Critique my first year associate budget Forum

[BrazilBandit]

Can everyone stop giving financial advice on TLS?

I think similar to the "retake" chant, TLS should start a "speak with a financial advisor or other qualified individual" chant.

As a former financial advisor, this is horrible advice. Fees will fuck you over... investing is like sex; you can certainly do it with someone else, but your own hand is just as effective.

[stannis]

I'm not trying to knock anyone but I don't understand the combination of low debt, not materialistic, and biglaw. What does biglaw offer to someone who isn't paying off large loans or looking for a luxury lifestyle?

[sublime]

..

[Dafaq]

My plan is simply to be tuition debt free after 3 years (by usually paying $800 a month more than is required). This leaves me $1k for 401k and roughly $2k for COL after $2.5k mortgage. Some months $1k goes into savings (other months zero)…my savings was nearly depleted due to the down payment for my home. The bonus covers Christmas and vacations. I am fortunate that there is no state income tax, if there was, then I’d have to make cuts on paying down the tuition.

[ponderingmeerkat]

I'm not trying to knock anyone but I don't understand the combination of low debt, not materialistic, and biglaw. What does biglaw offer to someone who isn't paying off large loans or looking for a luxury lifestyle?

Well, to piggie-back off the "nature vs. nurture" discussion going on in the Lounge, it probably has a lot to do with how you were raised. My parents modeled financial independence for me from a young age. So, I didn't grow up with materialism. They made great salaries but we were frugal and didn't conspicuously consume.

For them, it was the freedom to travel. So earlier this year (they're in their mid-50's), they spent two months in Australia scuba diving the Great Barrier Reef, among other things. They are in Botswana now, and later this winter they are going to spend several months in the south of France (because my Dad's always wanted to achieve fluency in French). They can do this because they saved up Fuck You Money by not spending it on worthless shit (and making smart investments).

I can't say travel will be my thing when I'm financially independent, but maybe the freedom to work with causes I feel passionate about and not worry about salary, paying the bills, etc. Ultimately, it comes down to a realization that the things you own actually own you. A lean, minimalist (within reason) lifestyle is less stressful, and allows you to avoid becoming a wage slave.

[abl]

What are folks' thoughts about Roth vs Traditional-type retirement plans? At what levels of savings / debt / salary does it make sense to do one over the other?

Play around with this calculator (make sure you open the "investment returns and taxes" tab): http://dinkytown.net/java/RothvsPreTaxAccount.html

Largely depends on your tax rate now vs tax rate at retirement age. Also depends on whether you want that cash to be liquid (Roth) or whether you want to get a tax break on the money invested now (Traditional).

I understand the principles at issue. Whether a Roth vs a Traditional makes sense largely depends on whether you think tax rates are going up or down (or flattening / becoming more progressive), as well as what you think returns are going to be over the next ~30 years. I understand any guess along these lines will just be a guess -- but I was wondering if there is any accepted "wisdom" about this.

[krads153]

I'm not trying to knock anyone but I don't understand the combination of low debt, not materialistic, and biglaw. What does biglaw offer to someone who isn't paying off large loans or looking for a luxury lifestyle?

Well, to piggie-back off the "nature vs. nurture" discussion going on in the Lounge, it probably has a lot to do with how you were raised. My parents modeled financial independence for me from a young age. So, I didn't grow up with materialism. They made great salaries but we were frugal and didn't conspicuously consume.

For them, it was the freedom to travel. So earlier this year (they're in their mid-50's), they spent two months in Australia scuba diving the Great Barrier Reef, among other things. They are in Botswana now, and later this winter they are going to spend several months in the south of France (because my Dad's always wanted to achieve fluency in French). They can do this because they saved up Fuck You Money by not spending it on worthless shit (and making smart investments).

I can't say travel will be my thing when I'm financially independent, but maybe the freedom to work with causes I feel passionate about and not worry about salary, paying the bills, etc. Ultimately, it comes down to a realization that the things you own actually own you. A lean, minimalist (within reason) lifestyle is less stressful, and allows you to avoid becoming a wage slave.

Yeah, agree with all of this. Although I'm skeptical that biglaw is the way to do this...the money is good but it isn't fuck you money by any means and it still requires 3 years additional school plus a ton of tuition. I know luck has a lot to do with it, but the only people I know who have fuck you money are entrepreneurs and fair number of those were computer programmers (who can pretty much work remotely anyway). If you want more freedom/money/geographical flexibility, law isn't the best career to get into.

[Tiago Splitter]

What are folks' thoughts about Roth vs Traditional-type retirement plans? At what levels of savings / debt / salary does it make sense to do one over the other?

