Breaking Up is Hard to Do: Part V – Money, Money, Money

In the last post of this series about my decision to leave law, I talked in detail about the emotional niggles of forfeiture of sweat equity, loss of prestige, and negative perceptions from others. This post is dedicated to the niggle of not making money. Numerous spreadsheets and countless internal debates went into wrestling with this niggle. When I pulled the trigger, I had overcome some irrationality surrounding this issue, but it still nagged me. I still get caught up on this issue from time to time, but the nagging voice has become weaker and weaker.

Talking about money is not exactly kosher in our society. It is a sensitive and personal topic. I debated long and hard whether to address it in a public way. I then debated some more after observing the recent mini-shit storm surrounding the blog post written by University of Chicago law professor (and President Obama’s Chicago neighbor) Todd Henderson, who bemoaned his family’s situation of “just getting by despite seeming to be rich”.

But given that I am trying to give a 360-degree view of my decision process to quit law, I feel compelled to talk about the one issue that I wrestled with the most, perhaps against my better judgment. After all, who doesn’t think about finances when considering career and life choices?

I recognize that I may come across as insensitive when discussing this topic especially when unemployment rate still hovers around 10% and there are many people who must work multiple jobs to make ends meet. I am not trying to show off here. On the flip side, to readers who are much wealthier, I may seem frivolous fretting over something insignificant. Buying a car for one person may have the same financial significance as buying an iPad for another person or a Learjet for yet another person. I understand that people have different financial situations and relationships to money and are going to react differently to my situation, but I am going to try to not censor myself. This is from my perspective only.

So, here it goes.

I admit upfront: I love money and I love making money.

As mentioned in Part IV of this series, when my family first immigrated to America, we suddenly became poor. I think my parents made less than $20,000 the first year we were here. I was 13 at the time and am sure they shielded me from their worries. How we lived through those dire times is unfathomable to me now, but we survived, without any consumer debt.

I had a modest allowance while growing up in China, but my parents couldn’t afford one when we came here. I was completely understanding and learned to be self-reliant early on. I worked as soon as I could earn money. During my high school years, I worked a wide of array of jobs, mostly menial. I worked as a babysitter, an Olive Garden hostess, a grocery checkout clerk, a gym receptionist, and a teacher for a summer enrichment program at a private high school. I worked throughout my MIT years, doing various work-study programs. I worked part time during my 1L (first) year at law school and was lucky enough to get summer associate positions for both my 1L and 2L summers, which covered a large portion of the tuition. (Despite being concerned about prestige, I chose U.C. Berkeley Law School over higher ranked schools for its low in-state tuition.)

So I worked, seizing every opportunity I had to make money. To me, productivity equaled making money. As a result, my career choices also largely hinged on pay.

Almost all BigLaw firms in New York and other major U.S. cities pay associates on the same well publicized lock-step salary scale, which can be found here. Thus, like other sixth-year associates at other BigLaw firms, I was making a base salary of $250,000 a year. If someone told me ten years ago that I would make $250,000 a year one day, I would’ve been flabbergasted. If someone told me then that I would walk away from a quarter million dollar salary one day, I would’ve probably bet my first born against that person.

How perceptions change.

Even though only around 2% of American households take in more than $250,000 a year, I no longer thought that amount made me rich by the time I was struggling with the decision to quit. After deducting FICA and income tax (with New York City having the highest rate in the nation after taking state and city taxes into account), $250,000 yielded only $155,775 in take-home pay. And then at the end of the tax year, far from receiving any refund, I paid Uncle Sam at least another few thousand dollars, if not tens of thousands dollars. I know I am sounding like Professor Henderson here as I’m making a similar argument that a $250,000 salary does not make one rich. It does make one a HENRY — an acronym developed by Shawn Tully, a Fortune Magazine writer, which stands for “high earners, not rich yet”). However, I want to be clear, I am not complaining about the amount of taxes I was paying; I believe in progressive taxation. But I also believe people who rake in millions each year should pay a higher effective tax rate (i.e., actual tax paid after taking into account all deductions, divided by all income received before tax), which is not the case under the current regime. This piece on Harvard Business Review’s website is worth a read.

The power of money lies in its value relative to what other people have. Here comes the double whammy. Surrounded by investment bankers, hedge funders, and private equity guys as a Wall Street lawyer, not only did I feel that I was not rich, I sometimes even felt — dare I say — poor. As I was pulling long hours at work, tethered to the blackberry even when at home, working for clients who were probably younger than me but made multiples of what I made, I felt resentful. I resented that I was working so hard with no clear path or purpose ahead. And I resented myself for not being grateful for the good fortune I had had since the days of earning minimum wage.

