How do BigLaw partners spend all their money? Forum

[bostonlsat]

Does anyone know how BigLaw partners tend to spend their enormous salaries?

[nealric]

Obviously, it depends.

Between a $3-4MM residence (which may not be all THAT nice in NYC or San Francisco), expensive private school for kids (often $100k+ a year for two kids), other services you need to outsource because you have no time of your own (maid service, laundry pickup, etc.), and high taxes, you can spend those salaries without even going hogwild with luxury. Get divorced (rates are high), and you can really get into trouble. There absolutely are biglaw partners that live paycheck to paycheck.

On the other hand, a frugal person who invests wisely could secure generational wealth ($30MM+ Net Worth, which puts you in the "Utra High Net Worth" category at most private banks) with that sort of paycheck. It would be easier from a place where biglaw partner salaries are still high but cost of living is not as much (something like a Houston Kirkland equity partner).

I will say that conspicuous consumption in the biglaw partner ranks is the exception. You aren't going to see a lot of partners driving Ferraris or buying rounds of drinks for the whole club. Even really enormous mansions are the exception. The personality type that becomes a biglaw partner tends not to go that direction (I'm sure there's exceptions there). Successful plaintiff's lawyers tend to be much more into the conspicuous consumption (at least in my experience). Plus, the incentives are different. A lavish living plaintiff's lawyer sends the message of "I win big cases." A lavish living biglaw partner sends the message of "you are overpaying me" and also invites fights within the partnership over comp.

[Anonymous User]

There absolutely are biglaw partners that live paycheck to paycheck.

I hate this forum.

[Anonymous User]

Income partner at a big firm. Between a mortgage on a 3-bedroom house in a HCOL area that cost nearly $2 million, various repairs/improvements to the house, and spending 60% of my paycheck on estimated taxes, unsubsidized health insurance, and mandatory profit-sharing contributions, it genuinely feels like I am living paycheck to paycheck some months.

[Anonymous User]

Income partner at a big firm. Between a mortgage on a 3-bedroom house in a HCOL area that cost nearly $2 million, various repairs/improvements to the house, and spending 60% of my paycheck on estimated taxes and mandatory profit-sharing contributions, it genuinely feels like I am living paycheck to paycheck some months.

My wife and I make about $175k between the two of us, have a kid, live in the NYC area, and still manage to save tens of thousands per year. I genuinely don't understand how people in your position can claim to live paycheck to paycheck. I grew up in a household with an income below $20k. That was paycheck to paycheck.

[Anonymous User]

I will say that conspicuous consumption in the biglaw partner ranks is the exception. You aren't going to see a lot of partners driving Ferraris or buying rounds of drinks for the whole club. Even really enormous mansions are the exception. The personality type that becomes a biglaw partner tends not to go that direction (I'm sure there's exceptions there).

This rings true, at least from my own (limited) experience. My father was an equity partner in a top NY firm for 20ish years before retiring in the early 2000s. What the money bought: comfortable but not lavish lifestyle in a fancy NYC suburb, nice house + good public school education + all the music lessons/extracurriculars/etc. we wanted, paid for three kids' college tuitions, nice vacations and plenty of international travel, and so on. That said, my parents were relatively frugal & lived well below their income -- we never flew anything but economy; infrequent splurge-y meals out; mandatory work around the house to earn small allowances and paying (as kids) out of pocket to replace any lost items; parents always drove Toyotas/Hondas/Subarus rather than the Audis/BMWs/Mercedes that were prevalent around town.

My dad was able to retire in his early 50s and gets to enjoy several decades of this lifestyle in retirement (living off the wealth built/saved previously, not to mention the $400-500K/year pension draw he receives in perpetuity). Obviously I'm grateful for the privileged upbringing & the debt-free education; also very relieved that I won't have to support my parents as they age.

[s1m4]

Income partner at a big firm. Between a mortgage on a 3-bedroom house in a HCOL area that cost nearly $2 million, various repairs/improvements to the house, and spending 60% of my paycheck on estimated taxes, unsubsidized health insurance, and mandatory profit-sharing contributions, it genuinely feels like I am living paycheck to paycheck some months.

