I have always wondered as to how a lot of young lawyers cope up with the idea of reaching the pinnacle of their careers in their early 30s. There is no ambition left. The only thing that follows after that is more money. How will people work for the next 30 years when you have achieved everything you could at such a young age. In other professions, such as litigation there is always the lure of being an SC judge, ASG, SG or AG. someday. An IAS officer will only become Cabinet secretary or finance secretary near the age of 60. But for corporate lawyers career ends only a few years after it began. Is the motivation only money?
Depends. I have been saving considerably. I don't spend a couple of thousand on shots on the weekend. I wear modest and save. I have been in the profession for only 3 years now and I have considerable savings. I don't intend to continue working in law after the first 10 years, and that is why I am saving (and investing) now. I will most probably do an LLM or a public policy program and settle into something that is not so hectic as a law firm job. They pay a decent sum and my savings from my job post a decade would be substantial enough to take care of most of my major expenses. Of course, I may decide to stick on or may quit earlier, who knows, only time will tell but till then that is the plan, to save now, do the grind for the time to come, and do something less demanding later on.
My post tax savings rate for FY21 was about 75% and I'm confident my savings rate will increase this FY. I actually now spend about 10% lesser than what I used to spend in my first couple of years after university.
I don't feel like I've deprived myself of anything that I value. Therefore, I don't consider myself frugal.
My point is: don't do shots if you don't like that but don't deprive yourself of things that you do - and if that is drinking scotch or doing the occasional line, then so be it. As Buffet says, don't save sex for old age.
I am not saying that you deprive yourself of good things in life otherwise what is the purpose of money. But here are few examples of how I save money (some of these are personal preferences too):- 1) I have a cook so I eat healthy and I don't end up spending 300-500 bucks on every meal. 2) I don't drink occasionally, and when I do, I get liquor at home, I am not a big fan of spending 5x in a noisy pub. I know this comes to personal preference but I am just not a big fan of the noise and uncomfortable chairs at most of these places, and the prices don't help too. I just invite friends over and have a nice time, and I don't mind playing the host. I don't smoke and don't do drugs either. 3) I don't live in the poshest area of the town. Some of my colleagues ask me why I stay where I am put up but honestly, I don't see why I have to move. The house is nice, my landowners are not meddling and people around are regular middle-class folks, they may make judgments, but they keep it to themselves, and the place is super close to the metro. My commute from home to the office is less than 40 minutes. 3) Pre covid I used to travel to the extent possible by public transport, I had purposely taken my residence at a walking distance from metro station. My office is also very close to a metro station. 4) There are these super nice places in Delhi and Gurgaon where you can buy apparels and footwear for insane prices. Most of these places are export houses and are selling their surplus so it's not branded but the material is nice and you can spend an entire day and still not go through all of their stock. 5) I do like expensive gizmo, a bit of a tech freak here, but since most of the time is spent on firm's laptop, I haven't purchased an expensive laptop. On phone, I have fixed my budget to 10k/year (this means if I buy a phone worth 30k, I will use it for at least 3 years). Also, I don't use postpaid for my personal number, I just don't understand why should I pay so much extra when I can afford to pay in advance. 6) I invest, I max out my 80C, 80D, and 80CCD(1B) for my safer investments (I don't do ELSS here, this is my safe money portfolio, so its PPF all the way here and few tax saver FDs). I also invest heavily in stocks, index funds and mutual funds with a long term outlook (in order of decreasing amount). 7) I don't own a car, don't intend to in the near future as well, perks of living in a metro city. I do own an Activa though, and no, I am not ashamed of it. 8) I use this nifty chrome extension that does price comparison and a couple of other things such as the possibility of price dropping in the next few days for online shopping. I am not part of any of these deals and discount places, I always used to end up buying a lot of stuff that I didn't really need just because it was going at a throwaway price, so left those.
Few other things here and there but I think the most important thing that I am doing is investing my money at the right places. Even if you don't do most of the stuff mentioned above, please do invest and invest consistently irrespective of how markets are doing, its just insane how much money you can make just by investing. Sometime around June 2020, I decided to spend a considerable amount of money on buying stocks of my existing portfolio, not only all my stocks have gone back to pre-covid levels, most are now at a higher price band, and the money I can make on the stocks I bought during covid time is slightly more than 5 months of my salary. That's just insane.
