My Personal Budget:
In order to build my budget, it was first important for me to find out how much money I bring in every month. After diving deep into my first Leave and Earnings Statement, I have calculated that I take home $4,542.90 every month after taxes. This includes Basic Allowance for Subsistence (BAS), Basic Allowance for Housing (BAH), and Base Pay.
Housing + Utilities
My first priority is to put a roof over my head. I opted to find a roommate to split rent with. With a roommate, I spend $850/month on rent and approximately $200/month in utilities. I currently receive $1,680/month for BAH, meaning that I pocket the difference.
$1,680 – $850 – $200 = $630/month saved from BAH!
$4,542.90 – $1,050 = $3,492.9/month left to budget!
Food
My second priority is to eat! I choose to spend $50/week at the grocery store, or $200/month. I currently receive $256.68/month for BAS, meaning that I pocket the difference.
$256.68 – $200 = $56.68/month saved from BAS!
$3,492.90 – $200 = $3,292.68/month left to budget!
Roth TSP
My third priority is to invest in my Roth Thrift Savings Plan. I choose to contribute $493.05 (15%) of my Base Pay to my TSP every month. If money gets tight, I may reduce this to a minimum of $164.35 (5%) of my Base Pay every month.
It is important to check how much you are contributing towards your TSP every month. If you were automatically enrolled into the Blended Retirement System, you may have been automatically set to contribute 3% of your Base Pay every month. If this is the case, you may want to consider bumping your contribution up to 5% of your base pay every month in order to receive your government matched 5% when you are eligible.
It is also important to check which funds you are allocating your money to. Many TSP’s automatically allocate your money to the G-fund or one of the L-funds depending on when you were enrolled into the Blended Retirement System. It is wise to consider doing some research and speaking with a financial advisor to allocate your money in accordance with your goals and risk tolerance.
$3,292.68 – $493.05 = $2,799.63/month left to budget!
Emergency Fund
My fourth priority is building my Emergency Fund! I deposit $500/month into a High Yield Savings Account every month in case of emergencies. This fund has already served me well, as my car needed $1,500 in repairs this past week.
It is estimated that 60% of Americans can NOT afford an unexpected $1,000 emergency expense. The intent of the Emergency Fund is to plan ahead for the unexpected expenses that life has to offer.
My plan is to build my emergency fund to $6,000. Once this goal is achieved, the following $500/month will go into another High Yield Savings Account to be saved for things I would like to buy someday (downpayment on a new car, vacations, boat, other fun things).
If I ever need to withdraw from my Emergency Fund, I will prioritize depositing the $500/month into the Emergency Fund until I reach $,6000 again. I chose $6,000 as my goal because it is equivalent to 2 months of expenses.
$2,799.63 – $500.00 = $2,299.63/month left to budget!
Student Loan Debt
Unfortunately, an education is expensive. My fifth priority is to make, at least, the minimum payment on my student loan debt every month. I graduated with ~$25,000 in student debt. Over the course of a 10 year loan, this comes out to $250/month.
There is a fair argument that I should pay more money every month to pay off these loans faster, however, I personally prefer to invest the extra dollars. Based on historic returns, I believe the interest earned by investing will beat the interest paid on the loans. Additionally, I plan to pay off the loans faster when I have more income, so I do not mind making the minimum payments for now.
$2,299.63 – $250.00 = $2,049.63/month left to budget!
Transportation
My sixth priority is to pay for reliable transportation. Fortunately, I was able to purchase my current vehicle for $3,000 (Yay, no car payments!). Despite costing an additional $1,500 for parts/repairs, this is a reliable vehicle that will last me a good while until I have the savings to afford something newer.
While looking for a car, my ideal target was to keep the cost of Car Payments + Car Insurance + Gasoline < $450/month (10% of total pay). With my current vehicle, the cost of transportation is $250/month
$2,049.63 – $250.00 = $1,799.63/month left to budget!
ROTH IRA
My seventh priority is to invest in my ROTH IRA. Currently, I do not have my Roth IRA setup. However, I am looking to open a Roth IRA with Vanguard. I plan to contribute $500/month to my Roth IRA to maximize my $6,000 contributions for 2020.
$1,799.63 – $500.00 = $1,299.63/month left to budget!
What Do I Do With the Rest?
SPEND IT!
Just kidding…. kind of….
Due to COVID-19 I do not foresee myself spending alot this money on fun in the near future. Currently, I invest $1,000/month into the stock market and do what I please with the remaining $299.63/month.
Honestly, I do not know how realistic this will be in the future when fun things to do start to open back up. The benefit of investing the money for now is that it is still accessible if I need to make a reasonable purchase (i.e. furniture, clothes, etc). As things start to open back up, I may change my budget to $750/month invested and $549.63/month to spend.
Personally, I am not very materialistic. If you are the type of person that absolutely wants to spend the $1,299.63/month, that is perfectly acceptable. As long as you hit the priorities above, I would agree that at this point it is your money to spend/save/invest as you choose. Your personal budget does not have to be static, and you should feel empowered to have financial flexibility and security every month!
What Are the Benefits?
With my personal budget, I am currently saving a whopping 55% of my income every month! Although quarantine has had a significant influence over this number, I would still manage to save 50% of my income every month under normal circumstances.
Additionally, $550.00/month is more than enough money for me to enjoy spending going out to eat, buying nice things, doing jiu jitsu, etc.
Finally, my budget gives me the flexibility to expand my spending limit by investing less in the stock market, up to $1,299.63/month if I really wanted to. And if I wanted to get really crazy, I can cut back on the Roth TSP contribution from 15% to 5% and still get the maximum match when I am eligible.
Is My Budget Perfect?
My budget is perfect for my current situation, and may or may not change in the future. My budget surely would not be perfect for everyone, or even anyone else, and solely serves as an example for others to see. As stated in the Disclaimer & Disclosure, this is not financial advice.
Tips
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Investing Money
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