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Author Topic: My postgraduation BigLaw budget  (Read 8659 times)

wildcataz2004

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Re: My postgraduation BigLaw budget
« Reply #10 on: May 10, 2005, 12:31:31 AM »
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:
Mortgage, 30 years, 6%, $350k:   2,100 /month
House-related (util + repair):       500   /month
Food and Restaurants:                  800   /month
Entertainment:                              250   /month
Automobile:                                    958   /month
Clothing:                                          300   /month
Gifts:                                              100   /month
Travel savings:                              200   /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.

I never actually thought about it until now. I'm actually copying your figures down for myself. Whay do you guy's think about donating to your church. Do people really donate 10% of their salary to their churches?

wildcataz2004

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Re: My postgraduation BigLaw budget
« Reply #11 on: May 10, 2005, 12:33:06 AM »
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:
Mortgage, 30 years, 6%, $350k:   2,100 /month
House-related (util + repair):       500   /month
Food and Restaurants:                  800   /month
Entertainment:                              250   /month
Automobile:                                    958   /month
Clothing:                                          300   /month
Gifts:                                              100   /month
Travel savings:                              200   /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.

I would up the travel savings. You'll probably need more than 2,400 for a really good vacation every year.

Javert

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Re: My postgraduation BigLaw budget
« Reply #12 on: May 10, 2005, 12:52:26 AM »
Quote
Wildcat: Do people really donate 10% of their salary to their churches?

When you factor in how much you, as a well-compensated lawyer, pay in taxes, and what percentage of your taxes help people in some way (i.e., food stamps, welfare, giving veterans a discount on college education, medicare, medicaid, HeadStart, bolstering social security, etc., etc., etc.), you're already doing more civic good than somebody who makes $40,000 and really does donate 10% in addition to paying taxes. As such, I'd argue it's unnecessary; you're already more than doing your part.
Attending: U Texas

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ormachea

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Re: My postgraduation BigLaw budget
« Reply #13 on: May 10, 2005, 01:50:11 AM »

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.

The only problem with your scenario is that the IRS is a federal agency with no interest in state income tax.

ormachea

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Re: My postgraduation BigLaw budget
« Reply #14 on: May 10, 2005, 01:57:07 AM »
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...)

I think I'd be fine living in a condo in White Plains. A 2-2 runs $380k asking price. After 8 years, I'll sell the condo. If I make partner I'll buy a NICE house. If I don't, I'll probably move out NY and go elsewhere, possibly take a government or mid-firm job--somewhere where house prices aren't so ridiculous.

ormachea

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Re: My postgraduation BigLaw budget
« Reply #15 on: May 10, 2005, 01:59:41 AM »
I just ran a savings plan schedule:
40 years, 6%, $21k pmt from start to finish:  3,445,001.35  :o
Not a bad nest egg at all.

Since I'll be making more through the automatic raises alone, I can use that money to finance my children's education should I have any.

Are we there yet?

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Re: My postgraduation BigLaw budget
« Reply #16 on: May 10, 2005, 02:06:12 AM »

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.

The only problem with your scenario is that the IRS is a federal agency with no interest in state income tax.

Fair enough. For the sake of clarity, please replace "IRS" with "New York State Department of Taxation & Finance," but note that the same rules will still apply.

ormachea

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Re: My postgraduation BigLaw budget
« Reply #17 on: May 10, 2005, 02:10:16 AM »

I would up the travel savings. You'll probably need more than 2,400 for a really good vacation every year.

True, although 2400 would cover a nice trip for two to the Caribbean for 5-day, 4 nights at a nice hotel.

As raises come in, this is how I'd distribute the new money: put a little more in travel, add to mortgage, save for kids' education.


ormachea

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Re: My postgraduation BigLaw budget
« Reply #18 on: May 10, 2005, 02:14:09 AM »
Fair enough. For the sake of clarity, please replace "IRS" with "New York State Department of Taxation & Finance," but note that the same rules will still apply.

It is a good point and I'd have to investigate the matter more carefully. What that 2L said surprised me, but he let me know with such authority--as if he were perfectly clear--that I'm leaning towards agreeing.

If it turns out that it would be a problem, I'd drop my retirement contribution and drop what I sock away for my down payment until I get a raise. As it stands right now, I'm very aggressively saving to allow me to use that as a buffer--I'd be willing to drop it down to 5% during lean years  (which is, after all, the amount many financial planners recommend).

ormachea

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Re: My postgraduation BigLaw budget
« Reply #19 on: May 10, 2005, 02:25:33 AM »
Quote
Wildcat: Do people really donate 10% of their salary to their churches?

When you factor in how much you, as a well-compensated lawyer, pay in taxes, and what percentage of your taxes help people in some way (i.e., food stamps, welfare, giving veterans a discount on college education, medicare, medicaid, HeadStart, bolstering social security, etc., etc., etc.), you're already doing more civic good than somebody who makes $40,000 and really does donate 10% in addition to paying taxes. As such, I'd argue it's unnecessary; you're already more than doing your part.

I agree with Javert. I'm contributing enough for now through taxes. Later, if I'm really rolling in money I hope to set up an endowed scholarship.