Where All That Associate Money Goes

Graduate School Law School
21

<p>I was certainly not suggesting that $160,000 is not a ton of money for a young lawyer to be making. I made it just fine on a lot less than that when I first started practicing (though I also shared a tiny one bedroom apartment on the fifth floor of a walkup with a girlfriend (those moving to NYC will quickly learn about temporary walls that get built across many a living room to create a small second bedroom) and ate only two meals a day to make things work). </p>

<p>The point I was trying to make is that the money that a lawyer makes is hardly the windfall that many of the college students here seem to think it may be. Living with a large amount of student loans will never be easy. The good news for young lawyers who are fortunate enough to make a good deal of money is that they can afford to take those loans, make the payments and live fairly comfortably (though not luxuriously). The good news is that every year, a lawyer should get a raise that will make it that much easier to have some breathing room in his or her budget (though many people do "live to their means" and simply spend more because they make more -- there is also very frequent the "I work so hard, I deserve this" philosophy that leads to many purchases of expensive suits, shoes and gadgets). The bad news is that not everyone can get a job that pays $160,000/year, and not everyone who gets one of those jobs will want to keep that job once they experience the sacrifices it entails.</p>

<p>The reality remains that a young lawyer, even one making $160,000/year, is often making less money on an hourly basis than many others who make much less on an annual basis.</p>

<p>An aside -- I believe that the $1,453/month number also represents all of those who work in Manhattan, not all of those who live in Manhattan. I would guess that plenty of the people making the average wage are not living anywhere in Manhattan or Brooklyn where a young lawyer would likely want to commute home at 2 a.m., either because the neighborhood is remote (many people have very long commutes to NYC each day, so that they can live in more affordable areas -- I'm talking about over 90 minutes in each direction to get to work in NYC each day) or because the neighborhood is unsafe.</p>

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<p>Another tidbit of information : a friend who just graduated from USC law school (a top 20 law school) accepted an offer of in-house attorney starting at $75K a year. Don't know how much he borrowed to finance his education but I know he didn't get financial help from parents.</p>

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An aside -- I believe that the $1,453/month number also represents all of those who work in Manhattan, not all of those who live in Manhattan.

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<p>Fair enough, then let's consider the following quote from the NYTimes.</p>

<p>"Manhattan's highest-income census tract is a six-square-block rectangle bounded by Fifth and Park Avenues and East 56th and 59th Streets. The median household income in this mostly commercial section of East Midtown is $188,697..."</p>

<p><a href="http://www.fiscalpolicy.org/SamRoberts4Sep05.htm%5B/url%5D"&gt;http://www.fiscalpolicy.org/SamRoberts4Sep05.htm&lt;/a&gt;&lt;/p>

<p>So if you're making 160k to start, that means that you'e still probably in your 20's, and you're making an income that is fairly close to the median of the * wealthiest * census tract of Manhattan. That tract presumably also consists of plenty of people who are far older and more experienced than you. Hence, I infer from that that such a lawyer is financially better off than the vast majority of people who live in Manhattan, and at a relatively young age to boot. That seems to be a quite nice deal. </p>

<p>All the talk about how expensive it is to live in Manhattan is certainly true, but also holds for * everybody* who lives there, not just the lawyers. What can I say? That's the New York lifestyle. Seems to me that plenty of other Manhattanites somehow manage to get by on far less money. </p>

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he reality remains that a young lawyer, even one making $160,000/year, is often making less money on an hourly basis than many others who make much less on an annual basis.

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<p>While I partially agree, I would also say that this sounds like the 'lament' of the beginning investment banking analysts who, while not making a lot of money on a per-hour basis, are still making a ton of money overall. It's hard to feel sympathetic for them simply because there are plenty of people who would love to trade places with them. Similarly, I am quite sure that a lot of people in Manhattan would love to trade places with a 160k lawyer, even if he does have to work deathly hours every week and deal with student debt. </p>

<p>Now, don't get me wrong. I agree with the point that young aspiring lawyers shouldn't think that they're going to be living a luxurious lifestyle right from the get-go and there is certainly plenty of career risk in assuming a great deal of debt and then not getting a high-paying offer. </p>

<p>But I also think we should separate that from the general problems of living in a high-cost-of-living area like New York, because those problems are clearly not specific to lawyers, but are characteristic of everybody who lives there. </p>

<p>Besides, I would also point out that there is a basic reason why New York is so expensive. Simply put - it's a very desirable and interesting place to live. You live in New York, and you have access to a menu of cultural, recreational, educational, gastronomical, and social activities that is unparalleled anywhere in the world except perhaps London (and even that is debateable). To paraphase Johnson, when a man is tired of New York, he's tired of life. If nobody wanted to live in New York, it wouldn't be so expensive, simply because of market forces. </p>

<p>Now of course, I agree that as a young New York lawyer, you are basically chained to your desk with little time to actually enjoy what the city has to offer. But of course the idea is that after paying off your debt, you can consider taking a lower-paid but less intense corporate in-house job that will give you the time to enjoy the New York lifestyle.</p>

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<p>I too live in NYC and less luxuriously, I gather, than Sally. There are ways in which it's actually cheaper to live here. For example, that $76 for a 30 day metro card sure beats the cost of having a car. (You can rent one on weekends if you need one.)</p>

<p>For anyone who really wants to do this...one CRITICAL piece of advice is to go looking for apartments WAY in advance of move-in date. There's no two ways around the fact that housing costs are HIGH in NYC. I am not trying to dispute that. But, if you show up to look for the first time two-three weeks before you start working and HAVE to find a place within that time frame, you may end up hiring a broker and paying him a high fee. Or you may end up in a brand new or just renovated building with all the modern conveniences and sky high rent. Or just generally having to take the first decent place you see.</p>

<p>Come early and at least scope out neighborhoods. If you work for one of the downtown firms, it may not take much longer to commute to Hoboken via the PATH than to the Upper East Side via the subway. Due to the way the subway routes are constructed, I can get to Rockefeller Center faster than anyone who lives on the Upper East Side can, and the rents in my neighborhood are substantially lower. (And, no, I'm not saying where I live.) </p>

<p>In NYC, physical distance doesn't necessarily equate with commuting time. I was reminded of this this week when I had a doctor's appointment further from my home than my office. I left from home, and got there in less time than I spend commuting to work. Why? I have to take a local to get to my office; the doctor's office is right next to an express stop, so I could take an express all the way. </p>

<p>Usually, if you work late, the firm pays for your cab ride home...right to your door. And just because a neighborhood is in the outer boroughs does NOT mean it's sketchy.</p>

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I too live in NYC and less luxuriously, I gather, than Sally.

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<p>I'm happy to hear that you think so, but I promise that, unfortunately, there is little that is luxurious or glamorous about my little piece of NYC. </p>

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For anyone who really wants to do this...one CRITICAL piece of advice is to go looking for apartments WAY in advance of move-in date.

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<p>Unfortunately, most real estate brokers specializing in rental apartments will tell you that NYC is generally a one month market, meaning that most brokers do not know about and do not get listings until approximately a month before that apartment is available for rent. This makes for the unfortunate situation where many people looking for apartments are between a rock and a hard place throughout the process. Oh, and then they get to pay the brokers a fee of 15% of annual rent just for the pleasure . . . . I agree that having an idea of what neighborhoods work for you is a fantastic idea, and that physical distance often does not equate with commuting time. </p>

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And just because a neighborhood is in the outer boroughs does NOT mean it's sketchy.

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<p>I never suggested that outer borough neighborhoods are uniformly sketchy. There are sketchy Manhattan neighborhoods. Unfortunately, though, many of the apartments listed on craigslist, the Village Voive and other places for what seem to be reasonable or affordable rents are, in fact, in sketchy neighborhoods or in bad locations within nice neighborhoods. There is definitely a lot of legwork required for a first time NYC resident when searching for that first apartment.</p>

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So if you're making 160k to start, that means that you'e still probably in your 20's, and you're making an income that is fairly close to the median of the wealthiest census tract of Manhattan.

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<p>I can virtually guarantee that no one making $160,000/year without substantial supplemental income from parents, grandparents or a large stock portfolio can actually afford to live in that tract of Manhattan real estate -- 10021.</p>

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<p>sally is on the money. 160K/yr isn't great. last time I checked 1 bedroom condos in the meatpacking district were going for about $1m. and thats not even an "ultra-desirable" manhattan neighborhood.</p>

