37:["$","$L38",null,{"category":"$39","relatedArticles":[{"id":"cG9zdDoyNjQxNDA=","databaseId":264140,"postId":264140,"author":{"node":{"id":"dXNlcjoz","databaseId":3,"userId":3,"avatar":{"url":"https://secure.gravatar.com/avatar/47938df052bf0a5283bd6b77ab786737?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"SmartAsset employs a team of writers and editors with years of experience in the editorial, news and personal finance industries. Some staff members also hold the Certified Educator in Personal Finance (CEPF®) designation from the Institute for Financial Literacy.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Michael","fullName":"SmartAsset Team","lastName":"Carvin","name":"SmartAsset Team","postCount":{"pageInfo":{"offsetPagination":{"total":1466,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"mcarvin","__typename":"User"},"__typename":"NodeWithAuthorToUserConnectionEdge"},"categories":{"nodes":[{"id":"dGVybTo3OTY5","children":{"nodes":[{"name":"Advisor Basics","slug":"advisor-basics","__typename":"Category"},{"name":"Advisor Fees & Costs","slug":"advisor-fees-and-costs","__typename":"Category"},{"name":"Ask an Advisor","slug":"ask-an-advisor","__typename":"Category"},{"name":"Certifications & Licenses","slug":"certifications-licenses","__typename":"Category"},{"name":"Financial Planning","slug":"financial-planning","__typename":"Category"},{"name":"Market Insights","slug":"market-insights","__typename":"Category"},{"name":"Other","slug":"other-financial-advisor","__typename":"Category"},{"name":"Tax & Legal","slug":"tax-and-legal","__typename":"Category"}],"__typename":"CategoryToCategoryConnection"},"databaseId":7969,"categoryId":7969,"link":"https://smartasset.com/financial-advisor/articles","name":"Financial Advisor","postCount":{"pageInfo":{"offsetPagination":{"total":791,"__typename":"OffsetPaginationPageInfo"},"__typename":"CategoryToPostConnectionPageInfo"},"__typename":"CategoryToPostConnection"},"slug":"financial-advisor","ancestors":null,"parent":null,"__typename":"Category"}],"__typename":"PostToCategoryConnection"},"content":"$3a","date":"2024-10-03T17:02:57","excerpt":"

\n","featuredImage":{"id":"cG9zdDoyNjQzMjQ=","databaseId":264324,"altText":"How Liquid Are Money Market Accounts?","date":"2024-10-03T17:01:17","fileSize":164610,"mimeType":"image/jpeg","modified":"2024-10-03T17:01:22","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2024/10/iStock-1201492874.jpg","__typename":"MediaItem"},"modified":{"datetime":"2024-10-3","readable":"October 3, 2024"},"multipleBylinesByRole":{"editedBy":{"id":"dXNlcjoxMzY=","databaseId":136,"userId":136,"avatar":{"url":"https://secure.gravatar.com/avatar/1d295f71ad5f26fc505155b8d7e5e2a0?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Jeff White is an Editor for SmartAsset. He's an expert in a variety of personal finance topics, such as investing, banking and retirement, and also holds the Certified Educator in Personal Finance (CEPF®) designation. Jeff has received his JD and MBA and has been featured in a number of publications, such as Investopedia, The Street, Forbes, Yahoo! Finance and more. He currently resides in Utah with his wife and five children, where they cheer for the Denver Broncos and make it to the water to sail whenever given the chance.","additionalMeta":{"expertise":"Financial Planning, Small Business, Retirement, Banking","__typename":"User_Additionalmeta"},"email":null,"firstName":"Jeff","fullName":"Jeff White, CEPF®","lastName":"White, CEPF®","name":"Jeff White, CEPF®","postCount":{"pageInfo":{"offsetPagination":{"total":16,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"jwhite","__typename":"User"},"reviewedBy":null,"writtenBy":null,"factCheckedBy":null,"secondEditor":null,"hideAuthor":true,"__typename":"Post_Multiplebylinesbyrole"},"adTargetingOverrides":{"fieldGroupName":"adTargetingOverrides","pageGroupNewKey":null,"__typename":"Post_Adtargetingoverrides"},"seo":{"canonical":"https://smartasset.com/financial-advisor/how-liquid-are-money-market-accounts","metaDesc":"Money market accounts are a popular choice for those who want access to their funds while earning interest. Here's how liquid they really are.","metaKeywords":"","metaRobotsNofollow":"follow","metaRobotsNoindex":"index","readingTime":7,"title":"How Liquid Are Money Market Accounts","__typename":"PostTypeSEO"},"slug":"how-liquid-are-money-market-accounts","status":"publish","title":"How Liquid Are Money Market Accounts?","uri":"/financial-advisor/how-liquid-are-money-market-accounts","tags":{"nodes":[{"name":"news-sitemap","__typename":"Tag"}],"__typename":"PostToTagConnection"},"__typename":"Post","adPageGroupOverride":null,"bylines":{"writtenBy":null,"editedBy":{"id":"dXNlcjoxMzY=","databaseId":136,"userId":136,"avatar":"$3b","description":"Jeff White is an Editor for SmartAsset. He's an expert in a variety of personal finance topics, such as investing, banking and retirement, and also holds the Certified Educator in Personal Finance (CEPF®) designation. Jeff has received his JD and MBA and has been featured in a number of publications, such as Investopedia, The Street, Forbes, Yahoo! Finance and more. He currently resides in Utah with his wife and five children, where they cheer for the Denver Broncos and make it to the water to sail whenever given the chance.","additionalMeta":"$3c","email":null,"firstName":"Jeff","fullName":"Jeff White, CEPF®","lastName":"White, CEPF®","name":"Jeff White, CEPF®","postCount":"$3d","slug":"jeff-white-cepf","__typename":"User"},"reviewedBy":null,"factCheckedBy":null,"secondEditor":null},"category":{"id":"dGVybTo3OTY5","children":"$40","databaseId":7969,"categoryId":7969,"link":"https://smartasset.com/financial-advisor/articles","name":"Financial Advisor","postCount":791,"slug":"financial-advisor","ancestors":null,"parent":null,"__typename":"Category"},"isModifiedBeforePublished":true,"contentBlocks":["

Money market accounts (MMAs) have long been a popular choice for those seeking a balance between earning interest and maintaining easy access to their funds. But are money market accounts liquid? These accounts are designed to offer a higher yield than traditional savings accounts while still providing the flexibility to access your money when needed. Typically, MMAs allow for a limited number of monthly withdrawals or transfers, making them more liquid than certificates of deposit (CDs) but slightly less so than regular savings accounts. This unique blend of accessibility and interest-earning potential makes money market accounts an attractive option for those who want to keep their funds relatively liquid while still benefiting from a competitive interest rate. If you are considering a money market account, this is what you need to know about their liquidity.

