Niraj Chhabra | Turning Legal Success into Financial Security

Elise Holtzman: Hi everyone, it's Elise Holtzman here, a former practicing lawyer and the host of the Lawyer's Edge podcast. Welcome back for another episode. Many lawyers assume that a high income automatically leads to financial security. Yet there are plenty of successful attorneys out there, who still feel uncertain about their long-term financial picture. In this episode, we'll talk about the financial realities lawyers face as their careers progress. From navigating partnership compensation and equity decisions to balancing career growth, family priorities and long-term wealth planning. Our conversation is going to explore how lawyers can think more intentionally about money so they have greater clarity, confidence and choice throughout the course of their careers. Before we dive in, today's episode is brought to you by the coaching team at the Lawyer's Edge, a training and coaching firm, which has been focused exclusively on lawyers and law firms since 2008. Each member of the Lawyer's Edge coaching team is a trained, certified and experienced professional coach and either a former practicing attorney or a former law firm marketing and business development professional. Whatever your professional objectives, our coaches can help you achieve your goals more quickly, more easily and with significantly less stress. To get connected with your coach, just email the team at hello@thelawyersedge.com. My guest today, Niraj Chhabra, is the founder of Sidebar Advisors, a financial planning firm dedicated exclusively to serving attorneys at every stage of their careers, from rising associates to equity partners. For more than 20 years, Niraj has helped lawyers navigate the financial complexity that comes with success, partnership compensation, tax strategy, equity, retirement planning and the competing demands of career growth and family life. Using a behavioral financial advice approach, Niraj works with attorneys to align their financial decisions with their values, which helps them build wealth intentionally, reduce unnecessary stress - that one sounds good - and create real optionality in both, their careers and their personal lives. Niraj, welcome to The Lawyer's Edge.

Niraj Chhabra: Oh, it's good to see you again.

Elise Holtzman: It's great to see you. It's been a while and I'm excited to have you here, to talk about something that is so important to lawyers, right? Lawyers are out there serving their clients and helping other people become successful, build businesses, you know, head off challenges. And so I'm excited today to talk to you about how we can serve lawyers and help them pay attention to what they need, in order for them to feel successful and have that kind of long-term stability that I think most people want. So let's talk about this idea of feeling financially secure, being financially secure. Many lawyers earn significant incomes, right? But they don't necessarily feel financially secure. Why do you think that happens? And what are they maybe getting wrong about the path to creating wealth?

Niraj Chhabra: I think it's a few things and it depends obviously on the type of lawyer you are. You could be a big law lawyer, a solo practitioner, you know, associate, all of these different stages of your career are going to have different nuances that you have to think about. But if I would have to identify a common thread, it's that the savings just typically doesn't keep up with the income and expenses. So if you think about the way most people structure their paycheck, when you get paid, you have your whole paycheck going into your checking account and then you have like a fixed dollar amount going into your savings. We typically tell clients to reverse this, have their whole paycheck going into their savings account and transferring a fixed dollar amount into their checking. This does a couple of different things. When you get your raise or your bonuses, where does that typically go? It goes into the checking account. When we see it in our checking account, we spend it. By having it automatically go into the savings, you know, you're doing a couple of things. It's number one, automatically being saved. Number two, when you see a smaller balance in your checking account, you're just prone to spend less and therefore, you know, you're kind of keeping the Joneses at bay. You're not necessarily trying to increase your standard of living. So I would say that that's the first thing that people oftentimes, you know, kind of, I don't want to say get wrong, but it's definitely, you know, that the savings does not keep up with the salary and the expenses. The other thing that we see very commonly with regards to high earners is that they don't have time to handle their finances. So what ends up happening? You know, as a general rule of thumb, you should keep somewhere between three months to 12 months worth of your expenses set aside in cash. But because these high earners just don't have the time to address anything, where does it go? It just goes into their savings account and we will literally find attorneys that have millions of dollars sitting in a savings account that is a real missed opportunity, over the course of a decade, two, three decades later, where it should have been invested, because they had sufficient money in cash, but they weren't investing in balance. So those are the two things that I think kind of help people, you know, attribute a lot of the feeling stuck that attorneys encounter when they are very much preventable in real life.

Elise Holtzman: What do you see in terms of lawyers' understanding of how to build wealth? Right, because there's so many things that I talk to lawyers about, as you know, Niraj, where they didn't bother teaching us this stuff in law school. And so unless a lawyer was in some kind of undergraduate business program perhaps, or something like that, it's not like anybody sat us down and explained this to us, which is one of the reasons I wanted you to come talk to me today. Do you see that a lot, that lawyers are like, okay, great, I'm really smart and I've got a great job and I'm really fortunate and I'm making a really nice living, but I don't… and the example you gave before of having millions of dollars in cash seems to be a good example of that, which is what made me think of the question. What do you see, in terms of lawyers really understanding, how to build wealth or, you know, what the foundational principles are?

