Breaking Up is Hard to Do: Part V – Money, Money, Money

In the last post of this series about my decision to leave law, I talked in detail about the emotional niggles of forfeiture of sweat equity, loss of prestige, and negative perceptions from others. This post is dedicated to the niggle of not making money. Numerous spreadsheets and countless internal debates went into wrestling with this niggle. When I pulled the trigger, I had overcome some irrationality surrounding this issue, but it still nagged me. I still get caught up on this issue from time to time, but the nagging voice has become weaker and weaker.

Talking about money is not exactly kosher in our society. It is a sensitive and personal topic. I debated long and hard whether to address it in a public way. I then debated some more after observing the recent mini-shit storm surrounding the blog post written by University of Chicago law professor (and President Obama’s Chicago neighbor) Todd Henderson, who bemoaned his family’s situation of “just getting by despite seeming to be rich”.

But given that I am trying to give a 360-degree view of my decision process to quit law, I feel compelled to talk about the one issue that I wrestled with the most, perhaps against my better judgment. After all, who doesn’t think about finances when considering career and life choices?

I recognize that I may come across as insensitive when discussing this topic especially when unemployment rate still hovers around 10% and there are many people who must work multiple jobs to make ends meet. I am not trying to show off here. On the flip side, to readers who are much wealthier, I may seem frivolous fretting over something insignificant. Buying a car for one person may have the same financial significance as buying an iPad for another person or a Learjet for yet another person. I understand that people have different financial situations and relationships to money and are going to react differently to my situation, but I am going to try to not censor myself. This is from my perspective only.

So, here it goes.

I admit upfront: I love money and I love making money.

As mentioned in Part IV of this series, when my family first immigrated to America, we suddenly became poor. I think my parents made less than $20,000 the first year we were here. I was 13 at the time and am sure they shielded me from their worries. How we lived through those dire times is unfathomable to me now, but we survived, without any consumer debt.

I had a modest allowance while growing up in China, but my parents couldn’t afford one when we came here. I was completely understanding and learned to be self-reliant early on. I worked as soon as I could earn money. During my high school years, I worked a wide of array of jobs, mostly menial. I worked as a babysitter, an Olive Garden hostess, a grocery checkout clerk, a gym receptionist, and a teacher for a summer enrichment program at a private high school. I worked throughout my MIT years, doing various work-study programs. I worked part time during my 1L (first) year at law school and was lucky enough to get summer associate positions for both my 1L and 2L summers, which covered a large portion of the tuition. (Despite being concerned about prestige, I chose U.C. Berkeley Law School over higher ranked schools for its low in-state tuition.)

So I worked, seizing every opportunity I had to make money. To me, productivity equaled making money. As a result, my career choices also largely hinged on pay.

Almost all BigLaw firms in New York and other major U.S. cities pay associates on the same well publicized lock-step salary scale, which can be found here. Thus, like other sixth-year associates at other BigLaw firms, I was making a base salary of $250,000 a year. If someone told me ten years ago that I would make $250,000 a year one day, I would’ve been flabbergasted. If someone told me then that I would walk away from a quarter million dollar salary one day, I would’ve probably bet my first born against that person.

How perceptions change.

Even though only around 2% of American households take in more than $250,000 a year, I no longer thought that amount made me rich by the time I was struggling with the decision to quit. After deducting FICA and income tax (with New York City having the highest rate in the nation after taking state and city taxes into account), $250,000 yielded only $155,775 in take-home pay. And then at the end of the tax year, far from receiving any refund, I paid Uncle Sam at least another few thousand dollars, if not tens of thousands dollars. I know I am sounding like Professor Henderson here as I’m making a similar argument that a $250,000 salary does not make one rich. It does make one a HENRY — an acronym developed by Shawn Tully, a Fortune Magazine writer, which stands for “high earners, not rich yet”). However, I want to be clear, I am not complaining about the amount of taxes I was paying; I believe in progressive taxation. But I also believe people who rake in millions each year should pay a higher effective tax rate (i.e., actual tax paid after taking into account all deductions, divided by all income received before tax), which is not the case under the current regime. This piece on Harvard Business Review’s website is worth a read.

The power of money lies in its value relative to what other people have. Here comes the double whammy. Surrounded by investment bankers, hedge funders, and private equity guys as a Wall Street lawyer, not only did I feel that I was not rich, I sometimes even felt — dare I say — poor. As I was pulling long hours at work, tethered to the blackberry even when at home, working for clients who were probably younger than me but made multiples of what I made, I felt resentful. I resented that I was working so hard with no clear path or purpose ahead. And I resented myself for not being grateful for the good fortune I had had since the days of earning minimum wage.

I was fully aware that I was being an entitled whiner. Advising on multi-billion dollar transactions in an air-conditioned office with a brass plate with my name on it was a good deal better than greeting Olive Garden customers with a forced smile while holding the doors for them. “Quit bitching and just do the job. A job is a job, and this one pays well,” I told myself. But I couldn’t shake the feeling that I was trapped by golden handcuffs — and that they were actually just silver.

