Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My take on this is that OP and others are humble bragging about having spouses making lots of money in big law.

-- Biglaw partner whose spouse has never found any of this to be "so complicated"

I think that's a bit cynical. My firm has a series of onboarding events/trainings for new partners (and even for associates or counsel who are putting themselves up for partner) to make sure they understand and prepare for the new tax situation that comes with making partner. Since OP's DH is taking a strangely laissez faire attitude toward the question and she knows budgeting is not her strong point, I think it's perfectly reasonable to come to the one place on the internet where all BigLaw SAHM's can be found at any given moment for advice.

-- Biglaw senior associate who has no plans on making partner but has witnessed the transition go poorly for certain colleagues

What firm provides partner "tax training" for associates who aren't partners yet? That's odd.

In any event, it's just not all that complicated. Just be careful for the first year and after that go on prior experience. And if after being careful you still find that you have to tap a line of credit because your numbers were off, no biggie.

You definitely think you're bragging that it's "not complicated" but really you're just demonstrating that, even as a law firm partner, you don't make that much money (or aren't at a top/global firm). Anyone making seven figures, which gets distributed a year after it's earned, in random huge chunks throughout the year, including what one must LATER pay in taxes to several countries and states at equally random dates, would find cash flow complicated.

Anonymous wrote:Wow these early replies are harsh. OP, I could have written your post years ago, and I *still* don’t understand exactly how much money we have (and DH understands it even less than I do). We pay taxes in like six countries and quarterly estimates in several states (and federally). And YOU are responsible for it, since nothing is withheld. It is absolutely confusing.

All I know is, ultimately, it’s A LOT of money. Just try to keep your spending at around the same level for a couple years, at which point you’ll have a good cushion of money that you know is earmarked for taxes / capital call / etc.

Not big law, but when DH became a partner, and had various tax payments in other places, we hired a good accountant. so while "we" are responsible for it, we have very very good guidance.

Anonymous wrote:

Anonymous wrote:My take on this is that OP and others are humble bragging about having spouses making lots of money in big law.

-- Biglaw partner whose spouse has never found any of this to be "so complicated"

I think that's a bit cynical. My firm has a series of onboarding events/trainings for new partners (and even for associates or counsel who are putting themselves up for partner) to make sure they understand and prepare for the new tax situation that comes with making partner. Since OP's DH is taking a strangely laissez faire attitude toward the question and she knows budgeting is not her strong point, I think it's perfectly reasonable to come to the one place on the internet where all BigLaw SAHM's can be found at any given moment for advice.

-- Biglaw senior associate who has no plans on making partner but has witnessed the transition go poorly for certain colleagues

What firm provides partner "tax training" for associates who aren't partners yet? That's odd.

In any event, it's just not all that complicated. Just be careful for the first year and after that go on prior experience. And if after being careful you still find that you have to tap a line of credit because your numbers were off, no biggie.

Anonymous wrote:My take on this is that OP and others are humble bragging about having spouses making lots of money in big law.

-- Biglaw partner whose spouse has never found any of this to be "so complicated"

I think that's a bit cynical. My firm has a series of onboarding events/trainings for new partners (and even for associates or counsel who are putting themselves up for partner) to make sure they understand and prepare for the new tax situation that comes with making partner. Since OP's DH is taking a strangely laissez faire attitude toward the question and she knows budgeting is not her strong point, I think it's perfectly reasonable to come to the one place on the internet where all BigLaw SAHM's can be found at any given moment for advice.

-- Biglaw senior associate who has no plans on making partner but has witnessed the transition go poorly for certain colleagues

Anonymous wrote:OP, a lot will depend on the precise compensation structure - how much is deferred to the following year, when the following year is it paid out, and what is paid out (and when) the current year.

That said, here's what we do:

- I set aside, in a separate account, money for estimated taxes each month.
- The first year is tough, because you're funding current tax expenses in real time. We also prefunded some of next years tax bite, to make cashflow a little easier.
- Do not make any assumptions about how much the raise is, because it's likely less than you think. For example, you're paying both sides of SS, and you may be paying a *lot* more for health insurance than you're used to.
- I have had good luck with setting up multiple online accounts for different buckets. One for estimated taxes, one for emergency fund, one for next year's insurance payments, one for vacation, etc. At this point, we have probably 15 "separate" accounts.

Adding to this: You'll need an accountant, if you didn't already have one, if the firm is a partnership, as opposed to a PA or something similar.
I keep a sizeable "cashflow management fund" that I draw from as needed to smooth out lumpy expenses.

OP, a lot will depend on the precise compensation structure - how much is deferred to the following year, when the following year is it paid out, and what is paid out (and when) the current year.