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<p>Great breakdown sally. You might have read some of my posts in the MBA section (I work in finance), but came over to check out this part of the board. There will be some critics who think if you're not saving much on $160k it means you are blowing money away but that simply isn't true in high-cost areas. In fact there was an article I read recently that said $75-$150k is middle class in New York and personally I think it should be up to $200k that is middle class. While you can cut down expenses in some areas it is not necessarily a proper choice. When you work in demanding careers there are certain conveniences you almost HAVE to have. Living near your office in Manhattan is one of them, having your laundry done professionally is one of them (especially when you work long hours and wear suits everyday). Having nice suits is a must, you can't work at a high-power firm and walk around in cheap suits. Your social circle will often end up consisting of other "successful" people, when you go out you go to better places (i.e. you and your friends aren't going to go to Red Lobster for dinner). So dining out and drinking costs more - it's part of the life. My first year in banking my salary was about $160k as well and I didn't save much of it, maybe $20k or so, and I didn't spend lavishly on anything, no big flat-screen TVs, no cars, no wild gambling sprees, etc. Just lived in a way to make my non-work life stuff a little bit more convenient. </p>

<p>To all the lawyers and bankers, present and future, on this board, the best thing you can do is not to increase your spending too much year by year. Since in our fields your income increases dramatically each year you will soon start saving lots of money if you can keep your spending in line with your spending during your first year. I think you lawyers typically get your base raised by a lot but your bonus is relatively small right? In banking our base doesn't increase by much but bonuses increase by a lot. I'm at a hedge fund and my compensation is mid-to-high six figures right now but my base is just $150,000. What I do is live solely on my base salary (even save some of that) and just bank my bonus which is the bulk of my compensation. Taxes are a pain, they take out almost half your salary. I've been on personal finance boards where you have a lot of people (not in these kinds of fields) say things like "anyone who doesn't think $100k is a lot of money is spending foolishly". There's no way for these people to understand that one of the benefits of earning a lot is also living well, sure I can live in little apartment in Queens, buy suits at Mens Wearhous, and live cheaper, but we choose to go into these types of careers and work our butts off to get into them so we can live well.</p>

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<p>"There's no way for these people to understand that one of the benefits of earning a lot is also living well, sure I can live in little apartment in Queens, buy suits at Mens Wearhous, and live cheaper, but we choose to go into these types of careers and work our butts off to get into them so we can live well."</p>

<p>I do it to save money, not to live well. I do live in a lower-cost area, and I buy my suits half-off at the outlet mall, and right now I'm wearing a dress from eBay and shoes from Payless. There's a lot more diversity among high-earning young people than you suggest.</p>

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<p>I'd like to emphasize again that all of sallys posts are about 100% accurate. If you take anybodys opinion, take sallys.</p>

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<p>Do Associates in Los Angeles, Chicago, Boston, Philly, etc usually earn as much as the Manhattanite ones?</p>

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<p>The starting salaries for associates at the most prominent firms in most of those cities now range from $140k- $160k. Starting salaries at the large firms for a city like Baltimore range from $115k to $140k. From there, the firms give lockstep raises for a few years, and there is quite a bit of compression at the mid range. The bonuses are all over the place and are usually based on a combination of hours and product evaluation. Most of the large firms require a minimum number of billable hours before an attorney will be considered for a bonus. The firms at the high end typically require something in the range of 1950 hrs. but you'll find attorneys there billing 2300 hrs and up.</p>

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<p>Here's the thing...in Chicago and Philly the cost of living is about 25% cheaper than that in NY. Plus you can generally get a decent apartment for $1200 instead of $2500 a month. Not to mention lower taxes.</p>

<p>which by the way means that you'll make out like bandits in Chicago/Philly/whatever, but not so much in SF and LA...SF and LA tend to cost MORE than NYC. Plus in California a car is a NECESSITY, not a luxury.</p>

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<p>Futurenyustudent, are you a high school senior here giving advice?</p>

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<p>
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Here's the thing...in Chicago and Philly the cost of living is about 25% cheaper than that in NY. Plus you can generally get a decent apartment for $1200 instead of $2500 a month. Not to mention lower taxes.

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<p>While I can't speak for Chicago, in Philadelphia the cost of living is no less than in NYC, though the cost of housing is somewhat less expensive. In a city like Philadelphia, for example, though (Chicago, too, I believe), you will need to own a car to do things like get to the grocery store, so in many cases, the less expensive housing costs will be balanced by the costs of owning and, at least in Center City Philadelphia, parking a car. For the most part, the prices for milk, butter, gas and electric, cable television, dry cleaning and medicine are very similar no matter where you are. Just last weekend, I was in a somewhat rural area in central Pennsylvania, and a gallon of milk there was about 40 cents more expensive than the gallon of milk I bought at Fairway market on the Upper West Side of NYC two days later. Gas there was only about 4 cents cheaper than in the NYC suburbs. </p>

