Spends Too Much on Mortgage in Fort Worth | Millennial Real Life Budget Review Ep. 27

welcome to Millennial real life budget review where we anonymously review a real Millennials budget today we are taking a look at a marketing and communications director who brings home $6,000 per month and spends 45% of their income on their mortgage let's take a look hey guys it's Justine your host of the debt free Millennials channel here we talk about always help you Achieve Financial confidence Crush debt that leads to more fund and fewer payments and we do Millennial real life budget review series and thank you so much to Rocket money for sponsoring this video rocket money can help you cancel unwanted subscriptions lower your bills and manage your money all within one app but more on that in just a second because I want to get into this this is not new as we've seen in other episodes where there are individuals who spend a large portion of their income on their mortgage payment so this person is from Fort Worth Texas which I feel like Fort Worth pretty affordable cost of living not the cheapest by any means but also not the highest they said that the biggest thing they're struggling with financially is feeling financially secure SL guilt as a single income homeowner I did not initially walk into becoming a homeowner on my own but life happened and I made the decision now that I am a homeowner I absolutely love and value my home but you know it's technically above the recommended percentage based on my income especially with the extra $800 temporarily being provided by my sister we'll get into that in just a second their top two to three financial goals is to one pay off Consumer Debt two a $115,000 emergency fund and three invest they currently have $2,000 saved in an emergency fund and then a little extra tidbit they gave me I am pslf certified that's Public service loan forgiveness and on track to have my student loans forgiven by 2028 I love my job love my home so I plan on sticking with both until at least after my loans are forgiven I have a 2017 Jeep compass that I paid off last year yay and I also plan on keeping it until after my loans are forgiven smart additionally my sister is living with me temporarily through the summer so that is where the additional $800 per month is coming in as her contribution okay let's get inside of her budget to see what's going on so I'm taking a look at this and actually this budget it it's very simple when I'm looking at it I'm like oh gosh you know there truly a lot of things listed here either in the fixed or the fun so I'm showing a um total monthly income of $623 she's got a net of $271 192 there are two different debts the Capital One credit card of $81 minimum let's take a look this 0% APR for 12 months but after that it raises to 29.99% I don't know how far she is in the 0% interest term but let's just say it's starting now and she's got 12 months to pay off the 900 $9 easy easy easy and then she's got the moila loan of $615 32 at 6.8% interest the minimum payment is $385 not uncommon that's pretty common let's take a look at the budgeted category so the mortgage is 2465 so I did a quick calculation here just to show okay the mortgage divided by the total take-home pay is 39 half% this includes the $800 contribution from the sister so if I was to take this out minus 800 you're looking at a mortgage percentage of 45% of the take-home pay which is way high even with sister's contribution it's still really high like way too high for Fort Worth this would be really really cutting it close if you were living in a high cost of living area like La San Francisco New York ideally you want that percentage and I think she already knows this is between 25 and 35% of your take-home pay so in order to make sure that this mortgage payment which you can't change the 2465 is 35% we we'll go on the top just because it is what it is 35% you need to be bringing home over $7,000 to make that happen so here's how you do that is you do the 2465 mortgage payment divided by 35% 35 and I got $742 you'd need to be bringing home an extra $800 a month in order to hit that like $800 on top of the $800 that your sister is already paying you so that's $1,600 extra income I don't think that's possible given your current work situation you mention your marketing and communications director uh but you qualify for pslf so that may mean that you're working in some sort of public organization U military maybe a university maybe a a hospital um let me know but the only way that I could see you really increasing your salary and your take-home pay by an extra $1600 is he got to get you like jumping to another company potentially that's and really getting a big fat promotion out of that so I just don't know if that's feasible at this point in time but let's keep going and let me take a look at everything else so we got kind of your utility set up that looks good gas looks good groceries looks good for if it's truly just you paying your own groceries $300 looks good um moo is the dog I had to look that up I was like what is Mu moo so it includes a monthly Wellness Plan um shots heartworm Farmers dog subscription is $223 which is paid every other month month because it it feeds the dog uh every 6 weeks farmers's dog is kind of expensive I do love the idea of it being fresh food I don't know if you guys have heard of the ads floating around especially if you listen to the new heights show the podcast with Jason and Travis Kelce Farmers dog was a sponsor for them so it sounds good it sounds like a good deal for the dogs but holy cow $223 every other month so you're paying $110 a month okay right guys dog owners chime in let us know if we think that's okay for dog food uh eating out 200 and then all of the subscriptions here wow we've got Hulu Disney plus Spotify Car Wash audible we've got a lot of different subscriptions I'm betting that's not all and if you want to check out