Boom times are over and recession is the word on everyone's lips. So whether you are a newly-qualified lawyer, an equity partner nearing retirement or somewhere in between, there has never been a better time to get your financial affairs in order.

According to a recent survey commissioned by Barclays Private Clients, female lawyers expect to earn, on average, £235,000 per year at the height of their career, while their male colleagues aim at £179,000.

Because your annual cash flow determines your investment strategy, it is vital that you prioritise your financial affairs according to where you currently sit on the legal ladder.

James Davis, manager of Barclays Premier Banking says that timing is critical in making the most of your investments.

"At each stage of their legal lifecycle, a lawyer must take stock of his or her key financial objectives and work out their priorities."

After all, there is little point concerning yourself with inheritance tax (IHT) planning when you are a trainee and by retirement time it is probably a little too late to address that student debt.

Assistant/associate

Must do: Your financial future rests on your ability to work, so first things first, get some insurance in order.

"Life and health insurance comes in a variety of forms," says Ian Creswick, investment manager at Thesis Asset Management.

"[Some come] as an employment benefit that include private medical insurance, permanent health, traditional life and critical illness for where you survive a life threatening illness."

A policy like this can be bought direct or over the internet, but Creswick warns that it does not make it necessarily cheaper or guarantee adequate cover.

He adds: "Beware of 'packaged products' combining insurance and investment (e.g. endowments) as these are rarely good value or tax efficient."

An independent financial adviser (IFA) is recommended when you go shopping for insurance. Although life cover may not be at the top of the list when you are 20- or 30-something, Davis says that income protection insurance is something you should put in place early in your career.

"Your income is your only financial interest at this stage of your career so you have to protect it before you do anything else," he says.

Income protection insurance will protect your earning potential in cases of critical illness, accident and redundancy.

Most firms make a provision for you to continue earning for a set period of time, usually 26 weeks and sometimes 52 weeks. But after that period has expired, only a private policy will give you protection.

Should do: If your firm allows you the luxury of a social life, your disposable income probably does not add up to much after the costs of bars, restaurants, clubs and taxis are taken into account.

Any disposable income should therefore be treated with care and put towards paying off any financial baggage and embarking on a savings and investment plan.

"At the early stages of your career, your immediate need is to package your debts advantageously," says Niall McCabe, business development manager at Allied Irish Bank in London.

"By having one loan for your student debts and credit cards, you reduce the out-going of smaller loans and the greater monthly payback and high borrowing rates of credit card debts."

You should take the time to look at the interest you can earn in a savings account and compare it to the interest accruing on your student debt. You can then order your debt and savings priorities accordingly.

Creswick advises people to consider convenience as well as interest when they open a savings account. "Postal, telephone and internet operated accounts will offer better rates of interest and may be more convenient for the busy lawyer to run," Creswick says.

If you are lucky enough to have something left over after you have dealt with debts and savings, you should think about suitable investments.

"Early investment through stock market funds may be made via an ISA, preferably starting with a broadly based fund rather than the latest hot, fashionable theme such as technology," Creswick says.

By setting up an ISA, returns on your investments are safe from income and capital gains tax.

Getting on the property ladder should also be a high priority on your financial 'to do' list and lawyer status is influential when it comes to negotiating the right mortgage for you.

"Because junior lawyers are on a fast track income, the bank will be flexible to their circumstances," McCabe says.

First mortgages to look out for include those allowing interest-only repayments for the first three years, which will make it easier for you to meet repayments from your initially small but growing salary. And McCabe says that the usual three times salary multiple can usually be exceeded on the basis of your projected earnings as a 'fast-track earning individual'.

Another mortgage to consider is a flexible mortgage, which combines a current account and mortgage in one package. Examples of this are Virgin Direct and Halifax One.

"If a junior lawyer has some savings, he or she can amalgamate them in a flexible mortgage so that the interest earned on the savings goes towards paying off the interest accrued on the mortgage," Davis says.

"And when bonuses are paid, as they often are in City law firms, they can be used to pay off the mortgage without penalty."

But Creswick warns that all that glisters is not gold: "Nowadays there are numerous special offers, including discounts, fixed rates (often recommended for first time buyers), offset arrangements with savings or flexible mortgages with the ability to vary or defer repayments," Creswick says.

"These may look attractive, but need discipline and the terms available may not be as good as special deals on more conventional products."

With the introduction of stakeholder legislation this year, firms with more than five employees must make a pension plan available to their staff. The bigger law firms usually offer group personal pensions, but you should also consider a stakeholder pension, which has its charges capped at 1%.

Although it is tempting to put pension contributions off until later in your career it is very much a case of the earlier the better. Davis advises to think of pensions planning – and other investments – in terms of a pyramid.

"At the base, there are conservative cash-based investments involving the best use of day to day investments such as bank accounts with high interest," he says.

"In the middle range there are managed investments in portfolios, shares, unit trusts and offshore ventures. And at the top are the high risk, get-rich-quick schemes such as investments in shares like dotcom companies."

Because there is no such thing as a fast return without risk, Davis advises that investments at the top of the pyramid should be made earlier in your career rather than later.

Creswick agrees: "It is always smarter to take risks earlier, when you have time on your side."

