Let's Talk Taxes
If you received a tax refund this year, congratulations! If you owed money (like me), there are a few things that will help avoid this next year (assuming you want a refund): (1) zero out your federal, state, and local withholdings; (2) max out your 401(k); and (3) consider increasing your charitable contributions. As for those who received refunds this year, what will you do with the extra cash? One suggestion is to pay down your debts. For associates who envision a future outside a law firm, decreasing your financial burden can open more options. It’s not uncommon for associates to feel constrained in deciding on a next step, because they did not budget their income to prepare for coveted job opportunities that pay considerably less than BigLaw or are less predictable in annual compensation. Outside of BigLaw, where lock-step compensation is uncommon, employees often start at a lower base, and bonuses (which can be sizeable) are predominantly performance-based. Aggressively paying down your debts will provide more latitude to take on a desired job that potentially pays less. Or, if you’ve already been diligently chopping away at those student loans, enjoy treating yourself to something fun this year.