088 | Building on a Weak Financial Foundation

When you try to take on too much before you have your finances in order, you will have a difficult time building a strong financial foundation for yourself.

If all your money is going to other people and things, you won’t have money available to strengthen your financial foundation, and a weak foundation can’t hold much.

In this episode, we chat about two situations in which I see lawyers taking on too much financially before building their own foundation and why it’s important to strengthen your foundation before you take on other things.

Lightly edited transcript appears after the show notes.

Topics Discussed

• two situations in which lawyers take on too much financially
• the impact of taking on too much before building your financial foundation
• key steps to ensure you can make the progress you want to make financially as you take on other expenses

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Resources mentioned

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Email: hello@rhothomas.com

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Lightly Edited Transcript

Hey friend, welcome back to the show. I hope you’re doing well and having an amazing day so far. Today we are talking about building on a weak financial foundation. Basically when you’re trying to do all the things but you have not gotten your finances together. So when you try to do too much before you have your finances in order you set yourself up for a difficult time. With building a strong foundation. So you may feel stressed about your finances. You may find yourself at the limits of your income or even overspending. You don’t have money available to strengthen your financial foundation because all of it is going to other things. And I want to talk about two specific situations I see come up for lawyers beyond the typical like everyday overspending. The first one is trying to help everyone around you when you haven’t helped yourself yet. I often see this with lawyers who are the first in their family to become a lawyer or to make the kind of money they make. They are helping family and friends and everyone else financially because they feel this pressure to do so. Sometimes it’s external pressure, right family members or others who think that you have money so you should be able to help them and you should give them money and they’re looking to you to take care of them. But often it’s internal pressure. So you think you’re the one who quote made it right, you’re the one who has reached this level of success. And so you should be helping. You should be providing financially for members of your family or other people who just aren’t in the same position. And so you try to help everyone out, but you’re not taking care of your own finances. The second is lawyers who feel like they should be living a certain standard of life, like a certain lifestyle, and they take on all these large expenses, because I’m a lawyer, I got it right, the money is coming in or whatever. But a lot of times, we will take on bigger expenses than we are actually ready for. And let me say banks will lie to you like they’ll tell you that you can afford more mortgage than you can probably comfortably afford. I remember when my husband and I were buying our house and the size mortgage at the bank told us that we could afford and the rule of thumb was something like a third of our gross monthly income, like a little less than that, but I know it was tied to our gross income. It’s like yes, we can afford that if we don’t do anything but pay this mortgage. Right? Like why would I base my mortgage payment on my gross income when I don’t have my gross income available to pay it? But anyway, the issue in both of these situations is if you don’t have your finances together, you don’t have your foundation set and you’re giving all your money away whether to other people or to banks or other entities that you have to pay for these expenses you’re taking on, then it’s gonna be very hard to build a solid foundation to achieve your money goals. You can’t build a financial foundation with no money. You want to lay that foundation as soon as you can, which then puts you in a better position to be able to help others or take on other expenses more comfortably and not be putting yourself in a bind. And that doesn’t mean that you have to be completely out of debt and have all the savings and you know whatever else before you can help your family or your friends or buy or do the things you want to do. But what a lot of people do is say, Well, I know I’m making good money so I’m going to spend it on this thing. I’m going to give it to this person, but they don’t know what their actual financial picture it looks like. So if you don’t know how much you actually bring in each month, and how much you actually spent and how much debt you have, and how much you have in savings and you’ll have a plan for all of that to move you forward in the direction you want to go. Then you don’t know if you truly can afford to spend or to give to someone else. The main thing is you want to make sure that you’re not putting yourself in a place where you’re not gonna be able to achieve your goals. Right well you’re not going to be able to pay off debt to save and invest to build your net worth, because your money is going out to everyone else. Make sure that you’re not putting yourself in a precarious situation before you even had the opportunity to really lay a solid foundation for yourself. You can’t be giving all your money to other people, whether that’s