321 | How to Stop Overspending

Are you a lawyer who overspends?

Learning how to control your spending is the key to achieving all of your financial goals.

In this episode, let’s talk about how to stop overspending and what to do if it happens anyway.

• • a brief overview of my journey to getting on top of my finances
  • how to know if you’re overspending
  • the step-by-step strategy to stop overspending
  • what to do if you overspend after implementing the strategy

n/a

You’re listening to Personal Finance for Lawyers. I’m Rho Thomas, and as a busy wife, mom, and former Biglaw associate, I know all too well the tension between the culture of the legal profession and pretty much everything else you want to do in life. That’s why each week, I’m bringing you the information and tools you need to improve your money mindset and manage your money to create true wealth. Because ultimately, it’s not about the money. It’s about the freedom and flexibility the money affords.

Hey friend. Welcome back, and happy summer. I am doing something I have not done in the six years I’ve recorded this podcast, and that is taking the summer off.

In place of recording new episodes, I’m sharing webinars I’ve done, trainings from private programs, and past episodes. So, please enjoy today’s episode, and I hope you’re having a great summer.

****

I’ve got two goals for this workshop. The first is to teach you about overspending, like how you can stop overspending. And then the second is just to engage with you, to be able to have a conversation, all of that kind of thing.

Because one, I think that money is such a taboo topic in our society, and it’s one of those things where if we don’t talk about it, we don’t ever get comfortable with it. We don’t ever learn. So I want us to feel more comfortable talking about money.

But two, when you are actively engaging, when you are responding in the chat, all that kind of thing, then you are able to learn better, to retain more information according to different studies, so that’s why I’m asking for engagement in the chat. I want you to talk back to me, so that we can have a conversation and just get the most out of this workshop today. Sound good? Let me know in the chat. We’re practicing. All right, perfect. Love it.

So for those who don’t know me, my name is Rho Thomas. I am a lawyer turned financial coach and my journey with my finances started back in 2016. I had a newborn at the time, and I was working at a firm that allowed for reduced hours where you could do a percentage of the billable hour requirement for that same percentage of your salary, so I wanted to do that.

But when I looked at my finances, we were not in a position to take that kind of pay cut. We had $678,000 of debt and a negative $342,000 net worth. So we went on this whole journey to pay off our debt and to get our finances in order so that we wouldn’t ever be in a position where we couldn’t do the kinds of things that we wanted to do because of money again.

And one of the key things with that is getting on top of our spending, because although we were making six figures, we had like $100 or $150 left at the end of each month. And at first we were trying to put that toward the debt, but of course, if you’ve got $600-something-thousand, making an extra $100 payment isn’t really moving the needle a lot, right?

So that is how I got started on this whole journey. And over the last four years, I’ve worked with over 100 lawyers to help them get started with paying off their debt as well.

My clients have collectively paid off $300-something-thousand. They’ve saved another $100,000. And all of the things that I am teaching today are the types of things that I’ve taught them. The stuff that you’re learning today is foundational to be able to pay off your debt.

All right, so in this workshop, we’re talking about overspending. I have helped so many lawyers over the years get on top of overspending, get their spending under control, all that kind of thing. And I think often we avoid this topic, like we avoid looking at our finances. We avoid seeing what’s going on with our bank account, seeing where we’re spending, because it feels scary, because it’s not something that we are used to doing.

But as I said, it is, you know, the baseline, the foundation of anything else that you want to do. I think there’s a lot of shame around money, and it doesn’t have to be that way.

By the end of this workshop, you are going to understand how to manage your money better, and you’re going to have a plan for how to stop overspending and what to do if you get off track, if you end up overspending in the first place.

As I said, this is the baseline for any financial goal you have. So it is really important, and it’s going to set you up for paying off debt, for saving more, for investing, for saving to buy a house, all that kind of stuff.

All right, so if you are ready, let’s type in the chat, get ready, and we can go.

So we are about to get started talking about overspending. And you’re all here. You want to learn how to stop overspending. It is a very important thing, but I want to start with a question first.

How do you know you’re overspending? Tell me in the chat.