","

Ask a financial advisor how a money market account can help shape your financial portfolio.

","

How Money Market Accounts Work

","

A money market account (MMA) is a type of savings account that typically offers higher interest rates compared to traditional savings accounts. It is designed to provide a safe place for your money while allowing you to earn a competitive return. MMAs are insured by the Federal Deposit Insurance Corporation (FDIC) up to the legal limit, which adds a layer of security for account holders.

","

Unlike regular savings accounts, money market accounts often come with check-writing privileges and debit card access, offering a blend of savings and checking account features. This flexibility makes them an attractive option for individuals looking to balance liquidity with earning potential.

","

One of the key features of money market accounts is their interest rate structure. These accounts generally offer tiered interest rates, meaning the more money you deposit, the higher the interest rate you may earn. However, to benefit from these higher rates, MMAs often require a higher minimum balance compared to standard savings accounts. It is important to be aware of these requirements, as failing to maintain the minimum balance can result in fees that may offset the interest earned. Additionally, interest rates on MMAs can fluctuate based on market conditions, so it is wise to monitor these changes to ensure your account remains competitive.

","

While money market accounts offer attractive features, they also come with certain limitations. Federal regulations typically limit the number of certain types of withdrawals and transfers from MMAs to six per month. Exceeding this limit can result in fees or even account closure. It is crucial to understand these restrictions to avoid unnecessary charges.

","

Additionally, some financial institutions may impose monthly maintenance fees, which can be waived if you meet specific criteria, such as maintaining a minimum balance. By carefully reviewing the terms and conditions of a money market account, you can make informed decisions that align with your financial goals.

","

How Are Money Market Accounts Considered a Liquid Asset?

","

","

Money market accounts are often considered a liquid asset due to their accessibility and flexibility. Unlike long-term investment vehicles, such as certificates of deposit or bonds, money market accounts allow account holders to access their funds relatively easily. This accessibility is crucial for individuals who may need to quickly convert their assets into cash without incurring significant penalties or waiting periods. Typically, money market accounts offer check-writing privileges and debit card access, making it simple for account holders to withdraw funds when necessary. This ease of access is a defining characteristic of liquid assets, which are assets that can be quickly and easily converted into cash.

","

Another reason money market accounts are considered liquid assets is their ability to offer competitive interest rates while maintaining stability. These accounts often provide higher interest rates than traditional savings accounts, allowing account holders to earn more on their deposits. Despite the higher interest rates, money market accounts are generally low-risk, as they are insured by the Federal Deposit Insurance Corporation (FDIC) up to the applicable limits. This combination of competitive interest rates and security makes money market accounts an attractive option for those looking to maintain liquidity while still earning a return on their investment.

","

For individuals seeking to balance liquidity with their financial goals, money market accounts can be an ideal solution. They offer the flexibility to access funds when needed, which is particularly beneficial for those who may face unexpected expenses or require quick access to cash.

","

Pros and Cons of Investing in Money Market Accounts

","

Investing in money market accounts can be an appealing option for those seeking a balance between safety and returns. These accounts offer a unique blend of features that cater to conservative investors. However, like any financial product, they come with their own set of advantages and disadvantages. Understanding these can help you make an informed decision about whether a money market account aligns with your financial goals.

","

Pros of Investing in Money Market Accounts

","$4a","

Cons of Investing in Money Market Accounts

","

Minimum balance requirements: One downside is that money market accounts often require a higher minimum balance to avoid fees. This can be a barrier for some investors, particularly those just starting to build their savings. Failing to maintain the required balance can result in monthly fees that erode your earnings.
Limited transactions: Federal regulations typically limit the number of withdrawals or transfers from money market accounts to six per month. This restriction can be inconvenient if you need frequent access to your funds, making it less suitable for those who require more flexibility.

","

Money market accounts offer a blend of safety, accessibility and potentially higher returns, making them a viable option for conservative investors. However, it is crucial to weigh these benefits against the limitations, such as minimum balance requirements and transaction restrictions, to determine if they fit your financial strategy.

","

Bottom Line

","

","

Money market accounts offer a unique blend of features that make them an attractive option for those seeking liquidity and a modest return on their savings. These accounts are known for their liquidity, allowing account holders to access their funds relatively easily compared to other investment vehicles. Typically, money market accounts provide the flexibility of writing checks or transferring funds, often with a limited number of monthly transactions. This makes them a convenient choice for individuals needing to access their money quickly while still earning interest.

","

Tips for Investing

","$4b","

Photo credit: ©iStock.com/Delmaine Donson, ©iStock.com/fizkes, ©iStock.com/simpson33

"],"experts":null,"link":"/financial-advisor/how-liquid-are-money-market-accounts","published":{"datetime":"2024-10-3","readable":"October 3, 2024"},"shareInfo":{"title":"How Liquid Are Money Market Accounts?","origin":"/financial-advisor/how-liquid-are-money-market-accounts"},"isNewsArticle":true},{"id":"cG9zdDoyMzkwMjQ=","databaseId":239024,"postId":239024,"author":{"node":{"id":"dXNlcjo5NA==","databaseId":94,"userId":94,"avatar":{"url":"https://secure.gravatar.com/avatar/72c05cde57f4d7ee65af27e91a5315c2?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Eric","fullName":"Eric Reed","lastName":"Reed","name":"Eric Reed","postCount":{"pageInfo":{"offsetPagination":{"total":931,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"ereed","__typename":"User"},"__typename":"NodeWithAuthorToUserConnectionEdge"},"categories":{"nodes":[{"id":"dGVybToxOTQ3MA==","children":{"nodes":[],"__typename":"CategoryToCategoryConnection"},"databaseId":19470,"categoryId":19470,"link":"https://smartasset.com/financial-planning/articles","name":"Financial Planning","postCount":{"pageInfo":{"offsetPagination":{"total":334,"__typename":"OffsetPaginationPageInfo"},"__typename":"CategoryToPostConnectionPageInfo"},"__typename":"CategoryToPostConnection"},"slug":"financial-planning","ancestors":{"nodes":[{"name":"Financial Advisor","slug":"financial-advisor","__typename":"Category"}],"__typename":"CategoryToAncestorsCategoryConnection"},"parent":{"node":{"name":"Financial Advisor","id":"dGVybTo3OTY5","slug":"financial-advisor","__typename":"Category"},"__typename":"CategoryToParentCategoryConnectionEdge"},"__typename":"Category"}],"__typename":"PostToCategoryConnection"},"content":"$4c","date":"2025-01-23T18:50:46","excerpt":"

