Money management is essential for any attorney. These great money management tips will help you avoid being surprised when you look at your bank account balance.
Money is a precious commodity for any attorney, and even more so when you are a solo attorney just starting out.
Starting your solo firm is a nerve racking process. Your financial status is never far from your thoughts. Finances often spawn worrying questions that can keep a solo attorney up at night:
- “What’s the next big expense?”
- “Do I have enough in my account to cover the costs for next month?”
- “Am I going to run out of money before I get my next referral?”
Don’t worry. These questions are common and even more reason why you should practice money management. We’ve gathered the best tips to help a solo lawyer keep their finances in check as they build their law firm. Take a look!
1. Know what you want and budget for it.
Regardless of how deep your pockets are, not knowing what you want can lead to poor choices, and inevitably cost you more money. If you know what you want, it’s a much simpler process to plan and achieve a goal, especially when it comes to finances.
A budget can help organize costs, and create a clear and concise strategy to achieve your goal, without overspending.
Think about the attorney who needs an office address, but can’t afford a private office. He or she may want to consider a virtual office or even a workstation option. Once decided on an option they will have a better understanding of their budget, and what percentage will go towards office space. Budgeting is all about planning and will help you in the long run.Money is a precious commodity for any #attorney. Click To Tweet
When you understand what goals you want to achieve and set a budget, you are eliminating confusion. These factors help to limit poor financial choices.
2. Create a bank account just for your firm.
As a professional, it’s smart to keep your business and personal finances separate. If you keep them all in one account, it’s much harder to track your expenses.
You never want to find yourself wondering if you spent extra on groceries or office supplies when you look at your bank account.
Choosing the right bank for your practice’s needs is essential. Certain types of banks are better for small businesses, whereas others are not. Do research to decide what bank is best for your firm, and never use your business account to pay for a personal expense.
3. Keep records of your expenses.
To ensure your solo firm is never financially surprised, it’s crucial to track all its expenses. You never want to check the bank account and have the balance shock you (in a bad way).
Tracking expenses doesn’t have to be complex, but it will help by being more savvy with legaltech. Keeping track of your receipts, and exploring money management software will help manage your budget by showing where your firm’s revenue is coming from, and where expenses are going.
4. Negotiate with vendors.
Vendors are often a lifeline for a solo firm.
You might not be able to run a package downtown because you’re bogged down with conference calls one day so using a messenger service becomes imperative. That’s fine, you’re working!Budgeting for your #law firm keeps your bottom line in mind. Click To Tweet
However, vendors often make it seem as though everything is finite with no room for discussion. This is where negotiation comes into play. Saying “yes” to every cost can open you up to exploitation; humans naturally want to trust, but unfortunately that can backfire, especially in business.
Note that there are some services where costs are set in stone (you can’t place an online order at FedEx or UPS and then call to negotiate the cost).
But if you’re seeking a service where costs can seem high, i.e. a marketing consultant or an office provider, it is possible to negotiate terms such as price point, payment plans, etc. Negotiation helps you to better evaluate your assets and potentially strike a better deal.
6. Know your minimum cost of living.
When first starting a solo firm, you will likely not be turning a profit. Don’t worry, this is highly common in business.
However, at some point after all the hard work, you WILL begin making a profit. This means you must know your minimum cost of living from the very start of your solo practice. This amount can change frequently, and you may have to make adjustments each month.
Knowing this also helps you to budget your personal life more efficiently. By planning your personal finances effectively, you’ll also influence your business because your personal life can directly influence your business’ budget.
Always keep in mind that running a solo firm means it’s your business first and your paycheck second. Remembering this can help you prioritize to better assess and safeguard both your personal and professional finances.
7. Plan for emergencies.
A contingency budget is key to keeping yourself out of hot water. You never know what might happen in the future. You might get sick, experience a substantial loss of clients or some other type of unexpected tragedy.
Creating a budget for emergencies helps you to sleep peacefully at night. It reassures you that if something does go wrong, you have a financial back-up plan.
Money from your business profits should go into this savings account monthly, and should never be touched unless completely necessary. Planning for this contingency should be incorporated to both your monthly business and personal budget.Good money management is a must for any #lawfirm Click To Tweet
8. Keep your ego in check.
You’ll often hear solo attorneys say, “I became a solo because I wanted to be my own boss.”
It’s great that you are a natural leader, and for the most part solos are the boss; however, your decisions, financial or not, must be for the good of your practice.
Your ego may want the private executive office in a shared law office space, but your budget allows for a desk space rental at most. Even when it comes to clothing or office supplies, you might find yourself searching for discounts instead of a full-priced item.
Egos can often make you feel that if you don’t get exactly what you want, you’ve automatically failed. This mindset can get in the way of opportunities to further yourself.
Maybe the private office is your deepest desire, but you had to take the desk space. It still puts you in a professional office setting and you’ve surrounded yourself with other attorneys. Keeping your ego in check will allow you to better understand the benefits of alternative paths, and possibly one of those paths will help you reach your ultimate goal once you are in a more stable and consistent financial position.
These great tips can help you manage your money so you can run a more efficient firm. Always keep in mind that each attorney is different, and the practices that work best for one may not work for another. Do what works best for you and your law firm!