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Budgeting in a High Cost of Living Area, Part 1 – $160k

In my last article, Being Rich v. Feeling Rich, I mentioned how you may not be feeling rich if you live in a high cost of living (“HCOL”) area, regardless of your annual salary. This inspired me to embark on a three part series for Above the Law where I lay out a budget on how to make the most of your income while living in New York City. Each part will deal with a different income bracket, as well as suggested cost of living adjustments. Since New York City is the ultimate HCOL area, it was my natural pick for the series, not to mention that I have personal experience living there.

So here we are at Part 1 with a hypothetical salary of $160,000, assuming that you are either a first year Big Law associate or mid-level associate outside of Big Law. At $160,000, you’re not going to be rich in New York City. In fact, you’re also not going to feel rich after we break down your net pay.

I found this nifty paycheck calculator that allows you to compute net pay based on the tax year, city and state. You can add voluntary deductions and other basic information that you would put on a tax return. The maximum 401(k) contribution for 2013 is $17,500.00, which comes out to approximately $673 per paycheck (for 26 bi-weekly paychecks in a year). If you’re making $160,000, you can afford to max out your 401(k) contribution while maintaining a comfortable standard of living.

As shown by the following results generated from the paycheck calculator, bi-weekly net pay on a $160,000 salary is $3,248.58. This gives you a monthly income of $6,497.16 after deducting for taxes and 401(k) contributions.

Your Pay Check Results

    Bi-weekly Gross Pay: $6,153.85

    Federal Withholding: $1,210.99

    Social Security: $381.54

    Medicare: $89.23

    New York: $349.27

    NY SDI: $1.20

    City Tax: $200.04

    401(k): $673.00

    Net Pay: $3,248.58

[Please note that all figures provided below are variable estimates based on the assumption that our hypothetical attorney prefers to live in Manhattan and carries at least $100,000 of law school debt.]

Now here is my proposed budget for how to spend or allocate the $6,497.16.

    • RENT – $2,500
    Assuming that the preference is to live alone in a studio or 1 bedroom, $2,500 is an approximation of what one would pay for such an apartment in Manhattan. Obviously, rent could be as low as $1,800 or as high as $3,400, but $2,500 will suffice for the purposes of this budget.
    • UTILITIES – Gas & Electricity, High-Speed Internet – $100
    I didn’t include cable because it’s an unnecessary expense that can be cut out of the budget, especially in this day of Netflix subscriptions.
    • TRANSPORTATION – Unlimited Metrocard, Cabs – $175
    Must provide an allowance for cabs because let’s face it, there will be nights out where you’re just going to want to cab it home. But spend on cabs conservatively!
    • CELL PHONE – $100
    Includes 2 GB unlimited data usage. While a smart phone is also an unnecessary expense, it’s more valuable than paying for cable that you might watch only a few times per week.
    Subtotal = $2,875
    • LOAN PAYMENT – $2,000
    Subtotal = $2,200
    • FOOD – Dining Out, Groceries – $600
    Hello HCOL! After rent, food will be your biggest expense. Cooking in NYC is hard but it’s healthier and more cost-effective to make dinner a few times a week if you have the time after work.
    • PERSONAL CARE – $150
    Includes haircuts, toiletries, dry cleaning, tailoring, and the occasional treat to a manicure or massage.
    Includes alcohol, event tickets, shopping, and a Netflix subscription if you choose to have one.
    It’s good to have a small cushion in your budget for any miscellaneous expenses that may come up, like a doctor’s visit.
    Subtotal = $1,400
    TOTAL – $6,475

Alright, so this budget doesn’t give you that much wiggle room for the fun stuff because the priority is on retirement and loans. If you’re one of the lucky ones with no loans whatsoever, you should divert the money to savings/investment. Even if you don’t have loans totaling over $100,000, it’s highly beneficial to just pay off the loans as soon as possible.

You can “create” extra funds in your budget by decreasing areas of less priority. For instance, you can choose to live in an apartment with lower rent, either within Manhattan or in the other boroughs. The extra funds can be put toward your loans, savings/investment, or more entertainment or shopping, depending on your personal preferences. Also I didn’t make a separate category for gifts or travel, which would not constitute regular monthly expenses. You would have to budget for that accordingly out of money left over from spending under a category or dipping into your savings which can be used for both short-term and longterm goals.

Hopefully, this budget will provide some guidance if you’re looking for inspiration on how to structure your budget as a recent law school graduate or simply trying to get a handle on your personal finances. Everything in this article is suggestion only. Good luck and please stay tuned for Part 2, $100k.

Sunny Choi is the 2013 Writers in Residence Coordinator for Ms. JD. She is a former participant in the Writers in Residence program, where her monthly column Legally Thrifty focused on beginners personal finance advice for law students and professionals. A graduate of the University of Michigan Law School, she currently practices commercial litigation and creditors’ rights while freelance writing and blogging in her spare time. She can be reached at

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