After becoming licensed, I worked at a big firm, at a small firm, and at two nonprofits. Despite a roller coaster of income, I still managed to pay off my private student loans, while reaching other financial goals and squeezing in a few international trips. To accomplish this, I had to be very careful about how I spent money. Here are some tips that worked for me.
You can use a simple excel spreadsheet or online budgeting tools that automatically track expenses (e.g., Mint, YNAB), or tools offered through your bank or credit card. If you are in the market for a credit card (and can responsibly handle one), look for credit cards with perks you will use (e.g., cashback, airline miles, or store gift cards). Credit card miles helped pay for my vacations.
The two biggest areas for saving money are your monthly housing and transportation costs. While it is tempting to rent a luxurious apartment, your monthly rent will only increase. Your housing costs, including utilities and insurance, should not exceed 30 percent of your gross monthly income. If you have a large car payment, high monthly student loan payments, other debt, or other financial goals, your housing expense ratio may need to be less than the 30 percent target. Regarding your cable bill: companies will start you at a low rate and then increase the price later. When that happens, call the cable company and remove all the bells and whistles, or threaten to go to a different provider (if you can) and ask for a lower rate (trust me—it works!).
Most new cars sharply decrease in value immediately after purchase. Gently used cars are a better choice. While most lawyers assume that they need a new car to appeal to clients, this is untrue. At the beginning of your career, it is unlikely that you will have to drive a client to court.
There are several browser extensions that will help you find the lowest prices, automatically apply coupons, and pay you cashback. Honey and Rakuten (formally Ebates) are two very popular options.
Amazon has a surprisingly large selection of brand-name clothes, sometimes offered at a deep discount. If you know your size in a particular brand, you can find gently used clothing from websites such as Poshmark, eBay, ThredUp, and The RealReal. You can sell your unwanted clothing on some of these websites. Check clothing tags and avoid the unnecessary expense of “dry clean only.” You may try more extreme measures and adopt minimalism or wear a capsule wardrobe. The fewer personal items you acquire, the less time you have to spend Marie Kondo-ing.
Daily habits add up. A $5 expense every workday costs $1,300/year! If you add on a $10 lunch each day, that amount creeps up to $3,900/year.
Every person should have six months of living expenses saved in a liquid, interest-bearing account (e.g., a savings or money market account) for periods of unemployment, illness, or car repairs. Take advantage of any retirement plan or matching retirement plan contribution from your employer. Otherwise, you are giving up free money.
Owning a home tends to be cheaper than renting but owning is not for everyone. While it is a myth that you need a 20 percent down payment to buy a home, if you don’t put 20 percent down, you will have to pay monthly mortgage insurance. Having a low monthly car, student loan, and other debt payments should help increase your credit score and reduce your interest rate and mortgage insurance. If you buy a house, don’t feel the need to buy the full amount for which you qualify. Buy what fits into your budget.
