By Joel Chouinard, CFP®
February 6th, 2025
For some attorneys, hearing the word “budgeting” is like hearing someone scraping their fingernails on a chalkboard. I get it—your job is very demanding, and spending money can feel like a relief. So, diving into your spending is like reality slapping you in the face. But here’s a secret that many financial planners don’t talk about: if you save enough money each year to accomplish your goals, budgeting doesn’t matter as long as you earn enough to cover your expenses. Yes, you heard that right! Think about it: if your emergency fund is fully funded, your retirement and college savings plans are on track, and you still have extra cash lying around after you’ve covered your fixed expenses, would it really hurt if you bought the business class seats on your next trip? My guess is it wouldn’t. The key is to automate your savings, so you can spend your money guilt-free.
That said, sometimes you simply cannot escape budgeting. For example, if you’re planning to transition out of big law and take a pay cut, or if you’re paying off high-interest debt, such as credit cards, then tracking your spending is crucial. If this is you, then you will want to follow my three-step budgeting process.
If not, then here’s how you can achieve financial freedom without budgeting.
Know Where You Want to Go
Before you can even think about how much you need to save, you need to figure out what you want out of life. If you enjoy working (even if it’s working in a lower-paying legal position), maybe you see yourself going through the more traditional route of working until 60-65 and then enjoying a quiet retirement. But for some, the idea of working until retirement age is depressing. They’d rather be financially independent quickly and be able to pursue new opportunities while they’re still young, known as the “F.I.R.E” (Financial Independence Retire Early) movement.
In financial planning, we call this process reverse engineering. Start with your end goal in mind and work backward to create the plan. It’s similar to using a GPS. You enter your destination, and the software tracks the best route to get there based on your current location.
For this exercise, sit down alone (or with your spouse) in a place where you won’t be bothered, and think about what you want for your future. Below are some conversation starters:
- Do I see myself working in big law until retirement? Do I see myself working in a lower-paying legal position until retirement?
- Do I have other passions I want to pursue (e.g., building a business, investing in real estate, traveling the world, etc.)?
- What do I want my life to look like now? Do I want to be able to enjoy my money now, or would I rather save as much as possible until I’m financially independent and then start enjoying it?
- Do I want to pay for my kids’ college? Or am I okay if they take out student loans?
Once your vision is crystal clear, write it down. Be as specific as possible. For example, don’t just write financial independence by age 50. Instead, describe what financial independence looks like. Maybe it’s being able to cut back on work significantly, or maybe it’s being able to travel the world. At this point, you can start planning how much you need to save to get there.
Determine Your Savings Needed to Get There
Now that you have concrete goals, you can start planning how to achieve them. A good rule of thumb is to use the 20% savings rate. The rule simply states that you should save 20% of your gross income each year. For example, if you make $300,000/year, you should save $60,000. It’s an over-simplified strategy, but it works. In my experience as a financial planner, I’ve never seen a financial plan “fail” when someone in their twenties, thirties, or even forties was saving 20% of their gross income.
That said, rules of thumb are based on averages and a typical path to retirement (i.e., work until 60-65 and spend 25-30 years in retirement). If you have more ambitious goals, like being financially independent at 50, then you will want to run your own calculations based on your objectives. The best way to do this is to use a financial planning software that accounts for all the different factors that will impact your plan.
Remember, however, that “saving” doesn’t just refer to saving for retirement. It can also mean saving for a major purchase (e.g., a down payment on a house or investment property), saving for college, or even paying down debt more quickly than planned. Your savings bucket should include all of these goals.
Automate Your Savings
In my introduction paragraph, I mentioned that you can achieve your goals without having to follow a budget. That said, it would be very difficult to consistently saving the right amount without automating your savings. The key is that you’re not the one manually making transfers to your savings accounts. There are three ways you can automate savings:
- Payroll deductions: This is probably the easiest way to save because it happens before the money hits your paycheck. Your 401(k) and your HSA are two examples of payroll deduction savings.
- Split paycheck: Ask your payroll department to split your paycheck into two different accounts. For example, if you’re trying to save for a house downpayment, you could split your paycheck so that a certain amount goes to your house downpayment fund, and the rest goes to your main checking account.
- Automatic contributions: If your plan warrants that you save additional dollars outside of payroll deductions (e.g., taxable brokerage account or 529 account for college funding), you can set up automatic transfers from your main checking account directly to those institutions. You can pick the day that you want the money transferred, so you can time it with when you get paid.
Determine Your Fixed Expenses… and Spend the Rest Guilt-Free
Once you establish your savings plan and everything is on autopilot, then you want to determine where the rest of your dollars will flow. First, take a look at your fixed expenses (i.e., what needs to be paid each month). Think of all the expenses that are on autopay, like your mortgage, utilities, kids’ tuition, etc. From there, you can spend the rest guilt-free! That’s right, no need to track all of your spending down to the penny and worry about whether or not you should buy that new pair of shoes.
The key is that you don’t spend more than your “guilt-free” spending bucket. Otherwise, you might start racking up credit card debt or dipping into savings. I suggest tracking only a few categories where you anticipate overspending, such as shopping, eating out, and travel. Your credit card companies should have a tool to help you track your spending, or you can use a budgeting tool like Monarch Money if you like to see all of your transactions in one place.
Final Note
Ultimately, achieving your financial goals doesn't have to be a restrictive and tedious process. By clearly defining what you want out of life and automating your savings, you can enjoy financial freedom and pursue your passions without feeling constrained by a budget. Remember, though, that this approach is not for everyone, and you should consult with a financial planner if you’re unsure about how to determine your savings goals.
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