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Why Losing $1,000 Per Year is a Big Deal

   Posted On: February 25, 2014  |    Posted In: Debt  |     Posted by: Broke Millennial®

One of my first side hustles in NYC.

I filed my taxes last night and realized two things: 1) I really don’t make much money. 2) Opening and fully contributing to a traditional IRA saved my hide this tax season.

Most regular readers know that I have a full-time job, I’m debt free and yet I still side hustle.

Sometimes I think it confuses people when they hear I devote a significant amount of my spare time to…well…work. Some wonder why I really need to earn extra cash if I’m debt free and not your average millennial hauling around the weight of student loan debt.

I’ve never disclosed my salary before, but let’s just say it’s been reported that people with jobs in communications have an average starting salary of just over $43,000. I don’t make that (even before taxes). I also live in New York. One of the most expensive cities in the United States.

Needless to say, extra money makes a big difference in my life, so it’s no surprise it impacts my fellow millennials who are graduating with student loans.

According to a recent study from the New America Foundation, millennials graduating with bachelor’s degrees between 2011 – 2012 are paying nearly $1000 more per year in student loans than their contemporaries who wrapped up college in 2008. This is going to have a ripple effect and I think the first thing impacted won’t be the short-term, it will be lack of building savings and decreased contributions towards retirement.

$1000 may not sound like a ton of money but here is what it represents in my life:

  • 1 month of rent
  • Just over 3 months of groceries
  • 9 months of unlimited NYC metro cards (well that would be $1,008 — but let me have the $8)
  • A full year of my utilities (electricity and internet)
  • About 10 trips to visit Peach (depending on the mode of transportation I take)
  • 5 years of Hulu Plus and Netflix subscriptions
  • 9 years of Amazon Prime (not accounting for price hikes)
  • 50 brunches
  • 33 Broadway plays if I buy rush tickets or 10 if I buy decent ones
  • Less money to contribute towards investing or retirement
  • A nice vacation

Last week, I had the opportunity to speak with David Lazarus on Marketplace Money about what this hike in student loan payments means for millennials and some ways to handle living on less. If you’re a fan of podcasts then you can download the full episode (which I highly recommend) or you can hear just my segment online.

What does $1,000 represent in your life? How would you handle seeing $1,000 leave your annual budget?

[For your amusement: Doing my taxes made me feel like Ron Swanson trying to eat a banana.]

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64 responses to “Why Losing $1,000 Per Year is a Big Deal

  1. $1K to me is a very good start on a vacation fund.. or retirement contributions if I’m being responsible! Last year we made an IRA contribution that immensely helped with our taxes too.

    1. It was absolutely mind blowing how much my tax situation changed after I put in that I’d contributed to a traditional IRA. So glad I did!

  2. You’re right, $1,000 is A LOT when you don’t make a lot. It makes me sad that your generation is saddled with so much student loan debt, plus a disproportionate percentage of the costs for Obamacare.

    1. I almost added ACA into my $1,000 break down, but fortunately my work covers my insurance so I haven’t had to deal with Obamacare. Your stories have scared me to no end!

    1. Is living in nyc worth it? If it’s where you want to be, then absolutely. The only cost that is ridiculously-high is rent BUT if you don’t have a car here it’s actually not that much more than what you’re already paying.

      Living in the outer boroughs (brooklyn, bronx, queens) will give you considerably more value for your money when it comes to apartments. Groceries in outer boroughs are about the same as anywhere else. And there is some super cheap street food.

      Entertainment is cheap/free and everywhere! There are always things to do, sometimes too much!

      1. I’m with Leslie. If you want to live here and it’s worth it to you then it’s absolutely worth the cost. The longer I stay then the more I envision it will be difficult to leave.

    1. I’m so thankful too! It makes me a bit sick to my stomach when put in terms of lost investment opportunities.

  3. Leave it to taxes to remind us just how little we make! You’re right about this extra $1000. Like you, I was fortunate to graduate without debt. I often think about what my 20s would’ve been like if things had been different on that front. One clear fallout: a lot less travel, which would’ve been a shame because now that I have a child, I live through my happy memories of traveling while “unattached.”

    1. My travel budget would take a huge hit too. I would certainly have a tough time living in NYC on my current salary if I had to make student loan payments.

    1. Same! It’s like when someone complains about gaining weight while munching on a brownie. You have the power to fix the situation, it just takes some work!

  4. $1,000 is a lot of money either way you slice it. As salaries grow, Americans tend to minimize the value of money. $1,500 for Cable TV per year, thousands for expensive cell phone coverage, etc. It’s a rite of passage!

    My guess is the extra $1k is from skyrocketing tuition costs?

    1. I think it’s also linked to the fact that kids graduating in 2012 would’ve been entering school when the recession hit so the Bank of Mom & Dad might not have an option which means the number of kids taking on loans/amount being taken on went up.

  5. ahhhh I always think of money in terms of what it “could have bought” — and it just makes me sad lol

    $1000 extra dollars per year is a HUGE difference.

    $1000 would buy all my MBA textbooks for a year or pay for FIVE MONTHS worth of groceries! It would also let me go on a lululemon binge and buy enough clothes that I can go to yoga every day without doing laundry 4x per week!

    1. Five months of groceries? Well color me impressed! My first roommate was a huge lululemon fan (and yoga-addict) but she always milked birthdays and Christmas to update her yoga wardrobe for “free.”

