1. Do you still have student loan debt? If so, when would you like to pay it off? What’s your plan to reach this goal?

Yes. I think I have a little over $40k left to pay off out of $60k. I graduated from law school in 1999. I’m not very concerned about when I pay it off because the interest rate isn’t even 4%, and (up to a certain income limit) there’s a little break on federal taxes for student loan debt. I pay $273/month. It’s roughly equivalent to my cable bill and cell phone combined; I don’t consider that too much to pay each month for a degree that allows me to earn my living.
2. When you were in law school, what action or habit do you think saved you the most money while in school?
I was stupid. I even had a full scholarship one year and still took out the full amount of federal loans. I didn’t understand what I was doing or the implications. I can think of lots of habits that wasted money when I thought I was saving like buying clothes at discount stores (but still buying clothes!). I remember justifying getting a manicure before every job interview. I don’t remember ever cooking dinner – I always ate out. I chose a very expensive private school over a very cheap state school. I chose an expensive city over a cheap city.Financially, I did it all wrong. I guess the point for your readers should be that your mistakes, if you make them, won’t kill you. Try not to make them, but know that (if you do) it won’t seem like a big deal once you’re earning your living and a few years removed from it all. But I never, ever had credit card debt and that is probably the best habit I started in law school.
3. As a law school admissions coach, what advice would you give pre-law students about preparing financially for law school?
Understand what you’re doing when you sign the loans on the dotted line. Every time you buy a drink, think about the interest you’re paying on that drink. Stop buying drinks – they are too darn expensive anyway. Manage your expectations – don’t spend your loan money thinking you’ll be rolling in dough during your first job. It just doesn’t happen that way. The more you make, the more you spend. And, usually, that first job isn’t all it’s cracked up to be and you don’t want to be a slave to it.
4. What advice would you give to a law student in school right now?
“If you live like a lawyer while you’re in law school, you’ll live like a law student when you get out.” Stop eating out. Just cook. Seriously. It’s not that hard. And absolutely no credit card debt.
5. What should law grads do about managing the debt load they may have taken on during school?

• Have your monthly payments automatically withdrawn form your account. I don’t even feel my loan payments anymore. Each month, it’s a mere blip on my radar.
• If having student loan debt bothers you, use half of every bonus you get to pay it off. But don’t try to pay it off your first year. You have to pace yourself.
• Pay off credit card debt quickly, but remember that some debt is good debt. Make your monthly payments. I promise, even if that $400 sounds intimidating now, you won’t even feel it in 10 years – even if you don’t work for a big firm. Managing your finances does get easier, and you will make a lot more money 5 years out of law school than you do your first year. (I’m not convinced that’s the case at big firms, but I know it’s true at small and medium size firms).
• Prioritize. Don’t pour all your money into student loans at the expense of waiting to buy a home or pay retirement. Pay yourself first, then everybody else.
• Open a retirement account immediately. Max it out every single year. Live off what’s left and you’ll never miss it.
• Don’t consolidate loans until you are happy with the interest rate because you can only do it once.
• Practice living like an adult first. I made the initial mistake of trying to pay off my loan debt of $60k in 10 years and the payments were huge (at the time it was 8% interest). I was just learning how to live by myself in a new city on a salary for the first time and bit off more than I could chew. I suggest keeping things manageable – spread it out over 30 years, especially for those first few years.
• There’s a lot of pressure in the real world to look like you’re making good money. Don’t buy that BMW right away. I know attorneys who waited until they made partner before they bought their first new car. They are the smart ones.

6. What do you tell a law grad who says they will only work at a big firm because they want to pay off their debt quickly? What other options would you suggest this person take?
I know lots of people who did this. They were all single. It’s not a great plan for someone with a family to support because you’ll never see your family working those kinds of hours.Just don’t expect to meet someone to start a family with while you’re working 90 hour weeks. There are other options. I really admire my brother who graduated from NYU with an offer from a very big NYC firm. He decided to be a Manhattan District Attorney instead. But, I’m not sure he would have made the same choice without NYU’s great loan forgiveness program. Live by your own priorities – don’t get too caught up in perceived prestige.
7. What is the biggest money mistake that law students make?
Not understanding that every dollar you spend is really that dollar plus interest.
8. How could using your coaching service save law students money?
I’ve seen applicants waste money on a lot of things – books they don’t need that offer generic, one-size-fits-all advice, “Pre-Law” workshops, getting a paralegal certificate, applying to the wrong schools, applying to too many schools, going back to school to try to beef up a poor GPA. These mistakes add up quickly. I work with people who applied the year before without help and didn’t get in anywhere, then after working with me they get into law school. Everything they did the previous year was a waste of time and money. And they lost out that year of attorney income too. One way I save people money is by helping them use their application-fee budget efficiently so they aren’t wasting a lot of money on impossible schools or schools that are all wrong for their ideals and goals. I can also help select schools that would be likely to offer scholarship money – I pay for myself thousands of times over this way! I pay an accountant to help me save money on my taxes. I pay a financial planner to help me save money for retirement. As a law school admission coach, I can save you a lot of money on the mistakes you won’t be making.

