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I’m a lawyer, and naturally an advocate for my clients. But, I’m also a huge advocate for financial independence. Financial independence for women, black women, and for lawyers. I worked in big law for almost 6 years.
They were the most miserable years of my life.
Yes, I got to travel the world, and was well compensated, but I hated my life. (spoiler alert: I’m much happier now in my current position as in-house counsel because my legal team and boss are wonderful).
That hatred led me to seek financial independence because I knew I could not sustain that lifestyle for 40+ years.
If you’re reading this, you may be in the same situation. I’m here to help! In this article, I will explain what financial independence is, why it is necessary for attorneys, how I went from $230,000 in debt to multimillionaire, and will provide resources to show you that you can too.
You can walk away from the golden handcuffs sooner than you think. Let me show you how.
What is Financial Independence?
You’ve probably heard the term “financial independence” thrown around a lot. If you’re just starting out in your career, it probably seems like a theoretical dream in the distant future.
When your student loan bills are showing up for the monthly shakedown, it is hard to imagine a life where you don’t have to work, or a life where your investments pay for your daily expenses.
No mater where your are on your financial journey, it is important to have a clear understanding of what financial independence really means.
Financial independence essentially means having enough passive income or assets to cover your daily expenses without relying on traditional employment.
This could come from investments, rental properties, or other sources of recurring income. It’s not about being rich and never working again, but rather having the freedom to choose when and how you work.
But what does it actually mean, especially for those in the legal profession?
Simply put, financial independence means having enough income to pay for your living expenses without having to work full time.
It’s about reaching a point where you’re not tied down by financial constraints, giving you the freedom to make choices in your personal and professional life from a place of strength, not necessity.
Financial independence is about many things, but most of all it is about freedom.
You have the freedom to chose how to spend your time (time freedom), where you live (location freedom), and how you life your life (financial freedom).
The Importance of Financial Independence for Lawyers
As attorneys, we enter a profession that often comes with high student loan debt and long, grueling hours in pursuit of success.
If you’re at a big law firm, success means partnership. That success is rewarded with, more money, more pressure, and more work.
Why is financial independence important for lawyers?
We experience unique issues across our career trajectory that can all be helped with achieving financial independence.
Even though I was in big law at the time of my dissatisfaction, all types of lawyers may face struggles whether they are in-house counsel, solo practitioner or a legal aid lawyer. Here are some of those issues that we deal with:
Challenges for Lawyers
Job Dissatisfaction
The American Bar Association (ABA) reported on two studies that revealed “high rates of substance use and mental health disorders among law students and lawyers.”
The ABA also reported that surveyed private practice lawyers and in-house counsel “reported they experience burnout in their jobs more than half the time.” You know what helps burnout? REST!
And I’m not talking about vacations. The Journal of Happiness reported that positive benefits of vacation only start to peak on day 8. That ain’t enough rest for me!
For me, rest is sabbatical or extended time off. It is having the option to choose part time versus full time. The only way to take advantage of those restful options is to have financial freedom.
As legal professionals, we dedicate countless hours to mastering our craft, advocating for our clients, and upholding justice. Some of us don’t hate our job, and choose the kind of legal work that truly fulfills us. But, its clear that most of our profession us unhappy.
Whether you are fulfilled or unhappy, it’s easy to overlook your financial well-being. While you are working as a lawyer, whether you are happy or not, you still want to have control of your life.
Having the freedom to pursue our passions outside of the law, and being able to create a future with options and choices is incredibly important.
Student Loan Debt
Most young lawyers start their careers with significant debt from law school.
When I started out as a lawyer, I had $230,000 in student loan debt. I couldn’t leave the job I hated because I was desperate to pay back those loans.
My monthly payment was $1,700! I lived in a high cost of living area, and I just felt tied to my job.
Financial independence was the only thing that could liberate me.
How Can You Pay Off Student Loan Debt?
I first used the snowball method. I first began to pay off my smaller loans, then rolled that payment into the next smallest loan.
Once I paid off the smallest two loans, I realized that my biggest loans (which were private) had the largest interest rates and my payments were barely reducing the principle!
If I didn’t focus on the largest debt, with the highest interest rate, I would be paying these loans for the rest of my life.
So I changed up my strategy, and started going after my largest debt first. Any income I had left in my bank account on the Thursday before payday went to pay off those loans on top of the monthly payments.
Any bonuses that I received were split up into debt paydown and investing, which I will discuss later.
Little by little, the debt went away. Over the course of 6 years, my monthly payment went from around $1,500 to $233.
Then, in 2020, the loans and interest were frozen because of Covid-19. I stopped paying (and invested that ‘extra’ money).
In September 2023, once the student loan repayments started, I paid off the balance of my Federal loans ($33,000).
If you’re in the same situation, figure out your long-term goals and make a strategy to pay down your debt. Don’t get overwhelmed by the amount. I was at first, but decided to stay consistent and it paid off–literally.
This debt can feel like a massive barrier to achieving financial independence, but with a strategic approach to repayment, it doesn’t have to be.
