People will often refer to lawyers when describing “successful, wealthy people.” But if you look at Forbes wealthiest people list, there are relatively few, if any, successful lawyers among them. Instead, investors, business leaders, property owners, and oligarchs fill the ranks.
Why Don’t All Lawyers Become Successful?
So what’s going on here? Why isn’t a lawyer earning $400 per hour always the wealthiest person in the room?
They Don’t Understand How Wealth Works
Having a high income – just like a lawyer – is great. It means that you can save money faster and retire earlier.
However, income and wealth are two entirely different things.
Here are two truths that successful lawyers need to understand:
- You can have an enormous income and still be poor.
- Wealth is a much more potent generator of money than work.
Let’s discuss the idea that you can have a high income and still be poor first.
Suppose for instance, that you’re the average lawyer and you’re taking home a good paycheck, perhaps $120,000 per year. For most people, that’s a fantastic salary. It puts you in the top five percent of earners in the US. It means that you’re able to buy a property in a good area, get full medical cover and drive an expensive car.
But income is only one side of the equation. The other side is your expenses. That luxury car could cost you $20,000 in insurance, maintenance and fuel. Your house could set you back $40,000 in mortgage repayments and bills. And your health insurance could be another $10,000 on top of that. You might also have other expenses as well, such as organic food, golf club membership, and vacations. At the end of the year, you might not have any surplus cash at all, forcing you to continue working.
Now let’s consider the second point: that wealth is a much more potent generator of money than work. As a successful lawyer, you might be able to generate $300,000 per year. Some surgeons earn more than $500,000. Again, these are exceptionally good incomes. However, they pale in comparison to what wealth can achieve.
Let’s say, for instance, that you sell a business for $10,000,000 and have that money sitting in the bank. Then suppose that you use it to buy assets, such as stocks, private equity and property that returns 10 percent per year. All of a sudden, you have an income of $1,000,000 per year, which is likely many times what you could earn working a regular professional job. What’s more, you didn’t even have to work for it. Instead, it came to you in the form of profits and rent.
And that’s just the start. Once you get the wealth flywheel going, there is almost no stopping it. If you reinvest your money, you can increase your income in the following year and so on.
Compare that to relying on income alone. If you never invest, you will never generate more money than what you can earn. Instead, you will always have to sell your time for cash. And, ultimately, that is why you will never enter higher levels of wealth.
However, some successful lawyers don’t understand this concept and, so, they never build the wealth that they need to be successful.
They Don’t Understand The Value Of Education
The second reason some aren’t successful lawyers is that they don’t fully grasp the value of education. To many, education finished when they left law school and now they’ve got their degree and license to practice, there is nothing left to learn.
But, of course, as any experienced legal professional will tell you, that’s not true. There are always new cases to study and new laws coming into effect that change how the system operates.
What’s more, there’s also a certain learning process required for the practice of law itself. It’s not something that you can always grasp in an undergraduate textbook.
Because of this, many successful lawyers spend a considerable chunk of their week reading. Tools, such as Practical Law from Thomson Reuters, provide resources they can skim through between clients or in the evening. Keeping up to date helps the practice and also provides a more holistic form of training than college alone.
They Don’t Understand The Power Of Corporations
Successful lawyers tend to see themselves as individual professionals, not fully functioning businesses. And, for this reason, they often miss out on opportunities.
There is nothing wrong with viewing yourself as an independent professional, making your way through the world. However, if you maintain that mindset, you will never see the value in leveraging the skills of others.
Remember, a large chunk of lawyers works in specialist law firms. And these firms are set up to ensure that the owner receives a profit, over and above the salaries of the individual attorneys.
Setting up a corporate structure makes this kind of profit generation possible. The firm can develop a brand and a client base, hire lawyers at the going market rate, charge customers a higher fee, and pocket the difference. Moreover, the more lawyers there are, the higher the potential profits can be. A law firm with fifty lawyers will yield more for the owner than one with, say, just five.
Once successful lawyers understand the value of corporations, their success tends to skyrocket. A few years after setting up a practice, they have two income streams: one from their regular work, and another from business profits.
They Don’t Link Up With High-Paying Firms
Corporate clients are among the best that a lawyer could hope for. They tend to pay on time and, in most cases, they’re willing to pay top dollar to get the best services.
However, some lawyers don’t pay them enough attention. Instead, they focus their efforts on a small pool of often flaky clients that don’t offer a consistent stream of revenue.
That kind of approach to the law profession is bound to end financial disappointment. Yes – lawyers who fall into this category may still make good money, but they will remain a long way from their full potential.
They Don’t Have Motivation
Going into the legal profession seems like a great idea when you’re young. You’ve heard that people can make millions of dollars during the course of their careers and you want to be among them.
But, for some, the actual day-to-day practice of law is uninspiring. Peeling through case reports and reading statutes isn’t something that appeals to everyone. Over time, motivation to do well starts to ebb, leading to a loss of job satisfaction.
Lawyers who find themselves in this situation need to do some soul searching. Did they choose the right career? Or should they go looking for something else?
Lack of motivation is a big issue in the legal field. You really have to care about your clients’ cases in order to generate value for them. If you don’t, it will shine through in all your work, and you’ll wind up getting a reputation for providing a mediocre service. You tick all the regulatory boxes, but your heart’s not in it.
They Lack Impulse Control
Impulse control is important in practically all aspects of life, but it is particularly critical for lawyers. If you’re constantly responding to how you feel, then it can affect your job performance, leading to declining client satisfaction levels.
The trick here is to take a step back and allow cases to stew. Spend some time mulling over what your client tells you and don’t feel the urge to react immediately. You’re allowed to take your time to fully digest the implications of what they have told you.
Often, cases are highly complex and there are no simple solutions. Some lawyers may spend a couple of weeks figuring out all the details and how everything relates to each other.
However, the payoff is always worth it. At the end of the process, they have something better than if they had simply gone with their gut instinct.
So what does all this mean to lawyers?
Essentially, it means that they can join the ranks of the super wealthy (particularly if they keep saving and investing for decades). But they need to understand how savings and investments work – and how to fly high in their careers.
When it comes to wealth, it’s not about how much money you make, it’s about how much you keep. If you have no wealth, earning a salary of $120,000 feels like a lot of money. However, it ceases to matter as much when you earn the same amount or more in interest. In fact, if you knew you could reliably earn $120,000 per year from your investments, you might decide to retire.
Wealth is also about networking, building a personal brand, and developing businesses. All these opportunities are open and available to lawyers and other people in the legal profession, so it is just a matter of seizing them for yourself. Don’t sit on the fence.