Christian says not enough money left at the end of the month. Okay. When you don’t have money left. Anyone else? In debt. Yes, I hear you.

All right, well, yes. But what I have found often with lawyers is a lot of lawyers believe that they’re overspending. Like they tell me that they’re spending too much, but they don’t know how much they’re spending in the first place. And they never set a goal for how much they wanted to spend, right?

And so there are situations where people are spending more than they want to, right? Like Nesha said, getting into debt. If it’s like you run out of money and now you’re relying on credit cards, then yes, we can say that that’s overspending.

But beyond that, what if it’s impossible to overspend if you’ve never set a goal for how much you wanted to spend? Have you ever thought about that?

Because that goal is the baseline for what you want to spend, right? And so that goal is going to tell you objectively, like, this is how much you want to spend. And when we are beyond that number, now we can say that we’ve overspent. But a lot of times we don’t have that goal. And so our brains automatically default, especially lawyer brains, where it’s like, we have to be A plus perfect or we failed basically, right?

It’s like lawyer brains will automatically default to you’re overspending or you’re doing too much. Like perfect example. I worked with a life coach during the pandemic. I was still practicing at the time. My kids were three and one. I was trying to do all the things. My husband was working with COVID patients directly, and we didn’t know what was going on. And then I had this budding idea for this business, right?

And something that had come out in working with my therapist was that I always put myself and the things that I wanted on the back burner when things got crazy in life. So I was showing up for everybody else and not showing up for me. Can anybody relate to that? Does anybody else do that? Don’t tell me it’s just me.

Nesha said, yes.

Yeah, so for me, my business, especially when I was first starting, it was almost like tied to me, right? Like it was, it was like an example of me sticking up for me. Christian, yes, I think lawyers all have that as a common trait. Yeah, right?

And so like I wasn’t willing to give up the business because for me, the business was me showing up for myself. And so I remember when I was working with this coach, one of the things that came up a lot in our coaching was like, I feel like I’m not doing enough. I’m not spending enough time with my kids. I’m not billing enough. I’m not posting enough on social media, right? Like all these things, I’m not doing enough.

And we would, she would ask me like, what is enough? How do you know that you’re not doing enough if you’ve never defined what enough is? And I was like, huh?

And this is the same thing here. Like, how do we know that we’re overspending if we’ve never defined like what we want to spend? So that is one of the key things with getting on top of overspending. Defining what is overspending. Like when you know this is how much I want to spend, then you can say, when I go beyond that, I’ve overspent.

Does that make sense to people? Let me know. Nesha says, “like a budget?” Yeah, so basically, yes, you’re setting that plan of how much you want to spend. Alma says makes sense. You’re setting that plan of how much you want to spend. So then you know that once you go beyond that, you have overspent.

So let’s assume, for purposes of this workshop, you know how much you want to spend, and you are overspending, right? So we’re going to talk about how to stop, but I wanted to provide this slight shift in perspective, because I think it’s really easy for us to say, I’m overspending, I’m spending too much, but we’ve not defined how much we actually wanted to spend to be able to say that I am overspending.

We’re going to talk about how to stop overspending. So the steps to stop overspending is to figure out where your money is going now, to create a realistic plan for your spending, the budget that Nesha just mentioned, to check in with that plan, and not beating yourself up. So let’s dive into each of those. I want to dig a little bit deeper.

The first thing you want to do is figure out where your money is going. You got to know where your money is going now to be able to create a plan for where you want it to go. We want to know where you’ve been spending, how much you’ve been spending, what things you’re spending on, all of that kind of stuff. Because having that information is going to help you to make decisions about whether you like where you’re spending, whether you want to make some changes.

When you are in a position where you’re overspending, like you guys mentioned, not having enough money left at the end of the month, right? Or not having as much as you would want left at the end of the month. Like if you’re in that position, then there are going to be some changes that you want to make. But you got to know where the money is going first.

So let’s get an idea of where things are going and then once you do, then you’re going to create a plan for your spending. Again, this is the budget. A lot of people don’t like the word budget. If you want to call it a spending plan, that’s fine. Some people call it like a cash flow system or, you know, all of these different words for it.

