The Foundation of Your Legal Career 1st - 2nd Year (Junior Associate)
Executive Summary
Nothing you do as a Junior Associate will guarantee you success as a lawyer, but doing things incorrectly as a Junior Associate can have negative repercussions that impact your professional and financial future. As a Junior Associate, you can create any life you want to live if you build a strong foundation. A solid professional foundation includes a practice area you are passionate about, a skillset you actively develop, and an ability to learn quickly from mistakes. A solid financial foundation includes managing your spending from the beginning, taking advantage of employer benefits, and saving/investing effectively. Starting your career with a weak professional and financial foundation can lead to unnecessary stresses and more limited personal and professional options. Instead, build a solid professional and financial foundation so you can confidently build your dream life.
Your first job out of law school is the starting point of your legal career. Whether you go into private practice, in-house counsel, or public practice, your first two years of practice lay the foundation for the rest of your career.
These years will not just define your professional career, but they are also foundational to your finances. Habits instilled early in your career are likely to persist over time. Doing the right things today will compound over your lifetime and impact what you achieve in the future.
If you think about the foundation of a house, it is a structure that you can build on. You can create anything that you want on a solid foundation. You can construct a small home that you can live in for years. You can also build a skyscraper that soars above all the surrounding buildings.
But without a strong foundation, you can not build anything. Anything you construct on a weak foundation is fragile. Fragile to internal and external stresses. Adding on anything new can cause a collapse of the entire structure.
While a strong foundation is necessary, do not think about a foundation as this hardened and rigid starting point. Instead, think of what you can create on top of the foundation. You do not have to solve everything from the beginning. The foundation allows you to create whatever you want on top of it. So do not think about the foundation as a rigid structure. View it as a platform to then create something that uniquely suits you. The first two years are about flexibility and optionality, not rigidity and following a specific track.
The Professional Foundation
When you graduate from law school, you may or may not have an idea of the career you want to have in law. Understand that your first two years are the least expensive years for your firm to train and retrain you. You are “inexpensive” to move to a new practice area, but you are too junior to likely laterally move to a new practice area in a new firm.
If you start working in a practice area you thought you would like and realize you want to experience another practice area, ask to try it out. The firm does not have to let you move, but they have invested a lot of money in you to succeed at your firm. They should want to help you find a practice area that suits your interests and skills. It is also okay to split your time between practice areas. A practice area switch as a junior lawyer does not have to be an all-or-nothing proposition. Take on a few hours in a practice area you are interested in exploring. It gives you an idea of whether you like this other area more without ruining your relationship with your current practice area.
Are you already in a practice area that you like? Congrats! You are in a great spot to start working on the skills and knowledge you can use to build a career in this practice area.
Nothing you do in your first two years of practice will guarantee you partnership, but you can do things as a junior associate that can hurt your chances of making a partner.
Once you find a practice area you think you will enjoy working in today and 5-10 years from now, it is up to you to build your brand within the firm. Some ways to build a strong reputation are:
Exceed the expectations of your senior colleagues
Ask for more responsibility at the right moments
Seek opportunities to have client contact
Be busy and build your skills to remain competitive with your internal and external colleagues
Make yourself indispensable
Improve your research skills
You build skills through failure and opportunities. Take on work outside of your comfort zone. Doing so exposes you to a more diverse range of client challenges. It also allows you to learn the solutions your firm offers. By doing this consistently, you will build a broad skillset faster.
By taking on work that is outside of your comfort zone, you are going to fail. We all face failure in our careers, and it is okay to fail. No one expects you to get everything right as a junior associate. Part of your compensation is to learn. As a junior associate, failing often and learning from mistakes is the best way to improve.
As you learn more and develop your skills, you become a valuable asset to your firm. Becoming an asset to your team and your firm gives you more control and security in your job, which empowers you to build the career you want. This professional foundation allows you to capitalize in your midlevel associate years.
The Financial Foundation
Laying the foundation for the professional side of your life is only a portion of what you should be doing in your junior associate years. It is also the starting point of your financial life as a lawyer. As a lawyer, you have a unique skill that pays well. Money may not have been why you became a lawyer, but it is a perk of the profession.
When you graduate law school and start working as a lawyer, you will likely make more money than you have ever made to this point in your life. Making more money is an ideal opportunity to start making good financial decisions that will shape your financial future. By making thoughtful financial decisions early on in life, you are more likely to have financial flexibility and optionality throughout your career.
You can avoid being a lawyer who feels stuck working at a job they do not like because they live paycheck to paycheck and cannot afford to leave the high-paying role they have. Financial stress is one of the most common stresses for workers. It leads to a lack of productivity, additional stress outside of work, and a general sense of insecurity. Neglecting to lay a financial foundation can weaken your professional foundation. Meanwhile, a solid financial foundation gives you even more options to pursue in your professional career.
So what should junior associates do in the first two years of their career?
Establish Your Standard of Living
When you begin working as a lawyer, you leave your lifestyle as a law student behind you. You are no longer living month to month on a small amount of money from student loans or a side job. You are now making a real paycheck that you can spend to improve your standard of living.
Here might be some advice you were not expecting: Spend that money! You have earned that paycheck by working so hard through law school and passing the bar exam. You deserve to live a better life.
My suggestion is to control how much you increase your standard of living. First, think about what you spent money on in law school. What is something that you wished you could have spent more on in law school? Is it dining out, the place you live in, travel? Then go ahead and double your spending on that thing after you graduate. If you lived in a modest apartment in law school and always wanted a better place, double your spending on your first rental out of law school. If travel was something you wanted to spend more on, double your spending on travel.
