Even high-earning attorneys can feel financially stuck when taxes, lifestyle creep, and poor planning collide. In this episode, you’ll learn how to fix the most common money mistakes lawyers make and build a financial plan that actually supports your life and career.
In this episode, Steve Fretzin and Niraj Chhabra discuss:
- Taxes as the biggest financial pitfall for attorneys
- Lifestyle creep and savings habits for high earners
- Balancing kids’ education, family support, and retirement
- Retirement, deferred compensation, and long-term care planning
- Unique financial challenges for solo and small-firm lawyers
Key Takeaways:
- Taxes are often the largest and most overlooked threat to an attorney’s long-term wealth, especially when income rises, but tax strategy doesn’t evolve.
- As income increases, spending almost always follows—but savings rarely keep pace unless it’s structured and intentional.
- Funding children’s education and big life events is important, but it must be weighed against the very real risk of extending your own working years.
- Tools like deferred compensation plans, 529s, and properly structured insurance can dramatically improve both tax efficiency and retirement outcomes when used correctly.
- Solo and small-firm lawyers face unique cash flow and risk issues and need different emergency reserves, retirement structures, and income protection than firm employees.
“You should have three to six months’ worth of expenses set aside in cash. If you’re a solo, you need 12 to 36…” — Niraj Chhabra
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About Niraj Chhabra: Niraj Chhabra is the Managing Director of SideBar Advisors. Before launching the firm in 2022, he was an advisor with Ameriprise Financial since 2005, concentrating on clients in the legal profession. His central focus includes family finances, tax and estate strategies, retirement, and financial planning for small businesses. His goal is to help attorneys navigate their unique tax challenges and modify their financial plans as their careers evolve. He does this by offering attorneys holistic financial planning and complimentary educational workshops.
Connect with Niraj Chhabra:
Website: https://sidebaradvisors.com/
Show: https://sidebaradvisors.com/podcast/
LinkedIn: https://www.linkedin.com/in/nirajchhabra/
LinkedIn: https://www.linkedin.com/company/sidebaradvisors/
Facebook: https://www.facebook.com/SideBarAdvisors/
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Email: [email protected]
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Call Steve directly at 847-602-6911
Audio production by Turnkey Podcast Productions. You’re the expert. Your podcast will prove it.
FULL TRANSCRIPT
Steve Fretzin [00:00]
Hey everybody! Before we get to the show, just want to remind you that the Be That Lawyer community is up and running and rock and rolling. We have a lot of amazing business developer and rainmaking attorneys in there. We’ve got incredible content, courses, live events, and all kinds of ways to help you to be that lawyer. Check it out today at be that lawyer.com/community And other than that, please enjoy the show.
Narrator [00:29]
You’re listening to Be That Lawyer: Life-Changing Strategies and Resources for Growing a Successful Law Practice. Each episode, your host, author, and lawyer coach Steve Ritson will take a deeper dive, helping you grow your law practice in less time with greater results. Now, here’s your host, Steve Bretson. Hey,
Steve Fretzin [00:51]
everybody! Steve Fretzin here, and welcome to the Be That Lawyer podcast. So happy that you’re here and that you’re with us. This show is all about helping you be that lawyer. I’m gonna apologize if you’re watching this on video. My I’m taping the World Cup downstairs, and it might be impacting my video. So if you see me like a robot or stuck, that might be why. But on audio, I think we’re pretty cool. Seems all right, Naraj, on the audio side. So far, crystal clear. All right, that’s good. All right, well, listen, I think I’ve always had the the Ilkwit podcast that audio always trumps the video, so there we go. All right, we are going to jump in and get started. Let’s jump in with your quote of the show. And I, I just actually did a little meme about Warren Buffett on on LinkedIn. I think he said something about you can have a salary, but it’s never going to be the same as having your own business. And of course, that is a great lead-in for us, but let’s do yours instead of mine. Here we go. Someone is sitting in the shade today because someone planted a tree a long time ago. So welcome to the show. Welcome back to the show, and then tell us a little bit why you love that quote.
