From Student Loans to Investing: Advice for Young Attorneys

Guest Writer
Jul 15
6 min read

Introduction

Young attorneys often face a unique financial journey from law school debt to building long-term wealth. High student loan balances, late career starts, and unpredictable income trajectories are some of the challenges attorneys may face early in their careers. In this article, we’ll set the stage for a discussion on financial priorities and how to manage student loan debt, savings, and investing.

Managing Student Loans Strategically

You’ve graduated and entered the workforce. Now your student loan repayment plan begins. You may be wondering what options you have and how to tackle what can sometimes be a significant and overwhelming loan balance. The good thing is you’ve chosen a career path that provides flexibility and high-income earning potential. Depending on your career choice, you may consider Income-Driven Repayment (IDR) plans, refinancing, and Public Service Loan Forgiveness (PSLF) for those in qualifying roles. It is important to choose a strategy that aligns with your career goals and trajectory, but also your cash flow needs. However, most people agree that having a plan to pay off your student loans as efficiently as possible for your situation helps provide mental clarity, a greater sense of control, and allows you to focus on other important goals you may have, such as career development, saving, and investing.

Building a Strong Financial Foundation

You may finally feel like you can spend money and enjoy yourself after all the years of hard work after graduating from law school, studying for the bar, and landing a job. It is easy to let your guard down by not watching your spending, being less careful with money, and enjoying yourself. On one hand, you deserve to live comfortably, cover the necessities, and have some fun. On the other hand, you should hang on to some of the financial sacrifices and frugality you may have practiced during law school. This is especially important in the early years of your career since a financial foundation may be nonexistent. First, you should work to set aside at least three to six months of living expenses in a FDIC-insured savings account. This is for emergencies or job loss. You can look for a high-yield savings account to take advantage of interest rates. Consider utilizing a website like Nerdwallet or Bankrate to help ensure you are earning a competitive interest rate. After you have established an appropriate cash reserve, you may wish to set up a separate account for specific goals such as a home purchase, new automobile, capital to start your own firm, or buy into one. You will also not want to ignore saving and investing for retirement in a tax-advantaged retirement plan. Employers may offer a retirement plan such as a 401k, which allows you to save and invest for retirement. Starting early is key and may provide your future self with financial flexibility and autonomy later in your career. Attorneys may have high enough income to consider maxing out retirement accounts (the maximum employee elective deferral into a 401k plan is $23,500 for 2025 and for individuals under age 50). I generally encourage clients to “save until it hurts” and try maxing out your retirement plan to see if your net income is enough to cover your regular expenses and save for your other goals. If you do not have access to an employer-sponsored plan or are self-employed, consider using an IRA instead. Know that everyone’s situation is different, and consulting with a financial advisor to discuss and explore the possibilities and priorities for your situation is something to consider.

Investing for Long-Term Wealth

While young and early in your career, you can generally afford higher-risk and higher-volatility investments like stocks in your retirement accounts. Starting early to take advantage of compounding and time can pay huge dividends. *For example, saving $1,000/mo. at age 30 could turn into $1,427,944 by age 60. Whereas saving $2,000/mo. starting at age 40 could turn into $1,140,206 at age 60. Time can be a huge factor in long-term wealth creation and financial success.

How to invest your retirement savings does not have to be overly complicated. Most employer-sponsored retirement plans offer something called target-date funds. These choices are set up to align with your projected retirement date. For example, a 30-year-old may want to consider the target-date 2060 fund. This aligns with their age 65. The benefit of using a target-date investment is that they typically provide broad diversification to stocks and bonds around the globe with most of the pie invested in stocks in the early years (such as 90% stock, 10% bonds) and slowly becoming more conservative (less stock, more bonds) as you get closer to the target date (i.e. the date in which you may start needing to use the funds).

In the event you have little to no student loan debt, no other high-interest personal loans or credit card debt, and are saving an appropriate amount into your retirement plan, you may still have excess cash flow you wish to invest in a non-retirement account. Here it is important to consider the tax ramifications of investing outside of a retirement account where dividends/interest/capital gains are usually not tax-deferred like they are in retirement plans. Since these may not be tax-deferred in a non-retirement account, you may want to explore tax-efficient investments such as passive ETFs (exchange-traded funds) that track an index such as the S&P 500 index, for example, and tax-free bonds also known as municipal bonds.

It would be inappropriate for me not to mention some of the other risk management items that should also be considered to have a sound financial plan such as disability income insurance. What happens if you become disabled and can’t work? Your largest asset as a young attorney is your ability to work and earn a living over many years. If that gets disrupted, having an appropriate disability income insurance policy to replace your lost income is ideal. You may also want to consider life insurance. If you pass away, who will be impacted and will they have to change their lifestyle if you are no longer here? Business liability, personal liability (umbrella coverage), and an appropriate estate plan are all important considerations as you age, create wealth, and as life gets more complicated.

Conclusion & Next Steps

It is important to put together a solid financial plan as a young attorney. It will help you feel more confident and in control of your financial life. In summary, you should:

Evaluate your student loan repayment options and projected income. Consider working with a student loan specialist or financial advisor to help you determine the best repayment plan for your situation.
Work to build a proper cash/emergency reserve and start saving early for retirement using a retirement savings plan.
Consider risk tolerance and timeframe, and invest accordingly. If you have a long-term timeframe, consider investing mostly in stocks. For shorter to medium-term goals or as your long-term goals get closer, explore money markets, CDs, fixed income, and other financial vehicles designed to help manage risk.
Don’t ignore insurance - disability income insurance, life insurance, and business/personal liability insurance are important considerations along with an appropriate estate plan.
Consider working with a financial professional such as a financial advisor to help create a plan for your needs, goals, and dreams.

Starting small and tackling each subject one at a time can help manage expectations and keep you from feeling overwhelmed. Remember the hardest part is behind you. You’ve graduated, passed the bar, and embarked on a new and exciting career with a lot of opportunity for personal growth and wealth creation. Ensure you take the steps to plan for your present and for your future.

Written by:

Christopher J. Gleber, CFP®

Financial Advisor

Gin Wealth Management Partners

A private wealth advisory practice of Ameriprise Financial Services, LLC

Ameriprise Financial cannot guarantee future financial results.

Ameriprise Financial and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

*This illustration is hypothetical and is not meant to represent any specific investment or imply any guaranteed rate of return. Calculations assume 8% annual rate of return compounded semi-annually

ETFs may trade at a discount to NAV, are subject to tracking/correlation risk and shareholders bear additional ETF expenses.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.

Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC.