Today’s article is a guest post I wrote for the excellent White Coat Investor website. The premise of the article is finding a path to save $1,000,000 before hitting partnership if you’re in biglaw, however I think the same principles apply no matter where you are in the legal field (it just might take you longer). Here’s an excerpt from the article but please click over and read: How to Save a Million Bucks Before You Become a Law Firm Partner.
The White Coat Investor became a millionaire by the age of 38, about seven years out of residency with an average annual income of less than $180K. The parallels between this and the legal partnership track at the country’s largest law firms is pretty close to spot on, although you’ll make a little more money on average than WCI (good) but you’ll be doing it in a much higher cost-of-living locale (bad).
So where are all the millionaire legal associates? I’m not sure, but maybe a few will send me an email after reading this article. What I do know is that it’s perfectly possible to accumulate more than a million dollars before you’re up for partnership at your firm. Here’s the back-of-the-envelope way to get that done.
First, if you’re not familiar with legal compensation at the nation’s largest law firms (“Biglaw”), it’s amazingly transparent. All associates are paid along a standard Biglaw salary scale based on seniority. The Biglaw salary scale moves around from time-to-time. The latest shift in the industry occurred in the middle of 2016. We’re likely to see the same salary structure for the foreseeable future, which breaks down like this:
- 1st year – $180,000 + $15,000 (bonus)
- 2nd year – $190,000 + $25,000 (bonus)
- 3rd year – $210,000 + $50,000 (bonus)
- 4th year – $235,000 + $65,000 (bonus)
- 5th year – $260,000 + $80,000 (bonus)
- 6th year – $280,000 + $90,000 (bonus)
- 7th year – $300,000 + $100,000 (bonus)
- 8th year – $315,000 + $100,000 (bonus)
The good thing about transparent salaries is that it makes it very easy to discuss strategies such as budgeting and saving among lawyers working in Biglaw. Unfortunately, only a sliver of lawyers end up with “Biglaw” compensation. The vast majority of the legal workforce – including those that are busy prosecuting criminals – earn much less. This quirk in the industry is reflected in what’s called the bimodal salary distribution curve, a phenomenon where starting salaries are clustered around two mountain peaks.
Read the rest of the article and then come back and leave a comment!