Budgeting: How Much Should My Cost of Living Be With My Student Loan Debt?

[Brandon216]

Hello everyone!

I've browsed this forum for advice in the past and finally decided to post and seek some personal budgeting advice.

To keep it simple I have student loans, about $80K worth

I just started a new job with a salary of about $40K ($2200/month or so after taxes)

My lease is up on my current apartment next month and I want to start the new year no longer paying the minimum on my loans and really get aggressive, or as aggressive as I can afford.

My question with that income & debt what kind of cost of living should I be looking at each month? I currently pay $800 for a 1bedroom/bathroom and about $60 power which is too much i think. I'm in a city with no parents (or i would totally move back in) and my minimum payments on my student loans total about $650/month leaving me with about 1550 or so.

Any advice is appreciated and thank you in advance!

[edg126]

I moved out of my parents into an apartment near grad school. I was making 48k a year, only a $175 month student loan payment and $425 a month rent(I had a roommate)

I was able to get by ok with that without much money worries.

Get a roommate and you'll be fine, especially if you expect your salary to increase over the years.

[kyoko]

I moved out of my parents into an apartment near grad school. I was making 48k a year, only a $175 month student loan payment and $425 a month rent(I had a roommate)

I was able to get by ok with that without much money worries.

Get a roommate and you'll be fine, especially if you expect your salary to increase over the years.

Your rent of $800 is a little high to me. You want housing expenses (rent and utilities) to be less than 30% of your income, especially you have a huge student loan payments, which is another 30% of your income. If you want to pay off your student loan in an aggressive way, look for the cheaper apartment, or as edg126 said, having a roommate might be a good option.

[dczech09]

I am not sure what area you live in, but geez $800 for a 1-bedroom/bathroom is crazy! I pay $729 per month for a 2-bedroom/1-bathroom, and that includes cable, internet, and a garage (low cost of living area).

I would look into the possibility of a roommate. I would only move back with parents if your back was against the wall and it was the only out. Or if it were for like a month or so while transitioning to a new place.

Either way, you either have to raise your income or lower your rent. A rent payment that is 36% of take-home is WAY too high.

Your take-home at $2,200 seems awfully low. Do you have any benefits such as health insurance and 401k? Insurance benefits are fine- you need those. But you should not be saving in your 401k right now. Under normal circumstances, I would say that hitting the match on your 401k is wise, but you have too much debt to justify any savings right now. Drop the 401k contributions if you have that going on, and maybe see a tax expert to see if you need to adjust your withholdings. That $2,200 take-home seems low by about $100-$200.

[hamchan]

Our rent on a one bed one bath is $1212 a month, and we couldn't really get much cheaper than that unless we moved outside the city.

[cardtrick]

What did you major in? Get a roommate and cut costs as much as you can. If you look for a while, you can find a nice deal.

Focus on getting a better paying job. Think outside the box. My gf is an English major and makes way too little and has too much in student debt. With her current job, she will never be able to pay it off. She is starting a Masters program in Computer Science in Jan. Part-time in the evenings. Hoping she can use that to score some sort of a business analyst/technical writer position after she takes a few classes. She should be able to work her way up to $100K+ within 5 years.

Focus your energy on figuring out how to make more money.

[MonkeyMama]

Agreed with cardtrick. As long as you have a $80k student loan, I'd start thinking outside the box and get my other expenses as low as possible.

The most obvious solution is getting into a roommate situation. The last city I lived in you couldn't even find a decent studio apartment for less than $1200 per month (That was 20 years ago). But I was able to rent a very nice space (a room in a house in a decent neighborhood) for $400 per month. This saved me $50,000-ish dollars over 5 years. I Attribute most my current net worth to making decisions like that when just starting out. I had more than one friend rent a private room with a private entrance, attached to a single family home. (A little more expensive, but still better middle ground). Roommates are usually not ideal, but was definitely worth saving housing costs for a few years when trying to reach a big financial goal.

[hamchan]

2200 a month take home would be around 30k a year. That's not terribly uncommon for entry level positions. There are majors that will likely get you a better paying job right out of school, but let's face it. Some people just don't have those skills or talents in the first place. Some people's skill levels and interests are all in areas that don't pay that great. I have a huge interest in sociology but I can't afford to go into that career path. Anyway...

I agree that getting a roommate could be helpful for now.

[Brandon216]

Your rent of $800 is a little high to me. You want housing expenses (rent and utilities) to be less than 30% of your income, especially you have a huge student loan payments, which is another 30% of your income. If you want to pay off your student loan in an aggressive way, look for the cheaper apartment, or as edg126 said, having a roommate might be a good option.

Thanks for your advice guys, I may have to move further out of the city for a less expensive rent. The commute is a drag and Atlanta has some sketchy neighborhoods outside of the city/perimeter but I may have to sacrifice to save.

I am not sure what area you live in, but geez $800 for a 1-bedroom/bathroom is crazy! I pay $729 per month for a 2-bedroom/1-bathroom, and that includes cable, internet, and a garage (low cost of living area).

Either way, you either have to raise your income or lower your rent. A rent payment that is 36% of take-home is WAY too high.

Your take-home at $2,200 seems awfully low. Do you have any benefits such as health insurance and 401k? Insurance benefits are fine- you need those. But you should not be saving in your 401k right now. Under normal circumstances, I would say that hitting the match on your 401k is wise, but you have too much debt to justify any savings right now. Drop the 401k contributions if you have that going on, and maybe see a tax expert to see if you need to adjust your withholdings. That $2,200 take-home seems low by about $100-$200.

