Debt vs. Career Flexibility

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Anonymous User
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Debt vs. Career Flexibility

Postby Anonymous User » Wed Mar 25, 2015 1:53 pm

I graduated with 80K debt, though its a loan my parents took out and gave to me. So I pay them back monthly, with very low interest. In 1.5 years of biglaw, I've paid back over 20K. Thinking about making a change to public interest, or certain other avenues that would cut down salary dramatically, but would come along with a far higher job satisfaction, more manageable stress levels and hours, etc. At what debt level does that kind of change become realistic? I have enough in savings that I could write a check and pay off all my debt tomorrow (though my parents are cool with me extending the repayment period a few more years if I need). To what extent does that factor into the calculus?
Last edited by Anonymous User on Wed Mar 25, 2015 1:59 pm, edited 1 time in total.

itascot1992
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Re: Debt vs. Career Flexibility

Postby itascot1992 » Wed Mar 25, 2015 1:58 pm

Anonymous User wrote:I graduated with 80K debt, though its actually a loan my parents took out and gave to me. So I pay my parents back on a monthly basis, with a very low interest rate. In 1.5 years of biglaw, I've paid back over 20K, and now owe in the upper 50's. I'm thinking about possibly making a change to public interest law, or certain other avenues that would cut down my salary dramatically, but would come along with a far higher job satisfaction, more manageable stress levels and hours, etc. At what debt level does that kind of change become realistic? I have enough in my savings that I could write a check and pay off all my debt tomorrow if I wanted to (though my parents are cool with me extending the repayment period a few more years if I need). To what extent does that factor into the calculus?


First, you should cut that check to your parents. I don't see why you would want to say in your parents debt. They were gracious enough to loan you money, pay it back when you have it.

Second, do what makes you happy

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Re: Debt vs. Career Flexibility

Postby Anonymous User » Wed Mar 25, 2015 2:06 pm

itascot1992 wrote:
Anonymous User wrote:I graduated with 80K debt, though its actually a loan my parents took out and gave to me. So I pay my parents back on a monthly basis, with a very low interest rate. In 1.5 years of biglaw, I've paid back over 20K, and now owe in the upper 50's. I'm thinking about possibly making a change to public interest law, or certain other avenues that would cut down my salary dramatically, but would come along with a far higher job satisfaction, more manageable stress levels and hours, etc. At what debt level does that kind of change become realistic? I have enough in my savings that I could write a check and pay off all my debt tomorrow if I wanted to (though my parents are cool with me extending the repayment period a few more years if I need). To what extent does that factor into the calculus?


First, you should cut that check to your parents. I don't see why you would want to say in your parents debt. They were gracious enough to loan you money, pay it back when you have it.

Second, do what makes you happy


You think so? My dad is far too kind to me, and tries to always get me to pay less than I have been paying, since he wants me to keep saving and not have too much monthly burden. But from a financial standpoint, I sort of think it would make more sense to just get rid of the debt in a few big shots, and have it gone.

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Re: Debt vs. Career Flexibility

Postby Anonymous User » Wed Mar 25, 2015 2:10 pm

It seems like you are at the point now when it would be realistic to do it. You can pay back 80k of debt even on a public interest salary, but with your savings you'll really have no problem. Still I'd probably wait until you finish at least two years since few places will be willing to hire someone with less than 2 years experience. What kind of public interest are you talking about?
Last edited by Anonymous User on Wed Mar 25, 2015 2:11 pm, edited 1 time in total.

itascot1992
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Re: Debt vs. Career Flexibility

Postby itascot1992 » Wed Mar 25, 2015 2:10 pm

You said it has a very low interest rate... but that is an interest rate nonetheless. The loan provider is making money off of you the longer you hold onto your debt. The essence of saving is being at least partially undermined by the interest accruing (even if it is small).

Just my two cents

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BarbellDreams
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Re: Debt vs. Career Flexibility

Postby BarbellDreams » Wed Mar 25, 2015 2:12 pm

I would do the following:

1. Deplete my savings to pay debt off in full.

2. Once debt is completely gone, I would stash away ~20-25K in emergency funds. On a big law salary you can do this easily in 6 months assuming you're not trying to live a models and bottles lifestyle.

3. Once emergency fund is intact and debt is nonexistent, I would bolt for the public interest position you are interested in. Big law, with very few exceptions, sucks. Life is too short to slave away at a job you don't like with hours you don't have and the stress you don't need for money. You can't buy years of your life back.

itascot1992
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Re: Debt vs. Career Flexibility

Postby itascot1992 » Wed Mar 25, 2015 2:13 pm

BarbellDreams wrote:I would do the following:

1. Deplete my savings to pay debt off in full.

2. Once debt is completely gone, I would stash away ~20-25K in emergency funds. On a big law salary you can do this easily in 6 months assuming you're not trying to live a models and bottles lifestyle.

