A Path to Retirement
October 17th, 2007 by Jim Cotterman
A recent Wall Street Journal article (9/24/07) “A Stingier Job Market Awaits New Attorneys“* discussed some of the less reported aspects of beginning a career in law — that most new lawyers do not get the top salaries currently being written about ($160,000), many finding employment elusive and law school debt burdens that run $50,000 to $80,000 or more. Add to that consumer debt and you have a significant fiscal challenge very early on in life.
I read the WSJ article just after reading an excellent article entitled “Personal Financial Ratios: An Elegant Road Map to Financial Health and Retirement“ in the Journal of Financial Planning authored by Charles J. Farrell. The Farrell article uses simple ratios to demonstrate how lifestyle (living expenses, debt repayment and savings rates) can be monitored to achieve retirement goals. He explains the underlying assumptions, provides a realistic budget, and exhorts fiscal discipline. Be warned, this frank depiction of what it takes to reach retirement debt free and with sufficient savings may shock those who listen to the traditional wisdom of how much debt someone can afford and still accumulate wealth.
Bringing these two articles together suggests that many law students should plan more conservative lifestyles. Expensive cars and vacations, frequent entertainment (dining out, theater, etc) may need to be deferred until income, savings and debt are brought in line. Unspoken in Farrell’s article, but certainly a possibility is that social security and Medicare will not provide for recent graduates when they reach retirement in the same manner that those programs do for current retirees. If those social programs were to materially change for the worse; the more aggressive scenario presented in the article would become much more important a consideration.
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