This is sad to hear because in the HCOL area where I live a $2M house is still not that great.

[nealric]

Income partner at a big firm. Between a mortgage on a 3-bedroom house in a HCOL area that cost nearly $2 million, various repairs/improvements to the house, and spending 60% of my paycheck on estimated taxes and mandatory profit-sharing contributions, it genuinely feels like I am living paycheck to paycheck some months.

My wife and I make about $175k between the two of us, have a kid, live in the NYC area, and still manage to save tens of thousands per year. I genuinely don't understand how people in your position can claim to live paycheck to paycheck. I grew up in a household with an income below $20k. That was paycheck to paycheck.

You can live paycheck to paycheck at almost any income level. If your income is sub-$20k, you don't have much choice in the matter unless you are willing and able to live out of a van, but lifestyle creep can be pernicious.

You go from a basic $2,000/mo 1 bedroom apartment as a junior associate, to a much nicer $5,000/mo 2 bedroom as a senior associate. You make partner and buy a $2MM 2-bed condo in the UES as a junior partner (because you need to be close to your midtown office). That condo feels a bit cramped when you have your second kid, so you pony up $4MM for a 4 bedroom (so both kids can have their own room). Pretty soon, you are paying $30k a month between mortgage/taxes/fees. Add on $100k in kids tuition, and you are spending $460k/yr just baseline. Keep in mind that your total take-home on $1MM salary would only be in the low $500s, so that doesn't leave a lot for other things.

Sure, if you were still living in that $5,000/mo apartment, you'd be saving money hand over fist. But a lot of people can't resist the temptation to upscale. Of course nobody NEEDs a $4MM UES condo, but it's what everyone in your social circle is doing. And a $4MM place in the UES is still no larger than the average $400k suburban house in most of the country.

Finally, I'd note that partner incomes can be pretty lumpy and uncertain. When you get paid quarterly and those quarterly draws are uneven and uncertain, it can lead to a feeling of financial uncertainty even if it is likely you will end up in the green by the end of the year.

[BigLawBigTX175]

Why not buy an annuity? You can afford a modest annuity that pays monthly. Sure the fees are high, but it solves your cash flow lumpiness issue. Better yet, why not self annuitize? I really find it hard to believe your portfolio allocation is cash flow efficient and optimal and this is a pretty solvable problem.

[nealric]

Why not buy an annuity? You can afford a modest annuity that pays monthly. Sure the fees are high, but it solves your cash flow lumpiness issue. Better yet, why not self annuitize? I really find it hard to believe your portfolio allocation is cash flow efficient and optimal and this is a pretty solvable problem.

It would be easy enough if you knew for a fact that you would earn $XXX per year but on an uncertain schedule. An annuity or other lending device to smooth out cash flow doesn't fix the underlying problem of not knowing how much you will make this year.

To be clear, this isn't MY situation and I have pretty limited sympathy for overspending equity partners. I'm just explaining how it happens.

There are good lawyers who just aren't very good with money. I once had a biglaw partner confide in me that they had seven figures in their checking account because they were afraid of investing. Obviously, that person isn't living paycheck to paycheck, but literally left millions of dollars on the table - mostly out of financial ignorance.

[The Lsat Airbender]

There absolutely are biglaw partners that live paycheck to paycheck.

I hate this forum.

He's right, though? Nobody's saying the patherns are struggling, but plenty fit the literal meaning of "paycheck to paycheck"; they pay their bills with their last paycheck, have basically no liquid savings, and smooth out lumps/emergencies with credit.

[Anonymous User]

Income partner at a big firm. Between a mortgage on a 3-bedroom house in a HCOL area that cost nearly $2 million, various repairs/improvements to the house, and spending 60% of my paycheck on estimated taxes and mandatory profit-sharing contributions, it genuinely feels like I am living paycheck to paycheck some months.

My wife and I make about $175k between the two of us, have a kid, live in the NYC area, and still manage to save tens of thousands per year. I genuinely don't understand how people in your position can claim to live paycheck to paycheck. I grew up in a household with an income below $20k. That was paycheck to paycheck.

