Money Snapshot: A BigLaw Associate Shares Her Thoughts on Saving for a Down Payment, Paying off Student Loans, and Spending Responsibly
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For today's Money Snapshot, we're talking salary, net worth, and avoiding “lifestyle inflation” with a reader in NYC who works as a BigLaw associate. She notes, “We are currently saving for a down payment. Although we could qualify for a larger loan, we plan to put down between 25 and 30 percent. We plan to have a 30-year mortgage but make at least three extra payments each year to pay it off early.”
We got a few requests from readers to launch our own “money diary” series, so we've asked willing readers to fill out a form with lots of details about debt, spending, saving and more! If you’d like to fill out the form and be considered for a future personal money snapshot, please click here to submit your response! You can see a PDF of the questions if you want to review them ahead of time. See others in the Personal Money Snapshot series here.
Please remember that this is is a real person who has feelings and isn’t gaining anything from this, unlike your usual friendly (soul-deadened, thick-skinned, cold-hearted, money-grubbing) blogger — so please be kind with any comments. Thank you! — Kat
Name: K
Location: Manhattan
Age: 30
Occupation: BigLaw associate; went to law school immediately after college
Income: $305,000 base plus expected bonus of $90,000
Household income: Approximately $500,000
Partner's age: 35
Net worth: My husband’s and my net worth is approximately $750,000.
Net worth when started working: Net worth when I started as an associate in BigLaw at 25 was approximately negative $210,000 from student loans. I worked part time during the school year and full time during summers starting in high school.
Debt
What does your debt picture look like?
$0 — we aggressively paid off my student loans, which were approximately $210,000 when I graduated law school. We carry no credit card debt but put everything on credit cards for points and are pretty into figuring out how to maximize our points, which we use to fund vacations.
How did you pay for school?
My husband had no student loans because his parents paid for his college education. My education was paid for with a combination of scholarships, grant money, working, loans and approximately $10,000 paid for by my parents for college. I attended a public college for undergrad and a private law school.
Have you paid off any major debt? Please share a success story if you have one!
Yes. Student loans all paid off. We budgeted so we could make 1.5x the required monthly payments when starting, and any “extra” cash from raises/bonuses went straight to paying down loans. I refinanced twice to get a better interest rate. We also set our 401(k) contributions very high so we max out early in the year and get a “fake raise” once we’ve maxed out our contributions. That all went to paying down loans and now goes to our savings account for our down payment.
Savings, Investments & Retirement
How much do you save for retirement?
We each max out our 401(k)s. We also max out our IRAs (we don’t qualify for Roth IRAs) each January.
How much money do you allocate to other tax-savvy investments/accounts?
We contribute $10,000 each year to our child’s 529 and plan to do so for future children as well. We plan to stop contributing when the child is about 10 and then funding any extra expenses from cash when the time comes.
How much do you save outside of retirement accounts?
Varies each year. My husband's entire salary goes directly to a high-yield savings account. His compensation is a combination of salary, commissions, and bonus with the bulk (about 60%) coming from commissions/bonus, so that’s variable. We also transfer any money in our checking account over a floor about a week after I am paid. I pay all our bills twice a month a day or two after my paycheck clears. Once those bills have been processed, I transfer all leftover money to the high yield account.
Do you have/use a financial adviser or planner?
We do not. I wish we could find a good one, but we haven’t found someone that fits our needs.
Do you have an end goal for saving or are you just saving for a rainy day?
We are currently saving for a down payment. Although we could qualify for a larger loan, we plan to put down between 25 and 30 percent. We plan to have a 30-year mortgage but make at least three extra payments each year to pay it off early.
What's the #1 thing you're doing to save money, limit spending, or live frugally?
We attempt to limit lifestyle inflation. I met my husband when I was in law school making negative money (accruing debt) and my husband was making about half of his current salary. We live in a nicer apartment now but our “entertainment” spending hasn’t changed much. We still book vacations on points, chase happy hour specials, use Groupons for splurges, and love dive bars.