Really, it’s just a plan for where you’re going to spend your money each month. So, you know, this is how much is coming in. This is how much is going out. This is where I’m going to spend it. I’m going to spend this much on, you know, my rent or my mortgage. I’m going to spend this much on groceries. I’m going to spend this much going out to eat. I’m going to spend, you know, whatever the different categories are, you’re deciding intentionally on the front end, how much you’re going to spend in those different categories. So you’re making that plan.

Now, when you are creating your plan, you want to make sure that the plan is realistic. One of the biggest things that I see, especially with lawyers is we’re like, I want this to be the A plus, ideal budget, like I should be able to spend this much or I should be able to do this. And it’s not realistic for your lifestyle or for the different obligations that you already have or the things that you want to do.

And so when you create a plan that’s not realistic, then you’re setting yourself up for overspending because you’re going to say, I should be able to spend, you know, $500 in this category, but typically you’re spending $1500 or $1000 or whatever it is. Your average spending in this category is beyond that, so spending $500 probably is not going to be realistic.

So we want to make sure that when you create your plan, you make it realistic. You make it something that is not too far off from what you’re already doing. Like, yes, we’re optimizing, we’re making it more effective. We are creating more room between your income and expenses, but we don’t want to go from $1500 to $500, right? It’s going to be like maybe you go from $1500 to $1000 or to $1200 or something like that, where it’s not so far off from where you’re at already that you can realistically hit that budget and not go over it.

Does that make sense? Talk to me. What are you guys thinking? Christian says, definitely makes sense. I think that’s where I failed in the past. Yeah, that’s a big, like it’s a common mistake. Where, you know, people are trying to set up these like great ideal budgets, but it’s just not realistic for their lifestyle.

And so then inevitably you’re going to end up spending more than what you planned because what you planned was like what the typical whatever the A plus budget would be, but not what’s realistic for Christian.

Nesha says, yes, I get caught up on trying to do it right. A lot of people do that. And the thing is, there is no right in personal finance. Like I tell my people all the time, you get to make the rules because it’s your money. So like, yes, There might be some guidelines or things like that, like some best practices that you want to have in mind. But ultimately, you get to decide what you want to do because it’s your money. And when you’re trying to fit into some mold of what you should do or what these experts say, like should be, often that’s where we go wrong and where we end up all off track because we’re trying to do something that somebody else thinks we should do and not doing what actually works for us.

Okay. Number three, check in with your plan. How many people have made a budget or a spending plan or whatever you want to call it? And you’re like, yes, I got my plan together. And then you just set it to the side and you never looked at it again. I know I did that at first. And then a lot of my clients do that. Anybody on here do that?

Alma says, “yep!” I see some laughs, some hand claps. Yeah, like that is a common thing too, where it’s like, oh yeah, I made my budget. I’m doing the thing, right? And then we don’t look at it again. But if you don’t check in with the budget, how are you going to stick to it? Like if you make a plan and you’re not checking against it, then you’re not going to be able to stick to it, right?

So it’s impossible to keep up with your plan because a week in you forgot what you put in the plan. And then the end of the month, you’re like, oh shoot, I was supposed to do this or I was supposed to do that.

So you want to check in with where you are with your spending in relation to your plan. And I have my clients do this weekly. So like you create your plan at the beginning of the month, you’re like, okay, I’m going to spend X, Y, Z in this place, this place, that place. And then each week you’re like, okay, where am I with this spending? Where am I in relation to this?

And so an example here, is let’s say, just for the sake of simplicity, that you decide you’re going to spend $400 in a particular category. And so you’re like, okay, $400 for the month is about $100 a week. So like we’re, you know, what, three weeks into May. So you would be at about $300, of course, depending on what that category is, but you’d be at about $300, right? So that way, you know, you’re staying on track.

If you are, you know, over that already, or if you’re, you know, half the halfway in and you’re already at your $400, then you know that you’re not on track. Checking in with it each week is going to help you to stay on track in that way.

When you check in with your plan, your actual spending, you’re able to kind of course correct if you need to. So you see that you’re off track, you can make a plan like, okay, maybe I’m not going to spend on that thing this upcoming week to get myself back on track or whatever the situation would be.

