I’ve been thinking about money a fair amount lately, for obvious reasons.
Like most of us, I’ve had a complicated relationship with money, and at various points in my life, I’ve managed to look like someone who’s either very good or very bad with money. Part of this is my long-held contention that the easiest way to be good with money is to simply make more money. Being broke is expensive as fuck; having a little financial breathing room makes it so much easier to make good choices like buying in bulk, setting up an emergency fund so you don’t need to use a credit card or borrow money when crisis strikes, buying big-ticket items when they’re on sale and not when it’s an emergency, and so on. But I can’t pin all my financial mismanagement on not making much money earlier in my career.
Throughout my college years and early to mid 20s, I racked up nearly $10,000 in credit card debt, in addition to my roughly $32,000 in student loans. Some of that was things that were either necessary or important, like college textbooks, professional clothes for my new job (especially after leaving the land of outlet malls, clothes became so expensive), or trips home to see family while I was living in the DC area. Some were truly frivolous - I still can’t believe I spent several hundred dollars to go to a College Democrats national convention when I had no real reason to and barely knew anyone there, and while I’m glad I did my Pacific Coast Highway road trip in 2016, I definitely overspent.
2017 was when things started to change for me. I had started a new job that paid significantly better than my old one, in part because I negotiated my salary for the first time. I was filled with both confidence that the committee I’d worked at truly trusted me and appreciated my work, as well as some righteous anger that I discovered while I was there that they’d been underpaying me compared to others in my department and never given me a raise after my then-boss switched roles, leading to a major increase in my responsibilities. (The committee did eventually make this right, and I’m very happy for the people who have done my job well after me and been paid fairly for it, but a tiny part of me still thinks they owe me and should cut me a check.)
However, I was also moving into my own apartment after nearly 4 years of living with various roommates. As a homebody who needs personal space and privacy to recharge, this was something I really wanted for my well-being, but DC rent isn’t cheap. I did the math and realized my extra money was all going to go toward increased rent, meaning I’d have to put forth more effort toward managing my money.
I started budgeting, using the free version of Goodbudget to track my spending and my progress toward financial goals. Being meticulous about entering all my expenses was really helpful - I’d tried automated budgeting like Mint in the past, but weekly reports after the fact weren’t doing anything to change my habits. Having to go in and enter my spending was what I needed to see the holes where I was spending money that wasn’t adding to my quality of life. (And for the record, I don’t drink lattes, but I never stopped spending a few dollars a day on my precious Diet Cokes.)
I also did something that a lot of financial experts will explicitly tell you is a Terrible, Horrible, No Good, Very Bad idea: I cashed out my 401k from the old job instead of rolling it over to my new account. It wasn’t much, about $6,000, but the financial experts are already ready to yell at me about compound interest and how much that would probably add up to when I retired. But I did some important things with it. First, I bought furniture for my new place and tided myself over during a fairly lengthy gap in full paychecks (both places I work/ed pay monthly on schedules that don’t sync well) without going into further debt, which was a major step forward for me. Second, I paid off a huge chunk of my existing credit card debt.
With a combination of the 401k, being able to throw extra money at my credit cards after I got a handle on budgeting, and a year-end bonus, I was able to pay off my credit cards in December 2017. After that, I started to save a little extra for both emergencies and travel (eventually going to the UK, Mexico, and Australia) and upped my 401k contributions, but my primary focus was paying off my student loans. I’d gotten onto a 20-year repayment plan instead of the standard 10 years to try to lower my monthly payments when I was young and broke, but I definitely didn’t want to take that approach anymore - I wanted them gone. I adjusted my mandatory monthly payments so I’d be on track to pay them off in 10 years and also tried to make extra payments with whatever spare money I had left at the end of the month. It took a couple years of diligent budgeting, but it worked: I paid off my last student loans in December 2019, also with a year-end bonus covering the last few thousand after I’d gotten the balance down from about $28,000 when I started to focus on them.
I would love to tell you that once I freed up the cash from paying off debt, this is where my money management went from good to great. Except…it didn’t. Meticulously tracking your expenses and spending is a lot of mental work and my urgency behind it had vanished. My next financial goal was purchasing a home or a condo, but looking at DC real estate prices, I felt like this was impossible, especially as home prices rose even faster during COVID. Paying off debt was something I knew I could do in a few years if I set my mind to it. Saving up a down payment and buying a home in DC, unless I somehow married rich, would take a decade or more.
