The second family who has asked for advice are the Jones(not their real name). They are in their 20’s. Mrs. Jones is pregnant with their first child. They rent an apartment in the Midwest. Their net income after all deductions is $ 28,281. divided by 12 months equals $ 2357.
Here are their expenses each month:
Rent: $ 950.
Groceries: $ 150.
Restaurants and Take Out: 60.
Clothing: $100.
Entertainment: $75.
Household: $25.
Travel: $100.
Medical Co Pays: $100.
Car Insurance: $95.
Gasoline and Oil: $55.
Cell Phone: $ 64.
Electric and Gas: $75.
Emergency Fund: $50.
Renter’s Insurance: $ 10.
Miscellaneous: $ 50.
Total Monthly Expenses: $ 1959.
They have been putting the extra $ 398. into a savings account in case they have extra medical expenses with Mrs. Jones high risk pregnancy. They have a good health insurance policy through Mr. Jones employer.
This is what they have saved:
Retirement Fund: $2100.
Emergency Fund: $2000.
Medical Savings: $1592.
When they were married a year ago, they took their cash wedding gifts and opened their retirement fund and their emergency fund. Mr. Jones has started contributing to his 401K through work and it is a deduction from his paycheck.
With a baby on the way, they are starting to think about buying a home. They would like to save a deposit of 20% down so that they don’t have to pay PMI. Housing is not really expensive in the area they live in but they still need to save $20,000 – 30,000. depending on how much they spend plus closing costs.
They want to know if they should start putting some of that $398. into a house deposit account? They also want to be able to save more money than what they are saving.
I told them I thought it was great that they didn’t have Cable TV or internet. He said it is included in their rent. They also have no car payment because they have a paid for car that her parents gave them as a wedding gift.
Mrs. Jones is not working because of her high risk pregnancy. They will rethink that after the baby is born. Her parents live close and would love to babysit.
When I first looked at their finances, I thought this couple is doing great and they are for only being married about a year. I also think it was very smart of them to fund some of their savings with wedding gift money.
I have had many conversations with them since they first contacted me. I have told them that I would continue to earmark that $ 398. for the high risk pregnancy. Then when they baby is born, if all or most of the bills get paid, they can just earmark it for their home deposit savings. I also reminded them that they need to get some life insurance for when the baby is born. Mr. says he already has it through work.
They had a little outstanding credit card debt;however since I first starting talking with them, they have paid that off.
Since they would like to save more money out of the paycheck, they need to cut their expenses. I do not believe that they can cut their groceries. It is pretty low. Nor can they touch the household amount because they will be needing diapers soon. However, they could consider cloth diapers which would be much cheaper in the long run.
The expenses I think they can lower or cut are clothing, restaurants and take out, entertainment, travel,and perhaps their car insurance although it is pretty low compared to what I pay. So these are the ones they need to work on.
Okay, now it is your turn to give them your $ .02!
What do you think they should do?
Lastly, I wanted to let you know that Bruce and Noreen want to thank all of you who gave them advice.
I will be updating you once a week on what they are doing.