Setting Financial Goals for Life After Law School
Setting and pursuing goals is a lot like eating healthy, exercising, or using a budget – we all know we should be doing it, but it frequently slips through the cracks when life gets busy.
If you just graduated law school, are starting your career or a new chapter of your career, or are a 3L looking ahead to life after law school, here are some practical ideas and steps for financial goal-setting you should have on your radar.
Let’s start by defining financial goals (a very vague term) in a practical way. Financial goals are really life goals that require financial action, like living debt-free and with peace of mind, retiring with dignity and comfort, and providing for your family now and after you’re gone. Financial goal setting supports desired outcomes in life through financial behaviors like earning, saving, and investing money, controlling spending, managing debt, and protecting against financial loss.
Now that we have a working definition, how do we set financial goals? The goal-setting process is iterative, and usually flows through a few practical steps:
- Inventory your current financial situation by gathering information on your new or updated income, expenses, debt, and savings. Using tools like a balance sheet, income and expense report, bank and brokerage statements, social security projections, and credit reports can help in this step. You’ll also want to gather information on which student loan repayment plans and strategies are available to you based on your specific career trajectory, income, and loan types.
- Identify your priorities by thinking about what’s important to you – like paying off debt, saving for retirement, helping your kids pay for college, or buying a home. Everyone has their own specific goals based on their upbringing, environment, and vision for the future. If debt elimination is your highest priority, a BigLaw starting salary might come with the opportunity to clear student loans quickly, whereas working for a public interest employer can make you eligible for Public Service Loan Forgiveness. Your priorities will drive your next steps.
- Specify those priorities and set a timeline and milestones on the path toward achieving them. For example, if your priority is saving for retirement, make it a specific goal such as investing $500 a month in your firm’s 401(k) for 20 years, increasing contributions as income increases over time. Make it even more specific by working with a financial planner or using a financial calculator to determine the actual amount you’ll need to live throughout your retirement years. Be sure to account for your projected expenses and social security income, plus the impact of inflation on your numbers. The more specific, relevant, and realistic goals are, the higher the likelihood that they will be achieved.
- Refresh your budget to reflect your goals. Discretionary income – the income remaining after covering all other necessary monthly expenses – fuels debt elimination and savings goals. Cutting expenses to a reasonable level and controlling increasing discretionary income can accelerate your timeline. Goals should be based on the realistic level of resources you have at your disposal now and in the near future.
- Track your progress with periodic check-ins of your budget and your written plan or by scheduling appointments with an advisor or financial counselor. Of course, working together on your goals with a spouse or partner is key to staying engaged, motivated, and on track.
- Repeat the process as frequently as you need, adjusting as you go based on new resources and information. Every new goal-setting cycle should be informed by the previous one. And don’t forget, students and alumni from MAX by AccessLex®-participating law schools can tap into free personal finance lessons, webinars, and coaching via Ask EDNA!® – the Education Network at AccessLex to stay informed and motivated along the way.
Creating financial goals is just the first step toward financial stability, security, and prosperity. The next important step is developing productive and effective money habits that support those goals. Some examples include seeking professional development opportunities to qualify for higher earnings in your career, using a budget to monitor and control monthly cashflow, incorporating and adjusting insurance to transfer financial risk, limiting consumer debt use, and dollar cost averaging in your 401(k) each month.
Next step: Schedule free 30-minute calls with AccessLex Accredited Financial Counselors through AccessConnex to talk about your goals.