Lawyers often have high student loans to pay and can earn less than what many expect. In 2023, the Bureau of Labor Statistics (BLS) says that the median salary for a lawyer was $145,760 per year, which means that half of those in the legal profession earned less than that. So managing debt is a […]

\n","featuredImage":{"id":"cG9zdDoyNzUwMjM=","databaseId":275023,"altText":"A lawyer fills out paperwork in their office.","date":"2025-01-22T20:12:53","fileSize":183020,"mimeType":"image/jpeg","modified":"2025-01-23T18:50:22","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2025/01/iStock-1731160977.jpg","__typename":"MediaItem"},"modified":{"datetime":"2025-1-23","readable":"January 23, 2025"},"multipleBylinesByRole":{"editedBy":{"id":"dXNlcjoxOTc=","databaseId":197,"userId":197,"avatar":{"url":"https://secure.gravatar.com/avatar/00cb0f465693d78173a61b56cc33e2fd?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Marie White is a Writer/Editor for SmartAsset, and holds the Certified Educator in Personal Finance (CEPF®) designation. She received her English degree from Stevenson University, with a focus on writing and communications. Marie has more than 15 years of experience working with financial content, having written for publications such as The Oxford Club, Agora Financial and The Trading Pub. Here, she covered topics ranging from stock market news to dividend stock investing and options strategies, as well as real estate investing.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Marie","fullName":"Marie White, CEPF®","lastName":"White, CEPF®","name":"Marie White, CEPF®","postCount":{"pageInfo":{"offsetPagination":{"total":0,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"mwhite","__typename":"User"},"reviewedBy":null,"writtenBy":{"id":"dXNlcjo5NA==","databaseId":94,"userId":94,"avatar":{"url":"https://secure.gravatar.com/avatar/72c05cde57f4d7ee65af27e91a5315c2?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Eric","fullName":"Eric Reed","lastName":"Reed","name":"Eric Reed","postCount":{"pageInfo":{"offsetPagination":{"total":931,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"ereed","__typename":"User"},"factCheckedBy":null,"secondEditor":{"id":"dXNlcjoxMTc=","databaseId":117,"userId":117,"avatar":{"url":"https://secure.gravatar.com/avatar/9fffe2eb35204e151b68731435d247c5?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Arturo Conde is a senior editor at SmartAsset. He has a master’s from the Graduate School of Journalism at Columbia University and a bachelor’s from the College of Arts and Science at New York University. As a certified educator in personal finance, he edits and writes content that focuses on retirement, investments, home buying and other financial topics.\r\n\r\nArturo is a bilingual native in English and Spanish, and also writes as a freelance journalist for NBC News, among other publications. His articles have been published in Fusion, Univision, City Limits, the NACLA Report on the Americas and WhoWhatWhy, as well as La Opinión A Coruña newspaper in Spain.","additionalMeta":{"expertise":"Financial Planning, Retirement Planning, Investment Planning, Tax Planning","__typename":"User_Additionalmeta"},"email":null,"firstName":"Arturo","fullName":"Arturo Conde, CEPF®","lastName":"Conde, CEPF®","name":"Arturo Conde, CEPF®","postCount":{"pageInfo":{"offsetPagination":{"total":38,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"aconde","__typename":"User"},"hideAuthor":null,"__typename":"Post_Multiplebylinesbyrole"},"adTargetingOverrides":{"fieldGroupName":"adTargetingOverrides","pageGroupNewKey":null,"__typename":"Post_Adtargetingoverrides"},"seo":{"canonical":"https://smartasset.com/financial-advisor/financial-planning-for-lawyers","metaDesc":"If you're a lawyer then you likely need to think about long-term financial growth and sustainability. Here's how to plan your finances.","metaKeywords":"","metaRobotsNofollow":"follow","metaRobotsNoindex":"index","readingTime":7,"title":"Guide to Long-Term Financial Planning for Lawyers","__typename":"PostTypeSEO"},"slug":"financial-planning-for-lawyers","status":"publish","title":"Guide to Long-Term Financial Planning for Lawyers","uri":"/financial-advisor/financial-planning-for-lawyers","tags":{"nodes":[{"name":"news-sitemap","__typename":"Tag"}],"__typename":"PostToTagConnection"},"__typename":"Post","adPageGroupOverride":null,"bylines":{"writtenBy":{"id":"dXNlcjo5NA==","databaseId":94,"userId":94,"avatar":"$4d","description":"Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.","additionalMeta":"$4e","email":null,"firstName":"Eric","fullName":"Eric Reed","lastName":"Reed","name":"Eric Reed","postCount":"$4f","slug":"eric-reed","__typename":"User"},"editedBy":{"id":"dXNlcjoxOTc=","databaseId":197,"userId":197,"avatar":"$52","description":"Marie White is a Writer/Editor for SmartAsset, and holds the Certified Educator in Personal Finance (CEPF®) designation. She received her English degree from Stevenson University, with a focus on writing and communications. Marie has more than 15 years of experience working with financial content, having written for publications such as The Oxford Club, Agora Financial and The Trading Pub. Here, she covered topics ranging from stock market news to dividend stock investing and options strategies, as well as real estate investing.","additionalMeta":"$53","email":null,"firstName":"Marie","fullName":"Marie White, CEPF®","lastName":"White, CEPF®","name":"Marie White, CEPF®","postCount":"$54","slug":"marie-white-cepf","__typename":"User"},"reviewedBy":null,"factCheckedBy":null,"secondEditor":{"id":"dXNlcjoxMTc=","databaseId":117,"userId":117,"avatar":"$57","description":"Arturo Conde is a senior editor at SmartAsset. He has a master’s from the Graduate School of Journalism at Columbia University and a bachelor’s from the College of Arts and Science at New York University. As a certified educator in personal finance, he edits and writes content that focuses on retirement, investments, home buying and other financial topics.\r\n\r\nArturo is a bilingual native in English and Spanish, and also writes as a freelance journalist for NBC News, among other publications. His articles have been published in Fusion, Univision, City Limits, the NACLA Report on the Americas and WhoWhatWhy, as well as La Opinión A Coruña newspaper in Spain.","additionalMeta":"$58","email":null,"firstName":"Arturo","fullName":"Arturo Conde, CEPF®","lastName":"Conde, CEPF®","name":"Arturo Conde, CEPF®","postCount":"$59","slug":"arturo-conde-cepf","__typename":"User"}},"category":{"id":"dGVybToxOTQ3MA==","children":"$5c","databaseId":19470,"categoryId":19470,"link":"https://smartasset.com/financial-planning/articles","name":"Financial Planning","postCount":334,"slug":"financial-planning","ancestors":"$5e","parent":"$61","__typename":"Category"},"isModifiedBeforePublished":true,"contentBlocks":["$63","

Financial Planning for Lawyers: How Much Do Lawyers Make?

