Personal Finance 101 for Young Lawyers Forum

[The Lsat Airbender]

If you are a biglaw midlevel, you should have a taxable brokerage account.

This is way too general a statement to be true. Once you've maxed out tax-advantaged space, it would be ideal to continue investing on top of that, but a lot of people just don't have the free cashflow to do so safely if they're buying real estate, paying down loans, supporting dependents, etc. A lot of biglaw midlevels haven't even made it to $0 net worth yet.

[Winter is Coming]

If you are a biglaw midlevel, you should have a taxable brokerage account.

This is way too general a statement to be true. Once you've maxed out tax-advantaged space, it would be ideal to continue investing on top of that, but a lot of people just don't have the free cashflow to do so safely if they're buying real estate, paying down loans, supporting dependents, etc. A lot of biglaw midlevels haven't even made it to $0 net worth yet.

Haha yeah I had 250 of loans. Got my emergency fund, maxed out tax deferred retirement savings each year and am saving for a house/apt in near term. I live in NYC, not a whole lot left for taxable investments after that and living a relatively nice lifestyle.

[sparty99]

If you are a biglaw midlevel, you should have a taxable brokerage account.

This is way too general a statement to be true. Once you've maxed out tax-advantaged space, it would be ideal to continue investing on top of that, but a lot of people just don't have the free cashflow to do so safely if they're buying real estate, paying down loans, supporting dependents, etc. A lot of biglaw midlevels haven't even made it to $0 net worth yet.

Haha yeah I had 250 of loans. Got my emergency fund, maxed out tax deferred retirement savings each year and am saving for a house/apt in near term. I live in NYC, not a whole lot left for taxable investments after that and living a relatively nice lifestyle.

I think you are missing out if you have not been investing since March. Energy stocks are still in the toilet. Other stocks have been increasing 20 to 60% in just weeks or months. You want to get out of debt, but now is not the time to be on the sidelines. This can accelerate you getting out of debt.

[AllAboutTheBasis]

What are everyone's thoughts of saving for a house vs. taxable investing for a recent grad in a HCOL area (NYC/DC/SF/LA)? I'll graduate with $0 debt and my spouse and I will have ~ $70,000 cash savings (mutual fund and money market). After maxing retirement savings and living expenses, we should have a pretty significant chunk of change to save/invest. Part of me wants to save for a house aggressively, the other wants to maybe do a 50/50 split between taxable investments and house savings.

[The Lsat Airbender]

What are everyone's thoughts of saving for a house vs. taxable investing for a recent grad in a HCOL area (NYC/DC/SF/LA)? I'll graduate with $0 debt and my spouse and I will have ~ $70,000 cash savings (mutual fund and money market). After maxing retirement savings and living expenses, we should have a pretty significant chunk of change to save/invest. Part of me wants to save for a house aggressively, the other wants to maybe do a 50/50 split between taxable investments and house savings.

Buying a house is a personal decision that can't be made purely based on ROI. Are you absolutely sure you want to live in [location] in [type of home] for at least another 5-10 years? Are you confident about how much house you can afford, accounting for the risk of leaving biglaw/having a kid/etc.?

If you're confident about buying a house, then IMO it's better to have dry powder. Personally, I wouldn't bother with investing money that I know I'm going to spend in the next 12-18 months because short-term cap gains tax eats up so much of the upside. And with the volatility we've had since COVID hit, you could get screwed out of your dream home if equities take a downswing at the wrong time.

[Winter is Coming]

If you are a biglaw midlevel, you should have a taxable brokerage account.

This is way too general a statement to be true. Once you've maxed out tax-advantaged space, it would be ideal to continue investing on top of that, but a lot of people just don't have the free cashflow to do so safely if they're buying real estate, paying down loans, supporting dependents, etc. A lot of biglaw midlevels haven't even made it to $0 net worth yet.

Haha yeah I had 250 of loans. Got my emergency fund, maxed out tax deferred retirement savings each year and am saving for a house/apt in near term. I live in NYC, not a whole lot left for taxable investments after that and living a relatively nice lifestyle.

I think you are missing out if you have not been investing since March. Energy stocks are still in the toilet. Other stocks have been increasing 20 to 60% in just weeks or months. You want to get out of debt, but now is not the time to be on the sidelines. This can accelerate you getting out of debt.

If you can get me a COVID bonus ill put it in a taxable account.

[sparty99]

If you are a biglaw midlevel, you should have a taxable brokerage account.

This is way too general a statement to be true. Once you've maxed out tax-advantaged space, it would be ideal to continue investing on top of that, but a lot of people just don't have the free cashflow to do so safely if they're buying real estate, paying down loans, supporting dependents, etc. A lot of biglaw midlevels haven't even made it to $0 net worth yet.

Haha yeah I had 250 of loans. Got my emergency fund, maxed out tax deferred retirement savings each year and am saving for a house/apt in near term. I live in NYC, not a whole lot left for taxable investments after that and living a relatively nice lifestyle.

I think you are missing out if you have not been investing since March. Energy stocks are still in the toilet. Other stocks have been increasing 20 to 60% in just weeks or months. You want to get out of debt, but now is not the time to be on the sidelines. This can accelerate you getting out of debt.

If you can get me a COVID bonus ill put it in a taxable account.

Your stock market brokerage account returns could be your COVID bonus if you were smart.

[Anonymous User]

If you are a biglaw midlevel, you should have a taxable brokerage account.

This is way too general a statement to be true. Once you've maxed out tax-advantaged space, it would be ideal to continue investing on top of that, but a lot of people just don't have the free cashflow to do so safely if they're buying real estate, paying down loans, supporting dependents, etc. A lot of biglaw midlevels haven't even made it to $0 net worth yet.

Haha yeah I had 250 of loans. Got my emergency fund, maxed out tax deferred retirement savings each year and am saving for a house/apt in near term. I live in NYC, not a whole lot left for taxable investments after that and living a relatively nice lifestyle.

I think you are missing out if you have not been investing since March. Energy stocks are still in the toilet. Other stocks have been increasing 20 to 60% in just weeks or months. You want to get out of debt, but now is not the time to be on the sidelines. This can accelerate you getting out of debt.

If you can get me a COVID bonus ill put it in a taxable account.

Your stock market brokerage account returns could be your COVID bonus if you were smart.

The average financially literate person here would say that when saving for a house/apt in the near term, the "smart" move is to *not* put your savings into a taxable brokerage account that's heavily invested in equities. That's literally the opposite of what most people would say is smart. Of course, that can and is perhaps likely to "accelerate you getting out of debt" - but you run the risk of getting stuck with a short- to moderate-term loser that sucks up your savings and sets you back five years from purchasing a home.

[AllAboutTheBasis]

What are everyone's thoughts of saving for a house vs. taxable investing for a recent grad in a HCOL area (NYC/DC/SF/LA)? I'll graduate with $0 debt and my spouse and I will have ~ $70,000 cash savings (mutual fund and money market). After maxing retirement savings and living expenses, we should have a pretty significant chunk of change to save/invest. Part of me wants to save for a house aggressively, the other wants to maybe do a 50/50 split between taxable investments and house savings.

Buying a house is a personal decision that can't be made purely based on ROI. Are you absolutely sure you want to live in [location] in [type of home] for at least another 5-10 years? Are you confident about how much house you can afford, accounting for the risk of leaving biglaw/having a kid/etc.?

If you're confident about buying a house, then IMO it's better to have dry powder. Personally, I wouldn't bother with investing money that I know I'm going to spend in the next 12-18 months because short-term cap gains tax eats up so much of the upside. And with the volatility we've had since COVID hit, you could get screwed out of your dream home if equities take a downswing at the wrong time.

Those are good points. The other issue is you don’t want to dump everything into stock/cash and then decide two years in that you are/aren’t going to buy. I guess one plan could be to do a 50/50 or 25/75 route of stock/cash depending on how certain we become about buying a home.

The cost of real estate is what makes it difficult. It’s one thing to be in a LCOL area where a down payment on Cravath scale is a six months pay saved and another in a HCOL where it’s two years (some hyperbole).

[sparty99]

What are everyone's thoughts of saving for a house vs. taxable investing for a recent grad in a HCOL area (NYC/DC/SF/LA)? I'll graduate with $0 debt and my spouse and I will have ~ $70,000 cash savings (mutual fund and money market). After maxing retirement savings and living expenses, we should have a pretty significant chunk of change to save/invest. Part of me wants to save for a house aggressively, the other wants to maybe do a 50/50 split between taxable investments and house savings.

Buying a house is a personal decision that can't be made purely based on ROI. Are you absolutely sure you want to live in [location] in [type of home] for at least another 5-10 years? Are you confident about how much house you can afford, accounting for the risk of leaving biglaw/having a kid/etc.?

If you're confident about buying a house, then IMO it's better to have dry powder. Personally, I wouldn't bother with investing money that I know I'm going to spend in the next 12-18 months because short-term cap gains tax eats up so much of the upside. And with the volatility we've had since COVID hit, you could get screwed out of your dream home if equities take a downswing at the wrong time.

Those are good points. The other issue is you don’t want to dump everything into stock/cash and then decide two years in that you are/aren’t going to buy. I guess one plan could be to do a 50/50 or 25/75 route of stock/cash depending on how certain we become about buying a home.

The cost of real estate is what makes it difficult. It’s one thing to be in a LCOL area where a down payment on Cravath scale is a six months pay saved and another in a HCOL where it’s two years (some hyperbole).

Well all of this is irrelevant as he said this money was for his student loans and not for his down payment..

[Sporty1911]

Hey all, I'm a 2020 grad who will be starting at a big law firm in a major market this January, and am looking for some credit card advice.

Currently, I have an Amex Express Blue Cash Everyday card that I got as a summer associate. It's been great for every day purchases and building up my credit history, but I am looking to apply for a new card with my new job starting, mainly to maximize the additional money I will be spending. Additionally, I am joining a practice that is pretty heavy on international travel during normal times, so I would definitely prefer a travel rewards card, with the Amex Platinum being my first choice.

I do have some concerns though: first, is it straight up dumb to go right for the Platinum as a first year? I have no idea when I would actually start to do the traveling that is part of my practice group (could only start as a 2nd or 3rd year, so no guarantee I'll even get to that point), and I am a little worried about golden handcuffing myself to a premium level credit card that has a $550 annual fee. Plus, with COVID likely shutting down most business travel well into 2021, is there really any point in getting a premium rewards card right now rather than just upgrading my current Amex to a better cash back card?

Looking for any and all credit card advice that could help an incoming first year, including specific advice to the scenario above or any other credit cards that may be recommend. Many thanks!

[The Lsat Airbender]

Important issue with only using premium charge cards is that they won't build your FICO score IIRC

[Chrstgtr]

Hey all, I'm a 2020 grad who will be starting at a big law firm in a major market this January, and am looking for some credit card advice.

Currently, I have an Amex Express Blue Cash Everyday card that I got as a summer associate. It's been great for every day purchases and building up my credit history, but I am looking to apply for a new card with my new job starting, mainly to maximize the additional money I will be spending. Additionally, I am joining a practice that is pretty heavy on international travel during normal times, so I would definitely prefer a travel rewards card, with the Amex Platinum being my first choice.

I do have some concerns though: first, is it straight up dumb to go right for the Platinum as a first year? I have no idea when I would actually start to do the traveling that is part of my practice group (could only start as a 2nd or 3rd year, so no guarantee I'll even get to that point), and I am a little worried about golden handcuffing myself to a premium level credit card that has a $550 annual fee. Plus, with COVID likely shutting down most business travel well into 2021, is there really any point in getting a premium rewards card right now rather than just upgrading my current Amex to a better cash back card?

Looking for any and all credit card advice that could help an incoming first year, including specific advice to the scenario above or any other credit cards that may be recommend. Many thanks!

You are much better off getting a CSR. It has broader categories (i.e. all travel instead of just flights and dining) and they are better tailored to the big law experience (you will order food into the office a lot). You can also build off the UR family to get other good Chase cards. Plus Chase cards are harder to come by later on if you build a lot of cards you will run into their 5/24 rule.

For a good breakdown/discussion, I would go to reddit r/creditcards and r/churning.

[lolwutpar]

Curious to hear what other midlevels do with their fat stax.

I max out my 401k, do a backdoor Roth (no mega backdoor for me) every year. I have no debt, other than a mortgage. I have a house/emergency fund of about $50k. I have a travel fund of $10k (lol lot of good that's done me this year).

So....what's next? I just started putting more money in my taxable brokerage account, but I'm pretty lame and do index funds.

Other than putting aside money each month for the taxable brokerage account...I guess save up for "unnecessary" house projects like re-doing the yard, painting, etc.? Stuff that's more for your preference than needed.

[rnen22]

I had the Platinum card a few years ago. I got the 100k sign up bonus but cancelled after 1 year since I found that I rarely used the card's benefits. In comparison to the Chase Sapphire Reserve, the Platinum's benefits are much tougher and cumbersome to use. Many benefits have a lot strings attached, like the Uber credit which expires every month, and the airline credit which can't be used for gift cards. I personally only think the Platinum is worth it if you travel regularly from airports with centurion lounges, since they are a lot better and usually less crowded than the Priority Pass lounges that everyone and their brother can access these days. Since you won't travel that often in big law, don't think it's worth it.

[EzraFitz]

I had the Platinum card a few years ago. I got the 100k sign up bonus but cancelled after 1 year since I found that I rarely used the card's benefits. In comparison to the Chase Sapphire Reserve, the Platinum's benefits are much tougher and cumbersome to use. Many benefits have a lot strings attached, like the Uber credit which expires every month, and the airline credit which can't be used for gift cards. I personally only think the Platinum is worth it if you travel regularly from airports with centurion lounges, since they are a lot better and usually less crowded than the Priority Pass lounges that everyone and their brother can access these days. Since you won't travel that often in big law, don't think it's worth it.

I would just say that, if you make sure to read into the various benefits, the Platinum is incredibly worth it. There are a lot of benefits that are $50-$150/year, and if you use them all the right way, it is very worth it. Excluding the Airline rewards, I get about $1k per year of benefits. So I net $450. Add in the $200 for airlines plus lounge access, it is very worth it for me. And I still use other cards for certain of their benefits.

[NoLongerALurker]

Fwiw I agree the CSR makes more “sense” than the platinum, but I have both (which isn’t exactly optimizing value but I use both often enough anyway — CSR for all food and Amex for all travel, mostly, and kind of split as between them for every day items). As between the two, the Amex customer service is extraordinary. Literally best customer service I’ve ever had.

I would recommend the Plat to anyone, personally. If you’re looking for a charge card I’d go ahead and get it.

[EzraFitz]

Fwiw I agree the CSR makes more “sense” than the platinum, but I have both (which isn’t exactly optimizing value but I use both often enough anyway — CSR for all food and Amex for all travel, mostly, and kind of split as between them for every day items). As between the two, the Amex customer service is extraordinary. Literally best customer service I’ve ever had.

I would recommend the Plat to anyone, personally. If you’re looking for a charge card I’d go ahead and get it.

Second this. And their travel reps are seriously the best to go to bat for you. I call, tell them what I want from the airline, they put me on hold for 20 minutes, and then come back with everything taken care of. Clutch.

[nealric]

Curious to hear what other midlevels do with their fat stax.

I max out my 401k, do a backdoor Roth (no mega backdoor for me) every year. I have no debt, other than a mortgage. I have a house/emergency fund of about $50k. I have a travel fund of $10k (lol lot of good that's done me this year).

So....what's next? I just started putting more money in my taxable brokerage account, but I'm pretty lame and do index funds.

Other than putting aside money each month for the taxable brokerage account...I guess save up for "unnecessary" house projects like re-doing the yard, painting, etc.? Stuff that's more for your preference than needed.

Index funds aren't "lame", they are an effective path to wealth. I don't think savings need to be earmarked for anything specific. For me, it's all about hitting financial independence. That doesn't mean retirement,m but it means being at a place where you are free to pursue your interests without worrying about finances.

[lolwutpar]

Curious to hear what other midlevels do with their fat stax.

I max out my 401k, do a backdoor Roth (no mega backdoor for me) every year. I have no debt, other than a mortgage. I have a house/emergency fund of about $50k. I have a travel fund of $10k (lol lot of good that's done me this year).

So....what's next? I just started putting more money in my taxable brokerage account, but I'm pretty lame and do index funds.

Other than putting aside money each month for the taxable brokerage account...I guess save up for "unnecessary" house projects like re-doing the yard, painting, etc.? Stuff that's more for your preference than needed.

