Speaking recently on The Lawyers Weekly Show, Helen Baker – who runs financial advice firm On Your Own Two Feet – said there are a few missteps that senior lawyers can take over the course of their careers when it comes to financial management.

Such missteps include: insufficient contributions into superannuation, the carrying of “an enormous amount of debt because banks love them and they’re happy to loan them quite a bit of money”, or seeing wealth eroded by virtue of being in the highest tax bracket and making financial decisions at the wrong time, thereby seeing wealth diminish by capital against tax.

In response, Ms Baker said, there are five foundations that senior lawyers can implement to ensure their nest egg is on the right track.

“The first one is about having an emergency fund and that sort of an amount that you would cover off for bills to manage those situations when cashflow is topsy-turvy or if you’re working for a firm and unfortunately are made redundant,” she said.

“The second one is what I call the spending and an investment plan. So, I tend not to use the word budget because budget usually means handcuffs and I can’t spend on this and that. We are going to take our kids on holidays, we are going to have a holiday ourselves. We’re going to have to put petrol in the car, kids through school, groceries, all of those things. So, making sure you know how you want to commit to spending and have extra leftover so you can invest for the future and what you do with that is another question.

“The third one is insurance. This becomes particularly important as well if you are in practice with somebody else because then you need not only the personal insurance for your own family but also from a business perspective as well.

“The fourth one is around superannuation and all the elements of that such as the fees, how it’s invested, the nominations, the insurance and not consolidate without seeking advice first.”

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The fifth foundation is estate planning, Ms Baker said: “Wills, powers of attorney, testamentary trusts, advanced health directives. Those are your foundation so that then you can build things on top without hopefully them falling down because if anything goes wrong, cashflow, there’s the emergency fund. If anything goes wrong from a health perspective, there’s the insurances and then hopefully you keep everything working at the top level.”

When asked how best senior lawyers could get started on implementing these five foundations, Ms Baker said an emergency fund is something they should look to start on sooner rather than later.

“They can go and find out what their superannuation is in terms of how they’re invested the fees, the nominations and the insurance inside there. And, also, if their organisation has its own insurance policy. Sometimes they’ll have some income protection or some perhaps some life or total and permanent disablement insurance,” she said.

“So, there’s probably an opportunity to gather information, but definitely seek financial advice because it’s one of those classic cases of you don’t know what you don’t know and unfortunately you find out later that it’s a problem.”

Education on such financial matters is particularly important for women in senior positions in law, Ms Baker added.

“For me, it’s about getting the best outcome and eventually we sort of run out of time when you get to that sort of level, if you get a few years down the track and you look back with regret because that money is gone and you find out you could have done things earlier,” she explained.

“We can still fix up from where you are now, maximise whatever we can. But getting on the front foot as early as possible is doing that because as a senior lawyer, certainly that you’ll be able to see that there’s only so many pay packets to go before retirement.”

To listen to Jerome’s full conversation with Helen Baker, click below: