Budget and Investing Question

Investing
#1

Sorry for the long post. I am switching to a new job next week and I really am trying to get my budget together. I am completely debt free and rent so I am at the point I want to maximize savings as I have only 19k saved for retirement and am just about to turn 32. So here it goes. This new job will pay me about 89k, BUT, I work in home health so I know that my caseload is going to fluctuate so I dropped that down to 80k to be save (I get paid per visit, not hourly).

So if I have 80k and I max out HSA(can only do $3000 as employer contributes $500) that leaves
77k remaining
10% to 401k is $7700
$69300 remaining which would be my actual taxable income, right?
Federal income tax 22%
Oregon income tax 9%
Now I don’t know how to account for SS, medical, etc… so I increased my taxes to 35% to be safe? That would be $24244
Remaining $45045
Max out Roth IRA $6000
Remaining $39045
and finally expenses for the year (rent, bills, utilities, insurance, etc.) $23280

Final remaining $15765

This looks like a good plan in theory, but unsure how true it would be to budget down to this exact formula. I account for misc bills and what not in my expenses portion of my budget so hopefully I am correct. How does this sound to others? Is there something I need to include in deductions as far as medical, SS, etc.? That was the confusing portion to figure out how to calculate.

#2

Hey Justin!

Kudos to you on breaking everything down like this! A few thoughts:

  • This looks pretty solid. Although taxes are (unfortunately) a little more complex. I’m going guess those federal and Oregon tax rates aren’t exactly right (they would need to account for the standard deduction, plus any other tax breaks, etc). Social Security and Medicare actually add up to 7.65%. But ballpark I think you’re pretty close.
  • Broad strokes, I think this looks like a great plan. 10% to 401k plus max out Roth IRA is a great start. I think I wouldn’t worry too much about budgeting a year ahead to the penny. Go money by month for a few months. See how it goes. Tweak things as you go along and you learn. If 3-4 months in it looks like you will have $15K surplus at the end of the year, then you can think about cranking up that 401k contribution or saving it for the down payment on a house!

And remember… it’s easy to get caught in the weeds. Just make sure to do the important things right. Spend less than you make and invest early and often. :slight_smile:

2 Likes