Help a Reader: Budget Tips

Here's an email I recently received:

I am currently in graduate school. I hope to graduate with $60,000 in loans but this may end up being $80,000. The amount will depend on the amount of scholarships, jobs I can get next year. What kind of budget would you suggest with the following goals in mind: Possible potential salary is 160,000, in a relatively expensive city (this will probably only affect rent), I want to save (retirement, emergency and general savings) aggressively and pay off debt aggressively. What should my budget look like with these things in mind?

What would you suggest for her?

Comments

[Green Panda]

When you get your first full-time paying job, keep your expenses as low as possible for at least a year or two. Room with 1-2 people. It'll cut your expenses a bit. See if you can get a graduated loan payment. Use a snowball for your debt repayment. Eat out rarely for the first year.

[JimL]

With loans of that size, you will not be able to do much with respect to retirement savings, etc. until these are paid off.

When you start working, put $1000 into an emergency fund. You will need to find something with cheap rent and more than likely will need to find a roomate. Forget eating out for awhile as well.

Given the economic environment, you will probably have to settle for a lower salary. You may even need to think about a part-time job during nights or weekends for a period of time.

[Shaun Connell]

I'm a bit of a radical, and the idea of debt simply horrifies me (I'm in the middle of my first year in school, and I'm debt free without a scholarship), so understand this might not be for everyone. But here's what I'd do:

1. $5,000 emergency fund. Given your situation and the amount of money you need, this should be in the ballpark of what you'd need to not "sink" supposing a loss of job or something else.

2. Figure out what's necessary for "basic survival." In other words, the basics of food, clothing, insurance, transportation, etc. The only "luxuries" being a $100 to "blow" on Saturday.

2. Everything else goes to paying off debts.

[Miss M]

Roomates to split expenses, can you live near mass transit so you don't need a car? Try to keep your expenses like they were in college, though you may need to invest in a good wardrobe. For retirement try to take advantage of a 401k or other plan your employer offers. Definitely start saving and build an emergency fund, but those big student loans should be your focus. With that high of a salary you can't deduct the interest.

[Chris]

You sound like you are in a good spot to me! Debt for consumerism is bad, debt for growth is good! Imagine if you had skipped grad school because you were afraid of 80k in debt and instead made $60,000 a year. That would be a loss of $4.8 million over 30 years! So it is the best investment you can make.

And, the interest on your student loans might be tax deductible, so it might be OK to let those ride. If you have any other debts pay those first. But, you are in a good place to save extremely effectively. If you are used to living a student lifestyle, hold yourself to it for a few more years! It might be hard when some of your friends are going out and buying nice cars right away, but it will be well worth it in the long run.

[James]

What I'm going to say is completely different than everyone else. But remember I am in a similar boat here. I'm graduating with my masters in May and currently have about $80k in debt, all student loans. My highest loan rate is about 7% and if that is the same case for you, what I would suggest is that you build your emergency reserve in case something happens. If you're living in an expensive place, get enough to cover at least the first month. This is not money to cover frills, just your rent, utilities, etc. (and definitely get a roommate for the first year or two if you can). My salary will not be as high as your initial one, but I'm impressed that it could be that high as a entry level position.

What I recommend spelled out, build emergency fund a few thousand, pay off the loans with the highest rate first at a slightly higher rate, if possible, make the loans into a 5 or 10 year, and use all of the benefits possible, auto withdraw from banks, pay on time, etc. If you can, try to pay off some of the interest now that way it'll be less later on. But the main thing is to keep things simply and try to have them paid off. My starting salary I'm hoping is somewhere around 55-65k I'm hoping at the bare min, realistically, I'm hoping for somewhere around 70k. With that salary, I'm trying to pay off my 80k debt load within 5-10 years. Mind you, I'm also going to try to get married in 2 years which will be another big expense, but planning for it now. Budgets are key though, once you know your true salary, you'll be able to budget very easily. And if you do have a salary as large as that, you could pay off your debt within 2 years easy if you know what your doing. Good luck!

