Note that many student loan lenders and servicers are offering relief options during the coronavirus outbreak, so be sure to also check out our Student Loan Hero Coronavirus Information Center for additional information.
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If you’re looking for strategies on how to budget with a $45,000 salary, you have options. Living on $45,000 a year can be tough, especially since wages haven’t kept up with the increasing cost of housing, health insurance, child care and more.
While the average hourly wage in the U.S. rose between 1978 and 2018, purchasing power has stayed nearly the same after adjusting for inflation, according to the Pew Research Center. That means that even though paychecks increased over that period, workers weren’t able to afford much more in goods or services in 2018 than they could in 1978.
How to budget a $45K salary: 11 ways to save and pay off debt
You can use the following tips as you try to make your money work for you, whether you’re looking to find freedom from debt or to gain budgeting tools.
1. Understand how much money you’re bringing home
2. Automate your savings
3. Use an app to help you budget
4. Evaluate how much rent you can afford
5. Take stock of monthly costs and bills
6. Use retirement planning tools to save for your future
7. Take a balanced approach to debt and avoid taking on more
8. Consider refinancing or consolidating student loans
9. Look into income-driven repayment plans
10. Keep an eye on discounts and free activities
11. Think of ways to grow your income
A $45,000 salary — before taxes are taken out — equates to $3,750 a month, about $1,730 biweekly or $21.63 an hour based on a 40-hour workweek.
But you won’t see all that money in your paycheck. Most states collect individual income taxes, and so do several counties, districts or municipalities. Plus, you’ll make Medicare and Social Security contributions from each paycheck. Your employer might also withhold some of your pay for health insurance, life insurance, retirement contributions or other workplace benefits.
Your net, or take-home pay will vary depending on:
- Your location
- Your tax filing status
- Your number of dependents
- Your contributions to employer-sponsored health and retirement plans
But, in all cases, understanding your take-home pay is a crucial step in setting up a budget.
Add up your paychecks and calculate your monthly net income to see how much you’re paid. Consider using a guideline like the 50/30/20 rule to allocate a certain amount of your pay to wants, needs and savings each month.
This strategy suggests spending:
- No more than 50% of your income on necessities, such as housing and groceries
- No more than 30% on wants like entertainment and travel
- At least 20% on emergency savings, retirement savings and extra payments toward outstanding debt
Setting up automatic transfers from your checking to your savings account each month will help you build a savings habit. First, prioritize creating an emergency fund, which you can draw on instead of relying on credit cards when an unexpected expense arises.
Ideally, you’ll have at least three months’ worth of expenses saved in your emergency fund. But it’ll take some time to get there. If you can only set aside $50 or $75 a month for emergencies to start, that’s perfectly OK. Make your initial goal to grow your account to $500. From there, continue saving automatically, and consider boosting your emergency fund with a portion of tax refunds or work bonuses when possible.
To help you stay on track while both spending and saving on a $45,000 income, try using one of the many free or low-cost budgeting apps that are available.
If you regularly use a debit card or credit card, your bank or credit card company might also provide a spending breakdown for free on its online portal. And if you’re particularly focused on saving or paying off debt, the app Digit will analyze your spending and automatically save a certain amount each month that it determines you won’t miss.
Experts often recommend spending no more than 30% of your gross income per month on housing, whether that’s rent or a mortgage payment. But 30% might be an unrealistically low number, depending on where you live.
Instead of focusing on the 30% rule, consider how your housing costs fit into your overall financial picture. The 50/30/20 budgeting guideline can be helpful, since it offers a way to adjust your housing expenses depending on your other bills. For instance, if you aim to spend less than half your monthly income on necessities — and your necessities include minimum debt payments — a high monthly student loan payment would cut the amount you can put toward housing.
To decide how much of your $45,000 salary you can comfortably afford on rent or mortgage payments, you’ll need to understand how much you’re spending on other expenses and bills. Try tracking your spending closely for a month, taking note not just of fixed costs but of those that fluctuate, too.
