Is hiring a financial planner worth it for new biglaw associates? Forum

[Anonymous User]

Hoping for some insight - reading through all the threads about net worth and student loan payments, it seems like there's so much that everyone knows about 401ks, stocks, refinancing, etc that I am totally in the dark about. For context, grew up super poor, never learned about money or investing, and through a combo of luck and work managed to go the t14-biglaw route. I'm in my first year at biglaw now, and for the first time in my life have a legit money coming in every paycheck. I'm thrilled but also stressed about not being smart enough with it in terms of investing, retirement, and student loans. I'm trying to learn basic concepts through investopedia and nerdwallet, but it seems like there's SO MUCH to learn that it's overwhelming, plus it's been hard to find time with biglaw hours.

Sorry for the super long lead-up to the ultimate question: is it worth it to hire a financial advisor as a new biglaw associate if mainly looking for general budgeting/investment and student loan payment advice? Has anyone had good results doing this?

[Fireworks2016]

been hard to find time with biglaw hours.

Sorry for the super long lead-up to the ultimate question: is it worth it to hire a financial advisor as a new biglaw associate if mainly looking for general budgeting/investment and student loan payment advice? Has anyone had good results doing this?

I would not recommend it. Just read that Personal Finance 101 for Lawyers post that is floating around TLS. That should get you through everything you need for basic finance and investing as a young associate. It basically boils down to either choosing to pay down loans as fast as possible (low-risk, low-reward) or trusting that the market will keep its historical trends over the long-haul and investing as much as you can spare while maintaining an acceptable QoL (moderate-risk, moderate-reward).

I would only use a financial planner, if at all, when you have significant assets in hand that need to be managed.

If you're still not feeling up to it, you could seek out a flat-fee fiduciary to sit down with and ask your questions. But again, I think buckling down and figuring this stuff out for yourself is totally worth the few hours you'll spend.

[legalpotato]

Agree with above. You should educate yourself -- I think reading/listening to "Random Walk Down Wallstreet" is a good place to start.

It is likely that maxxing your 401k contributions and just putting it in one of the targeted retirement funds will be good enough for you as a new associate. If you have more left over you want to invest, just stick it in a generic index fund. A financial planner is not going to tell you anything that beats that, but they will charge you a management fee.

[sparty99]

Hoping for some insight - reading through all the threads about net worth and student loan payments, it seems like there's so much that everyone knows about 401ks, stocks, refinancing, etc that I am totally in the dark about. For context, grew up super poor, never learned about money or investing, and through a combo of luck and work managed to go the t14-biglaw route. I'm in my first year at biglaw now, and for the first time in my life have a legit money coming in every paycheck. I'm thrilled but also stressed about not being smart enough with it in terms of investing, retirement, and student loans. I'm trying to learn basic concepts through investopedia and nerdwallet, but it seems like there's SO MUCH to learn that it's overwhelming, plus it's been hard to find time with biglaw hours.

Sorry for the super long lead-up to the ultimate question: is it worth it to hire a financial advisor as a new biglaw associate if mainly looking for general budgeting/investment and student loan payment advice? Has anyone had good results doing this?

God, no. Just read Suze Orman and the personal finance section of your local book store.

[avenuem]

Everyone who posted so far must not be in biglaw.

Only someone who is bad with money would not hire a financial planner. The only person worse than that is someone who doesn't hire a financial planner manager, to manage their financial planner. If you're looking for a financial planner manager, I have unparalleled years of experience.

[Chrstgtr]

Hoping for some insight - reading through all the threads about net worth and student loan payments, it seems like there's so much that everyone knows about 401ks, stocks, refinancing, etc that I am totally in the dark about. For context, grew up super poor, never learned about money or investing, and through a combo of luck and work managed to go the t14-biglaw route. I'm in my first year at biglaw now, and for the first time in my life have a legit money coming in every paycheck. I'm thrilled but also stressed about not being smart enough with it in terms of investing, retirement, and student loans. I'm trying to learn basic concepts through investopedia and nerdwallet, but it seems like there's SO MUCH to learn that it's overwhelming, plus it's been hard to find time with biglaw hours.

Sorry for the super long lead-up to the ultimate question: is it worth it to hire a financial advisor as a new biglaw associate if mainly looking for general budgeting/investment and student loan payment advice? Has anyone had good results doing this?

