Monthly/Annual Savings Goals

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Pokemon

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Re: Monthly/Annual Savings Goals

Postby Pokemon » Mon Jun 05, 2017 11:29 am

CPAn00b wrote:
Pokemon wrote:Also 5k a month in NYC is extremely difficult for a first year. Like you all do realize that taxes eat a huge chunk of income and op has debts and rent is expensive and we tend to underestimate how much we spend. This is key, every year people have unanticipated or unplanned expenses that take a chunk of your income.


Yea 5k is def hard if you have debt, but OP is only making 1k/month payment. I know I personally could save 3.5-4k if I were him. This is an argument, that seems to be recurring on TLS, bewtween how much you want to save and your lifestyle. It's personal finance and people will have different objectives and preferences. Some people want to pay 3k/month for a studio. You do you, boo.


I tend to give people realistic advise on average. I mean Charlie from its all sunny in Philadelphia can probably save 7,500 by eating trash and sleeping in the floor of his office but I do not advise that because it is not realistic. 5k a month is not realistic for NYC first year.

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Mon Jun 05, 2017 11:42 am

nyc 5th year, with wife + 2 kids. save about 6k a month. no debt, and wife doesn't work so no child care expense.

what do people do with all this cash? thinking of branching out into real estate

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Mon Jun 05, 2017 11:53 am

Secondary market, making $160k; save about 1.5k/month; 500 cash and the rest into investing while I work on paying down CC and loans. Currently have about 10k cash; ~25k in investments. Should be good with CC by end of summer into fall, then will focus on loans, but first want to have about 30k cash in the bank so I can consider looking at a house/town-home/condo rather than paying out the ass for an apartment. Not sure of the long-term goals here, but still manage to have fun and do some travel. Compounding interest, it's is a blessing and a curse.

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Mon Jun 05, 2017 12:32 pm

Incoming first-year here. I've budgeted major expenses, and plan to max 401k, max Roth through separate account, and save about $600/month on top of that, putting majority of all other cash to the massive debt load. Question for associates in similar debt situations--where are you placing the money that you save? After you've accumulated an emergency fund, are you just continuing to put money into that savings account, into index funds, or what? Like many others, I've been wrestling with whether to save cash or pay debt, and from research, the consensus seems to be you get the better return on your money by paying down 4-7% loans than holding it in a low-interest savings account or even putting it into volatile index funds. Thoughts?

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Re: Monthly/Annual Savings Goals

Postby Mr. Peanutbutter » Mon Jun 05, 2017 12:39 pm

Depends on what your long term goals are. I think paying an aggregate 6.5% on my loans to keep them in PAYE is worth the insurance in case I switch to gov or low income work and get my loans forgiven in the future. Others are fairly certain they are grinders and will refi and dump boatloads into their debt. It's a much more complicated question than simple "can't get 7% from the market." The value of income based repayment options and general forgiveness is a lot more than a rounding error.

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Re: Monthly/Annual Savings Goals

Postby Yugihoe » Mon Jun 05, 2017 1:08 pm

Anonymous User wrote:nyc 5th year, with wife + 2 kids. save about 6k a month. no debt, and wife doesn't work so no child care expense.

what do people do with all this cash? thinking of branching out into real estate


Where are you going to get real estate? Are you looking at rental properties to invest in?

I'm just invested in index funds, about 90-10 stock/bonds. Don't want to buy a primary residence until I leave biglaw, because NYC is too expensive, and I don't want to commute from somewhere far.

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Re: Monthly/Annual Savings Goals

Postby Yugihoe » Mon Jun 05, 2017 1:12 pm

Mlk&Ckies wrote:I'm not saying this with any amount of authority, just curious: I wonder how much of this super frugality for big law could be penny wise and pound foolish? Like, if saving an extra $800-1000/month by living with two roommates or commuting 30+ minutes each way is offset by burning out faster. Boneus your third or fourth year alone would outweigh those savings if it means you make it 3-5 years instead of 2.

Just throwing around that idea. It's only anecdata, but two acquaintances I know who pulled the super cheap route (one in EV with three roommates in a third floor walk up, the other in a metro-north suburb with fiancée) both left BL less than 2 years out from starting.


