Tackling Lawyer Debt

Money is a significant stressor in many people’s lives. Student loan and credit card debt can feel overwhelming, even paralyzing. Here are some resources that can help.

Student loan debt

In a recent guest post on Legal Ease, Andrew Josuweit of Student Loan Hero shared three solutions to ease the burden of student loan debt:

Start the process of tackling student loan debt by checking out the resources published by the Oregon New Lawyer Division. All three Oregon law schools offer a Loan Repayment Assistance Program (LRAP) for their recent graduates. If you attended law school out-of-state, check with your law school to see if they offer their own LRAP. You may also be eligible for the Oregon State Bar’s LRAP program.

For an overview of this topic, check out Navigating Student Loan Repayment Options, a free CLE available on the Professional Liability Fund website.

Credit card debt

If you are struggling to chip away at your credit card debt, consider whether a balance transfer is right for you. In theory, a balance transfer credit card allows you swap out your high-rate card for a cheaper card, paying off your original balance. Nerdwallet recently published a list of the best balance transfer cards for 2018. Terms vary widely, so do your homework. But all in all, the Nerdwallet list seems to include some good deals:

  • Discover – No annual fee, 0% interest on purchases for 6 months and 0% on balance transfers for 18 months, rewards rate 1.00%
  • Citi Diamond – No annual fee, 0% on purchases for 12 months and 0% on balance transfers for 21 months
  • Chase Freedom – No annual fee, 0% on purchases and balance transfers for 15 months, rewards rate 1.00%

For the pros and cons of pursuing a zero percent balance transfer, see this post.

Know your spending habits

Establish a system to track personal income and expenses. Free budget templates are available from Office 365, Mint, or these sourcesQuicken Deluxe is another good solution: cheap, easy to use, and a great value.

Speaking of budgets, have one. Each month, compare your actual income and expenses to the amounts you projected. If you see yourself going astray, make a mid-year course correction.

Be ready to make tough decisions and a few sacrifices to cut back on spending.

Managing the stress

Money management isn’t easy, and being in debt is stressful. But you are not alone. If you don’t know where to start, reach out to the attorney counselors at the Oregon Attorney Assistance Program (OAAP). They are supportive and can point you in the right direction. Help is free and confidential: 503-226-1057 or toll-free in Oregon 800-321-6227.

For an uplifting account of how one lawyer survived law school debt, read this article from the September 2017 issue of InSight, the OAAP publication.

All Rights Reserved 2018 Beverly Michaelis

Oregon Court Update: Closures & Fee Increases

Oregon state courts will be closed on the following nine calendar dates in 2011, 2012, and 2013 due to budget shortfalls:

These furlough dates are in addition to legal holiday closures.

Hours of operation have also been reduced in many locations.  If you are subject to a specific date or deadline concerning a court activity, you are advised to contact the applicable court to verify hours of operation.

Now is also a good time to note that Circuit Court Fees increase on October 1.  The new fee schedule is available here.

To stay on top of court closures and other breaking news from the Oregon Judicial Department, subscribe to the OJD RSS Feed.

Business Essentials

Your business plan serves as a roadmap for the future.  It describes your reason for going into business, why you are entering into (or continuing) a particular type of practice, your projected income and expenses, how you will market yourself and how your business will be structured.  It requires research, organization and reflection.  However, it doesn’t have to be a daunting task.

Excerpted from Business Essentials – Tips for the Small Firm and Sole Practitioner.

Like other business essentials, the key to successful business planning is to break the process down into a series of steps.  In this month’s issue of the Oregon State Bar Bulletin, we point you toward tools and resources to help you get on track, meet your goals, and create a vision for the future:

Read the full article here.

Copyright 2011 Beverly Michaelis

Accounts Receivable Do Not Improve Like Fine Wine

Unlike a fine cabernet sauvignon, your accounts receivable are at their best when less than 30 days old – and they definitely do not improve with age. Quite the opposite, in fact. The older you allow your accounts receivable to become, the more they cost you and the less likely your chance of 100% recovery. The trick is to keep from building up past-due accounts in the first place. Stay on top of your accounts receivable and keep that cash flow pouring into your bank account.

I couldn’t have said it any better!

This quote was offered by Ann Guinn in her presentation, Maximizing Firm Profits in a Challenging Economy, at the 2010 ABA Annual Meeting.  Ann is the author of Minding Your Own Business: The Solo and Small Firm Lawyer’s Guide to a Profitable Practice, published by the ABA in May 2010. 

Ann’s presentation was terrific.  Her advice was realistic, no-nonsense, and on-point.  With my own spin, here is some of what she had to say:

  • Collecting accounts receivable begins long before a potential client crosses your doorstep. The first step is to get a clear picture of your firm’s financial health.  For example, do you know the cost and profitability of your practice areas?  Your overhead-to-income percentage?  Your realization rates (percentage of fees actually collected)?  Your effective rate (your true hourly rate considering your realization rate)?  This information is key to assessing profitability.  
  • Do you have a written business plan and budget?  Don’t fall into the trap of thinking you don’t need these tools because you’re not applying for a loan or line of credit.  At all times you should know where you’re going, why, and how much it will cost to get there.
  • Properly screen clients and their cases to ensure payment.  Many a collection problem can be traced back to a client or case the lawyer should never have taken.
  • Communicate billing practices and procedures at the outset of representation.  Clients are more likely to pay and less likely to dispute your bill if they understand what to expect.  How are costs and fees billed?  What is your billing cycle?  When is payment expected?  What will happen if payment is not received?  These and other billing questions can be addressed in a client brochure or handout.  The PLF offers a sample billing brochure for clients on the PLF Web site.  Select Practice Aids and Forms > Client Relations > Billing Info Brochure.
  • Get adequate retainers up front or collect earned upon receipt fees.  Getting money before you begin work on a case is a no-brainer.  However, if you compromise and enter into an agreement allowing the client to make incremental payments, then monitor the arrangement closely.  Hold clients accountable and be prepared to withdraw if they don’t keep up their end of the bargain. 
  • Put it in writing.  Even if you do an excellent job of explaining your billing practices and follow-up your discussion with a brochure, you should still have a written fee agreement. If you are collecting a fee earned upon receipt, you may soon be required to put your agreement in writing.
  • Capture all your billable time contemporaneously. Lawyers who record their time after the fact almost always shortchange themselves by underestimating how much time a task actually took.
  • Resist writing your time off.  Clients should see all the work and effort put in on their case.  If you elect to mark an item “no charge,” that’s your decision, but don’t deprive clients of the complete picture.   
  • Clients love detail!  Studies show the more detailed your billing statement, the less likely the client is to dispute it, and the more likely he or she will pay promptly.  Your bill isn’t just the amount due, it’s an opportunity to demonstrate the value of your services.
  • Instead of tracking what Guinn calls the 4 P’s – Postage, Phones, Photocopies, and Phaxes – considering charging a flat two or three percent of monthly fees to cover these expenses.  Incorporate this approach into your written fee agreement, and your billing just got substantially easier.
  • Bill promptly and on schedule. If accounting isn’t your forte, outsourcing to a competent bookkeeper may be just the ticket.  In any case, get those bills out the door.  Clients can’t pay you if they don’t know what they owe.
  • Have a collections policy in place and follow it.  The first step might be as simple as sending a re-bill noting that payment was not received as expected.  For example, if your clients are expected to pay within 30 days of the billing date and no payment is received by day 31, a re-bill should be issued.  If the re-bill does not result in payment, outline the next step to to be taken and when.
  • Review your aged accounts report weekly.  If you have accounts that are more than a year past due, Guinn recommends writing them off (or making one last effort to collect, then writing them off).  Any account that is more than 90 days past due should be on a payment plan.  According to Guinn, you should have no more than two months’ worth of revenues in outstanding receivables.  For example, if you average $10,000 in revenue each month, your receivables shouldn’t exceed $20,000.
  • Last but not least:  Avoid suing your client for fees.

Minding Your Own Business: The Solo and Small Firm Lawyer’s Guide to a Profitable Practice, can be purchased at a discount through the PLF.  From the PLF home page, select ABA Products under the Loss Prevention heading.

Copyright 2010 Beverly Michaelis

How to Take a Vacation from Your Practice

We all need a break.  We all want a vacation.  So why is it that our loved ones practically have to drag us, kicking and screaming, from the office?

I Can’t Afford It

“If I’m not at the office, I can’t bill.  If I can’t bill, I won’t get paid.”  True enough, but there is a solution:  budget for your vacation.  A bit of research and number crunching is in order here.  First, calculate your vacation expenses. This should be relatively easy.  Next, quantify the lost revenue you need to replace during your time out of the office.  Now that you know how much you need, begin setting aside funds every week to meet your financial goal.  If necessary, find little ways to cut back that can really add up: like bringing your lunch to work, deferring your daily Starbucks fix, using public transportation, or telecommuting.  Saving weekly will keep you on track and help manage expectations. If you’re just getting started, then your plans this year may be more modest.  Next year, you can begin saving for your summer vacation in January.

I’m Too Busy

Work will never go away, but I guarantee that if you look ahead in your calendar you will find a block of time with no commitments.  Even if you haven’t made plans yet, block the time out now before your calendar fills up.  If you have a habit of backsliding, enlist your family as enforcers.  This time should be sacred.  If you need an extra incentive, consider non-refundable travel reservations.

Preparation is Key

If you’re a member of a firm, going on vacation is a matter of meeting with other lawyers who will be covering cases during your absence.  If you are a sole practitioner, use the buddy system.  Find a colleague who is experienced in your practice area and willing to cover for you.  This arrangement is usually reciprocal and is helpful if you have an unexpected absence from the office due to injury or a medical condition.

Get a game plan in place:

  • Notify clients, opposing counsel, judges, or other appropriate parties that you will be out of the office;
  • Prep your files.  They should be well-organized and current, with status memos so your buddy can easily step in if needed;
  • Create a “Countdown Schedule.”  Identify what needs to be done when and whether certain tasks can wait until your return;
  • Allow for wind down.  As your vacation approaches, leave time in your schedule to finish up last minute work.  Reduce or refer out new matters;
  • Train staff.  Do they have a clear understanding of office procedures?  How will they screen client calls during your absence?  Give them parameters for contacting you or your buddy in the event of an emergency.
  • Resist constantly checking voice mail, e-mail, or text messages.  Technology is a God-send, but part of rejuvenation is taking a break from our instant Internet society. Checking in is okay, but stick to a schedule to avoid obsessing over what is going on back at the office.  Remember – you have an emergency plan in place.  If something happens, staff or your buddy will get a hold of you.
  • Avoid post-vacation overload.  Just as you blocked out dates to go on vacation, allow yourself time to get back up-to-speed.  Otherwise, you’re right back where you started.

Give yourself and your family a well-deserved break.  With a bit of organization, you can budget for (and enjoy) your time off.

Copyright 2010 Beverly Michaelis

Many thanks to Tanya Hanson, who permitted me to utilize her terrific article, Plan Now for Your Summer Vacation or Sabbatical, which originally appeared in the PLF publication, In Brief in May 2004.