Niraj Chhabra: In certain ways, financial planning for lawyers is not different, at least in theory. You know, we earn money, the more we earn, the more we get taxed, you know. The same vehicles are available to attorneys as other folks as well. So it's not different in certain respects, but in other ways it is, you know. Attorneys may be buying equity into their firms. They have additional equity compensation programs or deferred compensation programs. So it's not uncommon for things to get very complicated, very fast for lawyers. And it could be so overwhelming and because they're billing by the hour, they see handling their own personal finances almost as coming at the expense of their practice. And given the choice between another billable hour and handling their finances, more often than not, they're going to choose another billable hour. And it's not just attorneys, it's humans in general. Like, I do financial planning all day long, but when I get home, am I in the mood to do this for myself? Absolutely not. So we hired an advisor to take care of this for us. And, you know, a lot of the meeting is like, duh, of course we should be doing this, but it doesn't happen unless there's a third party involved to help us get it done.

Elise Holtzman: Yes, so even somebody who actually knows what he's doing is not necessarily taking the time to do this, right? It's the “shoemaker whose children don't have shoes” - kind of thing. And I think that that, you know, I think that that's good to hear, because I think that sometimes lawyers feel like, I really don't know what I'm doing and I don't know when I should get started with, you know, using a financial planner and all of that sort of thing. I noticed that you use what you call a “behavioral financial advice approach”, what does that mean?

Niraj Chhabra: Sure, a lot of the time people think it's just about the numbers and it can be, but sometimes there's more to it than that. You know, we apply a behavioral financial advice approach, because a lot of it is behavioral. So your upbringing matters. Did you grow up with an abundance mentality or did you grow up with a scarcity mentality? That's going to impact how you approach your life, in terms of whether you're a saver or a spender. We work with, as you pointed out, almost exclusively lawyers. And a lot of the time we'll have a couple that met in law school and we will have one person who had mom and dad pay for their undergrad and potentially their law school education. And the other person went to school at night and really had to grind during the day, work and take out loans, in order to get to where they are. And now it's time for them to raise their own family. And one person says, well, we really should start thinking about opening up an education account for our children. And the other one's like, why? They could take out loans. Well, why would they take out loans? You know, we have a responsibility as parents to pay for our kids' education. Well, I took out loans, and I turned out fine. You know, it taught me how to hustle, you know. Who's right, who's wrong in that scenario? Nobody's right, nobody's wrong. It's just a different upbringing. And your upbringing is going to influence how you approach your finances later. The problem is going to become that because no one's right, but everybody thinks they are, this could easily lead to conflict in a household. So it's not necessarily about just the numbers, it's also about understanding the other person's perspective and how their upbringing is going to shape the way that they think about decisions and finances and things of that nature. So it's also about aligning your finances with your values. You know, so for example, if education is truly important to you, you're going to put that over anything else, including your own retirement. So I could be talking to two different couples. One person says, well, there's no loan for retirement, my kids could take out a student loan. I'm going to retire on my own terms. And that's probably true, there is no loan for retirement. So you have to put the oxygen mask on yourself, before you think about taking care of those around you. I had another client, you know, we talked about this and she said, I don't care if I have to work till I'm 75, my kid's not graduating with a single penny of student loan debt, because she valued education. So it's again, not just about the numbers, sometimes it's about aligning your values with your overall financial standing.

Elise Holtzman: Yes, that's a great point. So do you then sit down with people and ask those sorts of questions? You know, what are your priorities? What do you care about? And then how do you help couples, for example, right? Not everybody that comes to you is a couple, but to the extent that you are working with couples, are these the kinds of questions you ask and how do you recommend that they resolve some of those issues?

Niraj Chhabra: Yes, a lot of the time it is just helping unpack, where their mindset came from and their upbringing. I'll give you a quick example. One time we were sitting down with a couple and this again, to your point, doesn't have to just apply to couples. You know, one spouse really wanted to… They both had demanding careers. And one spouse said, you know what, I think it's time to get a housekeeper, because we're not getting to the house and things of that nature. And the other spouse was very resistant to it. And they were both attorneys, both busy. So you would think that he would have been on board with this understanding that, hey, there's just not enough time. But when we started to dig a little bit deeper, we found that his cultural background had a huge part in this. He was almost embarrassed to tell his mom that he had a housekeeper. So a lot of this wasn't necessarily just about, like he felt comfortable with it, but he was almost thinking about what the optics would look like in front of his family, based on his heritage, who thinks about gender roles and things of that nature. And that was part of the hesitation. Sometimes we'll see the same thing happen with the idea of hiring a nanny or something along those lines, where people just, you know, their backgrounds or their guilt comes into play, especially if they didn't necessarily come from money. This is an adjustment for a lot of folks. And it's something that they have to take into consideration, as they need, you know, need to free up their time, so they can be better parents, better spouses, you know, better caretakers to their loved ones and things of that nature.

