6 Smart Money Tips For Associates Who’ve Been Promoted
Climbing up the ranks in a law firm is often a long, challenging, and frequently unforgiving road. It demands a lot of every associate, and those who break through to the top should rightfully feel a tremendous sense of accomplishment.
From a financial perspective, newly found wealth (along with the accompanying newly found tax bracket) is often a tempting indulgence. Nothing feels better than celebrating success by spending a boatload of cash–which may sometimes actually involve buying a boat.
But wait! Before you pull the trigger on a new cabin cruiser, put your credit card back in your wallet and take a long, deep breath. There is some very important financial housekeeping work you should really consider completing before you take that test ride.
Here are six smart money management tips for any recently promoted associate to consider before going on a shopping spree.
#1 – Build Up Your Cash Reserves
Every halfway decent financial planner on Earth will tell you to have at least six months worth of regular monthly income in a savings account. Should you, for whatever reason, find yourself out of a job, this money is how you’ll get by until you resume working.
Many, many professionals have made the mistake of assuming that once they’ve “made it”, they’re immune to any sort of financial or economic disaster. The ones that survived their hubris are the ones who had cash reserves to fall back on when reality came back to bite them in the ass.
#2 – Pay Off Your Debt
This is another tip that goes in the “no brainer” category. Credit cards, student loans, mortgages, car payments–all of that debt is just a giant weight around your neck trying it’s very hardest to hold you down.
After building up your cash reserves, debt reduction should be your absolute first priority. Once your debt is paid off, then you can focus your efforts on building up long-term savings and investing for the future.
#3 – Make Maximum Contributions to Employee Benefits
Do your eyes glaze over when people talk about 401k plans? Do you get sleepy thinking about health savings accounts? Too bad. Time to suck it up and get with the program.
Employee benefits packages are often one of the most useful and (sadly) underutilized forms of savings and investments available. Retirement may seem like a long way off, but every dollar you put in will pay dividends for years afterwards when it finally arrives.
Find out how much you can contribute annually, and maximize your contributions to that limit every year.
#4 – Start An IRA or Roth IRA Account
We’re not done talking about retirement yet. Why? Because it is typically the single biggest financial problem Americans run into when they’re ready to stop working.
Let’s say, for argument’s sake, you want to have an annual income of one hundred thousand dollars when you retire. You retire at sixty five and live for another twenty years. You need two million dollars in that scenario. Does that number scare you? If not, you’re either wildy confident or you got a massive bonus with your promotion.
No one will ever accuse retirement accounts of being sexy investments, but IRA and Roth IRA accounts are the best friends you didn’t know you had. Talk to your financial planner as soon as possible to get an account started.
#5 – Save For College Tuition
If you have children, or plan on having children, than you’d better start planning for their college tuition. Start saving as early as possible after your kids are born, even if you can save only a small amount. Hopefully, you can increase the amount you save for college as your income rises.
You can begin a 529 college savings plan to reduce the amount you or your kids may have to borrow to attend college. Many state universities also offer a prepaid tuition plan that allows you to lock in tuition at current rates.
#6 – Make Sure You Have Adequate Insurance Coverage
There is no worse feeling in the world than finding out you have insufficient insurance coverage after disaster strikes.
Get friendly with your insurance agent and do a complete evaluation of health, home, auto, and life policies to be sure you’re properly covered. Consider an umbrella insurance policy that adds a layer of protection over your auto and home insurance, particularly if you have assets over a million dollars.
#7 – BUY A BOAT
Okay, finally. Once you’ve completed the previous six steps, go hog wild. Buy the biggest, sleekest boat you can afford and float away confident in the knowledge that you have made all the right financial planning choices and it’s time to relax a bit.
If you have questions about any of the topics mentioned above, or need help evaluating what kind of financial strategy is right for you and your family, give us a call and we’ll be happy to discuss your options and how we can help.