","

Financial planning for lawyers starts with understanding that most lawyers are not rich. In fact, the majority make a below-average income.

","

Many law students and young lawyers get into the profession to secure a high-paying job. This aligns with the perception of this field as lucrative. The trouble is, that perception doesn’t align with reality.

","

A small number of law school graduates exit into top-market salaries, with a large gap nationwide between salaries. According to the BLS, the lowest wage for lawyers in May 2023 was at the 10th percentile, where they earned an hourly wage of $33.54, which translated to an annual wage of $69,760. The highest wage reported for lawyers was in the industry of water, sewage, and other systems, where the annual mean wage was approximately $315,000.

","

For a wider comparison by sector, the median annual salary for lawyers in the same time period was $166,030 for those working in the federal government; $137,350 in legal services; $117,070 in local government (excluding education and hospitals); and $100,670 in state government (excluding education and hospitals).

","

What Your Salary Means

","

This means that financial planning for a lawyer breaks in two directions.

","

If you practice in big law, your financial planning will focus on two main factors: lifestyle and wealth management. Big law attorneys have an extremely high rate of burnout, so make sure you prepare a financial cushion should you want to leave. In the meantime, you have a high rate of income, and can put that money to work.

","

If you’re among the majority of lawyers with modest earnings, financial planning will involve careful money management. Don’t expect to organically grow wealth through sheer earning power alone. Instead, expect middle-class earnings that should afford a comfortable lifestyle, but not a luxurious one.

","

Budget for Lifestyle Spending

","

","

Lifestyle spending is one of the biggest dangers for any lawyer, especially junior ones.

","

Spending for a lawyer is typically driven by a combination of stress and time management, as many lawyers work long hours. This can lead to compensatory spending, as they try to make the most of their relatively little free time.

","

Lawyers can also have high convenience expenses, such as takeout during or after a late evening at the office, or in the form of hiring housekeepers and assistants to make their lives easier. While this can help claw back time, it can get expensive, so you’ll want to be careful about this kind of lifestyle creep.

","

Whether it’s car payments and private school tuition or just a standing order at a favorite restaurant, your lifestyle can quickly swamp even a generous income if you’re not careful. No matter where you fall on the income distribution, make sure to keep a personal budget and stick to it.

","

Manage Debt

","

The average law school graduate owes $130,000 in student loan debt. This will continue to grow, as the average cost of attendance for law school has reached $230,000. That debt comes at a standard interest rate of between 7% and 8%, putting an average first year lawyer’s debt at $1,000 per month in interest alone.

","

Managing this kind of debt can be difficult, but it is essential. According to the Education Data initiative, almost three out of four law school students (71%) graduated with debt. And the average borrowing amount to cover law school expenses in 2022 was $119,292.

","

Data also showed that graduated from top law schools owed slightly less, with an average debt of $92,267. Despite this financial burden, almost half of new law school graduates (47%) believed that their legal education was worth the financial cost.

","

Keeping these numbers in mind, it’s a good idea to pay off your law school debt as quickly as you can, as it will severely limit your options. High debt can limit you from starting a private practice or working in public interest law where salaries can be typically lower.

","

Accelerate Your Retirement Savings

","

After graduating law school, you’ll also have less time to save for retirement than most workers, so it’s a good idea to maximize your savings.

","

The average age of a first year law student is 25. This means that most lawyers don’t start working until 28. That means this cohort has about six years less time to save up for retirement compared with a professional who began working right out of college at 22.

","

Left unaddressed, this can lead to various outcomes. For example, say that two workers both plan to retire at 67 and each put $500 per month away in their retirement account. At a 10% rate of growth (the S&P 500 average), the worker who began at 22 will have $4.2 million saved by retirement. The worker who began at 28 will have $2.28 million.

","

As a lawyer, you’ll need to make up for lost time. You can do this by accelerating your retirement savings to compensate for this late start.

","

Budget for Future Plans

","

Whether you want to start your own firm, leave a practice to work for yourself, start an unrelated business, buy into your firm’s partnership or something else entirely, it’s important to budget for those future plans.

","

Starting your own firm or buying into a partnership, for example, is a capital-intensive process. You’ll need a lot of money on hand, as well as the ability to secure a significant loan for the rest.

","

Some lawyers, such as this writer, leave practice altogether and work for themselves. While less capital-intensive than starting a business, this does require a risk buffer. You’ll need money to re-establish your career and pay the bills during that process.

","

In all cases, if your future involves leaving a high-paying corporate practice, make sure to address the golden handcuffs. You won’t be able to execute on future plans if you can’t afford to sacrifice a certain salary level, so incorporate that into your plans. After all, it will be hard to open that quiet little practice in a college town while also making payments on a $1.5 million home.

","

Bottom Line

","

","

For lawyers, financial planning should typically be thought of in four stages:

","

Your past: Pay off student debt.
Your present: Budget against lifestyle creep.
Your near-future: Plan for your career goals.
Your far-future: Save aggressively for retirement.

","

While a handful of lawyers make very high incomes that require serious wealth planning, the significant majority make around $60,000 per year. For that cohort, it’s important to budget and save carefully while also paying down typically high student loans.

