OffBase_IHB
New member
<p>Mel, </p>
<p>Payoff debt as much as possible but get that 10% down payment saved. 7.5% interest rate on student debt (which at your income level is not tax deductable) is outrageous and therefore mortgage debt is better. Obviously, get rid of those car loans and high interest student loans. </p>
<p>Also, forget Newport, it's THE classic golden handcuff. Should you or your wife decide you hate law or hate your firm you'll do something else and won't make nearly as much money. Newport will still be expensive in 2-3 years (not as much so as now) and you won't be able to afford a house with a yard. Frankly, it will be hard to afford even working at a large firm. I have a friend who got offered a great job inhouse but ultimately couldn't afford the paycut because she and her husband (who also makes a lot) bought a newport coast house. Newport nowadays (unless you bought a long time ago) is a lifestyle that only the uber-wealth can afford and for most isn't worth it. </p>
<p>I've worked at big firms for almost all of my career, in NY and LA/OC. As others have observed, the majority of people burn out by years 4-5 and many burn out much sooner. I remember <em>every</em> single person from 1 summer class years back was gone by year 5. If you are consistently billing 2500+ you will end up divorced or in a very unhealthy marriage and/or be a very bad parent. Believe me, I'd done a 2800 hour year before and wanted to kill myself by the end. If you're busy than your busy but I'd say that as of a year ago, the majority of associates billed more around 2200 hours, which is still pretty hard to do. </p>
<p>Incidentally, my former firm here in OC along with several other big firms just raised 1st year salaries to $160K + year end bonus! Sure a lot of that is going to taxes, but you and your wife should be able to save 10% down pretty soon if you don't blow it living the OC lifestyle. I'm still astonished that a 25 year old with no real practical skills can earn that much. 9 years ago, starting pay was about $80-90K.</p>
<p>The key in your situation now is flexibility as you don't know exactly what you will want in 2-4 years as well as in about 8 years. So paying down debt gives you that flexibility. Many people are stuck at big firms because of the lifestyle they live. Go on Lexis sometime and do a property/deed record search of some of the mid to senior level associates at your firm. You can see how much they bought their house for, how much they owe, and who has taken out additional loans from the paper money they've "earned" on their property appreciation. That will explain how a lot of people can pay for their land rovers and who will be stuck at big firms for their foreseeable future - until they are pushed out in years 8-9 when they don't make partner. </p>
<p>For the majority of big firm lawyers, exit opportunities will mean you'll earn less. There are obviously exceptions, but can you really count on opening up your own shop and hitting big on a contingency fee case in 9 years? Also, you have to take into consideration that you're wife may want to stay home with the kids which means you may only have 1 bread winner. So the key is to maintain flexibility, not to keep up with the Jonses. </p>
<p>Payoff debt as much as possible but get that 10% down payment saved. 7.5% interest rate on student debt (which at your income level is not tax deductable) is outrageous and therefore mortgage debt is better. Obviously, get rid of those car loans and high interest student loans. </p>
<p>Also, forget Newport, it's THE classic golden handcuff. Should you or your wife decide you hate law or hate your firm you'll do something else and won't make nearly as much money. Newport will still be expensive in 2-3 years (not as much so as now) and you won't be able to afford a house with a yard. Frankly, it will be hard to afford even working at a large firm. I have a friend who got offered a great job inhouse but ultimately couldn't afford the paycut because she and her husband (who also makes a lot) bought a newport coast house. Newport nowadays (unless you bought a long time ago) is a lifestyle that only the uber-wealth can afford and for most isn't worth it. </p>
<p>I've worked at big firms for almost all of my career, in NY and LA/OC. As others have observed, the majority of people burn out by years 4-5 and many burn out much sooner. I remember <em>every</em> single person from 1 summer class years back was gone by year 5. If you are consistently billing 2500+ you will end up divorced or in a very unhealthy marriage and/or be a very bad parent. Believe me, I'd done a 2800 hour year before and wanted to kill myself by the end. If you're busy than your busy but I'd say that as of a year ago, the majority of associates billed more around 2200 hours, which is still pretty hard to do. </p>
<p>Incidentally, my former firm here in OC along with several other big firms just raised 1st year salaries to $160K + year end bonus! Sure a lot of that is going to taxes, but you and your wife should be able to save 10% down pretty soon if you don't blow it living the OC lifestyle. I'm still astonished that a 25 year old with no real practical skills can earn that much. 9 years ago, starting pay was about $80-90K.</p>
<p>The key in your situation now is flexibility as you don't know exactly what you will want in 2-4 years as well as in about 8 years. So paying down debt gives you that flexibility. Many people are stuck at big firms because of the lifestyle they live. Go on Lexis sometime and do a property/deed record search of some of the mid to senior level associates at your firm. You can see how much they bought their house for, how much they owe, and who has taken out additional loans from the paper money they've "earned" on their property appreciation. That will explain how a lot of people can pay for their land rovers and who will be stuck at big firms for their foreseeable future - until they are pushed out in years 8-9 when they don't make partner. </p>
<p>For the majority of big firm lawyers, exit opportunities will mean you'll earn less. There are obviously exceptions, but can you really count on opening up your own shop and hitting big on a contingency fee case in 9 years? Also, you have to take into consideration that you're wife may want to stay home with the kids which means you may only have 1 bread winner. So the key is to maintain flexibility, not to keep up with the Jonses. </p>