Personal Finance 101 for Young Lawyers

(On Campus Interviews, Summer Associate positions, Firm Reviews, Tips, ...)
Forum rules
Anonymous Posting

Anonymous posting is only appropriate when you are revealing sensitive employment related information about a firm, job, etc. You may anonymously respond on topic to these threads. Unacceptable uses include: harassing another user, joking around, testing the feature, or other things that are more appropriate in the lounge.

Failure to follow these rules will get you outed, warned, or banned.
lawhopeful100

Bronze
Posts: 402
Joined: Mon Aug 01, 2016 2:28 pm

Re: Personal Finance 101 for Young Lawyers

Postby lawhopeful100 » Wed Jan 15, 2020 3:26 pm

Anonymous User wrote:
The Lsat Airbender wrote:
Libya wrote:Is the benefit of the tax deferral in a 401(k) really worth the (obviously personal) illiquidity cost?


Generally, yeah, because you can draw down the balance strategically to minimize your tax footprint in retirement. Also, "loans and liquid assets" are rarely going to beat long-term investments in terms of ROI so it's not even an apples-to-apples comparison.

If you're trying to pseudo-retire around 50 then you want to max out traditional retirement options and build a warchest to get you through your fifties. Shortchanging the former to fund the latter means either retiring later, because you need to catch up, or going broke in mid-/late-retirement.


That makes sense although I am a bit wary about the loans and long term investments doing worse than ROI on stocks bc that’s based in historical data (which I know some experts find to not necessarily be predictive) my average loan rate is going to be at about 7% for sure; also, by liquid assets I meant a portfolio of mainly ETFs same as I would have in a 401(k). I guess Ideal outcome would be max 401(k) AND build war chest up but I am wary about not paying down my loans fast enough (starting off at at least ~50K a year and then increasing as I make more at firm), and also don’t want to live ~too~ frugally in biglaw since my professional life will be so hard/stressful. On the other hand I could always burn out and go into a lower paying state-local gov job after a year or two and LRAP, so maybe it isn’t best to payoff too aggressively in case I can’t hack it in biglaw right?

What you described is basically what I did. I'm a little over 3 years out from law school with some of that spent at a large law firm, although now I'm in-house. I had about 150k in loans after school which I've cut down to about 68k, but when I was at a large firm I was also nervous about job security and preferred liquidity so I have like 20k in a savings I won't touch and 35k in a Vanguard fund with a variety of different ETFs. My goal was to always have access to enough money that I could live a year comfortably if somehow I lost my job. I've spent the last year saving for a downpayment on a house and I'm getting close to that goal, and then I'm going to focus on maxing my 401k. I could and maybe should have maxed the 401k and delayed the house down payment, but I rationalize it by telling myself that home values have kinda tracked with stock market increases historically anyway.

FND

Bronze
Posts: 273
Joined: Sun Mar 17, 2019 2:23 pm

Re: Personal Finance 101 for Young Lawyers

Postby FND » Wed Jan 15, 2020 3:55 pm

nealric wrote:The deduction for traditional IRA contributions has income caps, so for Biglaw and other highly-paid jobs, you will be doing post-tax IRA contributions with a backdoor Roth. Under current tax law, nobody who is in the 30% bracket gets a deduction for a traditional IRA contribution.

Thanks for the reminder.
Just to add to this:

There's an income cap to being able to contribute to a Roth IRA - if your (single) income is over $137k, you're not allowed to contribute to a Roth
There's an income cap to being able to deduct contributions to a traditional IRA - if your (single) income is over $124k, your contributions are not deductible.

So yeah, at biglaw salaries, you can't contribute to a Roth, and your contribution to a traditional IRA is made with after tax dollars.
Considering that a traditional IRA funded with after-tax dollars is essentially the same as a Roth, but a traditional IRA has a required minimum distribution at age 70 1/2, whereas a Roth doesn't, it makes total sense to do a Roth conversion (aka backdoor Roth), which is just a matter of filling out the right paperwork.