But you can’t do those types of things, like make those types of corrections if you’re not checking in with the plan in the 1st place. All right.

And then #4, don’t beat yourself up. I always put this in here because I think we have this tendency to beat up on ourselves, to like hold ourselves to this really high, unrealistic standard and like talk down on ourselves and say all these mean things and all of that because we haven’t hit whatever goals that we thought that we were going to hit or because we’re overspending or we have less money than we want to have at the end of the month or whatever has happened.

But when you do that, it just feels bad, right? I always tell my clients, like, it doesn’t change anything that’s happened in the past. Like when you are beating up on yourself and you’re talking down to yourself and like, I shouldn’t have done that. I shouldn’t have made this mistake. It doesn’t change anything about what happened the first three weeks of May, right? Or the first whatever. Like it doesn’t change what happened. It only makes you feel bad.

And so when we are overspending when we are in these types of situations, the thing to keep in mind is that it doesn’t mean anything about you as a person, right? Like money is a like not good, it’s not a good thing. It’s not a bad thing. Like it just is. And you can look at it objectively and take that emotion out and not make it mean something about you that you’ve done wrong, that you are bad or anything like that.

You can just look at it as data. And it’s like, okay, this is where I am. And now what’s my step? What’s my next plan to get back on track? And it doesn’t have to be all of the beating yourself up and all of that. Because a lot of times, when you are beating yourself up, when you are talking down to yourself, because it feels bad, you subconsciously then avoid this thing, right? Like you start associating your finances with feeling bad. And so subconsciously, you’re like, I don’t want to touch that. I don’t want to look at that.

And so that’s how we get into this cycle of not looking at our finances. And then when you’re not looking at it, you don’t know what’s going on with your spending. You haven’t created a plan, then of course you’re going to overspend.

And then you just kind of get into this perpetual cycle because it feels bad because you talk down to yourself, you beat yourself up, all of that kind of stuff. So one of the key things that I do, like a little trick that I use is to try to think about how I would talk to a friend, a loved one, someone like that in a similar situation, because we tend to be harder on ourselves than we would be with our friends or our loved ones.

And if that helps you, think about how you would talk to your best friend or how you would talk to your partner or spouse or how you would talk to your kid or, your parents, right? You wouldn’t say to them, like, oh, how could you be so stupid? Like, how could you have gotten in this position? You would be understanding. You would be compassionate.

And so we can bring some of that same compassion, some of that same understanding to ourselves. And it allows us to have a much better experience of our finances, even if we make what we deem to be a mistake. All right?

So that’s what you’re going to do to stop overspending. You’re figuring out where your money’s going, creating a realistic plan, checking in with that plan, and then not beating yourself up along the way.

Now let’s talk about what to do if you overspend, because it will still inevitably happen. I still overspend sometimes, and that’s okay.

So the steps here are have compassion for yourself, like we just talked about, get an understanding of what happened, and then make a plan so it doesn’t happen again.

Again, the first thing is having compassion for yourself. And you’ll notice that’s a theme because of all of this the negative talk that we have around our finances. But like I said, that is only going to make you feel bad. It often leads to us avoiding our finances, which does not help the situation. So just have some compassion for yourself. Like it is okay. Think about how you would speak to a loved one and try to bring that same kind of perspective to yourself as well. All right.

I have a note here. I said, even if nothing changes about the situation, you can have a completely different experience of the situation by the way you treat yourself. And so I think that’s something important to think about, to learn.

All right, the next step is to understand what happened. So think about what was going on in your life at the time. Think about if you were going through a transition, like a new job or something like that. If you were feeling stressed and maybe you were shopping to relieve the stress or you went out to eat because you didn’t have time to cook. Like what were the things that were happening here that contributed to you overspending?

Were there expenses that were unexpected that came up? Or were there expenses that were expected, that do come up, but maybe they don’t come up every month and so you just forgot to plan for that, like maybe it’s some sort of quarterly expense or, it comes up twice a year.

So what are the things that happened that caused the overspending? Because once you know what happened, then you can make a plan to fix it.

