Wealth management can for many reasons often present a challenge for lawyers, especially female lawyers, and never more so than in 2021. The chances are you’re starting the year off on a different financial footing than you were this time last year; 2020 altered the financial landscape for many of us, and it’s taken some adjusting to.
Even if you haven’t personally experienced any financial losses or hardship, the last twelve months have thrown up so many challenges that our attention has been spread pretty thin. It would be no surprise at all if you hadn’t given your financial planning and wealth management the attention it needed.
And 2021 is certainly going to hold some more challenges; it would be shortsighted of us to think differently. While you’re dealing with changes to your professional life, to your social life and to your family life, you don’t want to lose your way with your financial life. But with just a little refocusing where it really counts, you can keep your money working hard for you. Here’s what wealth management should look like for female lawyers in 2021.
It’s All Change for Lawyers and Financial Planning
While they may have healthy salaries, female attorneys are not people who are time-rich. As it is, their work hours are long and often unpredictable; and then 2020 really changed the working environment for many female lawyers. A female lawyer’s work always competes with her family life, but 2020 really took that to new levels.
Many lawyers experienced a decrease in demand, and many partners have taken significant pay cuts. Bonuses have been cut, raises postponed. Others have been laid off all together due to firms needing to suddenly downsize to weather the storm. On the other hand, lawyers in some sectors saw a rise in demand thanks to the instability of 2020. For instance, sadly, but maybe unsurprisingly, the demand for family lawyers surged in the middle of the year. Contract lawyers have been more in demand too, as have those attorneys with employment practices.
But whether or not there were significant changes to the amount of work you were getting, female lawyers certainly experienced a significant amount of upheaval in the way in which work was done.
So the theme of 2020 was change, and I saw women all around me rising to meet the challenges they were facing. But if your financial planning didn’t accommodate those changes, then you may well be seeing some disconnect now. And you know the best way of looking after your money while you have other things on your plate? Delegate.
Make It All Feel a Bit Easier – Delegate!
Accomplished women attorneys tend to get to their level of profession by excelling in their field, often by taking on a tremendous amount of work personally. With the added demands the pandemic has brought, finances for many have become an afterthought.
There are many ways you can get help with your finances to make sure you’re steering the right course. Conduct a review of your circumstances with a financial planner or even just with your spouse or partner if that feels like a more comfortable first step.
Take thorough stock of your financial position. Look at your income against your expenses and ask yourself if you are using your money wisely. Could you curb spending in one area to bolster investments or savings elsewhere? Or could you spend your money differently to allow you to enjoy your free time more, enhancing your quality of life in the here and now?
Getting another opinion on your circumstances is always beneficial and serves to help you see where things could be improved. And truth be told, having someone else involved holds us to account – and many of us need it.
Tax Season for Lawyers
Tax season is fast approaching, and this can definitely be a challenging time for lawyers. Once again, it’s about finding hours in the day that are often just not there. It’s one more arduous task to add to the to-do list, isn’t it? Plus none of us want a higher tax bill than absolutely necessary, and we can often miss areas to be more tax-efficient if we don’t give it the attention it deserves.
Consult with a tax professional, and make sure you’re making the most of your income and using tax-efficient savings accounts. Given the tax law changes the Biden Administration has proposed, now is an especially important time for high earners to reach out to your CPA for guidance. Ensure that you’re fully informed about things like tax rates and possible deductions, and any actions you can take to lower your tax obligation.
If you’ve not paid off your student loan from law school, don’t forget about student loan interest deduction. The added complication for 2021 is that student loan interest from federal loan agencies has been temporarily suspended due to the impact of Covid-19. You need to check to see if you have any months of interest accrued that could still be deducted this year.
Maximize Your Savings: Know Your Limits!
Contribution limits to savings accounts changed this year too. Make sure that you’re fully informed, and that you’ve used your income as efficiently as possible by maximizing contributions to savings accounts.
The contribution limits to 401(k) plans as well as IRAs have changed only subtly this year. 401(k) plans have retained the same $19,500 limit in place for 2020 for employees’ contributions, and catch-up contributions after the age of 50 have also stayed at $6,500. However, the amount that an employer can contribute has increased.
As part of your financial review, check other possible vehicles for saving. If you have children that you intend to send to college, you should maximize your contributions to a 529 plan. And if you’d like to make sure you’ve got some money set aside especially for medical expenses, make the most of a health savings account too. 2020 changed the eligible expenses that can be paid for by money in health savings account, so make sure you fully understand how they work and what they cover.
Asset Allocation
Wealth management and a robust financial plan should always take asset allocation into account. There is no point in having investment accounts if you don’t regularly review them and make changes so that your money is working as hard for you as possible.
If 2020 changed your financial landscape in any significant way, you may well want to make adjustments to your investment portfolio. This might mean adjusting your risk tolerance, but not forgetting to review your asset allocation and make changes if needed. This may well be something that you’ll want to talk through with a financial advisor.
2020 might have knocked the wind out of your sails a little financially, or it may have freed up a bit more cash. Either way, it may be reassuring to know that you have enough cash to manage if anything happens to your income. Generally, it’s a good idea to have six months’ fixed expenses available in cash at any one time. So if you need to free up some capital, asset reallocation can be a good way of doing this.
Wealth Management for 2021: Adapt to Change
Wealth management for female lawyers in 2021 is going to hinge on your ability to react to change, as well as to accommodate the changes that have already happened. If you let your finances slip by the wayside a little over the last year or so, don’t be hard on yourself – there was a good reason for that. Refocusing now on your financial plan will put you right back on track. Now, at the beginning of the year, is the perfect time to do it.
Enlisting the help of a financial planner who specializes in working with lawyers and other highly driven professional women can really help. Then you can be sure that they will understand the demands on your time and the unique challenges that you face. They’ll help you to manage your money efficiently, freeing up time to pursue your hobbies and to spend time with people you love, securing your financially stable future at the same time.
If you feel that you’d benefit from a consultation, please do reach out. I’d be delighted to schedule an appointment to see if I can help you with your wealth management in 2021.