Law Practice Is All Consuming
The long hours and high stress of law practice can make it challenging to focus on personal finance. Our jobs are so all consuming, it is often times hard to spend quality time with our families.
However, dedicating a little bit of time each week to manage your finances can lead to a successful outcome.
When I ate lunch at my desk, I was reading personal finance blogs. During my commute, I was listening to real estate investing podcasts. When I had any other free time, I was using my Libby Library app to listen to books on passive income.
Achieving financial independence shouldn’t come at the cost of your personal life. Finding a balance is key. Allocating time for family, hobbies, and self-care is as important as any financial strategy.
Little by little, you can learn and gain control over your future financial health.
This article has some great books to get you started!
Lifestyle Inflation
In big law, there were sizeable annual increases in salary along with annual, and sometimes bi-annual bonuses.
Even working as in-house counsel, there are moderate increases in salary. And bonuses and equity means that you will receive a substantial increase in compensation over time.
It’s easy to fall into the trap of spending more as you earn more, especially in a profession like law where there’s a lot of pressure to keep up appearances. Avoiding lifestyle inflation is key to achieving early retirement or financial freedom.
While it’s tempting to upgrade your lifestyle as your income increases, don’t do it. Keeping your cost of living relatively stable even as your earnings grow allows you to invest more towards achieving financial freedom.
How Can Lawyers Achieve Financial Independence?
At its core, financial independence is about building a net worth that supports your lifestyle without the need for active work.
The pillars of financial independence include saving a significant portion of your income, investing in the stock market or real estate for growth, and creating sources of passive income.
The idea is to increase your net worth to the point where it generates enough return to cover your costs of living.
For me, I became a lawyer millionaire by simultaneously paying down debt and investing.
I also started side hustles to generate more income in order to invest more.
Read more about how I achieved financial freedom here.
Financial Independence Retire Early (F.I.R.E. for Lawyers)
I achieved financial freedom by embracing the principles of F.I.R.E., which stands for Financial Independence Retire Early. I encourage lawyers to learn more about F.I.R.E., which is the basis of this article.
But more specifically, F.I.R.E. is a movement that advocates saving and investing with a goal of reaching a state where one has enough financial resources to choose whether or not to continue working. Ultimately, maximizing your savings rate by reducing expenses and investing intelligently will enable you to retire significantly earlier than the traditional retirement age of 65.
The first step is to calculate your F.I.R.E. number, which is 25 times your annual expenses.
The theory, which is based on a study conducted by three professors at Trinity University, is that once you reach that amount in investments (25 x annual expenses), you can then pay yourself from your investment portfolio by withdrawing 4% of your invested amount each year.
For example, my annual living expenses are approximately $80,000, then multiply that by 25, and you get $2 Million. Once I had $2 Million invested, I could pay myself $80,000 annually without running out of money for the rest of my life (or for the next 30 years of my life, based on the Trinity Study).
Read more about the Trinity Study here.
F.I.R.E. does not have a one size fits all approach, but below are many of the key strategies that can help you achieve your F.I.R.E. number.
Pay Down Debt
Managing and paying down high interest debt, especially from credit cards or law school loans, is vital for lawyers aiming for financial stability. Working on debt paydown means you can run towards your financial goals much faster. I paid down debt and invested at the same time.
Targeting high-interest debt first (the avalanche method) can save you a lot in the long run.
Build an Emergency Fund
Having a safety net is critical. And it’s not one-size-fits-all, but aiming for 3-6 months’ worth of living expenses in your bank account is a solid rule of thumb. This provides a buffer that allows you to handle unexpected events without derailing your financial plans.
Think about it: if the unexpected happens – say, you lose your job or get sick for an extended period of time – having that cushion can keep you afloat without plunging into debt.
It’s about giving yourself peace of mind. I needed 12 months’ worth of living expenses in my emergency fund to have peace of mind! You’ve worked hard for your income, so protecting your financial stability with enough savings is just smart planning. Plus, it’s liberating!
My emergency fund is in a high yield savings account, which meant that it was paying me monthly interest simply for having my money sit in their account.
Wealthfront, Ally, and Marcus (Goldman Sachs), are just some banks offering high yield savings accounts.
The interest payment I receive each month pays for my monthly contributions to my kid’s 529 plans. I like to say that my bank is paying for my kids to go to college!
If the money is just sitting there, put it to work for you! That goes for all of the active income that you receive by working your butt off as a lawyer. Put it to work, invest for your freedom.
Paying down debt and building an emergency fund helps prepare your mindset for investing. While building your portfolio, you won’t be forced to liquidate your investments to cover unexpected emergencies or pay down debt.
Invest and Take Advantage of Compound Interest
Investing in the stock market, particularly through low cost index funds, has been a cornerstone of growing my wealth.
Index funds are mutual funds. They are low-cost and diversified, which helps reduce risk in your portfolio. As a busy professional, I don’t have the time to constantly monitor and manage individual stocks. Index funds allow me to invest in a large pool of stocks with one purchase, giving me exposure to different sectors and companies without having to research each one individually.
