As a law graduate with debt in the six-figure range, you may not feel rich even with a plum Biglaw salary. Coupled with living in a high cost of living (HCOL) area like Manhattan, you might feel downright poor.
There is obviously a distinction between being rich and feeling rich. One can be rich in terms of good health, friends and family, and overall quality of life. However, wealth is quantified in monetary terms, with statistical variables accounting for whether you’re in the top 1%, 5%, 10%, and so forth, for a given geographic area. Yet wealth can also be subjective with arguments that a $250,000 household income cannot be considered rich (see what Elie Mystal has to say about it here) while others would beg to differ.
You cannot examine this idea of being/feeling rich without looking at the local cost of living and in turn cost of living. It’s a fact that $250,000 is a very high income that will get you very far in a mid-sized town in Arkansas, but the same income may barely cover food and shelter for a family of four living in Manhattan. People living in Manhattan often lament that their $200k+ salaries barely sustain them. I disagree with this view.
[Check out this nifty cost of living calculator from the New York Times to compare salary adjustments for the same cost of living in two cities/areas.]
Feeling rich is a conscious choice. The people who claim that they are barely making ends meet in Manhattan are the same people who refuse to move to the suburbs around New York City, who insist on sending their kids to private school and keep a summer home in the Hamptons. Why must you live in Manhattan? Does it feel rich to say that you can live there while you secretly struggle with being rich enough to afford it? Keeping up with the Joneses is hard to do.
The National Association for Law Placement (NALP) produces a yearly Buying Power Index for selected cities based on the median reported private practice salaries for a given law school class. I think Texas wins (hello, no state income tax) for most buying power. Ultimately, you can make the choice to live and work in a city where your money will go
farther, hence making you feel richer and hopefully happier. However, even if you do pick a HCOL area like New York City, you can make your money work for you by living smart, not lavishly. Assuming that you’re single, it’s very possible to make a certain salary, live comfortably while paying off any loans, and still have money left over for traveling and savings/retirement (budgeting challenge accepted – stay tuned for a future article).
Money provides a tangible security and a psychological assurance that directly affects our happiness. If being rich was that important, most Biglaw associates would stay on the mother ship even after the law school debt is paid off. On the contrary, many lawyers happily take pay cuts for a better lifestyle, even if it means making a few sacrifices. Feeling rich isn’t equivalent to being rich.
Our society can seem this panicky, insatiable mess where nothing is ever enough. Fidelity Investments reported that people with 7 figures worth of assets wouldn’t feel rich unless they had $7.5 million (again, more from Elie Mystal here). This study feels perfectly aligned with my own observation of my socio-economic circles. In general, those with
higher incomes or earning potential say that they need $500,000 combined household income, for example, in order to feel “comfortable.” The more money that you already have, the more money that you need to feel rich, and the more that you end up relying on money to be happy. Does it matter if you actually become rich if you’re still never going to feel rich?
I know that the legal job market hasn’t totally recovered yet. With the right attitude and perceptions, you can feel rich through your personal choices, whether you earn $50,000 or $150,000. If you learn how to find happiness outside of money, you will always feel rich.
Sunny Choi is the 2013 Writers in Residence Coordinator for Ms. JD. She is a former participant in the Writers in Residence program, where her monthly column Legally Thrifty focused on beginners personal finance advice for law students and professionals. A graduate of the University of Michigan Law School, she currently practices commercial litigation and creditors’ rights while freelance writing and blogging in her spare time. She can be reached at firstname.lastname@example.org.