Elise Holtzman: I love these points, because it strikes me that even before talking to somebody who is in the kind of role that you're in, right, an expert who can advise you on your financial future and how to create that, it can be important to have some of these conversations beforehand. And also it strikes me that it's really important to respect where the other person is coming from, right? If you are in a couple…

Niraj Chhabra: A hundred percent.

Elise Holtzmann: … just because you were brought up one way doesn't mean the other person was. And I think these things are real, right? Like I remember feeling like, before I got a housekeeper, I felt guilty. I didn't want… I kept saying to my aunt, I don't want someone to touch my laundry. And like 10 years later, she was like, so how do you feel about someone touching your laundry? Now I'm like, let them touch it. You know, I wouldn't mind if they touched it five days a week, you know? So those things can change as well, but it's really important to, I think, to respect each other and have those conversations. When it comes to law firm lawyers, for example, one of the things that I see, particularly with young partners, is they start getting confused and somewhat stressed out about the idea that now they've become partner, maybe equity partner, or they're suddenly a law firm owner, and that those compensation structures can be very confusing to them. And so, you know, whether there's origination credit or there's certain profits being split or whatever it may be, how do you think that equity partners and law firm owners should be approaching financial planning differently from lawyers who are working on a salary?

Niraj Chhabra: Yes, good question. And, you know, it seems confusing, because it is very confusing, you know? There's the idea that you're going from a W-2 to a K-1. You know, you are going from paying taxes on one state to having multiple filing with holdings. You know, you used to make a higher salary. Now you're making less than a first-year associate and you're getting these big bonus distributions, either on a quarterly basis or an annual basis. So you have to understand the timing. You have no idea what safe harbor withholdings are and you have to make sure that you're thinking about that. All of a sudden, you're being thrown into a deferred compensation program and your firm's saying that you could put into this, but you can't change your mind about how much you're putting into this, for at least 12 months. So what do you do? You retreat. There's a lot of, you know, nuances to those decisions that may not necessarily apply to an associate or a non-equity partner at a law firm, and they're all very important. You know, you have to understand this. If you're not putting enough money aside for your taxes, guess what? You're going to be in a very uncomfortable spot, you know, come next April. If you're not taking advantage of a deferred compensation program and it's offered to you, that could literally be the difference of tens of thousands of dollars of tax savings, because you just didn't know, and, you know, because you didn't understand it, you just didn't take advantage of it. A lot of the time, it's not just impacting you. We were talking about, you know, the partners and your partner at home. You know, we've seen people not take a partner position, because their spouse didn't understand the compensation structure. So you mean to tell me that you're going to make less than an associate and we have to take care of my mom, who's aging and we have our kids' private school education. We have to put all this money aside for taxes and they want you to write a big fat check to become an equity partner and this is a good deal, why? You know, you can see on the surface, this doesn't exactly sound like a good deal. So it's making sure that not only you, but your significant other also understands the nuances and you got to understand the timing of this, because, you know, you might get a big upfront check, in order to help you get through the next couple months, until you start to get those quarterly or annual distributions and the timing does matter. Maybe you have some big ticket items that are on the docket at home that you need to get through and, you know, you're thinking, well, I can't survive on this base salary and that's often what people do. They just kind of compare base salary of the partner level, versus base salary of what they were making as an associate, ignoring all the distributions that come along the way. Now, one potential red flag that people need to be aware of is clawbacks. There's always the possibility that, you know, you put money into the firm or you get compensated on the distribution and later in the year, for one reason or another, the firm actually says, we need a charge back, you know and you've already spent that money. So there's a lot of nuances that new partners may encounter that catch them by surprise without proper planning.

Elise Holtzman: Do you find that most people who are becoming equity partners, or law firm owners are learning that kind of, when it happens to them or they come to you with an understanding that, hey, this whole thing is going to change?

Niraj Chhabra: I think, unfortunately, it's a lot of sticker shock when… and it's usually after the fact. You know, I'll give you an example. We had a client that came to us and they got a massive tax bill and that's why they came to us, because it already happened. So I think with proper planning, these things are less of a shock and they could be prepared for in advance, but that's not usually what ends up happening. Usually people, you know, a lot of times they don't know that they need an advisor. A lot of times they think that it's not that complicated, until they actually get to the end of the rainbow and then they see what happens a year later. So to answer your question, I think most of the time it happens, you know, retroactively.

