May 02, 2019

Written By David Carnes

Managing your money as a solicitor

May 02, 2019

Written By David Carnes

You may have learned frugality as a student, but frugality isn’t the same as money management – and it’s unlikely that you’ve learned money-management skills if you’ve never had any money to manage. That state of affairs needs to change, so that you can set the right financial precedents for yourself. Here are some principles to live by.

As a newly-minted solicitor, the contents of your bank account are likely to look a lot different than they did when you were a student. Newly qualified solicitors in smaller firms commonly earn starting salaries in the range of £25,000 to £40,000, while those in larger firms and in London can expect something in the £58,000 to £65,000 range. Some solicitors in the larger London firms start out at £80,000 or more.

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Live below your means

You cannot, of course, expect to continue living like a student on a solicitor’s salary. In fact, some increase in your standard of living will be expected of you (your wardrobe, for example). Nevertheless, it’s best at this point to cultivate the habit of saying “no” to some expenses you can afford. You’ll thank yourself years from now if you make the effort now to firmly establish the “live below my means” principle.

Pay yourself first

Consider yourself your first and most important creditor and try to save at least 10% of your income every month. If you invest these savings wisely, the law of compound interest will benefit you more and more as the years roll by. Remember – 10% is a minimum, not a maximum.

Keep track of income and expenditures

This might seem like basic financial advice, but presidents and kings forget to apply it. Train yourself in keeping track of your finances until it becomes second nature to you. Pretend that your bank account is a client trust account and watch your money just as carefully as you would watch your client’s money. Don’t spend any money unless you can justify it just as convincingly as you might have to justify spending money out of a client account.

Make debt repayment your second priority

If you qualified only recently, student-loan debt may be your only major debt. Pay it off as quickly as you can. Yes, you may be in a better position to pay it off in a few years, once your salary has reached the level of the average practitioner. At that time, however, you might need the money to invest in a one-in-a lifetime financial opportunity. Your mother was right – you should eat your vegetables before you eat pudding.

Keep your debts low compared to your income

Some debts, such as home mortgages, make sense. Life is unpredictable, however, and so is the world economy -- an unforeseen event such as a divorce or a severe economic downturn could leave you gasping for air at a moment’s notice. The greater your debt burden, the more difficult it will be to ride out the storm. A low debt burden also offers the abstract benefit of peace of mind, something that should appeal to any stressed-out solicitor.

It’s simpler than you think

Financial success isn’t particularly complicated, and there’s no need for you to think of it that way. Most wealthy people became wealthy not by acting on a sudden stroke of brilliance, but by observing a handful of time-tested principles and by avoiding stupid mistakes in the heat of the moment. Do the same and the odds will be on your side.

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