My name is Joshua and I write about investing and financial topics over at The Biglaw Investor.
Before I go any further, I’ve looked through all of Gen Y’s previous Financial Freedom interviews to find one with the most comments (current record holder is White Collar Freedom).
I want this to be Gen Y’s most commented on interview to date. Competitive? Maybe.
In order to get a lot of comments from you, I’ve got an ASK and a PRIZE:
THE ASK: This interview series is all about FIGHTING for your financial freedom. Freedom will not be handed to you. So, in the comments, tell us ONE concrete thing you will do after reading this post to get you closer to financial freedom. It has to be something that you haven’t already done (i.e. you must tell us something that you’re going to do, so it needs to be actionable). This is going to be most challenging for people well on their way to financial freedom, but everyone reading this post knows they could be doing something more.
THE PRIZE: Ever notice that when you learn something, it usually involves video, text & images … but it’s always delivered over the web?
How often have you been on the internet trying to learn something, but instead you get distracted by something else? ALL THE DAMN TIME right?
Well there’s always been one format that I’ve learned from the most … and that’s books.
Normally when you’re reading a book, you’re not doing anything else.
This might seem like a small detail, but sitting down and reading a physical object makes it sink in much much much deeper.
SO WHAT’S THE DAMN PRIZE?
A committee of two (GYFG and myself) will pick the best comment on this interview post to receive a PHYSICAL box in the mail.
And I’m calling it the Biglaw Investor Box.
It’s a physical package you get in your physical mailbox. You win the prize, you wait in anticipation to get it, and a few days later a REAL thing shows up at your door (it’s like Christmas … but for nerdy adults)!
Inside the Biglaw Investor Box are several things (I will purposely be vague to keep it secret, and keep you in anticipation):
- Maybe there will be a book or two.
- It might have a physical object that I love and use everyday.
- It might have some words of wisdom written down on an actual piece of paper.
- Perhaps some other helpful tools.
Only the person with the best comment will know!
Ok … back to telling my story for a bit.
I’m a corporate M&A lawyer working in the private equity group of a law firm in New York. Each day I wake up at 6:00am to get an early start on the day because I’ve found over time that the morning hours are my most productive. I’m also in bed by 10:00pm (okay, 9:30) most nights. I learned a long time ago that everyone needs to listen to their own body when setting those schedules.
My journey started with nearly $200K in student loan debt when I graduated from law school. I’d always been good with money and made a calculated bet that law school would be better for me in the long run (turns out, I was right). Even going in with my eyes wide open, I’m shocked at how long it took to repay the debt. I didn’t count on going through law school during a particularly unfortunate time when student loans were fixed between 6.8% and 8.5% with no refinance options in the private market. I paid over $14,000 interest in the first year of repayment. It’s kind of hard to make progress paying down the principal when you’re spending $1,150 a month on interest.
However, the mountain is always tallest when you’re standing at the base. I tried to keep in mind that $200,000 in debt would ultimately just be a drop in the bucket if I planned on reaching my financial goal of becoming a multi-millionaire. For those reasons, you just start paying down the debt and count on the fact that time will keep moving forward.
I didn’t get through the debt payoff years completely unscathed. There was that time that I made the worst financial mistake of my life and lost $10,000 when I thought I had special insight in the market. It took some time for me to realize the wisdom of index funds. For a long time I thought being average was for average people and still find it ironic that by investing to get the market return you’ll beat something like 80% of all investors. It turns out that it really is the financial helpers that get rich when people trade stocks.
As I’ve gone through the ranks at the law firm, I’m often surprised by the financial mistakes lawyers make. Many people think lawyers are rich, but there’s a reason why lawyers are underrepresented in The Millionaire Next Door. Nowadays the lawyers making high salaries live in high cost areas, spend plenty of money keeping up with the Joneses and neglect to remember that they need to save more thanks to getting a late start in their career. I started my site to create a future repository of financial information for lawyers and other high-income professionals.
What is your favorite Quote or Mantra that you live by?
My favorite quotes are often brilliant one sentence statements by Mark Twain. The one I remember daily is:
“I’ve been through a lot of bad things in my life, some of which actually happened.”
It’s a steady reminder that we’re meant to live life in the present moment. We all get stuck going through imaginary future events, many of which never come to pass.
Another favorite of mine (I can’t just list one Mark Twain quote) is:
“When I was a boy of fourteen, my father was so ignorant I could hardly stand to have the old man around. But when I got to be twenty-one, I was astonished at how much he had learned in seven years.”
What is your definition of Financial Freedom?
Financial Freedom is when you are free from finances. You’re free from finances when you can live life as you choose without regard to financial considerations. I’m one of the lucky ones that enjoys practicing law, but I’m aware that each morning I show up at a particular building on a particular street because someone is paying me to do so. I certainly wouldn’t show up for free.