@Guest - You would have talked to me in law school too. I was the guy whose notes were used by the rest of the batch before the exam :)
@Fire - Agreed, yes, it is about temperament. In my case it is from my parents, they never made much and rarely invested in the right places, but boy did they save some money.
As far as 115BAC, that is a bit of a personal choice because of a couple of reasons. First is without all these benefits, I am not sure I would invest in safe instruments without there being an incentive for me to do so, so in a way that is my carrot to play safe. NPS again is on similar lines, 50k per annum is not that much but in addition to the massive tax benefits, the best part is that I can't withdraw it all at one go even if I wanted to, this gives me the assurance that when the time comes even if I make terrible choices, I would still have something that I can depend on.
I invest in equities directly not because I understand candlestick pattern or can do technical analysis and stuff. I am not convinced entirely that really works. I rely on my own judgment (not gut). So, to explain better here is how I pick a stock, first I see the longest term graph and see while there may be ups and downs is the stock overall always increasing. (It is for this reason I don't invest in pharma and few other sectors where there is no such certainty) Next I look at its debt, if debt is way too much, I avoid them Finally, I look at the overall business and the timing. By timing, I mean like I picked up L&T few months back because it was obvious that the government will invest in infrastructure, and a huge chunk of it will go to L&T being the market leader. My hypothesis was correct, and I have close to 45% gain in just a few months. MF manager may be smarter but then just they don't have as much as liberty as we do when it comes to how our money can be spent. Recent example can be when RIL was gaining due to Jio's fundraise and most funds weren't able to gain due to SEBI imposed restrictions. And, no I don't think it was just the corporate governance thing at Reliance that kept all of them at bay.
I'm with you on all the things that you do except I always stayed close to work. If you save an hour a day in commuting (both ways), you will save more waking time in a year then your entire leave for the year. That's worth a lot to me.
I spend on my hobbies (which isn't doing drugs - anymore, lol) but I don't spend on things which I don't value - I don't travel abroad because I like slow travel and don't see the point of pit stop tourism and didn't have an AC (in Mumbai) at home because I didn't feel like I needed one. But these decisions weren't guided by how much they would cost or how much I would save. They were guided by my sense of value.
I find that a lot of what you're (and I am) doing is a result of a certain temperament and it's easy to save a lot of money if you have that temperament. A lot of people don't have this - I feel there is a selection bias at play: a lot of people who want to join firms from college are more outward (success / prestige) focused and they're the sort who tend to get addicted to consumerism.
BTW do check if 115BAC will be better for you - I did the math and it's definitely better for me. I also don't invest in: (a) NPS - don't see the value of locking in that amount, but to each their own; and (b) shares directly - it's all direct index funds (domestic and MOPE S&P 500). MOPE is also coming up with an emerging markets index fund soon - looking forward to that.
good question. it isn't more money it is the fear of losing the position and the money and the clients. after you are afloat you have to keep kicking.. to remain at "the pinnacle"
But at least at the very big firms which have institutional clients, the client will mostly never leave the firm. And it very big firms which have hundreds of partners. And partners at least in India or even in the US are never fired. The position of partner comes to many people at the age of 32 and remains till a person retires. 30 odd years is too long.
1. Rule one - save as much as possible (30 percent of the savings component in equity investments like Mutual funds since insider trading and all......cringe). The reason - you never know what decision you might end up taking within a few months, years, or in a decade of you joining a firm. Be very very specific on where you spend you money. And if you are a corporate lawyer continuing to work post covid - move out of Mumbai. You are paying 50 K rent for that one room or a 1BHK when you can have your own apartment with 17 Lac down payment and an attractive mortgage.
2. working at a top law firm (globally) is like working at one of the MBBs (McKinsey, Bain and BCG). you are only here till you find your last gig somewhere else. So make sure you really kick the savings into high gear. you wont be getting that sexy tax break once you get into one of those employment contracts.
3. Your physical fitness is key - nothin is more more important. - no amount of shitty #A1,2,3,SA1,2,3,PA1,2,Partner salary is worth compromising on health.
Hi, I'm a noob and lack experience regarding taxes. Come from a family where we never even qualified to pay taxes. Can you please expand a bit on the tax savings point? Thanks.
Read: (a) Section 44ADA since you will fall under it; (b) Section 194J to understand TDS (and TDS will revert to 10% from April) applicable to lawyers; and (c) Section 211 to understand the advance tax regime for lawyers.
Section 80C allows you to claim deductions on certain expenses upto a maximum of 1.5L. You will get a standard deduction of INR 10K for the interest in your savings account. You can claim some deductions on health check ups and on NPS (upto 50K but NPS is something you need to mull over whether it makes sense for you because of how it's structured). I'm forgetting the amounts of deductions that can be claimed under for preventative health check-up.
None of these deductions are relevant if you choose to go for the new regime under 115BAC. If and when you're over 15L of income (not gross receipt), it should make more sense to go under 115BAC rather than the old tax regime.
Cheers! Let me know if you have any questions once you've read these sections.
If you're an A0, after accounting for expenses (and even assuming you haven't made any deductions), you should get a refund this year.
But it's best to understand how all of this works - pretty useful for work as well. Once you get past tax and accounting jargon, it's pretty simple stuff and your clients will typically (yes, I'm making a generalisation) be more sensitive to tax risks than legal risks in a jurisdiction like India so its best to speak the language which is valued by your clients.
I don't feel like I've deprived myself of anything that I value. Therefore, I don't consider myself frugal.
My point is: don't do shots if you don't like that but don't deprive yourself of things that you do - and if that is drinking scotch or doing the occasional line, then so be it. As Buffet says, don't save sex for old age.
1) I have a cook so I eat healthy and I don't end up spending 300-500 bucks on every meal.
2) I don't drink occasionally, and when I do, I get liquor at home, I am not a big fan of spending 5x in a noisy pub. I know this comes to personal preference but I am just not a big fan of the noise and uncomfortable chairs at most of these places, and the prices don't help too. I just invite friends over and have a nice time, and I don't mind playing the host. I don't smoke and don't do drugs either.
3) I don't live in the poshest area of the town. Some of my colleagues ask me why I stay where I am put up but honestly, I don't see why I have to move. The house is nice, my landowners are not meddling and people around are regular middle-class folks, they may make judgments, but they keep it to themselves, and the place is super close to the metro. My commute from home to the office is less than 40 minutes.
3) Pre covid I used to travel to the extent possible by public transport, I had purposely taken my residence at a walking distance from metro station. My office is also very close to a metro station.
4) There are these super nice places in Delhi and Gurgaon where you can buy apparels and footwear for insane prices. Most of these places are export houses and are selling their surplus so it's not branded but the material is nice and you can spend an entire day and still not go through all of their stock.
5) I do like expensive gizmo, a bit of a tech freak here, but since most of the time is spent on firm's laptop, I haven't purchased an expensive laptop. On phone, I have fixed my budget to 10k/year (this means if I buy a phone worth 30k, I will use it for at least 3 years). Also, I don't use postpaid for my personal number, I just don't understand why should I pay so much extra when I can afford to pay in advance.
6) I invest, I max out my 80C, 80D, and 80CCD(1B) for my safer investments (I don't do ELSS here, this is my safe money portfolio, so its PPF all the way here and few tax saver FDs). I also invest heavily in stocks, index funds and mutual funds with a long term outlook (in order of decreasing amount).
7) I don't own a car, don't intend to in the near future as well, perks of living in a metro city. I do own an Activa though, and no, I am not ashamed of it.
8) I use this nifty chrome extension that does price comparison and a couple of other things such as the possibility of price dropping in the next few days for online shopping. I am not part of any of these deals and discount places, I always used to end up buying a lot of stuff that I didn't really need just because it was going at a throwaway price, so left those.
Few other things here and there but I think the most important thing that I am doing is investing my money at the right places. Even if you don't do most of the stuff mentioned above, please do invest and invest consistently irrespective of how markets are doing, its just insane how much money you can make just by investing. Sometime around June 2020, I decided to spend a considerable amount of money on buying stocks of my existing portfolio, not only all my stocks have gone back to pre-covid levels, most are now at a higher price band, and the money I can make on the stocks I bought during covid time is slightly more than 5 months of my salary. That's just insane.
@Fire - Agreed, yes, it is about temperament. In my case it is from my parents, they never made much and rarely invested in the right places, but boy did they save some money.
