kitty-Di ... hcpid=21_1
VoiceOfReason
Posts: 111
Joined: Sat Jan 02, 2016 6:54 pm

Re: New Grad's Budget

Post by VoiceOfReason »

You are doing great and way ahead of 95% of your peers. If you were 30 I’d be saying something very different.

At this stage in life you can’t over think things. You are headed on the right path if you execute your budget. Just make sure you do the HSA and 401k/Roth’s IRA as described or more. And keep all other spending in check.

3 things to note:

1) At that age, and over the next 8 years, all your friends will start to get married, want to do trips, etc. budget for it, and manage it. This will escalate every year until you get married and have kids.

2) payoff the car ASAP. Roll the car payment into savings/retirement once paid off. Make the car last at least until you are 30.

3) Do not get into any debt for anything other than school if there will be a payoff after graduation. That includes a house until you have an actual need for one (kids, wife).

Your salary will grow a lot over the next 10-20 years. To the point where you will laugh about some of these budget dilemmas you are having. Just set the good foundation behavior, which you are doing, and you will be good.
Topic Author
scarletngrey
Posts: 4
Joined: Fri May 01, 2020 9:06 am

Re: New Grad's Budget

Post by scarletngrey »

Thanks everyone for your comments. A couple things:
  • I'm a little apprehensive to put more money in my retirement accounts until I have a more established emergency fund. Also a little nervous to put that money into retirement and not have access to it (although I will have to look into what Grt2bOutdoors means).
  • No college debt or other debt and the car is a lease that has 2 more years. My family has always leased cars and I like new ones.
  • I really don't want to have roommates because I have always had them. I'm finally making enough money where I can have my own place. This is a luxury I will indulge in.
  • I work at a facility that is in the middle of a cornfield so public transportation is not possible. I am also a single female who would not feel comfortable living in the middle of nowhere by herself
oldfort
Posts: 1735
Joined: Mon Mar 02, 2020 8:45 pm

Re: New Grad's Budget

Post by oldfort »

Grt2bOutdoors wrote: Tue Jul 07, 2020 5:03 pm
02nz wrote: Tue Jul 07, 2020 4:55 pm So around $68K/year gross? No pension? If the 401k plan is good (low-cost options), you should max the 401k if at all possible ($19.5K/year). And fund a Roth IRA (you have until July 15 to make your 2019 contribution, assuming you had enough earned income last year). Don't invest in taxable before maxing out tax-advantaged accounts!

As for your budget, to me $160 for internet and phone looks high. Mint Mobile is $15/20/25 per mo for 3/8/12 GB, and you should be able to get internet for $40-60/mo. $250 is low for groceries. And when I add up your expenses and savings I get $3910, less than your estimated take-home pay of $3700.
Tough crowd - 29 percent savings rate in the 401k for a new grad. How about this instead? Collect the match, put 15% in the plan instead of 6%, then open a ROTH Ira and shove the $500 in general savings there. It will grow tax free and if you really need the principal you can withdraw it without penalty but not the gains.

You 21 or 22, go visit the bars and restaurants, get it out of your system now! YOLO!
Restaurants are okay but not bars. If you spend $300/month on alcoholic drinks, your liver is going to pay the price.
OhBoyUhoh
Posts: 43
Joined: Wed Feb 10, 2016 2:16 pm
Location: SW Ohio

Re: New Grad's Budget

Post by OhBoyUhoh »

Congrats on the new job! You sound like a Buckeye (from your user name). The suggestion from Grt2bOutdoors sounds reasonable, so if you aren't following his thought process just ask more questions.

Your desire to beef up your emergency fund sooner rather than later sounds very reasonable to me. My only suggestion is to pay yourself first so analyze the first couple of paychecks and get the deductions/investments/savings taken care of and then see what you have to work with. Take your pay raises and invest more, keep your lifestyle simple.

Good luck to you!

~Will
Gufomel
Posts: 548
Joined: Sat Feb 14, 2015 9:52 pm

Re: New Grad's Budget

Post by Gufomel »

scarletngrey wrote: Tue Jul 07, 2020 7:11 pm Thanks everyone for your comments. A couple things:
  • I'm a little apprehensive to put more money in my retirement accounts until I have a more established emergency fund. Also a little nervous to put that money into retirement and not have access to it (although I will have to look into what Grt2bOutdoors means).
  • No college debt or other debt and the car is a lease that has 2 more years. My family has always leased cars and I like new ones.
  • I really don't want to have roommates because I have always had them. I'm finally making enough money where I can have my own place. This is a luxury I will indulge in.
  • I work at a facility that is in the middle of a cornfield so public transportation is not possible. I am also a single female who would not feel comfortable living in the middle of nowhere by herself
If you truly get your money’s worth (enjoyment per dollar) out of a new leased car, and you can afford it, then you’re certainly free to do so. But just make sure you’re weighing the costs and benefits.

If you could save $100/month on your car (or eating out, or phone bill, etc) from age 25 to age 65, invested at a 5% real return would give you just under $150,000 at age 65. At a 4% withdrawal rate that would be an extra $6000/year or $500/month in retirement. Maybe that doesn’t appeal to you, but just make sure you’re aware of what the true cost actually is of “it’s only $100/month” type of thinking.

That’s my number one recommendation to anyone starting out. If you have money, you’re welcome to spend it how you choose. But build a habit of being aware of where your money is going, why it’s going there, whether you’re getting the desired benefit out of it, and what the future trade-off is of spending that dollar now. Don’t spend money just because “it’s the way I’ve always done it” or “that’s what everyone else is doing”.

