Seven Smart Ways Attorneys Can Use a Pay Raise to Build Wealth Automatically

Receiving a pay raise is a milestone worth celebrating—it’s a reflection of your hard work, dedication, and expertise as an attorney. But before you let lifestyle inflation creep in, it’s time to think strategically about how to put that raise to work for your future. The key? Automation. By automating your financial decisions, you can build wealth effortlessly while staying focused on your career.

Here are seven smart and automated ways to maximize the impact of your pay raise.

1. Boost Your Retirement Savings Automatically

Your first priority with a pay raise should be increasing contributions to your retirement accounts. If you’re not already maxing out your 401(k), adjust your payroll settings to contribute a higher percentage of your paycheck. The 2024 contribution limits are $23,000 for those under 50 and $30,500 for those 50 and older.

Already maxed out your 401(k)? Consider contributing to a Roth IRA or a backdoor Roth IRA if your income qualifies. Automating monthly contributions to these accounts ensures consistency and takes advantage of compound growth. Remember, every dollar saved now has the potential to grow significantly by the time you retire.

2. Build or Strengthen Your Emergency Fund

An emergency fund is your financial safety net, providing security in the face of unexpected expenses like medical bills or car repairs. Ideally, you should aim for three to six months of essential expenses. If your emergency fund isn’t fully funded, now’s the perfect time to catch up.

Set up automated transfers from your checking account to a dedicated high-yield savings account. Even a small, consistent transfer each month can quickly add up. By automating this step, you ensure that your safety net is always ready when you need it most.

3. Tackle Student Loans Strategically

For many attorneys, student loans are a significant financial obligation. Use your pay raise to automate extra payments toward your loan’s principal balance. This approach reduces the total interest you’ll pay over the life of the loan and accelerates your payoff timeline.

If you have federal loans and are enrolled in an income-driven repayment plan, ensure any extra payments align with your forgiveness strategy. For private loans with higher interest rates, automated payments can make an even bigger dent in your debt. The goal is to get rid of this burden as quickly and efficiently as possible.

4. Open or Expand a Taxable Investment Account

If your retirement accounts are maxed out, a taxable investment account can help you continue building wealth. These accounts have no contribution limits and provide flexibility for medium- and long-term goals, such as buying a home or funding your child’s education.

Automate monthly contributions to a diversified portfolio of stocks, bonds, and other assets. This steady, hands-off approach ensures that you’re consistently growing your investments without needing to monitor them daily. Work with a financial advisor to tailor your portfolio to your goals and risk tolerance.

5. Automate Charitable Giving

If you’re already meeting your financial goals, consider using a portion of your raise to support causes you care about. Automating your charitable contributions not only ensures consistency but can also make tax planning easier. For example, attorneys who tithe or donate to specific organizations can set up recurring contributions to stay on track with their giving goals.

For larger gifts, explore setting up a donor-advised fund. These funds allow you to make a charitable contribution, receive an immediate tax deduction, and recommend grants to charities over time. It’s a strategic way to give while maximizing tax benefits.

6. Invest in Your Professional Growth

Your pay raise isn’t just an opportunity to save—it’s also a chance to invest in yourself. Consider using part of your increase to enhance your skills and grow your career. Sign up for continuing legal education (CLE) courses, attend networking events, or hire a career coach. These investments can pay off in the form of higher earning potential and new opportunities.

On the personal side, use your raise to support your well-being. A gym membership, wellness retreat, or new hobby can improve your quality of life and keep you performing at your best.

7. Avoid Lifestyle Inflation

Lifestyle inflation is one of the biggest risks when you get a pay raise. It’s tempting to upgrade your car, buy a bigger house, or take more luxurious vacations, but these changes can quickly erode the financial benefits of your raise. To avoid this trap, automate your financial goals first—contributions to savings, investments, and debt payments should come off the top.

Once your financial priorities are handled, set limits on discretionary spending. Allocating a small portion of your raise for fun and enjoyment is fine, but keeping your expenses in check ensures that your financial progress remains on track.

Final Thoughts

A pay raise is more than just a bigger paycheck—it’s an opportunity to build wealth and achieve your financial goals. By automating your savings, investments, and debt payments, you can ensure your raise works for you, not the other way around. Attorneys often face demanding schedules, so automating these decisions removes the guesswork and keeps you on the path to financial success.

If you’re unsure where to start or want help optimizing your financial strategy, working with a financial planner who understands the unique challenges attorneys face can make all the difference. Your raise is an opportunity—seize it wisely, and you’ll thank yourself in the years to come.