That said, here's what we do:

- I set aside, in a separate account, money for estimated taxes each month.
- The first year is tough, because you're funding current tax expenses in real time. We also prefunded some of next years tax bite, to make cashflow a little easier.
- Do not make any assumptions about how much the raise is, because it's likely less than you think. For example, you're paying both sides of SS, and you may be paying a *lot* more for health insurance than you're used to.
- I have had good luck with setting up multiple online accounts for different buckets. One for estimated taxes, one for emergency fund, one for next year's insurance payments, one for vacation, etc. At this point, we have probably 15 "separate" accounts.

People are being awful to you. Anonymity is really gross sometimes.

I give you credit for recognizing your areas of weakness and trying to do better. We are in the exact same position this year and I work full time. I always have handled our day to day spending and have been the keeper of our general net worth estimates, and my husband always does our investing. It has been a transition for us this year with cash flow getting slightly tight until we got his first partner payment.

Now that he’s a partner, I have a separate checking account linked to our main account. Every time he gets any kind of payment from his firm, I immediately transfer 50% of it to the separate tax account. We used that to pay the first quarterly tax bill and it was funded with additional money left over. I am continuing to follow that because I’d rather overfund and err on the side of caution.

We’ve never had a strict budget. I do a monthly check in to make sure we are generally trending upwards in net worth. Obviously that doesn’t always work if the market is down, but I get a general sense of if we’re overspending and can pull us in again.

We have always lived on base comp, invested 100% of bonuses, and saved whatever is left, and we will still plan to do basically that. Once our main checking account gets over a six month emergency fund in it, I tell him and we transfer to our brokerage account throughout the year.

We fund 529s in January from the end of the year bonus in the past. Now we will do it from distributions.

I encourage you to have him talk to colleagues at his firm. We have an accountant now for the first time since it’s obviously very complicated now. We are using someone that others use. The accountant can guide you on what you need to do. My husband’s firm also has several banking relationships that I’m sure yours does too. When my husband first made partner, two tax partners called him to give him a run down of what to expect on top of the presentations and meetings they all get as new partners.

I’m thinking of this first year as a learning curve and expect we will work out the kinks as we go.

Anonymous wrote:We've been in this boat for about a decade or so now -- I'll tell you what we do. I don't try to keep track of his income or a budget. We spend basically like we would if we were on a dual fed income or a little better, with a few major, life-changing exceptions:

1) we don't worry about the timing of things, or worry about the margins. (Like -- can we afford to get the car fixed this month, or do we need to hold it until next month? We just get it fixed). We're not worrying about things like -- can both kids do soccer and baseball, or do we need to make them pick one. I'm not couponing.

2) if there's something we really, really want to do, we just are going to do it. Not like fly around the world -- but if we want to stay at a marriot over thanksgiving, we'll do that.

But in general, we don't live like rich people, and so the money is more than enough to cover both (1) and (2), allow us to save lots, and allow us to max out our 401ks and 529s.

I don't think that law firm life is like it used to be -- partners burn out or get cut. Don't plan on the money being an endless spigot. If it gets turned off, you probably won't regret letting your kids play soccer or taking decent vacations, but you might regret spending $5K on a purse, or $100K on a car. That's the metric we use.

Also, the first year is really rough, depending on how the firm does it. If you need a buy-in, that makes it worse. You are paying significant taxes on money that you haven't seen yet -- so if you can avoid major expenses the first year, avoid those expenses. By next spring, your liquidity will be significantly improved. But how bad that first year is depends significantly on how your particular firm does it -- they are all different.

Yeah it is so complicated! I thought I had a handle on it after DH showed me the chart he made with somebody from his firm but now that we’re here I am running into unforeseen issues. And really quarterlies are the least of what’s confusing. The buy-in and the fact that the firm pays a different percentage of what DH gets annually (I don’t even remember the term for that) have really thrown me for a loop.

I’m so with you on not getting those expensive things! It’s the medium things that I stress about, like do I spend $200 on a haircut or do it myself? Do I sign my kid up for the full day camp or the half day one? Do I get blinds for the house or no? All those little things. Although maybe my concern has been beneficial because I just haven’t been spending much money since I feel so unsure.

And you’re right, we have no idea how long DH will be making this salary because the job is so hard on him so I’m trying to be prepared for a change.

Anonymous wrote:OP, at your income level, wouldn't it make sense to have both a financial planner and an accountant familiar with these issues to advise you? That seems like money well spent. I would imagine folks here or at your DH's firm could offer recommendations.

DH and I spoke with several and at this point it doesn’t seem like the financial planners we have spoken to are worth the money. All I want is to have an idea of how much money I have to spend, and it seems like I should be able to figure that out myself. DH and I feel really good at this point about where we are going long-term, financially speaking.

Anonymous wrote:

Anonymous wrote:I'm not going to judge you for not being actively involved in the big-picture finances; that's the same in our house (with a gender swap). But if your DH has handled savings/investing in the path, and you handle household/variable/discretionary spending (either with a strict budget or by just keeping an eye on things), I'm not sure why you think you're expected to be responsible for calculating and setting aside taxes under the new system? My guess based on the way you've been managing things is he's already putting estimated taxes aside and leaving you with what's available. That's what I would do.