I live near downtown Atlanta close to both my jobs, I do have health/dental/vision thats about $45 a month and I am contributing to my 401K. I am strongly considering dropping my 401K contribution until I get this debt under control. Any good place in particular to find a tax expert? I always thought that I was paying way too much in taxes but an HR rep said its because I'm single with no dependents.

Taxes
Description Amount YTD Amount

Fed Withholding $206.11 $1,520.98

Fed MED/EE $23.20 $381.33

Fed OASDI/EE $99.22 $1,630.55

GA Withholding $73.28 $1,088.42


Total: $401.81 $4,621.28

considering my salary JUST went from 26K to 40K this month I feel like I've been getting beat over the head by uncle sam. I will def. look into seeing a tax expert thank you for the advice.

What did you major in? Get a roommate and cut costs as much as you can. If you look for a while, you can find a nice deal.

Focus on getting a better paying job. Think outside the box.

Focus your energy on figuring out how to make more money.

I majored in journalism and just began working with a major network in 2012. starting salary was a struggle to live with, 26K, just bumped up to 40K with a new position and I make an a additional $3-4K doing freelance work each year on the side. I'm considering shooting weddings to also help as far as thinking outside of the box. thanks for your advice!

2200 a month take home would be around 30k a year. That's not terribly uncommon for entry level positions.

This is what I can't understand! how my salary offer that I accepted is $40K and I'm only seeing $2200 after taxes and benefits. Maybe I should see a tax expert or financial consultant?

thanks for the advice guys please keep it coming if you have something that may help!

As of right now I'm thinking of finding a roommate a bit outside of the city to cut costs.

[TheKayla]

Sounds like an incredibly similar situation (ahem, me)!

Your cost of living does seem incredibly high -- where are you living? Definitely look for something cheaper if possible, and ideally, get roommates. If you moved to a city where you don't have a lot of friends, even look on craigslist or something similar for others looking for roommates, or you could even rent out a basement apartment a lot of the time cheaper.

Other than that, live as frugally as possible, consider taking on a part-time job, even if just for a short time to really get down those first several thousand and save a ton in interest. Put everything else you possibly can towards your debts. The more you put towards your debts these first few years of debt repayment will really pay off in the long-run with interest saved, its the most crucial time to get serious about paying off as much as possible. I know I've had to get rather creative with ways to save money and have fortunately gotten my living expenses (rent, utilities, food, everything) below $500, while I can dedicated $1500 or so to repayment. It often times feels really slow, but I love knowing I'm giving 100% effort to do the best I can.

You'll mostly need to find a balance of increasing your income and decreasing your expenses, just like paying off any other debt.

[Brandon216]

Sounds like an incredibly similar situation (ahem, me)!

Your cost of living does seem incredibly high -- where are you living? Definitely look for something cheaper if possible, and ideally, get roommates. If you moved to a city where you don't have a lot of friends, even look on craigslist or something similar for others looking for roommates, or you could even rent out a basement apartment a lot of the time cheaper.

Other than that, live as frugally as possible, consider taking on a part-time job, even if just for a short time to really get down those first several thousand and save a ton in interest. Put everything else you possibly can towards your debts. The more you put towards your debts these first few years of debt repayment will really pay off in the long-run with interest saved, its the most crucial time to get serious about paying off as much as possible. I know I've had to get rather creative with ways to save money and have fortunately gotten my living expenses (rent, utilities, food, everything) below $500, while I can dedicated $1500 or so to repayment. It often times feels really slow, but I love knowing I'm giving 100% effort to do the best I can.

You'll mostly need to find a balance of increasing your income and decreasing your expenses, just like paying off any other debt.

Thanks kayla! I appreciate the advice and will def. check out your blog/twitter! Congrats on being able to contribute $1500 /month towards rent. thats really difficult but thats about where I want to be. Best of luck continuing your journey

[hamchan]

Yeah, it really seems like you may be having too much withheld. If nothing else you will definitely find out when you file your taxes next year.

[TheKayla]

Yeah, it really seems like you may be having too much withheld. If nothing else you will definitely find out when you file your taxes next year.

I'm the same where I claim 0 and have the most withheld. I like doing so so I don't have to budget for taxes ever, and I'm guaranteed to get something back. It's definitely a personal preference. For me, I know if I got more in my paycheck, I probably wouldn't throw the difference at my student loans, but rather spend it somehow. If I get it back in a lump sum during tax season, I throw it all at my loans. To the OP, just make sure if you get a tax return to throw it all at that debt!

[asdf]

Brandon, what are the interest rates on your student loans, and how do the balances break down on each loan?

[BMEPhDinCO]

Atlanta is expensive - but a quick craigslist search showed you could get something around Tech for <$500 a month, with utilities if you have a roommate. Go out northeast to find more housing with basement rental places. You should be able to have a comfortable place for $600 a month or less. If you then spend $200 for groceries, $100 on transportation, $80 on your phone, $150 on other utilities (if needed), and $70 on fun each month, that leaves you with $1k for RothIRA contributions (at least $200) and loan repayment.

As for salary, you can google "net salary calculator" to figure out what's going on, but you can estimate your taxes with http://www.tax-brackets.org/georgiataxtable# (basically it's $230 + 6% of everything over $7k). Then for federal brackets, you can check with http://www.forbes.com/sites/moneybui...arginal-rates/ (basically, with $40k salary, after exemptions ($3,900) and deductions ($6,100), you'd be in the 15% bracket, ie, $1,275 + 15% of the amount over $12,750). Then there are also SS and Medicaid taxes (around 6.2% and 1.45%). So if you do that math, you can get an idea of your taxes. They are quite high because you are single, no children, no house, etc. You CAN deduct student loan interest you pay though!