Elise Holtzman: Yes, I mean, the irony of this, of course, is that lawyers know full well that what they do is more complicated than people think it is.

Niraj Chhabra: Sure.

Elise Holtzman: And that, you know, they need to be the advisors to their clients. But I do think that in many ways, the idea of becoming a partner at a law firm has been ingrained into us as kind of like…

Niraj Chhabra: Point of arrival.

Elise Holtzman: A golden ticket, right?

Niraj Chhabra: Yes.

Elise Holtzman: And so this is what you're supposed to strive for. And that somehow when you get there, it's all going to be easy and make more sense and you're going to get financial rewards. Nobody typically talks about the complications. So I think this is a great conversation for people to be listening to, so that they at least know that they've got to ask the right questions, because also every firm is a little bit different. You know, I always like to say that if one law firm had figured out the perfect compensation system for law firms, every law firm would be using the same one and we know that's not the case. What about other kinds of career shifts? What sorts of things do you see come up, when there are career shifts, such as even associate who is an income partner? You know, should that change something even though they're not necessarily getting equity? They move from a law firm to in-house. They launch their own firm. They're preparing for retirement. What are some of the things that you see people maybe ignoring, or financial mistakes that people are making over and over again?

Niraj Chhabra: No, they're all good questions, all with their own unique set of challenges. So if an associate moves to a partner or non-equity partner position, sometimes they come with a higher salary. Usually at that cusp, it means moving from the 24% to 32% tax bracket and that's a big jump for a lot of people that they don't necessarily realize. So it could mean you're flirting with the line of being on this tax bracket cusp. So maybe it means shifting from the raw portion of your 401k to the pre-tax portion or vice versa. You know, if you think about everything that's happening at that stage of your life, you might be getting married. Now you have to take into consideration your spouse's income, because you're typically teetering on this tax bracket. But we see the reverse happening too, where people might be a partner at a law firm, or even if they're an associate at big law and they just don't like the grind of it, they want to take a step back. People look at this very linearly, they look at their careers very linear to your point. They see that you have to become a partner and the reality is that in many people's financial situations, you know, if you're making a good income, you're probably saving a good amount of money. You could afford, in many cases, a six-figure drop in salary and still maintain your lifestyle, but have a little bit more peace of mind. You know, so sometimes that's something that's overlooked. Well, I can't afford to go from 350 a year to 250 a year. Well, why not? You know, let's map this out. We've gone through your expenses. Assuming you max out your 401k, assuming you still put money into your kid's education, you still have your spouse's salary, we could actually make this work. You know, would that make you happy, assuming that you're able to check off all the other goals that you're working towards? And the answer is often yes, not every time. Sometimes it's, well, we could do this but this is what needs to be cut. And now it's the client's choice to help make that decision. So yes, that's another example. You know, potentially going from big law to non-big law is a transition. Sometimes people want to go from working as an employee to opening up their own shop. That's going to come with its own nuances. You take for granted the fact that your firm offered a 401k. You take for granted the fact that your firm offered disability insurance. And by the way, what's your biggest asset? Your ability to earn an income. You know, you're taking for granted the fact that your firm was withholding your taxes for you. Now you're responsible for doing that on your own. What subscription? Should you sign up for Clio? Should you sign up for other, you know, document software? So it's a lot of nuances there. So depending on where you are, what the transition is, it's always going to look different. If you're going from a firm to in-house, now you have to think about restricted stock options. And, you know, maybe you have other programs available that weren't available for you as an employee at a law firm. So every attorney structure is going to come with its own little financial nuances depending on where you're at.

Elise Holtzman: I'm kind of laughing as you're talking, because one of the things that my husband and I did fairly recently is start really sitting down with our financial advisors and running some numbers to see, like what would it look like, you know, if and when we were to retire. And we're not ready to do that yet, but we said, well, you know, what does that look like? Because we have friends who are starting to retire. Some of them are retiring quite a bit earlier than I expected any of our friends to do. And I remember we went out to dinner one night with a couple that we're very close friends with. And, you know, he had retired earlier than he expected even, because there was something weird going on in his company and he decided he would be smart. He saw the handwriting on the wall and got out before the whole thing fell apart, so he could bring all of his stock with him and all of that. So he very successfully did that. But we kept saying like, well, how did you know that it was okay to retire? And he said, well, there was a certain number I wanted to get to. And I was like, what's the number? Like nobody knows what the number is, right? And I sort of feel like, shouldn't there be some flashing sign out there with a number that tells you, okay, you're going to be fine in retirement and you're going to be able to live the lifestyle you want to live. And of course the answer to that is absolutely not, because everybody's very different. So we have finally sat down and some of the tools that you all have, that you can put numbers in and it can tell you what your finances might look like in 20, 30, 40 years, that kind of thing, I think are very valuable. And I don't think I realized how easy it was to have somebody sit down and run some of those numbers for you. So one of the things that I'm going to suggest, I mean, I want to hear your advice certainly more than mine, but just in my own experience, knowing that the financial advisors are not there just to take your money and invest it, but have the opportunity to really sit down with you and run some numbers, so that you can have that peace of mind of looking at actual number. And of course things can change and you have to take in with a grain of salt what comes out, but it does give you some good ideas.

