Budgeting for the first time

[sageproduct]

Freshman in college, renting an apartment with two other roommates--does this seem like a reasonable budget?

(per month)
Rent-$633
Utilities-$37 (probably will be less)
Food-$240 (i buy groceries and cook, only eat out rarely)
Home Supplies-$30
Everything Else-$60
Total-$1,000

No car, free public transit, parents pay for phone plan.

I use mint.com's free money management service and it is pretty sweet. I'm addicted to it. I actually find managing money enjoyable.

Also--I've got about $3,000 in checking and savings accounts in two banks (Chase and TCF). The cost of school is covered, and I bought all my textbooks without including them in the budget because it's not like I can do without them. I got a direct loan from the government that pays $2,200 this month and $2,200 again in January or so. First semester ends first week of December, and there's a solid month off.

So, it looks like I have about $5,200 from now til the beginning of December. In September, October, and November, I will spend at most $1,000 per month according to my budget. So, $2,200 I will not need for the next 3 months.

I'm planning up to December right now because I plan to work the entire month of september--maybe doing sales for Vector, doing an internship, and also selling some junk around the house and doing whatever I can to make money.

Would it make sense to put my extra $2,200 in a 3-month CD account? According to Mint, there are a few I could get at around 0.75% APY, which would earn me a whopping $4 in three months. I do kind of want the experience of having used one, though. Or I could put $1,800 in a 6-month CD at 1.14% for $10 in 6 months.

Or would it be better to just keep my money in savings accounts with 0.01% APY? Both banks I have accounts with also offer money market accounts. I spoke briefly with TCF yesterday and they told me APY would be around 0.50%, and the minimum balance to avoid monthly fees is $1,500. However, I'll probably drop below $1,500 in about 6 months when I start running out of money. Would it be easy to close my account then?

Also, on Mint.com they're recommending some "high-yield" savings accounts--the best ones have APY from 1.30%-1.50% and are from Sallie Mae, Capital One, Discover, and American Express. Would this be a better option? I would have to keep some money in my Chase and TCF accounts. I could probably close the savings accounts and keep my checking accounts. I would have to load my TCF account with over $633 every month because I pay my rent with that account, and keep a few hundred in Chase because I use the Real Cash rewards card (up to 3% cash back depending on your spending tier, I'm at 2% this month and made about $5 cash back).

School ends beginning of May. I will start working again then. However, I am very interested in taking summer classes at my school so I can graduate as early as possible, so my working options might be limited. So, I need $8,000 to survive until May. I know my parents would cover me if I fell short, but I really don't want to ask them for help. Since I have $5,200 now and will be getting $2,200 from the loan in January, that means I need to make at least $600 in the month of December.

I've never budgeted or really managed my finances before, does my thought process make sense right now?

 

[Quiksilver]

Good work!

 

[Kailex]

Freshman in college, renting an apartment with two other roommates--does this seem like a reasonable budget?

(per month)
Rent-$633
Utilities-$37 (probably will be less)
Food-$240 (i buy groceries and cook, only eat out rarely)
Home Supplies-$30
Everything Else-$60
Total-$1,000

No car, free public transit, parents pay for phone plan.

Keep this on your fridge door.
Keep your receipts for the first month and then see how your plan compares versus the actual payments.

My reasoning for this is that I've seen a lot of people try to starve themselves because they can only have 240 in food a month and they just so happened to need 255. In other words, be flexible. $240 a month for food is very reasonable and you might find you'll spend less than that if you eat foods where you can mix and match for every few weeks. I've always been a savvy buyer when it comes to food and I can feast like a king for less than $40 a week. I ALWAYS look at shoppers and try to maximize my gains by getting the best deals from ONE place. I've known too many people that try to get the deals from 4 to 5 places and the money they save in pennies, they waste on gas and time costs.

The cost of school is covered, and I bought all my textbooks without including them in the budget because it's not like I can do without them. I got a direct loan from the government that pays $2,200 this month and $2,200 again in January or so. First semester ends first week of December, and there's a solid month off.

