Last week I wrote about how making partner can be a vehicle for making positive personal changes. I was not kidding. As a partner, I want my fellow partners to be happy with their personal lives. Much better for business that way. We all know that the pre-partner years are rough on personal lives, so the heady days immediately after making partner may be the best chance someone has to make any necessary course corrections on the personal front.
I don’t believe that Biglaw partners are any more capable than anyone else in insulating their work performance from the goings-on in their personal lives. Trouble has a way of spilling over. No one is saying that relationships are easy in Biglaw, even for partners. So why continue to dump emotional energy into relationships that are not satisfying? Better to take stock, and fix what needs fixing. Earlier is better than later, especially from your fellow partners’ perspective.
So let’s talk a bit about the financial ramifications of making partner. I’ll concentrate on a few aspects….
First off, debt. Get rid of it. Starting with the unsecured stuff, and then your student loans. As quickly as possible. Ignore the debt you will incur as a result of your buy-in. Most Biglaw firms have “arrangements” with big banks to give you the money for basically nothing. Focus first on getting yourself, personally, as debt-free as you can in the shortest possible amount of time. In today’s Biglaw you need flexibility. Debt serves as artificial shackles. Rid yourself of them.
That said, one of the main perks of making partner is access to the preferred banking relationships enjoyed by Biglaw firms. For partners, that means preferred treatment when it comes to getting a mortgage (handy when you are ready to buy or refinance), and typically access to very low-interest unsecured lines of credit. My advice is to take advantage of the latter right away, because there is usually a bit of a financial adjustment from the bi-weekly or monthly associate/counsel paychecks to the way partners are paid at many Biglaw firms.
For example, some firms have a low base/high bonus type structure, where there are big payouts at the end of year (and sometimes mid-year) for partners depending on the firm’s performance and a partner’s personal performance. Others go with a draw/distribution model, where partners get monthly fixed or variable draws, combined with larger distributions tied to estimated tax due dates. Your firm may vary — but you are unlikely to be a salaried employee and need to take that into account cash-flow wise. An unsecured line of credit can help smooth out the transition, and later serve as a type of “liquidity” insurance — an unfortunate necessity in this post-Dewey world.
Having some “liquidity” insurance can be very valuable. Perhaps you will one day want to go “From Biglaw to Boutique” and hang out your own shingle. Having a line of credit to draw on already in place can get you servicing your post-Biglaw clients that much faster. I would also recommend signing up for five or six credit cards, preferably from a few different banks. As a partner, you should be able to get at least a hundred thousand (if not more) in available credit lined up. No need to change your usual credit card spending habits (especially if you don’t carry balances and/or have taken my advice and wiped out any debt you have previously incurred). Again, the point is to have some easy access to money if you ever really need to float yourself for a little while. Better to line that up while you are well-employed so that you have more flexibility if and when you ever need it. Biglaw stability is simply not what it used to be, so plan for the worst while expecting the best.
Finally, let’s touch on another big issue for many new partners — your “Lawyerly Lair.” First off, no more roommates. If I was a client, and I found out a partner who was charging me a Jaguar XF monthly lease an hour had a “roomie,” I’d fire them for that social offense alone. Second, don’t rush to buy, and actually strongly consider cashing out on your current place if you are lucky enough to own something that is not underwater. Why? Because you will have the itch, if not now, then soon, to really and truly buy a place you can call home. The kind of place that if you never lived anywhere else the rest of your life you would be happy in.
It is unlikely that your current abode meets that criteria, and you may still be a few years away from being able to afford something that would. So get liquid, rent a really nice place, and sock away money until buying the house you really want is easy. Why put the added pressure on yourself of buying your dream house right away just because you made partner? The journey is just starting, and if you just keep things up, you are very likely to end up in your dream house very soon. A little patience can save you a lot of unnecessary stress.
To sum up, making partner should have an outsized impact on your personal happiness. From family, to relationships, to housing, it truly is a potentially life-changing period of transition. Make the most of it. So when people wish you congratulations, you can actually feel good about where you are. And more importantly, where you are headed.
When you made partner, what changes did you make, and why? Let me know by email or in the comments below…
Anonymous Partner is a partner at a major law firm. You can reach him by email at [email protected].