Here's the latest in my series of six figure interviews, discussions with everyday people who have grown their incomes to at least $100,000 annually.
My questions are in bold italics and their responses follow in black.
Let's get started...
Tell us a bit about yourself (age, marital status, kids, where you live, etc.)
Single, no kids, late thirties, high-COL metro area.
What do you do for a living?
I'm a lawyer at a large corporate law firm.
How much do you earn annually?
It varies based on bonuses. Last year I earned roughly $350,000 due to a special retention bonus; this year, it will probably be more like $310-$320,000.
How does this amount break down (salary, bonuses, etc.)?
About 4/5 salary, 1/5 bonus (usually).
Do you receive any additional compensation/benefits from your employer (401k match, stock options, etc)?
There is no formal 401(k) match, but the firm has made fixed contributions in the past.
How long have you been working?
In this career, about seven years.
How long have you earned at least six figures?
4 out of the 7 years. The non-six figure years were actually in the middle, when I worked in a different sector for (much) less money.
What have been the key steps you have taken that have allowed you to earn this level of income?
I switched careers. Before that, I had never made more than about $30,000. I went to a top law school, where I did well. The starting salary in my area for attorneys at the highest-level corporate firms was $160,000 when I graduated. I was brilliant enough to have managed to graduate before the bottom fell out of the legal market. Since then, it's been a question of working 60 hour weeks (sometimes more), being reasonably responsible, and showing halfway decent judgment.
Which of the following career advancing strategies did you employ (if any) and which were most effective: a. Doing well within your current company and being promoted. b. Jumping around from company to company always seeking a higher salary & responsibility. c. Entirely changing your career path from a lower earning field to a higher earning field (going back to school, etc).
Well, my initial choice of career would probably have never taken me past six figures (or the future equivalent), so I'd have to say all (c).
What are you doing now to keep your income growing?
Associates receive yearly raises, assuming acceptable performance. The big discontinuity is coming up for me--eventually you top out if you don't make partner, and my control over that is very limited.
What are your future career plans?
I'm looking for more satisfying work in my field. I won't pretend I don't like this level of income, but it is, truly, more than I need, and I value my time more. Yet I'm ambitious enough that I still need my job to be challenging, so I can't just go anywhere. It's going to be tricky.
Have you been able to turn your income into a decent net worth?
Net worth is about $200,000. Decent? On what scale? Where I live, it wouldn't merit a second glance. Where I grew up, I'd be a high-roller.
Why or why not?
I graduated with student debt larger than my entire first year's salary (law school is stupidly expensive). I've paid that off, so I have no debt at all, but obviously I traded the possibility of investing that money for a better return for the security of debt repayment.
It's very expensive to live in my city. I've tried not to give in to the madness, but I haven't run an austerity program here, either. I'm also in the worst taxpayer's position of all, i.e., that of a high earner whose income is almost all salary, so I see only about half of my salary in each paycheck, and the AMT does a number on me every year. I do aggressively exploit every opportunity to spend pre-tax dollars (maximum FSA, transit benefit, 401(k) contribution).
Right now I'm saving about 35-40% of my net salary. I didn't start saving for retirement before I graduated from law school, as most adult years before then I didn't clear $20,000 in income. My assets are all in Vanguard index funds (or the closest I could come with my current firm's limited 401(k) offerings) or cash. I started saving near the top of the pre-crash market, so obviously I took some losses there. But I didn't take out any funds, and my holdings have rebounded with the market. And at least I haven't frittered away a lot of cash under the delusion that I can beat the market.
What advice do you have for people wanting to grow their incomes?
DON'T GO TO LAW SCHOOL, unless (1) you don't have to pay for it or (2) you get into one of the top ten schools and are prepared to commit to doing well. Yes, it worked for me, but the world has changed drastically in just the past few years. The market out there for young lawyers is brutal, and if you have a significant debt load, there's a serious chance it will end up crushing you.
It's easy to fall into the day-to-day routine, especially if you're working long hours. You need to always be thinking about, and trying to position yourself for, the next step. (This is a real challenge for me.) You should only be loyal to people or institutions who are loyal to you. Working extra hard is good if there's a reasonable chance that it will lead to positive attention, but don't invest yourself in a job that's just exploiting you.
Finally--and I expect to catch some heat for this one--keep in mind that your life circumstances to date may well limit how far you can go. I'm much better off than my parents, but I have had ridiculously good luck to go along with my hard work. Statistics don't lie: social mobility in the U.S. has been steadily decreasing. So, while additional money is always a good thing and often quite necessary, don't pin your self-worth to your income. In the end, it's not what you're going to remember as you look back on your life. And don't become desperate to make a big jump in wealth. The world is swarming with people and institutions who will be happy to hustle you while pretending to help.
My questions are in bold italics and their responses follow in black.
Let's get started...
