It was spring of my fourth year at college and I was barreling toward graduation with a job offer with the federal government. This was pre-recession so this was more or less average, instead of exceedingly lucky. And I, as a completely entitled millennial, pictured the next 30 years of my life working in a gray cubicle under fluorescent lights in this office.
And that frightened me (though I tell myself the sexual harassment was the bigger issue with that job). When one of my friends excitedly told me she was going abroad for a year with some of our mutual friends, I jumped ship at the chance.
This is not the start you would expect for someone who saved $65,000 for grad school in 4 years, making, at most, $44k annually. I spent one year abroad, where I saved nothing, My first six months back in the States, I floundered about at temp jobs, making $10-20/hour, though I still managed to save because I was living rent-free with my parents. In my last six months, I was unemployed after having been laid off, though I still collected unemployment. But for a solid 2 years I was gainfully employed as a financial analyst and I hunkered down at the whole “being an adult” thing.
When I was 21, I read about 401ks and retirement in the book Financially Fearless by 40 by Jason Anthony. I was appalled that I hadn’t started saving at the ripe old age of 22. My dad is an accountant! Why didn’t he warn me?
But my parents had always taught us the value of saving. I decided that when I was fully vested I would max out my 401k even while I was making $42k and then $44k a year. Because the 401k is pre-tax, I saved a bunch on taxes by maxing it out, and I still had enough money coming in my paycheck for a simple existence. With the company match, I was saving about $20k in my 401k. Then I saved $5k in my Roth IRA. On top of that I saved a few thousand into my savings account and had saved a few thousand before and after this job while working odd jobs. So that’s the basic arithmetic answer of how I saved this money.
The aggressive 401k contribution was a method of forced saving. After I made the election, I was far too lazy to do anything about it so I just had to adjust my spending. I benefitted from the tax savings, which came to an extra few thousand a year. I also benefitted from being a natural hermit and a scrooge. I was paying $800/month in rent. This was a reasonable rent 10 years ago but is on the low end for the Washington, D.C. area now, though I still see rents this low. We didn’t have a TV or cable. The furniture was sparse – scrounged from a collaboration of my office’s discarded furniture, Ikea and this sweet Jennifer Convertibles sleeper couch for $200. (Selling that couch was a huge mistake).
We ate at home and I can’t remember doing a lot during these two years though I do remember studying for the LSAT. I went to work and I went home and did logic puzzles and wrote essays. On the weekends we visited our parents. Note: this is a highly effective way to save money and be completely lame.
But the key was having the money withdrawn immediately. When my sparse paychecks arrived, that was all I could spend. And in fact, I didn’t even spend all of it. I think a lot of people may have worked jobs where they weren’t making bank right out of college and took this as an excuse not to save any money. Sometimes people think, “I need to make $X before I can save money.” If $X is barely over minimum wage, then perhaps this person is correct. But I think for many people, we can make changes and even if we aren’t making that much money, saving small amounts of money is valuable. And making it harder to spend money is an easy way of forcing yourself to do that.
So I’m sure you’re saying, well you saved a lot of money for retirement, but how did you use that toward grad school?
Well, I liquidated most of my retirement savings to pay for grad school.
I’m sure a financial adviser would say I was foolish for withdrawing from my retirement accounts to pay for law school, and I probably was. I’m not going to argue this was a smart thing to do but it was what I felt at the time was a good use of my money. (And to be fair, I did such a poor job of investing my money, it really hasn’t grown much even as the stock market has soared). My approach was, rather than to take out max federal and private loans, I took out the max federal loans and paid the rest with savings and strategic withdrawals from my retirement accounts.
As I will show as I continue in this series, the money I saved in these two years would have a snowball effect to provide a solid financial foundation for my future during and after law school. And even if I didn’t make the most use of my savings, having the savings themselves was a huge accomplishment in my mind.
What I learned in my first four years of working was that I could live on very little, and I could be perfectly content. That is a message that I have carried through with me my entire career and has helped me avoid lifestyle creep.