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TDot’s Tips: Tips for the pre-L’s on $$$

Posted by T. Greg Doucette on May 29, 2010 in TDot's Tips

Judging by some of the search queries bringing folks here to law:/dev/null, those of you accepted into the Class of 2013 are scurrying around online looking for law school advice before orientation starts in a couple months.

First, CONGRATULATIONS! :D I was just in your shoes not too long ago, I remember what it was like, and I’m excited for you!

Second, chill out ;) See this post from Law School Ninja — use this summer to relax, not to try and prepare for law school. Preparation is not gonna make a lick of difference, I assure you :)

Third, assuming you’re going to ignore that previous paragraph, use the summer to learn how to manage your finances. I’ve met a lot of law students from a lot of law schools who barely know how to balance their checkbooks.1  Law school is stressful enough without being worried about money.

Here are a few tips I’ve put together that might be able to help you in your first year:

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1) CREATE A BUDGET
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A simple sample budget

This one probably seems like common sense, but it’s probably the most important thing you can do financially — make sure you’ve got a decent idea of how much money you’ve got coming in, and how much you’ll have going out.

I’ve seen simple budgets sketched out on a piece of notebook paper; I’ve seen needlessly complex budgets using crazy functions in Microsoft Excel that I didn’t even know existed :beatup:

No matter what level of complexity you use, the important thing is to try and stick to the budget whenever possible.

To the right is a sample budget I put together for this blog entry, which I’ll probably end up using for the upcoming year. The main thing is to have an easy-to-reference sheet where you can see your major expenses and income sources.

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2) SET ASIDE $$ IN SAVINGS
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You might notice in that sample budget that I’ve included “Deposit to Savings Account” as an expense.

One of the weird things about 1L life is that you’re strongly strongly strongly discouraged from having any outside employment at all.2 That means if something unexpected happens, you don’t have the option of working overtime or extra shifts to make the $$ for it.

So if you’re living off student loans like most of us, your financial aid refund is all you get for the entire semester. Set aside a chunk of it early (I’d suggest 10%) into a savings account or some other safe spot, before you get tempted to spend it.

That way if something unexpected does happen, you’re covered. And if not, you’ll have extra money to use on whatever you want later on :)

And put it explicit in the budget so you actually remember to set it aside, rather than forgetting it’s supposed to be saved and then inadvertently spending it on something. Like highlighters ;)

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3) RENT THE LEAST EXPENSIVE PLACE YOU’RE COMFORTABLE LIVING IN
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Most of the expenses you’ll have in a given month will be in the sub-$100 range, and a good chunk of them (e.g. cable TV, fast food, etc) can be given up if you get into a real financial bind mid-semester.

That’s not the case with the rent ;)

As you’re searching around your new city for an apartment, make sure to do a comprehensive comparison among your options — then pick the least expensive place you’re still comfortable living in.

I’ve got a classmate who I’ll leave nameless, but who definitely isn’t stupid. When he signed his lease back in August, he picked a newer apartment complex up the road from me with all kinds of fancy amenities — gated entrance, nice pool, nicer gym, detached garage, etc etc. A really swank place, about $75/mo more than mine.

Then when late November got here, he was running short on his funding and was stressed out trying to figure out how to cover his December bills… right as he had to start studying for final exams :beatup: Luckily for him everything worked itself out, but you don’t need that pointless stress.

For that $375 he paid more than me over the 5 months of Fall semester, he used the nice pool all of 0 times, went to the nice gym just the first month before studying took up his free time, and spent a good chunk of his life at the law school while his detached garage was empty. Plus his summer internship is in another town so he’s trying to find someone willing to sublease for just a couple months (thus far no takers).

Now if a potential apartment just screams to you “LIVE HERE!“, then by all means go with it. Preferably after getting psychiatric help for thinking your apartment is screaming to you :* But if you can handle a smaller pool or gym, or forgo the entrance gate, consider giving up those amenities for the $$ you’ll save over the course of the year.

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4) USE YOUR REFUND TO PAY DOWN YOUR CREDIT CARDS
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By the time folks reach law school, odds are good they have at least one credit card. An April 2009 study found graduating students on average have 4.6 cards carrying $4,100 in debt.

Despite the high interest rates many credit cards charge, they can provide an invaluable level of financial flexibility. I’ve had to use mine on more than one occasion for textbooks or tuition when financial aid didn’t stretch far enough.

But that doesn’t mean you can’t trim the amount of interest you’re paying for that flexibility :D

If you get a financial aid refund, throw it all at your highest interest rate credit card(s). You’ll end up using your cards throughout the semester for basic purchases and paying bills, but you’ll be paying less in daily interest than if you kept the $$ in your checking account while making minimum payments on the credit card(s).

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5) “YOU’RE A LAW STUDENT, NOT A LAWYER”
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No matter how you handle your finances, or whether you follow any other money-related tips you come across, remember: you’re a law student, not a lawyer ;)

The mansion, home theater, luxury car, yacht and all the other accoutrements of being an attorney will come to you in due time. But that time isn’t going to be the 3 years while you’re in law school3

Live like a lawyer now and you’ll end up like my friend, stressing over cash flow when you need to be studying for Contracts. Live frugally and you’ll still have the resources to still enjoy yourself :spin:

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That’s all I’ve got for this post — hopefully you’ll find at least one of these tips useful!

Good luck to all of you, and congratulations again on your acceptance! :) If you have any questions on anything, let me know! :D

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Past TDot’s Tips entries:

  1. It’s even more amazing considering some of these folks will be managing finances for their law practices… []
  2. To underscore the point, the ABA actually has a rule saying you can’t work more than 20 hours a week :surprised:  []
  3. Unless you hit the lottery. Don’t hold your breath. []

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