By G.M. Filisko
You may have mapped out your career, including where you’d like to be in five, 10, and even 15 years, along with the steps you need to take to achieve each milestone. But if you’re like many women lawyers, you probably haven’t charted a similar course for your financial future.
“I think because the world of attorneys is dominated by men, women have to be a little tough,” says Christopher Kimball, president of CK Financial Services and regional director of Money Concepts Capital Corp. in Lakewood, Washington, who counts many women lawyers among his clients.
“They’re often determined and have a real vision,” he continues. “That can be good in their career, but it can be detrimental to their other planning needs. Many of the female lawyers I’ve worked with were so focused on their career and taking care of their clients that they didn’t think much about their own financial needs.”
It’s easy to remedy this situation. Start now, with the following tips, to ensure your financial success mirrors your career success.
No matter how take-charge women are on the job, many still defer to others on money matters.
“Women sometimes leave financial decisions to their partner,” says Nathan Garcia, CFP, managing director of Westbourne Investments in Alexandria, Virginia, who advises 15 to 20 women lawyers. “They think they don’t have to worry about it. The frustration I have is that women in most cases will outlive men. They really need to be knowledgeable about what decisions are being made because some can’t be undone.”
Garcia’s comment may sound like a sexist generalization. But other financial experts say that’s been their experience, too. They note that many women know some basics about their financial status, but they often leave the heavy lifting to a partner.
“I see this chronically, even with well-educated, working women, that they don’t have enough of a handle on their own household finances,” says Rosemarie Moeller, CFP, CLU, CFDP, CTC, vice president of financial life planning at AEPG Wealth Strategies in Warren, New Jersey; she works exclusively with lawyers, many of them women. “One person will be responsible for the finances, and most often it’s the man. I have clients who don’t even know if they have a mortgage or not. It’s scary.”
Your first step in building financial power is digging in and becoming intimately acquainted with your finances.
This means having a basic understanding of your budget. “If you asked 100 people what their budget consists of, most wouldn’t know the answer,” Moeller says. “You need to understand how much it costs you to live. You get X from salary, you pay Y in taxes, savings, and contributions to your 401(k). Then what’s left over?”
It’s fine to let your partner take the financial lead. But you still need to be prepared to step in on a moment’s notice. You must know where all of your accounts are physically and all the account numbers and passwords.
“You really should look at your tax return each year,” adds Rochelle Odesser, CFP, vice president of Madison Planning Group in White Plains, New York, who advises 15 to 20 women lawyers. “That will show things like your family’s sources of income; if there are investments like income properties, those will show up on the Schedule D form. If you have questions, call your tax preparer and ask for a meeting to explain the return. Be prepared to pay for another professional’s advice if it’s necessary to become familiar with your finances.”
When it comes to specific financial tactics, experts suggest several that can mean the difference between financial fumbling and freedom.
If you’re just starting out, Zaneilia Harris, president of Harris & Harris Wealth Management Group, LLC, in Upper Marlboro, Maryland, suggests you live like you did while you were in college for a few more years. “That may mean having a roommate or two,” Harris says. “Reduce your expenses as much as possible, and start saving and contributing to a retirement fund. That helps you sock away a lot of money.”
Planning to start saving for retirement when you get on more solid financial footing? You’ll lose ground. Kimball explains it with an example of a couple who meet when they’re 20. One puts away $250 a month for 10 years and then stops. The partner does the same thing, but starting at age 30 and going until 65. “Assuming a hypothetical net return of 8 percent annually, with compounding, the first person will still end up with more money than the second person,” Kimball points out. “Start with a 401(k) plan, put money in every month automatically, and then every three to four months, bump up your contribution by 1 percent. You won’t even feel it.”
How much should you sock away into retirement? Advice varies among advisors and is based on your age. Kimball says if you’re 25 to 40 years old, invest about 15 percent of your gross income. If you’re 40 or older, max out on retirement savings.
Remember that couples should be strategic in contributing to retirement plans. If your employer has a lucrative company match and your spouse’s employer has a simple Individual Retirement Account and minimal match with limited investment choices, fund the best plan first. “If the couple in that scenario are over 50 years old, don’t put $15,000 a year in each plan,” Kimball advises. “It makes far more sense to put nothing in the small plan and instead put that full amount in the better plan.”
Student loan debt making you feel poor? Shake it off. “You shouldn’t focus so much on debt that you forget to save for your future,” Harris advises. She suggests thinking of student loans the way most people view mortgages—as long-term investments in your future.
“What if in three years—and this has happened—your law firm disappears or the firm fires you because they say you’re not partner material?” Harris asks. “If you’ve focused so much on paying down your student loan debt that you have no cushion to live off, that’s scary.”
What’s more, don’t put others’ needs ahead of your own by doing things like taking funds from your emergency fund or retirement account to help your children buy a home. “That’s a bad idea, and women do it, I think, because we’re nurturing,” Harris says. “Think about what you hear on an airplane: Protect yourself first; then you can protect others.”
Harris says that’s a hard rule for many women to follow, so she offers alternative advice. “If you’re going to do things like help your children, set parameters,” she advises. “Maybe you agree to help them with college up to a certain point. Or maybe you give them a specific amount annually that doesn’t trigger gift taxes but that helps your grandchildren go to private school. But continue to contribute to your own savings and retirement. You can’t get a loan for your retirement.”
Your planning must be flexible because the typical woman will find herself in a financial situation she never expected because of a blow like divorce or widowhood.
Garcia suggests couples meet with a financial planner who has software that can give them a view of their financial world without their spouse. Expenses like your mortgage, utilities, and child care probably won’t change, but your household income will. “I find that by turning off the income from one spouse, it’s sobering,” he says. “Most people then say, ‘OK, this is why I need insurance. This is why I need to save for retirement.’”
You may also make a transition by choice. Perhaps you couldn’t resist a lucrative job offer but now realize the work doesn’t make your heart sing. Odesser advises saving, saving, and saving so you can adjust to any financial shakeup more easily.
Also be sure to evaluate every aspect of a potential change. “The first thing to ask is what it costs you to maintain your lifestyle,” Moeller advises. “Then what is your income going to be if you make this transition? Will it permanently put you in a reduced income, or is there some kind of ramp-up time? If you won’t be bringing in enough money to support your lifestyle, do you have enough savings? Is there some sort of investment you must make for the transition? Will this change diminish your retirement savings?”
Often, your gut reaction is that you can’t afford to segue to a lower-paying job. But your thinking may shift if you’ve taken time to assess all the angles. “Give yourself six months to evaluate all aspects of a change,” Odesser says. “Those decisions are often based on emotions when you have a bad day or an argument with your boss. Try to step back and make an unemotional decision.”
It’s also crucial to have a career exit strategy. “If you’re a solo practitioner or affiliated with other attorneys, you need to think about working with someone younger than yourself to collaborate and provide a path for succession—or even just take a vacation,” Odesser notes.
Harris agrees. “You should be thinking about how you want to get out of the business,” she advises. “Will you sell your share to partners? Sell your firm to another firm? When you have an idea of how you want to transition out of the business, it helps you understand and appreciate the opportunities that come your way.”
The smartest financial planning tactic? Get solid advice. “Sometimes attorneys, because of their role with their clients, are so used to being the person giving advice,” Harris says. “They need to seek advice when it comes to their finances.”