Money

How to Pay off Your Loans and Still Save for the Future


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  • Lawyers graduate with crushing, six-figure debt—but you can pay it off quicker than your peers with budgeting and frugal living
  • It’s important to save for retirement and have an emergency fund while paying off your loans
  • Stick to a budget, no matter what you see other young lawyers doing, and make sure your budget includes room for entertainment

The average law student begins their career with about $122,000 of loan debt.

That is an overwhelming figure no matter how impressive your BigLaw starting salary is. Rather than resign yourself to being in debt for decades, it is possible to pay it off in a reasonable amount of time—while enjoying your life and saving for the future.

Pay While You’re Still in School

Every bit of cash you can throw at your loans helps, and you don’t have to wait until you’ve finished school to start paying. A part-time job or side-gig can take many forms, from working as a teaching assistant or taking a paid internship, to driving for Uber or renting out an extra room through Airbnb. You can either pay on your loans a little bit every month or save up until the end of law school and make one giant payment to kick off repayment mode.

Now, you may not be able to put much, if anything, aside for an emergency fund or a retirement plan before you’re done with school. This is the one stage of life when it’s understandable and acceptable not to contribute much to those aspects of your financial picture. Just be prepared to shift your thinking about saving once you’re making a lawyer’s salary.

Commit to Frugal Living…

The idea that you can’t immediately enjoy your generous new salary in all the ways you dreamed about while eating law-school ramen may seem unfair. But remember: This part of your life won’t last forever, and you will be saving yourself thousands of dollars by paying off your loans sooner rather than later.

Besides, the chances that in just a few years you will transition away from BigLaw—and that excellent salary—are very high. Take the opportunity to get out of debt as quickly as possible while putting a little aside for an emergency fund and taking advantage of your employer’s 401(k) offerings. Saving for these things is every bit as important as paying down your debt. Your retirement savings will be set up to deduct a specific pre-tax amount or percentage from every paycheck, so why not have a small amount automatically transferred to an emergency savings account as well? You won’t need to make decisions every month if you automate as much as possible.

You might struggle with seeing some of your peers immediately buy fancy cars and designer everything. Remember: You are not them, and you don’t know their situations. Maybe they come from wealth, or they’re terrible with finances and will remain in debt decades after you’ve paid off your loans. It doesn’t matter, because you only need to focus on yourself. This is the time for a used car, a small apartment, and a modest entertainment budget.

 …But Don’t Try to Banish Fun

Speaking of entertainment—don’t try to live without it. Just as some new lawyers will be tempted to spend every dime they make, some will be convinced that living a life of deprivation until they are debt free is the only way to go. These two extremes are both wrong.

A satisfying life must consist of more than working and paying bills. Can you think of ways you can still have fun and keep to a reasonable budget?

You can and should take vacations, have dinners out, and participate in activities just for pleasure. The key to enjoying yourself while paying off your loans and saving is budgeting.

You can create a complex spreadsheet if that’s your thing, but you can also just make a list of your monthly expenses, see how much you have left over, and allocate some of that money to whatever you would like to do with it. Your (modest, short) vacations may take a while to save up for, but they’ll still happen. You won’t go out for fancy dinners every week, but you’ll be able to on occasion. You’ll buy new clothing, but not an entirely new wardrobe, and some of it will be on sale. Ultimately, you’ll thank budgeting for keeping you sane while helping you work towards debt freedom.

Stay Focused

The most important thing you can do for yourself is stay focused on your goals. Every windfall you receive—like a year-end bonus or a gift from a relative—needs to be treated like an extra paycheck and divvied up among your debt and your savings. Remind yourself that this strategy will lead you to debt freedom, a sizable amount saved for emergencies, and a good start on your retirement savings. So worth it!

What's Next

If you don’t have a clear budget already, create a simple one. If you have a budget, determine how you can tweak it to divert a bit more cash to paying off your school debt. Revisit periodically.