Big Law associate savings and investment options Forum

[Anonymous User]

The person trying to sell you an annuity is a salesman trying to sell you a bad product and you should never speak to him again, flat-out. He's trying to extract a commission from you. Leeches like that thrive off high income folks that don't know what to do with their money.

Crypto... I mean, people that have invested in it other than at the top have obviously done really well. But it's pure speculation. Maybe speculation that will pay off very handsomely. Obviously I wish I had put some money into it when I started investing in 2011 and forward, because I'd be on a beach somewhere instead of just having a couple million NW, but it is what it is. I paid my loans off within 2 years and bought my house and paid it off early--cost myself hundreds of thousands of returns, so be it--and have put everything else in index funds. I'm fine. The key is to not try to time the market.

The thing to remember is that, with a biglaw shovel, you don't have to hit investing home runs. You just need to keep your lifestyle rational enough that you're able to put a decent amount away and set yourself up for your next steps.

How long did it take you to hit $1m? $2m?

I'm the anon you quoted. I have a really convoluted way of measuring my NW and have different metrics (including/excluding home equity--excluding is a huge hit since I paid my mortgage off early obviously; pre/post-tax; whether I include college savings/anticipated costs, etc). Using a more normal metric where I look at current gross numbers (i.e., pre-tax), include home equity, and include college savings but don't include college costs, if I had to guess (I haven't kept very good records of these milestones), I hit $1M around year 5-6, hit $2M around year 8 or 9, and this year's bonus puts me JUST short of $3M. Those figures assume my house hasn't appreciated since I bought it, which is probably somewhat conservative, but I'm not in an area that has benefitted from the housing appreciation in the last 2 years so it's not "super" conservative. I started out at -200k with loans. Numbers are lower once I start factoring in college costs, exclude home equity, etc.

[Anonymous User]

Does the prevailing wisdom indicated in this thread (i.e., keep it simple, dump all the money aside from your rainy-day savings into an ETF fund that tracks S&P, like VT or VOO) change if the money is like, $250k? Is that too much to dump into a single investment vehicle, even if that vehicle is itself a diversified fund like VOO?

[If so, should I split the $250k into 2-3 similar things, like half in VT and half in VOO? Or find something else besides that type of fund?]

Thanks in advance!

We're talking about tickers with eleven-digit market caps administrated by firms with thirteen-digit AUM. Your $250k is just a grain of sand on the beach. Better, for a number of reasons, to keep it simple.

Also, if you *did* want to segregate holdings for this reason, weird to use two Vanguard funds for that purpose.

Well, my question was geared towards my risk, not the fund's risk. I understand it's a huge fund with 13-digit AUM so my contribution into it will hardly make any impact. My concern was more that I would be parking my full amount (~250-280k) into a single fund rather than spreading it across 2-3 funds.

The concern, I guess, is that maybe you guys all are operating with some unspoken/background understanding or assumption that there's an upper limit to how much you allocate into an S&P-tracking ETF of this kind, and beyond which you should put additional amounts into something else (whatever it might be).

I should have specified my amount in my original question (I'm OP) so that it would be clear what amount of money we're talking about; that's why I flagged it later on when the consensus answer emerged: I didn't want to be in a position where the advice would have been different if the amount had been known (I can imagine, for instance, some basic finance- or investment-savvy principle whereby at a certain amount, you don't just dump it all into one place, kind of an investment 101 type thing I just wouldn't have known about).

Thanks again though, all these thoughts are very helpful and apprecaited. My real-life friends are telling me to invest in crypto (20%-100% returns!) and the guy at Fidelity I talked to keeps trying to sell me on annuities for some reason...

So the "buy VT" logic doesn't have an explicit cap at which you you should stop following it, but there is a psychological angle to this that I think people should take seriously.

At some point there's going to be another recession, and if you have $250k invested in VT when that happens you're going to see a huge drop in value. The absolute worst thing you can do in that moment is sell your shares - it's very important to hold onto them through the market's ups and downs, and if you sell low and buy high you're going to end up in a bad place.