Niraj Chhabra [01:52]
Thanks for having me, Steve. So I think that it’s important because I think a lot of the times, especially in the field of finances, we forget that you know you’re in your situation today, based on actions you made yesterday. So that quote definitely resonates with me for that reason. I think, especially with multi generational planning and things of that nature, you know, you’re in your spot because of something your mom and dad did for you and the sacrifices they made. In the same way that your kids are in a better spot because of the sacrifices you made, even within your career, you know, if you think about it, how much time did you spend investing in your practice and things of that nature just to have a lucrative career for yourself? So,
Steve Fretzin [02:26]
yeah, yeah, I think you know that’s you know the lawyers that are waiting to put some money away, or the lawyers that are waiting to develop business, or the lawyers that are waiting to see what’s going to happen with AI. Well, I don’t think waiting is a great strategy. I think it’s you know these are the people that end up in trouble that you probably you know run into from here to there.
Niraj Chhabra [02:44]
Yeah, and I think that sometimes people think that waiting comes at the expense of today, and it doesn’t have to. Sometimes it’s just a striking the right balance, especially if you do have a lucrative career. It doesn’t have to be either or.
Steve Fretzin [02:54]
Yeah. All right. Well, I have a feeling we’re going to be hitting a lot of a lot of high notes today. Everybody, Niraj Chabra’s old friend of mine out in New Jersey, New York, and he is head of Sidebar Advisors, managing director, financial advisor. I normally like I’m not. It’s not that I’m not a fan of financial advisors. I think there’s just a few good ones like you, and there’s maybe a lot more that are not great. And so I don’t have a ton on because I have like three or four of you that I absolutely am in love with, and then the rest that want to get on the show, I kind of put off and go. Well, we’re not really doing much on financials these days, or something. But but I thought it was important to have you on, and I’d love for you to give everybody a little a little Reader’s Digest version on your background.
Niraj Chhabra [03:35]
Sure, I’ve been in the industry for going on 21 years, I think, and probably 1516, of that was spent focused on the legal profession. Speaking about you know the quote about the tree, you know the reason I got into the industry to begin with is because of the sacrifices my mom made. She was a nurse, put two kids through college on her nurse’s salary, paid a house off in 15 years, and you know really sacrificed. And I remember thinking in college how much easier her life could have been had she known about a 529 plan or just understood how her 401k could work harder for her. And long story short, it led me to financial planning, and here we are today.
Steve Fretzin [04:12]
Yeah, and you’re in a great position to know what success looks like, and you know what failure looks like. And I’m noticing that you know people live beyond their means. People have massive credit card debt. There’s a whole industry of podcasts I think based on people just making bad decisions, and I think the younger generations even in more more trouble than the older. But what are some of the common financial mistakes that you see lawyers make? Not because they necessarily lack income, but because they don’t have a clear plan or really know what to do with money and how to really use it.
Niraj Chhabra [04:45]
I think the biggest culprit for attorneys specifically is typically taxes, you know, and that’s true regardless of what stage of their career they’re in. And I’ll give you a good example. We had a young associate come to us not that long ago, and he was maxing out his Roth. 401k, you know, and that’s great advice. Anything that you’re going to read is going to tell you that you should do that. But what he didn’t realize is that he, since the time he started at the firm to the time he is today, where he is today, his tax bracket has completely elevated to the top tax bracket. So essentially, he’s paying taxes at the top rate instead of deferring it to a later point where he should be taking advantage of something else. So I think you know across the board, taxes seems to rear its ugly head for attorneys, and it’s something that people need to be mindful of. But oftentimes they either a don’t address, or b they addressed it a long time ago and haven’t revisited, or c they’re just following generic advice, which sounds good on paper, but may not necessarily be applicable to them.
Steve Fretzin [05:39]
Yeah, I mean I think that there are lawyers making a very good living, and they work incredibly hard for it. You know, making 300 400 500,000 plus a year. But I’m also observing that that doesn’t necessarily mean they’re saving. It doesn’t necessarily mean that they’re investing properly. And I know they want the big house and they want the fancy car. And are you seeing much of that with the more people make than necessarily it doesn’t mean that they’re saving more? It means that maybe they’re spending more.