When did you start saving seriously? How has your savings strategy changed over the years?
As soon as my student loans were paid off.
Do you have an estate plan? A trust?
We do not but probably should. It’s embarrassing as a lawyer to admit that we don’t have wills (they are in process but not finalized).
How much do you have in cash that's available today?
$10,000
How much do you have in cash that's available in a week?
$300,000
How much is in your “emergency fund,” and where do you keep it?
We don’t separate out the emergency fund, but we could use the entire $300,000, which is our current down payment fund, in an emergency. Once we stop saving for a house, I’d like to have somewhere between $50,000 and $75,000 readily available.
How much do you have in retirement savings?
About $300,000 (combined funds)
How much $ do you have in long-term investments and savings (CDs, index funds, stocks) that are not behind a retirement wall?
Around $15,000
In honor of this series' original title, Tales from the Wallet… here's a wallet we love!
Spending
How much do you spend on the following categories on a monthly basis?
Groceries: $550
Restaurants, bars, takeout, and delivery: $400
Clothing and accessories: $200 — I've been trying to shop less and buy higher quality items. I’d say we spend about $2,500/year on my husband/myself. Our baby has a billion clothes that were gifts so we don’t currently spend much there.
Transportation: $35, maybe? We both walk to work.
Rent/living expenses: $5,000
Kid-related expenses: $3,600 (full-time daycare plus occasional night nanny)
Entertainment: Cable (we love sports so can’t cut the cord yet) about $160, Netflix $10, occasional book purchase is $10 but I usually borrow ebooks from the library, Pandora without commercials $5, random tickets/events $100.
Other major expenses: We pay about $10,000/year for our club, which also serves as our gym. We spend about $700/year on insurance but this should be more since we don’t have our life insurance finalized.
Health care — premiums and other costs: $0 — funded entirely through our jobs. Our out-of-pocket expenses for co-pays, etc., tends to be around $1,000 for the entire family each year.
What's your spending range for these things? What's your average?
Vacations – Average: Usually $0. We book almost exclusively using credit card points and airline/hotel points from work travel unless we find a very good deal.
Charity – Range of donations: Annual contributions usually total between $8,000 and $10,000. We have considered trying bunching donations given the change in tax law but have not yet done so.
Charity – Average donation: We give between $500–$2,000 to a few different charities each year. We donate between $100–$300 for individual fundraisers that pop up, such as Cycle for Survival.
Individual items of clothing – Range: $75–$200, although trying to up this to buy more quality items and get away from fast fashion.
Apartment or house – Current main residence: $5,000 rent
How much do/did you spend for childcare and/or education?
Approximately $3,600 — full-time daycare plus occasional night nanny during the week when my husband and I both work late/one of us is traveling.
Any other large personal expenses?
We pay a cleaning service to come every other week ($175 including tip). I get a monthly facial for $125 including tip. We spent a few hundred dollars each month on formula, diapers, and random kid stuff.
Fill in the blank on this question: I could save _____ if I stopped ______, but I don't because _______.
I could save a ton of money if I didn’t order everything from Amazon for convenience without comparing costs/quality, but I don’t because I’m busy and don’t have the time or energy!
When was your wedding, how much did it cost (total), and how much did YOU pay?
Our wedding cost approximately$75,000. Our parents contributed about half the funds and we paid for the rest. We booked our honeymoon on points. We just wanted to chill at the beach so we went to the cheapest place we could find that had a four-star resort.
How has your family provided financial support in your adult life, if any? (Or, do you provide support to them?)
Yes, my parents paid for a portion of my college education. For a few years after college they also paid my cell phone bill since it would have been like three times more money for me to get off their family plan and onto my own. Shortly before we got married, my husband and I got our own family plan.
Money Strategy
Do you have a general money strategy?
Avoid lifestyle inflation and bank all raises, bonuses, and other found money like tax returns (although we haven’t had one since I started working full time). I also find I get almost as much joy from planning a vacation or a special meal than the actual thing so I spend a lot of time planning vacations and get a lot of joy from “gaming” out how to go do some thing for the least amount of money/points.