So if you think that seeing $50k evaporate in a single day would lead you to sell your shares, you might be better off investing some of that money elsewhere now instead of waiting for the downturn.

[Anonymous User]

Yeah, I get the point about the importance of the psychological concern. I guess the next question then is: what's the alternative? I don't have the time or competence to do things like short-sell or learn about crypto or other exotic instruments or hedges or whatever. So then it's a matter of: am I ok with, at some point, seeing my ETF position lose $50k in a single day once that recession comes or would I rather keep the money in a savings account or a CD the whole time and lose out long-term on net. In those terms, I think I have to be ok with seeing my position lose $50k in a single day. I just don't have the capacity to invest in the types of things that would buffer me in that sort of recession scenario.

Not a great position to be in, I know, and I should have learned more about investing when I had the time back in school, but it is what it is (and I'm not saying cry me a river, people are much worse off so I am thankful of what I have -- frankly, I never imagined growing up that I'd be in this type of position where I had to worry about what to do with $250k!).

ETA: I'll definitely look into that 3-fund portfolio link above, thanks for that. My only wariness is that you'd have to "rebalance" the allocations periodically, so I'd need to first figure out a "thesis" for an initial allocation and then rebalance periodically to maintain or revise it. Even getting that initial thesis might be more than I'm capable of right now!

[fmrez]

Sorry, but folks in here talking about hitting $1-2m in net worth after 5 years of big law are either outright lying or omitting a bunch of key information (significant savings before law school, graduating UG/LS with zero debt, parents subsidizing their housing, etc.). The math just doesn't work.

[Anonymous User]

I'm certainly not one of these people with a 1-2M net worth, but I don't think the claim that the math simply doesn't work is justifiable. Imagine you are a class of 2016 who graduated with 50k in debt. Your stub year you would have made like 75K, and could have used like 25k to pay down debt, leaving you with 25k in debt. Your first year your make ~195, and use ~90 to pay down debt and save, giving you 60k in savings. Your second year, you get a 30% return, make ~220 and save 100, giving you 178. Your third year, you get a 30% return, make ~270 and save 140, giving you 370. Your fourth year, you get 30% return again, make ~350 and save 180, giving you 660. Your fifth year, you get 30% again, make 450 and save 250, giving you ~1.1M. Obviously this involves aggressive saving and good returns, but the stock market has done very well over the last couple years so it is definitely possible.

[chingwoo]

I'm certainly not one of these people with a 1-2M net worth, but I don't think the claim that the math simply doesn't work is justifiable. Imagine you are a class of 2016 who graduated with 50k in debt. Your stub year you would have made like 75K, and could have used like 25k to pay down debt, leaving you with 25k in debt. Your first year your make ~195, and use ~90 to pay down debt and save, giving you 60k in savings. Your second year, you get a 30% return, make ~220 and save 100, giving you 178. Your third year, you get a 30% return, make ~270 and save 140, giving you 370. Your fourth year, you get 30% return again, make ~350 and save 180, giving you 660. Your fifth year, you get 30% again, make 450 and save 250, giving you ~1.1M. Obviously this involves aggressive saving and good returns, but the stock market has done very well over the last couple years so it is definitely possible.

The other big factor here for people with 1m+ is Texas.

A 2016 grad at a market paying firm in Texas has somewhere in the ballpark of 50k more take-home cash this year vs. NY. That really adds up especially as cash compounding in the market.

Also know a few people have left their loans outstanding at lower rates so they are able to dump more cash into the market.

[Anonymous User]

Sorry, but folks in here talking about hitting $1-2m in net worth after 5 years of big law are either outright lying or omitting a bunch of key information (significant savings before law school, graduating UG/LS with zero debt, parents subsidizing their housing, etc.). The math just doesn't work.