So you are a law student, I guess. First, understand you aren't rich. I think that's the most important thing. Most people just starting out and making that type of coin have a tendency to think they are rich. You aren't.

Second, rent. Unless you get one hell of a deal on a house, I think renting makes sense while you tackle the debt.

Third, pay off the debt aggressively. I know this isn't a locked in stone answer. But I suggest it just because most people tend to forget how much debt will limit job choice. Your debt repayment is going to be substantial (unless you have some pretty generous repayment terms). Far easier to cut that thing down if you aren't already burdened with a lot of other costs.

Fourth, at your income level there is no reason why you can't at a minimum still be maxing out your 401k and an ira while you make your debt repayments. Just don't live like you are wealthy because, again, you are not. You just have high cash flow.

Oh, and Chris is wrong -- at that income level, the interest is probably not deductible.

[Chris]

True true..

"The maximum amount of student loan interst you can claim as a tax deduction is limited to $2,500.

The deduction is also limited by your total income. If your income is under $55,000 (or $110,000 for married couples filing a joint return), then you can deduct up to $2,500 in student loan interest.

If your income is over $55,000 but under $70,000 ($110,000 to $140,000 MFJ), then your deduction for student loan interest will be prorated.

If your income is over $70,000 ($140,000 MFJ), then your student loan interest is not deductible at all."

http://taxes.about.com/od/deductionscredits/qt/studentloanint.htm

[3L]

It does sound like you are a law student.

I am a 3L myself. I have accepted a position that will pay $90k, and I'm juggling some of the same questions. Between my wife and I, we will have about $70k in student loan debt, depending on certain factors.

I think the best idea is to be very aggressive in paying off the debt immediately after graduation. I hope to have our student loan debt paid off within a few years. I don't want to stretch it out for any tax advantages (blah,blah,blah). I want to be free, not a slave to any lender.

The biggest question for us is whether we should immediately buy a house or rent for a year. We currently own our home that we expect to get about $15 -20k of equity when we sell. How do you buy a home when you are expecting to use the equity from your current home as a down payment?

I am leaning towards renting at least for a year because if we can keep our expenses somewhat low we can pour money toward these loans and be debt free within a year. Yes, one Year. (My wife will have a decent salary of around 50k) If we rent we can certainly get our current equity in our house and immediately pay off 15k of our student loans.

However, there are some factors that make me reconsider this inclination to rent. The first being, that currently, it is a tremendous time to purchase a house, especially if mortgage rates continue to come down. Secondly, we have a chocolate lab and we will not live with a 80lb dog in an apartment. (FMF - another example of how expensive pets are - because we could easily rent an apartment for $800/month without the dog). Another factor is that if we use our current equity and aggressively pay off debt, we will have no money for a down payment. So, it looks like renting might have to be more like 18-24 months instead of one year. Right now we are going to look at a few houses, but we are not going to purchase unless we can find a great deal.

Despite our decision to buy a house or rent, we have some goals outlined to be debt free. Basically, as I indicated we are going to aggresively pay off our student loans. We are determined to live off my salary and pay the wife's salary entirely to debt. We are not going to be buying any cars or taking expensive vacations for a few years. We can certainly celebrate when we are debt free. If we continue our current level of lifestyle as students we should have no problem paying off our debt quickly.

As far as retirement savings we will only put a little into retirement until we have a significant emergency fund and have paid off our student loans. We already have a small Roth IRA invested in the market, and could easily contribute more if the situation calls for it. However, saving for retirement is not a priority, because our goal is to be debt free.

[Anon]

Hi 3L, Can you provide a basic budget. How much will you specifically allocate towards rent, retirement, utilities, etc.

Would others also be willing to provide the same info. for example, this is how much you should spend towards this and that.

thanks,

Hard to tell what a budget should be until the income is known.

