Budgeting 101 During Law School
If someone suggests that you should live below your means, does that sound ridiculous or impossible? It certainly can feel that way in a city like Boston. While it may be difficult, it really is the best way to maintain your financial stability and avoid financial stresses.
Most people go through periods of time when living on less than they earn is really not possible. If this pattern never changes, long-term financial goals will be more costly and harder to achieve.
To live below your means may require some hard choices. It could mean living with a roommate instead of getting your own apartment (even after you graduate). You may have to sacrifice some travel opportunities or hold off on some purchases until you’ve saved money. It may not sound glamorous or sexy—but neither is thousands of dollars in credit card debt.
Using a budget will help you form good spending habits now to keep you from overspending when you’re working full-time. Budgeting is not difficult, but it does require you to pay close attention to how and where you spend your money.
Here are some easy steps:
Step 1 – Track Your Expenses—Keep a record of every penny you spend for two to three months. It will feel tedious and boring, but this way you can see where your money goes.
Step 2 – Plan To Save—Simply put, it’s a good habit. Don’t wait until you have “enough” money to save. Even a few dollars a week can make a big difference.
Step 3 – Create Your Budget—Use the amounts you’ve been tracking from Step 1 and add in periodic expenses (gifts, insurance, etc.). An app or worksheet can be extremely helpful; examples are listed below.
Step 4 – Review Your Budget—Income and expenses can change during the year; review your budget periodically to ensure that you’re meeting your goals.
Save Yourself over $7,000
Here is another way to look at it: say that you spent $1,600 per month for the next three academic years, even though you could spend almost $1,800 per month under the Student Budget.
That means that you are spending $200 less per month. If you are borrowing to cover your living expenses this means that you are borrowing $1,800 less for one academic year and $5,400 less over three years.
On a student loan with a 10-year repayment term and an 6.8% interest rate, you will repay $115 per month for every $10,000 that you borrow. So over 10 years, borrowing that additional $5,400 costs $62 per month to repay or $7,440 in principle and interest.
- Look for an apartment where your rent includes heat; try to avoid apartments with electric heat
- Live with one or more roommates
- Take the T, BU Shuttle, or Blue Bike share— having a car in Boston is wicked expensive
- Put off unnecessary expenses until after law school
- Take advantage of student discounts and on-campus activities
- Brown bag your lunch, avoid Starbucks/Dunkin’ Donuts, organize potluck dinners with friends
Live like a lawyer when you’re a student and you could end up living like a student when you’re a lawyer.