This week we welcome back guest writer Shirlene Brown to discuss how to budget as a new lawyer.
Congrats! You have graduated from law school, passed the bar exam, have been sworn-in as a practicing lawyer, and you landed your first “big girl/boy/gender-noncomforming” job! With a new job and more income comes additional responsibilities, including (but definitely not limited to) managing your finances! Personally, I am an attorney at a small-medium sized law firm that specializes in personal injury. I have been officially working at the firm as an attorney for about a year now, however I started at my office in my first year of law school as a law clerk/paralegal. I am also a first-generation college student and the only lawyer in my family. My husband and I both come from very working-class backgrounds and have had jobs since the age of 16. So it should suffice to say that we “ball on a budget.” When I graduated from law school and passed the bar, I started working as an attorney and made more money than I had ever before in my life.
However, I also had to start paying my student loans and managing all my other finances. So what are some tips and tricks to budgeting, especially after you first become an attorney? And how can you best manage your finances at your new lawyer pay rate? Here is my advice to young lawyers on how to budget and be a financial all-star!
Entering the Workforce and Getting Paid
When you first enter the workforce full-time, it is thrilling to get that big check as proof of all of your hard work and long hours! You may feel like you have so much money and can do whatever you please. And I want to first say that it is okay to spend some money and treat yourself. However, you should also make sure you are living within your means. When I got my first big paycheck, I felt like I could buy anything I wanted. But, I knew that I couldn’t actually just go out and buy anything I desired. I needed to be disciplined and take care of my debts and expenses first, then I could treat myself to something I had really wanted with my disposable income. Your income may be different depending on if you are in BigLaw, working for a small firm, and so on. Thus, it is important to look over your own situation and start your budget from there.
Student Loans
It is no secret that law school is insanely expensive. Even at my law school, which was a middle-tier university that was considered the “best value” in my state, was still about a thousand dollars a credit hour, not including fees and other expenses. Thus, many individuals go into debt because of law school and believe that they will be unable to pay off their debt in their lifetime. However, many loan providers have payment plans to suit your financial situation and ensure that you can pay off your loans, usually in 10 – 30 years. This expense is extremely important and is usually a large monthly payment so it is important to know where you stand in terms of your student debt and continuously make payments to combat it.
Get Your Expenses Together
Unfortunately, living is not free, and we all have bills and expenses that we need to pay. However, each person is different in terms of what they have to pay each month. Personally, I like to break down each bill I need to pay each month, such as my mortgage, each of my individual utilities, car payment, insurance, and so on. Then I also include other expenses that I usually incur each month like groceries, gas, takeout food, and other miscellaneous expenses. Once I have a rough estimate of each for the month, I add it all together to know what my concrete monthly expenses are. This allows me to understand what my potential disposable income is and have a good estimate of what I am able to afford or save each month.
Incidentals
In addition to regular expenses, there is something that usually occurs each month in which you will have to spend money. This can be something simple like a birthday or holiday or it could be a bigger expense like attending a wedding. It is good to keep some money aside for these incidental expenses and look ahead to make sure you can afford everything that you have going on within a month but still keep a balanced budget!
Get Organized and Create that Budget!
Being organized is extremely important in being a successful lawyer and budgeting. Now that you understand what your income is, what your student loans and debts are, and what other expenses you owe, you can put all of your financial information together! I determine when I am getting paid, when each bill or expense is due, and what other events or things I have going on each month. Then I can decide when I need to make each payment, how much money I will have at a given time, and can keep track of what I am able to save or put away. This allows me to have a good understanding of what I can and cannot do each month, and I can budget for bigger things that may come up in the future. Being organized and understanding what your finances are will allow you to be prepared for anything that comes your way.
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