4 Ways Attorneys Can Boost Their Financial Wellness in 2022
Managing finances can be challenging — even for lawyers. While popular culture portrays attorneys as big moneymakers, the reality is that many routinely grapple with financial stress. This is especially true for lawyers running their own practice and recent law school grads who are navigating the hefty cost of student loan payments. Lawyers can be highly intelligent experts in the law. But that does not make them masters of finance. In fact, there is mounting evidence that money troubles are taking a toll on the health and careers of lawyers. Here are four things lawyers can do to position themselves for financial success.
1. Seek Out Services that Help Get Your Law School Debt Under Control
Law school isn’t cheap, and many recent grads don’t rake in enough cash to cover their substantial student loan bills and other life expenses. According to a 2021 American Bar Association (ABA) survey, the median student loan debt of new lawyers is a whopping $160,000, and many owe $200,000 or more. Not surprisingly, about 67% of respondents to a September 2021 survey of attorneys in their first decade of practice said they felt “high or overwhelming stress over finances in general.”
Few things are as distressing as not having enough money to pay your bills. Consolidating your federal student loans and applying for income-driven repayment plans can help make your monthly bills more manageable. You can also look into refinancing your loans to get a lower interest rate. This could save you thousands of dollars in fees, and can also help you pay them off faster, so you can say goodbye to those painful payments for good.
2. Consider Financial Support that Helps You Grow Your Practice
Cash flow challenges can also be a huge roadblock for lawyers who are sole practitioners or part of a small firm. Many lawyers in this demographic are coping with the financial stress that comes with being responsible for business operations on top of practicing law — and the pandemic has only amplified that stress. It comes in many forms: In 2020, 66% of solo lawyers said they were concerned about the success of their legal practice, and 72% expressed concern about their clients’ ability to pay them for their services. Uncertainty can also stem from forces outside a lawyer’s control. For example, the “durational risk” that cases may not resolve in the time expected can create uneven cash flows and increased expenses.
If you’re working on contingency fees and are struggling to cover your operating costs on existing cases and new clients, commercial legal funding can be a game-changer. This type of financing provides you with the operating capital to pay your staff and monthly expenses until cases resolve, so you can get the peace of mind you need to focus on doing your job. When you’re free from financial stress to be the best lawyer you can be, you’ll get better outcomes, win more new business and make more money.
4. Invest in Technology that Makes Your Business More Efficient
If you’re a lawyer working to grow your practice, the adage “sometimes you have to spend money to make money” might be applicable to you. These days, investing in the right technology can be the ticket to managing cases more productively and efficiently, and boosting cash flow. While the legal industry has been behind the curve of the digital revolution, it is starting to catch up, and consumers are gravitating toward lawyers who are keeping pace. The proof is in the numbers — Clio’s 2021 Legal Report found that firms using a mix of technologies for online payments, client portals and client intake experienced 6% year-over-year growth during the pandemic and collected 40% more revenue per lawyer than firms not using these technologies.
Technology can also help you spend more time practicing law, and less time on attracting new clients and managing general business operations. According to Thomson Reuters Institute’s 2020 State of U.S. Small Law Firms report, the average attorney at a small law firm spends 60% of their time or less actually practicing law. The rest is spent managing their firm or recruiting and retaining clients. Online client portals, client intake software and CRM technologies can take some of that administrative work off your hands and free you up to do what you do best. Plus, there are also new and exciting risk management and case evaluation technologies on the horizon that will enable lawyers to be more efficient and better serve their clients. The bottom line is that tech and data analysis have a major role to play in the future of the legal industry and making savvy investments now can put you ahead of the pack and help you make more money today, tomorrow and beyond. If you want to know how to finance these increasing tech costs, look into commercial legal funding to help provide operating capital for your firm.
5. Talk to Trusted Experts
Everyone needs advice and support. There’s no shame in seeking out guidance, especially when you’re feeling overwhelmed. Unfortunately, pride prevents many lawyers from asking for help when they need it most. ABA’s 2021 survey of attorneys in their first decade of practice revealed that 37% pf borrowers with $100,000 or less in loans said they were “embarrassed and ashamed” by their debt. That number jumped to 68% among borrowers with more than $200,000 in loans.
It’s important for attorneys of all ages, experience levels and backgrounds to understand that they are not alone. More lawyers than not are struggling with financial stress. Talking openly about your problems and addressing your issues head-on is the path to getting your finances — and your anxiety — under control.
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