  6. $1,000 is a lot of money to me, too, as I don’t have a large salary either. That would probably be about four months of food for us, two years of gas for me, and about five trips to see my parents.

  7. I think it’s awesome you are still hustling. And in NYC it’s necessary! 1k could be 3 months of rent, one month of student loans, many many meals out, and probably a flight to one of my favorite destinations abroad. That’s a huge number. I don’t want to constantly be stuck in this trap, so I’m trying to dump the debt now!

  8. I think a big problem is that a number of these kids (and their parents) don’t understand difficult lifestyle choices and budgets. $1,000 a month is not something they can wrap their head around, but I love how you broke it down. For me, it was monthly childcare expenses, but thankfully those only lasted 5 years unlike student loans that can last 20+.

    1. I think a lot of people also don’t realize that student loans stick with you, even if you go the drastic route and declare bankruptcy!

    1. I can’t tell you how many items I’ve talked myself out of buying buy thinking, “this would cost XX hours of work.”

  9. $1000 is just around the MINIMUM payment of my student loans and most of my fellow optometry graduates. I like to contribute whatever extra I can after that but $1000 is certainly a lot.

  10. $1,000 is a lot of money, especially when it’s just a loss for one year. Multiply it and it becomes even harder to stomach. It makes me sad that college students leave with so much debt. It frustrates me that both parents and kids (especially parents since they are the adults in the equation!) don’t spend much time thinking about how to pay for college. They just apply for loans and even then, don’t think about how much is really needed and taking the minimum amount. They take what’s offered and in some cases, a lot of beer and fun get paid for with student loan money.

  11. $1,000 definitely is a lot of money, especially living in NYC! But that would be two mortgage payments, gas for 5 months, or about 20% of my annaul Roth IRA contribution. And it’s a shame too, because it’s just kids out of college and new graduates that are being forced to pay this, rather than other individuals who might be able to better afford it.

  12. $1k is 5 rescue puppies, 3/4ths of a month’s rent in Chicago, a plane ticket to Europe (for two if you get a good deal), 10 pairs of designer boots, 5 months worth of groceries in my house, and one Nick Offerman/Ron Swanson made table!

  13. $1,000 is definitely a solid chunk of change when you start to look at what it can provide for. In our family, that would be either groceries for roughly three months or a very solid part of our annual vacation. I think that’s part of the problem many don’t see – they don’t truly quantify out what that money really translates to. Always love a good Ron Swanson clip. 🙂

  14. $1K is ….
    – a month’s worth of preschool + gas
    – a month’s worth of student loan payments + utilities + phone bill + internet
    – 2 months of deposits in our sinking fund account
    – an extra awesome Debt Eradication payment!

  15. I maxed out my student loan interest on my taxes this year. Paying over $2,500 on interest alone for student loans is not fun. That could’ve been a second trip to an all-inclusive resort in the Caribbean (honeymoon being 1st)!

    I paid off my high interest student loan and should not pay more than $1,000 in student loan interest this year. $1,000 is still a ton of money that is going to nothing isn’t fun, but it’s a heck of a lot better than $2,500!

    1. Glad you got that high interest one paid off. That’s a lot of extra money to be able to toss at the next round of debt repayment.

  16. $1,000 – that’s 2 round trip tickets to Hawaii for my husband and I! We don’t take that for granted. 🙂

    My younger sister graduated with $100K in student loans, and my sister who just started college will be in the hole for at least $100K too! FOR UNDERGRAD! It’s amazing how anyone can function saddled with that much debt. We will be there to help them work through and eliminate as much of it as possible in the shortest time possible!

  17. $1,000 will always seem like a lot of money to me. I spent a lot of time working as a waitress and after that, it’s hard not to look at any amount of money without thinking of the hours of physical hard work that went into earning it. Now it represents hours spent dealing with flight delays, early mornings, days away from home, and general long work hours. No amount of money is insignificant to me.

  18. I love the way you break this down. Without thinking too hard, $1,000 would be just under one month’s rent, 5 months of gas for our cars, 2 months of groceries, and 1 year of life insurance for me. It definitely matters!

  19. Good job with putting money into your Traditional IRA to avoid paying taxes…don’t know if a lot of people think of that. My student loans total over $4000 a year. That definitely pays for a lot of stuff. I definitely think the amount of students loans will impact this generation of millenials.

    1. Apparently it will delay retirement until 73. With that IRA I plan to not be that person!! Well more than just the IRA of course, but that will help.

  20. $1000 is so much money to me. That is about a tenth of my salary. Yay for AmeriCorps. I also know that that’s about 3 months rent, a savings for a car and all that nice stuff. I also know how much that money is because my ex-roomie owes me about that much money, so it definitely has put a huge hole in my bank account. 🙁

  21. I think I’ve made it clear in the past that my wife and I pay a lot in student loans each month. It motivated me to start my side hustle, which is nice because it more than cancels out my monthly student loan payments. I was thinking just yesterday how incredible it will be when that monthly student loan outflow is GONE and my side hustle income remains. The combination of the two will be awesome. But I’m with you that even if I was debt free I would still be side hustling, mainly because I have an entrepreneurial itch that isn’t satisfied in my job at a huge corporation.

  22. $1000 is pretty much all of my bills, groceries, rent, and other payments for one month, so it’s actually a really big deal! And I feel your pain in the salary/high cost of living department. I’m still too embarrassed to ever disclose how little I made when I first started out and how much I somehow managed to live off of in the expensive city of Vancouver.

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