Niraj Chhabra [06:07]
100% I think that the challenge is that you know this is true not just for attorneys but people in general. You know the more you make, the more you spend. But unfortunately, the savings does not typically keep up proportionally to the income. So if you think about what happens when you get a raise, you know you hit your billable hours, you get this bonus that you’ve already spent before it even hit your bank account. But when you get that raise, what happens? You your expenses go up, your income went up, but typically your savings stayed flat because if you think about what most people do, they direct deposit their entire paycheck into their checking account, and they have a fixed dollar amount going into their savings every month. We tell people to reverse that: have your whole paycheck going into your savings account, and have a fixed dollar amount going into your checking to cover day-to-day expenses. This forces you to keep your savings in proportion with those incremental changes to your salary.
Steve Fretzin [06:58]
Yeah, and I’ve always had the mandatory either plan or whether I was working at a company or on my own, where I’m maxing out the 401k, I’m maxing out the employee share, you know, plan, whatever that’s called. You can tell me. I don’t even know. Like again, I’m, I’m, I’m, you know, I’ve been very, I’m become a professional saver. Like I’m really, really good at it, but I, I I don’t always know like I do not have somebody in charge of it, but ultimately I you know I think it’s like an owner. What’s it called? It’s not a falling cat. It’s the other one.
Niraj Chhabra [07:27]
If it’s for a firm, it could be a deferred compensation program. If you’re on your own, it could be a simple or SEP IRA. Yeah, SEP
Steve Fretzin [07:33]
IRA. Yeah, that’s what it is. Okay, thank you. That’s why you’re in the driver’s seat here. You know something that I talk to lawyers about, and you know, it’s a scarier proposition because when I put money in the market, the market’s there, and and it’s somewhat controlled and somewhat not. When I am asking lawyers to make an investment in me or to recommend they they invest in marketing or or hiring staff or getting a VA, and I think they don’t recognize it as an investment. They think it’s just money going out the door, but they don’t put the numbers together to realize, hey, if I can bring in a million dollars more in origination every year, or have that extra million every year, like how much more am I going to make? The investment to help me get there might be nominal. But how do you circle the square marketing, coaching, technology versus putting more towards retirement, debt reduction, personal savings, things like that.
Niraj Chhabra [08:26]
I think a lot of the times it’s prioritization. So you were talking earlier about you know keeping up with the Joneses and mistakes as the mistakes that people make. I remember one time we were talking to somebody and he was saying that one of his biggest regrets was being so generous with his kids, and when I asked him to elaborate on that, you know, this is a guy that was pretty had a pretty lucrative career, made over $600,000 a year, had five kids, put all of them through college, put all of the paid for their weddings, there, helped them with the down payments on their houses. He was 70 years old, and we had to still tell him that he had to continue to work if he wanted to maintain the lifestyle that he, you know, and I think sometimes you know people may make different choices with information that they have today. So if I had met him 20 years ago and said, “Okay, you if you continue to do this, that’s fine, but just know you’re going to be working till 70, he may have made a different choice. Whereas I had shared the story with another client in a very similar situation, and they told me, “I don’t care if I have to work till I’m 80. My kid’s not graduating with a single penny of student loan debt, so it doesn’t matter, you know, what your philosophy is, as long as you have that information, you might make more informed decisions and maybe maybe make different choices.
Steve Fretzin [09:37]
Yeah, but I think it’s also a part of. I mean, you’re a planner, right? I mean, that’s a big part of what you do. What are some of the things that you that you work with lawyers on to ensure that they can pay for the weddings and the bar mitzvahs and the the houses or whatever they’re going to do, but also take care of themselves because that’s got to be a part of a plan, not something that you just wing and hope for.
Niraj Chhabra [09:59]
Sure, yeah. It’s the whole, you know, put the oxygen mask on yourself before taking care of those around you, and you know, like I said, it’s some people will choose to do that anyway, and that’s okay if that’s their choice. But when we’re working with attorneys, believe it or not, you know, I think a lot of them are more open to keeping the drones at bay. You know, they’re more open to having a balanced lifestyle because they do see the consequences, and sometimes that’s all it takes. You know, sometimes it’s just understanding that okay, if you do invest in this, you know, country club membership or this second home, this literally will come at the expense of your kid’s education, which will literally mean that you’re going to work an extra six, seven years. You know, are you okay with that? And sometimes the answer is no. A lot of the times, the answer is no. When you put it in black and white like that, the choices become a lot clearer. So again, not everybody’s going to make those choices, but when they have the information, it makes it a lot easier to see what’s really important to you.