[2L]

Agreed, clearly a law student aspiring too biglaw, since 160k is the magic number tossed around for what someone starting in biglaw makes. That aside though...

What kind of budget would you suggest with the following goals in mind: Possible potential salary is 160,000, in a relatively expensive city (this will probably only affect rent), I want to save (retirement, emergency and general savings) aggressively and pay off debt aggressively. What should my budget look like with these things in mind?

When making plans for your future, really keep in mind the 160k is the maximum possibility. The legal market is really bad right now, many types of law are being heavily impacted by the recession, but you may have a really good background for it, so I can't really say anymore about it than that.

It sounds like you are keeping your debt under control, that is good, I should have similar numbers when I graduate. I am in the IP field, so I am in a similar expected salary range.

Budgeting: Without knowing your income, it is hard to set an exact budget, it also really depends on your goals (there are two extremes of the spectrum, wanting to live as lavishly as you can from day one, or on the other end, becoming financially independent as early as absolutely possible). With that in mind, since you use the words very aggressive for retirement/savings/paying debt, I will gear my advice towards that (that is my own plan as well).

My suggestion is to figure out the amount you can comfortably live on each year, and aside from adjusting for inflation, do not increase it after that. Next, starting out at least, do things which will save you a lot of money. Buy a small house/have a roommate (or a girlfriend who works)/keep eating out to a minimum (you get pressured daily to go out to lunch)/pay off any debt over 6%/max out your roth each year, regardless/max out your 401k. Have an emergency fund of some sort, you can easily get laid off in the current environment.

Want to see a budget though? I'll show you mine:

Rent (includes water): $500/month
Utilities (internet/cellphone/electricity): $60/month
Food: $100/month
Tuition over 6%: Most of my spare money (so I only use subs. staffords)
Roth: Max/year
Gas/insurance/car maint: $120/month
Health Insurance: $40/month (paid for by employer during times I work)
Other stuff: $40/month
Income: Varies, about $1400/month when not working, $3000/month while working. It was affecting my grades though when I was working 35 hours/week.

As you can see, I keep my costs low, I spend about $8-9k a year. I pay my tuition with a 2% cashback card. My plan when I graduate is to get a small house, I expect the market should still be pretty good then. I wouldn't suggest renting once you've found the area you want to stay in. I expect my expenses will go up to something like $15-20k once I am out of school, but that's about it.

Try and develop more than one stream of income, this makes a potential job-less much less painful if it happens.

As a comment, student loans are just like any other debt. It is not "good debt". There are many options to get the education you need, yet still walk away with little to no debt. Dave Ramsey has spoken extensively on this one if you want to look into this more.

[F]

So you're looking for a budget. I suggest you make a list of expense categories (get inspiration from the 'net), estimate your expenses, and add 10-30% depending on your knowledge of the cost of your current life.

But I am hearing you: you want specific numbers. I can only provide you with a guesstimate I recently made for a frugal graduate lifestyle in San Francisco (basically a student lifestyle with selected splurges).

- shared housing (incl. minimal utilities): 11k/year
- food: 3k/y
- clothes: 1k/y (mostly suits etc.)
- leisure & weekend trips: 7k/y (incl. 3k/y car)
- 10% margin: 3k/y
TOTAL: 25k/y

Combine this with your 160k salary (105k or so take-home) you could get rid of your debt in 1 year - how cool is that! ;-)

Note that this budget is:
1. a rough estimate (based on 1-2h of internet research - I live in Europe)
2. very personal (frugal throughout, even cheap on housing, generous on leisure, weekend trips, main focus on saving/investing)
3. disregarding fiscal incentives such as 401k and the likes

Hope this helps!

[F]

4. assuming employer health insurance

I'm sorry, but anyone who thinks that he is going to get rid of his debt in 1 year is ridiculous.

