It’s always good to have a goal. It gives direction and it provides clarity. Financial milestones are no different. Outlining clear financial goals is a crucial aspect of wealth management for executives and as a retirement saving motivator.
In my book, Corner Office Choices, I explain how milestones are developed out of priorities, which should always be linked to your passions, pursuits and areas of professional interest.
Broadly speaking, most discussions around financial milestones are linked to your stage of life and your personal financial commitments. Women might, for instance, be told that by age 40 they should start putting away $650 a month to build a retirement nest egg of $1 million.
Or how, by 50, you should have already saved five times your salary and should be looking to catch up payments to your 401(k) or individual retirement account. Then, when 60 rolls around, you might want to consider working longer to afford a more comfortable retirement.
All of this is true, and many of the women executives and business leaders who come to us for financial planning, money management and retirement services face similar challenges at these key life stages.
But there are some professions where setting clear financial milestones are even more critical and necessitate planning from your very first salary. The law is one of these professions.
What Sets Women in the Law Apart?
Why do I single out female lawyers for special treatment when it comes to setting financial milestones? Well, as a lawyer you will know only too well that the way you earn is not as simple or clear-cut as many of your contemporaries in business.
Many lawyers, for instance, don’t take home a set amount each month. Instead, they might bill based on hours worked or on contingency, which makes cash-flow planning a challenge. In addition, there are lump-sum distributions to consider. On top of that, depending on where you are in your legal career, there will be other financial challenges to consider.
Associate level – The Foundation Phase
Since many associates enter the workplace owing significant amounts in student loans, it only makes sense that paying down those college debts maybe a priority at this stage of your career.
- While it may seem like a long way off, this is also the ideal time to start paying attention to retirement – don’t wait until you are 40 to get started.
- Learn to work within a budget to control your spending, this habit will serve you well later in your career.
- Start building up an emergency fund of between six to 12 months.
Non-Equity Partner – Preparing for the Big Leagues
Once a female lawyer has reached this stage there is one big door still to open: that of equity partner.
- At this stage and while you are still earning a salary, your financial milestones should continue focusing on retirement savings and calculating if you are on track based on the ‘4% rule’.
- You may have children, so you’ll need to broaden your financial goals to include saving for their education using a 529 college savings plan.
- You’ll probably be on the property ladder and lifestyle expenses will be on the rise, but if you’re going to handle the future cash-flow uncertainties associated with the draw and distribution model of an equity partner, you’ll also need to bulk up your emergency fund and ensure ready access to funds if necessary.
Equity Partner – Risk and Responsibility
When a female lawyer has made it to this position she is not only at the top of her profession, but she joins an elite group of women – just 23.3% – who have achieved equity partner status. When you reach this pinnacle, you will need to revise existing financial milestones, and here’s why:
- You must prepare yourself for the heightened financial risk associated with sharing responsibility for the firm’s success or failure.
- It is important to build financial milestones around the fact that you will not be paid a salary, but will be paid a portion of the firm’s revenue as compensation.
- A very clear financial plan, astute tax solutions and budgeting are critical to ensure that you get to enjoy the spoils of your success, while also keeping you on track with key financial milestones, such as retirement, ensuring sufficient insurance cover, building a solid investment portfolio and safeguarding your children’s futures.
Celebrate Your Financial Milestones
These examples are focused on a particular type of legal career route, but there are many other careers and positions that a female lawyer may attain, from working for private, non-profit organizations to serving as a corporate or government counsel, or as a public defense attorney. Each of these avenues will come with their own financial challenges which should be addressed in your financial plan of action.
Each time I meet with a client we start by updating the simple one-page summary we create together, in which we outline financial milestones and the actions required to achieve them. Over the years I’ve found that this simple outline keeps my clients focused and committed, by enabling them to track their progress through time.
If we need to adjust a goal based on changed circumstances, then we do so. If a financial milestone has been achieved ahead of schedule, then we take time to celebrate what this means to the broader plan – from reaping the benefits of compound interest to potentially exceeding their ambitions for achieving a successful retirement.
What helps women in the demanding legal profession to navigate these milestones with confidence is the fact that each stage of their financial plan takes into account specific challenges and considerations unique to lawyers and legal executives. No guessing games, no cut-and-paste financial planning approaches, just tailored and goal-orientated advice.
Contact us today and let WealthChoice help you leverage your legal career and your compensation.