You can live paycheck to paycheck at almost any income level. If your income is sub-$20k, you don't have much choice in the matter unless you are willing and able to live out of a van, but lifestyle creep can be pernicious.

You go from a basic $2,000/mo 1 bedroom apartment as a junior associate, to a much nicer $5,000/mo 2 bedroom as a senior associate. You make partner and buy a $2MM 2-bed condo in the UES as a junior partner (because you need to be close to your midtown office). That condo feels a bit cramped when you have your second kid, so you pony up $4MM for a 4 bedroom (so both kids can have their own room). Pretty soon, you are paying $30k a month between mortgage/taxes/fees. Add on $100k in kids tuition, and you are spending $460k/yr just baseline. Keep in mind that your total take-home on $1MM salary would only be in the low $500s, so that doesn't leave a lot for other things.

Sure, if you were still living in that $5,000/mo apartment, you'd be saving money hand over fist. But a lot of people can't resist the temptation to upscale. Of course nobody NEEDs a $4MM UES condo, but it's what everyone in your social circle is doing. And a $4MM place in the UES is still no larger than the average $400k suburban house in most of the country.

Finally, I'd note that partner incomes can be pretty lumpy and uncertain. When you get paid quarterly and those quarterly draws are uneven and uncertain, it can lead to a feeling of financial uncertainty even if it is likely you will end up in the green by the end of the year.

This might be true for an income partner making under $1mm/year, but I know of very few partners with multiple kids living in a NYC apartment.

Based on what I've inferred from discussions with equity partners at my firm, here's how a lot of the money goes:

1. Multiple Homes: They have a family home in Westchester/NJ + a pied-a-terre in NYC or some other city that one of their children may be living in rent free or they use when they want to spend the weekend in the city + a vacation home.

2. Education: I have never heard of a partner sending their kid to public school regardless of how good the local public school is. They're spending $60k/year per kid to go private school. Some of this is because of networking opportunities (guess where the client's kids are going - now you get to rub shoulders with clients on the pretense of giving your kids a better education. Basically a business expense.)

3. Expensive Hobbies: They regularly go to broadway show for $700/ticket, or they have a boat or take regular ski trips.

4. Vacations: They may not be traveling first-class, but they are having first-class accommodations wherever they go. Stays at Ski-in/Ski-out chateaus or large villas right on a beach in Europe, etc.

Even with all this, they have plenty of savings.

Those are the partners who spend money - there are partners who live much more frugally, and I assume they are just saving it all.

[Anonymous User]

One of the interesting things about the start of Covid and the switch to Zoom calls was getting to see inside the senior partners' beach houses/mountain lodges. They seemed pretty damn nice, and apparently many of those partners (the ones without kids in school) have just stayed at those pretty damn nice homes, to the extent that the managing partner of my group told me that the bigger issue with RTO isn't associates, its the senior partners who refuse to leave said second homes 3-5 hours away from the office.

[Anonymous User]

2. Education: I have never heard of a partner sending their kid to public school regardless of how good the local public school is. They're spending $60k/year per kid to go private school. Some of this is because of networking opportunities (guess where the client's kids are going - now you get to rub shoulders with clients on the pretense of giving your kids a better education. Basically a business expense.)

This must be a New York thing. Every single partner I know at my DC firm who has kids in school chooses to live in a nice suburb (Montgomery County, Fairfax County, or Arlington) rather than DC and sends their kids to public schools out there. Granted those kids (like many others at those public high schools) get tutoring and go off to Columbia, Georgetown, UVA, USC, William and Mary, etc.

[dabigchina]

There were definitely a couple equity partners at my old firm that spent all their money on alimony and child support.

[Anonymous User]

I will say that conspicuous consumption in the biglaw partner ranks is the exception. You aren't going to see a lot of partners driving Ferraris or buying rounds of drinks for the whole club. Even really enormous mansions are the exception. The personality type that becomes a biglaw partner tends not to go that direction (I'm sure there's exceptions there). Successful plaintiff's lawyers tend to be much more into the conspicuous consumption (at least in my experience). Plus, the incentives are different. A lavish living plaintiff's lawyer sends the message of "I win big cases." A lavish living biglaw partner sends the message of "you are overpaying me" and also invites fights within the partnership over comp.

