Yes, tiny violin - did anyone else struggle first years of law partnership?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The way we did it was taking a year or two, really cutting back on spending and increasing saving, and getting ahead of it. There are lots of possible permutations based on comp structure, but unfortunately, they all come down to this. It stinks for that year, OP, but it's a lot less stressful once you do it.

Yes, but as I said in my earlier posts, that’s not an option as the expenses are fixed. They cannot be altered.

This is true, private school tuition is essential and houses can’t be sold.

OP, I'm the one who started this subthread, and the latest response wasn't me.

If you can't pare back temporarily, you can stick to a firm budget, which will at least mean you tread water, and not have to bite into any of your year-end comp. Alao, try to bank increases over the next couple of years. Finally, though this won't make as much a difference, if your spouse can either go back full time and get a job that supplies benefits, that'll help - I can't imagine what your health insurance premiums are.

Yes, we have insurance through spouse. It’s very expensive to do through the firm.

[Anonymous]

Anonymous wrote:This happened to us when DH became a partner (I work too before anyone comes for me). Income on paper was the same, but our health insurance doubled, our tax situation changed, our forced retirement went up and we had to make yearly capital contributions. So our income actually went down quite a bit. I won't disgust you all with the figures but we break even, i.e. we aren't putting in any pools or fully funding 529s right now. We have a nanny for three kids under four so that will be a big expense lifted in a few years. Right now we just don't travel and watch our spending with the hope that in a few years we can build up savings again.

This explains why people get put off when others' try to count their pennies. You may think someone makes XX amount, but you have no idea what their work or expenses entail. In many cases, their money is actually tied up. OTOH, my friend knew someone who claimed to be "unemployed" for over a decade, yet was paid handsomely under the table for that entire time, and also was given free health benefits, as well. In the meantime, they had their nose in other people's business. Sickening.

It costs to be a partner in a business.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP it sounds like you’re spending more than you earn and didn’t ask any detailed questions about compensation in your new job.

What do you want? We can surmise that the house is an expensive house in a good school district. Send one or both kids to public school for a few years. Or refinance your house. Or apply for financial aid. Whatever.

Well, if you read my actual post, I asked if anyone else struggled at first and when it changed.

Most people were coming from being highly compensated senior associates and non-equity partners and had, you know, savings before doubling down on the mansion and private school. Its not fair that people can be this stupid and still be rich.

Oh, good lord. We saved and saved to buy a home. Then we bought the home. So we didn’t have much more in savings. We also have another income. If you’re not this rich, I’m going to assume you’re even more stupid. We do not have a “mansion”. We have one kid with special needs that requires private school. Most people don’t make, you know, wild assumptions when asked a simple question unless they are, you know, dicks.

You bought more home than you could afford. You’ll likely get there, but you aren’t there yet. You put the cart before the horse. That’s pretty dumb.

[Anonymous]

Anonymous wrote:This happened to us when DH became a partner (I work too before anyone comes for me). Income on paper was the same, but our health insurance doubled, our tax situation changed, our forced retirement went up and we had to make yearly capital contributions. So our income actually went down quite a bit. I won't disgust you all with the figures but we break even, i.e. we aren't putting in any pools or fully funding 529s right now. We have a nanny for three kids under four so that will be a big expense lifted in a few years. Right now we just don't travel and watch our spending with the hope that in a few years we can build up savings again.

Sigh. You ARE saving. Massive retirement contributions and refundable capital contributions IS saving. You just have a cash flow problem.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Your tax withholding sounds really high for that income. I bet it is incorrect.

Seems about right to me - maybe a little high. OP likely has to pay taxes in 15+ jurisdictions, plus UK and other countries.

An effective tax rate of over 50%? And thats just gross income not including any adjustments for the mortgage, that seems really high. There should be some credits and offsets for taxes paid to other jurisdictions even if not 100%.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Your tax withholding sounds really high for that income. I bet it is incorrect.

Seems about right to me - maybe a little high. OP likely has to pay taxes in 15+ jurisdictions, plus UK and other countries.

For which she gets tax credits.

As a retired big law equity partner, I find so many posts about the financial hardships of being an equity partner in big law to be laughable. So many of them are untrue.

There is no truer statement than this: the only thing worse than being an equity partner in a big law firm is being in a big law firm and not being an equity partner.

[Anonymous]

Anonymous wrote:Eeks. I am being recruited as a lateral partner and now wondering if I should think harder and stay in my cushy salaried gig. Can you describe it in more detail please on how it works in practice?

I just asked to be a lateral "senior attorney" instead. It made more sense for more personal circumstances.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Eeks. I am being recruited as a lateral partner and now wondering if I should think harder and stay in my cushy salaried gig. Can you describe it in more detail please on how it works in practice?

I just asked to be a lateral "senior attorney" instead. It made more sense for more personal circumstances.