Cement

New
Posts: 6
Joined: Sat Dec 21, 2019 2:54 pm

Re: Personal Finance 101 for Young Lawyers

Postby Cement » Wed Jan 15, 2020 4:59 pm

About to start biglaw as a first year and luckily enough have only ~70k in loans, but living in a super high COL city. I expect I’ll want to get out of biglaw within a couple years max. Does it make sense to try to pay off the whole 70k within 1-2 years? Or is the received wisdom to put the extra cash into investments? Thanks a lot

User avatar
nealric

Moderator
Posts: 3293
Joined: Fri Sep 25, 2009 9:53 am

Re: Personal Finance 101 for Young Lawyers

Postby nealric » Thu Jan 16, 2020 9:34 am

Cement wrote:About to start biglaw as a first year and luckily enough have only ~70k in loans, but living in a super high COL city. I expect I’ll want to get out of biglaw within a couple years max. Does it make sense to try to pay off the whole 70k within 1-2 years? Or is the received wisdom to put the extra cash into investments? Thanks a lot


The invest vs loans decision amounts to: Do you feel lucky? If we get another 25% rise in the stock market like last year, you come out ahead investing. If we get a year like 2008, you come out WAY ahead with loans. On average, you should come out slightly ahead investing (assuming mostly equities), though you will hear endless debate on what a reasonable market return should be.

I'd say if you are able to knock the loans out in a year or two, go that route for the psychological satisfaction if nothing else. If you have high interest loans, I'd look into refinancing into a variable rate loan. You lose many of the protections of federal loans, but that's less crucial given your time horizon. Build up an emergency fund of a few months living expenses before pouring every dime into your loans.

champ33

Bronze
Posts: 426
Joined: Wed Dec 09, 2009 10:34 pm

Re: Personal Finance 101 for Young Lawyers

Postby champ33 » Thu Jan 16, 2020 10:11 am

Agree with the above. No reason you can't max out your 401k and an IRA and knock out 70k of loans in 2 years of big law. Will still probably have some left to throw in a taxable brokerage account or in a HYSA for things like a vehicle, vacation, home down payment.

Want to continue reading?

Register now to search topics and post comments!

Absolutely FREE!


Usernameavailable

New
Posts: 4
Joined: Thu Dec 19, 2019 9:57 pm

Re: Personal Finance 101 for Young Lawyers

Postby Usernameavailable » Thu Jan 16, 2020 2:40 pm

I've seen this topic discussed before generally, but want to explain my specific situation especially with the current climate surrounding student loans and see what people's thoughts are.

I am currently a 1st year lit associate at a V10 in NYC. I have just under 100k in loans. My original plan was to knock out the loans asap, build a nest egg, and leave after 3 years or so. However, my timeline for leaving biglaw and NYC is likely advanced by at least a year, potentially more. My plan is to leave biglaw for a state government position in my home state making anywhere from 50-70k in a really low cost of living area. My school's lrap would completely cover my loan payment for 10 years if I got one of those jobs and then after 10 years, PSLF would take out the loan.

So my current crossroads is whether I:

1. Aggressively pay off the loan (while still maxing 401k) and get it as low as possible before I leave. The risk is that if I do this then go into a PSLF gig for 10 years, I'd effectively be "wasting" whatever money I throw at the loan beyond the minimums.

2. Pay more than the minimum but still save a good bit of money for other things when I move such as house down payment, buying a car, etc. The risk is the same as 1, but the benefit for me with this option is psychological if nothing else. It means I'll have a more manageable loan when I move in case PSLF doesn't work out or I want to take another private practice job or whatever. Also my aim would be to get the loan low enough to where my LRAP payment on IBR would cover more than interest (i.e. the loan is shrinking rather than growing once I leave).

3. Pay the bare minimum and aggressively save and put all my eggs in the PSLF basket. The risk is obvious with this option. But it has the most upside for my net worth by far. Assuming PSLF didnt work out, my loan payments on IBR wouldnt cover interest and I'd likely have this loan for 20-25 years until tax bomb.

I've been leaning towards option 2 for multiple reasons. Namely, I dont have a direct plan on when I'm leaving biglaw. It could be 1 year or it could be 3 or more. Also I am very risk averse so the idea of moving to a low paying government job with 90k or more in loans over my head is scary considering it relies on both my law school and the federal government to assist me. If I had to bet on it, I'd say my time in biglaw will last at least through bonus this upcoming year but no longer than January of 2022 (i.e. 2 more bonuses).

MurdockLLP2

New
Posts: 16
Joined: Mon Oct 22, 2018 11:51 am

Re: Personal Finance 101 for Young Lawyers

Postby MurdockLLP2 » Thu Jan 16, 2020 3:46 pm

Usernameavailable wrote:I've seen this topic discussed before generally, but want to explain my specific situation especially with the current climate surrounding student loans and see what people's thoughts are.