I think you're def on to something in terms of commute. Makes logical sense you'll burn out faster if you have a 45 min-1 hour commute each way on top of your big law gig. I don't think it's feasible to do more than 20-30 mins. Idk about the roommate situation. Really depends who your roommates are and if you have any drama or noise or rodents or something. If you have no issues, I don't see the problem. Definitely preferable to find a SO and live with him/her. NYC is an expensive city to be single.

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Mon Jun 05, 2017 1:30 pm

CPAn00b wrote:
Anonymous User wrote:nyc 5th year, with wife + 2 kids. save about 6k a month. no debt, and wife doesn't work so no child care expense.

what do people do with all this cash? thinking of branching out into real estate


Where are you going to get real estate? Are you looking at rental properties to invest in?

I'm just invested in index funds, about 90-10 stock/bonds. Don't want to buy a primary residence until I leave biglaw, because NYC is too expensive, and I don't want to commute from somewhere far.


yes rental properties. not in nyc, but was thinking NJ, CT, LI, upstate NY (basically anything I can afford). currently have in stocks, but with real estate you get benefit from the leverage aspect. no one will give me a mortgage on my brokerage account. seems like a better play long term

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Re: Monthly/Annual Savings Goals

Postby Yugihoe » Mon Jun 05, 2017 1:36 pm

Anonymous User wrote:
CPAn00b wrote:
Anonymous User wrote:nyc 5th year, with wife + 2 kids. save about 6k a month. no debt, and wife doesn't work so no child care expense.

what do people do with all this cash? thinking of branching out into real estate


Where are you going to get real estate? Are you looking at rental properties to invest in?

I'm just invested in index funds, about 90-10 stock/bonds. Don't want to buy a primary residence until I leave biglaw, because NYC is too expensive, and I don't want to commute from somewhere far.


yes rental properties. not in nyc, but was thinking NJ, CT, LI, upstate NY (basically anything I can afford). currently have in stocks, but with real estate you get benefit from the leverage aspect. no one will give me a mortgage on my brokerage account. seems like a better play long term


True, but you can't rely on appreciation, unless you can hold for a long time. If you can find property thats cash flow positive and isn't going to be a lot of work, jump on it. Being a landlord can suck unless you get a property manager, but that will affect cash flow.

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Re: Monthly/Annual Savings Goals

Postby stannis » Mon Jun 05, 2017 3:27 pm

Not biglaw, high cost of living mid-sized city, salary in the 90k range, planning to save about $1500 a month. No loans.

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Mon Jun 05, 2017 5:39 pm

Lateraling to a market-paying Chicago firm as a fourth year. Hoping to save $7k/month. No loans.

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Mon Jun 05, 2017 7:06 pm

OP Here. Thank you for all the input everyone - it's really nice to have so much perspective.

Just to add some details - I have one roommate already (two-bedroom) in as high a COL city as it gets,, and 2500 is all-inclusive of utilities, with a very decent gym and other amenities (it's a nice place). I'm a sub-ten minute walk from work. I could probably find a place somewhere in the 1800-2200 range, but don't feel like it would be that worth it when you consider commute, gym, utilities, etc. I'm mostly very happy with where I live.

I'm transactional/corporate for a heavily regulated industry. I think this could transition extremely well into government or in-house which are both serious contenders potentially within a few years. I'm mostly doing REPAYE b/c I determined I don't want to stress or even think about loans at ALL and highly value this. Sure, long-term this will cost more but I honestly don't care about loans hanging over my head basically forever if it's only a 10% salary cut basically.

I'm currently not maxing but 401k, but getting kinda close. I know it's extremely good value, and will likely do this after I have a sizeable nest-egg of liquid savings/emergency fund.

I COULD be saving quite a bit more, but I send a not insubstantial amount home every month (came from a relatively poorer background).

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Pokemon

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Re: Monthly/Annual Savings Goals

Postby Pokemon » Mon Jun 05, 2017 7:19 pm

Anonymous User wrote:OP Here. Thank you for all the input everyone - it's really nice to have so much perspective.

Just to add some details - I have one roommate already (two-bedroom) in as high a COL city as it gets,, and 2500 is all-inclusive of utilities, with a very decent gym and other amenities (it's a nice place). I'm a sub-ten minute walk from work. I could probably find a place somewhere in the 1800-2200 range, but don't feel like it would be that worth it when you consider commute, gym, utilities, etc. I'm mostly very happy with where I live.

