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Author Topic: My postgraduation BigLaw budget  (Read 8492 times)

ormachea

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My postgraduation BigLaw budget
« on: May 09, 2005, 06:50:58 PM »
I'm going about $98k in debt (assuming I can't finagle a BigLaw 1L summer job).

Sigh... $98k on a 10 year payment plan will mean $1,189.10 out of my paycheck a month.

1st Year BigLaw:       $140k (125k + 15k bonus)
After Taxes:               ~$98k
After Loan:                ~$83.5k
Saving 15% (pre-tax): ~$62.5k

That gives me $5,208 a month of completely spendable income.

Monthly Bills:
Housing:                                     2,100 /month
House-related (util + repair):         500   /month
Food and Restaurants:                    800   /month
Entertainment:                                245   /month
Automobile:                                      958   /month
Clothing:                                            295   /month
Gifts:                                                95   /month
Travel savings:                                195   /month
Charity:                                              20 /month
                                                        5208 

I don't feel quite so bad anymore.
Does anyone have any advice regarding the figures? This is the first time I've actually sat down and worked this out. I assumed about 30% taxes on average.

EDIT: Changed to Housing.

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Re: My postgraduation BigLaw budget
« Reply #1 on: May 09, 2005, 07:19:35 PM »
You should check out Law School Confidential.  Whether you agree with their suggested methods or not, there is a great worksheet on how to calculate your expenses vs. income...

But, seriously--it's enough to make you loopy isn't it?

Personally, I'm counting my chickens at 100k with no signing bonus and no raises.  But I have this ambitious plan to retire early...

I plan to buy a cheaper home or condo (150-200k; I plan to work in Chicago, but live outside of it) and either keep my 10 year old car or replace it with a Civic, while I throw money at both my debt and my savings.  This is because I plan on buying a place in South America while paying off my place here, so that when I've been working 8-10 years, my life doesn't end if I don't make partner. 

This way, if I'm tired of the 80 hr weeks I can either choose to work in the US for less money doing something I enjoy more (because my house will be paid off and I will have no debt), or I can retire to SA with a huge nest egg and rental income from my place in the US...

Money doesn't buy happiness, but it does create options...

dave303

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Re: My postgraduation BigLaw budget
« Reply #2 on: May 09, 2005, 07:20:25 PM »
350k mortgage? You plan on living in a studio apartment in manhattan?

ormachea

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Re: My postgraduation BigLaw budget
« Reply #3 on: May 09, 2005, 07:23:15 PM »
I've heard that if I keep my Texas residency and my Texas accounts I can have my earnings direct deposited over there and avoid state taxes (TX has no income tax).

Even if that's not true, I am socking a very large percentage away and can bring that and a few other things down a little if necessary.

Property taxes are a good point... I don't think I'll have to worry about that for the first 4.5 years because that mortgage payment will actually be going into an account to have the 20% down payment. At that point I should be making more, even if I only get the smallest raises and I'll be able to take property taxes out of that percentage.

350k mortgage? You plan on living in a studio apartment in manhattan?

I could live in CT or NJ... what are the prices like out there? I'm coming at this from a TX perspective and I figured doubling the cost of the average home here would be enough for something comfortable.

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Re: My postgraduation BigLaw budget
« Reply #4 on: May 09, 2005, 07:26:24 PM »
I've heard that if I keep my Texas residency and my Texas accounts I can have my earnings direct deposited over there and avoid state taxes (TX has no income tax).

you're likely going to be taxed based on where you performed the work as opposed to where you've established legal residency.

bobo21

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Re: My postgraduation BigLaw budget
« Reply #5 on: May 09, 2005, 07:28:38 PM »
I've heard that if I keep my Texas residency and my Texas accounts I can have my earnings direct deposited over there and avoid state taxes (TX has no income tax).

you're likely going to be taxed based on where you performed the work as opposed to where you've established legal residency.

And there is a City tax in NYC to boot...

ormachea

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Re: My postgraduation BigLaw budget
« Reply #6 on: May 09, 2005, 07:29:18 PM »
I've heard that if I keep my Texas residency and my Texas accounts I can have my earnings direct deposited over there and avoid state taxes (TX has no income tax).

you're likely going to be taxed based on where you performed the work as opposed to where you've established legal residency.

It surprised me too. I heard it from a 2L at NYU when I was visiting who has so far specializesd in tax law (and from what I heard from others is near or at the top of the class). But, take it with a grain of salt, of course.

Wait. It just occurred to me that I know for a fact that many actually live in NJ to pay lower taxes than in NY... So it seems like residency plays a big role. Hmmm...

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Re: My postgraduation BigLaw budget
« Reply #7 on: May 09, 2005, 07:35:50 PM »
well, i said likely because neighboring state often have state income tax reciprocality agreements whereby residents of one state who work in another state pay income tax to their state of residence.

however, i spent one tax year dealing with tax payments to the states of north carolina and new york, the city of Washington D.C., and the country of Canada.

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Re: My postgraduation BigLaw budget
« Reply #8 on: May 09, 2005, 08:08:23 PM »
350k mortgage? You plan on living in a studio apartment in manhattan?

Yeah, 350k in NY is crazy. It's like CA.... Where I live in CA, the AVERAGE HOUSE is nearly 500k.  And I truly do mean average.  To get anything remotely nice, you either have to pay 700+ or move out BFE...

A 2b/2ba 1300sqf condo runs at least 500k over here... In a nice area, anyway.  If you want to live someplace scary, you can find something in the 350-400s.  I can't imagine NY will be much different...  (That's why I want Chicago--I'm used to driving; I'll commute and be cold for a while, but at least I'll be able to live cheaply....by comparison, of course...)

Are we there yet?

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Re: My postgraduation BigLaw budget
« Reply #9 on: May 09, 2005, 09:45:19 PM »
I've heard that if I keep my Texas residency and my Texas accounts I can have my earnings direct deposited over there and avoid state taxes (TX has no income tax).

you're likely going to be taxed based on where you performed the work as opposed to where you've established legal residency.

It surprised me too. I heard it from a 2L at NYU when I was visiting who has so far specializesd in tax law (and from what I heard from others is near or at the top of the class). But, take it with a grain of salt, of course.

Wait. It just occurred to me that I know for a fact that many actually live in NJ to pay lower taxes than in NY... So it seems like residency plays a big role. Hmmm...

Yet the obvious difference there is that those New Jersey people actually live in New Jersey while commuting to New York. Since you intend to live in New York, the circumstances aren't truly analogous.

When considering tax matters, you have to remember that in the event of an IRS audit, the taxpayer carries the burden of proof, while the IRS gets to decide whether you've convinced them or not. Now if one of those NJ people were audited, they could argue that living in NJ and commuting to NY was reasonable and perhaps even necessary for a purpose other than avoiding taxes. You probably wouldn't be able to deploy that defense, so perhaps you should plan on paying the NY state income taxes and just consider it a bonus if you get out of it. At the very least make sure you're firmly grounded in the IRC and/or some comparable case law in which the IRS "acquiesced." Good luck.