Index funds aren't "lame", they are an effective path to wealth. I don't think savings need to be earmarked for anything specific. For me, it's all about hitting financial independence. That doesn't mean retirement,m but it means being at a place where you are free to pursue your interests without worrying about finances.

My issue is more that the cash stacks up quickly (such a bad problem to have). I have a separate account for my mortgage and property tax, and I already have emergency savings, so the rest of the money that comes in to my checking account just stacks. I want to put it to productive use, but the only thing I can think of that is available to me now that I maxed out tax advantaged accounts is my taxable brokerage.

[showusyourtorts]

Curious to hear what other midlevels do with their fat stax.

I max out my 401k, do a backdoor Roth (no mega backdoor for me) every year. I have no debt, other than a mortgage. I have a house/emergency fund of about $50k. I have a travel fund of $10k (lol lot of good that's done me this year).

So....what's next? I just started putting more money in my taxable brokerage account, but I'm pretty lame and do index funds.

Other than putting aside money each month for the taxable brokerage account...I guess save up for "unnecessary" house projects like re-doing the yard, painting, etc.? Stuff that's more for your preference than needed.

Index funds aren't "lame", they are an effective path to wealth. I don't think savings need to be earmarked for anything specific. For me, it's all about hitting financial independence. That doesn't mean retirement,m but it means being at a place where you are free to pursue your interests without worrying about finances.

My issue is more that the cash stacks up quickly (such a bad problem to have). I have a separate account for my mortgage and property tax, and I already have emergency savings, so the rest of the money that comes in to my checking account just stacks. I want to put it to productive use, but the only thing I can think of that is available to me now that I maxed out tax advantaged accounts is my taxable brokerage.

If an HSA is available to you, then I would max it out and not use a cent of it, even though you would be able to pay your medical bill with those expenses. If you want something that's a bit more high-risk, high-reward than index funds, but isn't totally batsh*t like picking individual stocks, then real estate crowd funding I think is relatively common for people that have some "fun money" if it's getting you down psychologically to not be able to enjoy the flow straight from work to the index fund (even if that is probably the most efficient and effective path to building wealth).

[nealric]

Curious to hear what other midlevels do with their fat stax.

I max out my 401k, do a backdoor Roth (no mega backdoor for me) every year. I have no debt, other than a mortgage. I have a house/emergency fund of about $50k. I have a travel fund of $10k (lol lot of good that's done me this year).

So....what's next? I just started putting more money in my taxable brokerage account, but I'm pretty lame and do index funds.

Other than putting aside money each month for the taxable brokerage account...I guess save up for "unnecessary" house projects like re-doing the yard, painting, etc.? Stuff that's more for your preference than needed.

Index funds aren't "lame", they are an effective path to wealth. I don't think savings need to be earmarked for anything specific. For me, it's all about hitting financial independence. That doesn't mean retirement,m but it means being at a place where you are free to pursue your interests without worrying about finances.

My issue is more that the cash stacks up quickly (such a bad problem to have). I have a separate account for my mortgage and property tax, and I already have emergency savings, so the rest of the money that comes in to my checking account just stacks. I want to put it to productive use, but the only thing I can think of that is available to me now that I maxed out tax advantaged accounts is my taxable brokerage.

Once you max out tax advantaged accounts, there's nothing wrong with taxable brokerage accounts. Make sure you are maxing out HSA and doing a backdoor Roth.

[masterherm]

Do you go with the traditional 401k or Roth? I keep going back and forth... is there a right answer for the typical big law associate?

[dabigchina]

Don't just wait for your firm to give you a raise, give yourself a raise that will pay you each year and not require you to work one second!

If you're a rising 4th year associate, you can take that bonus money and generate a passive income stream that will pay you ~$3,335 each year. The best parts, you collect it by doing nothing AND it's taxed at a lower rate than your ordinary income.

https://biglaw360.com/give-yourself-a-raise-today/

The general advice is good, but I have never seen or heard a convincing argument that dividend aristocrats provide outsized returns relative to the market, especially given how tax inefficient it is.

Just put some money into VTSAX/whatever SP500 fund you can find every month and call it a day.

[lawstudent212]

Why do you believe it is tax inefficient? Are you assuming buying and selling under a year period?