Advice for soon-to-be law school graduate

[lawstudent]

Hi all --

Hoping to get some financial advice as a soon-to-be law school graduate with limited knowledge on savvy personal finance strategies. Fortunately I have secured a job post-graduation. Below is what my financial situation will be once work starts:

Salary: $160,000
Roth IRA: $45,000
Stock portfolio managed by parents' wealth management guys: $100,000

Student debt: $170,000
- Interest rate around 6.8% now but will be able to refinance at an interest rate of 2.5%
Monthly expenses excluding any student loan payments: $2,200

I'm wondering what I should do with my monthly income when I start work. What percentage of it should I throw at my student debt and what should I do with the rest?

Any advice would be greatly appreciated!

[Vagabond76]

Law school is the only thing I told my kids to absolutely not do. Too much debt, not enough jobs, and dealing with too many assholes if you do to make it a rewarding career.

[Financial.Velociraptor]

Two and half is a great interest rate.  I'd pay it down but do it obliquely.  Money I earmarked for SL debt would go into closed end municipal bond funds (IQI, IIM, NEA, NIO, MHI) all paying a little better than 6% federal tax free.  You accumulate how much ever you need to cover the SL payments that way and come out 4.5% on the interest while maintaining your financial flexibility.  Those funds I listed pay monthly distributions so once you have your principal accumulated, you just redirect the interest in to your payments out. When the SL naturally amortizes to zero, you still have your income stream.  You won't be able to get that kind of loan for real estate or anything else so make the best of it?

I wish I had done this with my home loan instead of extinguishing it.  Lesson learned.

[Stagleton]

Only peice of advice: read the blog!

This is the last article that was posted: http://www.mrmoneymustache.com/2016/01/13/an-interview-with-the-lawyer-who-retired-at-33/

[terran]

Live like you're still a student. If you really stop and think about it, how much of that $2200/month represents lifestyle inflation? Sure, spend some of that money on things/experiences you truly value, but be very conscious about it, don't just change your lifestyle because it's what "grownups" do. It's a lot easier to slowly inflate your lifestyle than to drastically inflate it then try to deflate it later. The former feels like an embarrassment of riches (despite saving ridiculous amounts of money), the latter (I would imagine, since we took the first path on salaries smaller than yours) feels like deprivation (while living paycheck to paycheck).   

[soupcxan]

Stock portfolio managed by parents' wealth management guys: $100,000

I would find out what these jokers are charging you and then move the funds to Vanguard or a fee-only advisor.

[CorpRaider]

Yeah, I would recommend you read/peruse bogle's little book; common sense somthing (the"little book" series is a set of small, easily digestible financial books published by Wiley and written by various authors) or the little book "The Elements of Investing" by Charlie Ellis and Burton Malkiel.  You could knock one of those "little books" out in a day easily. 

Personally, I would pay the SL debt back over the longest permissible term, assuming that's a fixed rate, as long as you're not using the deferred payments to consume additional personal property and services. 

I would fire the wealth management guys or at least don't give them anymore money if you don't want to offend your parentals.  Max your tax advantaged accounts and put other stuff in vanguard balanced index fund if you don't want to devote any time to it.  Look into doing nondeductible contributions to company 401(k) and backdoor roth, if interested and permissible under terms of firm plan.

For personal finance stuff, read Mr. MM classics posts.  Mad fientist is a great blog for just looking at investment and tax optimization stuff.

[onlykelsey]

To the extent this matters to you, I'm 95% certain I know where you work now, and other may be able to figure that out as well. 

Don't let your lifestyle creep up, and set an aggressive goal for when you might get out.  A bunch of people from my class were offered jobs at the firm I think you work at, then they had to wait for a few months, and then the jobs disappeared, and they were up the river.  Stuff like that happens.  Maybe for you the number is 2 years or 4  years or whatever it is, but work towards freedom from student loans in case you suffer downsizing or need to quit for your sanity.

[Dee18]

Pay every penny you can toward that student loan, either directly or by investing as Velociraptor suggests.  That is a fabulous salary and nice loan repayment deal, but both only last as long as your job there lasts.  If you don't like the work (or they decide they don't need you), the less debt you have the more job options you will have. 

[BFGirl]

Yes.  Get loans paid off as soon as possible and try to stay grounded in your lifestyle.  Try to get broad experience in the legal field.  I was in private private practice for 9 years and with a court for last 13.  Try not to get caught up in keeping up.  I did that for a while and the amount of money you can blow is mind boggling. 

[BFGirl]

Two and half is a great interest rate.  I'd pay it down but do it obliquely.  Money I earmarked for SL debt would go into closed end municipal bond funds (IQI, IIM, NEA, NIO, MHI) all paying a little better than 6% federal tax free.  You accumulate how much ever you need to cover the SL payments that way and come out 4.5% on the interest while maintaining your financial flexibility.  Those funds I listed pay monthly distributions so once you have your principal accumulated, you just redirect the interest in to your payments out. When the SL naturally amortizes to zero, you still have your income stream.  You won't be able to get that kind of loan for real estate or anything else so make the best of it?

I wish I had done this with my home loan instead of extinguishing it.  Lesson learned.

I don't want to derail the OP's thread, but I've seen you mention closed end municipal funds several places.  Is there a thread where you explain your strategy?  Thanks

[Financial.Velociraptor]

I don't want to derail the OP's thread, but I've seen you mention closed end municipal funds several places.  Is there a thread where you explain your strategy?  Thanks

Not sure if I've detailed it deeply on the forum, just on my blog.  You can PM me if you have some specific questions you'd rather not broadcast to the world.