Co-author: Kat Thomas
Many young professionals wonder how to divide their paychecks in a way that covers their bills, supports their lifestyle, and still allows them to save money. Let’s explore student loans, transportation costs, phone and internet bills, entertainment payments, and budgeting.
After graduating college and starting an entry‑level job, it can be challenging to enter this new stage of life without knowing how much everything will cost. Understanding how to plan for expenses early on can help make the transition into adulthood smoother and less stressful.
Student Loans
According to the Education Data Initiative, $29,550 is the national average federal student loan debt held by young professionals who hold a bachelor’s degree. This number looks different for everyone, and paying off your debt should be included in your monthly expenses.
Take steps to understand your repayment plan. Federal Student Aid has a variety of resources available to understand different payment plans. Maintaining consistent payments on your loan will help you pay off your debt according to your plan. This helps manage the interest your debt will accrue and keep it within your expectations. Interest rates for undergraduate borrowers disbursed on or after July 1, 2026, and before July 1, 2027, were issued at 6.52%. Regular payments keep that interest in check.
Use this calculator to help determine when you could pay off your student loans.
Car
In today’s world, it is important to consider transportation costs. Public transportation is a great way to get around and offers consistent costs. However, the availability of public transportation differs greatly depending on where you live. This reality may make transportation costs a larger part of your budget.
If you’re purchasing a car, consider the 20/4/10 rule . That breaks down to:
- 20% (at least)of the car’s purchase price is paid in the down payment
- 4 years (or less) for the total loan term
- 10% (or 15%) of your monthly take-home income is saved for transportation costs
Transportation costs include more than just your monthly car loan payment. Budget for fuel, insurance, and maintenance costs. Maintenance costs can vary monthly based on your car’s needs, but it reasonable to budget about $100 for any maintenance-related expenses.
The average monthly car payment for new cars is $770. The average monthly car payment for used cars is $531. This amount can change based on your credit score, loan term, and interest rate. Use this calculator to estimate your car payment.
The average monthly cost for car insurance in Indiana is $183 for full coverage. For minimum coverage, the average is $97. Your personal cost for car insurance is based on your age, driving record, and other factors. This may cause your cost to vary significantly from the average. Some insurance providers offer ways to reduce your rates like bundling coverage like home and auto or for achieving safe driving scores.
Phone, Internet, and Entertainment
Phone and internet costs can all vary based on the service providers available in your area. Do research to find the providers in your area.
Phone
A recent study by J.D. Power found the average price per month for bundled wireless service to be $145. The average monthly price for standalone wireless service is $102. However, these prices vary greatly depending on the kind of phone plan you choose. It is important to consider multiple providers and find one that suits your needs.
Internet
In Indiana, the average monthly cost of internet is $104.52. The cost of internet can change based on the package you purchase. Consider your internet needs while you are deciding on a plan. Understanding this and your local service providers can help you choose the best option for your needs.
Entertainment
A survey by Forbes found that people spend an average of $46 a month on streaming services and 99% of people pay for at least one subscription service. When considering your budget, take time to decide what entertainment costs are reasonable for you. Explore cheaper or free streaming options. Finding ways to save money in this area can create room in your budget for other expenses.
Budgeting and Saving
We have mentioned budgeting frequently, but what is it?
For young professionals, the 70/15/15 budgeting method can be more beneficial than the popular 50/30/20 method. This allows for much of your paycheck to go towards your bills while still being able to contribute to savings and lifestyle purchases.
Here’s how you can break it down:
70% of your monthly income goes towards your needs. This includes costs like rent, groceries, transportation, loan payments, and utilities. Most of the costs we have discussed fall into this category. A need is a cost that you are required to pay to maintain your survival or job requirements.
15% of your monthly income goes towards your wants. This includes costs like entertainment, dining out, or socializing. A want is a cost that is nice to have but is not needed for your survival.
15% of your monthly income goes towards savings. This includes creating an emergency fund, saving for a goal, or putting money towards your retirement. This category is important for preparing for your future.
As you continue in your career and your income grows, you may be able to shift to a 50/30/20 split between needs, wants, and savings. For the time being, try the 70/15/15 split.