How Jen can add $450,000 to her retirement without taking her dogs out of daycare.

magnifying glass“Jen” is a high school athletic trainer, ten years into her career. She’s loves her two (big) dogs and she’s buying her home. Jen lives on last month’s income, recently paid off a few thousand dollars of credit card balances, has plenty of insurance, and saves about 10% of her take-home income for retirement. She also runs a $200 monthly surplus in her budget.

In other words, Jen is covering her bases. If you were to run Jen’s financial habits out a few decades (knock on wood), you’d likely find a person with a paid-off home and a decent retirement nest egg.

Here’s Jen’s budget:

Category Budgeted Notes
Monthly Bills
Mortgage $1,234 Balance: $133.634.03, Rate: 4.875%
TV/Phone/Internet $246 TV: $107.65, Phone: $89.20, Internet: $42.44. My comments below.
Electric $86
Natural Gas $32
Water $60
Investments $350 Part to Roth IRA, part to other investments.
Disability Insurance $55
Life Insurance $62
Student Loan $130 Balance: $9,614.31, Rate: 3%
Home Security $63 Gives her peace of mind as a single woman, living alone. Long contract, though.
Monthly Bills Total $2,318
Vet $50
Food $32
Daycare $150 Leaves dogs at daycare on her long (7am to midnight) workdays.
Misc $35
Pets Total $267
Transportation Expenses
Truck Payment $300 2010 Chevy Silverado w/ 40,000 miles. Balance: $10,191.17, Rate: 5.89%. Required payment is $222.
Insurance $62
Fuel $230
Maintenance $25 Mark’s comment: this feels low to me.
Tires $0 She just finished paying off a 0% credit card for new tires, freeing up $100/mo.
Registration/Inspection $8
Tolls $3.33
Transportation Expenses Total $628.33
General Expenses
Gardening $0
Home Maintenance $25 Feels a little low to me (as I talked about in yesterday’s post).
Insurance Company $3.50
Costco $4.60
Entertainment $20
Gifts $25
Random $20
Groceries $150
Restaurants $60
Doctor $10 Health insurance through the school district.
Prescriptions $9
General Expenses Total $327.10
Budget Total $3,540.43
Budget Surplus
Take-home Income ~$3,750
Budget Total $3,540.43
Budget Surplus ~$210

I guess we could nit-pick certain aspects of the budget, but I’d rather talk about some basic structures that could really accelerate Jen’s financial progress.

First, let’s talk about the truck.

Jen is a self-described truck person. I can appreciate that; I used to have a 1987 Ford F-150 long-bed named ‘Jolene.’ I miss her dearly.

Being a truck person means dealing with truck-sized costs for maintenance (ie big tires), repairs, insurance, and fuel.

Jen, your total monthly cost on the truck is $628.33. Going to a smaller, cheaper-to-drive vehicle could save you $300 per month (between a lower – or no – payment, reduced gas, and lower insurance costs). $300 per month has a 10-year value of $55,000 (if invested at 8%). Running that $300 per month out 30 years (when I believe you’ll be between 60 and 65), it becomes $450,000. It’s worth considering the power of $300 per month as it applies to your long-term finances. $628 is the cost of the truck, $450,000 is the (possible) benefit of the alternative.

Don’t get me wrong, I’m not saying you have to drive a Geo Metro (do they still make Geo Metros?) for the next thirty years. I’m saying figure out how to keep your vehicle expense below X (you get to choose X), and stuff the rest away into savings.

Next, let’s beat up a little on this cable and phone bill.

Your TV cost is $107 per month. You’re an athletic trainer, so maybe you’re a sports fan and like watching live events. Or maybe you couldn’t care less about live sports, and you love certain shows on premium cable channels. The question you have to ask yourself is: “How can I get roughly the same value for less money?”

Could you drop the full cable package, going to a more basic plan and supplementing with Hulu Plus, Netflix, and maybe $20 per month buying shows from iTunes? I think there’s something in there that could save you another $50 to $80 per month without having to give up much entertainment. It’s worth investigating.

After my experience dumping my expensive smart phone plan, I officially hate seeing people spend money on them. Look at Ting, or T-Mobile, or some other option for getting you phone bill down from $90 to less than $50. Make this decision: I will not spend more than $50 per month on my individual cell phone plan.

(By the way, be on the lookout for a post from Jesse next week on the intriguing approach he’s taken to cutting his cell phone cost.)

Jen, I went after the truck, the cable, and the cell phone because there really wasn’t anything else to nit-pick! You’re doing very well, setting yourself up for a solid financial future. Keep it up!

Oh, and by the way: If you apply your current $200 surplus to the truck loan, then snowball it into the student loan, the Balls of Snow debt elimination calculator tells me you can be debt free in a little under three years. Do that!

9 Responses to “How Jen can add $450,000 to her retirement without taking her dogs out of daycare.”

  1. PDXynab

    Do a no cost Refi on the home mortgage to a lower rate and free up some cash…

  2. tmb2

    Definitely be aggressive with paying off that truck. After the payment is closed she can snowball to the student loan and build up maintenance funds. As a truck owner, $25 a month towards maintenance barely covers that need. She’s 20,000 miles away from her next major service. Most of what she’s saved for the year will get eaten up by that. $50 is more realistic when you factor in a possible popped tire, a worn out part, a couple oil changes, and annual registration (depending on what state she lives in). When I started budgeting for my truck maintenance, I didn’t factor in the every 30k mile services and got caught with a big bill.

    • Iron Mike Sharpe

      I do $125/month for groceries and $75/month for restaurants. I do my shopping at Aldi.

  3. creek chic

    Just curious, why does Jen have life insurance? Is she supporting someone?

  4. Jay Bee

    We discovered that we can live without a cell phone and that we only need the most basic cable (for the internet). It works well for us. :)

  5. Dan McCurry

    Another cell phone option, which we use, is Tracfone. They usually or maybe always have two or three phones that are offered with triple minutes for life. Choosing one of those (around $30.00 for a basic no frills phone) can get you down to about 4.5 cents per minute.

  6. Lissa

    I want to say thank you for posting this budget! It’s nice to have a balance of different example budgets–some from those in the thick of debt payoff & others like this that are a great example of the fact that we are never done fine-tuning our budgets to do better, even when we feel like we are in a good spot! Both kinds are encouraging & enlightening! Great perspective/learning opportunity!

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