Time vs. money — do you spend money to save time (e.g., cleaning service)? Do you donate your time instead of money? What else does this phrase mean to you?
We have a cleaning service. I occasionally send out laundry. As our baby gets older and our income increases I’d like to outsource more.
What are your favorite resources for personal finance (podcasts, blogs, books, series, conferences)?
Boggleheads, BigLaw Investor, Money Diaries, The Financial Diet, Money Under 30
What advice would you give your younger self about personal finance?
Think harder about what the value of something is before choosing to spend/not spend on it. I have a lot of things I think I wasted money on (trendy fashion purchases, for example, that I didn’t like much a year later) and regret not spending on other things (mostly experiences;, for example, I remember not buying tickets to a sporting event a group of friends went to because it seemed too expensive at the time but I really wish I had spent the money by foregoing some other nonessential purchases). Also, buy a gift card to your favorite coffee spot each month, and when it’s gone, it’s gone. I do that now but spent way too many years with an outrageously expensive coffee habit!
Icons via Stencil.
Can I encourage you STRONGLY to sit down this weekend and figure out life insurance? Maybe it won’t be your forever solution? But at least get something purchased
Yes please! Overall you seem very frugal and like you’re in a great place financially (I can’t believe you’ve added almost $1M to your net worth in only 5 years!) but you NEEEEEED life insurance if you have a child.
yes please and for the sake of your child, get a will asap. hopefully it is something that you won’t have to use for a long, long, long time, but at least while you have kids under 18 – please get life insurance and a will with guardianship documents in place. I know you like to shop around for bargains, and i do too, but since you already have a child, don’t spend hours comparing price quotes for your trust & estate documents – just get them done!
otherwise kudos to you on all of your saving and keeping your spending down! i don’t know if you read the mom site at all, and if you haven’t already, would be great if you could submit one of the “day in the life”
OP here – thanks! We actually did that shortly after I submitted this. It was way easier than I thought and highly encourage others to do the same!
Speaking of money, have we already discussed the Ohio law school grad who was denied admission by the character and fitness committee, in part because she borrowed money for law school with the knowledge that she couldn’t pay it back, ever? I will put the link to the opinion in a reply to this post. I agree that this person should not have been admitted, but there is some debate about whether student loans are a fair consideration.
Here is the opinion:
http://supremecourt.ohio.gov/pdf_viewer/pdf_viewer.aspx?pdf=876632.pdf&fbclid=IwAR0tzH9DV-JAtpSD1SGZc4g0P9JmBpcYYg8fujFA6-e96kmqVTBBP5pX4Lw
This is fascinating, but the student loans seem to be the least of the concerns here: “The litigation referenced above represents only a small fraction of the dozens of cases filed by the applicant during her lifetime. The applicant appears to be a person who would rather file a lawsuit or otherwise engage in legal or administrative action than
resolve an issue by negotiation or other means.”
I think this is a very specific case, and it was just one more factor on a really terrible application. The fact that she is so inconsiderate of how her actions affect others is demonstrated, yet again, by the fact that she never intended to try to pay back the loans. I think it’s less that she took out loans and more that it is part of a pattern of selfishness and thoughtlessness.
That was incredibly entertaining, even though the tone of the writer is a little condescending. I don’t think this was about her debts, it was about her lack of judgement and poor character. They made sure to go through a ton of frivolous lawsuits and quote her in regard to how she never intended to work full time and had no idea how much was borrowed or what she’d do to pay it back. Her entire plan was the IBR plan and staying too far below the threshold to pay anything. It didn’t help that her husband owed over 600k in school debt and was “retired”.
A large portion of this blame should be on the law school – don’t they do background checks on students first?
whoever wrote this opinion is as shady as the editors on vanderpump rules! i mean that as high praise. i can understand why the application was denied.
