As a lawyer, you’ve probably invested a great deal of time, money, and effort into building your career. Now, it’s time to make your money work for you.
Wealth management is more than just saving for retirement—it’s about intentionally creating a strategy that supports your personal and professional goals. While asset management is important for anyone, wealth management for lawyers comes with several unique considerations, which we’ll address today.
Wealth Management for Lawyers Tip #1 – Ideas to Manage Your Debt
Your legal education likely came with a hefty price tag. Consequently, managing your student loan debt could be a major financial hurdle. You have a few options to ease this burden:
- Refinance Your Student Loans: Refinancing can lower your interest rates, reduce your monthly payments, or shorten your loan term. Here at Iron Point Financial, we suggest you compare lenders and understand the terms before committing (we reckon you know better than anyone how important small print can be).
- Public Service Loan Forgiveness (PSLF): If you work in the public sector, you may qualify for PSLF. You do need to make sure your employer qualifies, and that you’re on an eligible repayment plan while making 120 qualifying payments.
At the same time, try to establish a realistic budget. Your income may increase quickly on track to becoming a partner, but your spending shouldn’t outpace it. We believe it’s important to make room for essentials like debt repayment and saving, while allowing room for a bit of fun – just don’t overdo it!
We would also strongly recommend setting up an emergency fund, which is typically 3–6 months of living expenses. It could help to protect you from unexpected setbacks like job transitions, medical expenses, or economic downturns.
Also, beware of lifestyle creep: that new salary bump might tempt you into upgrading your car, wardrobe, or home too soon. Resist the urge to overspend now, so your future self can thank you later.
Wealth Management for Lawyers Tip #2 – Investments and Savings
We propose that you start investing early and consistently to benefit from compound growth. Basically, the longer you have your money in, say, a savings account, the more interest you are likely to earn over the long term.
Some of the best ways to stay on track are to:
Diversify Your Portfolio: Don’t rely solely on stocks or one asset class. We believe it’s important to diversify across sectors, geographies, and asset types (stocks, bonds, mutual funds, ETFs, etc.) to manage your risk.
Max Out Retirement Contributions: Take full advantage of tax-advantaged accounts like a 401(k)s, Roth IRAs, or traditional IRAs. Your contributions to these accounts can reduce your taxable income now and grow tax-deferred or tax-free for the future.
Seek Professional Advice: The markets evolve constantly. A Certified Financial Planner (CFP®) or Retirement Income Certified Professional (RICP®) can help you tailor your investment strategy to your goals and keep you informed about market trends and risks.
Wealth Management for Lawyers Tip #3 – Acknowledge Strong Wealth-Building Solutions
Once you’ve laid the foundation, the next step is to grow your wealth strategically. Doing so requires research, research, research!
- Specialized Investment Advice: As your wealth increases, consider working with a CFP® who specializes in serving high-income professionals like attorneys. At Iron Point Financial, for instance, we can help you analyze alternative investments, private equity opportunities, and tax-efficient strategies.
- Tax Optimization: Tax law is complex, even for lawyers! We know a few ways that could help you navigate it to your advantage, however: you could strategically use tax-loss harvesting, charitable giving, and retirement accounts to reduce your tax liability and improve after-tax returns.
- Cash Flow Management: Managing irregular income, especially if you’re a partner or own a firm outright, can be key. In that context, it can be especially important to track your expenses and prepare for quarterly taxes, irregular bonuses, or profit-sharing distributions.
- Real Estate Investing: Whether through rental properties, Real Estate Investment Trusts (REITs), or partnerships, real estate could offer you both income and long-term appreciation – but you would be wise to do your homework and work with professionals to evaluate case-by-case risks and returns.
Wealth Management for Lawyers Tip #4 – Take Time To Plan for the Future
Thinking long-term can help you stay ahead of financial challenges.
- Retirement Planning: It could be wise to understand your options—including 401(k)s, Roth 401(k)s, SEP-IRAs, or even defined benefit plans. You might want to consult with an RICP® to get personalized advice. Also, it could help to set up automatic contributions and increase them over time to stay on an upward trajectory.
- Estate Planning: At the very least, it’s recommended you draft a will, power of attorney, and healthcare directive. Additionally, you might consider using trusts to manage your assets efficiently and reduce estate taxes. This could ease some stress if something unexpected were to happen.
- Education Cost Planning: If you have or plan to have children, 529 plans or other tax-advantaged education accounts could help you save for tuition and other related costs. The earlier you start contributing to these, the more manageable those education expenses could become.
Wealth Management for Lawyers Tip #5 – Risk Management Considerations
Wealth management isn’t just about increasing the value of your assets, it’s about protecting them. Proper risk management can help to shield you and your family from potential financial disaster.
- Professional Liability Insurance (Malpractice Insurance): As a lawyer, you face the risk of claims that could damage both your professional reputation and your finances. This insurance can help cover the cost of defending against malpractice claims and any potential settlements or judgments.
- Disability Insurance: Your earning potential is one of your greatest assets. Disability insurance protects your income if you’re unable to work due to illness or injury. We reckon that having both short-term and long-term coverage could help you cover your bases.
- Life Insurance: If you have dependents or ongoing financial obligations, life insurance can provide peace of mind that your loved ones will be taken care of. Term life insurance is often affordable and appropriate for most young professionals.
- Asset Protection: As your wealth grows, so does your exposure. You might want to consider strategies like placing your assets in trusts, using LLCs for real estate, and maximizing retirement account protections to shield your wealth from lawsuits and creditors.
All of which is to say: don’t wait until you need protection to put it in place—by then, it could be too late.
Wealth Management for Lawyers Tip #6 – Law Firm Partnerships
If you’re on track to become a partner, you will likely face unique financial responsibilities, such as:
- Capital Contributions: Many firms require partners to “buy in,” contributing capital to the firm. Be sure to understand how much is expected, whether financing is needed, and what return you can expect.
- Profit Distributions: As a partner, your income may come from firm profits rather than a steady salary. This means budgeting becomes even more important, especially during leaner months for the firm.
- Buy-Sell Agreements: It could be a good idea to have a contractual plan in place for your retirement, death, or departure. These agreements can protect your interests and ensure a smooth transition for all parties involved.
Get Experienced Guidance On Wealth Management for Lawyers
At Iron Point Financial, we want to be as dedicated to your wealth management portfolio as you are to your clients’ court cases. To help us get on the same page and serve you as well as we can, our experienced CFPs® and RICP®s will sit down with you and spend all the time necessary to learn your aspirations, life goals, and dreams.
Why not schedule an appointment today to meet with an Iron Point Financial CFP® or RICP®? Let us help you manage your billable income now, so you can build your wealth into the future.
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Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have security registrations for 22 other states across the continental USA.
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Disclosures
REIT Disclosures
REITs are subject to various risks such as illiquidity and property devaluations based on adverse economic and real estate market conditions, and may not be suitable for all investors.
A prospectus that discloses all risks, fees, and expenses may be obtained from your financial professional.
Read the prospectus carefully before investing.
This is not a solicitation or offering, which can only be made in conjunction with a copy of the prospectus.
Municipal Fund Disclosures
Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing.
This information is found in the issuer’s official statement and should be read carefully before investing.
529 Plan Disclosures
Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan.
Any state-based benefit should be one of many appropriately weighted factors in making an investment decision.
The investor should consult their financial or tax advisor before investment in any state’s 529 Plan.