Niraj Chhabra: Yes, a hundred percent. And a lot of the time, you know, it's not just about hitting that number, because the number that you need is very different from the number I'd need, because our lifestyles are very different. But even if two people had the identical lifestyle and in theory needed the exact same number, in terms of what their 401k balance is, taxation matters, you know. There's a huge difference between $2, $3 million in a Roth IRA versus two, $3 million in a traditional IRA, because one's going to be taxed, one is not. So we have to take that into consideration, so that's the other thing. Especially when partners are retiring, it's not just the number, it's also the timing, because they have so many different compensation plans through their employer. Are you getting a return of capital on your investment? Your buy-in, is that going to be taxed? Do you have control over when you get that return? When does your deferred compensation start? There's oftentimes periods and this is the tricky part with attorneys that are retiring, especially from big law. There could be periods where all of their income starts at the same time and it just jumps them up a tax bracket. Or there's periods where there's no income and you have to be strategic about where that gap is going to come from. Maybe that's an opportunity to, we don't have to get into nuances, but potentially do Roth conversions while there's no income, because you're not paying a whole lot of money in taxes. So again, a lot of it when people are retiring, it's about timing and figuring out which lever to pull when to minimize your tax obligation, assuming you have any authority to do so. Sometimes you do, sometimes you don't, depending on the way that the firm handles it, because to your point earlier, every firm does it differently.

Elise Holtzman: Well, and even within firms, I mean, you know, we've seen so much consolidation in the marketplace, so many firms merging or buying other firms and that changes things too. You know, in my own experience, I mean, without giving anything away, my husband's firm did a major merger last year and as a result, a lot of those things are changing. And so you need to be paying attention. You can't just assume that because you're in the same firm, everything's going to stay the same forever. Also we take for granted our ability to earn an income. And again, to your point, unfortunately there are catastrophic events, where people become disabled or die or those sorts of things. So, you know, just… I think doing the best planning you can and having all the information you can, but revisiting it, I think on a fairly regular basis, which I think a lot of people, especially lawyers, because as you say, they're so busy, there's a bit of a set it and forget it kind of a situation.

Niraj Chhabra: Yes, and it's really unfortunate, because their situation is anything but set it and forget it. The plan that you're working from 20 years ago, it's just not the right tools anymore. Your income has gone up, your tax bracket has shifted. Maybe you have to take care of an aging parent that you didn't have to take care of before. You have kids in school. There's so many variables that change literally on a year to year basis with regards to lifestyles that you need to adjust the plan accordingly.

Elise Holtzman: Right, so how often do you think people should be checking in with you? Should it be a yearly kind of a thing? Because I know some of the… I have a client who does estate planning and he has sort of different levels all the way from random everyday people, you know, who just want to provide and make sure their children are taken care of, to family office type situations with multi-generational wealth situations. And what he says is that he thinks people should be revisiting their estate plans every three to four years, because to your point, things do change. What do you think from the financial advising side of things? Should people be meeting with you every year?

Niraj Chhabra: I mean, we meet with our clients typically every six months or so, depending on their circumstances. Some clients we need to meet every quarter, some clients we need to meet every six months. If you're just managing a person's portfolio, could you get away with meeting every year? Probably, but the reality is there's stuff that's happening along the way. So we're checking with our clients around October doing open enrollment, making sure they're taking advantage of the things that they need to be taking advantage of. We're taking a look at, did your tax bracket shift? Should we be changing from the Roths to the pre-tax to minimize our tax obligation along the way? Are we on track for our goals? Things of that nature. Now, the reality is attorneys are oftentimes busy and they don't want these lengthy conversations, which is totally fine. We could give them the bullet points, but a lot of the time, you know, there is stuff that needs to be addressed along the way. We were talking about the fact that a lot of times we have too much cash on hand. Hey, from our last meeting, you've accumulated X more dollars than you were at the time. Are you comfortable with us repositioning a portion of that? Do you have any major renovations coming up? No? Okay, great, let's do that. So it's just making sure that we're spot-checking their work along the way.

Elise Holtzman: Going back to different attorneys with different situations, I'm curious whether there are particular financial dynamics or blind spots you see that differ from men to women, especially around things like their expectations around compensation, even things like how long they're going to live, what kinds of caregiving responsibilities they have or career trajectories they have. And obviously we can't totally generalize, because we know that different people are different, but I'm curious whether you see patterns that you think are important to discuss.