I graduated law school with 120 in debt. Should have it paid off this year, which is pretty darn fast in the grand scheme of things, but still took many years. I mean, unless you are living in a dinky apartment and eating rice and beans every day, 1 year isn't going to happen. Why? A bunch of reasons:

1) Odds are you don't have the will power to live like you make 30K when you make 160K. So, even if you are being relatively frugal, I'm going to bet you will pay 1000+ for rent, etc. Biggest expense you probably aren't thinking about: lunch. Huge pressure to go out to eat with colleagues every day. That adds up fast.

2) You are going to want to save. Simply put, you are quickly going to learn just what it means to be paying the lion's share of taxes in this country. So max out your 401k or roth 401k if you have that option. btw, contrary to what the others are reporting, you are not eligible for a roth ira (unless you are married and your spouse doesn't make much, then you might be on the cusp). Still, I'd open up a traditional non-deductible IRA (nope you aren't eligible for a deductible ira either).

3) You are going to want to plan for emergencies. The legal field is incredibly unstable and I'd expect the gap between the top earners and the rest of the profession to widen even more as the years go by. Partnership is no longer like the concept of tenure. Firms now look at their profits per equity partner the way analysts treat stocks: increasing quarterly returns. Don't have PPP above 1million at a big firm thinking of itself as hot stuff? There will be cuts. And the reality is that many (and I mean MANY) of the people who start out as first years in biglaw don't make it to their 4th. They just can't stand it. I don't blame them. My point is don't assume this is the income you are going to have forever. In fact, I'd work with the opposite assumption. Assume you will never make more than this. If you go in house, except at a bank in new york or a hedge fund, you will likely be asked to take a 20-40% pay cut easy. If you decide to shift and practice law in the non-profit or public sector, you could be looking at a 60+% pay cut. Ignore all those financial planners who assume that pay always increases. There is a good chance that you will have a very different life time income curve.

As for a budget, no offense, but if you are an incoming biglaw lawyer you can handle that yourself. Just figure out your macro goals (out of debt in x years, retirement in y, house down payment in z, etc.) and back into it.

My main comment is again: don't forget that you are not rich. I mean that. You are not. You just have high cash flow. (Which is a good thing and can, over time, make you rich.) Nearly every lawyer I know who starts out and digs themselves a hole makes the mistake of assuming that a fat salary is the same as being wealthy. It's nice to have and a good thing, but it definitely is not the same as being rich.

[ben]

It's not clear if you will be graduating in 2009 or 2010, but either way I would be prepared for a down economy, and either having to wait or compromise a little bit before getting your dream job (160k). People graduating in 2009 had a chance to get an offer before the economy went south, but if things are still bad next fall, the class of 2010 should be prepared for a really tough environment.

[MaxPowers]

I would recommend that you don't count your eggs before the hatch. Looking at ABA weekly journals for the past few weeks will tell you that large firms are rescinding offers to 2Ls, and massive cuts by firms are happening with regularity, especially in the larger cities. (this also applies to the poster who is a 2L in IP...its rougher than it looks out there.

[HiredGoon]

I have a few questions regarding the deduction on the school loan interest:

Before we got married, my wife took out school loans (and is still in school). The interest was capitalized so that it was wrapped back into the loan.

By the time she graduates in two years, the interest will not be deductible due to increases in both of our salaries. (Currently about $125K married, filing jointly)

1) Is interest that gets added back to the loan count as deductible?

2) Can we take money out of our HELOC (where interest is also deductible and the rate is lower), to pay the interest on her school loan and take the deduction? Or does it work out the same?

[2ndyrassociate]

I'm a 2nd yr associate who graduated with about twice that amount of debt, so good job. And forget about IRAs, you won't qualify.

Assuming you find a job in big law, I encourage you to make the minimum payments on your student loans for the first year or so. Build up a pile of cash in a high interest savings account. With the sudden instability in the field, that will give you piece of mind. When I graduated I met with a financial advisor and he discouraged me from paying off debts before I put together a nice emergency fund. (Saving 3k a month, I'm trying to make it more) That was good advice. Of course, in addition, I maxed out my 401k contributions along the way.