Steve Fretzin [10:55]
Well, then with people that maybe here’s something I’m seeing, and you might see as well. My dad, the late great Larry, the lawyer, was committed to building wealth and saving and retiring at 60-five and not working again. Okay, and he pulled it off, and I don’t think it was the right decision for his brain, but he did it and played a lot of solitaire, and he he lived his days out on Marco Island, and things were okay. You know, he lived till he was 80-nine. He never ran out of money, and you know, and had inheritance for the kids and everything. But as people work and create revenue, you know, in the 345, 100,000 range, they’ve got spouses that work. Isn’t a part of of why we put money away? Because eventually, when we don’t work, the tax bracket is way lower, and then we get less. We pay less taxes. We as we exit out of some of these Roth IRAs and such, or not Roth, but the the 401k
Niraj Chhabra [11:47]
potentially. You know, sometimes people mistakenly think that they’ll be in a lower tax bracket, but it depends on your structure. So, for example, when you transition into retirement, let’s assume you’re a partner at an equity partner at your firm. There could be a gap where you’re not earning anything because you decided to retire, and you know there’s no income coming in. But what we also see is spikes where your capital contribution to the firm came back to you in the same year that your deferred compensation started, and your social security. And by the way, you know your dad decided to work but to retire early. But most attorneys are not. Most attorneys, you know, in other occupations, it’s an on-off switch. One day you’re in the office, one day you’re not.
Steve Fretzin [12:26]
Yeah.
Niraj Chhabra [12:27]
Attorneys nowadays, it’s more like a dimmer. You know, they’re working less, but they’re still working. Well, what does this mean? This means that on top of everything else, on top of your income, when you turn 73, you have to take a distribution from your IRA or 401k. Guess what? That’s taxable income because you deferred those taxes. So you could have everything spike and snowball all at once and end up in the same exact tax bracket in certain years, and that’s something that people kind of miss. So taxes are always going to rear its ugly head, you know, with regards to income planning.
Steve Fretzin [12:54]
Yeah, well, back to the word planning, and and you know, a failure to plan is a plan to fail, right? So, but there are probably some benchmarking and some benchmarks that you can recommend to lawyers in their careers to know, like how much they should be putting away, or percentages, or how they should be tracking and measuring as they build wealth and sock money away and load up that 529 I mean, I’m incredibly proud, and my son, by the way, thank God, appreciates you know his first year of college that I and my wife were able to put away you know the money for him so he won’t have any any debt. But he’s he’s in his friends are dropping out of college and not able to get loans and like it’s a bad scene for them and they really want to go to college and they just again that they didn’t plan or they didn’t have the income to be able to do it. So he’s very blessed and I’m very blessed, but talk to us about those benchmarks and what lawyers should be doing to really make sure that they’re they’re staying on top of
Niraj Chhabra [13:47]
- So I personally don’t like rules of thumbs and benchmarks, and here’s why. You know, when your income is lower, you need to be saving a certain percentage, and you can’t afford to save much more than that percentage. But as you’re a high earning attorney, there’s a lot more disposable income in your possession, so you should be saving a much greater portion of your income because you can and you should. Somebody in a lower tier, their kids are going to qualify for financial aid. Your kids are probably not, so you’re going to be self funding. And guess what? Attorneys typically have higher expectations of the type of school that they want to send their kids to, and that comes with a heftier price tag. So you need to put more money away compared to the other general studies and benchmarks. What we find is that attorneys feel very proud about the fact that they’re maxing out their 401k Well, guess what? That’s a drop in the bucket for you. You know, whether you make 100,000 or $2 million the limit’s 24 five for anybody. You’re maxing out. That’s not enough for you. What ends up happening is that a lot of law firms will offer things like a deferred compensation program or something else in front of them, but they’re not taking advantage of it because they don’t understand it, you know. And they really should be taking advantage of it because this could help them not only with their tax situation today, but it could help them for planning for retirement in the future.
