wealth from being an associate Forum

[Matthies]

You will never get 'wealthy" working for someone else period. Wealthy people in this country own the means of production and employ people to work for them, those people may get "rich," but its always been the business owner, not the employee who makes the most money.

Its pretty dated now but there was an interesting book/study done on wealth and those with a net WORTH of 1 million or more (The Millionaire Next Door). The most common people on that list: people who owned plumbing companies, electrical companies, grocery stores ect. It was not doctors, lawyers or bankers. many reasons for this, but the most common being he who employs people makes more than those who are employees.

There is a reason why many, many lawyers start their own firms after 7-10 years of experience, there is simply more money in it for the lawyer if he's good, than there is working for a big firm. Because your employing yourself, not being someone else's employee. You eat 100% of what you kill without having to share it with other equity partners who don't bring in as much as you.

[howcani111]

The entitled, whiny bitch attitude of our generation is staggering.

QFT.

UVA's dean made me think of this the other day. Said something to the effect of, "Our graduates are still doing well in the job market, but they're having to work much harder to do it now than ever before."
Cry me a fucking river.

Try being like my pops, who has a business degree (from back when going to college was still relatively valuable), took over the family jewelry business at 23, attended White House small business dinners, and even changed with the times. Went from a small town store owner to a business owner in 2 malls in a decent-sized city to a wholesaler working out of his shop in the backyard. Tried to get on board with a website, upgraded his engraving machines to some fancy $10k version, has bought gold from individuals for resale.

Now imagine being screwed over by two different business partners who have held you over the coals because of your lack of financial leverage, imagine being chased down by corporate law types of copyright infringement that you're not guilty of, and try being snubbed out by a failed economy. Now you're 60 and still scraping by, trying to make it work after the economy pulled an entire industry out from under you. You have no health insurance, because it costs too much. Luckily, you're healthy as shit, so you haven't needed it (yet).

This is reality even for smart, innovative, hard working folks. Since when does going to law school at UVA make you entitled to an easy rise to financial stardom?

Um... I don't know why your so bitter. Sure, everyone has their fair share of problems... but you should just take it in context of the article and not personalize it...

[motiontodismiss]

Seriously, what's up with the 50% income tax rate???

This is high, but not ridiculously high. Federal tax brackets are 28% from $80,000 to $160,000, and average about 20% below that (actually 10%, 15% and 25%, but it averages to 20%). Call it 24% average effective.

Add in social security (6%), medicare (1.5% employee share) to get 31.5%.

New York State income tax is 6%. New York City income tax is 3.5%.

So you are at a 41% effective tax rate. If you add in other withholdings (medical, dental, vision) you can easily get up around 45%.

California is similar. Yes, I know not everyone wants to live in NY or CA, but guess what, this is where most of the biglaw jobs are.

Edit: As a side note, this thread shows why it is a really good financial move to get married. Not only do your tax rates go down (or rather, the threshholds for the various brackets go up), but your expenses don't increase that much. You might bank almost all of your spouse's post-tax salary.

Sounds about right but a couple things: FICA is capped at $108k. There's no FICA tax on marginal income above and beyond that. So more like 4% at $160k (~$6,600/$160k). Of course, CA and NY have some of the highest tax rates in the country. Tax in other states: NJ=1.4-6.37% (and no city), CT=3-5%, TX=0, IL=3%, MA=5.3%, DC=4-8.5%, MD=2-5.5% (top bracket of 6% doesn't apply until $1 mil), VA=2-5.75%, GA=1-6%, PA=3.07%. I believe I heard that Philly has a city tax but that's just a rumor.

Btw I'll qualify the last sidebar with a note that it makes good tax sense to get married if and only if your combined income increases by less than the percentage by which the tax brackets are increased (I believe it's 20-30%?). Above that, there's actually a marriage penalty. The best tax status is that of a head of household.

Even more reason to target a secondary market. 120k in STL >>>>>>>>>>>>>>>>>>> 160k in NYC. For a whole host of reasons.

(Now if I could just find one of these jobs... )

Yeah and I haven't even begun to talk about CoL yet.

[Mirrored]

This is absolutely retarded.

First, you fail to understand how graduated taxes work. Probably because you've never actually paid taxes and just had mommy and daddy fund you.

Second, you really fail to understand how deductions can factor into this, especially with 401k matching.

And then you fail to level the associate salaries which are lock step at most firms. And forget bonuses.

And you forget that students that are making these big firms from less prestigious schools are likely to have graduated in the top 15-5% of receiving significant scholarships and probably full rides.

If you go to a non-t14 school and are paying sticker, you are also not a candidate for biglaw jobs. Thus the most debt is given to those least able to pay it.

[Bildungsroman]

If you go to a non-t14 school and are paying sticker, you are also not a candidate for biglaw jobs.

Demonstrably false.

[Anonymous User]

@ a $65k salary I managed to save $16k in a year, and that was after shuttling 5% of my netpay to a 401 and paying of $10k in loans. If you're only managing to save $10k off a $160k salary, then you're fucking financially retarded.

[romothesavior]

Even more reason to target a secondary market. 120k in STL >>>>>>>>>>>>>>>>>>> 160k in NYC. For a whole host of reasons.

(Now if I could just find one of these jobs... )

Yeah and I haven't even begun to talk about CoL yet.

I saw a debt calculator one time that equated a STL 120k salary to a 290k NYC salary. Not sure if that is totally accurate (it certainly isn't an exact science), but either way, that is a HUGE difference.

[nealric]

If you go to a non-t14 school and are paying sticker, you are also not a candidate for biglaw jobs. Thus the most debt is given to those least able to pay it.

Right, because there is a perfect correlation between LSAT performance and law school grades

[Matthies]

If you go to a non-t14 school and are paying sticker, you are also not a candidate for biglaw jobs. Thus the most debt is given to those least able to pay it.

Right, because there is a perfect correlation between LSAT performance and law school grades

This and no one from a non t14 school has ever gotten a biglaw job in the history of the legal profesion, and all biglaw firms came about my imculate conception, one day they where 1 t14 grad then the next 500 plus.

[Veyron]

You will never get 'wealthy" working for someone else period. Wealthy people in this country own the means of production and employ people to work for them, those people may get "rich," but its always been the business owner, not the employee who makes the most money.

Its pretty dated now but there was an interesting book/study done on wealth and those with a net WORTH of 1 million or more (The Millionaire Next Door). The most common people on that list: people who owned plumbing companies, electrical companies, grocery stores ect. It was not doctors, lawyers or bankers. many reasons for this, but the most common being he who employs people makes more than those who are employees.

There is a reason why many, many lawyers start their own firms after 7-10 years of experience, there is simply more money in it for the lawyer if he's good, than there is working for a big firm. Because your employing yourself, not being someone else's employee. You eat 100% of what you kill without having to share it with other equity partners who don't bring in as much as you.

This poast is credited in every particular.

[bilbobaggins]

50% isn't high if you live in the top bracket in CA, NYC, etc. It will be very high for states with no income tax.

[agentzer0]

I did this math 2 days ago:

Assumptions:

biglaw lockstep salary for 8 years (included modest bonuses)
$200k of student loans, paid off over 5 years (included interest of course)
$1500/mo housing (perhaps low but I figured this as rent, if you're paying more but it's a mortgage you have to factor in equity)
$1500/mo living expenses (food, gas, fun, etc)
Taxes: State (used NY State), Federal, Social Security, Medicare
Auto Insurance: $1500/year
Medical Insurance: $2400/year
$60k car purchased upon graduation from LS, 4 year note
$120k car purchased at end of biglaw year 4/upon completion of payments for first car; this car also a 4-year note

End Result:

$500k in savings at end of year 8
Note that this is after having spent ~ $185k on cars (certainly an unnecessary expense to incur on this scale, perhaps altogether if living in city with good transit)
Note also that this is assuming renting housing, not buying, which would offset some of the housing cost

No I didn't account for inflation, assumed that biglaw salaries will rise in conjunction; this is not a strong assumption but shouldn't skew these results too much either way.

[motiontodismiss]

50% isn't high if you live in the top bracket in CA, NYC, etc. It will be very high mathematically impossible for states with no income tax.

[romothesavior]

I did this math 2 days ago:

Assumptions:

biglaw lockstep salary for 8 years (included modest bonuses)
$200k of student loans, paid off over 5 years (included interest of course)
$1500/mo housing (perhaps low but I figured this as rent, if you're paying more but it's a mortgage you have to factor in equity)
$1500/mo living expenses (food, gas, fun, etc)
Taxes: State (used NY State), Federal, Social Security, Medicare
Auto Insurance: $1500/year
Medical Insurance: $2400/year
$60k car purchased upon graduation from LS, 4 year note
$120k car purchased at end of biglaw year 4/upon completion of payments for first car; this car also a 4-year note

End Result:

$500k in savings at end of year 8
Note that this is after having spent ~ $185k on cars (certainly an unnecessary expense to incur on this scale, perhaps altogether if living in city with good transit)
Note also that this is assuming renting housing, not buying, which would offset some of the housing cost

No I didn't account for inflation, assumed that biglaw salaries will rise in conjunction; this is not a strong assumption but shouldn't skew these results too much either way.

I like the big dreams... but anyone who drops $185k on cars as a biglaw associate is a moron. The lack of job stability in recent years should be reason enough.

Other than that though, glad to see some degree of sanity in this thread. OP is an idiot.

[ScaredWorkedBored]

Yeah, I don't understand the expensive cars in New York, especially mixed with the bargain-basement housing cost. You're not using either much as a NY associate but you're certainly using the apartment more.

And frankly, if you spend $60k on a car, you're a moron and douche. You went to law school, learn to negotiate. You can get a loaded Lincoln MKS for fifty grand.

[Matthies]

You guys need to factor in "firm culture" anyone ever heard of this? You ever worked at a big firm? He's the deal at a really elite firm, one that's is going to pay market or above in NYC you're going to be excepted to look the part. This means you can't wear cheap suits, cheap watches, buff your own shoes or brown bag your lunch. You also going to be expect to socialize with the senior associates socialize and spend money like they do, and play golf and join clubs, and bar associations and go met clients and fancy and expensive places that's a firm culture. And its not ITE good to bill your clients for your dry cleaning and shirt pressing.

When you were a summer they did not expect from you, or more likely you were too clueless to notice, but firms have unwritten rules, and not being or looking cheap is one of them. Lawyers at big firms are more prestige whores than TLS posters, you start doing things on the cheap and they are going to think your saying something about how they spend their money. Its called selling your soul for a reason, cause its not cheap to fit in and get ahead. $1500 a month an't gonna cut it unless you plan to be shunned out by year 2.

But you say Matthies I'm going to be the greatest lawyer they ever saw, so I can be cheap if my work product is good. Your work product will be writing memos until you start meeting clients which you can't do in $200 suits, and don't forget lockstep, the guy down the hall who's a shitty lawyer but a nice guy gets prompted the same as you, and will likely make partner when you won't cause he join X country club and is on the the fancy private school board where the CEO of the new clients kid goes to kindergarten.

Want to make money, wear shorts, eat PBJ sammichs and not spend all your money keeping up with the Jones and looking the part? Then start your own firm, cause your not going to be abale to do that and keep you job at an elite firm.

[saladfiend]

top bracket does not mean all of your income is taxed at that level

[theghostofDrewTate]

I'm too lazy to go through this thread so I apologize if my post is duplicative of anyone else's, but I've been in biglaw for a few years. I have almost no student loans because I went to a sTTTaTTTe school and paid off UG loans before LS. I have never paid more than $1400 for rent because I'm cheap. My old lady has a job that pays about $45k a year. I didn't jump into the RE bubble, so I don't own any RE. Me and my wife are sitting on close to $500k right now, including 401(k) money and Roth IRAs (I converted standard IRAs to Roths this year). Don't get me wrong, this has required a ton of sacrifice in terms of living well below my income and a ton of crappy work on nights and weekends in the biglaw salt mines, but if you keep your debt and expenses low and land a biglaw gig, unless you are a total meathead, you will save a ton of cash, even as a lowly associate.

Now there are plenty of other people I know who went to T14s at sticker, landed biglaw, leveraged themselves with a nice house and a nice car, had some kids and got fired. Their net worth is substantially negative, but I grew up poor and so I don't need a lot of crap and I don't ever want to be poor again.

[Eric475]

I'm too lazy to go through this thread so I apologize if my post is duplicative of anyone else's, but I've been in biglaw for a few years. I have almost no student loans because I went to a sTTTaTTTe school and paid off UG loans before LS. I have never paid more than $1400 for rent because I'm cheap. My old lady has a job that pays about $45k a year. I didn't jump into the RE bubble, so I don't own any RE. Me and my wife are sitting on close to $500k right now, including 401(k) money and Roth IRAs (I converted standard IRAs to Roths this year). Don't get me wrong, this has required a ton of sacrifice in terms of living well below my income and a ton of crappy work on nights and weekends in the biglaw salt mines, but if you keep your debt and expenses low and land a biglaw gig, unless you are a total meathead, you will save a ton of cash, even as a lowly associate.

Now there are plenty of other people I know who went to T14s at sticker, landed biglaw, leveraged themselves with a nice house and a nice car, had some kids and got fired. Their net worth is substantially negative, but I grew up poor and so I don't need a lot of crap and I don't ever want to be poor again.

How do you feel about what Mathies said, about "firm culture". Though you said you live cheaply, do you find that there are certain expenses that are more or less "necessary", such as expensive suits and such, to "fit in" with the firm culture?

Also, did you do extraordinarily well at your law school to get your biglaw job? what level of school was it? I'm very curious. I also have grown up in a family that is not exactly poor but certainly not too well-off, and feel I could live frugally without much trouble. The trouble is getting the biglaw firm job in the first place

[Anonymous User]

im 27 and im worth $1.1-$1.2m

[Mirrored]

Right, because there is a perfect correlation between LSAT performance and law school grades

Protip: If you are in the top x% (where x% is the percent being considered for Biglaw jobs) after your first year, you are going to get a scholarship and thus will not be paying sticker.

GULC'd.

[yesofcourse]

Say you're an associate for 7 years, earning 160-170-180-190-200-210-220 = 1.33 million
Uncle Sam takes 50%, so you end up with $665,000 USD in nominal wealth. That's about 90k a year nominal income.

Say you invested everything in a 3% secured instrument, if you can find one, you get like $700k or so at the end of 7 years, post tax, saved up at 3% a year.

This is the MAXIMUM you can save theoretically, assuming no expenses, no tax evasion or funky business or more than 3% returns.

Expenses (student loans, mortgage scam, wife, etc., = 90%), marginal rate of saving = 0.10
An average national savings rate is considered to be 10%

So your net worth will thus be only $70k when all is said and done by the time you make partner, congratulations.

so then vote for Ron Paul to avoid slave labor; otherwise, as is the current case, you will be working for the gov't FOR FREE W/O PAY for an entire 3.5 of those 7 years.

[romothesavior]

I'm too lazy to go through this thread so I apologize if my post is duplicative of anyone else's, but I've been in biglaw for a few years. I have almost no student loans because I went to a sTTTaTTTe school and paid off UG loans before LS. I have never paid more than $1400 for rent because I'm cheap. My old lady has a job that pays about $45k a year. I didn't jump into the RE bubble, so I don't own any RE. Me and my wife are sitting on close to $500k right now, including 401(k) money and Roth IRAs (I converted standard IRAs to Roths this year). Don't get me wrong, this has required a ton of sacrifice in terms of living well below my income and a ton of crappy work on nights and weekends in the biglaw salt mines, but if you keep your debt and expenses low and land a biglaw gig, unless you are a total meathead, you will save a ton of cash, even as a lowly associate.

Now there are plenty of other people I know who went to T14s at sticker, landed biglaw, leveraged themselves with a nice house and a nice car, had some kids and got fired. Their net worth is substantially negative, but I grew up poor and so I don't need a lot of crap and I don't ever want to be poor again.

How do you feel about what Mathies said, about "firm culture". Though you said you live cheaply, do you find that there are certain expenses that are more or less "necessary", such as expensive suits and such, to "fit in" with the firm culture?

I think a lot depends on where you are. I don't imagine St. Louis firms are quite as intense as this, or at least that's not the impression I get.

I have said this again and again and again, and I'll reiterate it one more time: financially, I would much rather be in a smaller market making low 6 figures or even high 5 figures than making 160k in NYC, DC, Chicago, LA, etc. You'll be able to save more money, your takehome pay will be higher in most cases, you will be able to live more comfortably (bigger house, etc.), virtually everything will be cheaper, your commute won't be as bad, etc. etc.

