Maximizing Your Financial Success as an Attorney
By Synergy Capital Solutions on September 21, 2023
As an attorney, you have worked hard to hone your skills and secure your financial future. And as your assets grow, so too do the opportunities ― and decisions ― related to managing your money in optimal ways to best serve your goals.
Yet, after serving your clients, growing your business and focusing any leftover attention on the people and pastimes you care about, you likely have little time left in your day for financial planning. However, not having the time and energy to dedicate to your hard-earned wealth makes you risk not realizing its full potential.
Here are some examples of common areas clients with demanding jobs tend to under-address and our suggestions for tackling them:
- Cash flow management
Many high-earning clients we work with make enough money that they don’t necessarily worry about running out of it, and therefore disregard the need to pay attention to their cash flow. However, even high earners can significantly impact the growth of their wealth over time by proactively understanding and managing cash flow.
This involves mapping out near- and long-term income streams and planned expenditures, and identifying the investment, tax, debt management and other planning strategies that align best with your overall goals. Businesses usually perform this type of analysis, but many individuals forgo it due to a lack of time, awareness or sense that it’s necessary, given that they’re financially comfortable.
However, it may be the case that you are holding too much or too little cash, not paying down your debt fast enough ― or, believe it or not, too fast ― unnecessarily taking on too much debt, taking on the wrong type of debt, or missing out on another opportunity to further build and protect your assets. Modeling your cashflows can help you identify these inefficiencies and opportunities.
- Investment strategy
Many of our clients demonstrate a relatively strong understanding of and appreciation for capital markets and investing. But that doesn’t mean they’re invested optimally ― and small tweaks can make a big difference over time.
This includes fine-tuning the following:
- Investment diversification: Many investors build a portfolio that looks well diversified but consists of underlying holdings that are highly correlated, particularly during times of market stress. High-yield bonds, smaller-cap stocks, investments linked to natural resources/commodities and alternative asset classes are just a few examples of investments that are often missing from portfolios and may offer additional diversification.
- Tax diversification: You may be able to reduce your tax liability by adjusting your mix of retirement accounts, including traditional, tax-deferred IRAs and Roth accounts.
- Asset location: If you have a combination of taxable and retirement accounts, you can minimize taxes, and thereby potentially enhance long-term after-tax returns, by placing more tax-efficient assets (e.g., municipal bonds) in taxable accounts and less tax-efficient assets (e.g., high-yield bonds) in retirement accounts.
- Tax Planning
In addition to investment account choices, you may be able to reduce taxes over time using strategies that tend to be underemployed. Examples include charitable trusts, Roth IRA conversions, insurance trusts, 1031 real estate exchanges, irrevocable trusts for wealth transfer and more. Identifying if and which of these planning strategies is right for you requires a clear understanding of your goals, assets ― and again, your cash flow ― which requires time, specialized skills and modeling tools.
- Health
At the risk of sounding trite, you can’t enjoy wealth without good health. And at the risk of generalizing, clients with demanding jobs tend to put their physical and emotional well-being on the back burner as they build their careers and care for others. This has two main negative consequences related to financial planning.
First, poor health makes financial success less enjoyable. Second, strong health correlates with better financial outcomes — lower life insurance costs, less out-of-pocket medical expenses, more years of high income from avoiding burnout and poor health, and more.
It’s easy to underestimate the relationship between finance and health, particularly when you are still building your career and business. We too, even as financial planners, tend to invest too little in our well-being, but it’s a focus of our practice to overcome this tendency and support clients as they do the same.
- Delegate
As an attorney, you are familiar with complex, time-intensive client situations that require skilled analysis and careful review. You also understand the important role dedicated resources and specialized experience play in producing successful outcomes for clients. Financial planning is no different. By working with the right advisor, you invest in better results, and more time for yourself and loved ones.
If you need help with your financial plan ― or a second opinion on existing plans ― please reach out to us for help. Advising other professional advisors, and allowing them to focus on what they do best, is one of the most fulfilling parts of our firm.