Best of luck! You’re ahead of the game just by the fact that you’re asking questions at your age on a forum like this. Keep asking good questions and build good money habits, and you’ll have a great chance at ending up well-off financially one day.
scubadiver
Posts: 1193
Joined: Sun May 04, 2008 9:48 pm

Re: New Grad's Budget

Post by scubadiver »

scarletngrey wrote: Tue Jul 07, 2020 4:49 pm Hi everyone. I'm starting my first job out of school as an engineer for a large company in MCOL. I start next week. I wanted to know what Bogleheads think about my budget. I was pretty limited with the housing options here for several reasons, but I finally found a place so hopefully my rent won't be criticized too much. I have little furniture from college so I have to spend money to furnish my new place. I've received a generous relocation stipend that I am using for the move, deposit on apartment, furniture, etc. Signing bonus will be used in ways TBD. Here goes:

5667 gross/3700 net estimated salary after HSA/6% 401k match contributions
1200 rent
160 phone/internet
160 utilities
278 car
87 car insurance
80 gas
200 estimated health insurance (???)
250 groceries
300 restaurants/bars
550 general savings
150 travel fund
495 misc (cat costs, target runs, other stuff)

Keep in mind I have not received pay stubs yet so I do not know for certain how my pre-tax deductions will affect my net salary. These are my best guesses. Maxing out HSA with $600 employer contribution. Putting in 6% to 401K so that employer matches that. I have 15k in taxable account, 6k Roth IRA, and 8k cash.
Thanks all
Welcome to the forum.

I think this is a perfectly fine "out of the gate" budget. And you made the brilliant decision of creating an account on this forum before you even received your first paycheck.

My 2 cents: Run with this budget for a couple of months to see how things are actually shaking out, get settled into your new job and check back in come September or October. Ok, the restaurant / bar budget is a little generous, but not off the charts.

Good luck.

Scubadiver
User avatar
FiveK
Posts: 10301
Joined: Sun Mar 16, 2014 2:43 pm

Re: New Grad's Budget

Post by FiveK »

scarletngrey wrote: Tue Jul 07, 2020 7:11 pm I'm a little apprehensive to put more money in my retirement accounts until I have a more established emergency fund. Also a little nervous to put that money into retirement and not have access to it (although I will have to look into what Grt2bOutdoors means).
See
Roth IRA as an emergency fund - Bogleheads and
How to withdraw funds from your IRA and 401k without penalty before age 59.5.

Good luck!
OnTrack2020
Posts: 648
Joined: Mon Mar 20, 2017 10:24 am

Re: New Grad's Budget

Post by OnTrack2020 »

scarletngrey wrote: Tue Jul 07, 2020 4:49 pm
5667 gross/3700 net estimated salary after HSA/6% 401k match contributions
1200 rent
160 phone/internet
160 utilities
278 car
87 car insurance
80 gas
200 estimated health insurance (???)
250 groceries
300 restaurants/bars
550 general savings
150 travel fund
495 misc (cat costs, target runs, other stuff)

Rent - somewhat high, but you probably are locked in for a year
Car - what is the balance on the loan?
Health insurance - will probably be more toward $125/$150
Restaurants/Bars - too high, especially with pandemic going on
Misc - seems fairly high

Your expenses per month are more than your expected net pay.
khram
Posts: 103
Joined: Sat Dec 16, 2017 1:36 am

Re: New Grad's Budget

Post by khram »

lthenderson wrote: Tue Jul 07, 2020 5:19 pm
scarletngrey wrote: Tue Jul 07, 2020 4:49 pm I have little furniture from college so I have to spend money to furnish my new place. I've received a generous relocation stipend that I am using for the move, deposit on apartment, furniture, etc. Signing bonus will be used in ways TBD.
My advice would be to not go out and buy an apartment full of furniture. At that stage in my life, I couldn't afford quality stuff anyway so it generally just fell apart with every move. Then later as my wealth increased, I was able to get better quality stuff only to have it sold at a garage sale for pennies after I got married. Now my kids are older and my wife is replacing that furniture with more sophisticated stuff. Furniture will come and go in your life so just buy the bare essentials for the time being and gradually add to it as your life progresses.
In addition to quality, you don't necessarily need what people say you need. I haven't had a dining table, dining chairs, ottoman, or dresser in years, and I've never missed them. The money itself isn't such a big deal over a long period of time, but I have a lot more space at home. Enough space that I've been able to build out a home gym. The space won't be a big deal if/when I buy a house, but in an apartment it is.

When I first moved into my own place many years ago, my parents pressured me into getting everything (and even paid for most of it). I hated it, I could barely move in my own apartment without bumping into furniture.

I have a simple glass table that probably costed $20-30 as a bedside table. I like it, and it looks pretty nice too. Back when I had a nightstand with drawers (which I never opened) for $400 or whatever, it was just a big expensive thing that was hard to get rid of.
tashnewbie
Posts: 806
Joined: Thu Apr 23, 2020 12:44 pm

Re: New Grad's Budget

Post by tashnewbie »

I think you’re way ahead of the game to even be thinking about this stuff, so I think if you get in the habit of saving and living below your means, you’ll do very well.

I think you’ve gotten some good advice so far. I agree with others who have said not to spend a lot of money on furniture. I do recommend getting a quality mattress. Best case, you’ll spend 1/3 of your life on that mattress so you want it to be a good one.

Good luck!!
Post Reply