Financial planning is not something that’s taught at law school, and can be pushed down your list of priorities very quickly with a busy and stressful career to manage. Sarah Deacon, area manager at Wesleyan, a specialist financial services mutual for lawyers, and Liz Mulley, senior associate at Trowers & Hamlin, offer tips and advice on making your money work harder for you.
Putting in place a financial plan that supports your independence, a pattern of saving and financial resilience, will be invaluable for later life.
To help you focus on making your money work harder for you, here are four key actions that junior female lawyers should consider taking.
1. Invest for the long term
Juggling a professional career and a personal life means that sometimes women feel that they have less time to plan for their financial future effectively.
The astronomical cost of childcare and the stress of juggling a high-pressure job in law are factors that need to be planned and saved for.
Starting an investment habit when you’re young or early on in your career can be a great way to boost your savings and help you plan.
Every type of saving carries some risk, but some choices are riskier than others. Generally, the higher the risk you take, the higher the potential return, and vice versa. So, if you put your money in stocks and shares, you may ultimately get a good return on your investment, but you are also at the mercy of the market.
Female finances often fall behind over time, and because of this there is a tendency for women to keep savings in cash. In fact, research shows that two-thirds of women are not considering moving their money out of cash. Don’t leave your lifetime savings languishing in a cash account when they could be invested for better long-term returns.
Keeping savings in cash is often considered low risk – but low risk doesn’t mean no risk. £10,000 in a bank account with 0% interest (assuming a long-term inflation rate of 1%), would be worth:
- £9,900 in one year’s time
- £9,509.90 in five years’ time
- £9,043.82 in 10 years’ time.
So, if you’re not exploring putting your money into savings or investments where the interest rate outstrips inflation, your fund could potentially reduce in real terms. As you build up your savings and investments portfolio, you should look to keep your money in a range of assets, so that if one type performs badly, another may perform well during the same period. Also remember to review your portfolio on a regular basis, so you can identify any underperforming funds.
2. Plan for the future
Planning a career break
Research by the independent Pensions Policy Institute in 2017 found that 34% of women are likely to have a career break involving caring responsibilities. So, it’s vital for women to take control of their financial planning to prevent a ‘motherhood penalty’ that would result in lower pension accruals. Again, this can be managed if a career break is carefully factored into your long-term saving plan.
It is considered by many that you can progress your career best by moving firms at least once at the 3-5 years’ PQE stage, but this can coincide with plans to start a family. Is there an ‘ideal’ time in your legal career to have your first child?
Liz Mulley, 32, is a senior associate at Trowers & Hamlin. “It very much depends on an individual’s circumstances and when they feel the best time is for them, taking into account a range of factors including how far they want to progress their career before having a baby,” she says. “Personally, I wanted to get a few years’ PQE under my belt and get to senior associate level before starting a family. It was the right time for me and my partner. Trowers has fully supported me, as they have done with my other colleagues who have decided to start a family earlier or later on in their careers.
“In fact, Trowers has recruited trainee solicitors who already have families; we have also had a number of fee-earners achieving partnership when pregnant or even during their maternity leave.”
The amount of maternity pay is likely to be a factor when women are deciding how long to take for maternity leave. It is a common requirement in many law firms that if someone does not return from maternity leave or leaves within six months of return, they are required to repay their full, enhanced maternity pay; if they leave within 12 months of returning, they are required to repay 50% of their enhanced maternity pay.
Planning for part-time
Many women who take time out for career breaks or maternity leave want to return to a position offering flexible or part-time working. Within highly skilled positions in industries like law, such opportunities still appear to be few and far between.
A report by Mckinsey & Co found that as a result of limited opportunities for flexible working, many female returners settle for positions at a lower grade than they previously held. While most law firms offer flexible working, many women still fear that participating in these programs will damage their careers.
Research by legal recruiter Douglas Scott found that 65% of female legal professionals surveyed said that they had partner, manager, or business leader aspirations (compared to 78% of male legal professionals). Amongst the reasons cited for avoiding partnership or leadership roles were work-life balance, additional stress / responsibilities, and lack of flexible working opportunities.
Have these conversations regarding part-time hours early with your firm and, again, review your financial plan accordingly.
3. Planning for retirement
Pension and retirement planning throughout life is key; failing to review your pension contributions in the early stages of your career can have a negative impact later in life.
Women today continue to retire with lower retirement income relative to their male counterparts, and can face a significant pension shortfall which, when taken together with shifts in family structure, well-being, home ownership and social care systems, leaves many exposed.
Consider this question to jump-start your thinking about retirement planning: What do you want your life to look like in 10, 20 or 30 years’ time? It is never too early to start retirement planning and you will feel better and relaxed when you have familiarised yourself with your options.
4. Know your worth and ask for it
One of the best things you can do for your financial health is to believe in the work that you do, and learn to negotiate a fair salary.
According to a recent report by the Law Society, female lawyers, unlike their male colleagues, are often challenged by their clients and employers about the level of fees they charge. The report found that it appears more acceptable for men to request greater financial recognition for their work, while women are perceived as aggressive when they do so.
Always keep up to date on industry salary benchmarks, and get your facts right before going into any pay negotiation meeting. Do you know what your colleagues are being paid? Do you know what other firms are paying? What facts and evidence of your performance should you bring along to any negotiations?
Women can worry that making a fuss over pay could mean that they might later be sidelined for prime clients, overlooked for promotion or even dismissed as a result. This is rarely the case, and you should embrace these crucial conversations around pay, not avoid them.
This much I’ve learnt
Liz Mulley, age 32, is a senior associate at Trowers & Hamlins and member of Wesleyan Junior Advisory Board.
“Whilst a career in law can pay well, if you are not careful, you can end up simply living within your means despite pay rises and bonuses. It is important to manage your money as soon as you can. Here are three things I have learnt.
1. Save into your pension immediately. It is never too early to plan for your retirement (even though this is probably the last thing on your mind when you start your legal career!).
2. Spend what you don’t save, don’t save what you don’t spend. Make saving a priority and set up regular direct debits to go into savings or investment accounts. Your savings pot will soon build up this way.
3. Consider getting a financial adviser. Your personal finances can drop down your priority list with a demanding career like law, so a financial adviser can help you stay on track and ensure your money is working for you. So many of my female friends and colleagues do not use a financial adviser, as they find it a bit awkward to talk about money. I did too at first, but after trying a couple of different financial advisers I found one I felt comfortable with.”