Tell us a bit about yourself (age, marital status, kids, where you live, etc.)
Single, no kids, late thirties, high-COL metro area.
What do you do for a living?
I'm a lawyer at a large corporate law firm.
How much do you earn annually?
It varies based on bonuses. Last year I earned roughly $350,000 due to a special retention bonus; this year, it will probably be more like $310-$320,000.
How does this amount break down (salary, bonuses, etc.)?
About 4/5 salary, 1/5 bonus (usually).
Do you receive any additional compensation/benefits from your employer (401k match, stock options, etc)?
There is no formal 401(k) match, but the firm has made fixed contributions in the past.
How long have you been working?
In this career, about seven years.
How long have you earned at least six figures?
4 out of the 7 years. The non-six figure years were actually in the middle, when I worked in a different sector for (much) less money.
What have been the key steps you have taken that have allowed you to earn this level of income?
I switched careers. Before that, I had never made more than about $30,000. I went to a top law school, where I did well. The starting salary in my area for attorneys at the highest-level corporate firms was $160,000 when I graduated. I was brilliant enough to have managed to graduate before the bottom fell out of the legal market. Since then, it's been a question of working 60 hour weeks (sometimes more), being reasonably responsible, and showing halfway decent judgment.
Which of the following career advancing strategies did you employ (if any) and which were most effective: a. Doing well within your current company and being promoted. b. Jumping around from company to company always seeking a higher salary & responsibility. c. Entirely changing your career path from a lower earning field to a higher earning field (going back to school, etc).
Well, my initial choice of career would probably have never taken me past six figures (or the future equivalent), so I'd have to say all (c).
What are you doing now to keep your income growing?
Associates receive yearly raises, assuming acceptable performance. The big discontinuity is coming up for me--eventually you top out if you don't make partner, and my control over that is very limited.
What are your future career plans?
I'm looking for more satisfying work in my field. I won't pretend I don't like this level of income, but it is, truly, more than I need, and I value my time more. Yet I'm ambitious enough that I still need my job to be challenging, so I can't just go anywhere. It's going to be tricky.
Have you been able to turn your income into a decent net worth?
Net worth is about $200,000. Decent? On what scale? Where I live, it wouldn't merit a second glance. Where I grew up, I'd be a high-roller.
Why or why not?
I graduated with student debt larger than my entire first year's salary (law school is stupidly expensive). I've paid that off, so I have no debt at all, but obviously I traded the possibility of investing that money for a better return for the security of debt repayment.
It's very expensive to live in my city. I've tried not to give in to the madness, but I haven't run an austerity program here, either. I'm also in the worst taxpayer's position of all, i.e., that of a high earner whose income is almost all salary, so I see only about half of my salary in each paycheck, and the AMT does a number on me every year. I do aggressively exploit every opportunity to spend pre-tax dollars (maximum FSA, transit benefit, 401(k) contribution).
Right now I'm saving about 35-40% of my net salary. I didn't start saving for retirement before I graduated from law school, as most adult years before then I didn't clear $20,000 in income. My assets are all in Vanguard index funds (or the closest I could come with my current firm's limited 401(k) offerings) or cash. I started saving near the top of the pre-crash market, so obviously I took some losses there. But I didn't take out any funds, and my holdings have rebounded with the market. And at least I haven't frittered away a lot of cash under the delusion that I can beat the market.
What advice do you have for people wanting to grow their incomes?
DON'T GO TO LAW SCHOOL, unless (1) you don't have to pay for it or (2) you get into one of the top ten schools and are prepared to commit to doing well. Yes, it worked for me, but the world has changed drastically in just the past few years. The market out there for young lawyers is brutal, and if you have a significant debt load, there's a serious chance it will end up crushing you.
It's easy to fall into the day-to-day routine, especially if you're working long hours. You need to always be thinking about, and trying to position yourself for, the next step. (This is a real challenge for me.) You should only be loyal to people or institutions who are loyal to you. Working extra hard is good if there's a reasonable chance that it will lead to positive attention, but don't invest yourself in a job that's just exploiting you.
Finally--and I expect to catch some heat for this one--keep in mind that your life circumstances to date may well limit how far you can go. I'm much better off than my parents, but I have had ridiculously good luck to go along with my hard work. Statistics don't lie: social mobility in the U.S. has been steadily decreasing. So, while additional money is always a good thing and often quite necessary, don't pin your self-worth to your income. In the end, it's not what you're going to remember as you look back on your life. And don't become desperate to make a big jump in wealth. The world is swarming with people and institutions who will be happy to hustle you while pretending to help.
You must have had some serious student/school loans
Posted by: Limey Junior | January 24, 2014 at 09:18 AM
You've done very well in getting a position in a corporate law firm. I read recently "Don't Go To Law School (Unless): A Law Professor's Inside Guide to Maximizing Opportunity and Minimizing Risk" and it sounded really scary, a lot of people still live with the perception that the law profession is always profitable. I am in an industry that seems to be going soon the way the legal market already went, so can absolutely relate.