(Sorry I keep using STL as an example, but that is just the market I'm familiar with and interested in.)

[nealric]

You guys need to factor in "firm culture" anyone ever heard of this? You ever worked at a big firm? He's the deal at a really elite firm, one that's is going to pay market or above in NYC you're going to be excepted to look the part. This means you can't wear cheap suits, cheap watches, buff your own shoes or brown bag your lunch. You also going to be expect to socialize with the senior associates socialize and spend money like they do, and play golf and join clubs, and bar associations and go met clients and fancy and expensive places that's a firm culture. And its not ITE good to bill your clients for your dry cleaning and shirt pressing.

Matthies- you are usually right, but here you are wrong.

First: Most people don't even wear watches any more at these firms. You won't be judged for using your firm blackberry to keep the time
Second: Most NYC firms, with a few exceptions, have gone business casual. You only need 2 suits or so for meeting with clients and/or going to court. They do not have to be $2000 bespoke suits. Most lawyers are not fashion mavens and can't tell the difference as long as the suit isn't polyester or something.
Third: Nobody knows where you go during your lunch hour unless you have been invited out (which isn't all that often). Even if they do, nobody cares if you brownbag it.
Fourth: Plenty of biglaw partners neither play golf nor belong to country clubs. Frankly, a lot of them don't have time for it.
Sixth: If you don't want to pay for drycleaning, you can always iron. Yeah, you work a lot, but not so much you couldn't spare 1/2 hour a week to iron if you really wanted to.
Seventh: NYC associates almost never have cars

Maybe there is some uber-stuffy firm that is different, but certainly not all market-paying NYC firms.

so then vote for Ron Paul to avoid slave labor; otherwise, as is the current case, you will be working for the gov't FOR FREE W/O PAY for an entire 3.5 of those 7 years.

Riiiiighhhhtt. Because Ron Paul is going to single-handedly make all taxes go away

Protip: If you are in the top x% (where x% is the percent being considered for Biglaw jobs) after your first year, you are going to get a scholarship and thus will not be paying sticker.

GULC'd.

Perhaps at a third tier school, but UCLA isn't going to give you a full-ride just because you were in the top 1/4.

[theghostofDrewTate]

How do you feel about what Mathies said, about "firm culture". Though you said you live cheaply, do you find that there are certain expenses that are more or less "necessary", such as expensive suits and such, to "fit in" with the firm culture?

Also, did you do extraordinarily well at your law school to get your biglaw job? what level of school was it? I'm very curious. I also have grown up in a family that is not exactly poor but certainly not too well-off, and feel I could live frugally without much trouble. The trouble is getting the biglaw firm job in the first place

Nobody makes partner at my firm, so saying clothes matter for making partner is irrelevant. I only shop at Brooks Brothers and only when crap is on sale. Sometimes I go to the outlet. I drop maybe around a grand a year on clothes and shoes. I bought some decent suits when I started, but it's not like I'm going out and buying a new pair of Ferragamo kicks every week or something to impress the people I work with. If I fuck up the indemnification section in an agreement, it's not like they'll say "Hey, you fucked up this indemnification section, but your shoes are so nice I'm going to give you a pass." I've gone to plenty of negotiations where I've been WAY overdressed. The clients don't give a crap, as long as I hammer away with them and turn the documents properly, they are happy. At 3 in the morning, they're usually happy someone else is there. Plus, if we go out, I expense that shit back to the firm, so the clients get a good trip out and I don't come out of pocket.

And GCs who steer the quantity of business I would need to make partner wouldn't talk biz with me (right now anyway) regardless of whether I attended the same country club. You make connections from working with people and those people going in house or from having friends from back in the day going in house. I wouldn't steer biz to some clown who came up to me at the CC with a pitch while I was maxing and relaxing unless he was a specialist in some niche and that niche was an area I just had a problem in.

I do M&A and securities work. Fact is, the dudes I work with don't look at other dudes' watches, shoes and suits. That's petty ass 7th grade girl bullshit. They look at the fucking documents we're working on and are a helluva lot more worried about the content of that than whether or not the guy working on it is wearing Tag or some shit. Plus, the clients are pissed as hell about the billing rates, there's really no point in attempting to flash money around.