I'm a 7th year this year. I graduated law school with 100k debt, spent 1 year clerking and have been doing biglaw for a total of 5 years + 3 months from stub year. Ended year 6 in biglaw with over 1.2M NW. All from aggressive saving, no inheritance, no prior saving. Annual growth averages 20% from all stock portfolio, not 30%. No crypto, just good ol' index funds. In metro city, not texas.

[fmrez]

I'm certainly not one of these people with a 1-2M net worth, but I don't think the claim that the math simply doesn't work is justifiable. Imagine you are a class of 2016 who graduated with 50k in debt. Your stub year you would have made like 75K, and could have used like 25k to pay down debt, leaving you with 25k in debt.

I'm going to cherrypick this. I was class of 2016. If you are saying stub year as in September (or October) 2016-December 2016, there is no way anyone netted $75,000. If I remember correctly the salary was 180 and stub year bonus was 15k pro-rated. After tax at most your take home would be 50k. Rent for NY/SF for those four months is going to be at least 10k-12k, groceries, utilities, going out for dinner once a week, visiting family for the holidays, buying your significant other/parents reasonably affordable Christmas presents, at least another 6k-8k for four months. After that you dump 25k into your student debt and you have ~7k left over for investing/saving.

[Anonymous User]

Rent for NY/SF for those four months is going to be at least 10k-12k, groceries, utilities, going out for dinner once a week, visiting family for the holidays, buying your significant other/parents reasonably affordable Christmas presents, at least another 6k-8k for four months.

These numbers are insane. You can easily live for way less than that in NY. $2k per month? Good lord.

[fmrez]

Rent for NY/SF for those four months is going to be at least 10k-12k, groceries, utilities, going out for dinner once a week, visiting family for the holidays, buying your significant other/parents reasonably affordable Christmas presents, at least another 6k-8k for four months.

These numbers are insane. You can easily live for way less than that in NY. $2k per month? Good lord.

Sure, if you are a complete exile who eats spaghetti and ketchup three times a day and doesn't have friends or a significant other. I am not a profligate spender and have always tried to have a reasonable balance between frugality and normalcy, and I have found it almost impossible to not have $1.5k-$2k on the credit card bill per month. Groceries in NYC are expensive as hell. Go out just one night or for a date and you can easily rack up $100-$150.

[The Lsat Airbender]

Sorry, but folks in here talking about hitting $1-2m in net worth after 5 years of big law are either outright lying or omitting a bunch of key information (significant savings before law school, graduating UG/LS with zero debt, parents subsidizing their housing, etc.). The math just doesn't work.

I'm a 7th year this year. I graduated law school with 100k debt, spent 1 year clerking and have been doing biglaw for a total of 5 years + 3 months from stub year. Ended year 6 in biglaw with over 1.2M NW. All from aggressive saving, no inheritance, no prior saving. Annual growth averages 20% from all stock portfolio, not 30%. No crypto, just good ol' index funds. In metro city, not texas.

congrats but, let's be clear here, this is a blistering bull market (arguably the best in history now that we've seen it shoulder its way through COVID-19) and seems unrealistic to expect 5-year stretches of 20% CAGR henceforward.

[Anonymous User]

Not OP, but in a similar position. I'm a third year big law associate who just recently paid off debt. I plan on keeping 3-6 months' living expenses in my checking account and dumping the rest in a Vanguard VT. My question is - should I be doing something different if I plan to buy a home in 2-3 years? Most of the advice I've seen on this thread is tailored for people who plan on not touching the fund for 20 years, but wondering if anything changes if I plan on taking out a pretty significant sum relatively soon.

This might be a dumb question, but I'm not the most financially savvy person so I didn't know if there is a disadvantage to taking money out of a fund early.

I'm in exactly the same boat re: buying a house soon and trying to figure out where to put the down payment money. The general consensus is that yes, this does change things significantly. VT (and all stock-based investments) are highly volatile over the short term, and it's possible that there will be less money in your account in 2-3 years than there is right now if you invest it in the stock market. For short-term financial goals, stability is more important than investment growth.

