I recall waiting for my first year obligations and contracts class to start and hearing a classmate boast about expecting to get a law firm job with a high salary upon graduation. He went on about his long-term plans – get a high paying job, buy a car, buy a house and be married before 30. He only made it up to our first year of law school because he dropped out.
Said classmate erroneously believed in propositions that don’t always logically follow each other. Here, I will attempt to name some pervasive money fallacies which lawyers and law students erroneously believe in as law.
A high income equals wealth
Most lawyers end up in this profession because they sucked at math. It comes as no surprise that most lawyers believe in the equation of
High salary = wealth
This is, sadly, not always the case. Case in point: law firm partners who have slaved away for more than a decade but still cannot afford to retire and must work beyond the 60-65 year old retirement age to support their grown-up kids or their extravagant lifestyle or to pay up existing debt.
Wealth is having the ability to earn passive income despite not having the capacity to earn active income anymore, either due to old age or poor health. Unfortunately most lawyers fail to see the distinction between earning a high salary viz spending such salary versus earning a high salary and actually building wealth by buying assets which earn more money.
A lawyer who looks, eats and does rich things, must be rich
What sets back high earning lawyers from growing wealth is their need for prestige. Admittedly, lawyers incur costuming costs as part of the job but most lawyers must go the exaggerated route. Older lawyers tend to show others their success by buying trinkets, such as boats, helicopters, planes.
Law school and law professors wittingly /unwittingly perpetuate the belief that lawyers who appear rich (carry the statement bag, jewelry, statement suit, etc) must be rich. No law student ever wonders on the actual size of a lawyer’s bank statement, what matters is the lifestyle – where the lawyers eat, what the lawyers drive, what the lawyers wear or what gadgets they use. No law student ever wonders how much debt the lawyer had to incur in order to acquire / pay for said things. I once had a law classmate who only had PhP 20.00 to his name but spent on stuff using his dad’s credit card. People see him spending, but they don’t know that he actually has next to nothing.
The older lawyers who still work must be rich
Now, law schools never teach finance or budgeting to law students. So upon graduation and upon going from zero to hero income, the first year lawyer struggles to manage money. The long hours and stress of law firm work pushes the first year associate to shop with that money. It becomes easy to justify frivolous purchases of shiny trinkets when one works terribly long 15-hour days.
Senior lawyers in the firm become a mentor and junior lawyers pick up on the senior lawyers’ lifestyles, emulating them. The junior lawyer is impressed with the senior lawyer who still works, despite nearing 60 years old and is amazed at the senior lawyer’s luxurious lifestyle and frequent trips abroad.
In an attempt to emulate their mentors, most first year associates immediately inflate their lifestyle upon working and get the inner city apartment (to avoid the long commute), shop for their corporate lawyer costume, buy the latest gadget, and eat out for almost every meal (mostly brought on by circumstances because no time to cook because 15-hour workdays). The stresses of being a first year associate necessarily justifies Friday night drinks, too.
Not too long later, the first year associate gets married, and gets saddled with the additional costs of having kids. Cracks in finances will start to show. Lawyer gets a raise, and likewise raises lifestyle inflation. By this time, the lawyer has to make payments on a mortgage for the huge house, and make monthly payments on the new car that he/she buys every 3 years. Eventually, the lawyer will live paycheck to paycheck, just like your average minimum wage earner.
Most lawyers are ill-equipped to handle their money and will work until old age just to keep up with their lifestyle expenses. In the Philippines, it is commonplace to see lawyers of senior citizen age still appearing in courts. It is a sad sight and could have been avoided if lawyers were taught personal finance while still in law school.
Any other lawyer money fallacies that you know?
20 something lawyer