Put each of your loans in a spreadsheet that shows you what % interest you're paying. Then take money left over from your monthly expenses, and after you've paid your savings, and put it toward the loans with the highest interest rates first.

Finally, let yourself enjoy a few things, you can dine out once in a while or catch a play, the job will drive you insane if you don't indulge once in a while, just choose carefully. The truth is you'll be able to buy anything, not evertying, so pick what you really want.

Remember, therapy and counseling for depression is expensive!

[3L]

I have made a budget on google spreadsheets. You can check it out at the link below.

Please keep in mind that this is a very conservative budget. By conservative, I mean that we don't have to eat beans and rice to meet the food category. We are trying to be realistic because the common problem with budgeting is breaking the budget and losing hope.

Also, keep in mind that this budget for my wife and I. So, some of the categories (such as cell phone) could be less expensive with just one line.

http://spreadsheets.google.com/pub?key=pYVYWg-qf3nIFOHsAuZCvAA

[2L]

That isn't really a conservative budget 3L...but it may be if you are making over 200K. Otherwise, I would say that someone would likely be barely living below their means on that budget (spending almost 100K after after-tax income). That would be about 100% of someones after tax income making 160k. Not exactly safe to say the least...

[3L]

I agree you could live on much less. Cancel cable TV and get rid of the dog,. Also, where I am located $1500/month will get a very nice house and is almost double what a decent apartment would go for. (I am hoping to buy a house by the Dave Ramsey standard only what you can afford on a 15 year fixed rate payment, which would be about $1500)

We are allocating $3000/month on student loan payments and savings for a car and emergency fund. There is also a $250 flex spending category. So you can subtract $36,000 to see what we are actually living on.

I don't think that its wise to budget only $100/month for food. You may could do it a few months (I couldn't), but I bet you would eventually break the budget, which would make me quit budgeting. However, I think I have almost $800/month budgeted for food, which is very easy to meet and probably excessive. I think the key is making it realistic.

[3L]

Seriously, What do you eat for only $100/month? This is clearly where I have the most to save.

[mrm]

Don't get your hopes up thinking you're going to make 160k right out of school buddy.

[2L]

While IP isn't all happiness and sunshine, it is one of the few areas of law that seem to be pretty stable, this is because there are a number of IP boutiques which pay almost as well as biglaw. That said though, IP is by far the pickiest of the legal disciplines about the type of background needed, so it is harder to get into to begin with, regardless of how the economy is doing, only 1-2% of law students go into it.

As to the food budget, I do stay around $100/month regularly, I've been doing it for a few years now. This is for someone just buying food for themselves, it would be nearly impossible to do for a couple or a family (though I have heard of a family doing it, but they had to do some extreme things). Here's a list of rules I go by:

1) I don't really go out of my way to find coupons, but I do try to reduce most of my purchases to items which are on "sale." These items in reality are heavily marked up if you don't buy them on sale. I have found these discounts to be at their peak midday on a weekday, especially earlier in the week. Pastries/vegetables/fruits always are discounted further during these times.

2) Another important thing to do is to buy a significant amount of frozen vegetables and pasta. These are generally very cheap (they are often on sale too), and can be used on a regular basis for meals.

3) I love tea, the same way some people love coffee. Why does this matter? Because tea is cheap, really cheap, especially loose tea from the right places. I would estimate tea costs me about 90% less than milk/juice. Over time, it got to the point where it replaced most of my other drinks, so I don't buy pop (or whatever your region calls it) or alcohol. I do buy milk, since that is another basic item the body needs, as well as whatever type of juice is on sale (I'm not too picky, I like mixed juices, apple juice, or good quality orange juice).

