Money Goals for Exiting Big Law

[Anonymous]

Figure out what a dependable income level will be for you after you leave considering your lower salary and the unpredictability of your husband's, and then start living as if that were your income today, including retirement investment, college funds, etc. Put the extra money into savings. If you still feel comfortable, great, you're ready to leave big law whenever you want. If it feels to tight to you or you don't feel like you have enough of a safety net in the event of a job loss, put the extra money into paying down your debt and building your emergency fund until living on that income level does feel comfortable. If you learn that realistically you're not going to be able to make any progress on, for instance, college funds at that salary level, focus on getting those pretty much fully funded before you leave.

[Anonymous]

do not defend / make excuses for your choices
just think about where you want to be

The guidance to try and live on less to give you flexibility is good.

Having more liquid as opposed to less is valuable. There are different points of view on types of investments - but pick one you are comfortable with and go with it.

You may want to think about a balance:
1/3 pay down house
1/3 savings
1/3 loans (college savings)

The absolute #s for your retirement do not matter right now - but as long as you have a plan to get to where you want to be. 401K will not be enough especially if you DH does not have anything saved in this area.

[Anonymous]

Anonymous wrote:Thanks-this is helpful. A few more facts about our situation: husband recently moved to $250K but he is in sales/marketing and has had some job losses in the not too distant past. So his income is not super stable (though has steadily climbed over the past 10 years). We have a full-time nanny and pay for my son's half-day pre school (would estimate that we spend about $5K a month on nanny plus school; most of it for nanny obviously). I have about $50K in liquid savings and another $20K in municipal bonds. I'm not sure how much we have in retirement right now. My husband has not had a 401K option at his prior job or at his new job (he is trying to get them to open one). I am at a firm so obvs. no match for my 401K contributions.

My husband's parents contribute the max amount to college savings for each of our kids every year so our financial advisor told us not to worry about making college contributions.

I've been at my firm for 5 years this fall and have been fine here. However, I want a more meaningful career and more regular work hours. My splurges are living in a city, childcare, and travel (though nothing super crazy; our travel budget is probably about $10-12K per year for a winter vacation and a summer vacation and lots of weekend trips).

I am very lucky to be in the situation I am in, but I want to take advantage of it and plan for the future and am thankful for your advice.

Your first goal should be to increase your emergency fund given your significant child care expenses and the relative instability of your husband's job. I assume your housing cost is at least $2.5K per month so that's $7.5K per month just in child care and housing.

[Anonymous]

You seem to have very little liquid cash for what you make. Try to hang in there for another 2-3 years if you can and save cash. You will need it for 2 kids. You could get a job at an association or company that would pay well and require less working hours. Good luck.

[Anonymous]

Just do it as soon as you can. I've never heard of anyone regretting it. Best decision of my life. So much less money, so much more life.

[Anonymous]

We are in a very similar situation (biglaw spouse and tech sales/marketing earning similar amounts). I try to keep the mentality that this income is temporary (while at the same time paying for conveniences we need when we are working like this).

After law school we hustled to pay off all loans (graduated in the 6-8% era). Then we banked that excess for a downpayment. Now we just bank/invest it monthly (after maxing out 401ks and 529).

We are 35ish with one young kid and have about $475K in retirement/529, $375k in home equity (15 year mortgage on an 800K-ish house) and $550K in liquid investments. We could probably have done better but with the hours we pulled before the kid a lot of convenience purchases have been in there too.

Just sharing the above in case it is a useful benchmark for you... I agree that your liquid savings is low given your incomes. But maybe those incomes are fairly new and the cash had a different job before?

[Anonymous]

Anonymous wrote:Thanks-this is helpful. A few more facts about our situation: husband recently moved to $250K but he is in sales/marketing and has had some job losses in the not too distant past. So his income is not super stable (though has steadily climbed over the past 10 years). We have a full-time nanny and pay for my son's half-day pre school (would estimate that we spend about $5K a month on nanny plus school; most of it for nanny obviously). I have about $50K in liquid savings and another $20K in municipal bonds. I'm not sure how much we have in retirement right now. My husband has not had a 401K option at his prior job or at his new job (he is trying to get them to open one). I am at a firm so obvs. no match for my 401K contributions.

My husband's parents contribute the max amount to college savings for each of our kids every year so our financial advisor told us not to worry about making college contributions.

I've been at my firm for 5 years this fall and have been fine here. However, I want a more meaningful career and more regular work hours. My splurges are living in a city, childcare, and travel (though nothing super crazy; our travel budget is probably about $10-12K per year for a winter vacation and a summer vacation and lots of weekend trips).

I am very lucky to be in the situation I am in, but I want to take advantage of it and plan for the future and am thankful for your advice.

Noticed a couple thigs here:

- you mention that "I am at a firm so obvs. no match for my 401K contributions." That's not my environment but I've seen others mention it. Does that mean that your 401k contributions are limited to ~18k/yr? If so, then as others have pointed out even 401Ks that include higher yearly contributions due to employeer matches aren't enough for retirement comparable to the lifestyle your salary would afford you. So, if you aren't getting a match and are equivalently doing less savings it would be even more critical for you to have non-401K accounts in addition

- it's prob worth teasing out what "My husband's parents contribute the max amount to college savings for each of our kids every year" really means. Often that would mean that they are contributing to the limit of their tax advantage (i.e. not the true max). If that's the case there may be room for you to put in more if there is any chance they won't complete the funding and you truely want that obligation off the books before you leave Big Law

[Anonymous]

Anonymous wrote:I plan to leave Big law in a couple of years. My loans are pretty much paid off, I max out retirement, and own a home with a 575k mortgage. I have two young kids and employ a nanny. I'm not sure what my next job will be but I will most likely take a pay cut. I currently make around $250-275 with bonus annually. My husband makes about the same (not a lawyer). We plan to send our kids to public school but will likely move in a couple or of years. Our current home will likely sell for between 1 and 1.2m.

I'd love to hear financial goals of others who left big law or a similarly lucrative job. Or just give me your advice on what my goals should be.

I'm not sure what you mean by this. Do you plan to have a more expensive home in the future or a less expensive one.

My husband (an in-house lawyer) makes $225-$250k annually and I don't work. We have a $480k mortgage on a $700k mortgage that we have on a 15-year loan. DH has about $30k of law school loans left but at 1.8% we are in no rush to pay them off. We are more than comfortable financially but we have modest taste. Only you know what kind of car, clothing, and entertainment budget you require. This varies greatly from family to family.

[Anonymous]

Yes, 401K is $18K per year. I had 401K savings from prior jobs though and my DH has some too (maybe $250K for him? Maybe a total of $150K for me?) We do some additional savings, but I agree retirement can be bumped up.

I estimate when we move we would move to a house that is about $1.2M to $1.3M. (current house would likely sell for $1 to $1.1)

I have about $50K left in student loans but the interest is 2.75% so I am in no hurry to pay it off. We have a small car loan at 2.78%. No other debt.

As to why we don't have more savings, I paid off all of my higher interest school debt my first year at the firm, saved up for a house the second, and my DH had a job loss and then a business venture that failed over 18months. We also had two kids in the last 4 years, so our childcare expenses were high. We will still need a nanny for the next year or two, but I am hopeful that we can move to more part-time care or an au pair in 2 years.

[Anonymous]

i am 39 and NW (excluding home equity) is 640k right now. once that hits 2 million, i may leave law and work part time or something.

[Anonymous]

Anonymous wrote:i am 39 and NW (excluding home equity) is 640k right now. once that hits 2 million, i may leave law and work part time or something.

Do you mean nw excluding home value?

[Anonymous]

I'm been thinking of this question too, but I'm 44 with a job that requires a lot of travel. From me, security is solid retirement account,fully funded emergency fund, paid off college tuition for DCs (age 7 and 10) and paid off mortgage.

[Anonymous]

Ive been think about this question too. Im 44 with a couple of kids. $1.5 million in retirement. $5 million in real estate equity and $400k a year in positive cash flow.

[Anonymous]

Anonymous wrote:Yes, 401K is $18K per year. I had 401K savings from prior jobs though and my DH has some too (maybe $250K for him? Maybe a total of $150K for me?) We do some additional savings, but I agree retirement can be bumped up.

I estimate when we move we would move to a house that is about $1.2M to $1.3M. (current house would likely sell for $1 to $1.1)

I have about $50K left in student loans but the interest is 2.75% so I am in no hurry to pay it off. We have a small car loan at 2.78%. No other debt.

As to why we don't have more savings, I paid off all of my higher interest school debt my first year at the firm, saved up for a house the second, and my DH had a job loss and then a business venture that failed over 18months. We also had two kids in the last 4 years, so our childcare expenses were high. We will still need a nanny for the next year or two, but I am hopeful that we can move to more part-time care or an au pair in 2 years.

I would pay off both of those loans (student loans and car loan) before leaving biglaw. The fewer fixed expenses you have, the more flexibility you will have (both mentally and actually) in your next steps.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Yes, 401K is $18K per year. I had 401K savings from prior jobs though and my DH has some too (maybe $250K for him? Maybe a total of $150K for me?) We do some additional savings, but I agree retirement can be bumped up.

I estimate when we move we would move to a house that is about $1.2M to $1.3M. (current house would likely sell for $1 to $1.1)

I have about $50K left in student loans but the interest is 2.75% so I am in no hurry to pay it off. We have a small car loan at 2.78%. No other debt.

As to why we don't have more savings, I paid off all of my higher interest school debt my first year at the firm, saved up for a house the second, and my DH had a job loss and then a business venture that failed over 18months. We also had two kids in the last 4 years, so our childcare expenses were high. We will still need a nanny for the next year or two, but I am hopeful that we can move to more part-time care or an au pair in 2 years.

I would pay off both of those loans (student loans and car loan) before leaving biglaw. The fewer fixed expenses you have, the more flexibility you will have (both mentally and actually) in your next steps.

OP is looking to stay what another 2-3 yrs? I know people say - reduce your fixed cost as much as possible before leaving. But honestly if it were a choice between paying down another 50k of 2.75% loans OR taking that 50k and investing it, I'd invest it and make my regular payments (or maybe regular + a bit extra monthly but not enough to pay off before leaving). Same with the car. Assuming you're still looking to stay in the law, you very likely will have no issue making the same loan/car payments you're making now. If you're looking to go non profit or HR or something like that were the salary will be sub-100k -- then I can see why the 'get rid of fixed costs' argument works.