Perhaps one of the most difficult hurdles to overcome to qualify as a solicitor is debt and financial hardship. This is a problem which faces all of us, and is something that shows no sign of disappearing.
People are usually advised to keep savings aside for emergencies, but with higher degrees of debt, saving can be difficult and you may find yourself in financial difficulties at some point. It is impossible to give advice which is more than preliminary and general – everybody’s situation is different. However, there are some known factors that can create difficulties, especially for students, trainees and paralegals:
- Not enough income to live on.
- Not enough money to keep up loan repayments.
- Bank charges due to cash flow difficulties.
- Living above your means
- Higher debts due to education
- Bad financial planning
The key thing is to be aware of problems as they arise and take steps to minimise the situation.
Typical problems in the early years of a legal career
Lack of income
Low income in the early years can cause of big problem as many people are on the minimum salary or below.
Before people are ready for it they may well find that student and postgraduate loans have to be repaid although their income is still not high.
Bank charges can be accrued through cash flow difficulties, making the situation more difficult when you are struggling to make ends. Charges eat into limited income, especially if you use an unauthorised overdraft for any length of time This situation can escalate if you don’t address it with the bank.
This is when an individual has, for example, an account in their original home town, one in their university, and one in the area they are now working. Or where their accounts are with different banks.
Managing limited finances is especially difficult if accounts are multiple and moneys have to be transferred between them. This may also make it harder to present a positive overview of your financial position to a single bank if they only have access to one of your accounts
Long work hours
Trainees and practising solicitors generally work long, tiring hours and finances may not be managed effectively as a consequence.
It may be particularly difficult to keep track of whether bills have been paid, or cheques drawn if you have difficulty getting to the bank and are relying on monthly statements to keep you informed. In these situations, telephone or online banking may help you to keep better track of your finances.
Banks know that in the early years of a legal career money may be tight, but they can only help find a solution if you get in touch with them to discuss the situation and any problems you may be having.
More often than not people avoid the bank manager, perhaps because they fear their credit cards being cut-up or suffering from some other penalty which will make life worst than it is now, or perhaps through fear or embarrassment about their situation. They may not have talked to their peers. They may feel that other people are not in the same predicament.
However, if the banks knows you are having problems they may be able to help by,for example, giving an overdraft, even on a probationary period, or by freezing interest on an account. In some cases they may even be able to write off certain debts or waive the right to impose bank charges.
Citizens Advice Bureaux (CAB)
Sometimes it can be difficult when the problem is your own and you are emotionally and subjectively involved. If you need to talk about money problems the CAB may be able to help. CABs have trained money advisors who can help you in dealing with creditors, prioritising debt repayments, and communicating with lenders.
You should check whether they can see an advisor at a convenient time, perhaps after college or work.
Managing your money - the dos and don’ts of debt
- Speak to a bank advisor to plan your finances to make the most of your money
- Put some money aside regularly for gas, electricity and phone bills.
- Cut back on all unnecessary expenses (clothes, holidays, etc)
- Keep a regular check on your bank account, i.e. by phone or using the internet.
- Get a part time job as long as it doesn’t interfere with your studies.
- Watch out for high call charges and other costs relating to mobile phones
- Plan your finances
- Switch credit cards if you have a high interest rate
- Don’t run up an overdraft or go over your overdraft limit without speaking to your Bank Adviser.
- Never commit yourself to a finance company, a personal loan or interest-free loan without checking whether you can afford the repayments.
- Don’t see credit cards as another source of funding.
- Don’t forget to pay your gas, electric and phone bills - make them a priority.
- Don’t live above your means, even if it means you can’t do what everybody else does.