I am currently a 1st year lit associate at a V10 in NYC. I have just under 100k in loans. My original plan was to knock out the loans asap, build a nest egg, and leave after 3 years or so. However, my timeline for leaving biglaw and NYC is likely advanced by at least a year, potentially more. My plan is to leave biglaw for a state government position in my home state making anywhere from 50-70k in a really low cost of living area. My school's lrap would completely cover my loan payment for 10 years if I got one of those jobs and then after 10 years, PSLF would take out the loan.

So my current crossroads is whether I:

1. Aggressively pay off the loan (while still maxing 401k) and get it as low as possible before I leave. The risk is that if I do this then go into a PSLF gig for 10 years, I'd effectively be "wasting" whatever money I throw at the loan beyond the minimums.

2. Pay more than the minimum but still save a good bit of money for other things when I move such as house down payment, buying a car, etc. The risk is the same as 1, but the benefit for me with this option is psychological if nothing else. It means I'll have a more manageable loan when I move in case PSLF doesn't work out or I want to take another private practice job or whatever. Also my aim would be to get the loan low enough to where my LRAP payment on IBR would cover more than interest (i.e. the loan is shrinking rather than growing once I leave).

3. Pay the bare minimum and aggressively save and put all my eggs in the PSLF basket. The risk is obvious with this option. But it has the most upside for my net worth by far. Assuming PSLF didnt work out, my loan payments on IBR wouldnt cover interest and I'd likely have this loan for 20-25 years until tax bomb.

I've been leaning towards option 2 for multiple reasons. Namely, I dont have a direct plan on when I'm leaving biglaw. It could be 1 year or it could be 3 or more. Also I am very risk averse so the idea of moving to a low paying government job with 90k or more in loans over my head is scary considering it relies on both my law school and the federal government to assist me. If I had to bet on it, I'd say my time in biglaw will last at least through bonus this upcoming year but no longer than January of 2022 (i.e. 2 more bonuses).


Honestly think option 3 makes the most sense (and gives the greatest flexibility). If you put all of your free cash into investments savings now, you can throw extra money at your loans later (if PSLF doesn't work out or if you leave government life).

sparty99

Gold
Posts: 1712
Joined: Sat Dec 11, 2010 8:41 pm

Re: Personal Finance 101 for Young Lawyers

Postby sparty99 » Thu Jan 16, 2020 5:06 pm

Usernameavailable wrote:I've seen this topic discussed before generally, but want to explain my specific situation especially with the current climate surrounding student loans and see what people's thoughts are.

I am currently a 1st year lit associate at a V10 in NYC. I have just under 100k in loans. My original plan was to knock out the loans asap, build a nest egg, and leave after 3 years or so. However, my timeline for leaving biglaw and NYC is likely advanced by at least a year, potentially more. My plan is to leave biglaw for a state government position in my home state making anywhere from 50-70k in a really low cost of living area. My school's lrap would completely cover my loan payment for 10 years if I got one of those jobs and then after 10 years, PSLF would take out the loan.

So my current crossroads is whether I:

1. Aggressively pay off the loan (while still maxing 401k) and get it as low as possible before I leave. The risk is that if I do this then go into a PSLF gig for 10 years, I'd effectively be "wasting" whatever money I throw at the loan beyond the minimums.

2. Pay more than the minimum but still save a good bit of money for other things when I move such as house down payment, buying a car, etc. The risk is the same as 1, but the benefit for me with this option is psychological if nothing else. It means I'll have a more manageable loan when I move in case PSLF doesn't work out or I want to take another private practice job or whatever. Also my aim would be to get the loan low enough to where my LRAP payment on IBR would cover more than interest (i.e. the loan is shrinking rather than growing once I leave).

3. Pay the bare minimum and aggressively save and put all my eggs in the PSLF basket. The risk is obvious with this option. But it has the most upside for my net worth by far. Assuming PSLF didnt work out, my loan payments on IBR wouldnt cover interest and I'd likely have this loan for 20-25 years until tax bomb.

I've been leaning towards option 2 for multiple reasons. Namely, I dont have a direct plan on when I'm leaving biglaw. It could be 1 year or it could be 3 or more. Also I am very risk averse so the idea of moving to a low paying government job with 90k or more in loans over my head is scary considering it relies on both my law school and the federal government to assist me. If I had to bet on it, I'd say my time in biglaw will last at least through bonus this upcoming year but no longer than January of 2022 (i.e. 2 more bonuses).


If you have $100k in loans then you can easily pay that off in 1.5 years. Why would you even consider leaving big law until your loans are paid off? You need to stay 3 years.

nixy

Gold
Posts: 2017
Joined: Fri Feb 16, 2018 8:58 am

Re: Personal Finance 101 for Young Lawyers

Postby nixy » Thu Jan 16, 2020 5:17 pm

People have lives and personal reasons for choices that may not be the most economically efficient but are still valid for them, sparty.

Want to continue reading?

Register for access!

Did I mention it was FREE ?


sparty99

Gold
Posts: 1712
Joined: Sat Dec 11, 2010 8:41 pm

Re: Personal Finance 101 for Young Lawyers

Postby sparty99 » Thu Jan 16, 2020 7:38 pm

nixy wrote:People have lives and personal reasons for choices that may not be the most economically efficient but are still valid for them, sparty.


Well that does not make any sense. This person has been handed a golden ticket and their live can be changed by staying in big law for however long they can. Leaving after 1 year makes no sense. Even if they were to switch firms after 1 year, take a month long break in between and do another 1 year stint at a new firm.

nixy

Gold
Posts: 2017
Joined: Fri Feb 16, 2018 8:58 am

Re: Personal Finance 101 for Young Lawyers

Postby nixy » Thu Jan 16, 2020 7:44 pm

sparty99 wrote:Well that does not make any sense. This person has been handed a golden ticket and their live can be changed by staying in big law for however long they can. Leaving after 1 year makes no sense. Even if they were to switch firms after 1 year, take a month long break in between and do another 1 year stint at a new firm.

nixy wrote:People have lives and personal reasons for choices that may not be the most economically efficient but are still valid for them, sparty.

sparty99

Gold
Posts: 1712
Joined: Sat Dec 11, 2010 8:41 pm

Re: Personal Finance 101 for Young Lawyers

Postby sparty99 » Thu Jan 16, 2020 8:00 pm

nixy wrote:
sparty99 wrote:Well that does not make any sense. This person has been handed a golden ticket and their live can be changed by staying in big law for however long they can. Leaving after 1 year makes no sense. Even if they were to switch firms after 1 year, take a month long break in between and do another 1 year stint at a new firm.

nixy wrote:People have lives and personal reasons for choices that may not be the most economically efficient but are still valid for them, sparty.


Lives and personal reasons do not matter. Their life would be better off staying 3 years versus 1. Or 2 versus 1. Let's not act like that is an impossible task, especially if they are talking about working for the state government as their exit plan. Litigation is litigation. Stick it out for 3 years.

User avatar
Yugihoe

Silver
Posts: 638
Joined: Thu Apr 12, 2012 4:25 pm

Re: Personal Finance 101 for Young Lawyers

Postby Yugihoe » Thu Jan 16, 2020 8:11 pm

sparty99 wrote:
Lives and personal reasons do not matter. Their life would be better off staying 3 years versus 1. Or 2 versus 1. Let's not act like that is an impossible task, especially if they are talking about working for the state government as their exit plan. Litigation is litigation. Stick it out for 3 years.


Where does one draw the line lol. 5 years in big law makes more economic sense than 3 years right?

Register now!

Resources to assist law school applicants, students & graduates.

It's still FREE!


QContinuum

Moderator
Posts: 3108
Joined: Mon Aug 07, 2017 9:52 am

Re: Personal Finance 101 for Young Lawyers

Postby QContinuum » Thu Jan 16, 2020 8:46 pm

sparty99 wrote:Lives and personal reasons do not matter. ... Litigation is litigation.

Are you serious? If this was true, no one would gun for impact lit at the ACLU, or international human rights law, or Bristow fellowships, or DoJ Honors, or even SCOTUS clerkships. None of these positions "make sense" from a purely economic standpoint, and after all, litigation is litigation, amirite?

sparty99

Gold
Posts: 1712
Joined: Sat Dec 11, 2010 8:41 pm

Re: Personal Finance 101 for Young Lawyers

Postby sparty99 » Thu Jan 16, 2020 8:51 pm

QContinuum wrote:
sparty99 wrote:Lives and personal reasons do not matter. ... Litigation is litigation.