Thanks, Ann, for that informative interview! If you’re thinking about going to law school, go by Ann’s site. Also, remember to sign up for her upcoming webinar about law school admissions. This $150 service is free to Frugal Law Student Readers.

Featured Resource

When attending Law School it is important to figure out where you want to practice Law. The rules of law vary by locality so there is a difference between becoming an Illinois Attorney and having a law office as a Texas Attorney so find about that State’s requirements.

Today we are fortunate enough to hear from Saira Rao, former attorney and author the new book Chambermaid. Saira was kind enough to take some time from her very busy schedule and answer these questions. Please join me in welcoming Saira to The Frugal Law Student!

1. How did you go from attorney to author?

I wrote and edited most of Chambermaid while still practicing. So technically, I was lawyering and authoring at the same time. I’d write early, from 6 to 9am every morning before leaving for work, then put in long stretches on either Saturday or Sunday. I think back to the two years I stuck, robotically, to this schedule and remember feeling like an automaton and such a pill.

2. Tell us about your book. Where did you get the inspiration for it? Is it autobiographical in some ways? How do you think federal judges will react to it?

Chambermaid is a comic tale told from the trenches of the federal chamber—the most elite and secretive institution known to the judicial estate. Even the Vatican is more open. The inspiration? I did, in fact, clerk for a court of appeals judge but it is not autobiographical. I’ll leave it at that.

I think (hope) anyone with a sense of humor — federal judge or not and lawyers and non-lawyers — will get a kick out of Chambermaid. Before the book was even released, some people in the legal community expressed outrage over its mere existence — as though having a federal judge as a character in a novel was inherently wrong. Although I think it would be fine for a former law clerk to write a memoir about his or her experiences clerking, Chambermaid is not a memoir. That said, I understand what all the scandal is about. Serving as a law clerk is considered to be the most prestigious job in the legal profession — a gift. Like anything else in life, some people have great clerkships, others have hideous ones. Chambermaid is the dark flip side to an otherwise shiny coin.

3. What are your future career plans? Have you made a permanent move from the practice of law? If so, why did you want to stop practicing?

I am working on a second novel. I decided to stop practicing not because I hated being a lawyer, but because I discovered that I loved to write. Really, it’s the only sort of work I’ve ever done that doesn’t involve me checking the clock every 15 minutes, wondering how much longer until I get to go home (that could also be attributed to the fact that I work from home).

4. Have you started writing your next book yet?

I have. Aside from one somewhat tangential character who is a former lawyer, my new manuscript is law-free (for the moment at least).

5. Now, for the law school finance questions. How much debt did you incur while in law school?

I did take out loans to pay for half of law school. But I was also deeply lucky to have parents who paid for the other half.

6. Have you paid off your debt yet? If not, do you have a goal of when you want to pay it off and how do plan on reaching your goal?

No, I have not paid off my debt. The rate on the loan is too low right now to pay it off.

7. What was your biggest financial mistake during law school?

Spending weeks on end in denial that I was in graduate school and behaving like a member of the gainfully employed. I’d eat out (a lot!) at the same restaurants as my friends who were investment bankers and very solvent. I tried to pretend I was someone-anyone—but a drab grad student.

8. What did you do to mitigate your debt load while in school?

Momentary shame spirals that entailed denial of basic things. These typically lasted hours, not days or weeks. As such, not much was mitigated.

9. Any parting advice to law students about saving money or choosing a career?

Law school is expensive. For some reason, most of us don’t quite grasp that until after the first loan repayment bill arrives. Unfortunately, my best advice is for the prospective law student-know what you are getting yourself into before going law school. Understand that most law graduates end up working at law firms. This, of course, is not at all a bad thing. It’s just the reality.

Thanks, Saira, for that awesome interview. Go and check out Saira’s new book, Chambermaid, available in bookstores now. (You can also purchase it through Amazon using the convenient link in the sidebar.)

