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I would like to know if I have a sound financial plan going into my first year as an associate. My feeling is that I might be cutting things a little close, but I wanted to get some outside opinions. Here are the facts: I’ll be making $160,000 in Chicago, which I estimate to be about $107,000 after taxes. I will be living with my girlfriend and dog, and we have agreed that I will cover her expenses while she saves for a wedding. I expect her to make between 25K and 40K the first year. I have about 200K in debt, and I would like to be rid of it in about five years, although that’s not gospel.

My “getting started” plan is to make is to make minimum/IBR payments on loans, and take the remainder of my loan payment and savings allocation and put it towards a cash buildup. I would do this until I have about 8 months of fixed expenses saved up. Once I reach that point, I would proceed to follow the following budget (category: monthly/annual):

Loan Payment: 4,619/55,439
Savings: 647/7,764
Housing: 2,329/27,952 (Includes rent in River North, utilities, single parking space, and payments on home furnishing, because I’m sick of my college stuff)
Groceries: 431/5,176
Transportation: 474/5,693 (Car payment, insurance, gas)
Clothing/Services/Entertainment: 431/5,176

I would apply any bonuses and raises towards a fund to save for a down payment on a condo/house. We are going to attempt to get by with one car in the city for the first couple of years. A little wiggle room will appear once we pay off furniture, the car and then again after the wedding is financed and my GFs income becomes available. If there are any unexpected expenses I would take that out of my entertainment or savings budget, or make a loan to myself out of the cash buffer account. One thing I know I have not accounted for is my medical insurance premium, which my firm pays 75% of. Finally, the firm I work for has a very low attrition rate by comparison to the V100s, so it is reasonable to assume I can be there for 4-6 years.

I would like to hear comments and criticisms of this plan. Thanks in advance.

$430 for monthly grocery budget? That sounds very tough to do for 2 people.

You should see a financial advisor. It sounds like you have a very good idea of what you want to do, but it's always helpful to have a professional's opinion. Congrats on the job!

I probably overestimated for my housing so I can reallocate a hundred or two from that and bump groceries to about $600. That rent for the apartment I am looking at is about $1600.

InGoodFaith wrote:You should see a financial advisor. It sounds like you have a very good idea of what you want to do, but it's always helpful to have a professional's opinion. Congrats on the job!

How much does this typically cost?

Who's wedding is she saving for

It's nice to try to be organized, but you will definitely need several months get a handle on what is realistic and what is not. During that time, I would suggest that you 1) Don't go out and buy all new furniture on a payment plan 2) Try to budget, but don't kill yourself to do so 3) Don't make IBR payments, try living making your scheduled or even accelerated loan payments.

I have a feeling you will end up spending more than you think in some areas, and might end up saving in others.

SpiteFence wrote:

InGoodFaith wrote:You should see a financial advisor. It sounds like you have a very good idea of what you want to do, but it's always helpful to have a professional's opinion. Congrats on the job!

How much does this typically cost?

You can go in and see one for an hourly rate. I have a friend in the business who did it for free for me. You'll have to do some research on rates in your area, but I doubt it would be more than around a hundred bucks?

InGoodFaith wrote:You should see a financial advisor. It sounds like you have a very good idea of what you want to do, but it's always helpful to have a professional's opinion. Congrats on the job!

Seeing an FA for a household budget??

As to OP's budget: your grocery, transportation, and clothing/services/entertainment budgets are all way too low.

Edit: also, question. Can people making $160k make IBR payments? Isn't a payment based on an income of $160k the fully scheduled payment?

I know I will need some basic furniture, but I do hope to have some of my summer stipend left over to make that happen, so I might be able to avoid doing a payment plan. It would be dumb for me to ship all that stuff just to sellit a few months later.

A more important question goes to my savings once I have a sufficient tax buffer. Should I be doing any retirement savings, building up my cash buffer, or paying down loans instead with that money?

MrKappus wrote:

InGoodFaith wrote:You should see a financial advisor. It sounds like you have a very good idea of what you want to do, but it's always helpful to have a professional's opinion. Congrats on the job!

Seeing an FA for a household budget??

As to OP's budget: your grocery, transportation, and clothing/services/entertainment budgets are all way too low.

Edit: also, question. Can people making $160k make IBR payments? Isn't a payment based on an income of $160k the fully scheduled payment?

I wasn't sure and I didn't care to calculate, that's why I said minimum/IBR, whatever I am obligated to pay. I just did some quick math though and I think would be eligible.

MrKappus wrote:

InGoodFaith wrote:You should see a financial advisor. It sounds like you have a very good idea of what you want to do, but it's always helpful to have a professional's opinion. Congrats on the job!

Seeing an FA for a household budget??

Absolutely, espicially with the kind of money OP is talking about making/spending

AS to my entertainment budget, it might be a little low but I am a very low maintenance person i.e. I don't go to expensive clubs. I am much more of a $1 beer night guy.

SpiteFence wrote:

MrKappus wrote:

InGoodFaith wrote:You should see a financial advisor. It sounds like you have a very good idea of what you want to do, but it's always helpful to have a professional's opinion. Congrats on the job!

Seeing an FA for a household budget??

As to OP's budget: your grocery, transportation, and clothing/services/entertainment budgets are all way too low.

Edit: also, question. Can people making $160k make IBR payments? Isn't a payment based on an income of $160k the fully scheduled payment?

I wasn't sure and I didn't care to calculate, that's why I said minimum/IBR, whatever I am obligated to pay. I just did some quick math though and I think would be eligible.