<p>The Philadelphia wage tax for anyone living or working in Philly (4-4.5%, I believe) is higher than NYC's local income tax and applies to anyone who works in the City, even if they live outside of the City limits (unlike in NYC, where you avoid the NYC tax if you live outside of the City limits).</p>

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<p>Philly has the 2nd most taxes after NYC. City Hall here really needs to cut back taxes on buisness and elites, because if they did we could get tons of start-up and midlevel buisnesses to move here from NYC.</p>

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<p>You do not need a car in Chicago as long as you choose your neighborhood with care. It's a lot like Boston that way.</p>

<p>In a true apples-to-apples comparison (size, amenities, view, location relative to downtown), my home in Chicago would cost, at a bare minimum, 4 times as much in NY. And that's insofar as condos like mine even exist at comparable locations in Manhattan, which for the most part they don't. Financially, we do indeed make out like bandits in Chicago.</p>

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<p>When I was a young lawyer in San Francisco, I lived in a one-bedroom apartment with views of Alcatraz, Mount Tamalpais and the Golden Gate Bridge, for a monthly rent (in today's dollars, acccording to the CPI calculator <a href="http://data.bls.gov/cgi-bin/cpicalc.pl%5B/url%5D"&gt;http://data.bls.gov/cgi-bin/cpicalc.pl&lt;/a&gt;) of about $1100, nine tenths of a mile from my office. A car is not a necessity in San Francisco. I lived there for five years without owning one.</p>

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<p>Why argue about what the differentials of cost of living are when we can just use one of the myriad cost-of-living calculators available all over the the Internet?</p>

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<p>I've never seen a cost-of-living calculator for NYC that was very accurate when it comes to actually living within a reasonable commuting distance from midtown Manhattan.</p>

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<p>Here are exerpts from one more article about the cost of housing in Manhattan from the New York Times. I hope that you will find it informative!</p>

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New York City Renters Cope With Squeeze

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As the apartment-hunting season begins, fueled by college graduates and other new arrivals, real estate brokers say radical solutions among young, well-educated newcomers to the city are becoming more common, because New York’s rental market is the tightest it has been in seven years. High-paid bankers and corporate lawyers snap up the few available apartments, often leading more modestly paid professionals and students to resort to desperate measures to find homes.

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While young people in New York have always sought roommates to make life more affordable, they are now crowding so tightly into doorman buildings in prime neighborhoods like the Upper East Side that they may violate city codes. They are doing so in part because the vacancy rate for Manhattan rentals is now estimated at 3.7 percent, according to data collected by Property and Portfolio Research, an independent real estate research and advisory firm in Boston. It is expected to shrink to 3.3 percent by the end of this year and to 2.9 percent by 2011.

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“It’s only going to get more difficult to rent an apartment in New York City,” said Andy Joynt, a real estate economist with the research firm. “While rents continue to rise, it’s not sending people out of the city. There’s still enough of a cachet,” he said.

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While New York City has always had a vacancy rate lower than most other cities, rental prices jumped last year by a record 8.3 percent. Some potential buyers, scared by the national slowdown in housing sales, decided to rent instead of buy. The housing crunch has also been exacerbated by the steady growth of newcomers.

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“There’s going to be limited inventory and a lot of demand,” Mr. Kotler said. “There just hasn’t been enough rental product built,” he said, as, developers have said that the price of land and the costs of construction in the last few years have made it impractical to build rental buildings. They have instead focused on condominiums.

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Renters without high salaries have not been shut out of the market. They are squeezing in extra roommates or making alterations as never before much to the frustration of landlords. The rents for one-bedroom apartments in Manhattan average $2,567 a month, and two-bedrooms average $3,854 a month, according to data from Citi Habitats, a large rental brokerage company, but rents tend to be far higher in coveted neighborhoods like the Upper West Side and TriBeCa.

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. . . [L]andlords typically require renters to earn 40 times their monthly rent in annual income . . .

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But more renters are finding that they cannot afford to stay in the city without resorting to less conventional living arrangements.

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To accommodate everyone, the roommates created five bedrooms out of three by building walls from drywall and lumber. Then they soundproofed the walls with carpet padding to limit the noise.

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She says she is hopeful that they will eventually find something in Brooklyn, perhaps in the outer reaches of Park Slope. “We’re definitely going to have to expand our definition of Park Slope,” she said.

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