I'm keeping my down payment savings in a high yield savings account (HYSA). The best ones on the market right now (Marcus, Ally) pay 0.5% interest annually. It's not much, but it's a lot more than a regular savings account, and your money will be there for you when it's time to buy a house.

Same boat here as well. I recently started considering putting some of my down payment money (currently in Ally getting 0.5% annually) in VTIP, which is Vanguards ETF for short term inflation protected bonds. It obviously carries slightly higher risk than a HYSA, but I'm also not interested in my money vanishing due to inflation, and 0.5% is barely making up for anything. Not to mention the current housing boom.

Overall, it depends on your time horizon and comfort level. I'm looking at 2-3 years and am comfortable with putting 50% in a HYSA, 40% in bonds/TIPS and 10% in the market (VTI/VOO).

[NoLongerALurker]

Rent for NY/SF for those four months is going to be at least 10k-12k, groceries, utilities, going out for dinner once a week, visiting family for the holidays, buying your significant other/parents reasonably affordable Christmas presents, at least another 6k-8k for four months.

These numbers are insane. You can easily live for way less than that in NY. $2k per month? Good lord.

Sure, if you are a complete exile who eats spaghetti and ketchup three times a day and doesn't have friends or a significant other. I am not a profligate spender and have always tried to have a reasonable balance between frugality and normalcy, and I have found it almost impossible to not have $1.5k-$2k on the credit card bill per month. Groceries in NYC are expensive as hell. Go out just one night or for a date and you can easily rack up $100-$150.

Maybe I'm also just a profligate spender, but my ordinary course life is "put everything on a credit card and pay it off at the end of the month in full." Without exception, I'm always somewhere between $1.5k and $3k in a given month. This is living a completely normal life from my perspective (among my friends at least, which is not the jetsetting "going to islands every month" but also the "doesn't think twice before buying some concert tickets, will buy the $30 entree instead of the $23 entree without second thought if I'm feeling the $30 entree". I've met plenty of people (including biglaw associates) who would say "Fuck that, I'm saving $7 bucks and going with chicken instead of steak", though, and I'm sure they have lower bills as a result.

I in no way think I'm like in an enviable financial position compared to someone who is more frugal, but also I don't think I'm some atypical spendthrift either. Cooking more at home during covid as opposed to eating out has been a real blessing for me financially, mind you.

[TUwave]

Rent for NY/SF for those four months is going to be at least 10k-12k, groceries, utilities, going out for dinner once a week, visiting family for the holidays, buying your significant other/parents reasonably affordable Christmas presents, at least another 6k-8k for four months.

These numbers are insane. You can easily live for way less than that in NY. $2k per month? Good lord.

Sure, if you are a complete exile who eats spaghetti and ketchup three times a day and doesn't have friends or a significant other. I am not a profligate spender and have always tried to have a reasonable balance between frugality and normalcy, and I have found it almost impossible to not have $1.5k-$2k on the credit card bill per month. Groceries in NYC are expensive as hell. Go out just one night or for a date and you can easily rack up $100-$150.

Maybe I'm also just a profligate spender, but my ordinary course life is "put everything on a credit card and pay it off at the end of the month in full." Without exception, I'm always somewhere between $1.5k and $3k in a given month. This is living a completely normal life from my perspective (among my friends at least, which is not the jetsetting "going to islands every month" but also the "doesn't think twice before buying some concert tickets, will buy the $30 entree instead of the $23 entree without second thought if I'm feeling the $30 entree". I've met plenty of people (including biglaw associates) who would say "Fuck that, I'm saving $7 bucks and going with chicken instead of steak", though, and I'm sure they have lower bills as a result.

I in no way think I'm like in an enviable financial position compared to someone who is more frugal, but also I don't think I'm some atypical spendthrift either. Cooking more at home during covid as opposed to eating out has been a real blessing for me financially, mind you.

110% this except mine ranges from $3-5k cause of wife/kid.