I was fully aware that I was being an entitled whiner. Advising on multi-billion dollar transactions in an air-conditioned office with a brass plate with my name on it was a good deal better than greeting Olive Garden customers with a forced smile while holding the doors for them. “Quit bitching and just do the job. A job is a job, and this one pays well,” I told myself. But I couldn’t shake the feeling that I was trapped by golden handcuffs — and that they were actually just silver.

I vacillated between feeling insufficient and feeling guilty for feeling so.

In my saner moments I knew we were far from poor. We were financially solid. With two good incomes and no plans for kids (we decided not to have kids, which will likely be the topic of a subsequent post), we had more than enough for occasional splurges, such as a $1,400 pair of Giants tickets, antique shopping outings now and then, a personal trainer, etc. But, for me, the thrill of spending money and acquiring things or experiences had waned.

I used to know exactly how much $1,000 was worth. It was equivalent to 166 hours of standing in front of a cash register, three weeks of full-time teaching, or 35 nights of babysitting. If I wanted something, I saved and waited until the item was on sale. But as I earned more money, desire got satisfied without yearning. Money can buy things and even time, but money itself became a less tangible concept. It all boils down to a single number in a Mint.com email summary. I didn’t feel that the number, whether six digits or seven digits, made a palpable difference to my happiness.

I also became wary of the trend that once-luxurious goods were starting to be taken for granted as ordinary necessities. I could feel that I was getting sucked into that pit of quicksand, getting mired deeper and deeper.

All of these thoughts — am I rich or poor, should I save or spend to enjoy, how much money is sufficient, what does it mean to be sufficient? — were circling in my mind like a messy ball of mixed yarn. All I knew at the end of the day was that I needed to make some sense out of my convoluted relationship with money.

In a conversation with a junior colleague who was feeling sick and overworked, she said that she would be so happy — in fact, she would pay $500 — just to be able to take the next day off without having to worry about work. “You realize that $500 is probably more than what you make in take-home pay in a day, right?” I asked. At that moment, it dawned on me that in relation to my decision to quit, the key missing variable I need to solve for was the amount of money I’d be willing to pay to be healthier and happier.

My first step was to thoroughly analyze our family finances. Cold hard numbers help put things in perspective. Without opening the kimono, the bottom line was that we could still live comfortably on the same annual budget with just my husband’s income. Of course, we’d have less left over each month, but barring unforeseen circumstances we would not have to tap into our existing savings. And even if we lost my husband’s income, after years of hard work and living below our means (despite the splurges), these savings were enough for me to take a risk.

After getting a sense of our financial big picture, I delved into cutting specific expenditures despite my husband’s adamant initial stance that my quitting should not affect our annual budget. My husband knew me well enough to be rightfully worried that I would go bonkers with penny pinching on everything in order to “recoup” part of my lost income. Taking his concern to heart, I started with discretionary expenses that would not affect my husband. I also targeted expenses that I didn’t think would be difficult or painful to reduce. For example, among other things, I cut half of my clothing budget since I no longer need to buy work clothes, a third of my massage budget to alleviate my back pain as I hoped to be less sedentary, a good part of the cost of personal training and gym membership which I’ve discussed here, and a net of 15% from our eating out budget (accounting for a corresponding increase in groceries) as I want to cook more and eat more healthily. All together, I was able to lower our annual budget by $30,000, shrinking the loss of $155,775 in take-home pay to $125,775.

Would I spend $125,775 to be happier and healthier, to have the chance to find my passion? Shifting the anchor number from $250,000 to $125,775, half of what I thought I was walking away from, actually made a significant difference in my battle with my niggle over money. $125,775 is still a lot of money, but we have spent $20,000 on a two-week vacation before without experiencing nearly as much internal debate. Was it wasteful to spend $125,775 to take a year to figure out what I want to do with the rest of my life to be happy? I realized my reasoning was far from rational; after all, I was giving up a reasonably secure annual income (plus potential bonuses) for years to come, not just a single year of base pay. But these calculations were enough to tip me into pulling the trigger.

It has been two months since I quit. My relationship with money has improved. I have learned three things so far. Even though they may seem obvious to many, I only started to appreciate them when I got in touch with a broader and deeper reality on my road trip.

