What should Liv do with her extra income?

Liv and her husband have been YNABing since 2010, and they’ve just had the good fortune of a monthly net increase in income of $1,775.50. Liv has a few questions for the YNAB community. Take a look at her budget:

Category 2013 Budgeted Increase from 2012 Notes
Gas, Metro & Tolls $250.00 $30.00 Increase for 2nd car
Groceries $433.33 $32.50 Increased because always overspending in 2012
Toiletries & Cleaning $64.00
Electricity & Gas $200.00
Phone & Internet $122.00 2 cell phones & land line
Water $52.00
Trash $8.93
Restaurants $50.00
Misc $110.00 $15.00 Increased so this category isn’t so tight
Housewares $30.00 $20.00 Used for storage boxes, towels, bedding, small kitchen items, etc and decorating house (bought 2 yrs ago)
Entertainment $5.00
Her – Clothes $25.00
His – Clothes $25.00
Her – Fun Money $0.00 Funded with credit card rewards cash back. ~$125-150 per year, per spouse
His – Fun Money $0.00
Gifts $100.00 All Gifts: Birthday, Anniversary, Christmas, etc
Travel to Home State $41.67 trips to see family (~500 & 700 mi away)
Vacation $83.33
Mortgage $1,576.24
Property Taxes $312.50 $10.42 Increase for 2013
Home Insurance $79.92
Life Insurance $86.00 ~$750k coverage on husband
Car Insurance $144.08 $53.41 Increase for 2nd car
School Loan $123.46
Tithing $975.00 $200.00 10% of gross income (which is up $2,000 per month over 2012)
Doctor, Rx, etc $20.00 This is in addition to what we put aside in Flex Spending – Flex is the conservative estimate. Amounts decreased in 2013 because taking less Rx’s.
Health Items $100.00 Vitamins, supplements, over the counter meds
Home Improvement & Repairs $300.00 $216.67 increased
Furniture & Appliances $75.00 $45.83 increased
Electronics $25.00 $25.00 Started new fund to save, otherwise would have come from Misc
New HVAC $300.00 $300.00 Started new fund to save, otherwise would have come from Home Improvement
Car Repairs & Maintenance $115.00 $31.67 Increase for 2nd car
New Car Fund $0.00 $55.00 Just bought second car.
General Savings $1,000.00 $730.00
Emergency Fund $0.00 Finished saving for it in 2012 – 6 months of expenses, and recently moved it to Betterment.
Betterment – Investing $380.00 $100.00 Shifted $280 from “New Car Fund” (Just bought a new car) and added another $100
TOTAL $7,212.46

Now, Liv’s questions:

  1. “Where can we decrease costs? It seems lean to me, but it’s easy to overlook your own ‘splurge’ categories?”

Notes on this question: they just bought their home two years ago, and plan to be in it for the long term. They also consider tithing an untouchable category. They may be starting a family in the not-too-distant future.

  1. “What’s the community’s take on how we’ve chosen to allocate the increased income (which we don’t expect to last more than a few years)?”

Notes on this question: Because they don’t expect the income to last, they hope to avoid using any of it to increase lifestyle. Here’s the specific breakdown of how they’ve allocated the new income in the budget:

Amount Beefed-up Category
$200.00 Increased Tithing on increased gross income
$115.08 Increased expenses related to 2nd Car
$77.92 Increased other tight categories
$642.50 Increased Save for Unexpected
$740.00 Increased Savings

Mark’s Take

Just a couple thoughts/questions, then I’ll turn it over to commenters:

  1. What are the interest rates and balances on the student loan? What is the net benefit of putting money into Betterment/General Savings rather than paying off the student loan?
  2. You want to avoid using the new income for more lifestyle, but you’ve allocated $115.08 + $77.92 to…more lifestyle? The rest is savings, and the tithing goes away when the income is done – but you’re building $193 per month into your lifestyle. What’s the plan there?
  3. Why does the new income have to go away? You say it’s going to last a few years – could you not create a situation where the income persisted? You do have a few years to work on it, after all. 🙂

That’s it from me. Anybody else?