The day I graduated college, I checked my bank account balance and the ATM receipt recorded my balance as $.01—one penny! I saved and framed the receipt. I imagined telling the story one day of how I had only a penny to my name on the day I graduated college and how—I imagined—I would one day look back and think of how little money I had and how far I had come in the intervening years.
In some ways, though, that day would represent the high-water mark for me financially. I may have only had one penny to my name, but at least I was one cent in the black. Nearly 20 years later, despite holding a law degree and having well over a decade of professional experience under my belt, I would find myself many tens of thousands of dollars in the red.
Psychology of Developing Professionals
A few months after the ATM generated my memorable receipt, I prepared to start my first year of law school. Part of this preparation was signing an agreement with several different banks and the federal government to repay over $150,000 in student loans. I was 21 years old and—until I signed those papers—had never borrowed a penny.
My first year in law school was the beginning of a very different life for me. In so many ways, my worldview was changing. I was learning to think differently—as the saying goes, I was learning “to think like a lawyer.” I was also surrounded by people who appeared to be more sophisticated than I was and who had larger ambitions (and—it seemed to me at the time—more confidence) than any group of people I’d met before.
As an undergrad, I was fortunate enough not to incur student debt (my mother, who worked as an administrative assistant at a prestigious college, had embarked on a successful campaign years before to secure tuition benefits for non-faculty staff members, so her employer paid for most of my education). I worked during the week and used the money I earned to support myself. The resulting lifestyle suited a college student. It was no-frills but also carried no debt, and generated many fond memories despite (or perhaps because of) its modesty.
During law school, though, I quickly learned from my new peers that we were “developing professionals.” In addition to the novel educational environment and expanded career opportunities, we also began to behave and seek out experiences we believed suited aspiring professionals. Quarter wings and dollar beers no longer seemed acceptable. Instead, we ate at higher-end restaurants and raised our glasses at posher happy hours.
The Most Important, Least-Talked-About Thing
Starting salaries at law firms always cause a buzz on law school campuses. Students who have opportunities with large law firms are keenly aware of the exact starting figures of their target firms and those firms’ peers. This obsessive discussion about starting salaries—as distasteful as it can be—is ubiquitous on some law school campuses, including the one I attended. Strangely, though, that is the sum and substance of the conversation I recall having about earning money as a professional. Very few, if any, conversations revolved around how to manage an income and create a stable foundation on which to grow a fulfilling career and a balanced life.
Law schools (and undergraduate, high schools, middle schools, and elementary schools, for that matter) should dedicate more (read: any) time to educating students about managing money. Every person reading this article earns and spends money every day. But how many have received a formal education on best practices?
Most people don’t like to talk about money. It feels too personal, too icky, and too unseemly to discuss. It feels like disrobing in front of a stranger—whether you are proud or ashamed of what you have to show, it is simply not done. It is also fraught with issues of class, privilege, politics, and privacy. I suspect, though, that our collaborative silence about personal finance results in our collective ignorance on the skills we need to achieve financial peace and professional happiness.
My $48,000 Secret
Six years ago, I (and my massive law school debt) married a man who also had his own considerable law school debt. We bought a house and signed a mortgage together. Aside from our mortgage and student debt, though, we carried no consumer debt. We had stable jobs. We felt comfortable.
Then, we struggled to have a baby, and I began to panic. Time was not on our side, and we had access to exceptional doctors who could help us with fertility treatments. But we did not have the cash required to pay. So, in our desperation, we applied for and used two credit cards to fund the process necessary to have a baby. We were incredibly fortunate to eventually have a beautiful baby boy. His birth, though, carried with it a $30,000 price tag. Once we had used our credit cards to purchase these medical processes, we gradually became less wary about whipping out a credit card to pay for other associated things we thought we needed: a new crib; a high-end stroller; a parents’ night out before the baby arrived…
Six months after my son arrived, we were astonished to find that I was—without medical intervention—pregnant with a second baby! In addition to my elation and gratitude, I immediately began to feel an incredible anxiety about our debt. Even though we never missed a payment, we had stopped checking our balances. When I logged on to each of our consumer accounts in February 2016, I was horrified to see that we held a total of $48,000 in credit card debt. With my heart in my throat and two daycare payments on the horizon, I frantically googled “how to pay off $50,000 in debt.” After reading several blogs, I knew that we had a real problem in how we handled money and needed to take drastic action to try to get back to even. Even as I read the blogs, though, I felt skeptical about our ability to create such a sea change.
