Personal Finance 101 for Young Lawyers Forum

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newbienew

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Re: Personal Finance 101 for Young Lawyers

Post by newbienew » Fri Aug 28, 2020 11:08 pm

Anonymous User wrote:
Fri Aug 28, 2020 9:56 pm
FSA expires at the end the year, HSA does not. My firm sadly does not offer an HSA -- I was not aware it was common.
Okay, that's helpful -- but it still means you'd have to spend that money on healthcare eventually or else lose it, right?

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Re: Personal Finance 101 for Young Lawyers

Post by Anonymous User » Fri Aug 28, 2020 11:25 pm

newbienew wrote:
Fri Aug 28, 2020 11:08 pm
Anonymous User wrote:
Fri Aug 28, 2020 9:56 pm
FSA expires at the end the year, HSA does not. My firm sadly does not offer an HSA -- I was not aware it was common.
Okay, that's helpful -- but it still means you'd have to spend that money on healthcare eventually or else lose it, right?
New Anon, but: Nope! Once you hit a certain retirement age, you can use your HSA similar to a normal 401k (i.e., no need to use it on medical expenses).

If you’re considering a high-deductible plan anyway, and if you’re maxing your tax-advantaged space (as most biglaw folks arguably should be doing), then the HSA is a no brainer. Here is a good resource: https://www.biglawinvestor.com/stealth- ... count-hsa/

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EzraFitz

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Re: Personal Finance 101 for Young Lawyers

Post by EzraFitz » Thu Sep 03, 2020 8:58 pm

Anonymous User wrote:
Fri Aug 28, 2020 11:25 pm
newbienew wrote:
Fri Aug 28, 2020 11:08 pm
Anonymous User wrote:
Fri Aug 28, 2020 9:56 pm
FSA expires at the end the year, HSA does not. My firm sadly does not offer an HSA -- I was not aware it was common.
Okay, that's helpful -- but it still means you'd have to spend that money on healthcare eventually or else lose it, right?
New Anon, but: Nope! Once you hit a certain retirement age, you can use your HSA similar to a normal 401k (i.e., no need to use it on medical expenses).

If you’re considering a high-deductible plan anyway, and if you’re maxing your tax-advantaged space (as most biglaw folks arguably should be doing), then the HSA is a no brainer. Here is a good resource: https://www.biglawinvestor.com/stealth- ... count-hsa/
Definitely agree with the above. If you can afford it, there is no reason not to.

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Re: Personal Finance 101 for Young Lawyers

Post by Anonymous User » Mon Sep 07, 2020 8:23 pm

I have about 250K in assets- no debt at all. I’m starting a big law job in NYC this year (just graduated in May). I’m older than most law grads- in my 30s. I’m single and no kids. I’m wondering if people have thoughts on renting vs buying. I’m seriously considering buying an apartment in Manhattan but unsure if that’s a monumental mistake. If it helps, I’m thinking of a down payment somewhere between 100 and 150K

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Yugihoe

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Re: Personal Finance 101 for Young Lawyers

Post by Yugihoe » Tue Sep 08, 2020 11:30 am

Anonymous User wrote:
Mon Sep 07, 2020 8:23 pm
I have about 250K in assets- no debt at all. I’m starting a big law job in NYC this year (just graduated in May). I’m older than most law grads- in my 30s. I’m single and no kids. I’m wondering if people have thoughts on renting vs buying. I’m seriously considering buying an apartment in Manhattan but unsure if that’s a monumental mistake. If it helps, I’m thinking of a down payment somewhere between 100 and 150K
Do you want to be house poor? How long do you plan on staying in NY (5+ years)? Given manhattan condo/co-op pricing, something tells me you'd end up cashflow negative vs renting a comparable apartment after taking into account HOA fees on top of your mortgage. This is not even taking into account the actual transaction costs of the buy/sale. Therefore, you're going to be relying on appreciation on the unit, net of transaction costs , being greater than whatever return you'd get in VTSAX during that time period on your downpayment+any excess cash you flow into the unit (compared to renting). That should be the analysis you do to figure out the numbers.