This is very perceptive and fits with my experience working with and alongside many biglaw partners who are easily making $5-$10m per year, sometimes more. It's a weird personality quirk of biglaw that you nailed on the head and only someone who's been in it will realize how true it rings.

I will say these people will spend money to access things that us normal mortals cannot, but they do it in a quiet way, e.g., they'll have a 1,000 acre ranch out west that they refer to as their "cabin" or if you start talking with them they'll casually mention how they flew "private" for spring break. They're not living like paupers. But they don't spend the money in splashy ways like plaintiff attorneys do and you're exactly right, most of them wouldn't be caught dead driving around in a Ferrari. It's a source of big embarrassment for most of them when they get written up somewhere re a real estate transaction they're doing.

[Monochromatic Oeuvre]

As others have pointed out, in NYC, SF, LA, DC, you could easily spend the entirety of a million-dollar salary without having anything that would look super out of place. Maybe even two million.

Other things to consider:

1. We judge ourselves based on our perceived peers and it's easy to feel like a piece of shit even at the 99.99th percentile.
2. People with real vices (drugs, gambling, women) are immune to your rational opinions of how much they spend on that thing.
3. Hedonic treadmill comes for us all. The same girlfriends who want dinner at Per Se used to be thrilled if some dude bought her a 4 for $4 at Wendy's.
4. A lot of people make partner as miserable fucks who strived for so long because they're always convinced the next million will finally be the thing that makes them happy. It never does. Hopefully you don't really think you ought to trade places with these people. Many of them are severely psychologically damaged.

[Anonymous User]

Why not buy an annuity? You can afford a modest annuity that pays monthly. Sure the fees are high, but it solves your cash flow lumpiness issue. Better yet, why not self annuitize? I really find it hard to believe your portfolio allocation is cash flow efficient and optimal and this is a pretty solvable problem.

There are good lawyers who just aren't very good with money. I once had a biglaw partner confide in me that they had seven figures in their checking account because they were afraid of investing. Obviously, that person isn't living paycheck to paycheck, but literally left millions of dollars on the table - mostly out of financial ignorance.

You're writing some great posts in this thread. I think many people underappreciate how bad financial literacy is among lawyers (like anyone else). I'm fairly financially savvy for {reasons} and so I've gotten a reputation at my firm as someone to come to for financial advice re investing, tax strategy etc. You wouldn't believe the number of lawyers who just take their extra money and stick it in a checking account. No awareness of tax protection, trusts, basics of investing, retirement saving, etc. I've seen 7-figure checking accounts. No one ever taught them what to do with the money even though they're making plenty of it.

[Anonymous User]

2. Education: I have never heard of a partner sending their kid to public school regardless of how good the local public school is. They're spending $60k/year per kid to go private school. Some of this is because of networking opportunities (guess where the client's kids are going - now you get to rub shoulders with clients on the pretense of giving your kids a better education. Basically a business expense.)

This must be a New York thing. Every single partner I know at my DC firm who has kids in school chooses to live in a nice suburb (Montgomery County, Fairfax County, or Arlington) rather than DC and sends their kids to public schools out there. Granted those kids (like many others at those public high schools) get tutoring and go off to Columbia, Georgetown, UVA, USC, William and Mary, etc.

It's very much a NY thing and some other areas. I've seen discussions about this before -- the NE has a weird obsession w/ private schools (I believe parts of the South too) whereas people at the same level of affluence in e.g., the Mid-Atlantic or Midwest are more comfortable sending their kids to public. Some whiz linked it to differences in pubic schooling structure or something I can't remember but I suspect a lot of it is just cultural and keeping up w/ the Joneses.

[glitched]

2. Education: I have never heard of a partner sending their kid to public school regardless of how good the local public school is. They're spending $60k/year per kid to go private school. Some of this is because of networking opportunities (guess where the client's kids are going - now you get to rub shoulders with clients on the pretense of giving your kids a better education. Basically a business expense.)

This must be a New York thing. Every single partner I know at my DC firm who has kids in school chooses to live in a nice suburb (Montgomery County, Fairfax County, or Arlington) rather than DC and sends their kids to public schools out there. Granted those kids (like many others at those public high schools) get tutoring and go off to Columbia, Georgetown, UVA, USC, William and Mary, etc.

