Hi Money Minder,
I’m 30 and living in a place that was once affordable but got crazy expensive thanks to all the folks moving in during Covid.
My salary is $60k this year, which breaks down to $5,000 a month.
After all the deductions and saving 15% in my 401k (which is $750 a month, thanks to my employer matching 5%), I’m left with only $3,000 a month. It’s a struggle to save $500 a month for emergencies, let alone for my Roth IRA.
My monthly recurring expenses total $1,700:
- $1200 for rent
- $100 for utilities
- $30 for internet
- $20 for phone
- $100 for car insurance
- $250 for gas
Then I have $525 for flexible expenses:
- $250 for groceries
- $25 for dining out or premade food
- $150 for essentials like toiletries and meds
- $100 for unexpected expenses and repairs
And finally, $250 goes to discretionary spending:
- $150 for hanging out with friends and dining out once a week
- $100 for treating myself to some entertainment
So with all those expenses, my baseline monthly budget is $2,200, or $2,450 if you count the discretionary stuff.
That leaves me with just $500 a month to save. I had an emergency fund of 3 months or $6,000 saved up, but I got into a major car accident last year that drained it down to $2,000. I was slowly building it back up, but then I hit a deer (thank goodness for insurance) and now my car’s a write-off. The insurance company’s offering me $3,000, but I’m not sure if I can find a decent replacement for that amount.
Is living on $60k a year supposed to be this tough?
Sincerely,
Budgeting Blues
Response from THE MONEY MINDER:
Hello There,
Sorry to hear about the challenges you’re facing with your finances, especially with the unexpected car accidents. Living on $60k/year can indeed be tricky, especially when faced with unexpected expenses like car repairs, insurance, and accidents. It seems like you have a good handle on your budget and have made efforts to save, which is commendable.
Given your current situation, it’s crucial to prioritize building back your emergency fund. One way to do this is to review your budget and see if there are areas where you can cut back temporarily. For instance, consider reducing discretionary spending, such as socializing and entertainment, until you’ve rebuilt your emergency fund to a comfortable level.
Additionally, when it comes to finding a replacement vehicle, consider exploring all your options. This may include looking for used cars that fit within your budget, negotiating with the insurance company for a higher payout, or even exploring public transportation alternatives if feasible.
Moreover, since your rent seems to be a significant portion of your expenses, you may want to explore if there are any opportunities to reduce this cost, such as finding a roommate or looking for more affordable housing options.
Remember, it’s essential to take steps to secure your financial stability by gradually rebuilding your emergency fund and finding ways to cut back on expenses. This may require some temporary sacrifices, but it will help you in the long run to avoid future financial strains. You’re on the right track by recognizing the issue and seeking solutions. Good luck!
Farewell from THE MONEY MINDER.
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