5 Financial Wealth-Building Moves for New Attorneys

James Herbert, Head of Student Loan Refinancing, First Republic Bank
July 2, 2018

The first years following law school can be overwhelming, and managing your finances can take a backseat to focusing on your career. With five must-know money tips, you can take charge by paying down debt, saving for future goals and preparing for life’s milestone moments.

Pay off and/or refinance law school debt

In the U.S., the average law school debt is $112,776 per student. In addition to this already steep cost, interest rates can add thousands over the life of your loans. Many graduates also carry hefty credit card balances and auto or mortgage loans. In short, it can take years to become debt-free as a graduate of law school, but adopting smart strategies can reap great rewards. Here are a few tips on managing your law school debt:

  • First, pay off high-interest debt. Credit cards, for instance, tend to accrue interest at a higher rate than other loans. Eliminating these balances can free monthly cash flow and give you a boost of confidence to tackle other debts.
  • Refinance your law school student loans to take advantage of the lowest interest rates available or the right program for you. You may be able to reduce your monthly payments, the time it takes to pay off your loan, or both — a winning combination. Some benefits like government-sponsored deferment or loan forgiveness programs may not be available through refinance programs, but those may also be less important for some people at this point in their career. Learn more about the process of repaying private student loans.
  • Make lump sum payments. When possible, channel an annual bonus or tax refund toward an outstanding loan balance to expedite the payoff and reduce the total interest paid over time. Learn more about ways to pay off your student debt.

By paying down your debt, you may improve your debt-to-income ratio, which can in turn increase your credit score. Your credit score is an important factor lenders use to evaluate your creditworthiness for things like mortgages or small business loans. Paying off debt will also help position you to achieve your financial goals sooner.

Focus on the long haul

A young attorney has a full financial plate, and it is difficult to predict 10 years into the future, let alone 20 or 40. Even so, large life goals — such as marriage, children, home ownership or a partnership buy-in — require preparation. Articulate your aspirations early, so you can plan and make steady progress. Successful long-term savers have time and compound interest on their side.

A great way to approach long-term goals is to get advice from a team. This may include a personal banker and, if needed, a financial planner or tax attorney whom you can go to for guidance on how to plan for the future.

Whatever the long-term goals, don’t neglect saving for retirement. Take advantage of workplace retirement plans to set aside pre-tax dollars. Pay close attention to whether your employers will match employee contributions to a 401(k) or other defined contribution plan. This should be the first place you put your savings dollars to get that free additional matching money. Set aside at least enough to benefit from your employer’s generosity and build contributions over time for faster growth. 

Have an emergency fund

Life happens fast. An unexpected job loss or illness are just two events that could shake a solid financial foundation. One effective way to cope is to keep emergency funds on hand.

An emergency fund should cover at least three- to six-months’ worth of expenses and should be kept in a checking, savings or money market account that can be accessed without a penalty. Define what constitutes an emergency for tapping funds to avoid raiding accounts for spontaneous purchases.

Set up automatic payments

Many people spend more than they think and therefore struggle to accomplish their financial goals. One way to avoid this is to put your savings goals on autopilot. Set up direct deposits or automatic transfers into savings or investment accounts to ensure saving is a priority. This will help you stay disciplined toward your goals, while giving you confidence to spend the remaining money appropriately without derailing your long-term financial strategy.

Safeguard against risk

One of the greatest assets young professionals possess is their potential to earn a high income for decades. That’s why many young attorneys choose to participate in wealth-building strategies that can safeguard that asset. For instance, disability insurance protects a worker and his or her family if an accident that impacts earnings capability should occur.

Additionally, a term life insurance policy can help preserve a certain standard of living for a spouse and children if a primary income earner dies. No one wants to contemplate a worst-case scenario, but some foresight and planning helps alleviate stress associated with an unexpected loss and gives you peace of mind to focus on building your career.

In the end, life is like studying for the bar: Those who are dedicated and plan well are likely to come out ahead. Thankfully, just a small investment of time — and some solid financial guidance — can establish a financial strategy that helps achieve major life goals. If you are looking to get your law student loans under control, there are options available to you. Use the free student loan refinance calculator to see what your rate with First Republic1 could be in under a minute.

Refinance your student loans – fixed rates as low as 1.95% APR with discounts.

1.Terms and conditions apply. The terms of this loan may differ from your current loan(s). For example, this loan does not contain special features such as forbearance periods or income-based repayment plans available for some student loans. This loan may not be dischargeable in bankruptcy. This product is not available in all markets. For a complete list of locations, visit firstrepublic.com/locations. This is not a commitment to lend or extend credit. Contact your legal, tax and financial advisors for advice on deciding whether this is the right product for you.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the consequences of any strategies mentioned in this document. This information is governed by our Terms and Conditions of Use.