Lawyers Don’t Know Much About Money
Something that might surprise you if you’re not a lawyer is that most lawyers (even ones working in M&A, banking or corporate finance) don’t know much about finance. Specifically, they don’t know much about personal finance. I used to be one of these lawyers, too.
Unless they’re self-educated or happened to have studied finance at some point in their lives before law school, being “good” with money isn’t something most lawyers are. Personal finance is definitely not a skill that is learned in law school or on the job at a law firm.
Which means, when lawyers graduate and start making decent salaries (or, great salaries, if they’re working in Biglaw), they don’t have much experience with or knowledge about what to actually do with their money. Invest it? Save it? Spend it all? Pay off those pesky student loans? A little bit of all of that?
Biglaw Money Doesn’t Last Forever
One thing I’ve always known was that my Biglaw salary wasn’t going to last forever. I just didn’t always know what to do with my Biglaw salary while I was making it. I ended up teaching myself a great deal about personal finance over the past few years, but there are some things I wish I could have learned earlier in my career.
Have you heard of the Biglaw Investor? It’s a personal finance site with great advice directed at Biglaw lawyers. You can find everything from information on paying back student loans, investing in your 401k and more, all aimed at the Biglaw lawyer audience. It’s definitely worth checking out if you’re a law student or Biglaw associate feeling lost as to what to do with your money.
Having only found the Biglaw Investor after I had already left Biglaw, I had to learn some financial lessons the harder way – by making my own mistakes. In this post, I’m sharing the five financial regrets I have from my seven plus years working in Biglaw. If I had educated myself earlier on in my career about what I should have done with my Biglaw salary, I’m sure my finances would look different today than they do. I’m here to offer you some advice and help you prevent some of the mistakes that I made.
But first, don’t feel too bad for me. Luckily, even without educating myself early on, I wasn’t actually a financial disaster. I never trapped myself in Biglaw with golden handcuffs because none of my mistakes were that huge in the grand scheme of things. I was able to squirrel away plenty of money to enable myself to leave Biglaw for a much different life of blogging and freelance writing.
Still, I could have done some things differently. Below, I’ve ranked my five financial regrets from my time in Biglaw, listed from the most forgivable to the least forgivable (according to my own assessment, feel free to disagree and share your own thoughts on this).
Hopefully in reading through my regrets, a few of you will be inspired to change some of your own money habits.
1. Wasting Money on Food and Wasting Food
My first regret is all about wasting food. From buying too many meals out, to buying groceries and letting them go bad (actually, this is unforgivable because it was so environmentally wasteful), to picking up Starbucks instead of making my own coffee – these are all food-related sins I was very guilty of committing during my time in Biglaw.
I hate thinking about all of this money I “wasted,” but in reality I needed these things to survive my first few years in Biglaw. Working at a demanding job like Biglaw is all about finding a balance between spending your hard-earned paycheck on things that improve your life now and saving for things that will improve your life in the future.
There’s a time and place for outsourcing your tasks and responsibilities, like cooking or grocery shopping, and you should strive to find a good balance between doing things for yourself and outsourcing them to others to take them off of your plate.
If you find yourself stressing about similar purchases or expenses that might seem frivolous, take a look at this post from the Biglaw Investor on the little expenses and follow the advice set forth in it. I agree with him that it’s ok to let yourself off the hook for spending on these things. If spending money on pre-made salads and fancy coffees is the biggest financial mistake you’re making as a Biglaw associate, you’re doing great.
2. Going to Fancy Gym Classes
This is another expense that barely falls into the financial mistake or regret category, but hear me out and let me know if you agree. The money I spent on fancy spin and barre classes while I was a Biglaw associate helped me to keep my sanity and for that reason alone was worth it.
However, I did not need to go to as many classes as I did, especially after my firm moved offices and opened up a brand new, beautiful gym on the top floor. Instead of using that gym, which was open 24-hours a day and was totally free for all employees, I chose to continue spending money on classes.
And it wasn’t just because I liked the classes (in fact, the gym had a Peloton bike that I’m sure I would have been as happy to use as going to a spin class in person), it was because I didn’t want to work out in front of my co-workers.
This is where the regret comes in. I should have been able to get over myself and use the free gym! When I did get around to using the gym at work, it was mostly empty anyway and if it wasn’t, I realized that just as I wasn’t looking at my co-workers, they certainly weren’t looking at me, either.
This one falls into the category of a justifiable expense that borders on unjustifiable since I opted not to use a free alternative for self-conscious (and silly) reasons.
3. Spending a Lot on Rent
Now we’re venturing into slightly less-justifiable spending territory (although I’m still going to try to justify it; let me know if you think I was being unreasonable or if this was a justifiable expense).
Throughout my time in Biglaw, I lived alone, in Manhattan and relatively close to my office. While I never lived in a super extravagant place, every few years (about three moves during my tenure as an associate) I moved apartments and every time the rent was higher and the place was better. Just a little bit bigger. And a little bit nicer.
Did I need to spend as much money on rent as I did? Absolutely not. I could have cut my living expenses in so many ways – had roommates, lived further away from the office, found a place in not as appealing of a neighborhood, not had a doorman, etc.
While I certainly could have lived on less, for me, this expense was worth it. That means it’s not really a regret, but something I look back on and think, “wow, if I had cut my rent in half, imagine how much more money I would have now!”
Of course, this is a dangerous way of thinking because I loved living in those apartments. I loved the security of having a doorman when I came home super late from working Biglaw hours and I loved being in a part of the city that was easily accessible to and from everything, including the office.
4. Holding Too Much Money In Cash
Ahhh, now we enter the territory of actual, unjustifiable mistakes and regrets. I chock this mistake up to being uneducated about my finances. As a junior associate, I knew just enough about personal finance to know that I should aggressively pay down my law school student loans, so I devoted my entire financial goals to this. The problem was, once I reached that goal, I didn’t set up a new financial goal.
In the past, any excess money I had each month went straight to paying down my student loans. Once those were paid off, I had no idea what to do with the excess money I suddenly had, so I let that Biglaw cash accumulate. And I sat on it for a long time. I didn’t even put it in a savings account, it simply sat in my checking account (gasp!).
By this time in my career, I was contributing the maximum amount to my 401K, but that was all I was doing in terms of investing. I regret that I didn’t educate myself sooner about things like Vanguard index funds or even simple, interest bearing savings accounts.
5. Not Maxing Out My 401k As a First-Year Associate
The is the one that kills me the most: I did not contribute the full amount to my 401K that I could have (which I think was about $18,000) during my first year as a Biglaw associate. As I mentioned above, at this time in my life, I had no idea what I was doing financially.
I don’t think I fully understood the benefits of a 401k. Now, my firm didn’t match, so I wasn’t throwing away “free money” but I did opt out of contributing the max. I don’t even really know why! I think I arbitrarily decided that a few thousand dollars was plenty to stock away for retirement per year.
(Note that while some places do not allow employees to contribute to their 401ks until they have worked at that place for at least a year, this was not my situation, I simply did not max it out.)
Luckily, something changed in me and I decided to max out my 401K every year following that first year, but this was still an opportunity that I missed out on simply because I wasn’t educated.
Educate Yourself and You’ll Be Well On Your Way to Whatever You Want
What my regrets all have in common is a lack of financial education. If you take one thing from this post, I hope it’s that you realize the importance of educating yourself on all things personal finance.
You never know where your career is going to take you, but I know first-hand that Biglaw money doesn’t last forever, but saving (and investing) will open the doors to so many other careers and possibilities.