You probably realize it yourself, but you need a bigger net worth/savings buffer if you decide to trade income for lifestyle or if you don't make partner. I assume the $200K don't include house equity since you don't mention a mortgage, but if you are spending $130-150K a year (60-65% of net salary at your level of taxes) they won't last long . As you said, you need to position yourself for that step - and that includes a financial buffer.
Posted by: Ivy | January 24, 2014 at 09:22 AM
Thanks for sharing your story.
I agree with you that anyone considering law school should be very careful. It is a dangerous amount of debt, and there is no guarantee of a lucrative career waiting for you on the other side.
However, I don't think law school is necessarily a mistake based on your criteria of 1) having cash to pay, or 2) going to a top tier school. Even with the debt, many graduates will probably earn more over their lifetimes with their degree than without. Maybe they won't be filthy rich, but having such a limited scope of who should go to law school is telling anyone outside of the upper class to forget about it.
In any case, it's a good thing to have more info out there about the reality of massive debt and the reality of the legal job market. It will help people think through it. I just think a black and white view of who it's a good choice for is no better than the marketing of bottom tier schools saying it's a good choice for everyone.
Anyhow, seems like it worked for you! I know several lawyers, and your path of a firm job as a method of debt repayment before moving on to something more fulfilling is a common one. (President Obama did it too!)
Good luck to you!
Posted by: VA | January 24, 2014 at 12:45 PM
I love this profile. It really resonates with me because I am a similar high earning professional in a major city and I feel like a lot of the reason I got to where I am is timing and luck. Not that I'm not smart, but it's not always about that. Although I live like I won't have this high an income forever, so I have been saving 50% or so for the last four or five years which has allowed me to amass a net worth about 3x my salary.
Posted by: Brooklyn Money | January 24, 2014 at 12:49 PM
UPDATE: I have found a new job, in a slightly cheaper city, for a much, much lower salary, which will hopefully give me my life back while being more satisfying to do!
LJ: I suuuuure did. Including a little consumer debt, about $180K.
Ivy: I spent my whole life pre-law school living on a LOT less money. I'm sure it will hurt going back to that lifestyle, but I don't really have fixed costs to sustain: no mortgage/other debts, no car, and no dependents. So my lifestyle is basically up to me. I will be using a bit of saved cash to buffer out the first year or so. I'm anxious about giving up the security of the larger salary, but I do believe I can adjust.
VA: The problem is this. There is a bimodal distribution of income amongst starting lawyers. At one end, the people starting at $160K--an ever-dwindling group. At the other end, people earning about $45K. There is very little in the middle (picture a U shape). Barring a few special circumstances, you simply can't service typical law school debt if you're on the left-hand side. It's a brutal trap I see far too many contract (temporary) attorneys in. (For the record, my family was nowhere in the vicinity of upper class.)
Posted by: Interview 11 | January 24, 2014 at 01:15 PM
"Statistics don't lie: social mobility in the U.S. has been steadily decreasing."
20 year study by top economists including from Harvard as reported yesterday disagrees:
http://www.washingtonpost.com/business/economy/economic-mobility-hasnt-changed-in-a-half-century-in-america-economists-declare/2014/01/22/e845db4a-83a2-11e3-8099-9181471f7aaf_story.html
http://www.nytimes.com/2014/01/23/business/upward-mobility-has-not-declined-study-says.html?_r=0
Posted by: Apex | January 24, 2014 at 03:01 PM
Interview11....I don't agree with every point, esp. the mobility one...but otherwise you seem very grounded. I like that!
I think the biggest way people kill themselves financially is having kids out of wedlock and divorce. Reduce the scope of those 2 problems and you have more economic mobility. (Not a panacea, I know....but it definitely would help).
Posted by: Mark | January 24, 2014 at 04:19 PM
Interesting post, as I was also in Biglaw until very recently. I took a $150k pay cut to take the job I'm at now and have zero regrets. Good luck!
Posted by: MJ | January 24, 2014 at 04:48 PM
I too would affirm the advice on not going to law school. Law schools have not adjusted their tuition to the new reality. Everyone wants to charge a tuition that only makes sense when biglaw is booming and partnership was lock step. The reality is that partnership is a crap shoot even for those who went to the best schools and are awesome lawyers. And biglaw is shrinking and the U shaped distribution is dead-on.
Posted by: JACK | January 24, 2014 at 08:40 PM
MJ: I hope it'll be the same way for me. Thanks!
Brooklyn Money: If you're saving 50% of your salary and living in Brooklyn, you're very self-disciplined indeed.
Posted by: Interview 11 | January 24, 2014 at 11:01 PM