$70 CSN Giveaway Just In Time for the Holidays (CLOSED)

Congratulations to Meaghan F. and happy holidays to everyone!

At the beginning of the fall season, I mentioned a partnership with CSN stores, and now I'm finally getting around to hosting the giveaway you all have been waiting for just in time for holiday shopping. Maybe some of you need a new dining set or barstools for your new apartment or dorm room. Others are probably trying to figure out what to buy for the holidays with money being so tight in this economy. CSN stores is a good place to start because it literally has every home and office item you are probably looking for whether as a gift for yourself or for someone else. You will never have to step foot in a department store now that all of your holiday shopping is just one mouse click away.

I decided to get a desk chair from CSN because mine was standing on its last two legs. CSN has over 1,400 desk chairs to choose from, many of them high quality and for a very reasonable price. All I needed was a comfortable yet inexpensive desk chair for my home office. I ended up with choosing the Regency Geo Bonded Leather Chair. I received it less than a week after ordering it online in brand new condition. This chair was such a great bargain and has held up very well so far. It looks great, feels comfortable, and adds a professional touch to my home office.

A lucky BIDER reader will receive a $70 CSN electronic gift card to use at any one of CSN's 200+ online stores. Hopefully this will go to one of our dedicated readers who really needs the money this holiday season. We know a lot of you who are in this position and BIDER is glad to help out in our own small way.

All you need to do is tell me in the comments section what item from CSN you would like to buy with your gift card. You get a bonus entry for following BIDER and mentioning you do so in the comments. Remember to include your contact information in the comment or email it to me or otherwise I'll have to pick another winner.

Giveaway ends December 1, 2010 at 12 noon. Good luck!

Not Rich At $250k - Great Post At the Legal Dollar

I haven't been following the story about the UChicago Law professor with a doctor wife who complained in a blog post about not feeling rich even though his combined family income is more than $250k. The professor took down his post after getting a ton of flack for his whining when so many people would kill to make even a fourth of his family's income, but a BIDER reader gave us the cached link to his post which you can go to here.

When I first read the post, I immediately thought to myself, this guy doesn't feel rich because he probably owns at least two luxury cars and a McMansion in a very wealthy suburb of Chicago with more space than his family actually needs. In short, I could tell from the blog post that like so many lawyers who win the job lottery and end up in Biglaw or teaching at a top law school, this professor and his family spends well beyond their means even when they earn more than most of us could ever dream of.

The Legal Dollar proves that my initial conclusion about this law professor to be correct with a post that explains the full story behind this professor's lifestyle and the total amount of student debt he and his wife still have 12+ years after graduating from law school. This professor and his wife still owe more than $500k in student loans. Don't feel sorry for them. They should have spent their first several years out of school focused on paying off their loans instead of taking out more loans for their McMansion, but that is a mistake that many Americans have made. I have heard so many stories of seemingly upper-middle class families who lose everything because most of what they have was bought with credit cards and loans. I personally know people who make $100k but still struggle to pay the bills because they HAVE to have that nice apartment in Manhattan even if it means paying triple the amount of a smaller apartment in Jersey or the Bronx:

...Some commentators have been critical of the Professor, but let's take a
look at his situation as a way for young associates and those considering law
school to gain insight into what their life will be like if they are lucky
enough to win the law school lottery and earn top dollar. I previously
talked about why 145K/year does not go as far as new law grads think it will, but now we can get an example of what life is like for a lawyer more than 10 years out of law school.

First, read the articles linked above and let's set the context. The Professor is a 1998 graduate of law school and spent time at Kirkland & Ellis (which typically pays top dollar.) He is also married to a doctor who apparently also makes at least a $100K/year contribution to the home.

The first thing that I note is that although the Professor has been out of
law school for 12+ years and spent time at K&E, he and his wife still have
more than $500,000 worth of student loans. We don't know the exact split
of who brought what debt to the marriage, but the existence of the debt even
after 12 years in practice should help disabuse law students of the unrealistic
idea that they will somehow just "pay back their student loans in 3 years or
so." Here's someone making top dollar with a wife working a high-paying
job and they still have $500K in loans after 12 years - yikes!

