Let’s Get Real About Money Let’s take a snapshot of where you are financially. Successfully running your law firm is only half the equation. Your personal financial picture is also a business that requires constant attention and management. The path to true financial freedom is not only running a successful law practice, but building personal wealth as well.
Let’s start by taking a financial assessment. First, complete a personal financial statement which outlines your assets and liabilities to arrive at your net worth. This is your barometer to evaluate whether you are moving forward and building your wealth. Has your net worth increased over the last few years or have there been circumstances that prevented you from doing so?
As a general rule of thumb, in order to receive $150,000 per year in retirement, you essentially have to have saved $3 million to generate this annual income at 5 percent interest and not invading the principal. This does not account for social security, inflation or taxes. What happens when you realize that this may not happen during your working life? What options do you have?
The first truth you have to face is why you haven’t saved enough money at this point? The probable answer is that your financial life is out of balance. You are earning enough to support your lifestyle but not saving enough for tomorrow’s challenges.
There are a lot of financial challenges that face us almost daily, but our ultimate test is how we saved money for our future.
The initial task is to review your personal income statement that outlines your income and expenses monthly. How much discretionary income do you have? Are you consistently saving money every month or at least saving your annual bonus?
Downsizing Is No Longer a Dirty Word As we get older and hopefully wiser, what steps are you taking to create more discretionary income?
A few suggestions could be selling your large home to downsize to a smaller home that requires less upkeep and capital, opting for a less expensive car lease, forgoing the country club or beach club membership or just reining in your lifestyle expenses such as dining out or lavish outings. How will you feel when you no longer have the constant financial pressure to perform like a gerbil on a treadmill?
Alternative Game Plan for Retirement It may be too late to amass the money required to walk away from practicing law. So let’s change our paradigm on this issue. We talk about retirement but what does this actually look like. We may not choose to stop working but can we practice on our own terms?
Can you downsize your practice to lower your overhead and handle specific cases? Can you work toward taking off Mondays and Fridays and have long weekends, every weekend? What changes can you envision that will create more balance in your life so you can start enjoying the future today instead of tomorrow? What is your lifestyle strategy for your future?
Balance Can Be Yours I hope I have given you an opportunity to contemplate your path to financial freedom. I would be remiss if I also didn’t mention that your health is vitally important to this entire equation. All the money is worthless if you don’t have your health.
For complimentary templates for personal financial and income statements, please email my office. Craig Richman