How I saved $65k in 4 years for graduate school

It was spring of my fourth year at college and I was barreling toward graduation with a cool 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 myself in the next 30 years of my life working in a gray cubicle under fluorescent lights at 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 friends, I jumped at the chance.

This is not the story you would expect for someone who saved $65,000 for grad school in 4 years, making, at most, $44k  annually.  But it worked out. I spent one year abroad, where I saved nothing,  but in the other three years I got a job and hunkered down at the whole “being an adult” thing.

My first six months back in the States, I foundered about at temp jobs, though I still managed to save because I was living with my parents.  In my last six months, I was unemployed after having been laid off though I collected unemployment. But for a solid 2 years I was gainfully employed as a financial analyst.

I had read about 401ks and retirement early on and was appalled that I hadn’t started saving at the ripe old age of 23. 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 pretty simple existence. And of course I was already maxing out my Roth IRA. With the company match, I was saving about $20k. 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.

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.  Fortunately, I was naturally a hermit and a scrooge.  I was paying $800/month in rent, which was an amount negotiated by my family. That seems quite low for the Washington, D.C. area now, though I’ve known people to still find rent in that ballpark. But also this was ten years ago so this was low but now unheard of amount for a room in a 2-bedroom condo in the suburbs. I lived with my brother. We didn’t have a TV or cable. The furniture was sparse – scrounged from 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. 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.

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 the future.