As a lawyer, you begin your career growth as an inexperienced specialist. The vast experience you gain allows for cool benefits, but you should avoid some financial mistakes to use them properly.
In most cases, it’s hard being a lawyer or having a law firm. It’s an ongoing process that involves customer meetings, case preparation, time in court, managing a team of lawyers and paralegals, client billings, and other general issues. But, also, it’s keeping a keen eye for avoiding different financial mistakes you or your law firm can face.
Based on this data, the income of law firms increased by only 12% between 2009 and 2014. And, if you compare with other fields, it becomes clear that this industry still needs some improvements. Lawyers are not accountants, and the primary goal of their job is to care about the law. However, sometimes, it leads to big financial mistakes.
Mistake 1: Starting Too Late
You don’t have much time to increase your savings. The longer you wait, the more pressure you will have at the end of your career.
At first, you can start with the retirement plans that your firm offers to you. Set a clear goal and create a schedule to get the best from those contributions. Ask for help to understand how much you need to save for your ideal retirement age and desired lifestyle. If it sounds crazy, try determining the number of expenses that ensures you won’t run out of money or make the lifestyle adjustments to achieve that spending number.
Mistake 2: Not Using the Firm’s Benefits
Sometimes we aren’t aware of the firm’s entire benefits package, and it may cause some questions.
As we know, most firms and big enterprises pay for membership in some organizations, attorney registration fees, and conferences. They also pay for your development, legal education, and even your mobile phone bill.
Mistake 3: Putting Too Much Money in Risky Investments
Another financial mistake that you or law firm can face is high-risk investments. It’s not about the pump and dump stocks or foreign biomedical portfolios; it’s about aggressive investments in hedge funds.
Although many people, including lawyers, have some of their portfolios in hedge funds, most of them should be in S&P index funds. Of course, they are not so attractive and don’t produce the returns of mutual funds; however, they’re much safer.
Mistake 4: Bad Debt Management
Many lawyers graduate from law school with substantial debt. This debt management begins during undergraduate years and exacerbates during law school. It can be student loan debt, credit card debt, vacation debt, and even mortgage debt. And the percentage of it becomes a significant financial drag that you need to get rid of as soon as possible. Today there are plenty of different tools that can help.
Mistake 5: High Operating Costs
Almost every law firm partner is blamed that he/she works poorly to reduce operating costs. Naturally, cutting these costs is easier said than done; however, it’s essential for the firm.
Many lawyers are pleased to save the status quo, especially if it means stable billings. So, if you want to get a new level of profitability for your firm, you need to improve cost structure and billing strategies and identify inefficient areas.
It’s not an easy decision, but accepting high operating costs is a big financial mistake.
The Choice is Yours
As a lawyer, you begin your career growth as an inexperienced specialist and spend almost your entire life to become an experienced partner. The vast experience allows for cool benefits, but you should avoid some financial mistakes to use them properly.