This is the first in a four-part series on personal finance for young lawyers. For more money talk, check out the cover story of the winter 2010 issue of Precedent, which offers tips on how to give, save and spend your legal salary.
Graduating law school with a massive student debt load can be a daunting experience. This week’s column provides law school graduates who are struggling to find work and re-pay debts with a game plan on how to overcome these obstacles.
1. Take a debt snapshot.
Find a financial advisor and discuss your debt. If you do not already have someone in mind, walk into your bank and ask the front desk to set you up with a financial advisor. Banks do this free of charge. When you meet with your financial advisor, take a snapshot of your debt —including credit cards, lines of credit and student loans— and devise a plan of attack on how to re-pay it as quickly as possible. Think of this experience as spring cleaning. You have just reached an incredible milestone in your life. Graduating from law school is no small feat. Taking a debt snapshot will clear your head. You will realize that debt is manageable so long as you have a realistic plan of eliminating it from your personal balance sheet.
2. Dust off the resume.
Now that you’ve devised a debt re-payment plan, hustle to land a legal job. Contact your parents, friends, parents of friends, law society, law school alumni networks and career development offices, and scour Precedent’s A-List, newspapers and other legal recruitment sources. Be pragmatic. To re-pay your debt and achieve financial peace of mind, you may need to take a job that is not ideal. I recommend taking any law-related job that is offered in order to fill the coffers and begin re-paying your debt. While you may yearn to work at a litigation boutique, perhaps the only job available is at a legal research company. Take the job. Fill your bank account. Re-pay your debt.
3. Create a budget.
Creating a budget is an essential component of sound financial management. Sit down with your financial advisor to ensure that you do this thoroughly. In your budget, list the income from your job, your expenses and your debt re-payment commitments. Your budget will become a useful tool you can use to ensure that your debt is being re-paid and that you’re not spending more than you earn. For one month, record every dollar you spend. At the month’s end, compare your expenditures to your budget. Creating your budget and tracking your expenses will allow you to think strategically about saving, spending and paying off your debt.
4. Live frugally.
Frugal living should be another component in your debt reduction strategy. Though a diploma’s now hanging on your wall, that doesn’t mean that you should stop living like a student. I recommend instituting the following suggestions until your debt has been re-paid: move in with your parents, take public transportation, make your own coffee, avoid buying a car, cancel your gym membership and run outside, avoid excessive bar tabs, pay cash and discover economical means of socializing, such as skating, picnics, sports and free cultural events. Though frugal living can be brutal, remember that it’s temporary. A few years of frugal living is essential to achieving debt-free existence.
Adam R. Freedman practices corporate law in Toronto.