Friday, March 3, 2017

Budgeting in Law School


If you're in law school, you may have noticed one kind of big thing: it's expensive. Like, hella expensive. Somehow, I managed to get through undergrad with absolutely no debt, which was incredible. However, I also made it through without any savings, and it quickly became apparent that there was no way I was going to be able to make it out of law school without any debt either. Thus, it became important to figure out how to manage my money to ensure I make it out of law school with as little debt as possible. Luckily, I've always been good at managing my money and I am so excited to share with you how to budget in law school!

For those of you who have been around since this blog started, you might remember a post awhile back about how you can go to law school for free. I am lucky enough to be on a full-tuition scholarship at my school. This obviously saves me SO MUCH money. I know that this isn't possible for everyone, but in order to minimize your debt, I highly recommend you attend a school where you might be able to get a significant scholarship. This might mean going to a school that's not at the top of your list, but I promise it's worth it. If you aren't lucky enough to get a full scholarship, you need to figure out how you're going to pay your tuition - whether it be grants, loans, or savings. This is an entire process and itself, and very important - however, I'm going to explain how I budget for my expenses outside of tuition in this post.

Step One: Determine Where Your Money Will Come From

First things first,  where are you going to get your money? This can come from a variety of sources. Maybe you've been great at budgeting in the past and have money in savings (although if you do, I don't know why you are reading this post because your money skills are on point). Maybe your parents will give you money to live on. Maybe you'll take out loans. Maybe you'll get a job (I don't recommend this - law school is your full time job). Either way, figure out where you're going to get all of your money from. If you are getting loans, know whether you're getting federal loans or private loans. If you have a co-signer, private loans will have lower interest. If you're on your own (like I am), federal loans are likely the way to go.

Step Two: Determine The Total Amount of Money You Will Need for the Year.

In this case, year can either mean the full calendar year, or the 9-month school year, depending on how you want to plan. If you are going to be working during the summer, you might not need to stretch your financial aid over the three summer months. If you plan on not working, or working an unpaid position in the summer, you might want to anticipate needing more money. Either way, know which way you are going to go early.

Next, your school likely gives an anticipated dollar amount that students need for expenses outside of tution for the year, usually labeled under "cost of living" somewhere on the finances page of their website, or in the information they have sent to you. This usually includes stuff like fees, books, rent, transportation, food, and miscellaneous needs, and is tailored to the school and geographic area. Keep in mind, this is a 9-month estimate for the school year only. It also determines the maximum amount you can take out in federal loans. However, if you are good at budgeting you can make this amount last the whole year. 

In making your decision on just how much money you need, I advise you consider this "cost of living" amount with your own personal lifestyle. If you know you tend to spend more, consider getting a little bit more money. If you tend to live a simple lifestyle and need less than average, why take out more loans or ask for more money from your parents. Use the school numbers as a guideline, and tailor them to you.

For purposes of giving examples, I will let you know that I took out $22,000 for my living expenses this year.

I gain income from some other sources - I have a part time job I work during breaks from school like Christmas break or spring break, as well as tax returns and various odd jobs like pet sitting for my friends. I don't budget this in, and just put it into savings or use it as extra money when I get it. 

Step Three: Determine Fixed Expenses (Typically Monthly)

One of the easiest things to factor into your budget is fixed, monthly expenses. This includes things like rent, insurance, your phone bill, Hulu, Netflix, and Spotify subscriptions, and anything that you have to pay on a recurring monthly basis. I like to figure out how much I'll spend on these monthly things right away, because they are fixed amounts and once I subtract these, I can determine how mch I should allow myself to spend on variable items like groceries, toiletries, household supplies, clothes, etc. each month.

To continue with my example, here are my monthly fixed expenses:

  • Rent - $610
  • Cell Phone - $85
  • Hulu - $10
  • Spotify - $5
  • Power Bill - $35*
  • Gas Bill - $35*
*These expenses vary, but I budget as though they are fixed because I know the maximum they will be.

All of this stuff adds up to $780/month, so multiply that by 12 (because I budget for a year rather than 9 months) and that adds up to $9,360. Subtract this from my total of $22,000, and I have $12,640 for the rest of my budget.

Step Four: Determining Variable Semester Costs

The next thing I like to do is determine a few variable costs I will have per semester, or for longer periods than a month. The most obvious for this is books and fees for school.So, let's add things up again.
  • Fees - $500
  • Books - $1000
Add this all up and you get $1,500. Multiply that by 2, and you've got $3,000, and I've got $9,640 left for everything else. 

Step Five: Determining Frequent Variable Costs

Now, obviously I only have a set amount left in my budget, and you might've noticed I haven't budgeted for groceries, household expenses, clothes, etc. Don't worry, I haven't forgotten. But I'm also not the type to set out specifics like "I will spend $150 on food this month, $40 on toiletries, $25 on eating out..." in a perfectly organized plan. To me, some of those things are too variable to plan out exactly. So, I try to give myself one lump sum for it all and budget myself within that. 

Now, since I've got $9,640 left, I can divide that in a couple of ways. If I want to give myself a monthly budget, I can divide by 12. I, however, think it's easier to budget weekly. I'm more likely to go to the store for variable things every week, so it's so much easier to split into smaller increments. Thus, I divide by 52. This comes out to roughly $185, but to err on the side of caution, I give myself $150/week. This has to buy me gas, food, household supplies, etc. And it's usually pretty easy.

The reason I don't give myself the full amount is so I always have a "cushion" for incidentals, emergencies, etc.

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And that is pretty much how I split up my money for budgeting. It's not the most exact representation of my actual  budget, but it basically shows you how I do things. Within this, I still try to spend as little as possible and generally come in under budget. But with money, it's better safe than sorry! I'm lucky enough that my parents pay for my car and health insurance, so that cuts two major costs. I also live with roommates, which cuts down my rent quite a bit. And, I like to overestimate rather than underestimate, meaning I usually spend less than I plan

In order to stick to my budget, I have two bank accounts. One account is where I keep the lump sum of money and take all of my montly and semester variable costs out of. I transfer the weekly variable amount of $150 from that account to another checking account, that was it's easier to make sure I stay within my budgeted amount. This also helps me keep track of the smaller, variable amounts in a more itemized manner.

Is this budget perfect? No. But overall it has helped me manage my money and keep me from being as broke as some law students. What's your best budgeting tip?



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