Steve Fretzin [15:03]
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Niraj Chhabra [17:27]
I think some people think that it’s necessary for their career, or they rationalize it, making it seem like it’s necessary. Well, I have to look the part, and you know, there’s certain expectations. How many times is your client coming into your car or into your home? Most of the time the answer is not. They’re not. So, I think we kind of talk ourselves into these type of decisions because it’s what we want. But the reality is, when people actually understand their situation and know what the trade offs are, I think they’re more comfortable with what they’re giving up. You know, whether it is that family car. So, I think it comes down to education and just understanding. You know, what at what cost, you know. Yes, we are seeing it, but I think that the people who are open to engaging with the financial advisor tend to be a little bit more open to restraint. And I hate to be that blunt about it, but that’s the reality. Sometimes people are going to spend it no matter who tells you what.
Steve Fretzin [18:18]
Yeah, you got to be the bad guy sometimes,
Niraj Chhabra [18:20]
all the time, especially when you know you’re dealing with couples. You know, typically, you know, especially if you have a couple that met in law school, which happens quite a bit. You know, you’ll have one partner that grew up, and you know, mom and dad pay for their education, and then they somehow married somebody who went to law school at night and had to take out student loans during the day, and had to work during the day and take out student loans to pay for their education. Now it comes down to funding their kids’ education. And one spouse says, “Well, we got to pay for 100% of their education because that’s what mom and dad did for me. And the other person says, “No, they could take out loans the way I did because you know I had to hustle and it taught me the value of education and taught me how to build a practice, and the spouse will come back and say, “Well, you see how much this held us back. We couldn’t get a house for X amount of years as a result of it. Nobody’s right, nobody’s wrong in that scenario. But there is a disagreement, and the number one reason that I think number one, maybe number two reason that people get divorced is financial disagreements. Yeah, somebody has to be the bad guy, and I’d rather it be me who says, “Okay, well, rather than funding four years of education, let’s fund two. Rather than retiring 10 years early, let’s retire five years early. And that’s the compromise, you know. But usually, there’s somebody who’s unhappy.
Steve Fretzin [19:32]
Yeah, right. The other thing I don’t know. This isn’t brought up very often or anywhere, and certainly not on this show. Although I, I happen to be very excited about the fact that I converted over my whole life insurance into a platform that includes the long-term care. Most people don’t know about that, and can you explain what that is and why it’s so important, and that people should be talking to you or other you know professionals about about the whole. You’ve been paying into this whole life for how many years? And here’s the deal: I’m just going to put this out there. If I my wife’s a teacher, she’s retiring in two years. Based on what we have, and based on what she’s going to get every year as her retirement fund through the school, she’s not going to need or want for nothing. She’s just not okay. So life insurance it becomes less important, but if something happens where she’s got to take care of me and I have get disabled or something, and that depletes all of the money, that’s really my concern. So I don’t know that people know that this exists. So maybe you can break it down a little bit.
Niraj Chhabra [20:33]
Sure, and I’ll start by saying a couple things about what you said. Number one is attorneys are oftentimes I’m going to use the word “targeted” in quotes by insurance agents to purchase these types of policies because they’re expensive and the they sell them really well, you know. And it doesn’t have to be just a whole life. Whole life is an example of permanent life insurance, and that could include universal life, index universal. There’s a lot of different flavors of it, but whole life is usually the one that people think of. They sound great on paper. You put money into it. It’s building equity. You could take this money out tax free. If you pass away, it’s got a death benefit. You could use it for education. You could use it for retirement. It slices. It dices. It does everything you need
Steve Fretzin [21:10]
it to.
Niraj Chhabra [21:11]
But it’s like I said, very expensive. And oftentimes, there’s other solutions that will address the same goal. So, for example, yes, you could use it for education, but are you taking advantage of a 529 plan? You know that’ll accomplish the same thing,
Steve Fretzin [21:24]
right?