","

Professional Income Tips

","$64","

Photo credit: ©iStock.com/ilkercelik, ©iStock.com/AmnajKhetsamtip, ©iStock.com/ilkercelik

"],"experts":null,"link":"/financial-planning/financial-planning-for-lawyers","published":{"datetime":"2025-1-23","readable":"January 23, 2025"},"shareInfo":{"title":"Guide to Long-Term Financial Planning for Lawyers","origin":"/financial-advisor/financial-planning-for-lawyers"},"isNewsArticle":true},{"id":"cG9zdDoyNzEyNDc=","databaseId":271247,"postId":271247,"author":{"node":{"id":"dXNlcjoz","databaseId":3,"userId":3,"avatar":{"url":"https://secure.gravatar.com/avatar/47938df052bf0a5283bd6b77ab786737?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"SmartAsset employs a team of writers and editors with years of experience in the editorial, news and personal finance industries. Some staff members also hold the Certified Educator in Personal Finance (CEPF®) designation from the Institute for Financial Literacy.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Michael","fullName":"SmartAsset Team","lastName":"Carvin","name":"SmartAsset Team","postCount":{"pageInfo":{"offsetPagination":{"total":1466,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"mcarvin","__typename":"User"},"__typename":"NodeWithAuthorToUserConnectionEdge"},"categories":{"nodes":[{"id":"dGVybToxOTQ3Mw==","children":{"nodes":[],"__typename":"CategoryToCategoryConnection"},"databaseId":19473,"categoryId":19473,"link":"https://smartasset.com/other-financial-advisor/articles","name":"Other","postCount":{"pageInfo":{"offsetPagination":{"total":6,"__typename":"OffsetPaginationPageInfo"},"__typename":"CategoryToPostConnectionPageInfo"},"__typename":"CategoryToPostConnection"},"slug":"other-financial-advisor","ancestors":{"nodes":[{"name":"Financial Advisor","slug":"financial-advisor","__typename":"Category"}],"__typename":"CategoryToAncestorsCategoryConnection"},"parent":{"node":{"name":"Financial Advisor","id":"dGVybTo3OTY5","slug":"financial-advisor","__typename":"Category"},"__typename":"CategoryToParentCategoryConnectionEdge"},"__typename":"Category"}],"__typename":"PostToCategoryConnection"},"content":"$65","date":"2024-12-12T19:34:14","excerpt":"

The high-low method is used in cost accounting to estimate fixed and variable costs based on a business’s highest and lowest levels of activity. By focusing on these extremes, the high-low method helps determine the variable cost per unit and the total fixed cost. This provides insight into how expenses fluctuate with production. The high-low […]

\n","featuredImage":{"id":"cG9zdDoyNzEyNDk=","databaseId":271249,"altText":"A man calculating the high-low method.","date":"2024-12-12T19:18:41","fileSize":169918,"mimeType":"image/jpeg","modified":"2024-12-12T19:24:38","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2024/12/iStock-1389759702.jpg","__typename":"MediaItem"},"modified":{"datetime":"2024-12-12","readable":"December 12, 2024"},"multipleBylinesByRole":{"editedBy":{"id":"dXNlcjo5Mw==","databaseId":93,"userId":93,"avatar":{"url":"https://secure.gravatar.com/avatar/04483497dbd73f712b504e401c9c7d22?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Mark Henricks has reported on personal finance, investing, retirement, \r\nentrepreneurship and other topics for more than 30 years. His freelance \r\nbyline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"William","fullName":"Mark Henricks","lastName":"Henricks","name":"Mark Henricks","postCount":{"pageInfo":{"offsetPagination":{"total":788,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"mhenricks","__typename":"User"},"reviewedBy":null,"writtenBy":{"id":"dXNlcjoz","databaseId":3,"userId":3,"avatar":{"url":"https://secure.gravatar.com/avatar/47938df052bf0a5283bd6b77ab786737?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"SmartAsset employs a team of writers and editors with years of experience in the editorial, news and personal finance industries. Some staff members also hold the Certified Educator in Personal Finance (CEPF®) designation from the Institute for Financial Literacy.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Michael","fullName":"SmartAsset Team","lastName":"Carvin","name":"SmartAsset Team","postCount":{"pageInfo":{"offsetPagination":{"total":1466,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"mcarvin","__typename":"User"},"factCheckedBy":null,"secondEditor":{"id":"dXNlcjoxMTc=","databaseId":117,"userId":117,"avatar":{"url":"https://secure.gravatar.com/avatar/9fffe2eb35204e151b68731435d247c5?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Arturo Conde is a senior editor at SmartAsset. He has a master’s from the Graduate School of Journalism at Columbia University and a bachelor’s from the College of Arts and Science at New York University. As a certified educator in personal finance, he edits and writes content that focuses on retirement, investments, home buying and other financial topics.\r\n\r\nArturo is a bilingual native in English and Spanish, and also writes as a freelance journalist for NBC News, among other publications. His articles have been published in Fusion, Univision, City Limits, the NACLA Report on the Americas and WhoWhatWhy, as well as La Opinión A Coruña newspaper in Spain.","additionalMeta":{"expertise":"Financial Planning, Retirement Planning, Investment Planning, Tax Planning","__typename":"User_Additionalmeta"},"email":null,"firstName":"Arturo","fullName":"Arturo Conde, CEPF®","lastName":"Conde, CEPF®","name":"Arturo Conde, CEPF®","postCount":{"pageInfo":{"offsetPagination":{"total":38,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"aconde","__typename":"User"},"hideAuthor":true,"__typename":"Post_Multiplebylinesbyrole"},"adTargetingOverrides":{"fieldGroupName":"adTargetingOverrides","pageGroupNewKey":null,"__typename":"Post_Adtargetingoverrides"},"seo":{"canonical":"https://smartasset.com/financial-advisor/high-low-method","metaDesc":"The high-low method is a useful tool for estimating fixed and variable costs, helping businesses predict how expenses change.","metaKeywords":"","metaRobotsNofollow":"follow","metaRobotsNoindex":"index","readingTime":7,"title":"How the High-Low Method Works and How to Calculate It","__typename":"PostTypeSEO"},"slug":"high-low-method","status":"publish","title":"How the High-Low Method Works and How to Calculate It","uri":"/financial-advisor/high-low-method","tags":{"nodes":[{"name":"news-sitemap","__typename":"Tag"}],"__typename":"PostToTagConnection"},"__typename":"Post","adPageGroupOverride":null,"bylines":{"writtenBy":null,"editedBy":{"id":"dXNlcjo5Mw==","databaseId":93,"userId":93,"avatar":"$66","description":"Mark Henricks has reported on personal finance, investing, retirement, \r\nentrepreneurship and other topics for more than 30 years. His freelance \r\nbyline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.","additionalMeta":"$67","email":null,"firstName":"William","fullName":"Mark Henricks","lastName":"Henricks","name":"Mark Henricks","postCount":"$68","slug":"mark-henricks","__typename":"User"},"reviewedBy":null,"factCheckedBy":null,"secondEditor":{"id":"dXNlcjoxMTc=","databaseId":117,"userId":117,"avatar":"$6b","description":"Arturo Conde is a senior editor at SmartAsset. He has a master’s from the Graduate School of Journalism at Columbia University and a bachelor’s from the College of Arts and Science at New York University. As a certified educator in personal finance, he edits and writes content that focuses on retirement, investments, home buying and other financial topics.\r\n\r\nArturo is a bilingual native in English and Spanish, and also writes as a freelance journalist for NBC News, among other publications. His articles have been published in Fusion, Univision, City Limits, the NACLA Report on the Americas and WhoWhatWhy, as well as La Opinión A Coruña newspaper in Spain.","additionalMeta":"$6c","email":null,"firstName":"Arturo","fullName":"Arturo Conde, CEPF®","lastName":"Conde, CEPF®","name":"Arturo Conde, CEPF®","postCount":"$6d","slug":"arturo-conde-cepf","__typename":"User"}},"category":{"id":"dGVybToxOTQ3Mw==","children":"$70","databaseId":19473,"categoryId":19473,"link":"https://smartasset.com/other-financial-advisor/articles","name":"Other","postCount":6,"slug":"other-financial-advisor","ancestors":"$72","parent":"$75","__typename":"Category"},"isModifiedBeforePublished":true,"contentBlocks":["