what subscriptions you have including The Unwanted ones or the ones and this has happened to me tons where you get charged an annual subscription that you completely forgot about rocket money is your answer rocket money isn't that can help you find and cancel unwanted subscriptions lower your monthly bills and manage your money with ease all within one app the biggest thing about rocket money that I really really love is finding those unwanted subscriptions that easily connects to your financial accounts it streamlines all of those subscriptions into One Financial view so that you can take a look inside of the app which subscriptions you have and which ones that you would like to let go of in fact rocket money has helped its customers save up to $740 in the year by finding those unwanted subscriptions and canceling them rocket money can also negotiate a bill on your behalf think about phone bills that start to creep up or internet plans that start to creep up even though you're paying for the exact same data and you get overcharged for it wouldn't it be nice to have your time back save you time from calling during your workday or calling on the weekends and trying to negotiate this yourself let rocket money do the work for you in fact you can upload a copy of your latest Bill and let them negotiate it on your behalf I call that a triple win you can keep your internet but do it at a lower cost and you didn't have to do it yourself that's fantastic not only can it do Bill negotiation and cancel unwanted subscriptions but you can manage your money inside of the app too you can take a look at your different spending Trends and patterns it could tell me exactly how many times I had gone to Target in the last few months and help me just stay on top of my spending in general get me back to that place of intentional spending versus The Habit spending so that I can keep on track with my financial goals I love utilizing tools like rocket money to help me just understand my finances better and know that I'm not wasting my money on really high bills and unwanted subscriptions and also just taking a look at those spending patterns that helps me get back to a place of spinning on the things that I love and cutting out the rest if you'd like to check out rocket money head over to Rocket money.com deeptree Millennials to check it out and download the app I will leave a link in the description box below thank you so much to Rocket money for sponsoring this video now let's get back to it so I think you could easily just use something like rocket money to just make sure we're factoring in all of your subscriptions and then I see the spending category personal spending fund money close home decor alcohol of $300 so I mean you've got let's see how much this is you've got $622 going towards discretionary spending and then I do see ooh I like this down here so you do have $1,200 going towards the emergency fund now you did say you had $2,000 currently and you wanted to build that up to 15 I'm curious why 15 why that is happening and then you also said Consumer Debt was your number one goal that you wanted to do also they've got a home maintenance fund of $215 love to see that it looks like an extra $50 towards the dog sinking fund for vet bills medication if needed boarding if traveling I love that car maintenance bill payments car insurance every 6 months and mint mobile every 12 months I love it they're a mint mobile user yes and paying the car insurance premium every 6 months is going to save you money so what this is really smart they're factoring in a monthly savings payment to themselves and then when that mint mobile subscription renewed next year they've got the money when the car insurance premium is due in 6 months they've got the money so that's really really smart and also doing a small little Christmas sinking fund I love the sinking funds okay let let's check out exactly how much you need in the emergency fund cuz I think this is going to change I don't think it's going to be 15,000 yet yet okay so on your fixed expenses you're paying about $ 3649 per month on just your basic living expenses your utility your mortgage your groceries and for the dog if I'm going to do this times 2 so 2 months of basic living expenses is equal to $7,000 and then 3 months is about $10,000 almost $1,000 so this is your starting point this is where I really want you to be you don't even have one month of basic living expenses set aside in an emergency fund I'd really want you to be building that up to $7,200 like $10,000 I think a $10,000 goal for you is realistic and then we can work on paying off your Consumer Debt so we're going to actually reorder your financial goals starting with the starter emergency fund which is equal to 2 to 3 months of basic living expenses set aside in a high yield savings account so you want to be looking at Ally Capital One I have a whole video on best high yield savings accounts I will leave a link up to that here in the cards for you to check out make sure it's in there so that you are earning interest at least 4% you've already got $2,000 if I'm going to let's just call this $10,000 emergency fund I like that as a round number so you've already got the two so we need eight more you're contributing at a pace of $1,200 that gets you into that emergency fund of 10K in about 7 months I think you could easily do more so you cuz you've got a net of $271 so if I did this to can I do this to maybe ,450 yeah yes and I haven't even changed anything else in your discretionary spending because I still want you to live live your life so 8,000 divided 1450 5 months so less than 6 months you could have that starter emergency fund I don't know if you want to wait that long if you want to continue to like build the momentum then you're going to have to cut some things out of the fund money or maybe adjust the farmer's dog diet meal plan subscription meal plan the the farmer dog subscription