The Hard Work Pays Off
Necessity is the mother of invention, and my husband and I needed to escape this debt we had incurred. We ultimately decided that we had to reinvent our entire relationship with money. We needed to learn about how to track it, where we were wasting it, how to reprioritize our expenses and how to be disciplined teammates in accounting for everything coming in and going out of our bank account each month.
We cut up and canceled every credit card we had. We started listening obsessively to personal finance podcasts: while walking to and from work, while exercising, while lying in bed at night, while driving and while eating meals together after we put our kids to bed. In other words, any time we weren’t at work or asleep, we were listening. We checked books on personal finance out of the library and learned all the best practices. We behaved as though we were training for the debt-reduction Olympics.
We knew that if we wanted to move away from the brink of financial ruin, we had to teach ourselves and really stick to a plan. We immersed ourselves to such a degree that the conversation around us changed. Instead of listening to the few explicit and many implicit statements about money from those around us, we started listening to advocates of budgeting, discipline, and risk aversion. As a result, our financial culture began to feel different, and we developed a value system around money that was different from the one we had grown to think of as the norm for two working professionals.
Over the course of the past 23 months, we have sold possessions, canceled subscriptions, cut cable, packed lunches, eliminated many unnecessary expenses and kept track of every single penny. As a result, we have paid off $81,000 in credit card debt, car loans, and student loans. We have $39,000 in student debt left to go. I feel completely different about our prospects than I did two years ago. I have no doubt that we will get to the finish line together, and then convert the money we have been putting toward debt into savings and other goals.
Maybe We Are Just Exceptional Idiots
You may be reading this article and thinking, “This is so patently obvious that only a spoiled, incompetent, reckless person could create such unsympathetic problems.” And you are not wrong—perhaps these concepts are and should be obvious to and practiced by some, maybe even many. But Neal Gabler’s eye-opening piece in The Atlantic in 2016 and the vociferous discussion it set off suggest that my husband and I are not alone.
You also may be thinking that these are the problems of extremely privileged, well-educated people. With so many other issues deserving our attention, why should you care about our family’s self-inflicted damage? I will not argue with you on that point, either. In fact, I hesitated to write this article for this precise reason. We both know how incredibly fortunate we are in life. We have hit, as Warren Buffett has called it, the ovarian lottery. Through nothing other than sheer good luck, we landed in the lives we have and have everything we need to be comfortable and happy.
Nonetheless, I have been surrounded by lawyers and law students for 17 years now. I know that my husband and I are not alone in making financial mistakes. I also know that many people live professional lives that do not make them happy, and that in many cases they do so because of their outsized financial commitments.
So, I share our story and the lessons we have learned with you, fully knowing how privileged we are, how undeserving we are of empathy and how unnecessary and elementary these lessons are to those who know them well. For anyone else, though, perhaps you can avoid some of our mistakes by practicing the habits it took us decades to understand.
How to Avoid Being Me
Budget, Budget, Budget
A written budget is absolutely essential to taking control of your personal finances. The younger you are, the better off you will be if you take steps now to set yourself up for success. Get on a written budget yesterday. Even if your income is in the form of loans—actually, especially if your income comes from loans—write down every single penny that comes in and goes out each month. Use a good app to make it easier. My husband and I use EveryDollar and find it to be very user-friendly. I have also read good things about YNAB (You Need a Budget). The specific app you use is much less important than the use itself.
Budgeting is not the end. To the contrary, it is the beginning of being the boss of your money and being able to tell it exactly what you want it to do. Without a written budget, you are spending mindlessly even if you are organized. You will leak money on unnoticed things like parking fees, convenience store mark-ups, casual dining, and more.
To Develop the Habit, Make it a Game
It took us a few months to get the hang of recording every item we purchased. Once we started “finding” money we didn’t know we were spending, though, it started to become a game. Where could we find more money?
As just one early example, we realized that we ordered pizza every Friday night. With tip, each pizza order came to $22. Of course, no one is going to go broke ordering $22 worth of pizza once a week, right? That’s the point, though. Because it was so small, we figured it didn’t matter. But, in our desperation, we decided that everything mattered because we needed every penny we could find to fight our way out of debt. We found that we could purchase a frozen pizza for about $5. We went from spending $88 a month on pizza delivery to just $20 on frozen pizza—a $68/month savings. So, we ended up saving over $800 a year just on pizza. We still had pizza every Friday, and while it wasn’t quite as tasty, it was fine, and it was just one of many, many small adjustments we made in the first few months that added up.
We also decided to save up and buy our three-year-old car at the end of the lease term instead of upgrading to a newer model. We rolled the $330 monthly payment we had been making on the car into our debt reduction: another $4,000/year.