That’s the third step. Creating that plan. And the plan is going to be specific to what you identify as the cause of the overspending. So if it was a situation where you were going out to eat, right? For example, one of my clients was spending more than he wanted to going out to restaurants and bars. And so we looked at it and figured out why that was happening. He realized like, oh, well, I’m not checking in with my plan as often as I’d like. And then he also never created any sort of guideline for himself of how much he wanted to spend when he went out.

So he would just go out, just spend, and then, at the end of the month, it’s like, oh, shoot, I spent more than I wanted to in this category. And so he decided to start looking at his plan, like looking at where he was in relation to his budget on Fridays before going into the weekend, which was when he was typically going out.

And he would look at that plan and see like, okay, I’m this far into how much I wanted to spend in this category, and this is how much I want to spend going out, right? And I think he also divided out…so let’s say, just for the sake of this example, that he was going to spend $400 a month on restaurants and bars. And I’m pretty sure it was more than that, but he’s going to spend $400 a month. And so he decided each weekend, he would have $100 to spend, so that way, he can keep himself on track, and he knows where he is within his budget and he can make sure that he’s staying on track and not spending more than he wanted to.

Another example was a client who, when she got stressed, she would impulse buy stuff on Instagram or online, like Amazon. She really likes Sephora, stuff like that. And so one of the things that we looked at there was like, okay, she’s got, you know, stressful things happening in her job. Nesha says that’s me. She’s got stressful things happening in her job, but what can we do to kind of give her this obstacle, if you will, to the impulse shopping?

And so we were like, what if we remove all of your payment information from Instagram, from the stores, that kind of thing, so that when she’s feeling this urge to shop, she now has to go and get her credit card and type in the information and that just gives her a little step to like, think about it and do I actually want to make this purchase, right?

She also decided to, instead of completing the purchases, just put stuff in her cart. And then she would go back through each week and see like, do I actually want to buy this thing or not? And that helped her significantly to cut down on how much she was spending with the impulse.

So those are just two tangible examples of how people can use the strategy of addressing exactly what happened in the overspending so that they can make sure that it doesn’t happen again. Does that sound doable to everybody? Like, how do those plans sound?

I see a heart. Yes. Love it.

The reason why these things work is when you know where your money is going, you can create that realistic plan for how you want to use it going forward. And then when you create a realistic plan, and you’re intentional about where you want that money to go, and you’re checking in with the plan regularly, then you’re much more likely to stick with the plan. All of that means you’re less likely to overspend.

And then if you do end up overspending, when you have that compassion for yourself, you can have a better experience of the overspending. So even though it’s not ideal, it’s not what you would have wanted, you’re not piling on the guilt and shame on top of it.

Like I said, I teach my clients that money is neither good nor bad. And you can take the emotion out of it and just look at it as this objective thing, look at it as data, and then come up with the strategy like those two examples that I gave of how do I address this going forward?

And you don’t have to have the shame and beating yourself up on top of it. Taking the time to understand what happened, creating a plan to address it going forward means that you’re much less likely to overspend again. So it all comes back to reducing the likelihood that you overspend.

And so like I said at the beginning of the workshop, mastering your spending is foundational to any financial goal that you want to achieve. So if you’re able to do the things that we talked about here, then you’re going to have way more control over where your money’s going, and you’re going to be able to direct more of it to paying off debt, to saving, to investing, all that kind of stuff.

And beyond that, you’re just going to feel better about money, period. You’re not going to overspend as often. And even if you do, you’re going to understand why and you’re going to know exactly what to do to get yourself back on track.

****

Alright, I hope you enjoyed today’s episode and got a lot out of it. If you have not done so already. Please subscribe to the show, leave a review, and/or share this episode with a friend or two who you think could use this information. All of that is how we get this podcast in the hands of more lawyers, and as always, I appreciate your support.

As we close out, friend, I pray that you take the information you learn here, apply it in your life, and open up to the realization that wealth is available to you. As you do that consistently, week after week, you’ll continue to take steps to take back control of your time, build wealth, and live the life of freedom and choice you deserve. Talk to you later.