Niraj Chhabra: Yes, I think that the legal industry has come a long way and in many ways they're ahead of other industries, with regards to gender equality. That being said, it's not that long ago that we were interviewing somebody for our podcast and she was telling us how she was applying for the bench and she was told, but we already have a female judge, why do we need a second one? This was not that long ago, probably in the 80s. Big law in particular does a very good job of being transparent with regards to their equity compensation, or their compensation packages in general and it's pretty transparent. That being said, you could have full transparency and equality, but men and women may not necessarily be earning the same amount, because women are more likely to take a backseat with their career. And what ends up happening with that? There's a snowball effect. You're not getting as many billable hours, you're not hitting your bonus targets as a result of that. You know, you're not getting as much face time in the office, therefore you're not getting as much work, when you do come back to the office. You're not saving as much into your retirement accounts as a result of that. So that's just assuming that you took off of work to become a mom. But to your point, you've mentioned something about caregiving, you know, I think 65% of caregiving responsibilities fall on women's shoulders compared to men. Plus, women lawyers have a double whammy. There's that expectation that at least as a woman and, you know, given the fact that you have a brother, it's more than likely going to fall on you. Again, we're generalizing to a certain degree. But you're also an attorney. Of course, Elise could afford to take care of mom, she's a lawyer. So there is that extra financial burden, not necessarily emotional burdens. Most of the time, the attorneys are happy to take care of a parent, but there is a financial obligation that comes with it. You mentioned longevity, that's another factor. Unfortunately, women have to account for the fact that they're going to live longer and to that number that you need for retirement, it's not the same for men as it is for women, because the old studies used to show that women were living about five years older than men, now it's about eight. You couple that with the baby-booming generation, where it wasn't uncommon for men to have been significantly older than women to begin with. Now there's a longer stretch of time at retirement, where women could be widowed. And if you map this out, you know, based on those stats, let's assume you have a husband and a wife and the husband gets old and frail and needs care, because statistically that's what's going to happen. The wife is typically there to support him. Wife passes away, who's there to take care of the wife? So we have to think about long-term care. It changes the way you take social security out, because what strategy might work for the general public, we have to take a different strategy for the fact that there's going to be a longer lifespan to account for. It changes the way, if you're fortunate enough for you and/or your significant other, to have a pension, you know, pension strategies change as a result of that. Most of the time people take a single life pension, because it's higher. Well, what happens if the male spouse who had the pension passes away first, leaving the woman in the dust? So you have to think a lot and you wouldn't think in theory that financial planning is going to be different between men and women, but there are a lot of nuances that you have to take into account.

Elise Holtzman: I also have noticed with many of my clients that what happens is, with women in particular, I think this happens for both men and women, but I think that there's a different impact on women in general, is that right around the time women start making partner, they are also being asked to step into leadership roles. They are also being asked to develop business. And again, that's true for men and women. I shouldn't say just for women. Having said that, that is often around the same time that women who want children and of course not everybody does, but that women who want children start saying, oh, okay, I made partner. Now I finally feel like I can have children, because I was driving so hard for partnership that I didn't really have the time to do that. And so all of that stuff starts to happen at the same time. It's like, well, where's your book of business? And oh, by the way, we want you to chair this committee, or we want you to manage this practice group. And by the way, I want to have a baby. I just had a baby, you know, the baby's two months old and there's all this stuff going on at the same time. And to your point, there is a snowball effect, when it comes to compensation, right? I remember when my daughters were graduating from college and I had heard this statistic, which was completely unproven. I have absolutely no idea where this statistic came from and I didn't look it up. But the idea was that within five… I think within the first year after graduation from college, men were making $5,000 more a year than women. And that what happens is over time, because a lot of companies base their compensation on what you've made before, right, that gap starts to grow. And so what I hear you saying is that something similar can be happening for women professionals, whether they're lawyers or not.

Niraj Chhabra: A hundred percent. And it's not because the system was designed to compensate men more than women. Again, you know, the legal industry does a better job of equality than others, but it's because of the reasons that we talked about.

Elise Holtzman: Right, so the effect is there even if the intention is not to create that gap.

Niraj Chhabra: Exactly. You're seeing a lot of law firms have women's support networks, or caregiver support networks, or different types of these committees. And that's a good start. But the reality is there's still a lot of guilt that comes with it. So what's your alternative? I was talking to a couple not that long ago and just because of gender role expectations, despite the fact that the wife earned triple the amount that the husband made, she was still the one that was going to be taking a backseat, once the baby came. And what's the alternative? You get a nanny. How much guilt is associated with bringing on a nanny? What kind of judgment comes with bringing on a nanny? There is, you know, we want to say that there isn't, but there is. And this is the real strain that women have to deal with, more so than men, with regards to deciding between finances, caregiving, and their career. And a lot of times you throw in, you know, caregiving for aging parents into the mix as well.