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Re: Personal Finance 101 for Young Lawyers

Post by Anonymous User » Tue Sep 08, 2020 5:54 pm

Look on streeteasy for renting vs buying comparable places and plugin some numbers on this calculator: https://michaelbluejay.com/house/rentvsbuy.html#mdt

Do not tick "Take tax deductions" box -- the SALT tax code change in 2017 essentially destroyed most big law lawyers incentives to purchase in NYC if staying in the medium term (i.e. ~4-10 years). NYC is also in a really tough fiscal tax hole -- so the future of property values is extremely uncertain. May allow you to get a good deal now though

kaiser

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Re: Personal Finance 101 for Young Lawyers

Post by kaiser » Wed Sep 09, 2020 10:51 am

Anonymous User wrote:
Mon Sep 07, 2020 8:23 pm
I have about 250K in assets- no debt at all. I’m starting a big law job in NYC this year (just graduated in May). I’m older than most law grads- in my 30s. I’m single and no kids. I’m wondering if people have thoughts on renting vs buying. I’m seriously considering buying an apartment in Manhattan but unsure if that’s a monumental mistake. If it helps, I’m thinking of a down payment somewhere between 100 and 150K
I would definitely suggest renting for a few years as you get settled into your biglaw job and new career. Rents are lower than normal due to the pandemic, while the cost of buying is still very high, even in hard hit locations. I would recommend renting at first regardless, but the pandemic just makes that an even easier choice.

You are off to a great start if you have 250k in assets and no debt right from the gate. Invest a good chunk of that wisely, rent for a few years, and then buy when you are ready.

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Re: Personal Finance 101 for Young Lawyers

Post by Anonymous User » Wed Sep 09, 2020 2:35 pm

kaiser wrote:
Wed Sep 09, 2020 10:51 am
Anonymous User wrote:
Mon Sep 07, 2020 8:23 pm
I have about 250K in assets- no debt at all. I’m starting a big law job in NYC this year (just graduated in May). I’m older than most law grads- in my 30s. I’m single and no kids. I’m wondering if people have thoughts on renting vs buying. I’m seriously considering buying an apartment in Manhattan but unsure if that’s a monumental mistake. If it helps, I’m thinking of a down payment somewhere between 100 and 150K
I would definitely suggest renting for a few years as you get settled into your biglaw job and new career. Rents are lower than normal due to the pandemic, while the cost of buying is still very high, even in hard hit locations. I would recommend renting at first regardless, but the pandemic just makes that an even easier choice.

You are off to a great start if you have 250k in assets and no debt right from the gate. Invest a good chunk of that wisely, rent for a few years, and then buy when you are ready.
I grew up in NY with family members in the legal industry. Not sure renting for a few (more) years makes much sense since I know I’ll be staying in NY.

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Re: Personal Finance 101 for Young Lawyers

Post by kaiser » Wed Sep 09, 2020 3:21 pm

Anonymous User wrote:
Wed Sep 09, 2020 2:35 pm
kaiser wrote:
Wed Sep 09, 2020 10:51 am
Anonymous User wrote:
Mon Sep 07, 2020 8:23 pm
I have about 250K in assets- no debt at all. I’m starting a big law job in NYC this year (just graduated in May). I’m older than most law grads- in my 30s. I’m single and no kids. I’m wondering if people have thoughts on renting vs buying. I’m seriously considering buying an apartment in Manhattan but unsure if that’s a monumental mistake. If it helps, I’m thinking of a down payment somewhere between 100 and 150K
I would definitely suggest renting for a few years as you get settled into your biglaw job and new career. Rents are lower than normal due to the pandemic, while the cost of buying is still very high, even in hard hit locations. I would recommend renting at first regardless, but the pandemic just makes that an even easier choice.

You are off to a great start if you have 250k in assets and no debt right from the gate. Invest a good chunk of that wisely, rent for a few years, and then buy when you are ready.
I grew up in NY with family members in the legal industry. Not sure renting for a few (more) years makes much sense since I know I’ll be staying in NY.
Its not just a matter of location. Its more a matter of getting settled into your new career first. Most biglaw tenures are quite short. Some people find themselves disillusioned with law entirely. Others find they want to pursue a passion in law that pays quite a bit less. Some will transition into next steps that pay just as well if not better. So from a purely financial standpoint, I wouldn't commit myself in that way until I had a few years under my belt, and had a better idea of where my legal career was going to take me. Locking yourself into a huge mortgage payment before you really have an idea of your long-term income projection is not a good idea.