Niraj Chhabra [21:24]
But most of the time, the agent wants to make a nice big fat commission, and that’s why they do that. By the way, I own these types of policies. I sell these type of policies. I believe in them, but I do think that they’re oversold. What you’re referring to is the industry’s response to addressing long term care needs, and I think that that’s a a big factor, especially for women who tend to live longer and outlive their their male spouses in many cases. And if you’re in a same sex relationship, you might have two women, and both of them are likely to get older and frail. So it’s definitely something that is something that needs to be addressed. What you’re describing is a hybrid policy. So hypothetically, you have a $500,000 whole life policy. Well, when you took it out, you probably had kids in college, and you had a mortgage, and maybe some student loans, and you had needs that needed to be addressed. As you said, your wife is not going to want for anything at this stage, so you’ve kind of outgrown that need. But you have this policy. Yes, it’s nice if you pass away, you’re going to leave money to the kids, but what if you needed it for old age? You needed to have an aide come to the house. You needed to go to a nursing home, assisted living facility. Doesn’t do you a whole lot of good. So now we’re depleting assets from another source that’s no longer growing. Maybe pay taxes on it, etc. These new policies basically allow you to add a rider to it that’s either used for long term care or used for death benefit. So hypothetically, 500,000 You needed two years of care at 100,000 a piece. You lowered your death benefit by $200,000 You used it today for long-term care purposes. You protected your 401k and all your other assets, and now your beneficiaries get 300,000 instead of 200,000 You know, so that’s very overly simplified, but that’s kind of how it works. That
Steve Fretzin [23:03]
that’s what we need to do is we need to educate people about something as simple as talking to your professional about what you have and is it really this what you need now? Is it the same as what you needed 10 years ago, 15 years ago? And for me, you could hear clearly that I see great value in one and in less than the other. So I appreciate you breaking that down and keeping it simple. You know, I love that for this show. I don’t think we need any anything complex. You know, going on here, we want to have some fun with it. So, kind of couple final questions for lawyers that feel behind financially. Right, they’ve overextended themselves. They’ve made some decisions. They’ve maybe you know, been trying to help other people out. What are three decisions that they should make over the next 12 months to try to regain control and build momentum?
Niraj Chhabra [23:49]
I don’t know why we’re sticking with trees today, but there’s another expression I liked. The best time to plant a tree was 20 years ago. The second best
Speaker 1 [23:55]
is
Niraj Chhabra [23:56]
today. So, you know, just because you did things a certain way doesn’t mean that it’s too late to reset. So that’s the first thing, you know. Definitely making sure that you’re doing that. I think a lot of times people are just afraid to look at themselves in the mirror. They’re afraid to get started, and usually it’s not as bad as you may think. So just get started. You know, reach out to a professional or review your expenses, whatever the case might be, that that would be number one. Other tips, you know, work in conjunction with other professionals. It doesn’t have to just be trying to go at it yourself. I think a lot of the times people default to the CPA, and the CPA is very valuable. But keep in mind that their role is to look in the rearview mirror and say, “Okay, give me all your stuff from the last year. This is how much you owe. This is how much of a refund you’re going to get. Call me in 12 months. No, this especially as once you get to the partner level or you’re a solo practitioner, you need to be more proactive about your planning and probably work in conjunction not just with your CPA but with your financial advisors. So we can make those projections. Your CPA is not going to project that tax spike that’s going to happen once you no longer work. They’re not going to project the fact that there is going to be a five-year period where you’re in a very, very, very low tax bracket as you get closer to retirement. So maybe we do Roth conversions and other strategies at that point. So working with other professionals can really help you maximize your overall income. And if somebody is thinking like you know maybe I’m behind and things of that nature, third tip, I don’t know. I think that that kind of covers it, so I can’t think of a third one. You know.
Steve Fretzin [25:24]
Well, let me ask the question again. What are your top two tips for? No, okay. So another, I guess another another area I wanted you to hit real quick was really around people that are. I mean, I’m I’m thinking ahead that with AI or with the world the way it is, that there’s going to be a lot of attorneys, you know, moving from big law to small, going out on their own, doing things like that. Do you work with a lot of solos and people going out? And if so, how do you help them differently than someone who just has a consistent, you know, I’m an equity partner at ABC firm, and that’s never going to change.
