Trading in the Expense Account: Transitioning from Big Law to Public Interest: Budget Is As Budget Does
By Valarie Hogan • February 26, 2013•Careers
The depths of winter are upon us. While you may be tempted to think about a beach vacation, I would like for you to channel the great Suze and ask yourself, can I afford it? On a law firm salary, chances are the answer is most definitely yes. On a public interest salary, the answer is: it depends - let me see if there’s room in the budget. Like all things we love to hate (and hate to love), it comes from the French, bougette.
Last month, we talked about preparing your finances for a decrease in funding. Specifically, loan repayment programs, emergency funds, and learning to worry about money (even if you don’t believe that it exists, you do understand the power that it has in your life). This new found worry may not be great for the wrinkles in your forehead, but it is exactly what you need to motivate you to create a budget. Fear, of course, is a notoriously effective motivational tool. The basics of budgets are discussed in many places around the internet, and there are plans for just about every kind of person, the most basic of which keep track of what’s coming in and what’s going out.
Personally, I am fond of Gail Vaz Oxlade’s “Build a Budget That Works” interactive website that allows you to take multiple incomes into account and breaks down what it all looks like on a monthly basis. I also like that it’s divided into fixed and variable expenses because it reminds me that there are some things that are completely within my power to change, if I so desire. So let’s think about what a budget really is for a minute.
We’ll go into the details of fixed and variable expenses in the next couple of months because there are so many ways to think about them, but, right now, we’re going to just accept that there are three things that go into a budget:
1. Income – For ease, let’s go with $50k/year or $4166/month
A. Housing shouldn’t be more than 35% ($1458/month)
B. Transit shouldn’t be more than 15% ($625/month)
C. “Life” shouldn’t be more than 25% ($1041/month)*
D. Debt shouldn’t be more than 15% ($625/month)**
E. Savings should be 10% ($416/month)
* “Life” includes a lot of things, but you may still be amazed at how much money you spend in this category when you’re not worried about money – I know I was. This is where having goals becomes a HUGE help, as discussed below.
**The importance of figuring out how you’ll handle loan payments cannot be overstated. My loan payments would be 70% of my salary if I was required to make the full payment every month, but because of my law school’s assistance program, my payments are only about 3% of my income.
The income and expenses part really doesn’t mean anything without some goals to guide how you make those decisions. I think that to be a successful budget-er, a budget can’t just be numbers on a page. It needs to be a tool to help you reach your goals – whatever they are. So, first things first, what are your goals? Do you want to buy a house? Do you want to save for retirement? Do you want to take the most amazing beach vacation anyone has ever taken in the history of the world?! Great! By virtue of having a goal, you are one step closer to making your budget work for you, as opposed to feeling like there’s a great weight on your chest. There are also great budgeting tools, like Mint.com that allow you to set goals, link an account, and track your progress. Your goals should be realistic, but something that has real value to you.
However you decide to build and maintain your budget, the most important thing is just getting started. I have tried a thousand different ways to budget and made a lot of mistakes along the way. I am prone to making impulse buys online and then returning everything, which make me feel like I don’t have control of my money. But, as my plan has developed and I’ve set more realistic goals, I’ve become better at managing my spending and keeping a running tally of things in my mind. Six months into my public interest job and my emergency fund is still alive and well – with a higher balance (thank you compound interest!) then it started. Making the move to a public interest job does require you to think about money more, but if you plan well, it doesn’t need to be the thing that keeps you up at night.