Salaried partner

Must do: Be warned that the pension plan you began earlier in your career will probably not be enough to keep you in the life to which you are accustomed by the time you reach retirement.

"Because of the earnings cap the government imposes on personal pension contributions, pension planning is about more than just putting money into a pension pot," says Glenn Grover, senior private banker at Coutts & Co.

For the 2001-02 tax year, a lawyer aged 35 or less is able to put up to 17.5% of their earnings (which are capped at £95,400) into their pension pot.

The percentage contribution goes up with age, but Grover says that it is wise to include investments in equities, properties to let and commercial property as part of your pension plan.

Should do: Like most partners, you will probably want to put your children through private schooling. This means that substantial and on-going school fees need to be factored into your financial plan.

Long term investments in a mixture of equities, unit trusts, managed and cash-based funds with good interest rates will help smooth out school fee payments. ISAs can be used as a tax-free wrapper to the investments that lie beneath. Annual deposits per couple are capped at £14,000.

School fees can also be made more manageable by the use of a flexible mortgage.

"The lifecycle of the lawyer includes financial needs of children and schooling," McCabe says.

"Flexible mortgages are available to anticipate and build-in school expenses. When these funds are needed they can be withdrawn and utilised."

If you have a family, you should think about reviewing your insurance policies. With your enhanced salary you should be able to upgrade the insurance policies you put in place earlier.

"There is more than just yourself to look after now, so you should think about getting additional life cover to top up what firms offer," Grover says.

Equity partner

Must do: When invited to enter the partnership, most firms require partners to inject a capital amount into the partnership. This can range from £50,000 to £250,000 depending on the firm.

"You should not have trouble getting a loan to enter the partnership," Davis says. "Everyone is desperate to be in the affluent market, it is like banking on a winner."

Many firms already have an existing relationship with the lending bank and loan schemes in place. A capital loan is granted to the new equity partner against an undertaking from the firm to hold the equity until retirement at which time the loan is repaid.

McCabe says rates and terms vary, but banks will lend these funds competitively, although usually on condition that the partner banks with them.
Should do: "The key issue for the equity partner is putting aside more income for investments," Grover says.

One such investment is a buy-to-let property for which you can borrow up to 80%. "The rental income usually covers payments," says McCabe. "But if there is a deficit, your surplus income at this stage of your career should easily make up for it."

Grover says that investment diversification is the key. He recommends programmes like the Coutts Investment Programme, which enables investment across more than 1000 stocks.

"It is wise to spread your investments through diversification rather than buying individual shares at this stage of your career," Grover says.

Heather Maizels, executive director of Barclays Private Bank, advises that a certain element of aggression in your investment strategy will get you returns. "Most clients want a conservative portfolio managed for growth," she says. "But moving assets from one portfolio to another is not going to make you money."

At Barclays, equity partners are advised to dabble in 'themed investments', which are based around a particular currency or stock, and are market driven.

"These are a more opportunistic way of making money and are available on a guaranteed or leveraged basis," Maizels says.

Nearing retirement

This is the time to harvest the assets you have grown over time from pension and other investments.

Must do: "By the time you are nearing retirement, your other out-goings should have stabilised and you should be earning more," Grover says. "So it is time to invest any surplus income into pensions and other investments."

Grover advises following three steps to maximise your pension:

1. Take control of your pension through a Self-Invested Personal Pension Plan (SIPP). You manage your pension yourself which allows you more flexibility, diversification and control.

2. Repay all of your non tax-efficient debts, such as the mortgage on your main residence, and any other loans or overdrafts.

3. Build up assets outside of pensions and diversify as much as possible to reduce risk.

With recent increases in property values and general wealth, inheritance tax is not something that only affects equity partners.

If the total value of your assets is more than £242,000, then the chances are that your estate will attract some inheritance tax.

Ways of staying within the nil rate-band include making the most of gift allowances and writing pension and life policies into trust.

Transferring assets by giving gifts will only escape IHT if you remain alive for a further seven years. If you die within three years of gifting assets, your estate is liable to pay the full amount of IHT.

Certain categories of gifting which are always exempt are gifts to spouses, charities, political parties or important national institutions.

The first £3000 of a gift made in any tax year is exempt from tax and, upon marriage, parents can give gifts up to £5000, grandparents up to £2500 and anyone else up to £1000 without attracting IHT.

Small gifts of up to £250 per recipient per tax year are also exempt.

Should do: Maizels says that this is not the time to be playing the stock market with your income. "Many people nearing retirement do not like equity investments because they do not like putting their money into something which might fall tomorrow."

Alternative, less volatile investments should be considered in bonds, securities and cash investments.

"Liquidity management involves private placements of cash in banks, building societies and insurance companies to take advantage of favourable tax treatment."

As a lawyer, you pull a high ranking on the City income scale, but that is no reason not to recession-proof your income and make preparations for your twilight years.

Your healthy financial future begins with putting a plan in place, which suits the passing phases of your career.

And if your career in law is to be a lifelong one, then time may be on your side.

"You should always keep an eye out for investment opportunities that arise throughout your career," McCabe says. "Things tend to occur in cycles and timing is critical."