I'm transactional/corporate for a heavily regulated industry. I think this could transition extremely well into government or in-house which are both serious contenders potentially within a few years. I'm mostly doing REPAYE b/c I determined I don't want to stress or even think about loans at ALL and highly value this. Sure, long-term this will cost more but I honestly don't care about loans hanging over my head basically forever if it's only a 10% salary cut basically.

I'm currently not maxing but 401k, but getting kinda close. I know it's extremely good value, and will likely do this after I have a sizeable nest-egg of liquid savings/emergency fund.

I COULD be saving quite a bit more, but I send a not insubstantial amount home every month (came from a relatively poorer background).


You should have maxed your 401k. There really is no excuse for people not doing that. Emergency funds in biglaw is slightly overrated since you will probably get some warning before being shitcanned. Even a two month warning is income of like 16k after tax. Also, it is not like you cannot save while maxing out your 401k; when you consider the tax benefit, it is not like you are giving up 18k on liquidity for 401k.

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Re: Monthly/Annual Savings Goals

Postby Barrred » Mon Jun 05, 2017 8:10 pm

Anonymous User wrote:the consensus seems to be you get the better return on your money by paying down 4-7% loans than holding it in a low-interest savings account

This seems to be more than just the consensus, its a hard economic reality that you are losing money for every dollar you leave for a year in a savings account that has a lower interest rate than your student loans.

Anonymous User wrote: I'm mostly doing REPAYE b/c I determined I don't want to stress or even think about loans at ALL and highly value this.

It seems odd to me to put a lot of effort/thought into wealth accumulation/maximizing investment returns while knowingly ignoring a pretty crucial aspect of your overall return on your investments (especially if you have 6%+ rates on your loans). Paying off your loans with REPAYE over 25 years could very well eat up all of your net returns elsewhere. Am I missing something?

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Re: Monthly/Annual Savings Goals

Postby Mojosodope » Mon Jun 05, 2017 8:17 pm

Barrred wrote:
Anonymous User wrote:the consensus seems to be you get the better return on your money by paying down 4-7% loans than holding it in a low-interest savings account

This seems to be more than just the consensus, its a hard economic reality that you are losing money for every dollar you leave for a year in a savings account that has a lower interest rate than your student loans.

Anonymous User wrote: I'm mostly doing REPAYE b/c I determined I don't want to stress or even think about loans at ALL and highly value this.

It seems odd to me to put a lot of effort/thought into wealth accumulation/maximizing investment returns while knowingly ignoring a pretty crucial aspect of your overall return on your investments (especially if you have 6%+ rates on your loans). Paying off your loans with REPAYE over 25 years could very well eat up all of your net returns elsewhere. Am I missing something?


PAYE and REPAYE pay some of the interest if your calculated payment is low enough; it usually is during stub and first year based on using prior tax returns.

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Mon Jun 05, 2017 9:14 pm

Barrred wrote:
Anonymous User wrote:the consensus seems to be you get the better return on your money by paying down 4-7% loans than holding it in a low-interest savings account

This seems to be more than just the consensus, its a hard economic reality that you are losing money for every dollar you leave for a year in a savings account that has a lower interest rate than your student loans.

Anonymous User wrote: I'm mostly doing REPAYE b/c I determined I don't want to stress or even think about loans at ALL and highly value this.

It seems odd to me to put a lot of effort/thought into wealth accumulation/maximizing investment returns while knowingly ignoring a pretty crucial aspect of your overall return on your investments (especially if you have 6%+ rates on your loans). Paying off your loans with REPAYE over 25 years could very well eat up all of your net returns elsewhere. Am I missing something?


To be honest, I'm quite new to implementing a plan for wealth accumulation and wouldn't claim to have thought or researched everything nearly enough. But I'm learning every day.

Part of what held me back was catching up on high-interest debt (from bar-study period and post-bar vacation); as well as having to sink a lot into retaking the bar. I feel like I can now finally look forward to being smart about this, and the 401(k) maxing is a priority there. I'm only on track to be a few thousand shy of the 18k max, so should be able to account for that by the year's end with minimal changes to my savings goals.

As for doing REPAYE - as I've indicated, I place a lot of value in the security of it at the moment to see how my first year or two works out career-wise. Hopefully smart financial decisions elsewhere can help offset the long-term loss I'm eating here. Once I feel more certain of where I may be long-term (if it's soon enough), I may change course and dump savings into loans and rush to pay off everything.