The key is to increase your spending on something that matters to you. Doing so noticeably improves your standard of living. Then only modestly increase some of the other areas of your lifestyle. If you move into a much better place, maintain a similar spending level across the rest of your life. Your life will improve, and you will have extra money to build your financial foundation.
Lawyers get into trouble when they graduate from law school and immediately increase their spending to match their new income. When this happens, they neglect to save and invest for the future. Having high expenses and low savings leaves lawyers feeling stuck at their job. Not establishing an adequate standard of living may lead to a more improved life today but at the expense of your future life. Why not have both? By increasing your standard of living in high-value areas, you improve your current life and have enough money to fund an ideal future life.
One significant expense added to your post-law school standard of living is student loans. For the average lawyer, monthly student loan payments can be around $2,000. Take time to evaluate your options.
Can you take advantage of an Income-Driven Repayment (IDR) plan? Are you working in public practice and have access to Public Service Loan Forgiveness (PSLF)? Do you want to stay in a federal repayment plan to possibly benefit if there are future loan forgiveness or student loan freezes? Do you want to try and find a private refinance that lowers your interest rate and total amount paid?
Choosing the right student loan repayment plan is a serious decision. Each repayment plan has pros and cons that are unique to you. It can go a long way in building your financial foundation to choose the right student loan repayment plan for your life.
Establish an Emergency Fund
Once you have set your standard of living, then you need to protect your lifestyle. Unexpected expenses will happen, and they can be more expensive than you may expect. If you do not have enough savings to pay for 3-6 months of your lifestyle, you are at risk of cutting back on your standard of living if an emergency happens. You are also at risk of hurting your future self, financially.
When you have 3-6 months of expenses, you can:
Afford unexpected expenses
Survive losing your job
Have cash on hand to take advantage of opportunities that arise
Emergencies are not always unfortunate, but they usually require a sense of urgency.
Take Advantage of Employer Benefits
Employer benefits are a part of your compensation, so use them. One of the most critical benefits to take advantage of is health insurance. Medical costs in America are high. Without insurance, you are at risk of getting sick or injured and incurring large medical bills. Since lawyers typically make high salaries, the chance of forgiveness for medical expenses is low. Protect yourself.
Another way to protect yourself is with employer benefit insurance. If your employer offers group life insurance and Accidental Death & Dismemberment (AD&D) insurance, take advantage of it. If they have an option to increase your coverage amount, look at your life. Do you have anyone depending on your income? Do you have debt like private student loans or a mortgage that would need repayment if you passed away? If yes to these, you may consider adding additional coverage. If not, you may not need to pay for supplemental coverage. If you are unsure, consult with a financial professional, but understand that it is best to talk to a financial professional who does not have a financial interest if you buy additional insurance.
Another insurance to look take advantage of is disability insurance. You spent years in law school working to obtain the skills to become a lawyer. As a lawyer, you have developed a high-value skill set. Your skills allow you to earn a high income for decades. Protect your future earnings. A short-term disability policy will pay for most of your expenses for a few months. A long-term disability policy will pay you for years if something unfortunate happens to you. You worked too hard to let a disability rob you of your potential earnings as a lawyer.
Save and Invest
It pays to start investing early. When you invest early in your career, you give your investments more time to benefit from compounding growth. Compounding growth results in the most investment gains typically coming at the end. By starting early, your future self will have more financial security and financial freedom because you decided to invest early.
Take advantage of any employer match in your 401(k) or another retirement plan. Take advantage of an employer HSA match if your insurance allows it. Investing in these accounts and collecting an employer match boosts your future investment growth.
As a young lawyer, how you invest over the next few decades of your career will impact your future financial wealth. But as a young lawyer, you should keep in mind that wealth is built by saving, not investing. It is best practice to save between 15%-20% of your pay each year. These savings can go towards your emergency fund, retirement funds, and investment funds. Prioritize your emergency fund and your employer match in a 401(k) first, then save towards other goals.
These other goals can include buying a home, retiring at a certain age, starting your own firm, or anything else important to you. Saving and investing over time accumulates enough money to live your dream life.
Final Takeaways
Your first two years as a lawyer do not define your career as a lawyer. They will not be the reason you succeed in life as a lawyer, but they can make the rest of your life as a lawyer more challenging than it has to be. Be intentional about building a solid professional foundation by:
Becoming an asset for your employer
Building a well-rounded skillset
Pursuing the career that you want today and in 10 years
Additionally, build a solid financial foundation by:
Establishing an improved standard of living
Adequately fund an emergency fund
Take advantage of employer benefits
Save and invest effectively
By achieving a solid professional and financial foundation, you will give yourself the best chance to succeed. Sometimes it might feel like these years do not matter financially or professionally, but they do. Achieving success is doing the obvious things early and for longer than everyone else.
Life can be overwhelming as a junior associate. You may be working long hours at your firm and feel like you are just trying to keep your head above water. Add on the financial and personal stresses in your life and it can be too much. If you are looking for a way to alleviate some of the financial pressure, consider financial planning. Financial planning is an ongoing process where you work 1:1 with a financial planning professional to establish a plan for your life. Like everything in life, this plan will change. By working with a financial planning professional who specializes in working with young lawyers, you will have a teammate who is anticipating future financial changes in your life. This allows you to place your focus on excelling in your career while also excelling in your personal finances. If you would like to learn more about the benefits of financial planning, schedule a free Meet & Confer. It’s a no-obligation meeting where you can share the financial concerns you have. It’s also a great time to share the goals you want to achieve in the future. Then together we discuss if financial planning can be useful in addressing your concerns and accomplishing your goals.
Disclaimer: Nothing in this blog should be considered financial advice or recommendations. Your questions are unique to you and your own personal financial circumstances. You should consult with a financial professional before making a financial decision. See full blog disclaimer.