If you enjoyed this post, then make sure to subscribe to my RSS Feed to get daily updates.

This week’s interview is with Austin Groothuis from the CALI’s Pre-Law Blog. Austin is a third year law student at Chicago-Kent. In addition to writing for CALI’s Pre-Law Blog, Austin is also the Communications/Marketing Coordinator for Computer Assisted Legal Instruction (CALI). (What a busy guy!)

1. How much student debt have you racked up during undergrad and law school?

I have just under $100,000 in combined school debt. I have paid for all of law school and virtually all of undergrad/graduate school plus cost of living during those times on loans/scholarships/or money I earned working while in school. I’ve had very little outside financial help so loans have really added up.

2. What action or habit do you think saved you the most money while in law school?

A lot of things combined. I buy all of my books used online at Amazon Marketplace or Half.com and then resell them at virtually the same price. It’s quite a racket the law school bookstores and casebook publishers have going on. I try not to participate in it as much as possible. I wrote about this on my blog here:

Cost of Text Books In School

Whenever I need something new I’m freakishly insistent on getting the best price through research online. Basically all of my gifts for Christmas this year were bought on deal websites and over half of them had rebates involved.

I sold my car last year to save money on maintenance, gas, random fees, and inevitable street cleaning tickets in Chicago. I just don’t need it in the city.

Although I don’t know what I’d do without my girlfriend to chauffeur me around the city at times. She has a real job and a car so, obviously, part of my advice is get to get a sugar mama (don’t worry, she never reads my stuff).

And most importantly, I opted to take a full-time job with CALI and switch to school part-time in the middle of my second semester. This extended my time in law school. But it literally cut my debt in half. That’s right, I’d be looking at upwards of 160k in debt had I not taken this CALI job. Amazing. It really saved me.

3. If you have student loan debt, when would you like to pay it off? How do you plan on reaching your goal?

It’s going to be a real long-term thing that depends on how much I make, what career path I choose to take, and what kind of family decisions I make (dual income? children? where to live?).

Optimistically, I think the best case scenario is 15 years to pay it back. But I could see using up the whole 25 or 30 years. I’ve never really sat down and thought of a schedule because I just can’t get a grasp on what my life looks like and what opportunities will be presented to me after I graduate.

4. What other personal financial goals have you set for yourself?

Don’t default on my loans and never have to ask someone for financial help.

5. What is your weakness in regards to your personal finances and how do you think you can improve it?

Eating out and the Starbucks across the street from work/school. I’m at work and school all day so it’s just too easy to not make a lunch the night before and worry about lunch the next day.

And it’s not like I’m addicted to Starbucks. But paying 4.50 for a latte once or twice a week at most really burns me just due to the fact that I’m paying infinitely more per gallon for coffee than what I paid for gas. But I really do love the mocha. It’s a bad habit but at least I don’t smoke!

6. How do you manage your finances? Is there a particular software you use to keep track of your money?

I do everything online. I don’t have to keep balances because I pay all my bills online and my bank transactions are reflected really quickly in my online checking account. I haven’t written more than 2 or 3 checks in the past 2 years.

My credit card (which I pay in full from month to month) is through the same bank and I can access that info easily and simultaneously with my checking.

I have an HSBC personal online savings account that pays 5+% and has no fees for transfers to and from other accounts and no minimum balance. Compare that to the less than one percent you might find at your local bank. It’s awesome.

7. What do you think is the biggest money mistake law students make?

Not understanding the way law school and legal jobs work. I think a lot of future students rely on the average salary of a school or become star struck by the numerous law firms paying 150k+ salaries and sending out press releases every time they increase starting salary. So students think they can go to any law school and rack up a ton of debt because they will be able to pay it off in 5 years with a $160,000/year salary.

But go to a non-elite school and at most only 10-20% of students even have a shot at big paying jobs. And nearly all non-big firm jobs with opportunities for graduates pay an amount much less than $100,000, let alone $160,000. I’ve written about this several times on the Pre-Law Blog including here:

The Chances of a Six-Figure Salary Out of Law School

and here:

Another Post On The Cost of Law School

and here:

How High Associate Starting Salaries Affect Law Schools…

8. Do you have any suggestions to other law students regarding their personal finances?

Besides the sugar mama thing, huh? Don’t carry credit card debt. Don’t spend more than what you can pay in a month on a credit card bill.

Read The Frugal Law Student blog. No joke. There are also several other money saving tips sort of blogs out there that are good to read.

