Posts Tagged ‘debt’

Pay Down the Most Expensive Debt First

Thursday, September 25th, 2014

Copyright  Images_of_Money via FlickrAs we process applications from law firms, it is not at all unusual to see a firm or partner that has $20,000 of cash in the bank and at the same time is carrying a $20,000 balance on multiple credit cards.

Obviously in a situation like that there is an opportunity to eliminate a lot of interest expense by simply paying off some credit cards rather have them sit out there with $20,000 on them for another year at 18 percent (or even higher).

If you have excess cash at the end of the month, review any outstanding debt you have and consider paying some of it down.

You can learn more about this and other law firm finance topics in my book, How David Beats Goliath – Access to Capital for Contingent-Fee Law Firms.


The above material is excerpted from How David Beats Goliath – Access to Capital for Contingent-Fee Law Firms and is subject to copyright protection © by Michael J. Swanson, all rights reserved.

 

 Photo Credit: Images_of_Money via Flickr

 

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Create a Rainy Day Fund

Tuesday, September 23rd, 2014

Copyright  Tax Credits via FlickrAvailable borrowing capacity on credit cards is NOT a rainy day fund! Many, many law firms and their partners are maintaining six-figure credit card debt over 10 to 15 cards because they have used them as a “rainy day” fund. Obviously it’s extremely expensive to do that and it just digs a deep hole that is difficult to ever escape. Many others simply have multiple credit cards with open balances available in case of unforeseen need. But I’ll say it again…a credit card is not an emergency fund. An emergency fund is cash in the bank. A credit card is the pathway to easy but expensive future debt. It is prudent move personally and professionally to put aside some cash so that you can deal with the unforeseen without having to dig a deep, expensive hole. You can learn more about this and other law firm finance topics in my book, How David Beats Goliath – Access to Capital for Contingent-Fee Law Firms.


The above material is excerpted from How David Beats Goliath – Access to Capital for Contingent-Fee Law Firms and is subject to copyright protection © by Michael J. Swanson, all rights reserved.

Photo Credit:  Tax Credits via Flickr
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Minimize Net Interest Costs

Tuesday, September 9th, 2014

How David Beats GoliathAs a general rule, you should strive to minimize the amount of interest you pay each year by borrowing in a very strategic, controlled way. Here’s a good exercise: At the end of each year (or right now!) total up the interest that appears on your income statement from loans at your firm, along with any interest from credit cards that your firm may have. Subtract the interest that you recoup from your cases (if any) and take a look at that number. Ask yourself: What did I get for that money? If you’re not sure…there’s a problem!

Too many firms borrow money for short term needs (advertising, bonuses, etc.) but then never pay it back during the good times. The result is effectively a permanent debt that does nothing but steal profits out of the partners’ pockets without giving back much in the way of tangible benefits.

If your firm is going to borrow money, especially for case expenses, consider recouping the interest from your cases. It’s legal, it’s ethical and there are lenders in the marketplace that can track the interest for you on a case-by-case basis to make it easy on your staff.

You can learn more about this and other law firm finance topics in my book, How David Beats Goliath – Access to Capital for Contingent-Fee Law Firms.


The above material is excerpted from How David Beats Goliath – Access to Capital for Contingent-Fee Law Firms and is subject to copyright protection © by Michael J. Swanson, all rights reserved.

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