Solo Practice, Big Goals: Personal Finance Tips for Independent Attorneys

Breaking away to start your own law practice is a bold and empowering move. It can offer freedom, control, and the chance to shape your career on your own terms. But with that freedom comes a financial reality: no regular paycheck, no guaranteed benefits, and a far greater need to plan strategically—both for your business and your personal life.

For solo and small firm attorneys, managing personal finances isn’t just about budgeting—it’s about navigating uncertainty, planning for growth, and aligning your money with your values. Whether you're just starting out or several years into building your firm, here’s how to structure your personal finances for both resilience and long-term success.

The Personal Finance Challenges of Solo Attorneys

Independent attorneys face a unique set of financial challenges that W-2 employees at large firms simply don’t:

  • Inconsistent cash flow

  • High startup and operating costs

  • Lack of employer-sponsored benefits

  • Tax complexity

  • Blurring of business and personal finances

Without a clear plan in place, it’s easy to end up in survival mode—making reactive decisions instead of intentional ones. But with the right systems, solo practice can become a powerful engine for wealth-building.

Step 1: Separate Business and Personal Finances

If you haven’t already, stop co-mingling accounts. Mixing business and personal transactions is a recipe for stress, tax headaches, and missed financial opportunities.

At a minimum:

  • Open a dedicated business checking account

  • Pay yourself a regular draw or salary

  • Use accounting software (like QuickBooks, Xero, or even a spreadsheet) to track income and expenses

  • Consider forming an LLC or S-Corp, depending on your tax and liability needs

Having clean separation makes it easier to manage cash flow, track profitability, and stay compliant with IRS requirements.

Step 2: Build a Cash Buffer for Lean Months

Cash flow variability is one of the biggest stressors for solo attorneys. Some months may bring in $30,000, others $3,000. The key to surviving (and thriving) is building in buffers.

Recommendations:

  • Maintain 3–6 months of business operating expenses in a separate reserve account

  • Keep 3–6 months of personal living expenses in an emergency fund

  • Use a high-yield savings account to earn interest on your reserves

Reserves aren’t just for emergencies—they give you breathing room to make better decisions without desperation.

Step 3: Pay Yourself First—Even on Variable Income

Too many solo practitioners treat their income as “whatever’s left after bills.” Flip the script.

Strategy:

  • Establish a baseline monthly salary that you aim to pay yourself, even if modest at first

  • Use a percentage-based system: for example, allocate 50% of net business income to salary, 30% to taxes, 10% to savings, and 10% to reinvestment

  • Use separate accounts to “bucket” each category so the money doesn’t get mixed

This creates consistency in your personal life, which is critical for saving, budgeting, and avoiding debt.

Step 4: Plan for Taxes Year-Round

When you're self-employed, there’s no payroll department withholding taxes for you. That responsibility falls squarely on your shoulders.

Tips:

  • Work with a CPA who specializes in solo practitioners

  • Pay quarterly estimated taxes to avoid IRS penalties

  • Track your deductible business expenses meticulously—meals, software, CLEs, subscriptions, home office, and more

  • Consider forming an S-Corp once your net income exceeds ~$80K/year, to potentially reduce self-employment taxes

Taxes don’t have to be scary—but they do require planning.

Step 5: Don’t Neglect Retirement Planning

Just because you don’t have a 401(k) through an employer doesn’t mean you can’t save aggressively for retirement. In fact, solo attorneys have more flexibility—and often higher contribution limits.

Options for Solo Attorneys:

  • SEP IRA: Contribute up to 25% of net income (max $69,000 in 2024)

  • Solo 401(k): Allows both employee and employer contributions

  • Defined Benefit Plan: Great for high earners who want to save $100K+ per year

  • Backdoor Roth IRA: Ideal for building tax-free retirement income

The key is consistency. Set up automated transfers so your retirement savings happen on autopilot.

Step 6: Protect What You’re Building

Risk management is a critical—but often overlooked—part of solo attorney financial planning. You don’t have a safety net anymore. You are the net.

Coverage to Consider:

  • Malpractice insurance

  • General liability insurance

  • Disability insurance (especially own-occupation policies)

  • Life insurance if others depend on your income

  • Umbrella insurance for added liability protection

  • Health insurance through a professional association, marketplace, or spouse’s plan

The goal isn’t to be paranoid—it’s to be prepared.

Step 7: Invest in Yourself and Your Firm Strategically

As a solo, your greatest asset is you. Whether it’s new certifications, software, or marketing strategies, invest intentionally in areas that support your long-term vision.

But be cautious of the “reinvestment trap”—where every dollar earned goes right back into the firm without building personal wealth. You need to be both business owner and wealth builder.

Ask:

  • Will this expense improve client outcomes?

  • Will it increase my capacity or efficiency?

  • Does it support the lifestyle and business I’m trying to build?

Step 8: Define Success on Your Own Terms

Without the prestige or salary benchmarks of Big Law, solo attorneys often struggle with comparison. But solo practice offers something even more valuable: autonomy.

Consider:

  • What income do you actually need to feel financially secure?

  • What kind of cases or clients bring you the most satisfaction?

  • How do you define enough?

Personal finance is personal. There’s no one-size-fits-all formula. Your practice should support the life you want—not the other way around.

Step 9: Work With the Right Financial Partners

You don’t have to go it alone. A good advisory team can help you stay focused, compliant, and intentional.

Helpful Professionals:

  • CPA: For tax strategy and compliance

  • CFP® professional: For long-term personal financial planning

  • Bookkeeper: To keep your books clean and current

  • Business coach or mentor: To grow your firm sustainably

Think of these partners as your personal board of directors—people who help you think bigger and avoid costly mistakes.

Final Thoughts: Solo Doesn’t Mean Small

Running your own practice doesn’t have to mean sacrificing financial security or long-term wealth. In fact, many solo attorneys build more freedom, more control, and more lasting value than they ever could working for someone else.

The key is to treat your personal finances with the same professionalism and intention you give to your clients. With smart systems, consistent habits, and the right advice, your solo practice can fuel a fulfilling life—both now and in the future.

Need help aligning your personal finances with your solo practice?
Book a consultation to explore how a financial planner can support your goals—so you can build not just a practice, but a legacy.

Next
Next

Leaving Big Law: The Financial Risks Attorneys Must Plan For