Not so much for law students, but those thinking about law school, understand the risks involved in choosing certain schools and in choosing to go to law school at all. Read some of what I’ve written about this above for a start. Make sure you weigh the risks vs. the benefits before you decide to go to school/ where to go to school.

Good luck!

Thanks, Austin, for that awesome interview! Head on over to CALI’s Pre-Law Blog. Austin has supplied some great information for those interested in attending law school and those who are already in law school. Make sure to sign up for his RSS feed as well.

If you enjoyed this post, then make sure to subscribe to my RSS Feed.

[tags]CALI, Austin Groothuis, law school, debt, personal finance[/tags]

1. How much student debt have you racked up during undergrad? How much more do you plan on taking on during law school?

I attended a public university for undergrad, and with the help of a big scholarship and some part-time jobs I was able to get my B.A. without any debt. For law school I will again be attending a public institution on a scholarship, so I expect that my debt will be less than most law students’, but not insubstantial. The University of California law schools are almost as pricey as some of the private law schools now.

2. What actions are you taking now to mitigate your law school debt?

There are three major ways I’m working now to mitigate my law school debt. The first was negotiating with the law school on my financial aid package, which will save me at least $25,000. Another is saving what I can now, before I start, to minimize my borrowing in the first year. The third is educating myself and planning accordingly. It’s one thing to know that law school is expensive, and another to know exactly how much extra per month living alone would cost me once my loans are in repayment. I think it’s a matter of establishing priorities.

3. When would you like to pay it off your student loans? How do you plan on reaching your goal?
I hope to pay off my loans within five years of graduating law school, which I wrote about here. I would have to adjust my goals if I were to take a public interest job or work for a year or two as a judicial clerk, but assuming I were to work at a typical large law firm right away in my hometown, it wouldn’t be impossible. That is, of course, provided I am able to resist the temptation of expanding my lifestyle to match my salary and diligently pay my loans instead of splurging because “I deserve it.” I would deserve it! But that’s not a good enough reason to blow the bank when I have other goals I want to meet.

4. What other personal financial goals have you set for yourself?
Aside from paying off all student loans by 2015, I expect to also be able to buy a home within five years of graduating. My other goals are a bit softer–saving 10-15% for retirement, living below my means, and retiring early enough to enjoy the fruits of my labor!

5. What is your weakness in regards to your personal finances and how do you think you can improve it?

I think I have a few big weaknesses in regards to personal finances. I’m a bit of a hoarder. It feels really reassuring to have a lot of money sitting in the bank (in a higher-yield online savings account, but still!), but I know that’s not the best way to make it work for me, because I neither can spend it to enjoy it, nor can I invest it properly. I’m also a little bit of a control freak, which makes the idea of investing money (where I can’t control what will happen to it) seem really daunting. I think the only way to get past this is to become more informed. The more I learn about personal finance and investing, the less intimidating it seems, and hopefully at some point I’ll reach the threshold where I no longer feel like stuffing cash under my mattress (figuratively speaking, of course).

6. How do you manage your finances? Is there a particular software you use to keep track of your money?

I use Quicken for the budget and expense tracking features. When I see that I’ve spent 50% of my budget for eating out for the month and it’s only the 8th, I get back on track really quickly. It keeps me a lot more honest than just watching the balance on my account fall. I don’t necessarily recommend that everyone run out and buy Quicken, though–I could just as easily do this with Excel, but a trial version was installed on my computer when I bought it in 2002. I don’t even know what features I can’t access, but I don’t seem to miss them.

7. What do you think is the biggest money mistake or misconception a future law student make?

Since I’m still only a future law student myself, it’s hard to say–I may be making that biggest mistake!–but I’m pretty sure the most dangerous trap to fall into is not really considering the costs of attending law school and living expenses before signing the promissory notes. For example, at my law school, the Loan Repayment Assistance Program will only cover $60,000 of your loans, but the total cost of attendance is closer to $150,000. If someone plans to become a public defender after graduating from a UC law school, she will have to come up with some creative ways to finance her education in order not to be overly burdened by the debt (and live frugally, besides!). Even someone making a salary of $100,000 or more per year will have to make some sacrifices in order to pay back that kind of debt. So it makes sense to be aware, and not live like you’re earning the money instead of borrowing it, because everything you buy will cost that plus 6.8-8.5% (or more!) interest afterwards. Most things won’t be worth it, in retrospect, so forget retrospect and just don’t buy it.