Are you serious? If this was true, no one would gun for impact lit at the ACLU, or international human rights law, or Bristow fellowships, or DoJ Honors, or even SCOTUS clerkships. None of these positions "make sense" from a purely economic standpoint, and after all, litigation is litigation, amirite?


No, because this person is already in Big Law so they need to stay because they have the golden ticket. They can do everything you just mentioned minus Scotus clerkship after big law. They are not thinking long term if they are talking about leaving after 1 year so they can get a low paying state job when they make $180k now.

QContinuum

Moderator
Posts: 3108
Joined: Mon Aug 07, 2017 9:52 am

Re: Personal Finance 101 for Young Lawyers

Postby QContinuum » Thu Jan 16, 2020 8:53 pm

sparty99 wrote:
QContinuum wrote:
sparty99 wrote:Lives and personal reasons do not matter. ... Litigation is litigation.

Are you serious? If this was true, no one would gun for impact lit at the ACLU, or international human rights law, or Bristow fellowships, or DoJ Honors, or even SCOTUS clerkships. None of these positions "make sense" from a purely economic standpoint, and after all, litigation is litigation, amirite?


No, because this person is already in Big Law so they need to stay because they have the golden ticket. They can do everything you just mentioned minus Scotus clerkship after big law. They are not thinking long term if they are talking about leaving after 1 year so they can get a low paying state job when they make $180k now.

But what's the economic difference between a low paying state job and a low paying impact lit gig at the ACLU?

nixy

Gold
Posts: 2017
Joined: Fri Feb 16, 2018 8:58 am

Re: Personal Finance 101 for Young Lawyers

Postby nixy » Thu Jan 16, 2020 9:26 pm

sparty99 wrote:
nixy wrote:
sparty99 wrote:Well that does not make any sense. This person has been handed a golden ticket and their live can be changed by staying in big law for however long they can. Leaving after 1 year makes no sense. Even if they were to switch firms after 1 year, take a month long break in between and do another 1 year stint at a new firm.

nixy wrote:People have lives and personal reasons for choices that may not be the most economically efficient but are still valid for them, sparty.


Lives and personal reasons do not matter. Their life would be better off staying 3 years versus 1. Or 2 versus 1. Let's not act like that is an impossible task, especially if they are talking about working for the state government as their exit plan. Litigation is litigation. Stick it out for 3 years.

So you're saying that if, say,

- they have a dying family member in another state
- they/their SO finds themselves pregnant and the SO lives in another state
- they have a minor sibling in another state whose only caretaking parent dies/is hospitalized/goes to jail
- they hate biglaw so much that it threatens their mental health
- they're moving b/c they see the writing on the wall that they're going to be fired

they should nonetheless stick out biglaw in NYC for 3 years? (keeping in mind that most "very low cost of living" areas don't have a lot of biglaw firms to go work at)

Get unlimited access to all forums and topics

Register now!

I'm pretty sure I told you it's FREE...


sparty99

Gold
Posts: 1712
Joined: Sat Dec 11, 2010 8:41 pm

Re: Personal Finance 101 for Young Lawyers

Postby sparty99 » Fri Jan 17, 2020 12:08 am

nixy wrote:
sparty99 wrote:
nixy wrote:
sparty99 wrote:Well that does not make any sense. This person has been handed a golden ticket and their live can be changed by staying in big law for however long they can. Leaving after 1 year makes no sense. Even if they were to switch firms after 1 year, take a month long break in between and do another 1 year stint at a new firm.

nixy wrote:People have lives and personal reasons for choices that may not be the most economically efficient but are still valid for them, sparty.


Lives and personal reasons do not matter. Their life would be better off staying 3 years versus 1. Or 2 versus 1. Let's not act like that is an impossible task, especially if they are talking about working for the state government as their exit plan. Litigation is litigation. Stick it out for 3 years.