Consider using a budgeting app or a budgeting worksheet like the one available from the Consumer Financial Protection Bureau. Make sure to include expenses that you pay automatically from your checking account or credit card. Seeing all your expenses in one place can help you identify patterns like:
- You order takeout more often than you realized
- You subscribe to services that you no longer use
- You spend more while shopping online than anticipated
While it may feel difficult to save for retirement while earning $45,000 a year, doing so early will help you save more over time, thanks to compound interest. Use a retirement calculator from companies like Vanguard or AARP to analyze how much you’ll need in retirement — above and beyond Social Security income — which can motivate you to save now.
Using the 50/30/20 budget, you’ll aim to put at least 20% of your income toward multiple savings goals and debt repayment. While that might seem like a lot to juggle, any employer match your company offers on your 401(k) will ease your own savings burden.
For example, if your company will put a maximum of 3% of your income toward your retirement savings, save at least that 3% to capture the full match. Aim to save as close to 10% of your income as possible for retirement, including your employer match if it’s offered.
A priority goal, if you haven’t done so yet, should be to start an emergency fund — even if you have debt you want to pay off, too. That’s because without emergency savings, you may be tempted to add to your debt if you need to pay for car repairs or sudden medical bills.
Once you have a solid amount saved for emergencies — $500, say, or $1,000 — you can focus on getting rid of debt. In general, it’s best to put extra funds toward your highest-interest debt first. That will slow the growth of interest charges that make it harder to put a dent in your balance.
Don’t worry about quickly paying off low-interest debt, such as federal student loans, if you have credit cards or personal loans that are accruing more interest per month. Concentrate on prioritizing and tackling those.
You may be able to pay less on student loans, though, by refinancing or consolidating them. Each approach has a different goal.
Refinancing student loans may be best for borrowers with good or excellent credit scores who can benefit from getting a lower interest rate now than they originally received on their loans. Private student loans you borrowed at high rates are good candidates for refinancing. But in addition to strong credit, you’ll generally need a low debt-to-income (DTI) ratio to qualify, meaning your income is meaningfully higher than the amount of debt you carry.
Student loan consolidation is available for federal student loans only. It doesn’t lower your interest rate, but it can lower your monthly federal loan bill by stretching out your repayment term. You’ll likely pay more in interest over time, but you’ll have just one monthly payment, which can make it easier to track your bills and pay them on time.
Student loan consolidation can also mean certain federal student loans qualify for income-driven repayment plans. These plans tie your monthly payment to your income and provide forgiveness on the remaining balance after 20 or 25 years. On a $45,000 annual salary, that could make your monthly payment significantly more affordable if your loan balance is overwhelming.
But choosing an income-driven repayment plan means paying more in interest, since your payments likely won’t cover all the interest on your balance as it accrues. You’ll also have to pay taxes on the forgiven balance at the end of your repayment term.
Even when living on a budget, it’s important to enjoy yourself rather than severely restricting all your hobbies or activities. That could cause you to feel deprived, making it more likely to splurge on items or experiences in moments of frustration or resentment.
Instead, use your budget as an opportunity to explore free activities in your area that can connect you with others who share your interests. Hosting potluck dinners, clothing swaps, music-listening parties and art nights at home can bring the entertainment to you for minimal costs. Look into discounts on museums, movies and theater events through your job, school or other organizations of which you’re a member. You can also try out free or cheap online workout classes as a way of replacing your gym membership.
If you’re eager to hit certain goals that feel out of reach with your current $45,000 salary — buying a house, for instance, or going on a special vacation — add to your income. You can do so in the short term by selling furniture, clothing, books and household items you no longer need, perhaps on online platforms, such as Facebook Marketplace or Poshmark.
To make ongoing extra income, sell services you already enjoy doing for others for free. Maybe you love animals and can start a pet-sitting service, or you’re an ace proofreader and you can help others refine their resumes, cover letters or college application essays. Or, if you’re crafty, start an Etsy shop or sell items at local events, which gives you the chance to spend more time on a hobby that gives others joy, too.
Elyssa Kirkham contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|2.99% – 6.44%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 6.43%4||Undergrad & Graduate|
|3.19% – 6.08%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
ANNUAL PERCENTAGE RATE (“APR”)
There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.
For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
ELIGIBILITY & ELIGIBLE LOANS
Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).
Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.
All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.
For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.
The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.
The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.
POSTPONING OR REDUCING PAYMENTS
After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.
We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.
We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.
If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020 and is subject to change.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of June 15, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 6/15/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.2% effective May 10, 2020.