4) All that said, I eat a balanced diet of food each day. That means bread/fruit/vegetables/meat/milk. I avoid foods which have ridiculous quantities of salt/saturated fats/cholesterol (no high salt soups/other canned foods/no hungry man meals, which will horrify you if you look at what is in them/no instant ramen/very low amount of red meat). Otherwise it wouldn't be sustainable.

[2L]

Ah, few more things on reducing food costs

5) There are going to be supermarkets with different prices for the same things. Find the one that offers lower prices more often than others and has the stuff you need. There is a huge price range between the 7-8 places that have a supermarket section within a couple miles of where I live. Luckily, one of the places beats the others most of the time, because I don't have time to be going to multiple stores every time I go get food.

6) Stuff can often be frozen past its expiration date, at least in most cases

7) I eat what I buy, I have a pretty good sense now for buying only what I will easily use. It is rare when I throw out uneaten food, I throw out $1 of food at most each month

[2L]

8) The law school often as free food events, especially around finals (like now). I always take advantage of them if I am around campus or have a lot of free time. I appreciate this, though I would prefer they not raise my tuition 10%/year instead of offering free food events.

[Sarah]

I think many people have given some good advice above--in particular, thinking of this as the period in which you may well earn more than you ever will in your life. Not many people are cut out for the biglaw lifestyle long-term. You really need to work on your debt/savings/retirement like this is the best chance you will ever have to, because it may well be.

That said, some counterbalance: when you are a poor grad student, you can often trade time for money, doing things yourself cheaply, standing in long lines for cheap stuff, etc. If you have a normal workload as a biglaw attorney (and you'd better pray that you do right now), you will not have time to do this anymore. Any realistic budget will have to take into account your very limited free time and the fact that you can't drive yourself this way for very long in the sort of conditions that were tolerable when you were a grad student. If you don't think carefully about the times when it will be worthwhile to trade some money for time and thoughtfully plan some nice things for yourself (and spouse if you have one), you run a high risk of falling off the wagon and spending uncontrollably after that fourth straight week of work.

I am a little concerned by the "potential" salary remark. If you're a 3L (when it makes the most sense to be budgeting for post-graduation), you should have a job offer right now. If you're a 2L, you should at least have your summer offer in hand. If you are graduating this year and you're not employed, you really should not be considering your likely salary to be $160K. Those jobs are, for the most part, already taken.

[Rod Ferguson]

I won't regurgitate the advice given above, but I will offer something: Build a budget at the level of income you'd be at if the $160k job falls through (or you get laid off, etc). For example, if you are a lawyer and if the biglaw job disappears, you may feel confident you can get a job as a paralegal at $55k. So, build a budget at $55k and use the remainder to pay off your debt. This is what I did when I moved to take my current job; different cost-of-living calculations, wife went back to school and stopped being an income generator, salary was larger than I was used to. I built a 5-year budget based on the next level down in my profession and consequently we're now debt free less our mortgage (5 more years!).

[Chris]

Quick comment about the food. We upped our food budget significantly when it became clear that our poor diet was making us unhealthy. I have problems keeping on weight and lost too much because of boring food. My partner has problems gaining weight and gained too much because we were eating too much starch and not enough vegetables. We were also both getting sick more often. So we set a rule that food and health was more important than debt, and things have gotten much better! We never eat out, but having good ingredients at home to cook with greatly improved our health and quality of life. We are still ripping down the debt at a good pace, but not at the sacrifice of our bodies anymore. It's just not worth it.

[Amy]

I graduated law school in 2006 and started at 160. I think your budget sounds pretty realistic, which is the important thing. I do want to echo a few points:

1) Don't assume you'll get the 160k biglaw job unless you've already accepted an offer. The big firms are laying off associates right now, and it will be tougher than ever to get into one in 2009.

2) If you do get a biglaw job, pretend you're only making 70k, 80k, or whatever you think you would get if you got laid off and could only find work at a small/mid-size firm (or if you burn out after 2-3 years and want to be at a smaller firm anyway). That way, if it happens, you'll be protected.