I vacillated between feeling insufficient and feeling guilty for feeling so.

In my saner moments I knew we were far from poor. We were financially solid. With two good incomes and no plans for kids (we decided not to have kids, which will likely be the topic of a subsequent post), we had more than enough for occasional splurges, such as a$1,400 pair of Giants tickets, antique shopping outings now and then, a personal trainer, etc. But, for me, the thrill of spending money and acquiring things or experiences had waned.

I used to know exactly how much $1,000 was worth. It was equivalent to 166 hours of standing in front of a cash register, three weeks of full-time teaching, or 35 nights of babysitting. If I wanted something, I saved and waited until the item was on sale. But as I earned more money, desire got satisfied without yearning. Money can buy things and even time, but money itself became a less tangible concept. It all boils down to a single number in a Mint.com email summary. I didn’t feel that the number, whether six digits or seven digits, made a palpable difference to my happiness.

I also became wary of the trend that once-luxurious goods were starting to be taken for granted as ordinary necessities. I could feel that I was getting sucked into that pit of quicksand, getting mired deeper and deeper.

All of these thoughts — am I rich or poor, should I save or spend to enjoy, how much money is sufficient, what does it mean to be sufficient? — were circling in my mind like a messy ball of mixed yarn. All I knew at the end of the day was that I needed to make some sense out of my convoluted relationship with money.

In a conversation with a junior colleague who was feeling sick and overworked, she said that she would be so happy — in fact, she would pay $500 — just to be able to take the next day off without having to worry about work. “You realize that $500 is probably more than what you make in take-home pay in a day, right?” I asked. At that moment, it dawned on me that in relation to my decision to quit, the key missing variable I need to solve for was the amount of money I’d be willing to pay to be healthier and happier.

My first step was to thoroughly analyze our family finances. Cold hard numbers help put things in perspective. Without opening the kimono, the bottom line was that we could still live comfortably on the same annual budget with just my husband’s income. Of course, we’d have less left over each month, but barring unforeseen circumstances we would not have to tap into our existing savings. And even if we lost my husband’s income, after years of hard work and living below our means (despite the splurges), these savings were enough for me to take a risk.

After getting a sense of our financial big picture, I delved into cutting specific expenditures despite my husband’s adamant initial stance that my quitting should not affect our annual budget. My husband knew me well enough to be rightfully worried that I would go bonkers with penny pinching on everything in order to “recoup” part of my lost income. Taking his concern to heart, I started with discretionary expenses that would not affect my husband. I also targeted expenses that I didn’t think would be difficult or painful to reduce. For example, among other things, I cut half of my clothing budget since I no longer need to buy work clothes, a third of my massage budget to alleviate my back pain as I hoped to be less sedentary, a good part of the cost of personal training and gym membership which I’ve discussed here, and a net of 15% from our eating out budget (accounting for a corresponding increase in groceries) as I want to cook more and eat more healthily. All together, I was able to lower our annual budget by $30,000, shrinking the loss of $155,775 in take-home pay to $125,775.

Would I spend $125,775 to be happier and healthier, to have the chance to find my passion? Shifting the anchor number from $250,000 to $125,775, half of what I thought I was walking away from, actually made a significant difference in my battle with my niggle over money. $125,775 is still a lot of money, but we have spent $20,000 on a two-week vacation before without experiencing nearly as much internal debate. Was it wasteful to spend $125,775 to take a year to figure out what I want to do with the rest of my life to be happy? I realized my reasoning was far from rational; after all, I was giving up a reasonably secure annual income (plus potential bonuses) for years to come, not just a single year of base pay. But these calculations were enough to tip me into pulling the trigger.

It has been two months since I quit. My relationship with money has improved. I have learned three things so far. Even though they may seem obvious to many, I only started to appreciate them when I got in touch with a broader and deeper reality on my road trip.

1. I often enjoy saving more than spending. Many times I actually derive more pleasure from being frugal than acquiring things. I have found pleasure in little things likeborrowing books from the library rather than buying them from stores and walking around the city rather than taking the taxis. Knowing that about myself has helped me to find ways to maximize happiness. I’ve convinced my husband to humor me and try out October as an “austerity” month. We will keep expenditures to a minimum, on non-discretionary items only. It will be interesting to see what our burn rate will be.

2. Bonds I developed with people and animals, rather than money, contribute more to me living a richer life. Now that I am happier myself, I want to be happy for others and help others. The dynamism of interacting with living beings, exchanging ideas, and feeling connected, can be more gratifying than appreciating a physical asset.

3. I am more content with what I have when I stop comparing myself to others. Unlike the two points above, where I can actively do something concrete, this one is about denying instincts, controlling the mind, and withholding actions, a much more difficult task for someone like me. I am still working on it and hopefully will be able to share some insights down the road.

I still care about money. I still love making money. All things equal, I would love for this journey to lead me to a profession that will enable to make even more money. But I hope that in forging this path, my foremost goal will no longer be to make money for the sake of making money. No more handcuffs, gold, silver, or otherwise.