Niraj Chhabra [26:00]
Sure. Yeah. No, we definitely work with quite a bit within the the solo slash self employed space. So small firm practitioners planning is very different. You know, as you pointed out earlier, you know they’re not going to have a 401k They have to have a SEP IRA potentially. You know, but what’s the problem with the SEP IRA? I mean, it’s great, but as you start to get more and more employees, if you want to contribute 25% of your salary to your retirement, guess what? You got to do it on behalf of your other employees too. So it’s very quick. You’re very quick to outgrow that. So a lot of the times, you know, it’s going from a SEP IRA to a simple to a 401k to a defined benefit plan, and making sure that your retirement plan evolves as your practice does as well. Other things that you have to be mindful of is you know everybody wants to lower their taxable income you know so running a boatload of deductions through the firm and you know as long as it’s within reason that’s totally fine but guess what there’s going to be a point where you’re going to realize that when you worked for X Y Z firm you had income protection insurance they offered you disability as a solo practitioner, you get nothing like that, so you’re responsible for doing it on your own. But it’s not as simple as saying, “I want to cover $300,000 worth of my salary. They’re going to ask for the tax return, and guess what? You brought your income all the way down to zero, so they’re not going to cover any income because you had no income. Now your family’s left exposed.
Steve Fretzin [27:18]
Wow!
Niraj Chhabra [27:18]
You know because of the event that you, who’s the primary breadwinner and you who’s the key person at your firm, if something happens to you, there’s no income to pay your employees. There’s no income coming to your household either, because you wanted to maximize the tax benefit. So it’s very integrated your personal and your business finances. You know, as a general rule, they say you should have somewhere. I know I said I don’t like general rules, but this is why they say you should have three to six months worth of expenses set aside in cash. If you’re a solo, you need 12 to 30-six,
Speaker 2 [27:48]
yeah,
Niraj Chhabra [27:48]
because you don’t know when your employees are going to pay you. If you work on contingency, it could be years before you get a salary, and then guess against that spike again. You know, you could go years without any income, then it spikes, and then it’s years without income. Maybe you have two cases that hit in one year, and that jumps you up a major tax bracket. And for those that might be listening, if you’re in PI or employment law, you know there’s different ways to mitigate against that. You know that uneven cash flow. You could look into structured settlements, which could defer the taxes or make your income steady throughout the year. So there’s a lot of unique opportunities for people that are self-employed.
Steve Fretzin [28:24]
Yeah. Well, and and again, now this is where we kind of started out. Is you know I’m I’m not trying to be you know self-aggrandizing here, but whether it’s me or it’s it’s investing in your practice, investing in being a student of business development, marketing, investing in your practice, putting that money into something where you have a good idea that there’s going to be an excellent return on it, and you can get your you know that the the the market’s doing incredibly well. Surprisingly, I’m not sure why, but it is, and you know maybe it’s a bubble. But the point is, people are making bank on this market, and is that going to stay around? And what control do you really have? You have control over what you do. You have control over the emails you send, the meetings you take, the way that you’re building your law practice, whether you’re at a firm or whether you’re not. So I’m of the ilk that you want to be a good saver, right? But you also want to invest back in yourself. And I think if you do it all intelligently and keep your spending at a you know reasonable level, everything sort of works out, and of course, talk to Niraj about planning. Makes sense. Yeah. All right. Well, I don’t know that you have one, but I’m going to ask it anyway because you you just seem well put together all the time. What’s your what’s Niraj’s big mistake?
Niraj Chhabra [29:33]
Big mistake. Interesting. I think early on I was trying to be all things for everyone, and you know, not being as selective on who I was able to help. You know, sometimes people were just asking for way too much, and I should have probably broke up with the client sooner. I think that’s true for most of us. So I would say that was probably it. You know, trying to take on too much early on in my career.