Play around with this calculator (make sure you open the "investment returns and taxes" tab): http://dinkytown.net/java/RothvsPreTaxAccount.html

Largely depends on your tax rate now vs tax rate at retirement age. Also depends on whether you want that cash to be liquid (Roth) or whether you want to get a tax break on the money invested now (Traditional).

I understand the principles at issue. Whether a Roth vs a Traditional makes sense largely depends on whether you think tax rates are going up or down (or flattening / becoming more progressive), as well as what you think returns are going to be over the next ~30 years. I understand any guess along these lines will just be a guess -- but I was wondering if there is any accepted "wisdom" about this.

The only consensus is that you should go with Roth if your income is low and you expect it to be higher in the future. If your income is high you're basically just guessing as to whether tax rates will go up or down. Some things to think about:

1) Traditional can lower your AGI which might be helpful for things like PAYE.
2) You may not be eligible to take a deduction on a traditional IRA if you or your spouse participate in an employer-sponsored plan like a 401k.
2a) If you already have pre-tax IRA money the "backdoor Roth" will still lead to tax liability.
3) Whatever happens with taxes in the future it will likely be nice to have a mix of pre-tax and Roth money so that you can optimize the tax consequences of distributions.

[jkpolk]

The point isn't market timing, the point is that OP shouldn't expose himself to market risk. OP cannot afford to invest until his downside isn't "UR FUCKED HAR HAR". This observation is not controversial. For the record, my personal belief that the market is over priced is neither dumb nor some endorsement of retail market timing strategies HTH.

[Anonymous User]

Re the discussion above and the roth vs. traditional, look into being able to roll over your traditional into a roth given the current state of affairs (despite having high income)

[ballouttacontrol]

Roth also gives you more freedom to withdraw without penalties for e.g. down payment on your first home

[Anonymous User]

For what it's worth I had an almost identical starting loan budget. I put that shit into 25-year repayment, and every month I pay about $360. Yeah, it sucks, but when the payment is only $360 you really don't notice it. If I were you I would do that and just worry about saving and investing. $360/month forever is a small price to pay for the privilege of drafting responses to form interrogatories for a living.

[Lacepiece23]

For what it's worth I had an almost identical starting loan budget. I put that shit into 25-year repayment, and every month I pay about $360. Yeah, it sucks, but when the payment is only $360 you really don't notice it. If I were you I would do that and just worry about saving and investing. $360/month forever is a small price to pay for the privilege of drafting responses to form interrogatories for a living.

That's what I'm doing as well.

[Frayed Knot]

What are folks' thoughts about Roth vs Traditional-type retirement plans? At what levels of savings / debt / salary does it make sense to do one over the other?

Play around with this calculator (make sure you open the "investment returns and taxes" tab): http://dinkytown.net/java/RothvsPreTaxAccount.html

Largely depends on your tax rate now vs tax rate at retirement age. Also depends on whether you want that cash to be liquid (Roth) or whether you want to get a tax break on the money invested now (Traditional).

I understand the principles at issue. Whether a Roth vs a Traditional makes sense largely depends on whether you think tax rates are going up or down (or flattening / becoming more progressive), as well as what you think returns are going to be over the next ~30 years. I understand any guess along these lines will just be a guess -- but I was wondering if there is any accepted "wisdom" about this.

The only consensus is that you should go with Roth if your income is low and you expect it to be higher in the future. If your income is high you're basically just guessing as to whether tax rates will go up or down. Some things to think about:

1) Traditional can lower your AGI which might be helpful for things like PAYE.
2) You may not be eligible to take a deduction on a traditional IRA if you or your spouse participate in an employer-sponsored plan like a 401k.
2a) If you already have pre-tax IRA money the "backdoor Roth" will still lead to tax liability.
3) Whatever happens with taxes in the future it will likely be nice to have a mix of pre-tax and Roth money so that you can optimize the tax consequences of distributions.

There's also the fact that you can (in essence) contribute more to a Roth IRA. The contribution limits are the same, but you're contributing after-tax money to the Roth, which is the same as raising the contribution cap by your marginal tax rate. This isn't a big difference—not enough to make a Roth IRA a good idea if you think your tax rate is going down. But it does mean that a tie goes to the Roth IRA. (This assumes, of course, that you're saving enough to hit the caps in either case.)

[bk1]

Roth also gives you more freedom to withdraw without penalties for e.g. down payment on your first home

IIRC, there's a 5 year waiting period for rollovers (which would apply to all biglaw associates).