Reply to NYC law partner w/ kids: "$850K gross is not enough to live on"

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]The whole post by the NYC lawyer makes no sense to me.  She basically claims that her $850k per year translates into just $21k per month take home pay.  Even with self funded retirement it should be close to $40k per month after tax.  The poster is either dishonest or dumb.  [/quote]

It makes sense if you understand law partner finances. She's trying to live off the guaranteed monthly draw because the quarterly and end-of-year profit payouts can fluctuate greatly based on the business environment. We are entering into lean years, so she's rightly trying to stick to a budget.

She probably has 55%-65% of her $850K gross already accounted for by taxes, partner buy-in, health/dental/liability insurance, and retirement. And then 70% of her gross comes in the form of lumpy, inconsistent quarterly profit shares (with most of it coming in the 4th quarter). This scenario makes day-to-day financial planning very difficult. Add onto that two young kids, another on the way, and a demanding job where she really needs to prove herself in these early partner years to build her book.

She should just continue renting in the city, imho. She doesn't have the time to own a home or take on a lengthy commute to the suburbs. She will get a lot more financial breathing space once the partner buy-in payments cease.[/quote]

+1 May also include deferred comp. When my spouse was a new partner it took a few years to figure out to spend/save. I have detailed analysis to see where it all goes, but you still get a surprise -- you owe $25K more in taxes, but you will see the comp over three months, four months from now. [/quote]

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