Well there isn’t a lot to be involved in. We max out 401K, put a certain percentage in other investments, DH has some he just plays around with, and there is the mandatory retirement. We haven’t put aside any for quarterlies. I think his feeling is that we have plenty of money and we aren’t big spenders (relatively speaking) and he just isn’t worried about not having enough set aside for taxes.

Okay, that would make me nervous. In that case I would aim to put at least 30% of what you see every month aside for quarterlies. That way his "we aren't big spenders" assurance will be satisfied, because you can't spend it. After the first year (and the first big disbursement) you should have a better idea of what you'll owe, and a bigger cushion to make those payments from.

It's absolutely worth sitting down with a tax professional in this circumstance to get a better understanding of what's to come, and if his firm didn't provide one then someone in his practice group can certainly recommend theirs.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Here’s what we do, OP. We use DH’s regular pay checks for our general day-to-day and month-to-month expenses. We keep a separate checking account for tax payments, and immediately transfer all of his quarterly distributions there to cover the quarterly tax payments. When we get his year-end distributions, they go into the tax account as well at first. Once our annual taxes are done and we have the quarterly estimates, we leave a small cushion in the tax account for the following year’s quarterly payments, move all of the extra back into our main account, and then make a plan for the remainder of the past year’s distributions. This is when we make annual contributions to the kids’ college funds, earmark money transferred to savings for vacations for the coming year, major home projects, and any other significant outlays we anticipate outside of our usual expenses for the coming year. The remainder goes into investments.

Oh that’s great! Do you do 529 contributions monthly or annually?

Annually, from the remainder of the year-end distributions after we pay taxes. It’s actually pretty helpful from an organizational standpoint because right after we pay our taxes, we make the 529 contributions and all of our planned annual charitable donations, save all of those records to next year’s tax file, and then can forget about all of those tasks for the rest of the tax year.

That makes so much sense.

Anonymous wrote:I'm not going to judge you for not being actively involved in the big-picture finances; that's the same in our house (with a gender swap). But if your DH has handled savings/investing in the path, and you handle household/variable/discretionary spending (either with a strict budget or by just keeping an eye on things), I'm not sure why you think you're expected to be responsible for calculating and setting aside taxes under the new system? My guess based on the way you've been managing things is he's already putting estimated taxes aside and leaving you with what's available. That's what I would do.

Well there isn’t a lot to be involved in. We max out 401K, put a certain percentage in other investments, DH has some he just plays around with, and there is the mandatory retirement. We haven’t put aside any for quarterlies. I think his feeling is that we have plenty of money and we aren’t big spenders (relatively speaking) and he just isn’t worried about not having enough set aside for taxes.

OP, at your income level, wouldn't it make sense to have both a financial planner and an accountant familiar with these issues to advise you? That seems like money well spent. I would imagine folks here or at your DH's firm could offer recommendations.

We've been in this boat for about a decade or so now -- I'll tell you what we do. I don't try to keep track of his income or a budget. We spend basically like we would if we were on a dual fed income or a little better, with a few major, life-changing exceptions:

1) we don't worry about the timing of things, or worry about the margins. (Like -- can we afford to get the car fixed this month, or do we need to hold it until next month? We just get it fixed). We're not worrying about things like -- can both kids do soccer and baseball, or do we need to make them pick one. I'm not couponing.

2) if there's something we really, really want to do, we just are going to do it. Not like fly around the world -- but if we want to stay at a marriot over thanksgiving, we'll do that.

But in general, we don't live like rich people, and so the money is more than enough to cover both (1) and (2), allow us to save lots, and allow us to max out our 401ks and 529s.

I don't think that law firm life is like it used to be -- partners burn out or get cut. Don't plan on the money being an endless spigot. If it gets turned off, you probably won't regret letting your kids play soccer or taking decent vacations, but you might regret spending $5K on a purse, or $100K on a car. That's the metric we use.

Also, the first year is really rough, depending on how the firm does it. If you need a buy-in, that makes it worse. You are paying significant taxes on money that you haven't seen yet -- so if you can avoid major expenses the first year, avoid those expenses. By next spring, your liquidity will be significantly improved. But how bad that first year is depends significantly on how your particular firm does it -- they are all different.

Anonymous wrote:I'm not going to judge you for not being actively involved in the big-picture finances; that's the same in our house (with a gender swap). But if your DH has handled savings/investing in the past, and you handle household/variable/discretionary spending (either with a strict budget or by just keeping an eye on things), I'm not sure why you think you're expected to be responsible for calculating and setting aside taxes under the new system? My guess based on the way you've been managing things is he's already putting estimated taxes aside and leaving you with what's available. That's what I would do.

typo fixed