I’ve been thinking a lot this month about money. I do my own taxes. I sighed last week as I used up the last of my tuition credits to score a decent tax return, knowing next year would be a different story. My financial situation has changed significantly since this time last year. Last spring, I knew I had secured an associate position, but I also faced a few months of unemployment.
A fresh and steady stream of income can be a big adjustment to those of us in full-time, “permanent” positions for the first time (or for the first time in four or more years). I admit this month’s topic has veered slightly from the professional to the personal, but bear with me. From what I can tell, lawyers in their first few years of practice are in a uniquely challenging position when it comes to finances.
Most first-year lawyers have a new influx of discretionary income. That is pretty damn exciting. We’ve worked hard to get where we are, and it’s easy to tell ourselves that, yes, of course we deserve the new iPad, or the brand new skis, or the trip to Paris (guilty). And, for once, these indulgences are in the realm of possibility, though perhaps not affordability.
We also have friends who didn’t spend the last several years in school. While I was in university, my best friend Susie spent the last eight years working in the telecommunications industry. She now owns a beautiful, brand new condo, her own car, and has a healthy RRSP account. I can’t help but feel envious from time to time. Where’s my stuff? I should have that stuff!
This “catch-up” mentality can make it easy to justify overspending. We’ve all heard the phrase “golden handcuffs”; the idea that generous law firm salaries lead to lifestyle inflation, to the point where you couldn’t afford to quit your job even if you wanted to. Just being around expensive clothing and technology, hearing about expensive trips, and attending client dinners at expensive restaurants can make it seem like this lifestyle is what’s normal, or expected.
Cruelly, these are also the years that most financial advisers say are the most important for building savings and paying down student debt. I take this to heart. I love the freedom and sense of independence that having a solid financial plan provides, even if it takes some work.
I started really caring about my money in my last year of law school, and have found a number of resources extraordinarily helpful. First, there are some great personal finance books out there for young professionals. My favourites include: I Will Teach You to Be Rich: No Guilt. No Excuses. No B.S. Just a 6-Week Program that Works by Ramit Sethi, and Get a Financial Life: Personal Finance In Your Twenties and Thirties by Beth Kobliner.
Keep in mind that U.S. books will have information about American investment vehicles, as opposed to Canadian ones. For classic Canadian financial advice, try The Wealthy Barber and The Wealthy Barber Returns by David Chilton. I subscribe to MoneySense magazine, which is also a terrific source of Canadian personal finance and investment advice.
There are also some great personal finance blogs out there, including J.D. Roth’s “Get Rich Slowly” and “Give Me Back my Five Bucks,” written by Krystal Yee, a 20-something Vancouver blogger.
Personal finance fascinates me, and so it’s become a bit of a hobby. I realize that to some, financial management sounds about as enjoyable as eating glass. If I’m describing you, you can just pay someone to look after your money. The Financial Planning Standards Council is a not-for-profit organization that develops, promotes, and enforces professional standards in financial planning, and raises Canadians’ awareness of the importance of financial planning. FPSC has a “Find a Planner” tool that can help individuals find a reputable, certified planner.
I think the bottom line is that new lawyers face both financial challenges and opportunities. We should all be thinking about our money and where it’s going. We work hard; our bank balances should reflect this. Some of us may want to scale back in later years, which often means taking a pay cut. Wouldn’t it be nice if that pay cut didn’t hurt so much because we already had little to no debt and healthy savings? Shouldn’t we make the most of these years when (generally speaking) we don’t have children, mortgages, etc.? The financial habits we create now aren’t just for today; they can provide the basis for a sound financial life for years to come.