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Re: Personal Finance 101 for Young Lawyers

Post by Anonymous User » Thu Sep 10, 2020 4:00 pm

Let's say that a 3L with no debt and no biglaw offers was recently granted access to a six-figure account. I intend to put as much of that into retirement as possible as quickly as possible. No intentions of buying a house until life is a little more stabilized. What do?

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Re: Personal Finance 101 for Young Lawyers

Post by nealric » Thu Sep 10, 2020 4:52 pm

Anonymous User wrote:
Thu Sep 10, 2020 4:00 pm
Let's say that a 3L with no debt and no biglaw offers was recently granted access to a six-figure account. I intend to put as much of that into retirement as possible as quickly as possible. No intentions of buying a house until life is a little more stabilized. What do?
Max out 401k, Roth (backdoor if needed), mega backdoor (if your employer plan allows it), HSA. As for investment accounts: put 6 months living expenses in a cash emergency account. Put the rest in VTI (total stock market index fund).

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Re: Personal Finance 101 for Young Lawyers

Post by Anonymous User » Fri Sep 18, 2020 5:34 pm

I am at a market paying biglaw firm and was just running some "estimated tax refund calculators" for the upcoming year and it is showing that I will owe approximately $6k in taxes this year, but I am not sure why that would be the case since I have my exemptions set to 0. Am I miscalculating my "taxable wages" at 190 because I make pretax contributions to my 401k? Should I be subtracting those and other pretax things like health insurance before entering my "taxable wages"? Otherwise, why would I owe taxes, wouldn't that mean my firm has some errors in their withholding since I have my exemptions set to 0?

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Re: Personal Finance 101 for Young Lawyers

Post by Necho2 » Fri Sep 18, 2020 6:08 pm

Anonymous User wrote:
Fri Sep 18, 2020 5:34 pm
I am at a market paying biglaw firm and was just running some "estimated tax refund calculators" for the upcoming year and it is showing that I will owe approximately $6k in taxes this year, but I am not sure why that would be the case since I have my exemptions set to 0. Am I miscalculating my "taxable wages" at 190 because I make pretax contributions to my 401k? Should I be subtracting those and other pretax things like health insurance before entering my "taxable wages"? Otherwise, why would I owe taxes, wouldn't that mean my firm has some errors in their withholding since I have my exemptions set to 0?
Bingo. Look at your paycheck for your actual wages after deduction and annualize that to have a better sense of your expected tax liability.

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Re: Personal Finance 101 for Young Lawyers

Post by maroon175 » Sat Sep 19, 2020 11:11 am

Refinancing seems to be the move for me with interest rates so low right now. I have about 240k in law school debt. I’m afraid to refinance all of my loans in case the gov rolls out some sort of forgiveness program in the next couple years. Am I be overly optimistic? I’m thinking I’d refi half and keep the rest on the IDRP.

Also, any recommendations on the best banks to refinance with? For a while I thought I’d go with first republic. Are there companies with lower interest rates?

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Re: Personal Finance 101 for Young Lawyers

Post by sparty99 » Sat Sep 19, 2020 12:27 pm

maroon175 wrote:
Sat Sep 19, 2020 11:11 am
Refinancing seems to be the move for me with interest rates so low right now. I have about 240k in law school debt. I’m afraid to refinance all of my loans in case the gov rolls out some sort of forgiveness program in the next couple years. Am I be overly optimistic? I’m thinking I’d refi half and keep the rest on the IDRP.

Also, any recommendations on the best banks to refinance with? For a while I thought I’d go with first republic. Are there companies with lower interest rates?
I doubt you can rely on the government. I heard $10k would be the most likely if it even happens. I would maybe refinance half or even zero. It is 0% right now. It really does not matter. You can refinance half and have the rest at 0%. See what happens in a year.