People making $160k don't qualify for IBR. HTH.

InGoodFaith wrote:IBR Calculator

Thanks, but either way I am only using IBR while saving up a cash buffer, which I hope won't take too long. For those that think my groceries, clothing, entertainment, misc, is too low, what would you suggest?

Your expenses are too low. Also, just buy furniture, don't rent. Also, I'm in the same boat and we are holding off on our wedding until the loans are paid off. Your priorities should be:

0 - cash cushion
1 - loans
2 - house
3 - wedding

Probably not what you want to hear but blowing 40-50k on a wedding when you have 200k in debt doesn't seem like a smart way to start a life together. If you just do loans and no wedding, with 200k+ yearly income, you'll be out from under your loans in 3 years. Then get married.

Income-Based Calculator Results
Your Information
Estimated Total Adjusted Gross Income: $160,000
Your Estimated Total Student Loans: $200,000
Your Estimated Average Interest Rate On Your Student Loans: 6.8%
Where You Live: Outside of Alaska and Hawaii
Family Size: 1


Your Results
According to the information you provided, it appears that you are eligible for the Income-Based Repayment plan with a monthly payment amount of approximately $1795.

c3pO4 wrote:Your expenses are too low. Also, just buy furniture, don't rent. Also, I'm in the same boat and we are holding off on our wedding until the loans are paid off. Your priorities should be:

0 - cash cushion
1 - loans
2 - house
3 - wedding

Probably not what you want to hear but blowing 40-50k on a wedding when you have 200k in debt doesn't seem like a smart way to start a life together. If you just do loans and no wedding, with 200k+ yearly income, you'll be out from under your loans in 3 years. Then get married.

Haha, easy to say. Yes the math says do that, but thats a personal decision so I'm going with the heart on that one. Plus, I estimate theres about $7500 in tax savings by getting married, so that's something.

ANd Im not talking about renting furniture. I was talking about buying on credit, hopefully at one of those silly President's Day sales where there's 0% if paid within 18 months or something like that.

Anonymous User wrote:$430 for monthly grocery budget? That sounds very tough to do for 2 people.

Jesus, I can get by on 300 or less for two people. Are you eating out often?

chem wrote:

Anonymous User wrote:$430 for monthly grocery budget? That sounds very tough to do for 2 people.

Jesus, I can get by on 300 or less for two people. Are you eating out often?

Food is 50% more expensive than average in Chicago, but point taken.

SpiteFence wrote:

c3pO4 wrote:Your expenses are too low. Also, just buy furniture, don't rent. Also, I'm in the same boat and we are holding off on our wedding until the loans are paid off. Your priorities should be:

0 - cash cushion
1 - loans
2 - house
3 - wedding

Probably not what you want to hear but blowing 40-50k on a wedding when you have 200k in debt doesn't seem like a smart way to start a life together. If you just do loans and no wedding, with 200k+ yearly income, you'll be out from under your loans in 3 years. Then get married.

Haha, easy to say. Yes the math says do that, but thats a personal decision so I'm going with the heart on that one. Plus, I estimate theres about $7500 in tax savings by getting married, so that's something.

Well that is the most obvious deficiency in your financial plan and vastly overshadows any marginal suggestions people can give you. A few hundred here or there in furniture/food/entertainment is a drop in the bucket compared to spending on a wedding. It sounds like you are already committed and, honestly, will probably be fine. But you should realize this thread is kindof like saying - "evaluate my financial plan: I have 200K in loans and plan to blow 50k in Vegas. But should I spend $400 or $600 monthly on groceries?" You aren't going to get much helpful advice with that starting point.

c3pO4 wrote:

SpiteFence wrote:

c3pO4 wrote:Your expenses are too low. Also, just buy furniture, don't rent. Also, I'm in the same boat and we are holding off on our wedding until the loans are paid off. Your priorities should be:

0 - cash cushion
1 - loans
2 - house
3 - wedding

Probably not what you want to hear but blowing 40-50k on a wedding when you have 200k in debt doesn't seem like a smart way to start a life together. If you just do loans and no wedding, with 200k+ yearly income, you'll be out from under your loans in 3 years. Then get married.

Haha, easy to say. Yes the math says do that, but thats a personal decision so I'm going with the heart on that one. Plus, I estimate theres about $7500 in tax savings by getting married, so that's something.

Well that is the most obvious deficiency in your financial plan and vastly overshadows any marginal suggestions people can give you. A few hundred here or there in furniture/food/entertainment is a drop in the bucket compared to spending on a wedding. It sounds like you are already committed and, honestly, will probably be fine. But you should realize this thread is kindof like saying - "evaluate my financial plan: I have 200K in loans and plan to blow 50k in Vegas. But should I spend $400 or $600 monthly on groceries?" You aren't going to get much helpful advice with that starting point.

You did catch that my GF income is going to finance the wedding right? I am not sure what your point is then. I am treating a wedding as extraneous to the other part of my financial plan, it will happen when my GFs savings allow for it.

Where did OP say that the wedding was going to run $40-50k, again? That would be idiotic regardless of his financial position. Even in Chicago, you can do a nice wedding for under 20, and the tax benefits pay that off after a few years.

Edit: TBF, if you're talking about marriage, separating your income from hers is illogical (even if you're keeping your accounts and the like separate, at the end of the day, it's all one pot) and, in any event, her saving for the wedding is making your living expenses higher.