During this time, I did some good things by automating increased transfers to savings and further increasing my 401k contributions, but I also began to be careless with tracking my spending. When COVID hit, at first I was saving some money by not having a daily commute to work, eating out at restaurants, or traveling, but living alone during COVID was exhausting. I began to rely on UberEats and other food delivery services to a truly embarrassing degree and I would buy things online without really thinking about whether I needed them, and I didn’t track my spending carefully because I was embarrassed about what I was spending it on and didn’t want to own up to my own habits. I was also in the thick of election season, working long hours and dealing with serious stress, and didn’t have the mental capacity to add that task to my to-do list. That meant I kept spending largely unchecked, $20 or so at a time.
I didn’t go back into debt, thank goodness, but it did seriously slow down my progress on savings. I do have some money saved up, a little less than $30,000. On the one hand, that’s an incredible amount to have saved compared to where I started in 2017, without even a real emergency fund. On the other, I’m going to need to supplement it with loans and part-time work to finish law school, even with my scholarship, and I’m frustrated with myself for not using the past few years to save more aggressively.
(As an aside: I’ve been reading Law School Confidential to try to prepare for law school after it was recommended to me, but I’m finding it frustrating and geared toward kids coming straight out of undergrad and gunning for elite schools rather than, well, students like me. The advice I found most infuriating was the instruction not to work at all during the first year of law school and to try to avoid it entirely during school years, only working for pay during the summers, so that I can devote myself entirely to studying and beat the curve, because of course I am in combat with all my classmates for the best grades. That might work if Mom and Dad were paying all my bills, but I’m a grown woman who needs to pay rent, keep the lights on, and feed myself and my dog. No matter how much I cut back on spending, I’m going to need to work at least a little, and it’s so aggravating to be treated like I and my financial circumstances don’t exist.)
I’m trying to cut back on spending a little in anticipation of quitting my full-time job in August. Progress is slow but I’m making some, cooking for myself a little more often or at least going to pick up takeout instead of tacking on delivery fees and curbing my impulsive spending a little.
I don’t want to fully give up spending on non-necessities, though. Some of my favorite writing is from a Vox series “The Best Money I Ever Spent,” in which writers reflect on purchases they’ve made that were meaningful to them. They vary in amount tremendously, from a few dollars to thousands, and may seem like frivolous spending to some. For the writers, however, those purchases were worthwhile. Some had the freedome to explore and take pride in their identity, others used it as an opportunity for self-care during difficult times, and others still used them to connect with and care for loved ones.
When I was in debt, I struggled a lot with guilt over my spending habits. I haven’t entirely shaken the habit. That can be productive sometimes, if it’s a prompt to adjust my behavior and cut out things that are costing me money without providing a worthwhile return in my quality of life, but there are good reasons to spend money on things that aren’t necessities. The best money I’ve spent has been on wants: throwing a bridal shower for my sister Mary, traveling to places I always dreamed of going to, supporting artists and musicians I love by dropping more money than is strictly practical on their work, treating myself to occasional float tank visits to supplement the other things I do for my mental health. It does me no good to beat myself up over that.
Most writing on personal finances is kinda garbage and comes from either a condescending place of assuming you’re in debt because you’re dumb and need to be lectured like a child about cutting back on spending or an even more bizarre place of assuming you want to hoard all your money and retire at 40. However, one bit of advice I like is the 50-30-20 rule, and not just because it’s the brainchild of Senator Elizabeth Warren and her daughter Amelia. It’s simple, practical, and realistic (if sometimes difficult) to implement: 50% of your household budget should go to things you need, 30% to things you want but don’t need, and 20% should go to financial goals like paying down debt or adding to savings.
I’ve done my best to follow it, particularly the 20% toward goals part, though I’m going to have to set it aside during law school because needs will be more than 50% and I won’t really be in a position to add to my savings. Getting needs down to 50% of income is hard, particularly with out-of-control real estate and rent prices. But what I find most liberating about it is the affirmation that yes, it is okay to spend on things you don’t need but that will make your life easier, happier, or more fulfilling. That’s what the 30% is for (or however much is left if needs are over 50%). If you want to travel the world, eat extremely expensive charcuterie, give generous gifts to the people you love, hire a housekeeper once a month - check the 30%. Is the money there to do the thing you want to? Great, go have a blast!
I’m trying to work out which spending is most important for me to keep while I go to law school. Rent, groceries, bills, gas/insurance (I don’t have a car payment, which helps big-time), and caring for Molly are obviously the first priorities. But I also want to leave room, even as a penny-pinching student, to live a little and occasionally treat myself to a new book, a float tank visit, a nice gift for my loved ones - things that aren’t the most practical but make me feel good.