7 financial mistakes no attorney should make in 2021
With 2021 here, it’s the perfect time to start projecting what your financial forecast will look like
With 2021 here, it’s the perfect time to start projecting what your financial forecast will look like. Given the wholly unprecedented nature of 2020, it’s natural—and prudent—to prepare well in advance in the event of another unforeseen economic crisis. Today, we’re going to talk a little bit about the mistakes all attorneys should steer clear of in the coming year.
1. Myopic Financial Portfolios
As mentioned above, there’s not a single person on Earth who could have predicted what could have happened last year. Unsurprisingly, financial portfolios across the nation took a serious beating as businesses and investments unexpectedly shriveled up. For this reason, it’s especially crucial now more than ever for attorneys to construct their financial portfolios with a sort of disaster mindset. You may also want to consider the tried-and-true method of investing in low-cost index funds. But if investing doesn’t sit well with you right now, make sure to keep tight control of your cash. “Cash is queen,” says Georgia Lee Hussey, chief executive of the U.S. wealth manager Modernist Financial, going on to add, “Having enough cash will allow us to float through the present moment.”
2. “Sit and See” Tactics
The early bird gets the worm, as they say–or at the very least, a head start on whatever’s coming down the road. Re-work tis since it won’t post until January? there’s never been a better time to educate yourself on current and emerging market trends, catch up with your clients and learn what their needs and concerns are, as well as reviewing your firm’s financial health. Twiddling your thumbs and only educating yourself and implementing changes when forced to is not only a bad business move, but it’ll damage your credibility in the industry.
However, you still need to strike a balance. Just as it’s unwise to wait and do nothing until it’s absolutely necessary, it’s equally bad to analyze every little detail to death. The truth is we can’t predict the future; 2020 is the best proof of that. But living in fear and letting your anxieties hamper your business acumen will only hurt you in the long run. Try to find a happy medium of checking up on market trends and business logistics once a month. That’s frequent enough to stay on top of the game but seldom enough to where you won’t drive yourself crazy.
4. Changing Investments on a Dime
When it comes to investing in the new year, proceed with caution. Even under normal circumstances, changing investments at will can be risky. Just as Warren Buffett once famously said, “The stock market has a very efficient way of transferring wealth from the impatient to the patient.” Buy appropriate investments for your strategy, try not to time the market, and don’t let your emotions get the best of you. If you doubt your abilities to do any of this, consult a trusted financial advisor who can help you get your affairs in order.
5. Missing Tax Deadlines
This one is pretty self-explanatory; we all know how missing any tax deadline can spell disaster for a small business. If you’re hoping to receive some tax breaks in the coming fiscal year, remember that the values of each tax deduction or tax credit vary year to year. This means that you can only claim that value on a tax return for that year once the credit or tax deduction expires.
Beyond that, April 15, 2021, will be the date you need to file but not pay—as it is in normal years. If you’re a “solopreneur,” though (i.e., a solo practitioner running their own firm), then you’ll need to file taxes quarterly: January 15, April 15, June 15, and September 15. If you fail to pay on time, you’ll pay an extra 0.5 percent of unpaid taxes each month until your initial tax bill is paid, so don’t miss these deadlines.
6. Budget Miscalculations
Here’s another point that was driven home especially hard this year. Firms nationwide took a serious hit trying to adjust to the wildly fluctuating market, and a few even went under as a result. Do both you and your firm a favor by factoring in a sizable emergency fund to your 2021 budget. Thankfully, there’s never been a better time to re-allocate overhead or travel funds–all of which could go to a nice nest egg that’ll keep you afloat in light of another unforeseen crisis.
7. Overestimating the Influence of Politics
Even though political affairs have real-world consequences on the laws and regulations that govern corporations, it would be an overstatement to say that they can swiftly turn the economic tide. These effects are normally indirect and short-term, so making any lasting financial decisions in light of political predictions would be shortsighted at best and downright disastrous at worst.
Mark Candler and Dave Owens of Maia Wealth are go-to wealth advisers for lawyers and law firms in Colorado. Specializing in debt reduction, investment management, retirement efficiency, and legacy planning, Mark Candler and Dave Owens are trusted professionals for attorney-focused wealth management strategies in the Denver metro area.