Personal Finance and Career Change
Personal finance is one of the major obstacles that can keep lawyers from changing careers, or even taking a different job within the legal profession. A recent article in the ABA’s Student Lawyer magazine states that the “average 2005 graduate of a private law school carried over $78,000 in debt from law school alone.” Add in the average undergraduate debt of $19,000, and many law school graduates start their legal careers with over $100,000 in debt.
Consider these examples:
A recent law school graduate has $250,000 in student loan debt, with a minimum student loan payment of $900 per month. He lives and works in the Washington, D.C. metro area, making about $150,000 a year as a contract attorney. He wants to move into a permanent law firm job, but he cannot afford to make less than $100,000 a year. His academic credentials are not spectacular, so it is likely that any permanent position that he takes will be for less money. As the colleague who told me the story said, “He makes six figures, but he never has any money because everything he earns goes to bills.”
Chuck Westbrook of I Hate Your Job writes about his friend’s desire to change jobs, and the financial circumstances that stand in the way:
My friend David is in a job that he absolutely loathes. David is a smart, young guy who landed a pretty lucrative first job, yet now that he’s been working there for a year, he’s realized that he’s made some poor choices when it comes to his career and his finances, and he’s miserable.
. . . .
He wants to make a change, but you’ll recall above where I mentioned that David had become aware of some mistakes that he’s made. For one thing, when trying to pick out a job for himself, he had his eyes on the $$$ and not much else. He didn’t care that he didn’t find insurance all that interesting, and didn’t take the time to process what a 60 hour workweek would feel like.
He made some questionable budgeting decisions as well. David drives a relatively new Lexus and lives in an apartment in one of the nicest parts of Chicago. He also is without a rainy-day fund and has moths in his 401k. He’s driven his monthly expenses up too high for the next couple of years and has no savings. So now, though he wants to work in marketing, he’s obligated to maintain his income by something that makes him miserable.
As Westbrook notes, keeping your expenses under control is vital. In a recent post, JD Bliss Blog discusses a Wall Street Journal article by Terri Cullen about two sisters who left higher paying jobs, where they were miserable, for lower paying jobs that better fit their career goals. As Cullen notes, “Lots of people stay in jobs they hate solely because it pays the bills — ask any newly minted lawyer slogging away at a corporate job to service $100,000 in student-loan debt. My sister and I weren’t that deep in the hole, but we still felt trapped by debt.”
Cullen notes several moves that you can take to ease the financial burden of a career change, prior to leaving your miserable job:
- Focus on reducing debt.
- Build up your savings.
- Try making your career situation less miserable by improving your current situation within your company. Cullen includes new positions with your current company, flexible work hour arrangements, and urging your employer to make some changes to your current position as possible ways to stay with your current employer. (Of course, as JDBliss Blog notes, these types of changes are more feasible for some lawyers (e.g., in-house counsel) than for others (e.g., partner-track associate).
- Investigate the job market to determine your employability. Cullen notes, “[n]etworking is the best way for people in high-paying fields to find jobs in alternative careers.”
- Upgrade your skills: review job postings to see what skills employers seek and then take classes to fill in the gaps.
Of course, if you’ve already left your job, or you’ve been laid-off or fired, your ability to implement some of these measures may be limited. One tactic which is usually possible, however, is limiting your expenses by (as one of my favorite financial gurus would say) “amputating your lifestyle.” If David is serious about changing careers, he can lose the Lexus and move to a cheaper apartment. These steps alone would help him to free up the cash he needs to pay down other debt and establish an emergency fund. It is a matter of priorities: does David like his car and apartment more than the prospect of having a job that makes him happy? Is he willing to make the lifestyle sacrifices will help him attain his career goals?
My first example is a bit harsher, particularly since it appears the young lawyer is using his income primarily to pay off student loan debt, rather than live the high life. A few things do strike me, however. First, Washington, D.C. is an expensive city. Would moving to a cheaper city help this lawyer cut his expenses in a way that would help him pay down the debt faster? Second, what was this lawyer doing during law school? $250,000 in student loan debt strikes me as extremely high, even if he paid full tuition at a top law school. This lawyer may have been able to avoid some of his current misery by keeping his expenses under better control during law school. Again, he could have accomplished this by amputating his lifestyle. (For a good example of a student who is actively amputating his lifestyle, see The Frugal Law Student).
Personally, I have taken several steps to “amputate my lifestyle” since I began my career change. I no longer buy things that don’t fit with my career change goals. Restaurant meals, trips to the bar with friends, new clothes, and decorations for my house are all luxuries that are now rare in my life. In addition, I am much more conscious about small expenditures (like coffee from the local donut shop) than I used to be. While sometimes I kick myself for my lack of frugality prior to my decision to change careers (think of all the money I could have saved), I know that the steps I am taking now are the only reason I am able to work part-time, explore career options, and still pay my bills. While my financial situation is not improving, my career change choice is not making it worse either.
Career change does not need to be financially disastrous for lawyers. Planning ahead to mitigate the financial burdens associated with career changes, and taking steps to reduce your expenses both before and during a career change can help you realize your dreams by removing one of the major obstacles to change.
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