3. Once emergency fund is intact and debt is nonexistent, I would bolt for the public interest position you are interested in. Big law, with very few exceptions, sucks. Life is too short to slave away at a job you don't like with hours you don't have and the stress you don't need for money. You can't buy years of your life back.


+100

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Dog
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Re: Debt vs. Career Flexibility

Postby Dog » Wed Mar 25, 2015 2:14 pm

Well we could go into details about whether the interest rate is less than inflation/typical stock returns/etc. but seeing as this is a loan from your PARENTS I think paying them back is the right call, so long as you have enough for some living expenses.

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Re: Debt vs. Career Flexibility

Postby Anonymous User » Wed Mar 25, 2015 2:21 pm

BarbellDreams wrote:I would do the following:

1. Deplete my savings to pay debt off in full.

2. Once debt is completely gone, I would stash away ~20-25K in emergency funds. On a big law salary you can do this easily in 6 months assuming you're not trying to live a models and bottles lifestyle.

3. Once emergency fund is intact and debt is nonexistent, I would bolt for the public interest position you are interested in. Big law, with very few exceptions, sucks. Life is too short to slave away at a job you don't like with hours you don't have and the stress you don't need for money. You can't buy years of your life back.


My savings account is essentially the same as my debt load. But I also have about 40K in my stock account (which is up from a 15K initial investment a few years back). So I could cash out on that anytime (minus the tax on the gain), and thats where the emergency funds would come from.

You are right that life is too short. And its not like I'd be resigning myself to a life of destitute poverty. My wife and I will still have a combined income of around 100K. At the end of the day, I think happiness, balance, and time with loved ones is what I need and what I will never get if I continue on my current path in biglaw litigation. And its what I will regret not having when I ultimately look back.

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Re: Debt vs. Career Flexibility

Postby itascot1992 » Wed Mar 25, 2015 2:22 pm

Anonymous User wrote:
BarbellDreams wrote:I would do the following:

1. Deplete my savings to pay debt off in full.

2. Once debt is completely gone, I would stash away ~20-25K in emergency funds. On a big law salary you can do this easily in 6 months assuming you're not trying to live a models and bottles lifestyle.

3. Once emergency fund is intact and debt is nonexistent, I would bolt for the public interest position you are interested in. Big law, with very few exceptions, sucks. Life is too short to slave away at a job you don't like with hours you don't have and the stress you don't need for money. You can't buy years of your life back.


My savings account is essentially the same as my debt load. But I also have about 40K in my stock account (which is up from a 15K initial investment a few years back). So I could cash out on that anytime (minus the tax on the gain), and thats where the emergency funds would come from.

You are right that life is too short. And its not like I'd be resigning myself to a life of destitute poverty. My wife and I will still have a combined income of around 100K. At the end of the day, I think happiness, balance, and time with loved ones is what I need and what I will never get if I continue on my current path in biglaw litigation. And its what I will regret not having when I ultimately look back.


you already know what you want and need to do ! GOOD LUCK!

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Re: Debt vs. Career Flexibility

Postby J9ofDiamonds » Thu Mar 26, 2015 1:02 am

itascot1992 wrote:You said it has a very low interest rate... but that is an interest rate nonetheless. The loan provider is making money off of you the longer you hold onto your debt. The essence of saving is being at least partially undermined by the interest accruing (even if it is small).

Just my two cents


If your interest rate is low enough, you should make absolute minimum payments and invest in an index fund or some bonds (as long as the yield rate is higher than your interest rate).

Considering it's your parents, you should talk to them about it.

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Re: Debt vs. Career Flexibility

Postby Anonymous User » Thu Mar 26, 2015 10:13 am

J9ofDiamonds wrote:
itascot1992 wrote:You said it has a very low interest rate... but that is an interest rate nonetheless. The loan provider is making money off of you the longer you hold onto your debt. The essence of saving is being at least partially undermined by the interest accruing (even if it is small).

Just my two cents


If your interest rate is low enough, you should make absolute minimum payments and invest in an index fund or some bonds (as long as the yield rate is higher than your interest rate).

Considering it's your parents, you should talk to them about it.


I can see why that would be a benefit, but I can also see why my dad would want his money back now if possible, since it was them doing me a favor.

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Re: Debt vs. Career Flexibility

Postby Anonymous User » Thu Mar 26, 2015 11:06 am

Your parents don't seem dying to be paid back anytime soon (and, in fact, you've mentioned that they've expressed a preference for you to save instead of paying them back). I'd talk over the public interest decision with them -- part of being in debt to them means that you should probably include them a bit more than you might otherwise. If they are supportive of you going the public interest route, and understand that it might mean a slightly longer payoff time frame, I think you have more than sufficient assets to leave and head to public interest now.

Regardless, I would not dump all of your liquid savings into paying off your loans. At most, if your parents aren't supportive of PI, or you really highly value the idea of putting this behind you, I would arrange some sort of accelerated 5-year payoff schedule. Liquidity has inherent value and this seems like the sort of situation in which your debt has extraordinarily low costs (both financial and personal).