Winter is Coming

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Re: Personal Finance 101 for Young Lawyers

Post by Winter is Coming » Sat Sep 19, 2020 2:13 pm

Agree with this. I would obviously wait until fed rates are no longer at 0% (until 12/31 at the earliest) to do anything.

I assume that any loan forgiveness that Dems give (or even Trump) would be capped at both a max number and probably income phased out so if you were in biglaw it probably won't help.

Personally, I've been putting my money that normally would have gone to loan payments into a savings account while these are at 0% until we see what the longer term outlook looks like. If interest comes back in January I will plow that all in and/or re-finance.

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Re: Personal Finance 101 for Young Lawyers

Post by Anonymous User » Sun Sep 20, 2020 5:28 pm

maroon175 wrote:
Sat Sep 19, 2020 11:11 am
Refinancing seems to be the move for me with interest rates so low right now. I have about 240k in law school debt. I’m afraid to refinance all of my loans in case the gov rolls out some sort of forgiveness program in the next couple years. Am I be overly optimistic? I’m thinking I’d refi half and keep the rest on the IDRP.

Also, any recommendations on the best banks to refinance with? For a while I thought I’d go with first republic. Are there companies with lower interest rates?
If you are in their service area, then First Republic will probably always be the best option in terms of lowest rates. It will be worth it to get a "soft quote" from Earnest, SoFi, Splash etc (which does not do a hard credit pull) to see if they can get anywhere close to First Republic, though.

I think that Winter is Coming is right in that any Dem loan forgiveness option hinges on income levels. It may be worth looking into that a bit more, especially so if Biden wins and if there is a Dem majority in the House and/or Senate (of course, more real possibility if both).

Either way, it almost certainly doesn't make sense to refinance right now prior to the election, while interest rates are still at 0%, even *if* the student loan companies allow you to delay payments for a few months! The *only* downside of not refinancing right now is that you are foregoing the opportunity to lock in a very low fixed rate. However, rates change pretty slowly (especially in a COVID economy) and any rate increase would be gradual and very trackable -- i.e., you likely are NOT foregoing any kind of significant rate change by not locking in a low rate right now. The benefits to not refinancing right now are 1) federal loans have no interest, 2) the no-interest program has at least a decent chance of being extended past Dec 31, and 3) you do not lock yourself into foregoing any potential forgiveness program.

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Re: Personal Finance 101 for Young Lawyers

Post by NoLongerALurker » Mon Sep 21, 2020 7:49 pm

What are people thinking about emergency funds these days? Factoring in loans alongside rent and everything else, 6 months expenses would be nearly 36k. Part of my loans are a revolving LoC, so I’m inclined to drop emergency fund down to 20k in liquid cash and otherwise throw that other 16k to pay off LoC and treat it kind of like a pseudo shit-hits-the-fan fund and then just go all in on student loans. At 2.5k a month minimum payments in loans, getting rid of them would actually also turn that 20k into nearly a 6 month cushion after the fact incidentally...

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Re: Personal Finance 101 for Young Lawyers

Post by The Lsat Airbender » Tue Sep 22, 2020 11:03 am

NoLongerALurker wrote:
Mon Sep 21, 2020 7:49 pm
What are people thinking about emergency funds these days? Factoring in loans alongside rent and everything else, 6 months expenses would be nearly 36k. Part of my loans are a revolving LoC, so I’m inclined to drop emergency fund down to 20k in liquid cash and otherwise throw that other 16k to pay off LoC and treat it kind of like a pseudo shit-hits-the-fan fund and then just go all in on student loans. At 2.5k a month minimum payments in loans, getting rid of them would actually also turn that 20k into nearly a 6 month cushion after the fact incidentally...
Even at your current burn rate, $20k is still 3+ months, so it's not like you're walking on thin ice if you want to deploy that cash elsewhere. Especially if there's a substantial interest rate on that LoC (not paying such interest is close to a free lunch; same principle as a credit card).

