Friday, May 18, 2018

A Biglaw-Ish Attorney's Money Map

This post is inspired primarily by the money map posts by Luxe and Jess. I tend to be a little obsessive in how much I enjoy tracking my money data every which way: I use Personal Capital and YNAB near-daily, and draw up an additional Excel spreadsheet now and again, so making a visualization like this was right up my alley. Whether all my tracking is useful is another question entirely. I'm notoriously averse to actually doing math and attempting to make projections for important things like when I'll finishing paying off my student loans, even though I totally have more than enough data for the task. (The projections above are courtesy of plugging the numbers into Unbury.Me. For more advanced calculations, I recommend Vertex42's debt reduction spreadsheet.)

Longtime readers may know that I'm not shy with transparency about some very specific financial details, though I'm also oddly reluctant to type out actual numbers in full because, to be frank, they're big and scary (the loans for obvious reasons, the salary because it's so temporary). There's no point being too coy, though, because the biglaw payscale is so standardized and transparent, including bonuses, as were clerkship salaries (rates in the larger NYC metro area, term clerks are generally limited to step one of JSP-11, JSP-12, and JSP-13, so only a sliver of the chart is relevant). I'm in a different part of the industry now, but my salary matches biglaw, though my bonuses will be less (maybe far less) than half of the biglaw market rate.

Some percentages in my money map are fudged, but the general picture is accurate. For instance, I set my actual 401(k) contribution rate last year, before my annual raise, so it's higher than ~8.8%. I'll stop making contributions in mid-November, once I'm maxed out. I've already maxed out my backdoor Roth IRA for 2018, so my contributions were higher in earlier months, but I'm done now.

The student loan-related numbers, arguably the most important ones, are accurate. And I wish it weren't so, because darn, there's still a long way to go, years after graduation and after ~$65,500 in payments and counting. My ability to repay in earnest was curtailed when I spent ~14 months clerking, which brings a significant pay cut. (It's an extravagantly expensive choice, but one that opens certain career doors that would otherwise be closed.) The hypothetical three-year plan I described, which isn't actually in the cards, requires monthly payments of more than $4,700! For 36 months going forward! The six-year plan still calls for monthly payments of more than $2,500! (I'll probably be able to knock a few months off the projections with year-end bonuses, which I couldn't factor in here because the numbers are so uncertain. Either way, terrifying!)

The main thing that requires further explanation is the "E-Fund, Planned Expenses >6 months" piece that I group under "Net worth positive" activities. Classifying the emergency fund that way is uncontroversial, I think. I really hope not to dip into it in the forseeable future, but in the unhappy event that I must, that's why it's there. Classifying money set aside for other major expenses expected to hit more than six months from now this way is perhaps a little odd (at least when that number mostly represents a certain elective surgery), but at some point savings for more traditionally "net worth positive" things, like a down payment on a home, will be part of that number.

One big omission is Charitable Giving, which will likely be done late in the year in a lump sum or two of yet to be determined size, to yet to be determined cause(s), but probably something like Planned Parenthood and a local pro bono legal services organization. I must confess, with regards to charitable giving, I struggle sometimes because the benefits of the small amounts I'm able to contribute (thanks, student loans!) feel so minuscule and abstract, especially when compared to the far more concrete benefits of my pro bono work. I've had a pretty good run of success with my cases (lion's share of the credit to my wonderful, dedicated supervisors), and my 150+ hours of service a year while practicing have truly helped people, which is incredible. But I'm also acutely aware of how much work and resources (and thus, money) it takes to meaningfully assist just... three or four individuals and their families. It'll never feel like enough. Of course, the organizations I would donate to are far more efficient in their good works than I am! Still, as an attorney, I may be in a category where, due to highly specialized qualifications, my time is far more valuable than what money I'm able to put to charitable giving at this point.

Another thing I didn't break out into its own category, but that is a significant part of my expenses, is Travel, for which I allocate around ~3.5% of my post-tax income most months. Presently, about half of that is in "Living Expenses" (for a trip sometime this fall with K, probably to Japan) and another half is in "Planned Expenses" (for a trip to Europe with my mom and sister sometime in 2019, which I'll shoulder most of the financial burden on, in keeping with my income). I broke out shopping into it's own category just for fun. The ~4% of post-tax income is for the year to date, but it should decrease as the months go by because my first few months were unusually spend-y.

Please follow the link below for some additional rambling about the cost of law school!

My overall money management picture is on the simple side of the spectrum. The numbers, particularly on the student loan front, are large and scary (law school, especially ones that reliably place a majority of graduates desiring biglaw into those jobs, is extremely expensive, even with my significant scholarship). The way to tackle it, however, is simple, at least at this uncomplicated stage of my life (no car, no serious prospect of owning real property, no kids in the immediate future, no health insurance option that allows for a HSA, and no particular entrepreneurial dreams or interest in investments more creative than "stick it in a low-fee S&P 500 or appropriate target date index fund and let it ride") and given my career choices (private sector, mostly biglaw and now biglaw-ish for the forseeable future, except while I was clerking). All I need to do is:
  • Refinance my student loans for a better interest rate as soon as I could, from ~7% to ~2.6%, saving me more than $6,000 a year in interest; 
  • control lifestyle inflation as much as I can, which isn't always that much; 
  • max out of my tax-advantaged retirement accounts, to benefit from the power of compounding and knowing that this income level is definitely not forever so I'd better save now; 
  • also save a comfortable cushion of cash because someone in my shoes, for whom having kids and helping support elderly parents is still a distant-future thing, has no excuse for the "financial struggle being real" if and when I leave biglaw-ish; and
  • pay it off as quickly as possible, so that I could take a significant pay cut for a less demanding job if that's my choice, so I could actually clean my living space regularly, never again need to consider services like Blue Apron, and actually parent the kids I'd like to have.  
It goes without saying that I'm grateful, and feel so incredibly lucky that my law school bet paid off. Just a few short years ago, on the heels of the 2008 recession, biglaw firms conducted widespread attorney layoffs, cut down their new graduate hiring for years after, and as a result, a large number of graduates from tippy-top law schools had their careers, and financial plans, completely upendedcut off before they really got off the ground. Had I graduated college a year earlier and gone straight to law school, I think it's likely that my career prospects would have felt some of the effects from 2008 and 2009. (I was a good student, but a terrible interviewer, far from a winning combination for recruiting success.)

Anyway, I don't think I'm using my "money map" post the way they're usually intended because I ultimately find the nitty-gritty of where I keep my accounts and my choice of credit cards for travel points and cash back to be boring. Not much has changed since I last visited the topic. Instead, for me, this post is more an opportunity to reflect on the cost of law school, and give some context for possible future posts about the whole experience. 

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