If books aren't super important for your major to have, you can actually find places that rent books.
I never had a chance to do it, but I might have. It avoids the pesky buying and reselling.

[QUOTE}Would it make sense to put my extra $2,200 in a 3-month CD account? According to Mint, there are a few I could get at around 0.75% APY, which would earn me a whopping $4 in three months. I do kind of want the experience of having used one, though. Or I could put $1,800 in a 6-month CD at 1.14% for $10 in 6 months.[/QUOTE]

Only if you are going to absolutely NOT need the money.
I've always tried to tell people that anything less than 1 year is probably not worth it. You're not getting the most bang for the yield. As you can see, $4 is hardly worth it. But of course, a savings account isn't going to get you that much either.

Right now, CD's and Bank Accounts in general are a joke.
You actually might want to ask around for Interest-Bearing checking accounts.

In this day and age, if the amount of cash is around that area and you think you MIGHT need it at some point soon (car repair, medical bills, etc...) then I try to keep it as liquid as possible.

Or would it be better to just keep my money in savings accounts with 0.01% APY? Both banks I have accounts with also offer money market accounts. I spoke briefly with TCF yesterday and they told me APY would be around 0.50%, and the minimum balance to avoid monthly fees is $1,500. However, I'll probably drop below $1,500 in about 6 months when I start running out of money. Would it be easy to close my account then?

If you know you are going to dip below the minimum, just don't open the account. Avoid the hassle, the fees, and everything else. Sometimes you don't read the fine print and it states that if you close your account before a certain period of time, you can get charged a fee for that.

Also, on Mint.com they're recommending some "high-yield" savings accounts--the best ones have APY from 1.30%-1.50% and are from Sallie Mae, Capital One, Discover, and American Express. Would this be a better option? I would have to keep some money in my Chase and TCF accounts. I could probably close the savings accounts and keep my checking accounts. I would have to load my TCF account with over $633 every month because I pay my rent with that account, and keep a few hundred in Chase because I use the Real Cash rewards card (up to 3% cash back depending on your spending tier, I'm at 2% this month and made about $5 cash back).

Does mint.com include credit unions or smaller community banks?
I've found that most smaller banks usually have better yielding products than larger banks. I'd shop around locally and see what you can find.

School ends beginning of May. I will start working again then. However, I am very interested in taking summer classes at my school so I can graduate as early as possible, so my working options might be limited. So, I need $8,000 to survive until May. I know my parents would cover me if I fell short, but I really don't want to ask them for help. Since I have $5,200 now and will be getting $2,200 from the loan in January, that means I need to make at least $600 in the month of December.

I've never budgeted or really managed my finances before, does my thought process make sense right now?

I like that you are actually thinking this through and not once have I seen you talk about splurging on something shiny and new and something you probably don't need.

One thing you always need to remember is plan for the unexpected. Even if you think it couldn't happen, it probably could.

Right now saving your money is good, but don't expect too much of a return from it. Until this economy gets turned back around (which might be never), I just think of bank accounts as "liquid safety deposit boxes")


My advice to you is to not get frustrated if your real budget doesn't meet your intended budget. There might be variations between the two and it's just as important for you to be flexible.

I budget monthly simply because I don't know if something could happen in October that wasn't planned in August. I have a pretty good visual of September, but a LOT can happen in 4 weeks.

The important thing out of all of this is that you ARE taking a preemptive look at your finances and seeing what the OVERALL panorama looks like. You are going to be living with roommates which means that you could find yourself spending differently than originally intended.

 

[sageproduct]

Thanks--I did some more looking around and have concluded that my best course of action would be putting my cash in a high-yield rewards checking account. Here is a list of the banks I can considering:

http://www.depositaccounts.com/productsearch.aspx?amount=5000&products=1|1|1|1|0&term=6

Do these look legit? What are the risks associated with opening a new account with a bank I haven't heard of? What do I need to watch out for?

