Getting Started: Being Able to Afford to Change Legal Careers
Looking for a change? Can you afford it?
No really—do you have money to afford the change you are seeking?
As a legal recruiter, a lot of times the topic of finance is narrowed to discussions about compensation. After all, my job is to advise you on your legal career, not your personal finances. So why talk about money as a legal recruiter?
Lawyers—are often stressed, pressured into an expensive lifestyle, and straddled with debt. This creates a cycle where even if their salaries go up, they don’t actually keep a lot of their hard earned money.
And when you don’t have much money, you will feel insecure. When you are insecure in a stressful profession, you lack confidence and leverage. You become chained to your current employer with “golden handcuffs.”
And if your dream role comes along, you cannot afford to take it. Or when you are excited by something that you are passionate about, you are unable to “afford” the risk.
In sum—for a lawyer to really thrive and take advantage of the opportunities available, they have to be financially secure.
I have been impressed by lawyers who instinctively know this and have their personal finances together. Since the recession, there are newly minted lawyers who have their personal finances in better shape than some seasoned partners.
Lawyers with their own “money-moves” plan operate with the confidence and ability to take greater risks because of the financial cushion they’ve built for themselves, for the sole purpose of being able to prioritize their development. If they don’t like their current practice areas, they can have those awkward conversations to align their preferences, interests and work style to what they want. They can begin thinking about going in-house, starting their own firm, pursuing partnership or a non-partner role—because they can afford to do so.
Here are a few takeaways from lawyers with great “money-move” game plans:
Know your numbers.
Sit down monthly or quarterly to understand your numbers. You can’t track where you are now, how far you have to go to be where you want to be, and the pitfalls you want to avoid without the facts. Sometimes, the mere act of knowing how many dollars come in, how many dollars are going out—and where those dollars are going to—provide a clear picture and answer to the adjustments that need to be made.
Grab the “low-hanging fruit”.
Contribute to retirement plans. If you work for a firm, start by taking advantage of their matching policy. If you run your own shop, go about setting up a retirement plan (something most solo and small-firm practitioners completely ignore). If you have a high-deductible health insurance plan, take advantage of a health savings account. Automate your money and set up direct-direct so that you automatically set aside some money to savings.
Create your “money-moves” account.
In here, you should have a total of one or two month’s salary to cover for the cost of transitions. This grants you the flexibility to take some time off to adjust if you so desire, and frees you from having to stay for the sake of a paycheck.
Establish a value for your time.
This isn’t just about your billing rate—it’s about what your time is worth. Remember that the firm’s rainmaker and the most junior associate both have the same number of hours in a day. Wherever you are in your career, understand the cost of your time before you take on a commitment. Well spent time with family has different value than going out with some acquaintances for lunch. Learning the tricks of the trade for a new matter has a very different value than popping into a CLE. Understand the value of your time, and determine whether you are getting the most value out of your time in your current role.