So you're saying that if, say,

- they have a dying family member in another state
- they/their SO finds themselves pregnant and the SO lives in another state
- they have a minor sibling in another state whose only caretaking parent dies/is hospitalized/goes to jail
- they hate biglaw so much that it threatens their mental health
- they're moving b/c they see the writing on the wall that they're going to be fired

they should nonetheless stick out biglaw in NYC for 3 years? (keeping in mind that most "very low cost of living" areas don't have a lot of biglaw firms to go work at)


Girl, bye. You are talking extremes when the OP is talking going from Big Law to State Court.

sparty99

Gold
Posts: 1712
Joined: Sat Dec 11, 2010 8:41 pm

Re: Personal Finance 101 for Young Lawyers

Postby sparty99 » Fri Jan 17, 2020 12:18 am

QContinuum wrote:
sparty99 wrote:
QContinuum wrote:
sparty99 wrote:Lives and personal reasons do not matter. ... Litigation is litigation.

Are you serious? If this was true, no one would gun for impact lit at the ACLU, or international human rights law, or Bristow fellowships, or DoJ Honors, or even SCOTUS clerkships. None of these positions "make sense" from a purely economic standpoint, and after all, litigation is litigation, amirite?


No, because this person is already in Big Law so they need to stay because they have the golden ticket. They can do everything you just mentioned minus Scotus clerkship after big law. They are not thinking long term if they are talking about leaving after 1 year so they can get a low paying state job when they make $180k now.

But what's the economic difference between a low paying state job and a low paying impact lit gig at the ACLU?


The difference is going from big law to low paying versus starting off at low paying. They are not thinking long term. One year in ACLU is equal to 3 years of Big Law. Just stick with it. Why leave after 1 year to go to a state job! 3 years in Big Law is like 6 six years ACLU! Think about how that would put you in retirement, etc.

dabigchina

Gold
Posts: 1727
Joined: Mon Jan 13, 2014 2:22 am

Re: Personal Finance 101 for Young Lawyers

Postby dabigchina » Fri Jan 17, 2020 1:41 am

Yugihoe wrote:
sparty99 wrote:
Lives and personal reasons do not matter. Their life would be better off staying 3 years versus 1. Or 2 versus 1. Let's not act like that is an impossible task, especially if they are talking about working for the state government as their exit plan. Litigation is litigation. Stick it out for 3 years.


Where does one draw the line lol. 5 years in big law makes more economic sense than 3 years right?


The obvious answer is to gun until you die at your desk at age 45. Lives and personal reasons do not matter. Litigation is litigation.

somewhat related interesting fact - the reason law firms have such expensive health insurance plans because partners tend to be sicker than the rest of the general population after accounting for education and income.

sparty99

Gold
Posts: 1712
Joined: Sat Dec 11, 2010 8:41 pm

Re: Personal Finance 101 for Young Lawyers

Postby sparty99 » Fri Jan 17, 2020 4:01 am

dabigchina wrote:
Yugihoe wrote:
sparty99 wrote:
Lives and personal reasons do not matter. Their life would be better off staying 3 years versus 1. Or 2 versus 1. Let's not act like that is an impossible task, especially if they are talking about working for the state government as their exit plan. Litigation is litigation. Stick it out for 3 years.


Where does one draw the line lol. 5 years in big law makes more economic sense than 3 years right?


The obvious answer is to gun until you die at your desk at age 45. Lives and personal reasons do not matter. Litigation is litigation.

somewhat related interesting fact - the reason law firms have such expensive health insurance plans because partners tend to be sicker than the rest of the general population after accounting for education and income.


Yeah, but no one was talking about until 45. You took it to the extreme too. We talking 3 years.

Communicate now with those who not only know what a legal education is, but can offer you worthy advice and commentary as you complete the three most educational, yet challenging years of your law related post graduate life.

Register now, it's still FREE!


nixy

Gold
Posts: 2017
Joined: Fri Feb 16, 2018 8:58 am

Re: Personal Finance 101 for Young Lawyers

Postby nixy » Fri Jan 17, 2020 7:36 am

sparty99 wrote:
nixy wrote:So you're saying that if, say,

- they have a dying family member in another state
- they/their SO finds themselves pregnant and the SO lives in another state
- they have a minor sibling in another state whose only caretaking parent dies/is hospitalized/goes to jail
- they hate biglaw so much that it threatens their mental health
- they're moving b/c they see the writing on the wall that they're going to be fired

they should nonetheless stick out biglaw in NYC for 3 years? (keeping in mind that most "very low cost of living" areas don't have a lot of biglaw firms to go work at)


Girl, bye. You are talking extremes when the OP is talking going from Big Law to State Court.

So you don’t actually have a substantive answer to my question. Got it.