Steve Fretzin [29:56]
Yeah, my general rule of thumb, and this may not apply to. Divorce and it may not apply to employment in some instances, but any chance you get, stay away from crazy. Crazy doesn’t work, right? No, a lot of hell no, a normal nice life and then go to bed at normal hours. Stay away from crazy. And I’ve done the same thing. I made mistakes and brought in people that I thought you know. There’s one guy that was. This is funny. I had a life insurance guy, and I. This I feel terrible saying this, but I felt bad for him because he just didn’t. You know, I wanted to help him. I was just trying to be, you know, a mensch to the guy. And I brought him to an event, and he immediately burned every relationship in the room, selling and pitching and handing out cards. It was like Moses parting the seas when this guy walked through. Yep. And even the head of the chamber came up. He’s like, “Did you bring that guy? I’m like, “Yeah, it’s someone that I I was trying to like pick up as a hitchhiker, and really, what I should have done is back over him a few times. And it’s the
Niraj Chhabra [30:48]
reason I know when you were starting off, you were saying like, you know, not too many financial advisors you like. It’s the reason that we have that reputation most of the time. You go to an event, they kind of steer clear once they see your your business card. So that can be
Steve Fretzin [31:00]
that can yeah, but you know that’s the beauty of of everything. There’s always there’s always silver linings in the gray cloud, and I think you and a few of the other professionals I’ve met in your space are incredible and generous and and just super knowledgeable. I think lawyers need you know all the help they can get, whether it’s business development, finances, operations, technology, to just hey you don’t have to know it all you just need to have somebody smart in your corner that can help you get through some of this stuff like I don’t know half the stuff my guy tells me but I trust him with my life and and that he keeps he keeps everything you know communication up and everything so all right so real quick let’s thank our incredible sponsors of course PimCon the number one PI event of the year coming up in October. Lex reception. Don’t answer your phone. Have professionals do it. And of course, lawyer.com And talked to Colleen today, and she’s like traveling all over Europe for her job. I’m like, okay, nice to be you. People want to get in touch with you, Niraj Sidebar Advisors. They want to say, hey, I like this guy. He knows his stuff. I want to talk to them. What’s the best way for them to reach you?
Niraj Chhabra [32:02]
Just go to sidebaradvisors.com
Steve Fretzin [32:04]
No, that’s all easy enough.
Niraj Chhabra [32:06]
If it’s a yeah, you could reach out to me on LinkedIn. You know we have a social media presence, all the usual platforms like yourself. We have a podcast as well, the Sidebar Advisors podcast. But sidebaradvisors.com is definitely going to be the easiest way to find out about us, our practice, upcoming attorney networking events, things of that nature.
Steve Fretzin [32:22]
Yeah, really, really great, man. Always a pleasure to to have you on, and and that I’m I’m just thrilled that we’ve been able to collaborate and work together. More to come, more to come. Thank you, my friend. I appreciate it.
Niraj Chhabra [32:34]
Thanks for having me back on. It was good to see
Steve Fretzin [32:36]
you. Yeah, and everybody. Hey, this was not our typical marketing business development chatter. This was this was getting into the finances, which is just super uncomfortable in in some instances.
Niraj Chhabra [32:47]
Doesn’t have to be, but yeah, it
Steve Fretzin [32:48]
doesn’t have to be. That’s like that’s the theme of the show, though. It’s the theme of of having you on, man. It doesn’t have to be, but you know, look, we are talking about things that you know. I mean, I don’t know. Do you have an idea what percentage of the legal population isn’t doing right by their money.
Niraj Chhabra [33:02]
That’s a good question. I haven’t seen any formal stats, but I would say more are not doing well than are. You know, it’s in my experience. You know, attorneys are very good at managing their practice and they’re very diligent about that. But what takes the back seat? It’s their own personal finances. So we’ve literally seen people max out their 401k and nobody educates you on what to do next,
Steve Fretzin [33:22]
right?
Niraj Chhabra [33:22]
So what do you do? You just continue to stockpile money in your bank account, earning next to nothing.
Steve Fretzin [33:27]
Yeah,
Niraj Chhabra [33:27]
when it going into that deferred cop, it could have been going into your 529 blank. Could have gone somewhere else other than you know your your bank. So
Steve Fretzin [33:34]
yeah, yeah. All right. Well, listen, I appreciate you and thank everybody for hanging out with us. Be that lawyer. Build your book. Own your future-that’s what this is all about. And appreciate you. Take care, everybody. Be safe and well. We’ll talk again very soon.
Narrator [33:52]
Thanks for listening to Be That Lawyer: life-changing strategies and resources for growing a successful law practice. Visit Steve’s website, fretzin.com, for additional information and to stay up to date on the latest legal business development and marketing trends. For more information and important links about today’s episode, check out today’s show notes.