","

Are you looking to build a financial plan? Consider working with a financial advisor as you put together long-term investment goals.

","

What Is the High-Low Method?

","

The high-low method is a cost-estimation method that identifies the variable and fixed costs within a company by using only the highest and lowest points of activity. Activity levels may be based on number of products manufactured, number of guests served or a similar metric. This method calculates variable cost per unit based on these extremes, then applies it to determine the total fixed costs.

","

By analyzing high and low data points, the high-low method creates a cost model that can help predict expenses at different levels of production. However, it assumes a linear relationship between activity levels and costs. This makes it most reliable in stable environments with minimal cost fluctuations.

","

3 Steps for Using the High-Low Method

","

To calculate costs using the high-low method, here are the steps to follow:

","

1. Determine the Variable Cost Component:

","

The formula for variable cost per unit is:

","

Variable Cost = (Highest Activity Cost – Lowest Activity Cost) ÷ (Highest Activity Units – Lowest Activity Units)

","

Here, the highest and lowest activity units refer to the periods with maximum and minimum activity levels, respectively. Use the number of products shipped, customers served or similar unit measure rather than costs to identify the highest activity levels. This period may be a month, a quarter or other span of time.

","

2. Calculate the Fixed Cost Component:

","

Once the variable cost is calculated, use this value to find the fixed cost with the following formulas:

Fixed Cost = Highest Activity Cost – (Variable Cost × Highest Activity Units)

","

Fixed Cost = Lowest Activity Cost – (Variable Cost × Lowest Activity Units)

","

3. Calculate the Total Cost Using the High-Low Cost Formula:

","

Finally, use the calculated variable and fixed costs to determine the total cost at a specific activity level:

Total Cost = Fixed Cost + (Variable Cost × Units of Activity)

","

Putting the High-Low Method into Practice

","

As an example of using the high-low method, assume a company that tracks the number and cost of products it makes every month wants to understand their cost variance throughout the fiscal year. Here’s a monthly breakdown:

","

","

For this example, the highest activity occurs in October with 1,500 units produced, costing this hypothetical company $58,000. The lowest activity is in May with 900 units produced, costing them $39,000.

","

1. Calculate Variable Cost per Unit

","

Using the high-low formula for variable cost:

Variable Cost = ($58,000 – $39,000) ÷ (1,500 – 900)
Variable Cost = $19,000 ÷ 600
Variable Cost = $31.67 per unit

","

2. Calculate Fixed Costs

","

Choose either the high or low point to solve for fixed costs. Let’s assume the company wants to start by using the high point:

Fixed Cost = $58,000 – ($31.67 × 1,500)
Fixed Cost = $58,000 – $47,505
Fixed Cost = $10,495

","

Now let’s flip it and assume the company wants to use the low point:

","

Fixed Cost = $39,000 – ($31.67 × 900)
Fixed Cost = $39,000 – $28,503
Fixed Cost = $10,497

","

The fixed costs are nearly identical for both high and low points. This indicates that the high-low method has been performed correctly. It shouldn’t matter whether you use the high or low points, as the relative difference between each metric is matched within itself.

","

3. Construct the Total Cost Equation

","

Using the calculated fixed and variable costs for the high point and an estimated production of 2,000 units, the total cost equation becomes:

","

Total Cost = $10,495 + ($31.67 × 2,000)
Total Cost = $10,495 + $63,340
Total Cost = $73,835

","

A similar calculation can suggest likely costs for other production levels. Once the variable cost figure is known, it’s only necessary to multiply it by the projected production figure and add fixed costs.

","

What We Can Learn From the High-Low Method

","

","

The high-low method helps companies estimate costs quickly and can empower them to predict future expenses for different production levels. This method is especially useful for companies with seasonal production fluctuations, as it helps to set cost baselines and identify how fixed and variable costs impact overall spending.

","

Limitations and Other Considerations

","

While practical, the high-low method has some limitations. It relies only on the highest and lowest extremes and overlooks other activity levels. This can lead to inaccuracies if these extremes are not typical of regular operations.

","

Additionally, the high-low method assumes a linear relationship between costs and activity, which may not hold in all business scenarios. For companies with fluctuating or irregular costs, alternative cost estimation methods may offer a more accurate picture of expenses.

","

Common Uses for the High-Low Method

","

The high-low method is particularly beneficial for small business owners, financial analysts and accountants who need a quick and simple way to estimate fixed and variable costs. It’s especially useful when detailed cost data is limited, allowing for rapid approximations of cost behavior to inform budgeting and decision-making processes.

","

In personal or business budgeting, the high-low method can separate fixed costs, like base fees, from variable costs, such as usage-based expenses. For example, individuals can analyze utility bills to see which portion remains constant and which changes with consumption. Small businesses can use it to understand delivery or production costs and plan more effectively.

","

This method can also support decision-making by revealing how costs might change in different scenarios. For investors, it provides insight into a company’s cost structure, helping them assess efficiency and growth potential. By applying the high-low method, readers can gain a clearer understanding of cost behavior and use it to plan or evaluate opportunities.

","

Frequently Asked Questions

","

What Are the Advantages of Using the High-Low Method?

","

The primary advantage of the high-low method is its simplicity. It requires only the highest and lowest activity levels and their corresponding costs to estimate variable and fixed cost components.

","

How Does the High-Low Method Compare to Regression Analysis?