For $500K in loans, assuming an interest rate of about 6.8%, they pay
$34K/year after taxes (most likely about $51K/year pre-tax) IN INTEREST
ALONE! It's hard to know what the actual total payments are, but figure an
additional 20K/year after taxes has to go to principal (about 30K before
taxes.) This means that about $80K of their pre-tax income goes to loan
payments.

What's my point? Student loans are just a monkey on your back that you will be carrying for decades. The Professor has been carrying his for 12+years - and will probably be carrying it for 20 more. For those considering law school, recognize that this means you - even if you win the "good job lottery" that is harder and harder to win these days.

Second, we note that the single biggest expense for the Professor and his
wife are TAXES! More than $100K/year. In my experience, potential law students - and even young associates - are consistently underestimating just how big a bite taxes take as your income increases. For example, remember those things like personal exemptions and loan interest deductibility that you get to deduct at lower incomes? Well, they disappear when you go higher. Also, the Alternative Minimum Tax (AMT) starts to take a much bigger bite. But it's not just federal income tax - it's state income tax, Social Security, and Medicare taxes (FICA), too. Right now these probably consume about +40% of the Professor's income.

...Third, the last thing that struck me about the articles is that the Professor mentions that his second biggest expense is his mortgage - and that it is less than $100K/year, but more than his student loan payment - and that his property tax is about $15K/year. According to Bankrate, the P&I payment on a $1.5M home loan over 30 years at 5% is about $96K/year. $80K represents about a $1.3M home loan.

Also, I am generally familiar with the Chicago real estate market and (although some suburbs deviate and are more expensive) a home that requires about $15,000/year in property tax probably costs somewhere in the $1.2-1.7M range.

This leads us to two points: First, even though the Professor has been out 12+ years and his wife works as a doctor, they probably don't have a large percentage of equity in their home. Second, the the Professor owns too much house. The total housing expenses including mortgage and tax are near to or in excess of $100K/year - which is frankly too much.

In summary, even if the Professor and his wife are paid $400K - as some commentators have suggested - they are most likely out about $100K in income taxes, $100K in mortgage and house taxes, and $80K in loans. That gets them down to about $120K, which after private school for the 2 kids (probably about $30K/year), a 401k contribution ($33K/year), and some base living expenses
for food, utilities, cars, etc (figure $3000/month = $36K/year) - the Professor
and his wife are left with a total of $21K.

This should be a lesson for anyone who still thinks that taking out $100k+ in student loans is a good investment even to go to a good school. Unless you are willing to live frugally for a decade or longer, you will have the student loan monkey on your back for the rest of your life, even if are lucky to earn in the six-figure range.

We all want nice things and to live comfortably, but there is a point when some people just become flat out greedy and when they hit a rough patch, they aren't willing to downgrade to a smaller house or a used car. They'd rather live on credit and pay off hundreds of thousands of dollars in loans until they die before giving up the luxuries they've become accustomed to. That is not the way to live. Unfortunately, people aren't realizing this until it is too late. This seems to be the case with this UChicago professor. Don't feel sorry for this guy, but do realize that a six-figure salary does not mean you are living the high life when you have six-figure student loans to pay back and you expect to send your kids to the best private schools, colleges, and graduate schools.

Modern Family: Lawyers Are Being Laid Off Left and Right and Mitch QUITS!?

I have a couple of guilty pleasures.  I like Reese's Peanut Butter Cups, Canada Dry, LOST and Modern Family.  With the last episode, Modern Family may have knocked Reese's off the top of the list.

This episode is in the spirit of our career-life balance discussion--Mitch gets a little pissed off because he is called into work on weekends (btw, Mitch is a lawyer at a BigLaw Firm) and his chubby, lovable partner witnesses their adorable baby daughter engage in her "firsts" in his absence. Watch the episode to find out how this situation unfolds.

Best Line: "I'm used to nice things!"

I contemplated writing in to the producers to suggest that Mitch register with temp agencies and do document review to tide the family over until better times.