It’s not news that lawyer incomes vary widely depending on where you are in your career, what type of law you go into, and even where you live.
And no matter what your income level is now, it will likely rise as you progress in your career—as will your expenses, responsibilities, and financial concerns. You’ll need a roadmap to make the most out of your lawyer income at every stage.
When you’re making less than $100,000
At this salary level, you could be into a few years of working in the public sector or you could be a first-year associate straight out of law school. If you’re like most lawyers, paying off your law school loans as soon as possible is one of your most pressing priorities. To do this, figure out how your budget can be adjusted to allow you to pay as much as possible every month. If you have loans from a few different sources, choose a strategy, whether it’s paying off loans with the highest interest rates first or tackling those with the highest balances first. And don’t forget to deduct any eligible interest payments at tax time.
Even while paying off your student loans and any other type of debt, you’ll need to focus on building your savings. Though you probably can’t start at this percentage, your future goal should be to work up to saving about 20% of your income. If you’re early in your career, make sure not to fall into the trap of thinking that you can neglect retirement savings. Starting early is the key to taking advantage of compounding interest. Sign up for your firm’s 401(k) plan immediately and contribute at least enough to get the company match. Contribute a bit more every time your salary increases or you get a substantial bonus.
You’ll also want to get into the habit of budgeting so you can make it an automatic, lifelong routine. Try one of the many available budgeting apps or use an old-fashioned spreadsheet. You may be making a lot of money for a younger person, but being aware of exactly how much is coming in and how much is going out is still necessary for good financial health.
When you’re making between $100,000 to $200,000
At this range, you may be a mid-career attorney, a junior partner, or a brand-new hire at a Big Law firm. If you’re farther along in your career, at this point you’ve hopefully made a large dent in your student debt, have been able to maintain a good credit rating, and have developed a healthy savings account. If you haven’t already, consider beginning to save for home if you plan to stay put for the next several years. Instead of paying rent to a landlord, you want to find ways for more of your income to stay with you, and even appreciate in value. Home ownership is one way to accomplish this goal.
Hopefully, by now you’ve mastered sticking to a budget and your savings are continuing to grow along with your income. If you haven’t already, you’ll want to put some of those savings to work. If investing on your own seems daunting, a financial advisor can help you manage your money; many firms provide access to advisors who can set you on the right path to reach your financial goals.
When you’re making over $200,000
More likely than not, you’ve been working in the legal field for some time and you’re probably in a mid-level or senior position, especially if your salary is much higher than $200,000—depending on the field you are in and how long you’ve been practicing. You’ve likely paid off all your law school debt, you may own a home, and you might even be happily married with a family. Although many of your financial goals—funding your children’s college educations, paying off your home, enjoying a well-funded retirement—may seem far away, being properly prepared for them takes forward thinking. Hopefully, you already have a financial advisor who can help guide you, but there’s plenty you should be doing on your own.
If you have children, look into the most effective ways to save for their college educations while still fully funding your own retirement. (Never take from your retirement to fund college, no matter how tempting it may be!) One of the best savings strategies is to contribute to a 529 plan as early in your child’s life as you can.
Now that you’ve carved out a successful career and (hopefully) financial security, one of the most rewarding things you can do with your lawyer income is to give back. Consider contributing to a charity or non-profit you feel passionate about or donating to a scholarship program at your alma mater. Using your extra income to help others is always a top money move.