As far as 115BAC, that is a bit of a personal choice because of a couple of reasons. First is without all these benefits, I am not sure I would invest in safe instruments without there being an incentive for me to do so, so in a way that is my carrot to play safe. NPS again is on similar lines, 50k per annum is not that much but in addition to the massive tax benefits, the best part is that I can't withdraw it all at one go even if I wanted to, this gives me the assurance that when the time comes even if I make terrible choices, I would still have something that I can depend on.
I invest in equities directly not because I understand candlestick pattern or can do technical analysis and stuff. I am not convinced entirely that really works. I rely on my own judgment (not gut). So, to explain better here is how I pick a stock, first I see the longest term graph and see while there may be ups and downs is the stock overall always increasing. (It is for this reason I don't invest in pharma and few other sectors where there is no such certainty)
Next I look at its debt, if debt is way too much, I avoid them
Finally, I look at the overall business and the timing. By timing, I mean like I picked up L&T few months back because it was obvious that the government will invest in infrastructure, and a huge chunk of it will go to L&T being the market leader. My hypothesis was correct, and I have close to 45% gain in just a few months. MF manager may be smarter but then just they don't have as much as liberty as we do when it comes to how our money can be spent. Recent example can be when RIL was gaining due to Jio's fundraise and most funds weren't able to gain due to SEBI imposed restrictions. And, no I don't think it was just the corporate governance thing at Reliance that kept all of them at bay.
I spend on my hobbies (which isn't doing drugs - anymore, lol) but I don't spend on things which I don't value - I don't travel abroad because I like slow travel and don't see the point of pit stop tourism and didn't have an AC (in Mumbai) at home because I didn't feel like I needed one. But these decisions weren't guided by how much they would cost or how much I would save. They were guided by my sense of value.
I find that a lot of what you're (and I am) doing is a result of a certain temperament and it's easy to save a lot of money if you have that temperament. A lot of people don't have this - I feel there is a selection bias at play: a lot of people who want to join firms from college are more outward (success / prestige) focused and they're the sort who tend to get addicted to consumerism.
BTW do check if 115BAC will be better for you - I did the math and it's definitely better for me. I also don't invest in: (a) NPS - don't see the value of locking in that amount, but to each their own; and (b) shares directly - it's all direct index funds (domestic and MOPE S&P 500). MOPE is also coming up with an emerging markets index fund soon - looking forward to that.
after you are afloat you have to keep kicking.. to remain at "the pinnacle"
1. Rule one - save as much as possible (30 percent of the savings component in equity investments like Mutual funds since insider trading and all......cringe). The reason - you never know what decision you might end up taking within a few months, years, or in a decade of you joining a firm. Be very very specific on where you spend you money. And if you are a corporate lawyer continuing to work post covid - move out of Mumbai. You are paying 50 K rent for that one room or a 1BHK when you can have your own apartment with 17 Lac down payment and an attractive mortgage.
2. working at a top law firm (globally) is like working at one of the MBBs (McKinsey, Bain and BCG). you are only here till you find your last gig somewhere else. So make sure you really kick the savings into high gear. you wont be getting that sexy tax break once you get into one of those employment contracts.
3. Your physical fitness is key - nothin is more more important. - no amount of shitty #A1,2,3,SA1,2,3,PA1,2,Partner salary is worth compromising on health.
Section 80C allows you to claim deductions on certain expenses upto a maximum of 1.5L. You will get a standard deduction of INR 10K for the interest in your savings account. You can claim some deductions on health check ups and on NPS (upto 50K but NPS is something you need to mull over whether it makes sense for you because of how it's structured). I'm forgetting the amounts of deductions that can be claimed under for preventative health check-up.
None of these deductions are relevant if you choose to go for the new regime under 115BAC. If and when you're over 15L of income (not gross receipt), it should make more sense to go under 115BAC rather than the old tax regime.
If you're an A0, after accounting for expenses (and even assuming you haven't made any deductions), you should get a refund this year.
But it's best to understand how all of this works - pretty useful for work as well. Once you get past tax and accounting jargon, it's pretty simple stuff and your clients will typically (yes, I'm making a generalisation) be more sensitive to tax risks than legal risks in a jurisdiction like India so its best to speak the language which is valued by your clients.