1. I often enjoy saving more than spending. Many times I actually derive more pleasure from being frugal than acquiring things. I have found pleasure in little things like borrowing books from the library rather than buying them from stores and walking around the city rather than taking the taxis. Knowing that about myself has helped me to find ways to maximize happiness. I’ve convinced my husband to humor me and try out October as an “austerity” month. We will keep expenditures to a minimum, on non-discretionary items only. It will be interesting to see what our burn rate will be.

2. Bonds I developed with people and animals, rather than money, contribute more to me living a richer life. Now that I am happier myself, I want to be happy for others and help others. The dynamism of interacting with living beings, exchanging ideas, and feeling connected, can be more gratifying than appreciating a physical asset.

3. I am more content with what I have when I stop comparing myself to others. Unlike the two points above, where I can actively do something concrete, this one is about denying instincts, controlling the mind, and withholding actions, a much more difficult task for someone like me. I am still working on it and hopefully will be able to share some insights down the road.

I still care about money. I still love making money. All things equal, I would love for this journey to lead me to a profession that will enable to make even more money. But I hope that in forging this path, my foremost goal will no longer be to make money for the sake of making money. No more handcuffs, gold, silver, or otherwise.

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17 Responses to Breaking Up is Hard to Do: Part V – Money, Money, Money

  1. AE says:

    Interesting. Looks like our thought process is not indifferent. Going to read your prestige post, now. Although I resent that Berkeley is a sacrifice on that measure! Enjoy freedom.

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  3. JP says:

    This is kind of amusing.

    Last I checked, I spent about $26,000 for my family of four for the last twelve months. This was 2009. I’m comparing this to your $20,000 years ago.

    I own my own house (no mortgage) and my own cars (no debt), but still this is funny. I paid off my loans from Duke Law years ago (about $120,000 in principal and interest).

    I save between $3,000 and $4,000 per month, but I really derive very little joy from saving money. I much prefer spending to saving.

    I’ve never had a budget. I just don’t spend money on anything.

    • everysixminutes says:

      Thanks JP. I find your comment very intriguing, in a good way. I’d certainly like to know about the way you live. You say that you prefer spending to saving, what would you like to spend your money on? Also, you save about 1.5x -2x of what you spend per month. Are you saving for anything in particular, e.g., college fund? I’d love to hear from you. If it is easier to communicate by email, I can be reached at everysixminutes@gmail.com.

  4. exholt says:

    The problem people have with Henderson’s blog post goes far beyond the fact he is in the top 2% of income earners in the US and we’re in a period of high unemployment.

    There’s a commonplace perception among many Americans that it is unseemly for someone whose income and the lifestyle it could potentially provide is far above the national average. In short, it would be interpreted as unsympathetically by most as my visceral disgust as a 17 year old college freshman at overhearing an obviously well-off spoiled 18 year old dude loudly whining to his girlfriend at a Boston area bar because his parents won’t get him the Mercedes he wanted for his 18th birthday.

    Even in good times, the common thinking among most IME is that there are plenty of people who suffer misfortunes and setbacks which are exponentially far worse than someone like Henderson…..and it is they to whom we should extend our full sympathies and support. Even if his income does not make him “rich”, it still makes him far more fortunate than the vast majority of those in the US. In short, his post clearly demonstrates that he is really out of touch with the realities the vast majority of Americans face and really needs to get some perspective.

    As for issues with money, it is interesting to read about your background as I myself am Chinese-American and had many classmates and relatives who seemed to value themselves and career paths mostly or solely on income level. Was quite interesting to see how many of my Chinese-American classmates’ families were blunt about their love of pursuing a high income and valuing careers and even other people on that very basis. Felt it was such a turn-off and was accused of being “too Americanized”. Was quite interesting to later find how those feelings would have found much sympathy among much of the Confucian oriented scholar-gentry elite during the Chinese imperial period.

    • everysixminutes says:

      I agree with you that Henderson’s whining was in poor taste. There are many people who are far less fortunate than he is and he should have been more in touch. However, looking beyond Henderson’s whining, I think he provided a valuable perspective on the disparity of the actual lifestyle of a top 2% income earner vs. the lifestyle envisioned by the masses on how a top 2% income earner ought to live.

