In law school, my torts professor told us that he was able to close his practice (retire) because he settled a particularly big case and banked a big fat fee.
It was close to 40 years ago, but I remember thinking, “Sounds good to me.”
One reason I chose personal injury over other practice areas is because big cases happen. One case could retire you, and that was my plan.
But it didn’t happen. I had some big cases, but not big enough to let me fold up my tent.
I was thinking about this on my walk this morning and I thought I would ask you a question. Here it is:
Would you rather have a big pile of cash (from any source) or enough cash flow coming in (from any source) to accommodate your desired life style?
Five million dollars in cash earning a four percent return, for example, equates to $200,000 in cash flow per year. Would you rather have the five million or $200k in passive income?
When I was in law school, I would have said gimme the cash. With what I know now, I’d take the income.
Aside from the fact that I’ve put on a few years and my priorities are different today, if I had the cash, I’d be afraid of squandering it. I might spend it or make bad investments. I’d have to spend time nurturing my nest egg, time I could spend doing other things.
How about you? Which would you take? I know, you’d take both. Touche, mon frere.
But this isn’t just a fanciful exercise. There is a point to it.
What you want in the future influences the choices you make today. To some extent, your cash or cash flow preference will dictate the direction of your career.
If you prefer cash, you need to consider practice areas that makes that possible. You might target start ups for clients because they might offer you a piece of their company in return for your services.
If cash flow is your thang, in the short term, you’ll want clients who have ongoing work for you. Business clients rather than consumer clients. For the long term, you’ll look at investing in income producing assets.
You could also start a business. That’s what I did. A series of businesses, actually, that provide me with passive income and allowed me to retire from practicing law.
One lesson in all this is that long term plans are often like an oral contract. They’re not worth the paper they’re written on.