an actual person like some of your family, or the bank or some other company because while you’re giving all your money away, then you’re staying in the exact same place financially or maybe even digging yourself into a deeper hole and you’re not able to make the progress that you want to make with your finances and you’re keeping yourself stuck right where you are. I’ve said before that wealth is built in the gap between your income and expenses, and all of the things that we’re talking about increase your expenses, you’re able to achieve your goals when you have a gap between your income and expenses that you can use toward paying down your debt, building your savings, building your investments, building wealth, that puts you in an even better position to be able to help your family to get the house get the car all those things right. So using my own example, we’re in a way better position now having no debt but our mortgage and significant savings and investments to be able to help our family than we were five or six years ago when we had $670,000 of debt and like $150 surplus each month. We have much more wiggle room to be able to help and we’re in a better place to be able to do things or get things that we want and have no concern that those things are going to impact us financially because of the work that we’ve done to lay our financial foundation. So how do you get there? How do you build a stronger financial foundation? It starts with knowing your numbers. How much money are you making? Each month? How much are you spending each month? How much debt do you have? How much argument on debt payments? How much do you have in savings? How about investments? What is your net worth? Right? That awareness is everything and with all that information. You can make a plan for your finances so you can decide whether you like how much you’re spending and the things you’re spending on. You can decide how much you want to be spending each month. You can decide how much you want to put toward paying off debt or saving or investing and overall increasing your net worth. And then you can start implementing that plan. For those who are helping family financially. The thing that I teach my clients to do is include in your budget, a set amount of money that you will use for the family things that come up. So you know, this is what I have set aside for my family. This is what I’m able to contribute to family things and still be able to make the progress I need to make to lay the financial foundation for myself. You can take that same approach with your purchases. So know your numbers ahead of time and set your budget for whatever it is. So you know you can spend this much on this thing and still have the money available to build your financial foundation. That way when you’re buying a house, or upgrading your house or buying a car or planning a trip, or whatever the thing is for you, you know how much you can afford and you’re not putting extra stress on yourself and making what could be a nice thing into something that’s not so fun or ultimately something you regret. The goal is to make sure all these things fit comfortably into your financial picture. And that may mean that you’re not able to do as much as you want to do right now. So you may not be able to give as much money to the family as you like, or you may not be in position to buy as hard to house as you’d like or as nice a car as you like or whatever. But there’s a lot of benefit to constraining yourself until you get to a stronger place financially and can do those things without putting a strain on yourself in your money. When you’re putting a lot of things on a weak foundation. It will inevitably fall when you have a lot of debt and little savings and then give the money you have coming into everyone else and don’t have a good handle on your finances. It’s going to cause way more stress than it’s worth and it’s going to lead to more problems for you. So I encourage you to get a handle on your finances and make your plan to build your financial foundation and then follow that plan and keep it in mind when you’re thinking about helping family or making large purchases or whatever. You still want to be able to make progress on your money goals. And not be putting yourself at risk financially while trying to help other people or taking on large purchases. And then when you build a stronger financial foundation, you’ve got less that you got more in your savings and investments. Your net worth is higher and continually increasing, you’re in a better position to be able to do more if you want to. So I hope that is helpful for you. If you know that you’re on a weak foundation, trying to take on all the things and you’re ready to turn that around, reach out to me, you can head to rho thomas.com/call and schedule your consultation. Alright, so that’s it for this week’s episode. Join me over on social media. You can find me on Instagram at I am rho Thomas and on LinkedIn. Subscribe to the show and leave a review both of which help more people find it. And of course you can always share with a friend or two who would benefit from this information. I greatly appreciate it as we close out for and I pray that you take some time to analyze the strength of your financial foundation. I pray that you create and implement a plan to strengthen your foundation and make sure that all of your expenses fit comfortably into it. And as always, I pray that you continue to take steps to regain control of your time, build wealth and live the life freedom and choice you deserve. Talk to you later.