I’d be real interested in your rationale. Because it sounds like you made a mistake.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This happened to us when DH became a partner (I work too before anyone comes for me). Income on paper was the same, but our health insurance doubled, our tax situation changed, our forced retirement went up and we had to make yearly capital contributions. So our income actually went down quite a bit. I won't disgust you all with the figures but we break even, i.e. we aren't putting in any pools or fully funding 529s right now. We have a nanny for three kids under four so that will be a big expense lifted in a few years. Right now we just don't travel and watch our spending with the hope that in a few years we can build up savings again.

Sigh. You ARE saving. Massive retirement contributions and refundable capital contributions IS saving. You just have a cash flow problem.

We have illiquid retirement savings, but not enough in an emergency fund, 529s or house repair fund. Savings isn't just retirement accounts.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This happened to us when DH became a partner (I work too before anyone comes for me). Income on paper was the same, but our health insurance doubled, our tax situation changed, our forced retirement went up and we had to make yearly capital contributions. So our income actually went down quite a bit. I won't disgust you all with the figures but we break even, i.e. we aren't putting in any pools or fully funding 529s right now. We have a nanny for three kids under four so that will be a big expense lifted in a few years. Right now we just don't travel and watch our spending with the hope that in a few years we can build up savings again.

Sigh. You ARE saving. Massive retirement contributions and refundable capital contributions IS saving. You just have a cash flow problem.

We have illiquid retirement savings, but not enough in an emergency fund, 529s or house repair fund. Savings isn't just retirement accounts.

I get that. But your “income” didn’t go down and neither did your “savings.” Your cash flow and flexibility did, it’s only temporary, and there are various avenues easily available to partners to bridge this temporary gap.

Just a lot of whining going on.

[Anonymous]

Anecdotally, I have heard of many new partners struggling the first few years if they did not plan for it. There was a good thread here a few years ago from the wife of a new partner (maybe PP above) about the financial reality.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Eeks. I am being recruited as a lateral partner and now wondering if I should think harder and stay in my cushy salaried gig. Can you describe it in more detail please on how it works in practice?

I just asked to be a lateral "senior attorney" instead. It made more sense for more personal circumstances.

I’d be real interested in your rationale. Because it sounds like you made a mistake.

Maybe. I can retire in the next 3-5 years, so I decided to ask for a position that maximizes short term income. They are paying me more than any associate, which is quite enough.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Eeks. I am being recruited as a lateral partner and now wondering if I should think harder and stay in my cushy salaried gig. Can you describe it in more detail please on how it works in practice?

I just asked to be a lateral "senior attorney" instead. It made more sense for more personal circumstances.

I’d be real interested in your rationale. Because it sounds like you made a mistake.

Maybe. I can retire in the next 3-5 years, so I decided to ask for a position that maximizes short term income. They are paying me more than any associate, which is quite enough.

Ok.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is an equity partnership at top 50. All partners start at $800k. Retirement is around $70k, overhead around $130k. Monthly payout is around $20k. Draws about 55k, three times a year. Then end payout. Tax bills for quarterly payments about $80k, fed and state. That’s the gist of it.

So you can’t live on 280k/yr? Sounds like a you problem.

Well, categorically, yes. It is. We have set expenses of schools plus mortgage that make it tough. And it’s not 280 - it’s 240.

I’ll play a duet with you. My DH will probably lose his job. This brings us to only my income which is about 290k. With one kid about off to college it’s definitely not as comfortable as it used to be. Plus I’ll be the first to admit we like our vacations and like our comfortable life. I’m sure he’ll find something, but I’m not gonna lie, I quite enjoy living off 600-700k/yr vs less than half that.
Of course we can do it.

My advice to you is you really need to ditch the private school. Unless you are in a terrible school district it is only a status symbol. Reason why college is so expensive for us is because my son got into Duke. Public school did him well.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is an equity partnership at top 50. All partners start at $800k. Retirement is around $70k, overhead around $130k. Monthly payout is around $20k. Draws about 55k, three times a year. Then end payout. Tax bills for quarterly payments about $80k, fed and state. That’s the gist of it.

So you can’t live on 280k/yr? Sounds like a you problem.

Well, categorically, yes. It is. We have set expenses of schools plus mortgage that make it tough. And it’s not 280 - it’s 240.

I’ll play a duet with you. My DH will probably lose his job. This brings us to only my income which is about 290k. With one kid about off to college it’s definitely not as comfortable as it used to be. Plus I’ll be the first to admit we like our vacations and like our comfortable life. I’m sure he’ll find something, but I’m not gonna lie, I quite enjoy living off 600-700k/yr vs less than half that.
Of course we can do it.

My advice to you is you really need to ditch the private school. Unless you are in a terrible school district it is only a status symbol. Reason why college is so expensive for us is because my son got into Duke. Public school did him well.

Really interesting that you’re telling the OP to ditch private school in the same post where you say your kid is going to Duke. I’d never pay for a private college either.