Published August 29, 20194 min read
Joshua Holt is an attorney at a large firm in New York. He lives in New Jersey with his wife and infant son. He also writes the Biglaw Investor blog. We asked him how he budgets.
Holt works on big deals for his firm, and there are two- to three-month stretches when he works very long hours, sometimes from 8 a.m. to 2 a.m.
"So at least for me, one of the challenges with budgeting is having not a lot of time to pay attention to it," Holt said.
Because his time is limited, Holt tries to turn budgeting into a system. He earns a high income and has enough money to cover his expenses. The budgeting challenge he faces is ensuring he devotes enough of his salary to savings.
"One of the successful strategies I use is to give myself a fixed amount of money each month to live off of," Holt said.
He deposits only what he needs to live on into his checking account and the rest goes directly into a retirement account.
The average annual tuition at a private law school is $49,095, according to U.S. News and World Report. At Boston College, where Holt attended law school, tuition is now $54,750 and the school advises students to budget another $20,000 for living expenses, books and other costs.
Holt graduated from law school in 2009 with about $200,000 in student debt.
"It was not fun times for me," he said.
His starting salary out of college was $160,000.
"I naively thought I would be able to pay it off the debt in like, I don't know three years," Holt said.
That thought was quashed by the cost of living in New York City.
"One of the big challenges was just coming up with a system to pay off that debt right away," Holt said.
To motivate himself, Holt cut out 200 strips of paper, one for every $1,000 he owed. He looped them together into a chain and hung the chain in his apartment.
"It was always in my living room as a way to motivate me to pay off the debt," Holt said. "That is really difficult when you owe $200,000. You don't feel any better when you owe $170,000."
Every time he paid off $1,000, he got to cut a link from the chain.
"If I was able to cut off a link from the chain, then I can visually see the difference and the chain felt shorter," Holt said. "And of course, over time, the chain did get shorter and as we got to be down to the $60,000 range, you're really feeling like, 'OK, I might be able to get rid of the thing from my house.'"
Holt paid off the final $60,000 in one year and is debt-free today.
"I use You Need a Budget and I've been using it for probably seven years at this point," Holt said.
Holt uses YNAB like the envelope system, allocating money ahead of time to his spending categories.
"To the extent that I overspend in any category, I simply am forced by the YNAB system to deduct against other categories," Holt said.
Holt's firm pays for malpractice insurance for himself, as well as health insurance and short-term and long-term disability insurance. Holt used the ladder strategy to buy three life insurance policies with terms of 30, 20 and 10 years. Laddering reduces his life insurance coverage as he ages and his net worth grows. (Learn more about the ladder strategy.)
Holt has renters insurance and an umbrella insurance policy to protect his assets. Holt doesn't have a car, but bought a non-owners car insurance policy, which covers him if he's injured as a pedestrian. He plans to buy his own disability insurance on top of his work-provided policy.
"The disability insurance I have through my firm is not portable," Holt said. "So if I leave I would be relying on my new job to provide disability insurance. I'd like to have my own."
Holt is a saver.
"I enjoy seeing my assets increase," he said. "I measure my net worth every month. I have a spreadsheet that I've been using for over 10 years."
Holt doesn't consider himself frugal, but thinks every dollar should have a purpose.
"The whole point of spending is to maximize happiness," Holt said. "So I don't like to have wasteful spending that doesn't maximize happiness."
"Really the financial goal at this point is to hit $1 million net worth," Holt said. "The way I'm doing that is by being consistent. If you were training for a marathon, you have to go out and run every other day and you have to do that over a long stretch of time. I see building $1 million net worth as the same thing. It's being consistent about your saving."
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