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As a summer associate and soon-to-be permanent associate, you are not a very popular person these days in some circles. A good deal of animosity has been directed lately toward new lawyers, and even summer associates, because of skyrocketing salaries. You have surely seen, heard, and perhaps been affected by the hoopla. You may be dreaming of the fat paychecks you’ll have in your hands very soon. And though law firm partners may regard high salaries as a compulsory response to youthful greed, the truth is that this great hike in salaries has everything to do with one simple economic principle: supply and demand. Right now, there is a great demand for qualified lawyers and a relatively small pool of law students who are perceived by the big firms as associate material. Simply put, you are in the right place at the right time. In many respects, law firms can afford to pay out high salaries these days. In my discussions with many managing partners, human resource managers, and headhunters, I have found a consensus that these are the best of times for most firms. But at the same time, all concur that this economic boom cannot last forever. And the inevitable downturn will definitely affect you and your career. So with all this extra cash and the knowledge that nothing good lasts forever, what can you do to make the most of this salary boom? Take a quick lesson from the ant and the grasshopper. As you may recall from the fable, the grasshopper squandered away his time, heedless of the coming winter, while the ant worked steadily to prepare for hard times. I recommend that you follow the example of the ant and spend this time wisely preparing financially. View your first few years as an investment in long-term career planning. Ann Director, of the D.C.-based placement and consulting firm Sitcov & Director, contends that “you will never earn a greater proportion of money to your level of experience as in your first year as a lawyer.” Let’s face it: Firms are not paying you huge sums or signing bonuses for your billable hours. They are shelling out the big dough as an investment, hoping that you will stay with them and become a valuable member — i.e., an income producer — in the future. Use this disparity to your advantage. Your personal financial decisions in the first three years as an associate can greatly affect your future career opportunities. You may decide to use your new exorbitant salary to splurge on the BMW and the upscale home you’ve always wanted and worked so hard to have. But of course, if one of the top firms in the country hires you, you’re going to have little time to enjoy that new house and drive that fancy new car. I’m not suggesting that you continue to live the existence of a law student pauper, but before you assume additional debt, consider easing into the lifestyle of the rich and famous. Use this opportunity of a higher salary to set yourself up for the big picture of your life (family, college degrees, retirement, etc.) instead of on short-term impulses. Recently, for example, some law firms have decided to offer associates a choice in pay structure. If this is the first time you are reading about a two-tiered pay structure, then you are spending way too much time on law review and not enough reading about your chosen profession. Should you decide to join a large firm, chances are that you will have a choice of working more billable hours in return for a higher salary or working fewer billable hours to have some semblance of a life. According to Eve Howard, a partner at D.C.’s Hogan & Hartson, which has set up the dual pay structure, “The two tiers preserves the culture of the practice and allows people to have outside lives.” Again, consider the big picture. What are your goals? Where do you want to be financially? What is a suitable balance of work and lifestyle? In your first few years, your choice will determine how much time you actually have to enjoy your considerable earnings. Thinking about the big picture will help you work through which choice is right for you. Statistics show that up to 25 percent of new associates leave their firms within the first two years. This is not to say that they are kicking themselves for choosing the legal profession. Rather, after your second or third year as an associate, you will have completed your “apprenticeship,” and career opportunities will begin to fall on your doorstep. You may decide to make a lateral move to a new firm where the benefits are better, join a corporation as in-house counsel, start your own firm, or stay on the partnership track where you are. To prepare for these opportunities, the personal finance strategy that will leave the most doors open is to focus on your debt. If you are like most law students, that debt is still growing and you are dreading the day when you’ll have to make the first of many payments. But instead of putting that day out of your mind as long as possible, start paying down your debt. Now. Clearly, if after three or four years your loans have dwindled to a bearable amount, your options will abound. Without a heavy debt burden, you will be in a better position to swallow a salary cut in favor of the stock options offered by the technology firm you want to join. Thinking about starting your own law firm? Imagine how much easier it will be to get approved for a loan if you’re not $70,000 in the hole with educational debt and carrying a $500,000 mortgage. It’s especially important to avoid the very worst kind of debt — credit card debt. You have probably already started to receive fan mail from every credit card company in the country, offering you an introductory interest rate or a high line of credit. From here forward, carry scissors with you to the mailbox. If you happen to be so fortunate as to not have exorbitant educational loans to repay, consider starting a nest egg. Whether it’s for your first home, children’s college education, or retirement, the earlier you start the better. A good place to start is your firm’s retirement plan. Find out when you will qualify for the plan and what type of matching contributions are offered. The sooner you take advantage of what the firm offers, the sooner you’re on your way to having a greater control over your life’s decisions. PLAN FOR A DOWNTURN For summer associates, this is the time not just for planning financially, but also for thinking strategically about the area of law you will practice. The economy won’t always be as strong, and the more marketable you are as a lawyer, the greater your chances of maintaining a steadily climbing income. According to Cynthia Sitcov of Sitcov and Director, many associates lost their jobs in 1992 and 1993 when the economy turned south. The practices (and associates) that survived were the ones with enough practice depth to withstand a downturn. Howard of Hogan & Hartson believes you should look at the firm’s client base: “Firms can survive different types of economics when you have different practice groups. They each wax and wane.” Stephen Nelson of the McCormick Group, a legal search outfit, urges new associates to focus on trends in an area of practice, be aware of the longevity of that area of law, and then choose a firm dedicated to that area. For example, in the 1980s, environmental law was huge. Now, it is a dwindling practice. He cites the profitable area of transactional work and also says to avoid commercial litigation, “except IP litigation, of course.” In writing this article, I was advised by many partners and human resource departments not to omit the importance of training and mentorship to your new career as a lawyer. While you are going to wine tastings, tours of the city, and baseball games as a summer associate, remember that you’re there to learn and that your mentor plays a crucial role in helping you make the right career decisions. Take advantage of his or her experience, ask tons of questions, and apply what you learn this summer to your big picture. As a student who chose to practice law, you couldn’t be joining the profession at a better time. But don’t be like the grasshopper by thinking that summer is the time to play. Use the incredible advantages that come with a high salary to plan for turbulent times ahead, and use your summer’s experience to strategically plan for your long-term career. Be like the ant by working hard and being disciplined, and you will ultimately reap the long-term rewards. Barry Glassman is a certified financial planner and first vice president with Cassaday & Co. in McLean, Va. He specializes in assisting attorneys with individual financial planning and law firms with evaluating and implementing firmwide retirement plans. He can be reached at [email protected]

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