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Re: Debt vs. Career Flexibility

Postby Anonymous User » Thu Mar 26, 2015 11:24 am

Anonymous User wrote:Your parents don't seem dying to be paid back anytime soon (and, in fact, you've mentioned that they've expressed a preference for you to save instead of paying them back). I'd talk over the public interest decision with them -- part of being in debt to them means that you should probably include them a bit more than you might otherwise. If they are supportive of you going the public interest route, and understand that it might mean a slightly longer payoff time frame, I think you have more than sufficient assets to leave and head to public interest now.

Regardless, I would not dump all of your liquid savings into paying off your loans. At most, if your parents aren't supportive of PI, or you really highly value the idea of putting this behind you, I would arrange some sort of accelerated 5-year payoff schedule. Liquidity has inherent value and this seems like the sort of situation in which your debt has extraordinarily low costs (both financial and personal).


This sounds like the approach my parents would want me to take (i.e. just extend the payback period however long I need). It was my dad who always tried to convey to me the importance of having balance, spending time with family, putting health and happiness above all else (not at the total expense of all else, but finding reasonable compromise). So they are supportive of any decision I would make that would substantially lower my salary, so long as it in fact creates more satisfaction, balance in my life, etc.

As much as I would like to just write a check for 58K and have it done, I know my parents would prefer the alternate approach. I just want to be sure that the extended payoff approach is the best for me. And if there is truly an inherent value in liquidity, then maybe it makes more sense.

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Re: Debt vs. Career Flexibility

Postby Anonymous User » Thu Mar 26, 2015 11:30 am

Anonymous User wrote:
Anonymous User wrote:Your parents don't seem dying to be paid back anytime soon (and, in fact, you've mentioned that they've expressed a preference for you to save instead of paying them back). I'd talk over the public interest decision with them -- part of being in debt to them means that you should probably include them a bit more than you might otherwise. If they are supportive of you going the public interest route, and understand that it might mean a slightly longer payoff time frame, I think you have more than sufficient assets to leave and head to public interest now.

Regardless, I would not dump all of your liquid savings into paying off your loans. At most, if your parents aren't supportive of PI, or you really highly value the idea of putting this behind you, I would arrange some sort of accelerated 5-year payoff schedule. Liquidity has inherent value and this seems like the sort of situation in which your debt has extraordinarily low costs (both financial and personal).


This sounds like the approach my parents would want me to take (i.e. just extend the payback period however long I need). It was my dad who always tried to convey to me the importance of having balance, spending time with family, putting health and happiness above all else (not at the total expense of all else, but finding reasonable compromise). So they are supportive of any decision I would make that would substantially lower my salary, so long as it in fact creates more satisfaction, balance in my life, etc.

As much as I would like to just write a check for 58K and have it done, I know my parents would prefer the alternate approach. I just want to be sure that the extended payoff approach is the best for me. And if there is truly an inherent value in liquidity, then maybe it makes more sense.


Have you actually shared what sort of interest you're paying to your parents? I suppose this is relevant.

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Re: Debt vs. Career Flexibility

Postby Anonymous User » Thu Mar 26, 2015 11:49 am

^^^

The loan incurs about 3% interest. And my dad isn't even charging me the interest, which is why the loan is pretty much interest free. I fought him hard to let me pay the interest since I didn't want them to have any additional burden, but they were adament about it. Its a fine line since I sometimes feel like they are babying me, but at the same time, they are just being kind, so I can only fight to a certain extent.

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Re: Debt vs. Career Flexibility

Postby Anonymous User » Thu Mar 26, 2015 12:22 pm

Anonymous User wrote:^^^

The loan incurs about 3% interest. And my dad isn't even charging me the interest, which is why the loan is pretty much interest free. I fought him hard to let me pay the interest since I didn't want them to have any additional burden, but they were adament about it. Its a fine line since I sometimes feel like they are babying me, but at the same time, they are just being kind, so I can only fight to a certain extent.


Ok, so this is really a personal decision then. From a financial standpoint, most households with ~$100,000 in income will have little difficulty paying off ~$50,000 in loans (although your specifics--e.g., 6 kids and a giant mortgage--could change that). And, from a financial standpoint, a 0% interest loan is an exceedingly favorable thing. That said, on the other hand, you have your relationship with your parents.

From what you've said, though, it sounds to me like starting the PI job as soon as you're ready and continuing to repay your parents at your current rate is TCR. If the loan starts to create tensions between you and your parents, you have the liquidity to pay it off tomorrow. But right now, there's no need for you to lose that substantial amount of liquidity for essentially no benefit. Your parents are generous enough to have lent you money for free -- and, in fact, they want that loan to enable to you to bolster your savings, pursue a rewarding career, and potentially pay for things like a house and a family further down the road. Your parents aren't wrong: having that extra $50,000 will be helpful to you living a happy, balanced, and financially secure life. So long as you continue to feel comfortable taking advantage of their generosity, do.




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