I happened to watch an old episode of the Cosby Show where Cliff was trying to teach his son Theo about the cost of living. For the sake of nostalgia, you can see the clip here:
If you are a 0L reading this, observe Theo’s cocky, nonchalant attitude. Look familiar, Ms. soon-to-be 1L of Garbage School of Law? That’s right – you’re gunning to graduate at the top of your class and get that coveted $160,000 per year associate position and show everyone that you’re special.
Just for today, I’ll grant your wish. Let’s say you graduate at the top of your class at your bullshit “Top-30” law school and you accept an offer from BigLaw at a salary of $162,000 per year or $13,500 per month. Of course, like most of your classmates, you fully financed your education through student loans. For the sake of simplicity, let’s suppose your student loan balance is $250,000 which includes undergrad and interest accrues at $20,000 per year. You’re also single with no one to support, like family and children.
Now for the law school apologists and hair-splitters out there, I know that everyone’s situation is different and a lot of variables come into play – such as lifestyle choices, family support, family size, etc. With that being said, I don’t give a shit. This is my blog and I’ll make up whatever I want. I should also point out for most people, this post is pure fantasy because by definition, 90% of law school graduates will not graduate in the top 10% of their class and for that reason alone, their resume will not even be considered by Biglaw firms.
So lets look at your $13,500 per month Biglaw paycheck and break it down.
- Gross Pay – $13,500
- Less Health Care Deduction (Medical, Dental, Vision, etc.) – $400
- Less Retirement Contribution – $1,000
- Less State Tax Withholding – $1,300
- Less Federal Tax Withholding – $2,750
- Take Home Pay – $8,050 per month
$8,050 per month take home….Wow…that’s great compared to your friends who aren’t taking home shit because their lazy asses are unemployed. But keep in mind these BigLaw salaries are only available in urban cities like New York, Los Angeles, Chicago, etc. where the cost of living is expensive. There is no Biglaw in Smallville. So now let’s look at a reasonable estimate of monthly expenses. I’ll be pretty generous here and assume you are not making car loan payments.
- Apartment Rental – $1,300 (minimum)
- Utilities – $300 (minimum)
- Auto or Public Transportation Expenses – $400
- Food – $1,000 (You’ll get used to eating out all the time when you’re stuck at the office during those 80 hour work weeks)
- Entertainment – $400 (good luck getting out of the office)
- Net leftover – $4,750
You have $4,750 left over after expenses. That’s super. Now let’s talk about student loans. According to most debt repayment calculators, a $250,000 total student loan debt can be paid off in 10 years by paying about $3,000 per month (which leaves $1,750 left over for savings). On a 25 year plan, you pay about $1,900 per month ($2,850 left over for savings).
I’ll leave it at that. I know a lot of people who spend a lot more money than what I posted above. And some spend less.
The point is that even with a large Biglaw salary, you will most likely end up paying your student loans for a very long time. Even though your income may increase on a yearly basis, so will your expenses. Especially if you decide to get married, have children or buy a house. If you’re lucky enough to stay in Biglaw for a few years and get the annual raise and bonuses, you may be able to pay off your student loans pretty quickly with some deferred gratification and financial discipline.
And there is a very real possibility that you will get laid off or fired which will most likely result in prolonged unemployment or a big pay cut. Now that will really fuck up your financial future.