Biglaw Budget: 1st Year Associate (2024)

As a Biglaw associate, a budget will help you capture as much wealth as possible, control your spending and ensure that you make the most of your time in Biglaw.

Keep in mind that this budget won’t be your specific numbers but should be helpful in generating some thinking on your part (here’s one for a SmallLaw associate).

In this hypothetical, I’ve calculated the first year associate could save $81,076 a year. That’s a pretty solid savings rate of 35.6%.

Hardcore savers could do even better, but I wanted to start with something that’s middle of the road, because I’m much more afraid of the other end of the spectrum – lawyers making a $225,000 starting salary and, yet, only saving $20,000 to $30,000 a year, all while thinking that they’re making good progress toward their financial goals.

Thanks to your late career start, a savings rate of 10% to 15% just won’t cut it. You need to do better.

We’re assuming our hypothetical first-year associate lands a job at one of the prestigious firms in New York, San Francisco, Boston, or even a place like Dallas or Houston, and that their pay is based on theCravath scale.

If you end up with a deferred start date, we’ve covered that, too!

For purposes of this example, let’s assume she lives in New York, as it’s one of the most expensive places to live in the country.

Income, retirement and pre-tax line items

As you can see, on the income side we’re assuming a starting salary of $225000 plus the most recent annual bonus. Those numbers match up with the current market Biglaw salaries.

The first two buckets of expenses on any budget are: (1) retirement contributions and (2) pre-tax contributions.

The budget is designed for you to max out your retirement account contributions off the top of your income without you having to think about it. Make this your default going forward in your career.

Pre-tax contributions are to things like healthcare and transit expenses. Given that you don’t have to pay taxes on these expenses, you want as many expenses to be pre-tax as possible.

Download Budget

Your biggest expense: Taxes

The tax bite on your salary is gigantic and that’s even after taking advantage of pre-tax contributions to retirement accountsand using pre-tax dollars to pay for health insurance premiums and a monthly subway card.

Anything you can do to minimize taxes is going to be an effective use of your time and worth planning.

The budget assumes you’re living in New York, which is subject to a city tax. Many associates in other big cities will not be subject to a city tax (but might see higher taxes). We include the city tax on its own line so you understand the cost of living in the five boroughs (read our story of moving to New Jersey).

Bottom line is that you should be aware that taxes are your single biggest expense, not because they’re evil but because any action you take which reduces a $1 of taxable income can have a big effect on building wealth.

Your second biggest expense: Housing

Housing spending is discretionary. We assume a generous $3,000 spent on a 1 bedroom apartment. If you can live on less (i.e. with roommates, as you should be doing), that’s even better. You could easily trim $1,000 from your rent by continuing to live like a law student.

For anyone serious about building real wealth, I highly recommend you continue to live like a law student for the first 3-5 years after law school.

You’ll also notice in this category I’m assuming you have a house cleaner (a luxury I think is well worth it) and that you’re only spending $40 a month on Internet and $40 a month on your phone.

There’s really no need to be paying more than that, nor do you need cable TV. Cut out the unnecessary expenses and move on.

How to limit general expenses

For food and bars, I’m assuming you can get by on $1,150 a month. Many spend much less, but, hey, NYC is expensive. You’ll probably be going out with friends to relieve some of the stress, so go ahead and have a little fun.

For the most part, you should be trying to capture all of your reimbursable expenses anyway, which will often include late night meals.

On the shopping side, the clothing allowance takes into consideration the work from home policies pervasive in Biglaw at the moment. When offices open up, you may need to adjustas needed.

For entertainment, we’ve kept things pretty minimal. You’ll mostly be working, so I doubt you’ll be able to spend much on entertainment even if you wanted to. The key here is to keep from paying for expensive monthly subscriptions forservices you don’t use.

At the end of the day, this hypothetical lawyer is saving a total of $81,076 a year. That’s a great base, particularly since you’ll be saving your raises as you go along.

Even if you only spend three to five years in Biglaw, you’ll be able to rack up over $300,000 in savings in a pretty short timeframe.

What about student loans?

Many of you will notice that the budget doesn’t include student loan payments. That’s on purpose.

We want you to think of payments toward your student loans as “savings” since reducing your debt has the same effect of increasing your net worth and saving money in a bank account.

The savings generated by this budget are yours to deploy as you see fit, although if you’re looking for some ideas, we have a guide for prioritizing your dollars.

Regardless, if you have $200,000 in student loans, you should be able to pay them off in five years, assuming you use future raises and bonuses toward the loans.

Don’t forget to grab our cashback bonuses when you refinance your student loans.

If you find yourself five years out with no student loan debt (i.e. you’ve paid off $200,000) and over $150,000 in retirement accounts (remember, you’re still making those contributions in the above example), I’d say you’re doing pretty good.

I know many readers will want to do even better and of course you can do more to push the needle by increasing your savings rate.

Download Budget

The reality of Biglaw spending

Unfortunately, many lawyers won’t be able to save this much. They’ll leave Biglaw in three to five years with a large student loan balance and a negative net worth.

It’s pretty easy to spend every penny of your salary when you’re living in a high cost of living city like NYC. This is especially true when you’ll be watching your peers do the same.

But it’s possible to pay off your student loans and build up a considerable net worth. Ultimately, it’s up to you to decide where you want to be in five years.