Many people think becoming rich as a lawyer is automatic. It’s not. Lawyers tend to have high salaries, but also high debts. Also, a fine wardrobe and a well-groomed appearance play a much more significant role in success than say for tech workers. These things don’t have to cost a fortune – but they are still significant costs.
Wealth is in the eye of the beholder. Wealth is not just money, but time and a fulfilling life. And as a lawyer, you are not looking for risky get-rich quick schemes. As a lawyer, you have to look for the common pitfalls and try to avoid that.
Here are some money tips for lawyers to get rich.
To Build Wealth, Start with Your Exit Strategy
They say when you starting a business, you have to think about the exit strategy. Are you looking to build a business to sell or are you going to operate forever? Your answers to those questions determine how you start.
Too many associates act as if they’re going to work at their law firm job, earning their law firm salary, long enough to pay off their loans and set up a life.
78% of associates leave their BigLaw job before their 7th year. So you can’t simply assume that you’re going to work in BigLaw for the rest of your life. You might be in that 22%, but the odds are not in your favor and it’s not a decision that’s completely up to you.
Slay Your Debt
Nearly half of associates (44%) leave before their third year at a law firm. Many will go on to work at smaller firms, the government, nonprofits – usually for much lower salaries. If this is you, and you are on a 10-year loan repayment plan, you will leave with 2/3 of your loans left to pay.
The real reason you have to slay your debt is that you don’t want large levels of debt impairing your choices in the future. It’s hard to feel like you have choices when you have a large burden on your back. As we all know, big debt and low salaries just don’t mix.
Save a Lot While the Money’s Good
If you graduate law school in your 20s or 30s, as many people do, your early law firm years are a great time to save as much as possible. There will be plenty more financial responsibilities as you get older and you might not have the time or endurance to keep working those crazy law firm hours.
When I talk to lawyers who have left firms, most say they regret not saving more. I didn’t know how long I would stay at my law firm, so my plan was to pay my loans off as soon as possible and build up savings. If you nix your debt and ramp up your savings, you have options for your future.
Live a Sustainable Money Life
It doesn’t make sense to live like a law student when you’re a lawyer. Why have money if you’re not going to use it? But the problem with lifestyle inflation is not that we have a nicer life. No, the problem is running a marathon of spending, when you don’t like running or the destination.
You can inflate your lifestyle with a fancy apartment, a fancy car, and fancy clothes, and if you are content with your new lifestyle, that’s fine. But if you’re in a mountain of debt and you don’t care that much for any of these goals, then it’s time for a change.
If you’re plaintiff-side, the money can be feast-and-famine for some years. If you work defense-side, it’s unlikely that you will stay in a firm for the 10 or 25 years you need to pay off your loans. You have to make your life sustainable on a much-lower salary so that if you switch careers, it won’t seem as jarring.
Find Your Why
Many students enter law with grand aspirations. But lawyers are often miserable because they haven’t figured out their why. It’s really easy to get lost as a lawyer. It’s deceptively easy to get caught in chasing someone else’s dreams when you’re surrounded by so much wealth.
One of the main symptoms of burnout is lacking purpose. Whether you stay in the law or leave, it’s crucial to figure out a purpose for your work. That purpose will guide your decisions for an exit strategy, and will guide your spending so you can pay down your debt, ramp up your savings, and live a sustainable life. Once you have your why, everything else comes into place. Purpose will make you into a rich lawyer even if you aren’t monetarily wealthy yet.
Conclusion – How to Become a Rich Lawyer
Wealth is about managing money for a lifetime. Law careers can be very similar to athletic careers in that you have to maximize a few years of high earnings. If you think long-term, you can have a lifetime of possibilities and wealth.