Sunday, October 26, 2014

Why we should press on.

At the end of the semester, some classmates are having doubts about whether they made the right choice in coming to the SMU JD program. I promised that over the weekend, I would write something to cheer them up so that they would press on in their studies.

I think that my class is a small class and the industry is large enough to absorb all of us in spite of all these changes going on to "nerf" the legal profession.

For the rest of the readers, my analysis should also apply if you've worked damn hard to get into a fairly exclusive MBA like the one at INSEAD or the APEX MBA program in NUS.

When I look at my class, especially the younger folks in their early-30s and 20s, they are likely to able to be placed in a career that is going through the tail-end of a Golden Age. I've taken some very conservative estimates to calculate the expected net-worth of my classmates upon graduation.

Here are my assumptions.

a) You get the minimum grades to be admitted into the bar. No need for 2nd Upper grades.
b) You start out at $4,500 a month.
c) 7% increment a year with 3 months bonus every year.
d) You save 50% of your income and your entire bonus every year.
e) You invest your savings at 7% returns.

( Ok... granted not all of you lawyers will know how to invest, but 7% a year is not too ambitious )

Based on the table below, if they can meet conditions (a) to (e), a conservative starting salary will net them their first million within 13 years. So if a graduate at 30 charts his career and finances properly, they are likely to make their first million at 43.

SalaryBonusAnnual SavingsCumulative SavingsInvestment at 7% returns
$54,000.00$13,500.00$40,500.00$45,000.00$45,000.00
$57,780.00$14,445.00$43,335.00$88,335.00$91,485.00
$61,824.60$15,456.15$46,368.45$134,703.45$144,257.40
$66,152.32$16,538.08$49,614.24$184,317.69$203,969.66
$70,782.98$17,695.75$53,087.24$237,404.93$271,334.77
$75,737.79$18,934.45$56,803.35$294,208.27$347,131.55
$81,039.44$20,259.86$60,779.58$354,987.85$432,210.34
$86,712.20$21,678.05$65,034.15$420,022.00$527,499.22
$92,782.05$23,195.51$69,586.54$489,608.54$634,010.70
$99,276.80$24,819.20$74,457.60$564,066.14$752,849.05
$106,226.17$26,556.54$79,669.63$643,735.77$885,218.11
$113,662.01$28,415.50$85,246.50$728,982.28$1,032,429.88
$121,618.35$30,404.59$91,213.76$820,196.04$1,195,913.73
$130,131.63$32,532.91$97,598.72$917,794.76$1,377,226.42

I will let the real practitioners discuss the feasibility of my financial projection, these numbers can even apply for the top-flight engineers who can get into the banks after their first degree. 

Of course, my table and projections are what happens in theory. 

It's baffling to know legal professionals, who shockingly, are not millionaires before 40. There are many reasons why savings and investments targets cannot be met. I mean no insult to those professionals who are still working hard to met their financial targets but the alcohol at Ice Cold Beer attracts a lot of government taxes so less trips to the bars help. 

But, I think having a seat in SMU is something we should be grateful for, so I think this qualification is worth striving for, even when many of us are currently our ego bruised and getting perhaps our first B- in our entire lives. 

For me, even if no law firm were to take me in due to my age, I think I'd be a pretty formidable outsourcing contract manager if I have to crawl back to the IT industry.





5 comments:

gagmewithaspoon said...

i left the legal industry in my 4th year, like many others. unless you are a top notch legal eagle, you are still supposed to entertain and socialise with your colleagues - hence, the expensive wine and dine. most of social conversations revolved around bags (i am a lady), clubs, drinks, parties, dive trips for the first few years. not sure about the rest, but i don't supposed it will change much. of course, you can choose to be alone and feel even more alone at 3am at night on christmas eve when you are turning around the next transactional document for the client and the investment banker. even with all the money, most of the time, transactional lawyers are the lowest life form and you are usually too powerless to say, "hey, my granny is in hospital so i think i need more lead time".
of course, if you don't work in one of fast paced firms or you don't plan to do financial legal work, then your projections are probably not going to cut it, so prepare to hit a millionaire only about 25 years later but of course, a more leisurely journey!

the above does not apply if you are really a legal eagle, or if you have great socialising / networking skills, or a wealth of contact. but if you did, then barring the first exception, you probably will succeed without a law degree!

sorry to sound so pessimistic, i am a ex-lawyer after all =(

Kyith said...

hi, think you should moderate your 7% return. it is very unrealistic in this time and age.

Richard Ng said...

7% yearly increment is on the high side, I think average 4 to 5% is more realistic! ;-)

Christopher Ng Wai Chung said...

Thanks for all the feedback, especially from the real lawyers !

This provides alternate perspective. I may not have the truth and I guess it may somehow be between what we are trying to propose.

Passive Income Builder said...

Hmm i still think that 7% is quite ok. Maybe cos i rojak with high yields and not so high ones...