Clearly one of the most stressful issues that attorneys face day-to-day is financial uncertainty. A large percentage of attorneys operate in solo and small firms which, like many American families, operate from paycheck to paycheck. The only difference is that the paychecks come from clients who are often slow in paying. Therefore, cash flow is inconsistent and stress rises as mortgage payments come due. Rather than using this as a motivator for financial planning, I find many attorneys simply throw up their arms saying that financial planning is impossible. In truth, financial planning is not impossible; it is simply more difficult where the income stream is inconsistent. To meet this challenge and reduce the stress attorneys must recognize that financial planning using a real budget is of critical importance.
A good starting point for any attorney is to develop a personal home budget based upon actual income and expenses. This personal budget will provide a key tool for evaluating both your bottom line income needs, and also will help you identify excess spending. A key to developing a successful budget is accurate information that reflects the economic reality based on a careful analysis of historic spending and income. This is critical because we all tend to underestimate our spending and overestimate our income. Here are several tools for creating a realistic budget.
A first option is to use Microsoft Excel or other spreadsheet program which all have free templates which can be used to create a personal budget. For example, Microsoft personal budget templates may be found at the Microsoft site. To populate the critical information you will do an analysis of your bank account, bills, credit cards, etc., to determine your spending and income for the last six months.
A second option is to purchase personal finance software like Quicken or Moneydance. These are relatively cheap (less than $40.00), support on-line banking and bill payment, and help manage your budget. These programs require less input then a spreadsheet template, but will require some input and analysis by you.
The third option is sign up for free internet based software vendors such as mint.com, intuit.com (free Quicken on-line), or yodlee.com, that provide personal budget programs. These sites will do a complete analysis of your spending and income, help you set spending and saving goals, track how you are doing, and help find ways to save more money. For example, mint.com will suggest where you can improve on interest rates on loans and credit cards, help you prepare for tax season, and will provide helpful advice on how to achieve your goals. A word of caution: to effectively use the on-line service providers you will need to provide them some access to your financial information so look at technology reviews, user agreements, and exercise caution about the security used by the site to ensure that site is keeping your information as safe as possible.
Once you have gained control of your household budget you can easily implement the same financial controls in your firm. There are excellent programs that will allow you to get the same financial control of your law office as you will have in your personal life. These software programs will track and reconcile your operating accounts, IOLTA and trust accounts, and provide real time financial reports to determine cash flow, budget projections, and profit/loss statements. Contact Mass.LOMAP to get a list of available programs. You can also set up an appointment to use our technology center and demo a number of programs.