We made dozens of these tweaks and stuck with them. Netflix and microwave popcorn became our entertainment instead of a trip to the movies. Our regular excursions to Barnes & Noble became trips to the free library. YouTube yoga classes replaced expensive studio visits. With a hand that now sports nails polished in drug store lacquer, I waved goodbye to $25 manicures. We brewed all our coffee at home. We cut coupons, sought out free activities in our neighborhood, and shopped around for cell phone plans, insurance premiums, and dry cleaning.
Making budgetary adjustments, refinancing our mortgage, and selling a few things we had around the house, we paid off the $48,000 in credit card debt in just over 15 months.
Reframe Your Goals
I do not think we were unique in the way we used to think of the future. I suspect that many professionals think about life two, three, five, or 10 years down the road and imagine a nicer car, a bigger house, fancier vacations, better clothes, private school, etc. What if, instead, we spent our time imagining not the things we could acquire by assuming larger financial obligations, but instead imagining how much more at peace we would feel if we used budgeting and our income to become more powerful in relation to our existing obligations? If we currently spend 30% of our income on housing, what if, over time, instead of buying a bigger house, we could lower that ratio to 25% or 22% and put the rest toward savings or debt reduction? What choices would we create for ourselves professionally by lowering our overhead as our skills and experience increase?
Needs Versus Wants Versus “Could Really Use”
Most of us know the difference between a need and a want. Heat in the winter is a need. Heated tile in the bathroom is a want. Food is a need. Fine dining is a want. But what about everything in between? For example, what if you don’t have an ice cream scoop in your kitchen and would like to acquire one? Certainly, this is a want. No one needs an ice cream scoop. Nonetheless, it could be handy to have around and would make your culinary life a little easier.
When we went through our financial makeover, we started to sort things into these three buckets. We knew that we needed to eat, so we did what we could to lower our grocery budget, recognizing that we couldn’t eliminate it altogether. We knew that eating out at a restaurant is a want, so we eliminated it until we had paid down our credit card debt (we took to heart Dave Ramsey’s admonition that, “if you’re in debt, you shouldn’t see the inside of a restaurant unless you’re working in one!”). For the things that fell in the middle—like the ice cream scoop or a slow cooker to make winter meals—we developed a budget to save and execute those purchases. Once we had paid off all of our credit card debt, we began building space into our budget for the things we “really could use.” When we finish paying off all of our debt except for our mortgage, we will begin to build in some pure wants, as well.
Delay Gratification, Build in Rewards, and Be Creative
Budgeting and discipline do not mean that you can’t ever use money to enjoy life. In fact, these practices are just the tools you need to be able to enjoy the things you want. We have found that when we approach the practice of acquiring something with thought and in a planned way that allows us to pay with cash and not derail our other financial goals, we enjoy it even more.
When we finally write out the last check to clear our debt, we plan to celebrate by budgeting to save money to see Hamilton on Broadway. Those tickets are certainly a decadent want and we will be lucky to be able to save to buy them. Just a few years ago, we might have swiped our plastic for the experience. Now, though, we have a plan. In the meantime, we will catch up on great movies and shows on Netflix while enjoying some microwave popcorn.
Conclusion
When I think back to that college graduate with one penny in the bank and her life ahead of her, I feel sad at how far off course she would soon become. But I also know that the process of coming back from the bring has helped her learn the true value of becoming a professional.
Being a professional doesn’t mean aspiring to some imagined future lifestyle whose contours are based on car commercials and episodes of Billions. Being a professional means being fortunate enough to have an education that provides opportunities to earn a living that, when approached with maturity and responsibility, provides power over your life. It means having the foresight to plan and make smart moves that don’t elevate monthly overhead but instead generate greater security and professional and personal opportunities.
I sincerely hope that you are not in a position to be heating frozen pizzas every Friday night for the foreseeable future. I hope you have managed your financial life with more intelligence that we did. But if you haven’t, I hope this story will help you feel less alone and know that you, too, can create new habits that will truly change your life.
I think that we would benefit as a profession if we began an honest conversation about money—what we do with it, how we can maximize it, and how to really use it to make our lives more rewarding and less stressful. Please consider this reflection one professional’s contribution to that conversation.
About the Author
Jennifer Leonard is the director of the Center on Professionalism at the University of Pennsylvania Law School, which designs programs to help prepare students for success in the evolving legal landscape. Contact her at jenleo@law.upenn.edu or on Twitter @PennLawCOP.