Do you have a vision for your family’s future? Have you signposted the significant events in the years ahead and considered what the potential costs could be? Have you set a series of goals to ensure that you are on the path to the future you want to live?

While some people have a lifestyle and a future in mind, and strong financial plans in motion to achieve their vision, many lawyers do not. Despite their impressive analytical skills, lawyers have a reputation for being not so smart about money. “Their financial I.Q. doesn’t come close to their overall smarts level,” the New York Times once said. “There is a tendency to ignore things.” (New York Times, Money Advice for Doctors and Lawyers and the Rest of Us).

Are you too busy working really hard, putting in the hours and billing, billing, billing to think about what it is you are making all the sacrifices for?

You don’t get what you want unless you know what you want

While you don’t need to have crystal-clear clarity about your future lifestyle, having a vision imparts a sense of direction to your finances. People ‘invest’ in a vision, which means it attracts a long[1]lasting commitment. Without it, you can easily slip into analysis paralysis or get sidetracked by investments that are not ideal for you.

Your vision will be the first building block in your custom tax optimisation and wealth strategy. So, before you do anything else, ask yourself the searching questions about your goals, aspirations and needs.

Are you doing the best for your family?

How do you know if you are doing the best for your family unless you have a vision of their future in mind? Partnerships tend to be offered to employees in their late thirties or early 40s, at a time when they have a young family or are planning to start one. This comes with a number of costs both now and in the future— childcare, school fees, university fees and, more immediately, moving into a forever home.

Notably for new partners, the change in employment status may make it difficult to get a cheap fixed-rate mortgage or increase the size of your home loan when you buy a new property. You are now a self-employed taxpayer, and banks generally look for three years’ worth of self-employed tax returns before they will make a mortgage offer.

When you have a vision in place, you can build a financial strategy that meets all of your milestones while accounting for the hurdles – like a self-employed mortgage – that may unexpectedly stand in your way.

The impact of lock ins

Being a partner makes you highly marketable as an individual. But notice periods to leave a partnership tend to be longer than those you may have had as an employee; one to two years is not untypical (Law.com, Why GCs Don’t Like It When Firms Impose Lengthy Partner Notice Periods). That extended notice period may mean that it is more difficult to move firms or switch careers in the future.

In addition, some LLP deeds also seek to restrict the number of capital contributions that can be repaid in any year. This should not prevent you from leaving the firm, but may delay getting your capital contribution back by as much as 12 months.

Limitations like these mean it is especially important for partners to have a vision for the future. Only then can they put in place the dynamic cash management and insurance plans that will deliver the outcomes you want to achieve.

Adrian Johnson