What is your FREEDOM number?
I don’t have a particular number. The reason? In my mind it would suggest I’m doing my current gig UNTIL I reach that number, at which point I’ll finally start living the life I want. I think that’s a trap. Too often we humans think life will be better once something we’ve been waiting for finally happens. It reminds me of the rat race comic (click through to see) of rats running through a maze with signs that say “happiness is right around the corner.” I’ve got news for you. Happiness isn’t right around the corner. Happiness starts today. So while I don’t have a particular number in mind, I admit that I’m heavily motivated by money (and competitive as I mentioned before). In fact, now that I think about it, $10,000,001 sounds like a pretty good freedom number to me.
What is your favorite Asset Class to invest in and why?
I’m a big fan of keeping things simple, which means investing in index funds at Vanguard. When I was younger, I dabbled in stock picking and had some success and other failures. It consumes a lot of your time to pick and follow stocks. It’s better to spend that time invested in growing your income. Also, I’m not convinced that anyone can beat the market. Have you ever thought that out of 300 million people if everyone is calling heads or tails on a series of random coin flips, someone is going to nail it 100,000 in a row? And that person will become famous for his or her ability to predict coin tosses? And we’ll totally buy into it? I’m not saying that’s Warren Buffett, but think about it for a few minutes!
What is your favorite online financial resource?
My favorite resource is the Bogleheads forum. It’s truly a gift to the world and completely free. The owners don’t even monetize it for themselves, which means they’re forgoing millions in revenue to support the right thing. I really admire Alex Frakt for that decision.
If you haven’t visited, the Bogleheads is where all the really smart and nice people on the Internet hang out. So yeah, it’s basically the opposite of YouTube comments. The collective knowledge of the group is powerful and helpful in answering the trickiest questions (including complicated tax stuff). Chances are good that any financial question you’ve had has already been asked anyway, so the forum archives is a treasure trove of helpful answers.
When it comes to building wealth, do you spend more time figuring out how to cut expenses or increase income? Why?
Here’s a funny fact about Biglaw. Everyone gets paid the same. Even better, you’re automatically promoted each year regardless of merit (the downside being that if it’s not working out, you’ll quickly be let go). In fact, for your voyeuristic pleasure I’ll lay out the Biglaw salary scale for the readers. Bonuses are also “market” every year and usually set by the most prestigious firms at the end of November. Pretty weird that everyone knows what everyone is making, right?
1st year – $180,000
2nd year – $190,000
3rd year – $210,000
4th year – $235,000
5th year – $260,000
6th year – $280,000
7th year – $300,000
8th year – $315,000
For this reason, there’s not a lot I can do to increase my income at my day job. That’s different if you can break into the ranks of equity partnership, but being an equity partner at a firm usually has less to do with your skills as a lawyer and more to do with your skills at bringing in clients.
Despite all this, I still think it makes sense for most people to adopt an abundance mentality and work on increasing their income. When it comes to cutting expenses, my main push is for people to realize how much unnecessary spending is going on in their lives. High income is like sand flowing through your fingers. It’s easy to spend money on things you don’t like or even need without much consequences, so high earners should make sure to audit their expenses and take steps to limit lifestyle inflation, even more often and carefully than people earning an average US income.
How many hours a week do you watch TV? What’s your favorite show?
I’m not much of a fan of TV and haven’t had cable for years. I’ve learned from living abroad that the NFL has a high quality service called NFL Gamepass that lets you watch any game live in HD. Once I figured out how to get that in the States and on my Apple TV, I’m all set for live events.
Otherwise, my favorite show right now is probably Air Disasters. Understandably, it’s not everyone’s cup of tea, but they do a really impressive job breaking down each component of a major airline crash and reconstructing what went wrong. Oddly enough I feel safer after watching Air Disasters because you start to understand that it takes a lot of errors to actually bring down a plane. I won’t blame you if you don’t watch.
If you had to recommend 1 book, what would it be? And why?
How to Get Filthy Rich in Rising Asia by Mohsin Hamid. It’s fiction but written in the style of a self-help book and follows an unnamed reader that rises from poverty to riches in – you guessed it – rising Asia. Each chapter begins with a rule — “Work for Yourself,” “Don’t Fall in Love,” “Be Prepared to Use Violence” – and then switches over to narrative. I haven’t read another book like it and highly recommend you read the first chapter from Amazon. You’ll know quickly whether it’s your type of book or not.
What is the best piece of advice you have ever received or what advice would you give to the readers?
Realizing that you have to make the difference you want to see in your life. Steve Jobs sums it up nicely in this short video saying that “everything around you that you call life was made up by people no smarter than you.” It’s a profound realization when you realize that you don’t have to participate in the system (no matter what the “system” means to you) and that you are much more free to break the rules than you realize.
What does living life by design look like to you? A typical day, week, month, year, or whatever?
Being conscious, focused on the present and realizing that you’re making a choice no matter what you’re doing (and in fact, not choosing is a form of choosing as well). Living a life by design means taking on the active voice in your own life and being the force of change. Funny thing is it doesn’t even take much force to make big impacts. As the Roman poet Ovid said, “Dripping water hollows out stone, not through force but through persistence.”
What is holding you back from living life by design?
Nothing. I’m not yet financially independent, but that’s not stopping me from living a life by design. I’m choosing to build wealth because it is the right choice for me now. When it’s no longer the right choice, I hope I’ll have the courage and foresight to make a different choice.
Where can you find me?
I have all the usual social profiles, but the best place to find me is at The Biglaw Investor. It’s been great to have the opportunity to share my story and path to financial freedom. Thanks for thinking of me GYFG and allowing me to be part of your Freedom Fighter Interview series.
p.s. Don’t forget to leave a comment for your chance to win the Biglaw Investor Box.
p.p.s. Yes, we will need your mailing address to send you the prize since it’s a physical box.
Thanks GYFG, it was really fun doing this interview series.
I’m putting the finishing touches on The Biglaw Investor Box and looking forward to sending it to the winner.
I’m also excited to see what your readers come up with, since I think we’re all looking for way to gain the slight edge.
For me, I’m starting a trial this month where I’m going without voice service on my phone. I think voice service is going the way of the dinosaurs. I know I rarely use it. I’m still keeping the data plan, so should have no problem making VOIP calls on the mobile network or on wifi (since VOIP calls on wifi often sound better the regular phone calls anyway). I’ll report back on how it goes!
I appreciate your contribution to the GYFG community. Looking forward to hear what is in the box you are putting together…but seems like the book “how to get filthy rich in rising asia” should be considered :)
How much cheaper is it for you to get rid of the voice part of your phone? Does this also mean you will not have a dedicated phone number? Or will you port it over to something like Google Voice?
My phone bill this month should be about $5 (I say “about” because I have a data only plan where I pay for my actual data consumed). I ported my phone number over to Google Voice. So far it’s working great. I’m still getting regular calls and text messages without any interruption.
Huh, I thought most big law firms were on a tiered bonus system. Learned something new today.
Bonuses are tiered, although not all firms match the “market” bonus. It’s in the bonus where firms start to differentiate themselves a bit. Each year the bonuses are announced in late November / early December. Last year the bonuses were as follows:
Class of 2015 — $15,000 (pro-rated)
Class of 2014 — $15,000
Class of 2013 — $25,000
Class of 2012 — $50,000
Class of 2011 — $65,000
Class of 2010 — $80,000
Class of 2009 — $90,000
Class of 2008 — $100,000
Class of 2007 — $100,000
I read How to Get Filthy Rich in Rising Asia and highly recommend it. Very creative writing and pretty eye opening.
My action out of this is to get to work increasing my income! Unfortunately that means getting off the blogs for a little bit…
Nice Brian! Such a great read and really a perfect fiction book for this community. Cool to hear that you’ve read it too.
Glad to see you talk about raising your income. That’s one of the things I like about this blog, since it’s pretty clear GYFG is focused on abundance and expanding the pie. I think the same way. Although I can be ruthless about cutting expenses that aren’t necessary, most of my time is spent trying to increase income. It’s just a lot easier to move the needle that way than it is to cut expenses.
I have heard the recommendation from too many sources not to read it…officially added
Get Filthy Rich in Rising Asia.
Really identified with this post (as a lawyer too)…. My concrete step is going to be finally refinancing my high interest student loans to drop the rate and also to shorten the payment term. Paying off the loans will certainly help my pocketbook, but I am more hopeful that it will help feel like the anchor has been lifted.
Thanks for the comment @JR. Also appreciate the email you sent me separately. Looking forward to getting to know you more. Loan refinance sounds like a great idea!
Great to see you on here Josh! The biggest lesson that I learned was that the average return beats out 80% of other investors. This is why no matter what happens, I’m going to be staying the course, contributing to my 401k without adjusting the contribution rate to max it out by the end of the year. S&P500 all the way!
Nice to see you here Finance Solver. Maxing out your 401(k) is a sure path building wealth. And why try to find the needle when you can buy the haystack. Sounds like you have a great plan.
Big law M&A associate here. Despite the market base and bonus, you can increase your take home pay substantially by working in Asia. COLA and housing allowances resulted in bigger paychecks during my 3rd and 4th years than I made as a 5th year when I returned to a US office.
