"I have money sitting in my bank not generating any interest and little financial knowledge": How can I make my $175k work for me during law school and beyond?

Hey Money Minder,

So, during the pandemic while grinding through law school, I managed to stack up some serious cash teaching tennis on the side. It was just supposed to be a little side gig, but it ended up turning into a major money-maker for me. I’m also super frugal and don’t have many expenses.

But now, as I’m gearing up to prep for the bar exam, I know I need to stop teaching to fully focus on studying. That means no more income for at least a year, maybe more since I’m also planning a big move cross-country. With all this money just sitting in my bank account not doing anything, and me not having much financial know-how, I’m kinda lost on what to do next. I know I should’ve figured this out ages ago, but I was too focused on watching my bank account grow than on making smart money moves.

And I’m thinking ahead to when I start my own practice after passing the bar. I’ll need money to set up the practice, not just for rent and food. Should I also be thinking about retirement savings? Oh, and I’m single and live alone, too!

Oh, and my family is suggesting I take out $100k for a CD for a year or six months. What do you think?

Farewell,
Financially Confused Tennis Pro

Response from THE MONEY MINDER:

Hello There,

While it’s great to hear about your success in generating savings through teaching tennis to pay for law school during the pandemic, it’s essential now to plan for this upcoming period where you’ll focus on preparing for the bar exam. It’s understandable that stopping your income stream during this time can be a cause for concern, especially as you plan to move cross-country and set up a private practice post-bar exam.

Given your financial situation and the need to have access to your funds in the relatively short term, investing in risky options is not advisable. It’s crucial to ensure that your money is safe and accessible when you need it. You may consider looking into high-yield savings accounts or short-term certificates of deposit (CDs) with a reputable bank, which offer slightly higher returns than a traditional savings account while maintaining liquidity. Taking out a large sum for a CD might not be necessary; instead, you can ladder your CDs, investing varying amounts for different time periods.

Moreover, setting aside money for setting up your practice and covering your basic living expenses is a prudent step. You mentioned being single and living alone, so it’s essential to factor in not just rent and food but also insurance, utilities, and other essential expenses. While retirement planning is crucial, especially for someone going into private practice, focusing on building up your business and emergency savings might take precedence at this stage.

In conclusion, it’s advisable to seek guidance from a financial advisor or a banking professional who can provide tailored advice based on your specific situation and goals. Establishing a solid financial plan that aligns with your short and long-term objectives will be key to ensuring financial stability as you navigate this upcoming phase in your career. All the best from THE MONEY MINDER.