","

Regression analysis considers all available data points to provide a more precise estimation of cost behavior, capturing variations and trends that the high-low method might overlook. However, regression analysis is more complex and requires statistical software or advanced calculations, whereas the high-low method offers a quicker alternative, albeit at the cost of some degree of accuracy.

","

Bottom Line

","

","

The high-low method is a useful tool for estimating fixed and variable costs, helping businesses predict how expenses change with activity levels. While it’s not without limitations, it provides a quick and accessible way to analyze cost behavior. For investors and business owners, the high-low method can support better cost control, financial planning and investment decisions.

","

Tips for Financial Planning

","$77","

"],"experts":null,"link":"/other-financial-advisor/high-low-method","published":{"datetime":"2024-12-12","readable":"December 12, 2024"},"shareInfo":{"title":"How the High-Low Method Works and How to Calculate It","origin":"/financial-advisor/high-low-method"},"isNewsArticle":true},{"id":"cG9zdDoyNTIwNTA=","databaseId":252050,"postId":252050,"author":{"node":{"id":"dXNlcjo5NA==","databaseId":94,"userId":94,"avatar":{"url":"https://secure.gravatar.com/avatar/72c05cde57f4d7ee65af27e91a5315c2?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Eric","fullName":"Eric Reed","lastName":"Reed","name":"Eric Reed","postCount":{"pageInfo":{"offsetPagination":{"total":931,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"ereed","__typename":"User"},"__typename":"NodeWithAuthorToUserConnectionEdge"},"categories":{"nodes":[{"id":"dGVybToxOTQ3MA==","children":{"nodes":[],"__typename":"CategoryToCategoryConnection"},"databaseId":19470,"categoryId":19470,"link":"https://smartasset.com/financial-planning/articles","name":"Financial Planning","postCount":{"pageInfo":{"offsetPagination":{"total":334,"__typename":"OffsetPaginationPageInfo"},"__typename":"CategoryToPostConnectionPageInfo"},"__typename":"CategoryToPostConnection"},"slug":"financial-planning","ancestors":{"nodes":[{"name":"Financial Advisor","slug":"financial-advisor","__typename":"Category"}],"__typename":"CategoryToAncestorsCategoryConnection"},"parent":{"node":{"name":"Financial Advisor","id":"dGVybTo3OTY5","slug":"financial-advisor","__typename":"Category"},"__typename":"CategoryToParentCategoryConnectionEdge"},"__typename":"Category"}],"__typename":"PostToCategoryConnection"},"content":"$78","date":"2025-01-24T15:32:49","excerpt":"

According to Experian, about 60% of Americans don’t understand their own finances. Within that group, another two-thirds say this has led them to mistakes costing $1,000 or more. So if you don’t feel like you have a great handle on your money, you’re not alone. To improve your personal finance management, consider taking these five steps. […]

\n","featuredImage":{"id":"cG9zdDoyNzUxNDg=","databaseId":275148,"altText":"A couple reviews how to manage personal finances.","date":"2025-01-24T13:11:38","fileSize":198905,"mimeType":"image/jpeg","modified":"2025-01-24T15:32:19","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2025/01/iStock-1887469204-7.jpg","__typename":"MediaItem"},"modified":{"datetime":"2025-1-24","readable":"January 24, 2025"},"multipleBylinesByRole":{"editedBy":{"id":"dXNlcjoxOTc=","databaseId":197,"userId":197,"avatar":{"url":"https://secure.gravatar.com/avatar/00cb0f465693d78173a61b56cc33e2fd?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Marie White is a Writer/Editor for SmartAsset, and holds the Certified Educator in Personal Finance (CEPF®) designation. She received her English degree from Stevenson University, with a focus on writing and communications. Marie has more than 15 years of experience working with financial content, having written for publications such as The Oxford Club, Agora Financial and The Trading Pub. Here, she covered topics ranging from stock market news to dividend stock investing and options strategies, as well as real estate investing.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Marie","fullName":"Marie White, CEPF®","lastName":"White, CEPF®","name":"Marie White, CEPF®","postCount":{"pageInfo":{"offsetPagination":{"total":0,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"mwhite","__typename":"User"},"reviewedBy":null,"writtenBy":{"id":"dXNlcjo5NA==","databaseId":94,"userId":94,"avatar":{"url":"https://secure.gravatar.com/avatar/72c05cde57f4d7ee65af27e91a5315c2?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Eric","fullName":"Eric Reed","lastName":"Reed","name":"Eric Reed","postCount":{"pageInfo":{"offsetPagination":{"total":931,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"ereed","__typename":"User"},"factCheckedBy":null,"secondEditor":{"id":"dXNlcjoxMTc=","databaseId":117,"userId":117,"avatar":{"url":"https://secure.gravatar.com/avatar/9fffe2eb35204e151b68731435d247c5?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Arturo Conde is a senior editor at SmartAsset. He has a master’s from the Graduate School of Journalism at Columbia University and a bachelor’s from the College of Arts and Science at New York University. As a certified educator in personal finance, he edits and writes content that focuses on retirement, investments, home buying and other financial topics.\r\n\r\nArturo is a bilingual native in English and Spanish, and also writes as a freelance journalist for NBC News, among other publications. His articles have been published in Fusion, Univision, City Limits, the NACLA Report on the Americas and WhoWhatWhy, as well as La Opinión A Coruña newspaper in Spain.","additionalMeta":{"expertise":"Financial Planning, Retirement Planning, Investment Planning, Tax Planning","__typename":"User_Additionalmeta"},"email":null,"firstName":"Arturo","fullName":"Arturo Conde, CEPF®","lastName":"Conde, CEPF®","name":"Arturo Conde, CEPF®","postCount":{"pageInfo":{"offsetPagination":{"total":38,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"aconde","__typename":"User"},"hideAuthor":null,"__typename":"Post_Multiplebylinesbyrole"},"adTargetingOverrides":{"fieldGroupName":"adTargetingOverrides","pageGroupNewKey":null,"__typename":"Post_Adtargetingoverrides"},"seo":{"canonical":"https://smartasset.com/financial-advisor/how-to-manage-personal-finances","metaDesc":"There are many short- and long-term facets to managing your finances, including budgeting, saving for retirement, taxes and more.","metaKeywords":"","metaRobotsNofollow":"follow","metaRobotsNoindex":"index","readingTime":5,"title":"Comprehensive Guide on How to Manage Your Personal Finances","__typename":"PostTypeSEO"},"slug":"how-to-manage-personal-finances","status":"publish","title":"Comprehensive Guide on How to Manage Your Personal Finances","uri":"/financial-advisor/how-to-manage-personal-finances","tags":{"nodes":[{"name":"news-sitemap","__typename":"Tag"}],"__typename":"PostToTagConnection"},"__typename":"Post","adPageGroupOverride":null,"bylines":{"writtenBy":{"id":"dXNlcjo5NA==","databaseId":94,"userId":94,"avatar":"$79","description":"Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.","additionalMeta":"$7a","email":null,"firstName":"Eric","fullName":"Eric Reed","lastName":"Reed","name":"Eric Reed","postCount":"$7b","slug":"eric-reed","__typename":"User"},"editedBy":{"id":"dXNlcjoxOTc=","databaseId":197,"userId":197,"avatar":"$7e","description":"Marie White is a Writer/Editor for SmartAsset, and holds the Certified Educator in Personal Finance (CEPF®) designation. She received her English degree from Stevenson University, with a focus on writing and communications. Marie has more than 15 years of experience working with financial content, having written for publications such as The Oxford Club, Agora Financial and The Trading Pub. Here, she covered topics ranging from stock market news to dividend stock investing and options strategies, as well as real estate investing.","additionalMeta":"$7f","email":null,"firstName":"Marie","fullName":"Marie White, CEPF®","lastName":"White, CEPF®","name":"Marie White, CEPF®","postCount":"$80","slug":"marie-white-cepf","__typename":"User"},"reviewedBy":null,"factCheckedBy":null,"secondEditor":{"id":"dXNlcjoxMTc=","databaseId":117,"userId":117,"avatar":"$83","description":"Arturo Conde is a senior editor at SmartAsset. He has a master’s from the Graduate School of Journalism at Columbia University and a bachelor’s from the College of Arts and Science at New York University. As a certified educator in personal finance, he edits and writes content that focuses on retirement, investments, home buying and other financial topics.\r\n\r\nArturo is a bilingual native in English and Spanish, and also writes as a freelance journalist for NBC News, among other publications. His articles have been published in Fusion, Univision, City Limits, the NACLA Report on the Americas and WhoWhatWhy, as well as La Opinión A Coruña newspaper in Spain.","additionalMeta":"$84","email":null,"firstName":"Arturo","fullName":"Arturo Conde, CEPF®","lastName":"Conde, CEPF®","name":"Arturo Conde, CEPF®","postCount":"$85","slug":"arturo-conde-cepf","__typename":"User"}},"category":{"id":"dGVybToxOTQ3MA==","children":"$88","databaseId":19470,"categoryId":19470,"link":"https://smartasset.com/financial-planning/articles","name":"Financial Planning","postCount":334,"slug":"financial-planning","ancestors":"$8a","parent":"$8d","__typename":"Category"},"isModifiedBeforePublished":true,"contentBlocks":["

