Avoid debt, save or invest? Forum

[BLKyopo2018]

I will be attending a lower T14 with the goal of working in biglaw for at least three years, after which I hope to lateral to a secondary market and/or move in-house. My school has a strong record for placing graduates at large firms, but I understand that nothing is ever guaranteed.

I have never invested but realize that should change soon. Due to the significant cost of attending law school, however, I'm unsure how best to allocate my savings.

Here is my situation:

Maximum debt at graduation: $70,183 (incl. fees, interest), all Stafford loans

Current savings KRW80,000,000 (all liquid); I am hesitant to exchange much of this money due to the incredibly unfavorable exchange rate (see http://www.xe.com/currencycharts/?from= ... SD&view=1Y)
*This does not include income from summer work, e.g. 2L SA
*Also does not include COL contributions from my spouse (amount uncertain, if any)

No current investment portfolio (hence my reason for reaching out)

No retirement fund

Married, spouse has modest retirement savings

Hoping to start a family during 3L (if I have a job) or soon thereafter

Hoping to have enough for a downpayment on a house by the end of my three years in biglaw, if not sooner

My main questions are:
1.1 Should I use my savings to avoid debt (since I am set on biglaw); try to save, at minimum, $50,000 toward a downpayment; or invest all of it?
1.2 If one of the latter options, how should I invest this $50,000/$70,000ish, considering I will need access to it in the relative near term?
2. Should I put some of the savings into an IRA/Roth IRA? If so, how much?
3. Any advice with regard to exchanging my savings to USD or investing in international markets?

At present, I am considering taking the full $20,500 Stafford loan for the first year as a hedge in case I totally bomb, which would force me to change my goal from biglaw to forgiveness-eligible options. If I do well, I can start aggressively paying down the loan and/or use my savings to minimize loans during 2L and 3L. This would also allow me to wait out the exchange market for a more favorable rate. But again, if I did this I'm not sure how best to invest money in KRW in the meantime.

As you can tell, I am totally new to this. Would be extremely grateful for any advice.

Thanks in advance!

[BLKyopo2018]

Anyone...?

[Kinky John]

If I had $70k laying around I would probably put most of it into a combination of retirement and investment accounts, holding on to $10-15k for emergency/discretionary spending.

I think it would be silly not to take out loans. $70k in the bank/invested and $70k in debt is better than 0 debt and 0 in the bank.

But you should speak to a financial adviser, not me.

[withoutapaddle]

I'd say invest the 70K. I used a conservative ROI of 6%

You'd have $83,371.12 to pay off the 70K loan you would take out to cover COA. That leaves you with $13,371.12 when you graduate, and debt free.

Initial investment 70,000
ROI 6%

Year 1: 74200
Year 2: 78652
Year 3: 83371.12

[gnomgnomuch]

I'd say invest the 70K. I used a conservative ROI of 6%

You'd have $83,371.12 to pay off the 70K loan you would take out to cover COA. That leaves you with $13,371.12 when you graduate, and debt free.

Initial investment 70,000
ROI 6%

Year 1: 74200
Year 2: 78652
Year 3: 83371.12

But there's no guarantee he'd make a profit. I'd at the very least keep 15k or so just in case something happened... you never know what might happen!

Personally, the prospect of attending a T-14, graduating debt free (even if you wipe out your savings) and then entering big-law to start saving up is appealing. Plus, if you strike out, you won't have the threat of debt hanging over you and might be able to secure a non big-law position that wouldn't screw you financially.

[legends159]

I'd say invest the 70K. I used a conservative ROI of 6%

You'd have $83,371.12 to pay off the 70K loan you would take out to cover COA. That leaves you with $13,371.12 when you graduate, and debt free.

Initial investment 70,000
ROI 6%

Year 1: 74200
Year 2: 78652
Year 3: 83371.12

Legal hiring is correlated with market conditions. Markets could tank in the next few years and then he'd be scrambling and selling, thus locking in the loss - and all that with no income to utilize the tax losses. He'd be buying high and selling low. Investing is a long game - not a 3 year game.

I would recommend you use the funds to pay for law school. You should invest is a safe instrument such as a CD or an online saving account the COA for years 2 and 3.

When you get out into the work force, with no debt you can save the max in 401K/IRA and take advantage of the tax benefits. This beats investing now, accruing interest and then paying back loans when you're working because you might not be able to max out your tax advantaged space.

[Kinky John]

With OP's goals, paying off the $70k over time makes much more sense.

[legends159]

Whether it makes sense is a question of whether OP can get a better ROI by investing the money vs. the interest from student loans. Isn't stafford loans at 6.8%? There's no investment right now that returns that amount without tremendous risk.

[Tiago Splitter]

Assuming you have earned income during these next few years I'd at least toss $5500 each year in to a Roth IRA. Use the rest to avoid Grad Plus loans. 4% origination fee is killer.

[starry eyed]

I am faced with a similar decisions of whether to pay 70k in total expenses in school out of pocket or take out loans. I decided to take out 30k in loans so in the off chance that i work for the govt or PI, they will cover the 300 monthly loan repayment (about what 30k would cost) for 5 years. But it doesn't make much sense to bet against 6.8 interest in hopes that your invetment will return more than that IN THIS MARKET that's at an all-time high. So far the market has returned about 3% so far this year; i see years of low or negative returns ahead of us.