Law school graduation season is upon us. Whenever I open LinkedIn these days, I’m greeted by pictures of my students in their graduation gowns holding diplomas and posing with family members.
If you’re a new law school graduate, enjoy your time celebrating with friends and family. When you have a moment to catch your breath, take some time to reflect on how far you’ve come since you started law school. Besides what you learned in class, I bet you’ve learned a lot about yourself since your first day as a 1L.
So, are you sick of all the advice you’re getting about starting your legal careers?
Let me guess some of the advice you’ve been getting lately:
- Your reputation is everything. The legal world is smaller than it seems, and reputations travel fast.
- You’re still learning. Don’t expect to know what you’re doing right away. Practicing law is a different skill set than most of what you do in law school.
- Find mentors early. Learn from people ahead of you. Good mentors can help you avoid preventable mistakes.
- Be easy to work with. Lawyers who are pleasant to work with tend to build stronger careers over time.
- Your first job does not define your entire career. Legal careers are far less linear than they appear in law school.
All good advice. Interestingly, much of it has very little to do with the law itself, right?
If you’ll humor me, I have one more piece of advice to add to the list:
Continue living like a law student.
This is advice that I wish I listened to when I graduated.
Instead, I spent years digging out of the hole I created for myself because of my poor money decisions. To this day, I still think about all the mental energy I exerted trying to get my finances in order in my 20s.
The problem was I did not continue living like a law student. Here’s what happened.
When I graduated law school, I did not continue living like a law student.
As soon as I started making money after law school, I started spending on things I really didn’t need.
About a year after I graduated, I moved into an apartment by myself. I started spending more freely on my social life. I took taxis (no Ubers back then) when I could easily have hopped on the bus or walked.
At the time, I was a judicial law clerk making around $70,000 per year. That’s the equivalent of roughly $109,000 in 2026 dollars.
Despite a decent income, it was because I was careless with my money that I fell into credit card debt so quickly after beginning my career as an attorney.
On top of my poor spending choices, I had student loan debt. Because I had debt and hardly any assets to my name, my net worth was a negative number.
Every month that went by, my debt grew because of my thoughtless spending choices. That meant my net worth fell deeper into negative territory.
Looking back, my problem was that I spent money that I didn’t have and justified it based on my career potential. That was a mistake.
What I should have done was continue living like a law student until I was on more solid ground.
One way to help you think about living like a law student is to make your spending decisions based on your wealth, not on your income.
Let’s explore what that means in the context of a new big law lawyer.
Continue living like a law student by spending money based on your wealth, not your income.
Let’s say you are starting in big law upon passing the bar. At the current salary scale, that means you’re making $225,000 in salary, plus another $25,000 or so in bonuses. We’ll call it $250,000 in total compensation.
That’s a lot of money.
It’s so much money, in fact, that you might convince yourself you can make some lifestyle changes.
For starters, you figure it’s time to leave the old law school roommates behind and move into a nicer, but smaller apartment by yourself.
Even though the tradeoff for living by yourself is paying more in rent, you justify it because your income is so high.
Besides paying more in rent, you can’t help but order in more meals now that you’re earning a high income. You’re working long hours, after all. Who has time to cook?
Even though you survived on frozen chicken breasts in law school, that won’t cut it anymore now that you’re a practicing attorney.
Finally, you start taking Ubers to get around town. It’s only $15 per ride, and you make more than $20,000 per month (before taxes).
Even though you took the bus or the “L” home in law school, you can afford a ride! Uber it is.
As a fresh graduate, you may be thinking that you would never spend money like that. I hope you’re right.
Unfortunately, this is exactly what happens to a lot of new lawyers, including me, because we mistake a high income for a high net worth.
Don’t mistake a high income for a high net worth.
Earlier, I said “That’s a lot of money” when introducing the big law starting salary.
And, it is.
But, what I should have said was, “That’s a lot of income.”
See, earning a lot of money is not the same as having a lot of money.
There’s a key difference.
Income is temporary. There’s no guarantee that your income will always be there. People lose their jobs all the time. People also switch careers, which can result in lower income.
Wealth is your financial foundation. When you earn money and don’t spend it, you can build wealth.
Of course, when we talk about wealth, we are talking about all of your assets minus your liabilities. This is your net worth.
When your liabilities are greater than your assets, you have a negative net worth, like I did when I graduated law school. By the way, the same is true for most people when they graduate law school.
A high income is not a bad thing, but it can be a wasted thing.
A high income means you have a lot of money coming in.
That’s not a bad thing, but it can be a wasted thing.
What you do with that money is what determines your wealth and financial progress.
