i'll be going to grad school and earning $2700/month for my stipend. after taxes (and if i make contributions to a traditional IRA), I will earn $2,200.
i owe $80K of federal school loans, $20K to my parents for school loans and $5K to credit cards.
i made this budget and wanted to know if you think it's good and maybe where i can improve it??:
$750/month: utilities and rent
$65/month: phone
$100/month transportation
$300/month food and entertainment
$50/month toiletries
$200/month credit card bills
$200/month pay parents back
$200/month pay school loan interest
$200/month savings account
$200/month traditional IRA
OK, fine so that adds up to $2,265 and i'm only expecting $2,200, but i think i can cut back a little on the food and entertainment.
any ideas?
...............................................................................
I like the fact that you are trying to approach your financial life with a budget. Most people don't.
I would throw everything you can at the Credit Cards. Get them paid. Take some of the money which is budgeted to your parents, and/or interest on school loan. When credit cards are paid, the pay your parents, you can increase the about you pay them each month because you don't have the credit cards anymore, also pay the BUDGET AMOUNT on the school loan.
I like the IRA idea, but maybe for 6 months I might want to add the budgeted amount to the credit card debt.
...............................................................................
Your savings rate is awfully high for the amount of debt you carry. Some of your costs are pretty fixed; others can be tinkered with. The food budget is high for one person. If you eliminated the parent loan and school loan at first, cut the IRA to $100 per month, and eliminated savings, you would pay off the credit cards in about a year.
You have savings either for fun and frivolous purchases, or for emergencies. But the credit card can be your safety net for emergencies as you reallocate to your other priorities and increase monthly savings, pay your parents, or pay down the federal loan.
The downside is there isn't anything for frivolity for the first year.
...............................................................................
Here's what I would do: Cut $100 per month off paying your parents back, the IRA, and savings. Start putting $400 per month toward your student loans instead of just paying the interest and let the extra $100 be a cusion against unexpected monthly expenses. Yes you owe your parents money, but they are your parents and they will want you to get out of other debt and not be encumbered by those huge student loans.
...............................................................................
You might want to pick up some extra money by tutoring if you have the time. Your budget sounds extremely tight. You could cut back on the IRA, savings, and parent payment. Remember, you are still trying to finish school. After you finish school and get a real job, then you will be in a better position to do all the things you want to do.
...............................................................................
You should cut back on your food and entertainment. You might also want to re-think investing in your IRA while your budget is so tight. If not, you'll need to try to come up with a way to increase your income.
Another concern is . . . What if you have an emergency or something unexpected? Do you have funds set aside?
...............................................................................
yeah sounds like a great budget!
...............................................................................
100 ira, 100 savings, 250 a month for the school loan and you have some wiggle room-- I know this puts you at saving 5% for emergencies and 5% for yourself, but you are still young and paying off the student loan asap is important. at the end of 2.5 years the cc should be paid off, and you can add 50 extra to IRA savings mom& dad and the loan.
That should leave you owing your parents about 7000 at the end of 5 years and would drop your 80000 in student loans to a bit over 70000.00. With zero dollars in credit card debt you would then be able to use your education and ability to flourish and add extra money to the IRA and savings.
Help me plan my budget? worried!?
This entry was posted on 12:41:00 AM and is filed under Personal Finance . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.