and maybe cutting that out a little bit and maybe supplementing with something else I don't know I'm just picking on that because that was a an area that I saw well maybe she could reduce otherwise you're going to have to think about picking up extra income opportunities to really accelerate this so I'd really like to see this at a 10K like that's the goal and then after the 5 six months is over which truly is not that long of a period of time then this would zero out we would stop and then we could move money over to towards that Capital One card if you were still in that 12-month grace period of the 0% interest then this truly does work out in your favor because you would be paying the $81 for 6 months so you'd be making minimum payments on the credit card while you're building up your emergency fund and so during that six-month period you'd be putting $486 towards the debt out of 909 oop 909 -486 so you'd have $423 left you'd pay that off in month's 6th or 7 of this journey right okay so if you're starting now the next 6 months going hard building up that that savings account stop redirect so month s you would be putting an extra $423 and just completely paying off Capital One and then technically you are done you are done with the with the debt you are done with the emergency fund and now you can build onto the the third Financial goal which you had uh was investing and so making sure that you're following the steps for the investing also I know I said stop on the emergency fund obviously you can continue to build that out to a 6month emergency fund for you that's going to be around $22,000 a fully funded emergency fund is equal to 6 months of basic living expenses if you were to lose your job if you were to have some sort of medical emergency that has you like like out of work for for months this is the cushion that you're falling back on not on a credit card okay so that's why people build up these emergency funds so high that's why my partner and I have our emergency fund built up to 6 months of living expenses some experts are going to tell you that you can have 9 months or 12 months really it's what ever you feel comfortable with but I'm telling you of the people that I've interviewed and me personally and what I've learned from other personal finance experts out there 6 months is definitely the way that you want to Trend towards so you can always after you pay off Capital One knowing that you're in pslf with moila you just leave that 385 there for the next four years and then we're just putting more money in the bank towards that fully funded emergency fund and we are looking at investing opportunities for you so when I'm thinking about investing opportunities I'm always starting with an employer uh sponsored retirement plan if you are working at a university that's probably a 403b if you are working for another entity like the government it could be a Thrift Savings Plan or a 401k any kind of tax deferred plan is kind of what you're going after and really building to maximize your retirement contribution so this year your contribution limit max is $223,000 it sometimes it takes people a long time to build up to that max contribution limit so take a look at what you're contributing now if you're contributing 3% next time you get a raise can you do 4% or can you jump from 3 to 5% any little jumps that you can take whenever you get a raise is always a really great opportunity to continue to max out that retirement plan so that's kind of step one especially contributing up to the match so if you can contribute up to the match to that employer sponsor retirement plan keep it at the match and then if you're eligible for the Roth IRA um and I think you are given your income amounts uh I would start maxing out the Roth IRA I've got a whole explainer video on what a Roth IRA is but basically you're taxed upfront on the dollars you invest into that Roth IRA account this is a retirement vehicle that you can invest in stocks bonds index funds what have you and then it grows taxfree and then when you get to retirement age you can withdraw that money taxfree cuz you're taxed upfront on the money this is a great great investing account I personally use it's been a great way to offset the tax deferred accounts that you might have such as the 401K or traditional IRA is also taxed the same way as a 401K Roth IRA are taxed up front 401ks are taxed on the back end so that would be kind of step two for you so employer sponsor retirement plan then the Roth IRA and then after you do the match and after you max out the Roth then you're going back to the employer plan maxing out the um 401K we'll call it and then you can continue to do things like a traditional IRA and Max that out you can then go into a taxable brokerage account it's a lot but I think I think let's just focus on kind of your step one is the emergency fund step two debt then go back build out the emergency fund and and then you can kind of sprinkle in some of these investing opportunities starting with that employer sponsored match I hope that was helpful and thank you so much to Rocket money for sponsoring this video don't forget to check them out if you want to just take a look at what bills you have what subscriptions you have just getting an idea of how you're spending money right now would be a really great idea and there's a budgeting app called Rocket money that can help you do that so head over to Rocket money.com for Millennials to check them out I will leave a link in the description box below if you like this series and you are still interested in nosy and want to find out more be sure to like this video and if you personally want to have your budget anonymously reviewed on the channel fill out the Google forms link below the more information information that you give me the better advice that I can give you on what next step to take in your financial journey and I'll catch you in the next [Music] one