Elise Holtzman: Putting aside gender for a moment, let's talk about practical steps. I mean, I think we've talked about one very practical step, which is understanding the landscape, right? Understanding how all of this works, educating yourself, having someone educate you about what are the factors that are going to be important to you in terms of growing your financial portfolio. In your experience, what sorts of habits or behaviors tend to distinguish lawyers who build long-term financial security from those who feel like they're constantly reacting. Or they wake up when they're 50 or 55 and all of a sudden go, oh my God, I've made a lot of money, but now I don't feel financially secure. I should have thought about this before. What are some things that are characteristics or behaviors?

Niraj Chhabra: Yes, isn't it crazy how you could earn high six figures, low seven figures, or even high seven figures and still feel like you're financially stuck? We all know that attorney. I think it's just the lack of systems in place. You have to have a system in place that's going to help your finances grow with your income. Again, we talked about the fact that if you're on a fixed savings schedule, where you're making sure X amount of dollars of every paycheck is going into your savings and your salary is growing by significant numbers every year, of course you're going to feel stuck. You're just not, you don't have the systems in place. So hypothetically, if we do the math and we need to spend 250 a year after taxes and we decide that that's the number we're going to keep in cash, we want to see $250,000 set aside in cash. Well, we need a system in place that says that every time we exceed $250,000, that money automatically gets invested into our kids' education or automatically gets put into a non-retirement account to create long-term wealth. The systems are what's going to do it. It's not because you made the most money in your career. It's not going to be because you predicted the markets, it's really just making sure that you put the infrastructure in place that's going to grow with your overall financial situation.

Elise Holtzman: If somebody comes to you who's a lawyer and they're feeling successful professionally, but they're not necessarily feeling financially secure, they feel uncertain, what are the first couple of things that you would tell them to do?

Niraj Chhabra: First, we got to figure out what it is that's making them feel uncertain? Because at the end of the day, most people don't feel like they're on track for their financial goals, even if they are. So sometimes it's just shining the light on it and just showing them, no, you're in better shape than you thought. Sometimes they're not. And then we have to figure out why. There's going to be times where people are on track, but they didn't realize it. There's times where people feel like they could, like I said, go from big law to a different lower paying job and they're not going to skip a beat with their retirement, or their kids' education, or whatever goals they're working towards. But other times, it's going to be a tough choice. Well, we can't retire early and provide for our kids' education. Which one's more important to you? Well, maybe instead of retiring 10 years early, we retire five years early, when we… instead of paying for four years of education, we pay for two years of education. So it depends on where they're at. Sometimes they really are in a bad spot financially, sometimes they're not. But salary alone is not going to be what determines whether you're financially successful.

Elise Holtzman: How often do you find that people are really uncomfortable having these conversations? Or do you feel that when you present this information and say, hey, these are the things that we need to talk about, that most lawyers say, okay, you're right, we should have these conversations?

Niraj Chhabra: I think a lot of the times when they come to me, they're ready to have the conversation, even though they may not be ready to see what the results are. Most of the time, they know that something needs to change. And again, sometimes it is behavioral, where they have to change their habits. They're just spending too much money that they're not going to be on track for their lifestyle, or what they say is important to them. Sometimes it's just that we have that scarcity mentality. We have plenty of clients who are more than on track and we actually have to tell them, listen, you're never going to spend this money. I don't care how hard you try, you're just never going to spend this money. And it takes a couple years sometimes for them to accept that. And when they do, they're like, okay, you know what… You were right. We have more than enough money to do all the things that we need to do. And now it's not just about them, it's about multi-generational planning. How could we set up our kids to be successful in their lifetimes? How could we donate more to charity? But until you actually peel back and have somebody diving deep into the numbers and comparing where you are to where you want to be and generating a report card of some sort, you just might be stressing for no reason.

Elise Holtzman: What's interesting to me is this idea of the relationship between the money stories that you mentioned early on, that's what my financial advisor calls it, is the money stories that we all show up with, because of how we grew up. The relationship between that and the behavioral aspect that you talked about. And so I realized that, yeah, I do have a money story, because of how I grew up. And my husband has a different money story, because of how he grew up. And what's interesting is, you know, my parents are sort of extreme on one end and his parents are extreme on the other end. We were kind of in the middle, so it mostly worked out. But I think that there is this scarcity mentality that even when they show you the numbers and they're like, listen, you're doing great and it's fine. For me, at least, I think there's a part that goes well… It's like, well, I literally looked at her and I said, I don't believe you.

Niraj Chhabra: Right.