I’m equally concerned that they penalized her for trying to access the legal system before she entered law school. I understand that she filed dozens of suits, but it seems like her cases were dismissed because she didn’t know how to proceed and couldn’t afford the costs of filing. Maybe they were all frivolous, but the panel essentially seems to be punishing her because she was poor and not educated in the legal system but tried to access it anyways. Then, despite the fact that she received a legal education and was effective in clinic, they used her previous litigiousness against her.
They also characterized her minimum wage suit, in which she was represented and from which she received a decent settlement, as “taking advantage” of a lawyer “willing to help her learn” who didn’t pay her minimum wage for an internship. So, even when she did things correctly, they found her willingness to use the legal system to be evidence that she didn’t belong in it.
Lacking representation does not bar you from being judged for frivolous lawsuits. She showed a basic lack of judgement as to whether there was any legal remedy or anything to base a suit on. She wasn’t a yokel or dumb, she had an associate’s, college, and master’s degree. She had the capacity to make better decisions and just didn’t, seemingly mostly acting out of emotion (“I was wronged they must pay!”) and laziness.
Man, I just read that and the student loans seem like the least of her problems. The 60+ civil actions (most frivolous) were probably enough to sink her.
Same, I thought there were maaaaany red flags here and they weren’t denying her application just because she had student loans.
The treatment of the educational debt is concerning. My husband and I were very fortunate to have parents who could pay for undergrad, but we both took out full loans for law school. (We met in law school). When we graduated we had 400k maybe 410k in law school loans. We both went into private practice, but what if that hadn’t worked out for us or what if we had wanted to do public interest and had planned to take advantage of a public interest loan forgiveness program?
I mean this woman was 59 years old at graduation and had been disabled for years and acknowledged that she could not work a 40 hour week. There is absolutely no way whatsoever that she was ever going to pay back any meaningful portion of the $340k that she borrowed.
This is picking nits, but you’re definitely paying for health care. Even if it’s “funded through your jobs.”
but it’s not a monthly expense.
OP here – we have no employee contribution to healthcare (job funds all premiums). In theory I guess we pay in the sense that our jobs might pay us more if they didn’t cover the full expense
What are you invested in versus the rate you expect on your mortgage? Interest rates are so low right now, I don’t understand the impulse to pay down mortgages (in particular, but I actually apply this to all debt personally) versus simply investing the money. You get a tax exemption from mortgage paid on interest, as well, so you don’t even have to earn a very high return on investments in order to be better off paying your mortgage on time and investing any additional money. Same logic applies to your down payment, as well, if you can take out a larger loan and not be charged a significantly higher rate!
OP here – totally agree with you from a logic perspective but emotionally we are both very debt averse. My student loans gave me a ton of anxiety and the mental health benefits of not having debt is worth lower returns to me
I do respect that, hope you can come to terms with debt someday! It’s a very powerful tool for savings growth!
Just have to say, that while I completely understand the logic of using debt to leverage your net worth, it’s only a valid argument if your intent is to increase your net worth at all costs. There are a lot of reasons to live debt free that are just as rational as debt leveraging. Millennials especially, after seeing firsthand how much trouble you can get into if you over leverage yourself and then lose your job, tend to have a different opinion on investments than our parent’s generations did. Banks and credit card lenders have no problem loaning you MORE than would be good for you. Debt = Risk. And yes, sometimes risk pays off, but sometimes it doesn’t. The more debt you have, the higher the monthly income you MUST maintain to keep up. That’s part of why our society is SO stressed out. For a lot of people, we’d rather have zero debt and be able to use our monthly income anyway we want. Zero debt means that, if necessary, you could continue to live just fine on a much smaller income. I would much rather be in a financial position where I don’t have anything to fear from losing my job (or can QUIT if I’m ever in a position where I’m being asked to go against my integrity or character). I don’t need ALL the money, I just need ENOUGH money to live my life comfortably. And for the record, I have nothing against your comment :) for someone interested in debt leverage, you are correct. I just wanted to add the other side of the argument for anyone on here who can’t put their finger on WHY they can’t help but pay off debt before investing.