8. Do you have any suggestions to other future law students regarding their personal finances?

KNOW WHAT YOU ARE GETTING YOURSELF INTO. Whatever is motivating you to go to law school, you should be aware of the financial consequences, because they are not inconsequential. People will tell you that a law degree will pay itself off, but it won’t–YOU will pay it off. Make sure that you know exactly how much it will cost, how you will pay for it, and if you are willing to make the sacrifice.

Thanks, Strange Bird, for that awesome interview! Stop by Strange Bird’s blog, I Am Running With Scissors, today to read some of her great content on saving money on law school before you start law school.

If you enjoyed this post, then make sure to subscribe to my RSS Feed.

[tags]law school, debt, saving, money[/tags]

1. How much student debt have you racked up during undergrad and law school?

Currently, I have around $84,000 in student loans. By the end my final year of law school, I expect to have roughly $102,500. A fair portion of that is in the form of government subsidized loans, which means that there is no interest while I am still in school. For the loan amounts and rates, see my most recent quarterly statement of financial assets (available at: http://lawsoffinance.blogspot.com/2007/04/quarterly-statement-of-financial-assets.html).

2. What action or habit do you think saved you the most money while in law school?

Frugality, generally. I am not one of those students who goes out drinking and running up $200 bar tabs every night. I buy used books when available and I look around for the best deals online before buying any books from a brick and mortar store. I also look for ways to get the most money for my own used books at the end of each semester. Those little things add up over time.

3. If you have student loan debt, when would you like to pay it off? How do you plan on reaching your goal?

I have a timetable arranged for repaying my loans. The high interest loans (6.8%) will be paid off first out of law school. I have already created a budget with my expected salary and repaying approximately $1,000 per month fits fairly well into that budget. I will make the minimum payments on the other loans until the higher interest loans are paid off. Then I will move on to paying down the lower interest loans. That said, I expect to keep my 4.25% loan around for as long as possible. At least at present, I expect that I will be able to do better by investing that money that I could use to pay off the 4.25% loan.

4. What other personal financial goals have you set for yourself?

Unlike many other people, my goal is not to be debt free. I intend to use debt financing where it benefits me. As long as my cost of capital is low and my investment prospects are higher, I intend to take on debt. My goal is not to incur any “bad” debt, such as high interest credit card debt. In that area, my goal is to go my entire life without carrying a balance on any credit card. I am doing well so far

5. What is your weakness in regards to your personal finances and how do you think you can improve it?

My weakness is a recent change in my frugal nature. I have always been frugal / miserly / CHEAP. Recently, though, that has changed and I have started to spend more freely. It is just this past year that I have really noticed the change. It came right after I secured summer employment with law firms for two consecutive summers. I rationalize it by telling myself that it is the normal by-product of more certain future income prospects. It is not a terrible thing, though, because I know I could tone down my unnecessary spending if my income situation changes. That said, I would still like to keep it in check. I may end up hating law firm life and want out fairly quickly. If that is the case, I will wish I had saved more and spent less with that temporarily increased income.

6. How do you manage your finances? Is there a particular software you use to keep track of your money?

I don’t use any special software. I use Excel spreadsheets that I created myself the calculate returns and totals. I keep track of everything with my spreadsheets. It allows me to keep a handle on all that is happening in my financial life. Once I have calculated everything myself, I publish the results on my blog, Laws of Finance (http://lawsoffinance.blogspot.com/), as well as on NetWorthIQ, which can be accessed from Laws of Finance. Just this April, I started to publish my quarterly statements of financial assets. I hope to keep that up each quarter on Laws of Finance.

7. What do you think is the biggest money mistake law students make?

The biggest money mistake that law students make is getting depressed about their loans. They figure that, since their loans are so big already, a few more thousand here or there won’t matter. That is a recipe for disaster. Just because something is terrible doesn’t mean that it is alright to make it worse. Also, and I know this goes against my own admissions earlier, law students must remain frugal throughout law school and beyond. You don’t need to live more luxuriously as your income (or prospects for income) increase. The way to financial freedom is to save that extra income so that you won’t have to work forever.

8. Do you have any suggestions to other law students regarding their personal finances?

My only advice is, “Pay attention!” Don’t just forget about your financial situation because you don’t like the looks of it. Is that extra debt that you are taking on actually worth its cost to you? Do you really need that $6 specialty coffee drink everyday? If you consider the impact of your choices on your overall financial health, you will be much better for it. Just thinking about it might be enough to avoid making some bad decisions.

Thanks, Laws of Finance for that great interview! Stop by Law of Finance, read some posts, and sign up for his RSS feed.

[tags]law school, student debt, money, frugal, personal finance[/tags]