20%: savings and debt (emergency savings, additional debt payments)īut to tackle larger debt, both student loan and credit card, experts say you’ll likely need to reduce expenses to find at least 15% in your budget to pay for debt.30%: wants or variable expenses (dining out, clothing, cable subscription, entertainment, travel).50%: basic/fixed needs (rent, utilities, transportation, insurance, health care, car payment, minimum loan payments).A common one is the 50/30/20 rule, a starting point that some financial planners use to develop budgets. Once you have your net income figure, there are a few different ways to divvy up your money. Find the budgeting rule that works for you That’s the money that hits your bank account, and that’s what you’ve got to live (and budget) off of. After subtracting deductions including federal and state taxes, Social Security and Medicare taxes, and pre-tax contributions to employer-based healthcare and retirement funds, you have your net income, says Patti Hughes, owner of Lake Life Wealth Advisory Group in Chicago. Here’s what financial planners say you should know about budgeting for student loan payments. Whether you’re a student trying to figure out how much you can afford to borrow, or you graduated years ago and are simply trying to get a handle on your loans, some basic budgeting fundamentals can help you balance student debt with other financial needs and goals. Sometimes they don’t know until they graduate how much student loan debt they’ve accrued. The problem so far is that many students borrow without understanding prospective salaries for their career path, nor do they understand the difference between discretionary, take-home or gross income. Hawaii Alaska Florida South Carolina Georgia Alabama North Carolina Tennessee RI Rhode Island CT Connecticut MA Massachusetts Maine NH New Hampshire VT Vermont New York NJ New Jersey DE Delaware MD Maryland West Virginia Ohio Michigan Arizona Nevada Utah Colorado New Mexico South Dakota Iowa Indiana Illinois Minnesota Wisconsin Missouri Louisiana Virginia DC Washington DC Idaho California North Dakota Washington Oregon Montana Wyoming Nebraska Kansas Oklahoma Pennsylvania Kentucky Mississippi Arkansas Texas See Detailsįor example, if the starting annual salary for a chemical engineer is $62,000, your total student loan amount should not exceed that number. Experts often recommend that students not borrow more than 8% to 10% of their projected monthly gross income or 20% of their “discretionary income.” On the other hand, the Consumer Financial Protection Bureau (CFPB) says students should not borrow more than their expected starting salary one year after graduation. Now that the student loan moratorium is ending after pausing interest accrual and student loan payments for more than 40 months, it’s an especially great time for borrowers to think out how their loan payments fit into their overall financial picture.įirst, let's review the general rules of thumb that do exist. So how much of your income should you actually be putting toward student loans each month in an ideal budget? While there’s no hard-and-fast rule like there is for housing, the answer is no less important to know. Try asking them the same question, except about student loan payments, and you'll likely hear 'well, it depends.' To learn more about relationship-based ads, online behavioral advertising and our privacy practices, please review the Bank of America Online Privacy Notice and our Online Privacy FAQs.Ask financial experts how much of your monthly income should go toward, say, housing, and you’re likely to get a quick response: 30% or less. You may also visit the individual sites for additional information on their data and privacy practices and opt-out options. To learn more about ad choices, or to opt out of interest-based advertising with non-affiliated third-party sites, visit YourAdChoices powered by the DAA or through the Network Advertising Initiative's Opt-Out Tool. Ads served on our behalf by these companies do not contain unencrypted personal information and we limit the use of personal information by companies that serve our ads. Relationship-based ads and online behavioral advertising help us do that.īank of America participates in the Digital Advertising Alliance ('DAA') self-regulatory Principles for Online Behavioral Advertising and uses the Advertising Options Icon on our behavioral ads on non-affiliated third-party sites (excluding ads appearing on platforms that do not accept the icon). We strive to provide you with information about products and services you might find interesting and useful.

General household budget percentages