It's very much a NY thing and some other areas. I've seen discussions about this before -- the NE has a weird obsession w/ private schools (I believe parts of the South too) whereas people at the same level of affluence in e.g., the Mid-Atlantic or Midwest are more comfortable sending their kids to public. Some whiz linked it to differences in pubic schooling structure or something I can't remember but I suspect a lot of it is just cultural and keeping up w/ the Joneses.

Public schools in Jersey and Manhattan probably suck.

[Anonymous User]

Why not buy an annuity? You can afford a modest annuity that pays monthly. Sure the fees are high, but it solves your cash flow lumpiness issue. Better yet, why not self annuitize? I really find it hard to believe your portfolio allocation is cash flow efficient and optimal and this is a pretty solvable problem.

There are good lawyers who just aren't very good with money. I once had a biglaw partner confide in me that they had seven figures in their checking account because they were afraid of investing. Obviously, that person isn't living paycheck to paycheck, but literally left millions of dollars on the table - mostly out of financial ignorance.

You're writing some great posts in this thread. I think many people underappreciate how bad financial literacy is among lawyers (like anyone else). I'm fairly financially savvy for {reasons} and so I've gotten a reputation at my firm as someone to come to for financial advice re investing, tax strategy etc. You wouldn't believe the number of lawyers who just take their extra money and stick it in a checking account. No awareness of tax protection, trusts, basics of investing, retirement saving, etc. I've seen 7-figure checking accounts. No one ever taught them what to do with the money even though they're making plenty of it.

I brought up at a meeting with partners and associates that associates would rather not get paid two annual bonuses in the same calendar year (e.g., 1/1/21 and 12/31/21) because of the potential tax hit and explained that income bunching is bad because it can push you up into the next tax bracket, and all of the partners looked at me like I had two heads.

[Anonymous User]

2. Education: I have never heard of a partner sending their kid to public school regardless of how good the local public school is. They're spending $60k/year per kid to go private school. Some of this is because of networking opportunities (guess where the client's kids are going - now you get to rub shoulders with clients on the pretense of giving your kids a better education. Basically a business expense.)

This must be a New York thing. Every single partner I know at my DC firm who has kids in school chooses to live in a nice suburb (Montgomery County, Fairfax County, or Arlington) rather than DC and sends their kids to public schools out there. Granted those kids (like many others at those public high schools) get tutoring and go off to Columbia, Georgetown, UVA, USC, William and Mary, etc.

That seems incorrect that big law partners are not sending their kids to public schools in New York. In CT and NYC that may be the case, but in places in Westchester, NJ, or Long Island there are plenty of partners who send their kids to public school. I grew up in a wealthy suburb in one of those areas. There were children of partners from big law, children of investment bankers, children of hedge fund moguls, children of private practice doctors, etc. Private school was more the exception than the norm.

[thisismytlsuername]

Clearly no one here lives in Scarsdale or has heard of Horace Greeley.

[Anonymous User]

Weird thread.

As one of the recently-anointed, I will be feasting on caviar and drowning myself in tubs of dom perignon in the vacation house that I will fly private to. What else would I spend these endless riches on? Fortunately I have already applied for and received adequate credit lines!

That or shove a bunch of money into investments so I can retire and pay for my kids' college and give them some money.

You know, one or the other.

[Anonymous User]

Clearly no one here lives in Scarsdale or has heard of Horace Greeley.

I'm the original poster who made the comment about partners spending money on private school. I grew up in NYC area and went to a public school. I'm not saying that good public schools don't exist; I'm saying that, in my experience, the majority of partners kids go to private school. I obviously don't have any concrete numbers to back this up, but it's my perception from speaking to partners who are in the midst of applications for schools. Many of them are applying to special montessori pre-schools that charge $40k/year.

It's definitely at least partially a geographic thing where private schools are more common in northeast vs. rest of the country. I never knew there were boarding schools outside of Exeter and Andover until I got to undergrad where a significant amount of my classmates went to boarding school and dorm living was nothing new to them.