I believe so strongly in diversification, not only with investing, but also with your income. Always diversify your income streams because you can lose your W-2 job in an instant.
Investing in the stock market undeniably comes with a certain degree of risk. However, a strategic long-term investment in a low-cost index fund, for instance, over a span of 10 years, can significantly curb this risk.
Index funds essentially mimic the performance of a specific market index, offering you a diversified portfolio. This means your risk gets distributed over numerous different stocks, ensuring a much safer investment.
And, your partner in investing is compound interest. It does all of the work! It’s not magic – it’s math. The earlier you start investing, the more time your money has to grow.
And even if you can only invest a small amount each month, remember that consistency is key. Over time, those small investments will compound and grow into a significant sum.
Over 15 years, this method provided substantial returns, thanks in part to the power of compound interest.
I’ve grown my brokerage portfolio to approximately $800,000 over the last 15 years. Compound interest is your friend!
Contribute to Your 401(k) or Other Tax Advantaged Retirement Accounts
Automating contributions to my 401(k) and taking advantage of employer matches significantly boosted my retirement savings. Through consistent contributions and employer matches, my 401(k) has seen impressive growth, expected to reach over $2.5 million by the time I retire, illustrating the magic of compound interest.
I have been with this company for 8 years, and the match significantly contributed to my annual returns.
In the long run, the growth of my 401(k) was effortless.
Technically, my 401(k) has reached Coast F.I.R.E. That means, if I don’t contribute another dime from now on, my $645,000 401(k) will still grow to over $2.5 million in 18 years, which is the time I can actually pull money from the account!
If you are wondering how I did that math, it is simple. I used the Compound Interest Calculator found on the United States Securities and Exchange Commission’s website. I plugged in the numbers and set a conservative interest rate of 7%.
Invest in Real Estate
Real estate investments, particularly rental properties, have added a valuable stream of passive income. Educating myself through resources like the Bigger Pockets podcast enabled me to make lucrative real estate deals, such as purchasing and later selling an 8-unit residential building for significant profit.
There are other ways to invest in real estate, such as investing in a Real Estate Investment Trust. This allows you to invest in a portfolio of properties without the hassle of managing them yourself.
If you’re interested in real estate investing, I recommend listening to the Bigger Pockets podcast and reading The Book on Rental Property Investing by Brandon Turner. The book is amazing and has everything you need to get started investing in real estate.
Start A Side Hustle
Engaging in side hustles like running an Etsy shop has provided additional income streams to accelerate my investment goals. I’ve been able to make over $2200 a month on Etsy!
Over time, these ventures contributed meaningfully to my financial independence and allowed me to further invest in my retirement portfolio.
With the rise of digital platforms and AI, it has never been easier to start a side hustle and generate extra income.
Read more about my Etsy side hustles here.
Don’t Inflate Your Lifestyle
By resisting lifestyle inflation, I managed to allocate more funds towards savings and investments. Practicing mindful spending and setting financial goals helped maintain a stable cost of living, enhancing my ability to grow my wealth without sacrificing current enjoyment, such as indulging in my love for luxury travel.
Take stock of your expenses. What is necessary, what can be eliminated? You don’t need to deprive yourself of joy in order to reach financial freedom. Just be introspective and aware of your expenses over time.
Keep track of your spending, and then evaluate what you can change to eliminate expenses that are contributing to lifestyle inflation.
There are great apps out there to track your spending like YNAB and Empower.
I use them to keep track of all my spending, and my net worth overall. It is an easy way to check in on your financial progress over time.
Work On Your Money Mindset
Money mindset isn’t part of the F.I.R.E. movement, but it is incredibly important to have the right mindset while working on your F.I.R.E. journey.
It is a long process, and money is emotional.
Friends and family may not understand your goals. F.I.R.E. can be lonely. It certainly is for me, and that is part of the reason I write about it.
The key takeaway from such success stories is that with the right mindset shifts and actionable strategies financial independence is within reach. It’s about making informed decisions, taking calculated risks, and, most importantly, starting.
If you’re a young attorney just starting out in your legal career, you are in a very good position. Though your financial situation may seem daunting if you have student loans, just know that if you implement the strategies above, in a reasonable amount of time (not 40 years) you will achieve financial freedom.
Conclusion
We’ve covered a lot. Remember that everyone’s journey is different, and what works for one person may not work for another.
Financial independence is not a pipe dream; it’s achievable with the right mindset and strategies. Don’t be afraid to take risks and learn from your mistakes. Stay disciplined and focused on your goals, and you’ll be well on your way to a sustainable and fulfilling financial future.
Keep learning, adapting, and never forget the value of starting now. The journey may not always be easy, but the rewards are worth it.
I am on the other side of it, and about to retire in my early 40s. I can’t wait to share my post-law retirement era with you!
This is not legal advice or professional advice. It is simply an educational resource for you and something I hope will kickstart you on your financial independence journey.