The Lsat Airbender

Silver
Posts: 560
Joined: Wed Jan 30, 2019 7:34 pm

Re: Personal Finance 101 for Young Lawyers

Postby The Lsat Airbender » Fri Jan 17, 2020 12:34 pm

sparty99 wrote:Yeah, but no one was talking about until 45. You took it to the extreme too. We talking 3 years.


Lives and personal reasons do not matter. Their life would be better off staying 8 years versus 3. Or 4 versus 3. Let's not act like that is an impossible task, especially if they are talking about working for the state government as their exit plan. Litigation is litigation. Stick it out for 8 years.

User avatar
nealric

Moderator
Posts: 3293
Joined: Fri Sep 25, 2009 9:53 am

Re: Personal Finance 101 for Young Lawyers

Postby nealric » Fri Jan 17, 2020 12:55 pm

Usernameavailable wrote:I've seen this topic discussed before generally, but want to explain my specific situation especially with the current climate surrounding student loans and see what people's thoughts are.

I am currently a 1st year lit associate at a V10 in NYC. I have just under 100k in loans. My original plan was to knock out the loans asap, build a nest egg, and leave after 3 years or so. However, my timeline for leaving biglaw and NYC is likely advanced by at least a year, potentially more. My plan is to leave biglaw for a state government position in my home state making anywhere from 50-70k in a really low cost of living area. My school's lrap would completely cover my loan payment for 10 years if I got one of those jobs and then after 10 years, PSLF would take out the loan.



It might be helpful to understand what your motivation for leaving biglaw early is. Do you just hate it that much, did a unique opportunity come up, or are there family circumstances? If you just dislike it, it might be worth seeing if there's something that might be improved within the context of biglaw- perhaps a lateral move or even just working with different partners. When you are getting closer to your exit (perhaps as a third year), you can likely get away with working a lot less hard. If it's an opportunity, I'd evaluate how truly unique it is and how closely it dovetails with your goals. If family, that's a highly personal decision only you can weigh.

I'd also note that PSLF has been a bit of a disaster of a program, with a lot of qualifying candidates being denied or payments not being property credited. There have supposedly been some efforts to remedy the problems, but I'd be very wary of relying on it, especially given that the rug could get pulled out by changes in the law before the 10 years are up.

Personally, I'd stick to your original plan as the nest egg would serve you well on your move. It would put you in a position to buy a house, pay for a wedding, help a family member out, etc. But I'm not you, and I won't be in the biglaw trenches.

Hutz_and_Goodman

Gold
Posts: 1579
Joined: Mon Apr 30, 2012 10:42 am

Re: Personal Finance 101 for Young Lawyers

Postby Hutz_and_Goodman » Sun Jan 19, 2020 12:15 pm

nealric wrote:
Cement wrote:About to start biglaw as a first year and luckily enough have only ~70k in loans, but living in a super high COL city. I expect I’ll want to get out of biglaw within a couple years max. Does it make sense to try to pay off the whole 70k within 1-2 years? Or is the received wisdom to put the extra cash into investments? Thanks a lot


The invest vs loans decision amounts to: Do you feel lucky? If we get another 25% rise in the stock market like last year, you come out ahead investing. If we get a year like 2008, you come out WAY ahead with loans. On average, you should come out slightly ahead investing (assuming mostly equities), though you will hear endless debate on what a reasonable market return should be.

I'd say if you are able to knock the loans out in a year or two, go that route for the psychological satisfaction if nothing else. If you have high interest loans, I'd look into refinancing into a variable rate loan. You lose many of the protections of federal loans, but that's less crucial given your time horizon. Build up an emergency fund of a few months living expenses before pouring every dime into your loans.


This is similar to the situation I’m considering. I’m a 5th year in big law NYC and I have no loans but my wife has 50k in loans and is leaving her current job summer 2020. I’ve been maxing out my 401k since I’ve been in big law and also invested some in an ETF that is up about 25% in the last year. Her loans have interest rates between 4-6%. We have about 60k in cash in an online savings account that makes a little less than 2%. The question is whether to pay off her loans this year or invest the money and pay them off more slowly. It’s basically a gamble on what happens with the U.S. economy because if the stock market goes up 10+% in 2020 and 2021 then we would be better off investing but as a novice it looks risky.

Seriously? What are you waiting for?

Now there's a charge.
Just kidding ... it's still FREE!




Return to “Legal Employment?

Who is online

The online users are hidden on this forum.