Common cents: A young lawyer’s financial Top 5

  • June 27, 2018
  • Julie Sobowale

You worked your butt off making the grade in law school, then articling, then passing the Bar exam. But you found a job and you’re making good money and it’s time to enjoy it, right?

Except … there’s student loans and buying a new wardrobe, and you’ve been talking about buying a house…

“You’re making a big salary, probably the most money you’ve ever made, but you have big debt,” says Jessica Moorhouse, a certified finance counsellor specializing in working with millennials. “Young lawyers can end up spending so much to live this lifestyle and it becomes really tough to pay debt. Then you get a house and it becomes more expensive to live.”

Landing your first job as a lawyer can give you the ground you need to start of a good financial future. But you studied law, not personal finance. So what’s a young lawyer to do? The best advice is usually common sense – things we all know, but need to be reminded of every so often. Here are some common-sense tips for putting your financial house in order.

Tip 1: Make a budget

The most effective budgets start not by tracking expenses, but spending. Where does your money go? Take a month or so to monitor what you’re spending on, and then decide where you need to spend more or less depending on your goals.

In order for your budget to work, make yourself accountable. Share your financial plans with friends and family in order to get moral support.

“We need to talk about not spending money,” says Moorhouse. “You can let your colleagues know that you won’t be eating out so often because you’re paying off your student debt. People will understand.”

Tip 2: Look for ways to save money

It’s 12:59 pm and your stomach is growling. As usual, you were too rushed this morning to make a sandwich so you head to the nearest food court. It’s quick, convenient – and costly. According to Capital One Canada and Credit Canada, the average Canadian spends nearly $200 a month eating out.

The daily specialty coffee is another area that can usually be cut back. Housing is another expense that can quickly add up.

When Adam Freedman was working as an articling student and later as an associate at Torys LLP, he decided to live with his parents as a way to save money.

“I was fortunate that I could live at home,” says Freedman, partner at Keslassy Freedman Gelfand LLP. “I put money in GICs and was able to save cash. My law firm paid part of my third-year law school tuition, which was a huge benefit, as well. Toronto housing prices were so high, I knew that I needed to work my butt off and save whatever I could. My wife and I, when we were first married, lived in a dumpy place but we saved a ton of money by being frugal and keeping our overhead low. The apartment was located in a decent area but it was tight, didn’t have air conditioning and the parking garage was hazardous to our health. We kept our expenses low and spent money on what mattered.”

Buying a new wardrobe, which can include investing in robes, can also be costly, especially for women.

 “Women are expected to have a variety of clothes so you need to find deals and do your research,” says Moorhouse. “It takes some time to get the clothes you need to look professional. You don’t always have to buy the designer brands either. It’s the little things that can save you money.”

Tip 3: Look closely at your debt repayment plans

Look at the types of debt, such as student loans or lines of credit, and prioritize based on the interest rates. Generally you want to pay off debt with the highest interest rates first.

“Don’t take out any more debt,” says Moorhouse. “If you can, just pay for expenses with your income. Having that due date for student loans can be deceiving. If you pay the minimum, and people just usually go with it, it will take you 10-15 years to pay off the debt. So you should say okay, what’s my interest rate? What am I earning? How much can I afford to pay so that I can pay down my debt sooner?”

Tip 4: Save 3 to 6 months of living expenses for an emergency fund

This is the tricky part. When you have a large debt load, it can be tempting to use most of your income to pay off debt. Have part of your paycheque automatically put money into your savings account. Even if you’re only saving a few dollars a month, you will build up a habit of saving.

“Your habit shouldn’t only be just paying debt,” says Moorhouse. “You need that balance of paying debt and savings for the long term. It’s not sexy but you want to set yourself up for success.”

Tip 5: Consider hiring a financial planner

If you’re feeling overwhelmed, hire a financial counselor, says Moorhouse.

“Get help. It’s the same as getting a personal trainer. Some people work out at the gym by themselves and others want a personal trainer maybe for accountability or to get help.”

When shopping for a financial planner, look for advisors who are fully certified by the Financial Planning Standards Council or the Canadian Association of Credit Counselling Services and those who are not obligated to sell you products. Remember that only investment brokers can give advice on investments.

“With investing, people think you just give money to a financial planner and that’s it,” says Moorhouse. “You need to educate yourself when investing. Look at your needs.”

Julie Sobowale is a lawyer and freelance writer.