3) Building an adequate emergency fund should be goal #1, right away. Pay minimums on all loans until you have a nest egg that allows you to sleep at night if you were to get laid off. At least 6 months of living expenses.

4) Once emergency fund is established, then aggressively pay off your private (higher interest) loans. I still have $70k in loans, but they are all stafford and they have a fixed rate of 3.85%. Therefore, I fully fund my 401(k) each year in lieu of paying down more of my loans. Why? Because I anticipate that my 401(k), in long term, will do better than 3.85% (over 20-30 years) and I would rather put my money into that basket. But any debt over 6-7% should be paid off before you aggressivly save for retirement.

Hope that helps. I think it's great that you're thinking about these issues now and planning for the future. I didn't really get on track until about a year ago, and I'm still paying for the financial mistakes I made right after school (that same point about thinking I was "rich" because of my paycheck.)

Good luck to you. Sounds like you'll be fine.

[Amy]

Also, I ment to add what other expenses may expand your budget, from my own personal experience:

- Clothes: you will need more than $75/month in the beginning to establish a quality wardrobe, which is essential (even if you're business casual).

- Lunch: your $800/month food budget may be stretched if you buy your lunch every day. Try to brown bag it at least 1-2 days a week. The good news is you will have a fair share of free lunches if you're at a big firm (training programs, client meetings, interviews, etc.).

- Home/rental insurance? Is that included in the 1500?

- Car repairs/maintence? (oil changes, car washes, tuneups, and set aside some for an emergency fund if a big repair is needed).

- Other household items, such as cleaning supplies, paper goods, toiletries, cosmetics, etc. These add up quickly, even if you're buying in bulk.

- Dog: $40 a month sounds low if you're covering dog food plus potential vet bils, etc.

Hope that helps!

[Jim]

First of all I'd recommend you wait and find out how much you actually make before you take any plans too far. It really doesn't do much good to build a budget around a theoretical salary number. Do NOT make any purchases or investments in advance expecting a salary that may not happen.

But having said that I would guess you're just trying to plan ahead in general. IF you do end up making $160k then that is a substantial income and you should have plenty of room to afford a comfortable life and save significantly.

So here's some things to consider and my personal recommendations:

First of all I'd max out the retirement fund. Hopefully your employer would have a 401k so you can put pre-tax money in. I'd max that out at $16k. This will keep your tax bill lower and set aside about 10% off the top for retirement.

One key to budgetting will be knowing how much you actually take home after taxes. That would leave $144k taxable. With that level of income you'd be paying 7% for social security up to about $100k. Your feds tax bill would be around $30k with standard deductions. Then depending on what state you're in I'd expect another ~7% give or take in state taxes. You'd take home roughly $95-100k of that after taxes give or take.

For reference, with student loan of $80k at about 7% you'd have minimum payments around $1k a month for 10 year repayment.

Your car and clothing are areas where as a professional in a high profile firm you may be tempted to spend a lot on to keep up appearances and fit in. Some spending on clothes may be required for your job. Use your judgement there. Spending on a car is one area that could quickly eat up your income. Resist the urge to go buy a new high end luxury car.

Generally I'd shoot for a balance of spending 50% or less of your after tax income on 'needs' and then split the rest for 'wants' and savings so you're putting at least 20% into savings.

Jim

[Sarah]

Amy, you should be able to fully fund your 401(k) *and* pay extra on your student loans on even a junior's biglaw salary. I fully fund my 401(k) and I've paid off over $80K in the past two years (and I have a three months emergency fund), despite living in one of the most expensive cities and being only moderate in lifestyle rather than super-frugal. Now, given the current situation, I would probably put the "debt repayment" money into a separate high-interest savings account rather than actually sending it to the bank, but no one in ordinary circumstances in biglaw should have to choose.