      On your last point, I was just talking to my husband (who is an American-born-Chinese) how we, Chinese-Americans, tend to live more conventional lives, climbing the corporate ladder and making the money. I think part of the reason is that we internalize, whether directly through our parents’ nagging or indirectly through our own need to fulfill our filial duty, our parents’ sacrifice as immigrants to provide us a better life. To immigrants, money is oftentimes a proxy to security.

      I think it is great that you want to pursue something different. I wish I had spent my youth to figure out my passion.

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  6. This was a great read. I am so glad you shared. My first time at your blog.

  7. Anonymous says:

    Wow, I just found your website, and I can’t stop reading. You were right to quit b/c you have some mad writing talent. I hope you continue to use it–maybe figure out a way to re-coup some of that BigLaw salary.

  8. Greg says:

    You should consider relocating to another city, not just for the lower cost of living but because the professional culture is much different than New York. I live in Portland, Oregon where the cost of living (according to one of the online calculators) is about half of New York City. You can get a great apartment in a desirable area of the city for under $1500 a month. I work in medicine, which has a reputation for being an all-encompassing field similar to law.
    However, the culture here is to enjoy life outside of work. Full time is about 50 hours a week (granted, some of those hours are nights and weekends) but the culture is to get work done efficiently and enjoy life outside of work. The description of checking work email every hour while on vacation would seem bizarre here. I would imagine law jobs culture here would be similar, in that people want to get away from work and enjoy skiing, the beach, or just hanging out in the city while still doing quality work.

    • everysixminutes says:

      Before my husband and I relocated back to NYC from London, we considered other cities in the US, including Portland. Portland sounded really cool, but we ultimately decided that we couldn’t deal with the rainy weather (especially after having dealt with the gloomy London weather). When I did my big road trip in August, I was certainly surprised by how life outside of NYC is so different.

  9. Dr. says:

    I really liked your posts.

    They fit my paradigm, in fact I think I may’ve gone a step farther and started considering changing cities (as a few other commentors note). Really, this is the key. NYC is ridiculous, and staying here only helps the rich NY land-owning cabal (it IS a cabal– just see what a small group really owns the millions of NYC apts, but it IS NOT “Jewish” [I have heard this prejorative from others] as all faiths take part).

    Also, I wanted to point out that it seems to me to be not just “Chinese” but rather immigrant, because my Eastern-European thoughts/experience closely mirrors yours.

    In any event, great posts, thanks.

    • everysixminutes says:

      Thanks for the encouraging words.

      I definitely see your point. NYC is expensive and can certainly perpetuate the rat race mentality. But I still love it for its varieties and vivacity. Maybe I will get sick of it one day, but I think it is NYC for us for now.

      I agree that strict parenting is not limited to “Chinese” or “Asian”. Many immigrant parents have the same mentality. My theory is that because happiness for immigrant parents is to achieve what they couldn’t achieve due to circumstances (including sacrifices for their children), they push their children extra hard to achieve these things. What do you think?

  10. GC says:

    Even though in deciding to leave law you have given up your salary as a BigLaw associate, it seems that you and your husband are still able to rely on your husband’s salary to pay the bills. It further seems that his salary is equivalent to what you used to make as a BigLaw associate or, in any event, is significant. To what extent did your husband’s salary factor into your decision to quit the law? Would you have decided to leave law if your husband’s salary was much less? Would have decided to leave law if you were married with one or more kids and were the sole breadwinner of your family? That is the situation that some of us face, and it would be helpful to hear your thoughts. Thanks.

    • everysixminutes says:

      Very probing questions and I will answer as honestly as I can.

      When I was deciding to quit law, my husband and I agreed that I would make my decision independent of his career situation. As I have noted in the post, “even if we lost my husband’s income, after years of hard work and living below our means (despite the splurges), these savings were enough for me to take a risk.” So, I tried hard to adhere to what we agreed. Technically, I would have arrived at the same conclusion even if my husband’s income changed.

      But life is not technical. No doubt the decision would have become much more agonizing to make. Maybe I would have ended up sucking it up and stayed at Simpson Thacher gunning for partnership. Maybe I would have given other legal careers a much harder look. Maybe I would have continued working in BigLaw for a period of time to build up a larger financial cushion. Maybe we would have taken our savings and moved to another, less expensive city. Maybe we would have tried to really rein in our cost to make everything work (after all there are households making five figures living in New York).

      Ultimately, I decided that it was worth me taking the risk. I know this decision was easier to make and I didn’t have to think as long and as hard at other alternatives because I wasn’t the primary income contributor and that we felt that we had enough saved up.

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