If you use your high income to acquire assets, you are winning the game. The same goes for paying off your liabilities.
If you use your high income to buy expensive things, you’ll be stuck in place. At the end of the year, you’ll likely be in no better shape than someone making a fraction of what you make.
That’s why I prefer to think about how much money I keep each year, instead of how much I make.
It’s why my advice to you is to continue living like a law student for as long as you need to until your overall financial situation improves.
But, I thought high earners deserve to splurge!
You may think that as a new lawyer earning $250,000 per year, you deserve to splurge on life’s finer things. Does your thought process change if you acknowledge that your net worth is a negative number?
Think about it: most new lawyers leave law school with hundreds of thousands of dollars in debt. They also have little to no assets. That means they have a negative net worth.
Should someone with a negative net worth really be splurging on a fancy apartment?
If that person is looking to build a solid financial foundation, the answer is obviously, “No.”
This person should continue living like a law student and spending in accordance with his net worth, not his income.
By the way, is it really so bad to continue living the way you have been for just a few more years? Are you truly miserable? I doubt that most of you are.
You can take significant steps forward on your financial journey by just doing the same things you had been doing throughout law school. Keep your same apartment. Don’t update your entire wardrobe. Cook the frozen chicken breast.
Instead of inflating your lifestyle, use that high income to acquire assets and eliminate liabilities. A high income means you can pay off your debt faster. It means you can build up your emergency savings and fund your investment accounts sooner.
As you take those steps, you’ll see your net worth climb, and you’ve earned the right to start spending more.
We all know that it’s bad to live beyond our means. The problem is we don’t evaluate our means properly.
You don’t have to be a personal finance expert to know that living beyond your means is a bad idea.
Most of us intuitively understand that we should live within our means. Actually doing so can prove to be more problematic.
Part of the explanation may be that we don’t think of our spending in terms of our net worth.
We may not appreciate that if we are spending extravagantly while our net worth is still low, or even negative, we are living beyond our means. It doesn’t matter what our income level is.
That’s why I recommend recent law graduates spend based on their level of wealth (net worth) instead of their income.
Of course, this lesson applies to all of us, not just recent graduates.
This is challenging for lawyers and professionals who feel compelled to keep up with the Joneses.
When you’re making $750,000 per year, you may think you need to buy the $100,000 luxury car. Or, you may not hesitate to spend $10,000 to upgrade your family’s plane tickets to first class.
But, can you really justify that level of spending when your net worth does not match up with your income?
What happens if that income goes away?
Instead, you should prioritize saving and investing until your net worth justifies that higher spending threshold.
Spending money based on your wealth does not spending from your wealth.
When I say spend money based on your wealth, I don’t mean that you should spend from your wealth.
In other words, this is not a post on spending down your wealth in retirement.
Rather, what I mean is that you should consider your net worth before deciding how much of your income you are comfortable spending.
For example, if you earn $250,000 per year from your job and have a negative or low net worth, you should continue living like a law student.
If you earn $250,000 per year and have a net worth of $1M, you would be justified in splurging from time-to-time.
If you earn $250,000 per year and have a net worth of $10M, you shouldn’t worry about spending extravagantly with that income. Why?
The reality is that your investment earnings on $10M will far exceed your $250,000 income from work.
Even a 5% investment return on $10M would earn $500,000 per year, double what you earn from your job. You actually might start thinking about why you still have that job in the first place.
These numbers are just for illustration purposes. Still, the idea is that your spending decisions should factor in your net worth at least as much, if not more so, than your income.
Continue living like a law student when it comes to spending.
Whenever you are evaluating your current financial position, especially your spending decisions, I recommend that you focus on your wealth at least as much as your income.
That’s why my number one tip for recent law graduates is to continue living like a law student.
Income is temporary. It can go away at any moment.
If you are fortunate enough to earn a high income straight out of law school, use that high income to acquire assets and pay down liabilities. That means you’ll have to avoid spending extravagantly until your level of wealth can justify it.
Wealth is foundational. Yes, there will be drops in the markets and your net worth can decrease. That is to be expected.
However, if you focus on spending in line with your net worth, you’ll naturally adjust your spending if your net worth temporarily drops. When it rises again, you can justify spending more. The key is to be flexible.
If you can think in these terms, you will build a strong financial foundation that will give you choices down the road.
At the end of the day, financial independence is all about choices.
The lawyers who create choices for themselves will be the ones who don’t have to worry about money as they move through life.
They will be the ones with true wealth that supports extravagant spending, if they choose.
Lawyers: what is the best tip you received upon graduating law school? What advice do you wish you received back then?
Let us know in the comments below.
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