That bright and shiny and possibly six figure number is inaccurate. If it is six figures, divide it in half. If less, somewhere between 30-45% is going to Uncle Sam, or the state, or somewhere else other than your pocket. The amount you are left with is your real income.
When I got my offer letter from my current employer, I grinned ear to ear at reading the salary. It was nice, very nice. But I only get about 45% of it as take home. It isn't so nice. Now, as I budget and scrimp, and seek to reclaim my lost dollars, I become much more familiar with the tax code, and realize the huge adveange of pre-tax deductions (and also become a deduction fiend!). This knowledge also frames how I view my financial future, future employment opportunities, and other important life choices.
Here is some advice I have picked up along the way, to help myself in my plight of being a relatively well paid but single employee who bears the brunt of much of the nations fiscal policies, and who Uncle Sam is seriously taking to the cleaners.
1. Pre-tax deductions are your friends! Seriously. 401K deductions lower your income that is taxable. Also, IRA payments are deducted from your taxable income. So it is a good idea to save. For me, a $680 a month 401K deduction equals about $300 less per month income. Now I just have to pray that tax rates don't keep climbing for when I hope to access this money.
2. Give money away. Being philanthropic is good for your soul, and good for your bottom line. Personally, I pick charities and organizations which I feel make a real difference and that I can be involved in. I also donate to political campaigns, and different charities my friends are a part of. You get to deduct the money at the end of the year. And you feel good all year long.
3. Live below your means. I have an aunt who is a prolific saver, because she says you never know what might happen to you. My aunt lives well below her means, and invests or holds on to her nest egg in other ways. When she out of the blue bought a house outright in Florida, everyone had to admit that she clearly knows what she is doing. I took this advice to heart when buying my first car. While I loved the idea of a BMW, the M3 to be exact, I knew that if I did that I would be at the very very tip-top of my car budget. I bought a Volkswagen instead. I am very glad I did, too, because I don't have to worry about making my budget each month, and I can concentrate on other things, like visiting and having fun with friends.
4. Plan for your financial future from day one. I met with some very zealous financial planners during my second month at work, and while I didn't buy any of their products, I did start thinking about where I want to be in 30 years, when or if I want to retire, and how I want my financial future to look. While doing what you love is a wonderful goal, and I embrace the idea of refusing to accept a job that you don't like, I do think that you also must be honest about your financial outlook, and plan accordingly. Nothing worth happening happens by happenstance. I know I have a lot of work to do, and law school debt is a huge priority, but I do have a roadmap to success, and I make decisions consistent with that map in my day to day acitivies.
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