Elise Holtzman: Right. And I mean, and by the way, she's fantastic and she really knows her stuff and the numbers are literally on the paper. And sometimes I do think that, you know, that emotional piece, we have to sort of have a little therapy conversation with ourselves and understand that in order to create the behavior that we want, we have to get past that money story a little bit.

Niraj Chhabra: I'll give you a good example. One time, this isn't my story, this is I was talking to a colleague of mine, who follows a similar philosophy about behavioral finance and making sure that you're unpacking the history first, before you understand what next steps you could take. And she was talking to a client and he shared a story about how when he was younger, he was underprivileged. And he really wanted to show up to high school his freshman year with nice clothes, nice sneakers and everything like that. So he worked really hard all summer and saved his money to buy new gear by the time September rolled around. And every week he would take his paycheck and give it to his mom and continue to really work hard over the summer. And it was the end of August and now it was time to go back to school shopping. And he asked his mom for his money that she was putting aside for him. And she said, what money? She spent it. And who knows what she spent it on? It could have been rent, it could have been anything. But the point is that she spent his money and now he has trust issues with money. He's in a relationship and there's no way he's combining finances. You have your money, I have my money and that's what we're doing. We're splitting the mutual expenses and that's about it. And can you fault him when you hear that story? But that's a story that you may not know about your significant other without getting too deep into it. But it does play a part in the way that you approach your finances. So it is important to understand. A question I like to understand is what was your first experience or memory with money? Because sometimes it makes people think, I'm like, what was that?

Elise Holtzman: Yes, what were the stories that your parents were either telling you about money or demonstrating with the way they handled money? So, very interesting stuff, but also very powerful, impactful stuff. And to your point, I think not only understanding, unpacking some of that for yourself so that if you want to keep thinking that way, great. Right, if that's serving you, fantastic. Say, you know what? This is how I think, this is where I came from. It's absolutely serving me. I'm going to continue to do that. Or being able to say, you know what, this is how I'm showing up. And here are the reasons why. And I don't know that it's serving me. So I'm going to work on letting some of this go and you know, let Niraj help me, figure out how to make some better decisions about it. I'm going to ask you a question that I ask all of my guests at the end of the show, Niraj, and it goes like this. There's a phenomenon called the “Curse of Knowledge”, where experts sometimes forget that what is so obvious and natural to them is not at all obvious to others. So as an expert in this space, when it comes to building wealth and creating financial security, what is a principle or piece of advice that may seem obvious to you, but you think is very important for lawyers to hear?

Niraj Chhabra: I think it's probably part A and part B. Your financial plan needs to change as your financial situation changes. Brought it up earlier, you know, working the old plan. You need to change. Your tax brackets are changing and the types of plans you might have available are going to change. Maybe you have a child now or you didn't have it before and that's going to change where we save money going forward. And, you know, a lot of this is tax planning, a lot of tax planning with lawyers, because it's not just about what you earn, it's really about what you keep at the end of the day. And I think that a lot of lawyers take for granted the impact that taxes will have on their lifestyle, not just today, but in retirement.

Elise Holtzman: I love that. It's not just what you earn, it's what you keep. And we know that it can get very hard to kind of rein in the spending. If you're making a decent salary and you have the basics covered, you have every right to want to enjoy your life. And you have every right to want to give people in your family, whether it's your children, or your parents or your siblings, some ease in their life and help set them up. But again, you have to be thinking about what that looks like. You know, you can't be spending like a drunken sailor, because you make, you know, five or six figures.

Niraj Chhabra: And a lot of times people think that that's what's going to happen when they come to see me professionally. They think that I'm going to tell them to switch from Skippy to Starbury and peanut butter. And the reality is, I might tell you, listen, you're doing everything that you need to do to pay for all the things you said are important to you. If you're doing all of that, I don't care if you spend the surplus and whatever that's…

Elise Holtzman: Enjoy, have a little fun.

Niraj Chhabra: Yes, you worked really hard to study for the LSAT, sit for the bar, network, grow to the partner position, whatever the case might be, that's a lot of sacrifice. You deserve to have that balance. And that balance doesn't mean just saving for the future. Again, if we're prepared for all those things and it's not coming at the expense of those things, have at it.

Elise Holtzman: Right, you can do two things at once, right? You can plan and be rational and have financial security enjoying the fruits of your labors. So, great advice, Niraj. Thank you so much for being here today. It's been a pleasure having you on the show.

Niraj Chhabra: I appreciate it. Thanks for having me on.

Elise Holtzman: I'm going to thank our listeners for tuning in as well. If you've enjoyed today's show, please subscribe, rate, and review us at Apple Podcasts, Spotify, or your favorite podcast app. In the meantime, be bold, take action, and make things happen. We'll see you next time.