As concern over employee well-being continues to grow, the financial element of that dynamic, which can lead to great stress, should be part of that equation
In 2021, the starting annual salary for first-year associates at large law firms rose to $205,000; and while that can be a life-changing amount of money if you are one of the few thousand law school grads to earn a first-year associate slot, that’s far from everybody’s experience.
About 80% of law school graduates don’t enter the profession making this salary and many leave law school carrying six-figure student loan debt. According to the ABA Young Lawyers Division Law School Student Loan Debt survey, about 75% percent of respondents had more than $100,000 in student loan debt after graduation and many reported the heavy burden was negatively impacting their mental health, particularly in terms of “stress, anxiety, depression, anger and mental wellness.”
Addressing financial well-being
Well-being has been a hot topic within the legal industry for the last few years, but the financial element of that dynamic has largely been left out of the conversation. Stress around finances and related money problems can lead to more downstream mental and physical health issues. And when employees are financially healthy, they have better mental and physical health in many cases. The legal industry is generally seen as a stressful profession because of the intellectual rigor of the day-to-day work, and an extra presence of mental pressure about money can impair lawyers’ ability to make sound decisions.
Minimizing mental burdens with solid financial planning helps to ensure confidence that any urgent and stressful situation that arises can be addressed with a clear mind, eliminating the chance that finances could become a distraction from making clear a legal decision.
The good news is that legal employers have taken notice. During Lawyer Well-Being Week in May, for example, Winston & Strawn brought in Jacquette M. Timmons, a financial behaviorist to do a workshop on managing finances, in addition to the firm’s regular retirement savings and financial planning services.
Some legal employers also are offering longer-term holistic solutions by partnering with third-party providers. LearnLux, a workplace financial well-being provider and which published Top 5 Reasons Lawyers Need Financial Wellness on its website, works with legal employers to provide independent digital and live financial planning services. These planning services can help employees establish the building blocks of personal finances, which include understanding spending patterns, debt repayment, emergency savings, and investing for the future, according to LearnLux CEO Rebecca Liebman.
LearnLux only hires certified financial planners (CFPs) because of their ethical obligation to be a fiduciary, explains Liebman, which means that they are required to be unbiased, transparent, and act in the best interest of the client. Using a third-party financial planner also eliminates many conflicts of interest because independent partners often do not sell financial products.
Many lawyers don’t understand personal finance
People assume that high earners with advanced degrees understand money and investing, says Liebman, but often that is not true. Liebman says she first observed this when working at an MIT lab with many colleagues who had PhDs yet were struggling to fill out a 401k form. At the same time, some high-earning lawyers don’t prioritize solid financial planning because they assume they will have the cash flow to withstand any high-dollar emergency expense.
Further, lawyers come from all different backgrounds that have unique cultural and familial influences around money. Attorneys coming from humble beginnings who then go to making a six-figure salary often experience expectations of supporting family members, which can be overwhelming when starting a new high-stress profession. Working with an outside third-party financial planners can assist lawyers with these competing priorities and the creation of a financial and spending plan that features built-in accountability while ensuring the lawyer’s behavior is aligned with the plan.
Financial well-being amid job changes
Sometimes, job and career transitions are planned and sometimes they are not. Unexpected changes, such as a job loss, usually causes sudden stress and is typically exacerbated without the building blocks of a financial plan. At the same time, a lawyer in private practice wanting to go in-house or work in government service will almost certainly take a pay cut, and a financial plan with a significant debt pay-down strategy makes these personal career transitions much easier.
Studies show that the majority of Americans are stressed out about money, and Gen Z professionals, especially early career lawyers, are no exception. Some estimate that nearly one-half of Gen Z workers cite student loan debt as their greatest financial concern. The financial burden and stress of repaying student loans is likely a great concern for young lawyers as well. Legal employers that offer a holistic well-being strategy that includes financial wellness will only strengthen the employer value proposition of potential hires.
Diane Costigan, Director of Coaching and Well-Being at Winston & Strawn, says she has spoken with dozens of lawyers on this subject. “My definite observation over the course of my own career is that the happiest lawyers are the debt-free ones,” she says.