Absolutely not. They will charge you a fee for advice that is at best (but usually far worse) the same as what you can get with an hour of reading online. I recommend reading the r/personalfinance subreddit and boglehead forums. Even if you don't want to personally manage everything yourself (which is actually super easy and will take less than an hour every year) you should at least become knowledgeable enough to know that your financial advisor isn't fleecing you (because that is what most of them do). It's truly an industry the relies on taking advantage of people who don't know better because if the consumers did know they would never consider hiring one in the first place.

[Anonymous User]

(OP) Thanks everyone, this is really helpful. I think I've been going wrong by trying to learn on a way too detailed level, and then when two sites offer different student loan or investing advice I don't feel qualified to choose between the two. I get so worried that I'm picking the wrong advice and am doing something stupid with my money/ will go back to being poor. I'll try to stick to simpler and high level advice.

My biggest question is whether I should aggressively pay down loans (220k from undergrad/law school) or save up everything and do income based repayment so that it'd be ok if I left biglaw before too long (it feels weak, given the huge salary, but I truly truly hate it and am having a rough time mentally). Would it be worth doing just a one-time consultation with an advisor to get their thoughts on this?

[Chrstgtr]

(OP) Thanks everyone, this is really helpful. I think I've been going wrong by trying to learn on a way too detailed level, and then when two sites offer different student loan or investing advice I don't feel qualified to choose between the two. I get so worried that I'm picking the wrong advice and am doing something stupid with my money/ will go back to being poor. I'll try to stick to simpler and high level advice.

My biggest question is whether I should aggressively pay down loans (220k from undergrad/law school) or save up everything and do income based repayment so that it'd be ok if I left biglaw before too long (it feels weak, given the huge salary, but I truly truly hate it and am having a rough time mentally). Would it be worth doing just a one-time consultation with an advisor to get their thoughts on this?

I don't see what a fin advisor would tell you that could be helpful and isn't more quickly and easily accessed elsewhere. What financial advisors really do is sell you products, so I would expect them to say something along the lines of "give me the money, I'll invest it, and you'll get bigger returns." Which is all true. But also doesn't require the middleman.

Long story short, on average, you are best off refinancing to low interest rates and putting the extra money at the end of the month into the market and letting it grow. But there are risks with that because the market can do down and there is nothing quite like the peace of mind of knowing that you are done with student debt. Personally, I would wait until student loan payment forbearance is over and see whether Biden/Congress forgives any debt. If that is obviously dead/exhausted, I would refinance to the lowest rate possible. The math can get trickier if you are considering a massive pay cut in the future or loan forgiveness. I would post on TLS or reddit for more specific advice for your exact situation.

[CanadianWolf]

If your biglaw firm pays on the Cravath scale, you should be able to pay off $220,000 of student loans in 4 years.

There is no need to wait until the forbearance period is over to make aggressive payments on your student loans.

[sparty99]

(OP) Thanks everyone, this is really helpful. I think I've been going wrong by trying to learn on a way too detailed level, and then when two sites offer different student loan or investing advice I don't feel qualified to choose between the two. I get so worried that I'm picking the wrong advice and am doing something stupid with my money/ will go back to being poor. I'll try to stick to simpler and high level advice.

My biggest question is whether I should aggressively pay down loans (220k from undergrad/law school) or save up everything and do income based repayment so that it'd be ok if I left biglaw before too long (it feels weak, given the huge salary, but I truly truly hate it and am having a rough time mentally). Would it be worth doing just a one-time consultation with an advisor to get their thoughts on this?

I would not waste my money hiring a financial planner. You owe $220,000. That is a lot. Are these government loans? If so then you don't have to pay anything until October. Thus, I would use the next five months to save everything you make and put it in a SAVINGS account or the stock market (like the Vanguard S&P 500 or Total Stock Market Index Fund) or like $5,000 into a backdoor Roth. Next, I would pay down your debt starting in October. I would also consider refinancing your loans. You have a lot of debt, so it will take 3 to 4 years for you to pay that off. You have a huge salary, but it is kind of irrelevant with your huge ass debt. You also need to know that you are already poor. You owe $220,000. You are not rich. You are poor.

[legalpotato]

(OP) Thanks everyone, this is really helpful. I think I've been going wrong by trying to learn on a way too detailed level, and then when two sites offer different student loan or investing advice I don't feel qualified to choose between the two. I get so worried that I'm picking the wrong advice and am doing something stupid with my money/ will go back to being poor. I'll try to stick to simpler and high level advice.

My biggest question is whether I should aggressively pay down loans (220k from undergrad/law school) or save up everything and do income based repayment so that it'd be ok if I left biglaw before too long (it feels weak, given the huge salary, but I truly truly hate it and am having a rough time mentally). Would it be worth doing just a one-time consultation with an advisor to get their thoughts on this?

I don't see what a fin advisor would tell you that could be helpful and isn't more quickly and easily accessed elsewhere. What financial advisors really do is sell you products, so I would expect them to say something along the lines of "give me the money, I'll invest it, and you'll get bigger returns." Which is all true. But also doesn't require the middleman.

Long story short, on average, you are best off refinancing to low interest rates and putting the extra money at the end of the month into the market and letting it grow. But there are risks with that because the market can do down and there is nothing quite like the peace of mind of knowing that you are done with student debt. Personally, I would wait until student loan payment forbearance is over and see whether Biden/Congress forgives any debt. If that is obviously dead/exhausted, I would refinance to the lowest rate possible. The math can get trickier if you are considering a massive pay cut in the future or loan forgiveness. I would post on TLS or reddit for more specific advice for your exact situation.

Largely agree with the above, but have a few other thoughts. In some situations, paying down your loans aggressively now might provide you with better "returns" than what you might get in the market. You should still max out your 401k IMO, but if your student loan interest rates are, e.g., 5%, you might get a better return by freeing up some future money by paying down your loans a bit more aggressively, especially if you believe markets are topped out / frothy. With that said, refinancing isn't a bad option. As the above poster said, in the pay down or refinance option, you should also keep in mind that that could preclude you from taking advantage of student loan forgiveness if that becomes an option for you.

A financial planner will just tell you to give them your money so they can earn more fees.

[Anonymous User]

If your biglaw firm pays on the Cravath scale, you should be able to pay off $220,000 of student loans in 4 years.

There is no need to wait until the forbearance period is over to make aggressive payments on your student loans.

There is also zero benefit to making payments during the forbearance period. You could get a free PS5 from socking away loan-payoff money into a risk free HYSA for the past year - zero risk and no downside at all.

[CanadianWolf]

If your biglaw firm pays on the Cravath scale, you should be able to pay off $220,000 of student loans in 4 years.

There is no need to wait until the forbearance period is over to make aggressive payments on your student loans.

There is also zero benefit to making payments during the forbearance period. You could get a free PS5 from socking away loan-payoff money into a risk free HYSA for the past year - zero risk and no downside at all.

The benefit is that the loan balance decreases dollar for dollar while upholding a promise to repay. Besides the obvious financial benefit, there should be a psychological benefit as well.

[nixy]

Or someone could save the money and pay a lump sum when the forbearance ends. There really isn’t any financial reason to pay student loans right now.

[Anonymous User]

Start here: https://www.bogleheads.org/wiki/Getting_started

Read the basics and then make a detailed post on the forum with all of your financial information. It’s hard to give advice when we don’t have your entire financial picture.

[CanadianWolf]

Start here: https://www.bogleheads.org/wiki/Getting_started

Read the basics and then make a detailed post on the forum with all of your financial information. It’s hard to give advice when we don’t have your entire financial picture.

If paying off your student loan is not your priority, then consider the above.

[Anonymous User]

Start here: https://www.bogleheads.org/wiki/Getting_started

Read the basics and then make a detailed post on the forum with all of your financial information. It’s hard to give advice when we don’t have your entire financial picture.

If paying off your student loan is not your priority, then consider the above.

(OP) Thank you, from a preliminary read this is really helpful! I'm going to try to read more throughout today/tomorrow and will then post specifics. I feel embarrassed for not already knowing more about all of this, so I really appreciate everyone's advice here (and thank you all for saving me from falling for a financial advisor).

[Anonymous User]

Yes, but you should hire one that charges a flat hourly fee. The others try to sell you stuff.

A family member has been a financial planner for decades and he's constantly getting rid of the swag that mutual funds send him to get him to sell people their stuff. So many planners are compromised in this way. The hourly rate people generally aren't.

[CanadianWolf]

Financial Planning is not an exact science.

Psychological factors of the individual investor should be given consideration. Often expressed as "risk tolerance level", an individual's wiring is an important aspect of a financial plan.

Some will find excuses to avoid paying off debt obligations when more attractive yields are being realized elsewhere. Just because some see impressive investment returns does not mean that all will.