To be clear, my goal isn't absolute efficiency (I acknowledge that taking the long-term interest loss isn't optimal in terms of pure cash). However, I want to live comfortably in my 20s, while retaining some sense of security and otherwise making reasonably responsible decisions.

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Re: Monthly/Annual Savings Goals

Postby Mr. Peanutbutter » Mon Jun 05, 2017 9:38 pm

Mega debt big law associates do and should use different assumptions from conventional wisdom. Flaming out second or third year with no cash savings is really bad, even if you have a $30k 401k and half your debt paid down. You can't live off of what you've paid down on your debt, and if you end up going gov work or non profit (which is probably more likely for attorneys than most other professionals) then you've essentially thrown $100k+ away if the government forgives that debt anyway.

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Mon Jun 05, 2017 10:30 pm

CA 3rd year. I am saving around $7000-8000 a month, including 401K. Not really living that frugally and could definitely be saving more. I fly around to visit friends and blow $200-300 on nice dinners at least once a month.

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Thu Jun 08, 2017 2:18 am

Anonymous User wrote:CA 3rd year. I am saving around $7000-8000 a month, including 401K. Not really living that frugally and could definitely be saving more. I fly around to visit friends and blow $200-300 on nice dinners at least once a month.


Are you living on <$2k month, or are you married/living with parents/have no loans/other income sources??

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Re: Monthly/Annual Savings Goals

Postby PeanutsNJam » Thu Jun 08, 2017 9:55 am

There's something to be said on capitalizing on your youth and being more liberal with your consumption vs living like you make 60k so you can have a pool in your house that you never touch when you're 55.

I mean, if you really want to pay down your debt ASAP, I get living like you're on a 60k salary and then paying down your debt aggressively, but if you're already only planning on 1k/month towards loans, 3k/month towards savings seems fine.

It's okay to go to broadway shows, have nice dinners once in a while, buy some nice clothes, get that apple version of an amazon echo, and maybe travel and fly first class once every few years when you have like 200k+ total comp in your first year. At least get the economy+ seats for extra legroom.

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Fri Jun 09, 2017 12:16 am

Anonymous User wrote:
Anonymous User wrote:CA 3rd year. I am saving around $7000-8000 a month, including 401K. Not really living that frugally and could definitely be saving more. I fly around to visit friends and blow $200-300 on nice dinners at least once a month.


Are you living on <$2k month, or are you married/living with parents/have no loans/other income sources??


~$4K. Not married, have roommates in SF, finished paying off loans, no other income sources.

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Re: Monthly/Annual Savings Goals

Postby Anonymous User » Fri Jun 09, 2017 2:31 am

Anonymous User wrote:
Anonymous User wrote:
Anonymous User wrote:CA 3rd year. I am saving around $7000-8000 a month, including 401K. Not really living that frugally and could definitely be saving more. I fly around to visit friends and blow $200-300 on nice dinners at least once a month.


Are you living on <$2k month, or are you married/living with parents/have no loans/other income sources??


~$4K. Not married, have roommates in SF, finished paying off loans, no other income sources.


Ah...just realized you're counting 401k contributions as equivalent to after-tax cash.

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Re: Monthly/Annual Savings Goals

Postby shock259 » Sat Jun 10, 2017 2:57 am

3rd year making NY market salary in a secondary market. Take home each month (after taxes, 401k, insurance, etc.) is about $10k. Save about $5.5k/month. Rest goes to the mortgage and to pay off the monthly credit card balance.

It would be extremely difficult to save $5k/month as a first year in NY. I was living pretty thrifty when I was there and it was closer to $3k, if I remember right.

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Re: Monthly/Annual Savings Goals

Postby Hutz_and_Goodman » Sat Jun 10, 2017 7:59 am

NYC 2nd year. Maxing out 401k and saving 1k a month on top of that. We have a child and daycare is 2k a month. We're luckily buying an apartment and the tax advantage of owning will help (mortgage interest deduction).

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Re: Monthly/Annual Savings Goals

Postby TatteredDignity » Sat Jun 10, 2017 9:18 am

Hutz_and_Goodman wrote:NYC 2nd year. Maxing out 401k and saving 1k a month on top of that. We have a child and daycare is 2k a month. We're luckily buying an apartment and the tax advantage of owning will help (mortgage interest deduction).


Confused about this. You're adding an expense--interest payments--and then recouping 25-30% of that expense due to deductibility. How is that a net gain?



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