There’s no one way to make – or keep – a budget, but most of us agree it’s important for us, as lawyers, to track our expenses.
That’s especially true if we’re paying off law school loans or are saving to buy a house.
Yes, budgeting takes some work. The good news, though, is that creating a budget can be simple. Certainly, that’s for the best, because the last thing any of us needs is more tedious work in the little free time we have to spare.
With that in mind, here’s a five-step process for creating and maintaining a budget that can help any lawyer get a handle on his or her finances.
1. Calculate Your Total Income
This isn’t as simple as writing down your annual salary, dividing it by 12, and moving on to the next step. Instead, add up all the money you’re expecting to take home each month – combine the amount of your paycheck (accounting for 401(k) and health insurance deductions) with any consulting fees, rental income, bonuses, or anything else you take home on a regular basis. Divide the total by 12 to determine the amount of money you’ll end up with each month.
2. Find the Right Budget Plan
Is the 50/30/20 budget right for you, or does the envelope system make more sense for your lifestyle? As mentioned above, there’s technically no right way to budget – but there definitely are plenty of options out there. What will work best for you depends on your personality type, the type of law you practice, and your goals (more on that below), but we recommend starting with a Google search for “how to choose a budget plan.” A quick search should give you an idea of the best path forward to choose.
3. Set Goals
No matter which specific budgeting plan you go with, one thing will stay the same: It’s important to set goals. Maybe you want to pay off your law school loans in five years, or perhaps you want to be able to pay for a luxe vacation each year. Don’t overthink while goal-setting; choose the things that are most important to you, whatever they may be. As lawyers, we work hard, and it’s important to be able to enjoy the fruits of our labor. But, of course, do remember to be realistic.
4. Keep Track and Adjust
Once you’ve figured out a plan that works and set some goals, it’s time to track your spending habits. There are myriad ways to track, whether you do so via Excel or a budgeting app. In addition, remember that your budget is a live document and won’t continue to work if you aren’t regularly updating it as your lifestyle, income, and expenses change. Be sure to revisit and possibly adjust your budget as your situation and priorities evolve.
5. There’s an App for That
Hoping to save more? There’s an app for that. Want to automatically track your expenses? There’s an app for that. Looking for a pocket-size budget worksheet? There’s an app for that. There’s a mobile app that can help you with any aspect of budgeting. Take some time to explore what’s out there, because chances are you’ll find something that can make budgeting that much simpler. Three of the most popular personal finance apps are Mint, YNAB, and Acorns.
Considering implementing a budget? Start by getting a sense of what’s out there. In step No. 2 above, we advised an online search for budget plans – but before you begin the process, take a more informal approach by asking friends and loved ones about what works for them. Once you’re ready to start, come back here and follow the process outlined above.