Hey @JS – Nice to see another biglaw M&A lawyer! Very cool that you took advantage of COLA and housing allowances to boost your net worth. I have a co-worker that spent two years in Dubai doing the same thing. I’d love to talk to you more about your experience. If you’re game (or anyone else who wants to reach out), send me an email:
My concrete step is to finish the book and decide LLC or Sole Proprietor. Plus figure out first steps to get it in place, other than picking a name.
My goal is to use my business to funnel my side hustle earnings into a small business 401k to #1 reduce taxes #2 not be tempted to spend the money if is mixed in with regular savings #3 get closer to the 401k max. I would have minimal savings if I max out through work. Because my outside of work earnings vary, if it goes to 401k saving, I’ll be able to save without feeling the difference.
Thanks for the motivation to finish the book!
P.s. I am envious of your bonus and salary structure being common knowledge. Our bonus is based on how well the company did (or not). One year they had extra money in our department so my bonus was more, the next year they managed to find fault in my performance and I got very little. This year I wasn’t with the (new ) company long enough to be eligible. We will see what the next round of bonuses holds.
Jacq – This sounds like a great next step! Glad to see you doing it and also glad to hear that your side business is making enough money to warrant the costs/work of forming a Company. Keep in mind that if you have multiple 401(k)s you can only make the employee contribution of $18,000 once. On the profit sharing side, for your side hustle, you can contribute 20% of your net earnings from self-employment income. You’ll have to do some digging on this if it’s a new concept to you.
Just out of curiosity, if you are making decent side hustle money, wouldn’t it be easier to max out your 401(k) through the day job and supplement your income as needed from the side hustle? This way you won’t have to worry about the hassle or expense of setting up your own 401(k). Once you’re at the point where you are maxing out the day job 401(k), then you could look into opening up a Solo 401(k) and contributing 20% of net earnings there.
Really enjoyed this interview Joshua and GYFG. I especially like how you point out the lifestyle inflation trap that a lot of lawyers fall into. The income really is like sand. Lawyers get their money, and then out the door it goes. Don’t forget the high attrition that comes with the biglaw turf. That means if something happens and your income drops (which happens for ALOT of lawyers, including yours truly), your suddenly in trouble and either forced to scramble for another firm job or make cuts when you’re not used to it.
During my entire time I worked in a big law firm, I got the same thing. I’ll be fine because I was making a lot of money. I’m sure you hear the same thing too. While you do make a lot of money, there’s a lot of mistakes that can really set you back if you aren’t wise and careful with it.
An example of a mistake I see a lot of my colleagues make: letting their student loans sit around instead of taking the time to pay them off while they’re making a good income and have less family responsibilities (i.e. most young lawyers don’t have kids, houses, or other big obligations when they start out).
Attrition is very high at law firms. Of my incoming class, only about 10% are still in positions with big law firms. Most have jumped ship or been pushed out. Despite the evidence of this all around them, plenty of first year associates adopt the mentality that the money will be coming in forever. As you said, they’re in for a pretty rude awakening when their income drops dramatically. There’s nothing more disheartening then when I talk to someone who spent two years in Biglaw only to make almost zero financial progress (it’s not that uncommon actually). The only good thing is that it only takes one experience like that for most people to snap into a much different posture on their finances and it’s not like they’ve committed some fatal error by being stupid for two years. They can and will bounce back.
I’m with you in the student loans. People make the “math” argument all the time. It seems so smart to string out your student loans at 3% while you’re making 7% in the market. The problem is that the person making the statement is often not investing the extra money. They just think they’re being clever only to find out much later that it’s still a pain in the ass to be carrying around six figures of debt.
Fun interview guys!
I think I would have a heart attack if I graduated from college and grad school with $200,000 in debt. Good thing I wasn’t smart enough to get it into any good college or a good graduate school! Otherwise, I would’ve gone!
It’s really good you are practicing law. I know many friends who studied law school and didn’t end up doing anything law related.
The law your income path Kinda reminds me a lot about the blogging income path if you can make it. That’s why I love blocking so much because anybody can do it.
What percentage of people get to become partners think once they enter big law?
in banking, the base salaries are very steady as well but the bonuses can range and enormously based on performance.
Thanks Sam! You got lucky to skip out on those expensive graduate schools. Law firms are real cash cows for universities. You have all these people willing to spend $30K a year for tuition and, best of all, it scales wonderfully – no problem if you stick 200 of them in an introduction to contracts course.
Bankers do have variable bonuses. I wonder why that’s different from law. In the legal field, the business owners have recognized that it’s better to keep the profits for themselves. However, in banking, it seems that the business owners want to share the profits with the employees. Why are bankers so altruistic? Do you think it’s because they have so much money that they don’t mind sharing it?