A good financial planner should take into consideration the psychological characteristics of the client.

Knowing that you are an inexperienced investor with significant non-dischargeable student loan debt working in a likely short-term (a few years) category of your profession suggests that you should reduce or eliminate this debt burden as soon as possible.

FWIW: Life often gets in the way of the best laid plans including financial plans. Even the most successful & admired investors have bad years. Individuals react differently to experiencing financial losses.

I do not believe that there is any "risk-free" investment as even the most conservative investment vehicles face inflationary interest rate risks.

P.S. As a final note: Debt free can help one be more productive & clear headed. Managing investments can be distracting. Lots of high income earners end up broke (professional athletes, for example). Being broke is bad, but being broke with substantial non-dischargeable student loan debt is worse.

[Anonymous User]

If your biglaw firm pays on the Cravath scale, you should be able to pay off $220,000 of student loans in 4 years.

There is no need to wait until the forbearance period is over to make aggressive payments on your student loans.

There is also zero benefit to making payments during the forbearance period. You could get a free PS5 from socking away loan-payoff money into a risk free HYSA for the past year - zero risk and no downside at all.

The benefit is that the loan balance decreases dollar for dollar while upholding a promise to repay. Besides the obvious financial benefit, there should be a psychological benefit as well.

Okay, Dave Ramsey-style psychological benefit aside, there is no rational financial benefit to making a payment on a debt that is forborne with no interest. It is, in fact, financially irrational to do so.

[CanadianWolf]

If your biglaw firm pays on the Cravath scale, you should be able to pay off $220,000 of student loans in 4 years.

There is no need to wait until the forbearance period is over to make aggressive payments on your student loans.

There is also zero benefit to making payments during the forbearance period. You could get a free PS5 from socking away loan-payoff money into a risk free HYSA for the past year - zero risk and no downside at all.

The benefit is that the loan balance decreases dollar for dollar while upholding a promise to repay. Besides the obvious financial benefit, there should be a psychological benefit as well.
[/quote

Why post anon ?

[CanadianWolf]

OP: Not sure why another is posting as an anon in this thread.

A major difference in offering investment advice is difference in experience / inexperience.

How do you feel about having $220,000 in non-dischargeable student loan debt ?

[nixy]

It’s much less stressful these days with the availability of income-based repayment plans.

[Anonymous User]

OP: Not sure why another is posting as an anon in this thread.

A major difference in offering investment advice is difference in experience / inexperience.

How do you feel about having $220,000 in non-dischargeable student loan debt ?

OP here - I hate knowing the debt exists, but at the same time, I'm not overly stressed about it because it's all government loans. I know if I lost my job suddenly and took a while to find another one, my loan payments would go down to however much I can then afford, and would still count towards the PAYE plan I'm on. In that same lost-job situation I'd be much, much more stressed about payments like rent, since there's no room to breathe there.

It also helps that my SO has so far had a positive experience with PSLF (SO went to fancy undergrad + grad school, so has 150k loans, then took a public service job that's desirable but only pays $60k). They're in the 6th year of qualifying payments, and though it doesn't truly count until it actually gets forgiven, they've gotten certified each year to check that the payments are actually counting (they all are so far).

So with my loans, I'm torn between the options of trying to pay them down asap so that they just don't exist anymore (but that would require staying in biglaw 4+ years, when I don't think I can manage more than 2-3 tops), or staying on PAYE and saving for the 20-year tax bomb, knowing that if I switch to a PSLF eligible job then I also have that option to get them forgiven faster. If any of this sounds ignorant or wrong, I'm more than happy to hear that too, though.

My main stress is how best to manage the money in my general checking/saving account. I'm terrified of investing it and then losing everything. Have been reading through the linked website, and it's helping me see that there are safer, diverse investments, so it's not as volatile/skill-reliant as I thought, but I still have that fear.

[CanadianWolf]

Warren Buffet has had some bad investments recently. A top analyst on CNBC announced on the air that he would mortgage his house to buy Alibaba stock if it went as low as $255. Two days ago, a billionaire investor lots almost all of his fortune in one day due to a margin call. (He was on the Forbes 400 list of wealthiest people in the world.)

If you think that you will become a savvy investor--regardless of your level of risk tolerance--by reading an article or two, then that is your call. If you are comfortable with your student loan debt whether you are earning major money or not, then at least you have made a thoughtful decision.

It is your money, your debt, & your career.