","

1. Get Advice From Professionals, Not Social Media

","

While exact numbers are hard to nail down, reporting suggests that a majority of people under 40 receive some or all of their personal finance advice from social media accounts. This is risky, particularly when it comes to short form platforms like Instagram, Twitter and TikTok. Influencers on these platforms organize their work by engagement and, especially when it comes to money, the most entertaining work is frequently the least accurate.

","

From tax tricks to credit card points and beat-the-market strategies, these accounts may spread dubiously legal and badly misinformed takes, and are not the safest option when it comes to guiding your finances.

","

2. Think in Terms of Habits and Goals

","

A good way to start managing your money is by thinking in terms of habits and goals.

","

Don’t think about your money in a general sense of “saving up.” Instead, set clear financial goals. For example, “save up $10,000” or “invest $500 in a retirement account each month” are concrete and achievable. You can see yourself progressing toward those goals, and since they have an end point, you know when you meet them. Once you’ve invested your $500 for the month, you can relax.

","

And don’t think about your finances in terms of “spending less.” Instead, look at specific habits you can build or change. In the same way that someone will simply cut out potato chips or add a daily run to lose weight, you can set a cap on entertainment spending each month or add a spending alert to your credit card. Like with goals, thinking about your finances in terms of specific habits to adopt will turn a vague, abstract idea into something concrete.

","

3. Make a Budget and Audit

","

","

It’s almost impossible to manage your finances unless you know how much money is coming in and going out.

","

First, make a budget. This takes into account your salary, and helps you plan how you intend to manage your money going forward. Based on your income, goals and other factors, you’ll answer a few questions, such as:

","

What are your fixed and variable monthly expenses?
Which of those expenses are necessities, and which are discretionary (i.e., wants)?
How much do you want to save and invest?

","

Always leave a little room for flexibility. Life is more fun if you can spontaneously go out for a movie or a beer, but have a structure in place.

","

Then, conduct an audit. This is your analysis of how you currently manage your money. Pull your bank and credit card statements and look at the money you actually spend each month and where it goes. If you spend a lot of cash, grab a small notebook or use a budgeting app and spend a month tracking your daily spending.

","

This can help you determine where to make cutbacks in discretionary spending to reach your saving and investment goals.

","

4. Monitor Credit, Debt and Regular Spending

","

Recurring charges can eat away at your wallet every month. Not to mention, debt adds up quickly, not only generating monthly bills, but prolonging your spending through interest rates, fees and payment charges. Paying down debt should be a priority, especially anything with a high interest rate.

","

It’s important to monitor these things, especially your use of credit cards, as they can have a significant impact on your credit score.

","

Your credit score can make or break major life events, like getting a job, or buying a car or home. This is why it’s important to not only monitor your spending and credit usage, but verify that information listed on your credit report is accurate. If it’s not, you can dispute it with the credit bureau.

","

5. Treat Finance As Maintenance

","

Financial management is something you should pay attention to regularly. Check your spending against your budget each month. Check up on your habits and recurring expenses every few months. Monitor your credit once or twice a year.

","

That way, any changes you need to make will be small and incremental, which will make your financial life far easier and less stressful.

","

Bottom Line

","

","

Managing your personal finances is a large, often complicated task. But it doesn’t have to be an overwhelming one. Get your information from good sources. Think in concrete terms of habits and goals. Make a good plan and stick to it.

","

Tips on Sticking to a Useful Budget

","$8f","

"],"experts":null,"link":"/financial-planning/how-to-manage-personal-finances","published":{"datetime":"2025-1-24","readable":"January 24, 2025"},"shareInfo":{"title":"Comprehensive Guide on How to Manage Your Personal Finances","origin":"/financial-advisor/how-to-manage-personal-finances"},"isNewsArticle":true}]}]