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I didn’t realize how large of a burden repaying my $53,000 in student loans would be until I actually began repaying them each month.  When I took an accounting of my monthly expenses, I realized I wasn’t as thrifty as I thought I was. 

On reflection, there were 3 careless ways I lost money every month after graduating college:

1. Housing

I spent 47% of my monthly net income on housing.

  • I never really “paid” for housing until I graduated from college at 22 years old in 2012. My parents paid for my housing while I lived with them through high school, and while I was in college in Los Angeles, I paid for housing with student loans.
  • In college, I paid about $1,200 per month to share a room and upon graduation, I signed a lease for more than that.  I didn’t consider shopping around or getting creative to decrease this cost because it just seemed normal to spend that much on housing.
  • At my first job out of college, I signed a lease at an apartment complex and spent roughly 47% of my monthly income on housing.
  • Only when my student loan repayments kicked-in a few months after signing my lease did I fully understand my need to bring my housing costs drastically down.
  • After my 12 month lease ended, I moved-in with a buddy and my housing decreased to just 17% of my monthly take-home pay!
  • Ever since I’ve had this housing wake-up call, I haven’t spent more than 20% of my monthly after-tax income on housing. This has enabled me to save, invest, travel, and give much more freely than I could have before.

2. Food

As a single guy, I spent $700 on food per month.

  • Shortly after I graduated from college and started my new job, it took me a while to adjust to the rigors of working Monday thru Friday. In school, I didn’t have class on Fridays, so I had 3-day weekends every day for 2 whole years.  Going from that to starting at 6AM Monday through Friday was quite an adjustment.
  • I found myself making excuses like “I’m too busy to cook” and “I’m too tired to cook” so I spent $700 per month on food – roughly $500 on eating out and $200 on groceries.
  • Looking back, I smile at how lame these excuses were. I was not “too busy” or “too tired” to cook.  I was simply undisciplined and unorganized.
  • Fast forward a few years and I placed a recurring reminder in my calendar to check the ads for my 4 local grocery stores so I can capitalize on their weekly deals and meal plan accordingly.
  • There’s also great recipe books with cheap and healthy meal suggestions.
  • This led to me spending $400 per month on food – roughly $250 on groceries and $150 on eating out. Not only was this cheaper, but much healthier with less of the added-sodium often found in fast food and restaurants.

3. Discretionary Spending

Without a budget, I spent $300 – $600 per month on unplanned purchases. Despite having a large percentage of my money going toward housing, food, and repaying student loans, I still spent a lot on miscellaneous things.

  • Whether it was a friend’s birthday, a cousin’s marriage gift, or an out-of-town football game, I spent $300 – $600 per month on unplanned purchases.
  • Of course, none of these purchases were “wrong” or “bad”, but my lack of intentionality led me to spend much more than was prudent given my other financial obligations.
  • Now, I have a recurring calendar reminder on the 28th of each month to plan-out the next month’s budget. Things do come-up, but that’s why I allot some “miscellaneous” money each month.
  • Creating and sticking to a monthly budget hasn’t allowed “life” to surprise my bank account and has enabled opportunities to save, invest, spend, and give more.

Key Takeaway

If I could rewind the clock and give myself some advice, I would say 3 things:

  1. Make sure your monthly rent is no more than 25% of your take home pay. It can be done…even in the San Francisco Bay Area where I live.
  2. To save money & eat healthy, review your grocery ads each week and cook 3 days per week.
  3. Create and stick to a monthly budget!

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