The Economics of an Unpaid Internship

Good afternoon everyone, I have been meaning to write this all semester, but am just now getting around to it. Nevertheless, I hope some of you find it useful.

By about September of last year (my sophomore year) I was dead-set on doing investment banking. I realized that in order to best position myself for SA recruiting in 12 months, I would need an internship for the upcoming summer. That fall I interviewed with some of the companies I had my eyes set on like JPMorgan and Goldman for their sophomore programs. But I did not get a single offer (or even an invite to their offices). Fast forward to the spring, I got back in touch with some trusted mentors and they told me that an unpaid internship was fine and not to worry about the money – that I would make it back, and more, if it helped me secure a BB internship the next summer. Coming from not much money (qualified for free lunch at school for three years of HS), I was very skeptical; but I listened to them. I ended up accepting an offer from a fund away from my hometown in a middle tier city (DC, CLT, ATL).

Now down to the nitty gritty, what did my costs look like? I ended up spending about $3700 for my 3 month stay, which is just over $1200/mo. (not too, too bad in my opinion).

By far my biggest cost was housing. I spent $1500 ($500/mo.). I think this is where I was the luckiest. I was able to stay in a very nice suburb of the city with a friend I knew who graduated a few years prior to myself. I wanted to stay for free, while he wanted ~$700/mo. I offered $1500 upfront, and he agreed (sidenote: this is why I like dealing with individuals over institutions. I think it is much easier to have negotiations like this with individuals.). This ended up saving me $500-600, or ~15% of my eventual expenses.

[I will also note here that $1500 should be sufficient for housing (except in NYC/SF areas). Prior to getting in touch with my friend, I had been on Craiglist and found numerous postings in the $400-600/mo. range. A lot of these were college apartments where the students would be home for the summer. Obviously these aren’t as nice as where I ended up staying, but they are more than sufficient. Also, because their costs are sunk already it is pretty easy to negotiate with these kinds of people.]

Other large expenses included food, on which I spent about $550 (~$180/mo.). This includes breakfast, lunch, and dinner pretty much every day. Breakfast I would either have a bagel with peanut butter or a bowl of cereal with either milk or yogurt (this is pretty cheap, healthy, and filling). For lunch, I had either Panera or Chipotle pretty much every day. I had not discovered the greatness that is the Chipotle burrito bowl until a couple weeks into my internship. After that, there might have been two or three times I didn’t get one for lunch (it tastes amazing, is extraordinarily filling, decently healthy, and costs only $7 with water to drink). Also, nearly every Friday we would go to lunch as a large group. This was great because we got to get to know other people at the firm, we got a nice(ish) sit-down meal, and it was free. As for dinner, at the beginning of the summer I wanted to learn how to cook, so I bought salmon or tilapia a few times. This was very short-lived, though, and soon enough I was back to having sandwiches with a salad every night. It was much easier, less stressful (didn’t have to worry about burning down the house), and cheaper. This also includes a couple nice dinners that I took girls out to and the few times I had to pay when getting drinks after work.

Next comes the $300 I spent on “Entertainment.” Not sure why I categorized this as entertainment, though, because it is pretty much just golf. While I didn’t get to play as much as I wanted to, I was still able to play about once a week (~12 times total). Looking back, I thought this number would have been much higher given how expensive golf is in cities. Two things I did to keep costs down on this: 1) I always walk – it is good for you and helps me to just relax – and 2) I would drive outside of town to the shittier (and cheaper) courses – I am not a scratch golfer and not the son of a [insert lucrative career] so shittier is something that will suffice for me.

Thankfully my workplace was business casual (people even wore golf shirts regularly) and I already had a decent amount of clothes to fit that. I still spent ~$300 on clothes for the internship though. I went to Jos. A Bank to get some dress pants, and ran into the clearance rack. Walked away with what is probably my favorite suit to this day for $140. Also got a couple shirts on super clearance at the outlet mall ($125 shirts for ~$30), and an amazing pair of AE loafers at a second-hand store for dirt cheap.

I also spent ~$150 on other clothes during the summer. This was mostly golf shirts. Clothes shopping is one of my favorite things to do; I love finding great deals on nice clothes. I wanted to separate this from professional clothes shopping because I view this as discretionary spending that wasn’t really necessary for survival of the summer.

Since we’re on the topic of discretionary, I will add in the ~$500 of what I called “Do not count” in my spreadsheet. This was ~$400 for a new phone and insurance because my upgrade was over the summer. And ~$100 of automatic investments that I make into an account on a regular basis. I don’t think these should really count against my summer expenses either because they would have happened regardless.

This brings us to a good wrap-up of expenses. I spent ~$225 on gas over the summer. This number seems lower than I would have expected because I drove ~1.5hrs home pretty regularly to work on the weekends, but I didn't have far to drive to work everyday (and gas is pretty cheap right now).

I will now transition to income, which I think is the biggest part of surviving an unpaid internship with no source of capital behind you (ie. Parents). I think there is a pretty set floor to expenses. On the other hand, working on the weekends can greatly counter the money you are dishing out. Obviously this only works if you are not working on the weekends, but I think that it is reasonable for you to get weekends off if you are not getting paid. Like I said, I drove home to work. I’m sure that I could have found something in town, but I had a good setup at home. I got paid ~$200/weekend and worked about 10 weekends for a grand total of ~$2000 of income. I also neglected to mention that I got a weekly meals allowance that came out to ~$500 for the summer. So in all, I had a total income of $2500.

To summarize, I spent a total of ~$3700 over the course of three months, and counteracted that with an income of ~$2500 for a total deficit of $1200 ($400/mo.). When taking out unnecessary expenses, the expenses fall to ~$3000 for a deficit of $500 ($170/mo.).

Now I know this is a lot of information, but this is something that I would have loved to see prior to committing to my unpaid internship. There was a lot of anxiety leading up to the decision, and I just wanted to layout for people that it really is doable if you are proactive about being cost conscious and making some money on the side. I know everyone said that the next summer and beyond will make up for the loss, and now I believe them.

Please let me know if you have any questions. I would be more than happy to answer them for you. I hope this is useful to some people who are weary about taking an unpaid internship because of the cost barriers.