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Re: Personal Finance 101 for Young Lawyers

Post by JusticeChuckleNutz » Thu Oct 01, 2020 9:03 pm

Can anyone breakdown to me why the prevailing wisdom is to convert a traditional IRA to a Roth IRA? I will be using after-tax dollars to fund the IRA. Also, I am in biglaw, so my traditional IRA contributions are not tax deductible. It seems like under these circumstances they are essentially the same. Is the main advantage to converting to a Roth IRA just avoiding the mandatory distribution at age 70.5 IRAs require? Any info would be much appreciated!

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Re: Personal Finance 101 for Young Lawyers

Post by sparty99 » Thu Oct 01, 2020 10:19 pm

Winter is Coming wrote:
Sat Sep 19, 2020 2:13 pm
Agree with this. I would obviously wait until fed rates are no longer at 0% (until 12/31 at the earliest) to do anything.

I assume that any loan forgiveness that Dems give (or even Trump) would be capped at both a max number and probably income phased out so if you were in biglaw it probably won't help.

Personally, I've been putting my money that normally would have gone to loan payments into a savings account while these are at 0% until we see what the longer term outlook looks like. If interest comes back in January I will plow that all in and/or re-finance.
That is a prudent idea, but why not put it in the stock market?

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Re: Personal Finance 101 for Young Lawyers

Post by polareagle » Fri Oct 02, 2020 12:30 am

JusticeChuckleNutz wrote:
Thu Oct 01, 2020 9:03 pm
Can anyone breakdown to me why the prevailing wisdom is to convert a traditional IRA to a Roth IRA? I will be using after-tax dollars to fund the IRA. Also, I am in biglaw, so my traditional IRA contributions are not tax deductible. It seems like under these circumstances they are essentially the same. Is the main advantage to converting to a Roth IRA just avoiding the mandatory distribution at age 70.5 IRAs require? Any info would be much appreciated!
Traditional IRA *returns* (along with the amount of the initial investment) are taxed on withdrawal in retirement. Roth IRA returns are not. So if you will have the money in the market for a long time and anticipate large returns, it makes sense to avoid those returns being taxed. For the amount you put into the IRA, there is some question about your tax rate now vs. in retirement (although as you note your post, your income is too high for the traditional IRA deduction anyway), but tax rates are probably lower now than they will ever be again. Long story short, invest in Roth going forward.

N.B. You talk about "converting" traditional to Roth. To the extent you mean a backdoor conversion, you should indeed do that now. If you mean converting money you already have in a traditional IRA to Roth, that's a closer question. If you anticipate your marginal tax rate going down in the relatively near future (e.g., you will transition from biglaw to government), you might want to wait.

Winter is Coming

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Re: Personal Finance 101 for Young Lawyers

Post by Winter is Coming » Fri Oct 02, 2020 11:55 am

sparty99 wrote:
Thu Oct 01, 2020 10:19 pm
Winter is Coming wrote:
Sat Sep 19, 2020 2:13 pm
Agree with this. I would obviously wait until fed rates are no longer at 0% (until 12/31 at the earliest) to do anything.

I assume that any loan forgiveness that Dems give (or even Trump) would be capped at both a max number and probably income phased out so if you were in biglaw it probably won't help.

Personally, I've been putting my money that normally would have gone to loan payments into a savings account while these are at 0% until we see what the longer term outlook looks like. If interest comes back in January I will plow that all in and/or re-finance.
That is a prudent idea, but why not put it in the stock market?
I'm lucky enough that I maxed out my 401(k) and IRA (biglaw midlevel) this year, I just don't want the hassle of a taxable account right now and would like to get the loans in good enough shape that I can take a lower paying but more humane job when the opportunity arises. I am generally a believer in long term investing but the election shitstorm also scares me a bit right now.

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Re: Personal Finance 101 for Young Lawyers

Post by mak_ » Fri Oct 02, 2020 1:23 pm

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

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Re: Personal Finance 101 for Young Lawyers

Post by showusyourtorts » Fri Oct 02, 2020 2:31 pm

mak_ wrote:
Fri Oct 02, 2020 1:23 pm
If you are a biglaw midlevel, you should have a taxable brokerage account.
Are you speaking about the above posters, or just speaking generally? What's your rationale? (I.e. what if people have large student loan debt, or have the ability to make after-tax non-Roth contributions up to 57k but aren't yet maxing that out?)

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