As many advantages as lawyers have when it comes to building wealth—relatively generous salaries, regular expensing, predictable raises and generous bonuses (much of the time)—we also have our share of lawyer-specific financial challenges.
After entering the workforce roughly three years after our peers in finance and business, young lawyers may start with a lucrative salary (especially in Big Law) but often face staggering law school loans, far too little free time, and a social status that seems to expect a higher cost of living.
That being said, there’s no real reason why debt or social expectations should hold your financial plans too far back—especially if you’re spending smart and saving smarter. Plenty of lawyers enjoy the finer things in life while paying off debt and investing where they like.
But for too many associates, poor financial habits keep them from amassing the savings that lead to financial security and the flexibility that comes with it. Fresh from the confines of law school and straight into the high-stress legal environment, young lawyers spend too much and save too little, limiting their chances to build real wealth.
So what’s the secret to building real wealth without scrimping and depriving yourself?
Spend Smarter, Not Smaller
You do earn a great salary, and you do work hard enough to deserve a higher standard of living. You don’t need to avoid spending altogether. Instead, make sure you’re spending on the things you really want, both short- and long-term. The smarter you spend, the happier you’ll be with your purchases and the more you can save to invest in your future.
Does it take time to build wealth as a new associate? Yes. But think about it this way: The time was going to pass anyway. And wouldn’t you rather finish your fifth year as a lawyer with real money accumulating in the bank instead of a closet full of expensive clothes or lavish trips that are nothing but a distant memory?
Rethink Your Status Symbols
We know, we know: Lawyers need to make a great impression. And depending on where you work, you might feel the need to impress your clients with a brand name wardrobe, five-figure watch, or a luxury car. But these days there are many more emails and calls than face-to-face client meetings, so it’s become less important overall. Still, it pays to look professional when meeting clients. But quantity doesn’t mean quality, and you’ll make a far better (and less frivolous) impression by choosing your expensive pieces wisely.
Fewer impeccably tailored pieces look far better than a bunch of expensive outfits with an off-the-rack fit. When it comes to cars and watches, these are large purchases that you should get for yourself, not to impress clients, because that’s not how they’ll evaluate their legal relationship with you. Remember, the wealthiest of your clients will be more impressed with quality than with hype, and that goes for legal work as well as the more consumer-oriented things in life.
Give Yourself a Pre-Purchase Break
Most of our regrettable purchases have a few characteristics in common: They were too expensive, they were unnecessary, and they were impulsive. Truthfully, it’s often trait #3 that’s the catalyst for the first two. Cut down on impulse buys by instituting a 24-hour, 1-week, or 30-day period before every purchase —depending, of course, on the circumstance and price of the splurge.
Giving yourself time to think it over will prevent you from buying something new just to relieve stress or pass the time. Those types of purchases add up to a lot of spending without too much to show for it.
Plug Your Financial Leaks
You know that $10 a month you pay to Spotify? Music for your commute might be worth it for heavy music listeners, but maybe you’ve shifted over to listening to mostly podcasts. And what about your monthly fees to the New York Times, Apple Music, and anything else you’re not using regularly? Review your credit card statements to find out which unused subscriptions are eating away at your account, and decide which to cancel or which to use more. It’s not just subscriptions, either. Are you paying for services because other lawyers or professionals use it? Are you paying annual fees on a credit card that sits in your wallet? Uncovering—and canceling—scheduled fees like these can leave you a couple hundred dollars richer and more aware of your overall spending.
Turn Your Money Invisible
If you’re like many lawyers, you keep your budgeting a little too simple. You might take a look at your bank account, think about the upcoming week’s expenses, and then give yourself carte blanche to spend the rest. Well, good news. You can still do that— if you make some of your money invisible.
Automated savings will allow you to divert money to your savings account right after deposit, meaning you’ll up your savings without having to think about it. Keeping your money out of your checking account will limit your spending without any budgeting at all. The same applies to your bonus or yearly raise. If you managed just fine without it, you’ll manage even better putting your bonus—or a significant amount of your raise—into savings right away.
What’s sweeter than a raise? Enjoying half of it now and half of it next year when you realize you have more than enough cash tucked away in your savings account to enjoy that trip across the country to spend some quality time with old friends, and splurge a bit on that nice hotel and meals together.