What credit cards are you using to get those points? I’m trying to get into that game and not wanting to waste a lot on annual fees.
What is charity bunching? Is that doing 12/31 and 1/1 donations every other year so you itemize every other year?
OP here – on credit cards, check out The Points Guy who does a good job breaking down what card/combos work for different people. Our main card is the chase sapphire reserve. The fee is high but you get a huge chunk back in travel credit each year and a bunch of other benefits that for us make the steep fee with it. You get 3x points for restaurants and travel (includes Uber, taxis, etc), which are our biggest spending categories (both our jobs let us expense on personal cards so we get a ton of points this way for free). We have the chase unlimited which gets 1.5x on everything and chase freedom which has a 5x on a category that changes quarterly. Both those cards let you transfer points to the reserve account which gets you a bigger discount if you book through the site or allows you to transfer to a bunch of hotels/airlines.
On bunching the idea would be instead of 10k (or whatever) each year, you donate 20k every other year so you itemize every other year and take the standard deduction every other year.
thanks!
thanks!
Thank you so much for sharing this snapshot. I am 29 years old in my last year of school, and find it so hard to relate to people who had free rides or no debt at all. I’ve tried my best to limit my debt picture, but it sure can be stress and anxiety provoking, as you’ve mentioned in the comments.
You are 30 years old now, and had $210,000 of debt when you graduated law school. How old were you when you graduated, and how long did it take you and your husband to bring the number to zero? Thank you so much for your insight!
Debt advocate here (as you can probably see from previous comment): Unless debt makes you extremely uncomfortable, it isn’t necessarily a bad thing. Try to refinance your student loans into as low of a rate as possible where you can still comfortably afford the payment. Then, don’t worry about how long it takes to pay off! As your salary grows relative to the debt payment, you can just save and invest the extra money (instead of paying down the debt)! And, always be revisiting offers to refinance your student loans into a lower rate! When my loans were originated, they were going to charge 4%-8% once then went into repayment. But, I refinanced them into a very low-rate floating loan, and just keep refinancing them once rates drop. Currently, I am in the process of refinancing my debt into a loan that will cost under 2% per year! Any money I invest is almost certain to make more than 2%, even if I am very conservative. Remember, you can always pay off the debt with your accumulated savings at any time, so you might as well maintain control of the money!
You inspire me
OP here – I graduated when I was 25 when I graduated and it took a little over 3 years to pay off everything. My biggest recommendation is if you’re living to limit your debt now to continue that same lifestyle when you graduate. It can be super tempting to immediately upgrade your life as soon as you have income coming in the door but avoiding lifestyle inflation was really key for us. Since I’d been living like a student already it didn’t feel like a huge sacrifice to continue that general lifestyle with small treats/splurges for a few more years. My husband and I also promised ourselves to buy a big ticket item once debt was paid off and that was motivating as well! Good luck!!
I do want to add despite all my debt advocacy, major props to this level of discipline!
Super encouraging, thank you for the response and feedback!
Great job paying off student loans! You should look into a back door Roth IRA – how to contribute to a Roth for those above the income limits. If your IRA is very large now, it may no longer be a good option.
Hi – what does it mean to max out your IRAs each January? Thanks!
OP here – that just means that we contribute the maximum amount to our IRAs ($6,000 this year) each January so we have the full year of investment benefits.
Can I ask why you are investing in IRA when you are not getting the tax deduction for it? Since you aren’t getting the tax deduction now, and then will just have to pay income taxes on it when you withdraw it at retirment you’d be better off puting that 6k in a taxable account where you’d only have to pay capital gain tax which is lower than income tax rates.
Unless you are planning on using the backdoor Roth conversion to convert that 6k in the IRA into a Roth IRA and then pay no taxes on it at all in retirement.
How is it possible to spend just $3,600 a year on baby childcare plus the occasional night nanny? In a big city??
The $3,600 is a monthly expense