One thing I noticed was a requirement some of them had on direct deposit, and receiving at least one paycheck a month. This is a problem since I have no income. Is there a way to get around this? (what i was thinking was having a trusted friend write me a check every month while I give him cash)

 

[Bible_Belt]

Would it make sense to put my extra $2,200 in a 3-month CD account? According to Mint, there are a few I could get at around 0.75% APY, which would earn me a whopping $4 in three months. I do kind of want the experience of having used one, though.


It would be worth it to you to sacrifice the $4 and instead use that money to help build your own credit. Get a credit card, which will not be easy if you have no income. You may have to deposit money at a bank in order to cross-guarantee a credit card from that same bank. Anyone will loan you $1,000 if you first give them that amount in collateral. Max out the card, carry the balance for a month or two, and then pay it all off. Then call and ask for an increased credit line. Repeat this process and your credit standing will grow. Interest rates are so atrociously low right now that a bank cd is worth about as much as a coffee can of cash buried in your yard.

 

[Kailex]

Would it make sense to put my extra $2,200 in a 3-month CD account? According to Mint, there are a few I could get at around 0.75% APY, which would earn me a whopping $4 in three months. I do kind of want the experience of having used one, though.


It would be worth it to you to sacrifice the $4 and instead use that money to help build your own credit. Get a credit card, which will not be easy if you have no income. You may have to deposit money at a bank in order to cross-guarantee a credit card from that same bank. Anyone will loan you $1,000 if you first give them that amount in collateral. Max out the card, carry the balance for a month or two, and then pay it all off. Then call and ask for an increased credit line. Repeat this process and your credit standing will grow. Interest rates are so atrociously low right now that a bank cd is worth about as much as a coffee can of cash buried in your yard.

This is gold by the way.
Even if the credit line begins only as a $500 dollar limit.
You're a student and a lot of times universities or community colleges will have promotions for students and they practically hand away 500 - 1000 credit limits so that students can get into debt early.

VERY important to start establishing credit and a good credit history at an early age.

 

[sageproduct]

A little update for those who gave me advice here.

September is drawing to a close. I've actually trimmed my budget to make my money last longer since I don't really have time right now to bring in any real income.

Food: $240-->$180
Home Supplies: $30-->$10
Everything Else: $60-->$40

Total: $1,000-->$900

So far, so good. Home supplies, I spent $3 for another couple bottles of body wash. Struck a deal with my roommates that if they by the dishwasher and sh!t like that I'd do the dishes. So that's another expense that I've cut.

Food I'm also doing well on. I'm at $173 for this month, so I'm going to go over a bit, but I don't really consider that a loss for this month because I bought a sh!tload of food at a good price. GOOD food. I cooked myself a steak meal yesterday with mushrooms, potatoes, and salad for probably under $5.

Special thanks to Kailex for telling me that it's possible to feast like a king for under $40. Because I thought $240 would be on the LOW side...after my dad biting my head off saying $300 a month wouldn't be enough, and my friend telling me that living on $8 a day for food was impossible.

Everything Else--I've only spent $11 of the $40 I've allocated this month. $1 was for a Redbox DVD when I spent the night at my best friend's house, and the other $10 was to chip in for my roommate who bought a case of beer for the house. I paid even though I'm hardly going to drink any of it. I want to be frugal, not cheap.

Credit--Went in last week to apply for a Student Credit Card with Chase. I'll be VERY happy if I get it. It might seem a little strange for an 18 year old, but literally the thing I've been most excited about the last few days is waiting to see if I get the card. No annual fee, plus a good rewards program that complements my cashback debit card real well.

If I don't get it, I'm going to a financial institution at my university and pay $5 for a secured credit card. I already talked to them about it. They report to all 3 credit bureaus.



@Bible Belt--I actually heard some advice about credit that conflicted with what you told me. The banker at Chase told me that it would be better for me to use less than 10% of my available credit and pay off the balance instead of maxing it out and then paying it off. He said a certain portion of my credit score depends on how much of my available credit I am using, and generally the less, the better.