No one likes to budget, but everyone likes to spend. Budgets force us to cut back — like a diet, motivation fades and the rules break. Lawyers who want to spend and achieve their other financial goals can do both by spending intentionally. Here are three spending strategies that help young lawyers put money where it brings the most joy.
Have trouble saving enough? Make a budget. Too much credit card debt? Make a budget. Going on a trip? Make a budget.
I prefer to avoid budgets, and most people feel the same. Budgets work best for people facing large amounts of inescapable debt. For most lawyers who want to make better financial decisions, I say: don't budget. Spend.
This isn't as counterintuitive as it sounds. First, we all have preferences — an internal set of values that helps us decide whether something is worth buying. Second, it's far easier to spend than to budget. Budgeting means studying past statements, categorizing everything, and deciding what to cut. Spending is something we already do every day. Life is hard enough — make it easy and give yourself a chance to succeed.
The three major spending categories
- Taxes — 25-50% depending on where you live and what you earn
- Savings — 15-20%
- Discretionary spending — everything left over
Taxes
Taxes are the highest-priority category, because if you don't pay them your daily life gets constrained fast. They're also likely your single largest expense — after federal, state, and local taxes, some lawyers spend over 50% of income here.
Saving before spending
After taxes, saving is the next priority. In fact, for young lawyers, saving builds wealth better than an optimal investing strategy.
The rule of thumb is 15-20% of pre-tax income. Save for now and for later. Saving for now means an emergency fund of 3-6 months of expenses, held in a savings account rather than investments. Protect your current self before helping your future self.
For saving for the future, options include an employer plan like a 401(k), an IRA, or a traditional brokerage account.
Saving hack: the 15-20% target includes employer contributions. A lawyer with a 5% employer match reaches a 15% savings rate by contributing only 10% themselves.
Early in your career, contribute to retirement only up to the employer match and direct the rest of your 15-20% toward the emergency fund. Once that's adequate, raise your retirement contributions.
Three discretionary spending strategies
1. Values-based spending
Look back at where you spent money last year. Where did it feel best spent? Where did it feel wasted? Would your life be more enjoyable if you shifted money from the second list to the first?
I like to travel and cook, so it's easy for me to spend an extra $30 a week on good groceries, or more on an Airbnb and dining when I travel. I know I'll look back on those and be glad I spent it.
2. Needs before wants
Have you ever been so thirsty you'd pay five times the normal price for a water bottle? In that moment it's a need, not a want. Prioritizing from highest-priority needs down to lowest-priority wants produces spending that delivers the most value.
Common needs: food, housing, utilities, transportation, insurance, debt payments. Common wants: entertainment, dining out, travel, charitable giving, health and fitness, shopping.
Wants can also be upgrades to needs — moving from an apartment to a house, or a gym membership (need) versus a personal trainer (want).
3. Specific account spending
Open separate bank accounts for different spending categories and set up automatic transfers into each. Spend freely from each account; when it hits $0, wait for the next paycheck.
Example: A lawyer allocates $400 per paycheck to a "dining out" account. They can eat out guilt-free until it's empty. Leftover balances roll forward, so $100 remaining means $500 available next period.
This works well for people who like organization, and pairs nicely with category-specific credit card rewards.
Tips to spend better
- Save before spending
- Reflect on what you love spending on — then spend even more on it
- Not all needs are wants, and that's fine. No one enjoys insurance premiums, but they're critical
- Break spending into short periods, like monthly
- Automate transfers and bill pay, but review statements regularly
- Don't be ashamed of your spending. If it intentionally makes your life better, it's money well spent
- Try different strategies until you find one that fits
Have questions of your own?
I’m not taking new ongoing clients right now, but I’m still glad to offer a free 30-minute Meet & Confer — to answer your questions, add you to the waitlist, or point you toward another advisor.