You’ve made it through another year of law school, you have your bar exam results, and now it’s time to start thinking about your future as a practicing lawyer. The first step is knowing where you stand financially so that you can make the best decisions for yourself and your family. This guide will help you understand where to start with financial planning for lawyers in 2023.
Assessment
Once you’ve done the hard work of getting your financial house in order, it’s time to take a good look at where you’re headed. This is where an assessment will help. A good place to start is by looking at your current financial situation. What do you have saved? How much debt do you have? What are your goals and priorities right now?
The answers to these questions can help determine which type of planning makes sense for your future—and whether it’s time for a new retirement plan (or not).
Budgeting
There are a number of ways to set a budget for your finances. You can create spreadsheets, use online budgeting tools, or even just write everything down on paper with pen and paper. The key is to know what your goals are and make sure that your spending falls in line with those goals.
Here are some questions to ask yourself when setting your financial goals:
- Are you saving enough money? If so, you might not need any additional advice from me! I’ll keep my fingers crossed anyway!
- How much do you spend per month right now? Is this number too high or too low? If it’s too high, then it may be time for some changes. If it’s too low then maybe there’s something else holding back on the side of good fortune (or bad fortune) preventing good things from happening in your life right now. Either way — take action by setting up a sustainable budget! Don’t worry about what other people say about their budgets either; instead focus on making yours work best for YOU based on YOUR needs!
Credit Building
Building good credit is a long-term goal that will pay off in the future. It’s important to understand the different parts of your credit score and how they impact how much lenders are willing to lend you, but there is no need to stress out about it right now. There are plenty of other things you can do with your money right now that will help get you where you want to be:
- Get a copy of your three major credit reports from AnnualCreditReport.com—it’s free! This way, if there’s anything weird going on with them, you’ll know about it before applying for any new loans or lines of credit.
- Check out this list of ways lawyers can build their credit score (and follow some advice).
-Get a credit card. Open up a credit card and use it responsibly—paying off the balance each month. Try to do this at least once per year (and preferably more). -Use your credit wisely. Don’t open accounts that you don’t intend on using; otherwise, they’ll just be sitting there taking up space and hurting your score!
-Get a secured credit card. If you don’t have any credit cards and want to build some, try getting one that is secured. This means that you’ll put down some money (usually around $200), which acts as collateral for the bank when issuing your credit card. The amount of credit you are given will be based on this collateral.
Debt Management
Debt management is a process that aims to help you get out of debt by consolidating your loans. Debt consolidation can be achieved through a loan or through a debt management plan, which is an alternative to bankruptcy and can help you avoid filing for Chapter 7 bankruptcy.
One common approach involves taking out a personal loan with a lower interest rate than what you’re currently paying on your credit cards. This amount would then be used to pay off smaller debts, such as credit card bills, medical bills, school loans, and so on. Once those debts are paid off in full (or as much as possible), the remaining money from the personal loan could then be applied toward larger debts such as mortgages or car loans—although this isn’t always necessary if there’s no money left after paying off smaller ones first!
Saving and Investing
You have the right to be skeptical about saving and investing, especially in a climate where the stock market has been on a roller coaster. But you also have a fiduciary duty to your clients, who count on you to help them plan for their retirement years. And as a lawyer, it’s important that you’re looking out for yourself by saving in your peak earning years so that you can retire comfortably—or at least take some time off before returning to work full-time.
With all this in mind, here’s what we recommend:
- Retirement savings accounts: The best way for most lawyers to save for retirement is through an IRA or 401(k), which are tax-advantaged options offered by employers or financial institutions. These accounts allow investors to set aside money without paying taxes until withdrawal and enjoy tax benefits when they withdraw at retirement age (59½).
- Investment options: There are many types of investments available today. Some are riskier than others; some carry higher returns but come with higher risks too. You should invest only after doing thorough research on what works well in each market environment so that you don’t lose money unnecessarily!
-Apply for a secured credit card (you’ll need to deposit the amount you want to spend on it). -Use your credit card responsibly and pay off your balance in full each month. If you can’t afford that, don’t get one!
Everyone can improve their finances, even attorneys.
The first thing to remember is that it’s never too late to improve your finances. It might not feel like it at the moment, but you can always make a change.
If you don’t know where to start, ask yourself what you want out of life—not just in terms of money, but also relationships and experiences. Once you have an idea of what will make you happy, start working toward those things with small steps each day. You’ll be surprised how quickly they add up!
If you need help getting started or keeping motivated along the way, there are numerous resources available online for free (or low cost). Here are some ideas:
- Ask friends for advice about their financial planning process;
- Sign up for personal finance classes at local colleges;
- Read blogs by people who know what they’re doing;
- Listen closely if someone mentions saving money! They may have something useful to say about ways that could help both now as well as in 2023.
Retirement calculators: Retirement calculators can help you determine how much money you’ll need in order to retire comfortably. They can also give you an idea of when your investments will become sufficient enough for you to stop working full-time and enjoy life insteadIf you really want to make a change, start small. For example, try saving $5 a week for one month. Once that becomes normal and easy to do, up it by another $5 per week for the next month. Keep doing this until you have reached your goal amount (set at least six months in advance)!
Conclusion
If you’re an attorney, we hope our tips for planning for the New Year have been helpful. We know it can be overwhelming to try to change habits and implement new ones, but remember that it’s never too late to start making progress in your financial life. RunSensible is a legal practice management software is a digital solution that helps legal professionals manage the day-to-day operations of their practice. It provides a range of tools and features that help streamline tasks, such as case management, document management, billing, and more. Want to make your financial planning more efficient and error-proof? Sign up with RunSensible for free and see how easy it is to manage your law firm or solo practice the right way.
