303 | Justified and Broke

Too many attorneys are stressed, overextended, and broke despite high incomes.

For many, rationalizing bad spending habits is the main culprit.

In this episode, let’s talk about four common justifications for bad spending decisions that keep lawyers stuck and a new way to think about money, so you can build financial security.

• • examples of attorneys justifying bad spending decisions
  • the four common justifications attorneys give me for their decisions
  • the negative impacts that putting your kids before your financial wellbeing has on them
  • status signaling in the name of maintaining your professional image
  • feeling entitled to luxuries because you work hard
  • comparing your behind the scenes with others’ highlight reels
  • an important mindset shift for financial security

• Episode 256: From Bankruptcy to Wealthy Woman Lawyer with Davina Frederick (Part 1)
• Episode 257: From Bankruptcy to Wealthy Woman Lawyer with Davina Frederick (Part 2)
• Need help with your finances? Schedule a consultation here

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.

Today, we are talking about justifying bad spending decisions. I want to preface this episode by saying if you are in the kind of situation I’m going to talk about today, if you are one of the many attorneys that I’ve had this kind of conversation with before, this episode might feel a little spicy.

But I want you to receive it in the manner in which it’s intended. I’m not trying to hurt your feelings. I’m not trying to poke fun at you. I just want you to be better. And I think thinking about how we justify our poor spending decisions and how it leads to the financial messes that we find ourselves in is very important to helping you change that mindset so you can get out of it.

So with that, I have talked with so many lawyers over the years who are making poor spending decisions and then justifying it. I’ve talked with people who are struggling to pay their mortgage because they took on a mortgage that is some huge percentage of their take home pay. One attorney I talked with a couple years ago was paying 70% of her take home pay on her mortgage, and she justified it because she’s in a high cost of living city.

I’ve seen others who are struggling to pay the mortgage because they are paying for all of these different activities and the private schools and all of that because they want to give their kids a better life than they had. I’ve seen people who are going on vacations because their friends are doing it, but they are in tens of thousands of dollars of credit card debt, and they feel like they deserve it. I have worked with people who are spending on all of these different designer purchases, and they justify it because they need to portray a certain image as an attorney.

All of these people have convinced themselves that the spending is necessary. They’ve got all the justifications for why they needed to spend this money, and they don’t think that they’re making bad decisions. But the truth is they are telling themselves lies. They are telling themselves these stories to justify the spending, and the stories that they’re telling themselves do not line up with the math, because if it weren’t a bad decision, then you would not be struggling with your finances after making it.

There are a lot of reasons, I think, that people rationalize or justify their spending. I think a big one for attorneys is trying to portray a certain lifestyle that you think or that you think others think lawyers should live. I think also there is this underlying fear of failure, like if I admit that this spending, the way that I’m spending, is unsustainable, then it feels like I’m admitting that I failed.

And so we create these justifications for why I should be spending this money, why I need to spend this money, even though it’s taking me further into debt, even though I’m struggling and I’m stressed all the time. But when we are justifying these purchases, you are making yourself feel better about spending the money, but you’re also making yourself feel better about the real financial problem that you have. You are protecting this purchase, but you also aren’t solving the problem. You’re not making the problem better.

There are a few common justifications that I see, and a lot of the things, I even venture to say all of the people that I’ve talked to, their justifications fall into these common categories. So it’s stuff for my kids. Like, this is for my kids. It’s very, very important. It’s needing things for work. This is my profession. This is my professional image. I need this for work. I deserve it. I work so hard. I’m a lawyer. I’m supposed to live this type of lifestyle. And then just the comparison trap. Well, they’re doing it. I actually had a client who took a trip, and part of the reason why she did was her friends were taking the trip. None of her friends are lawyers, and she feels like, as the lawyer, she should be able to take the trip too. So those are the common kind of four justifications that I see.

Let’s talk about them deeper. Starting with it’s for my kids. I have seen people have their kids in expensive private schools, but they’re struggling to pay the mortgage. I’ve had people have their kids in all of these different activities, the sports, the piano, the all of these extracurriculars that are costing them thousands of dollars, but they are overdrafting their account. I’ve seen people do these huge vacations because they feel like their kids should have this type of childhood because they weren’t able to have it.

And I get wanting your child to have a better life. I get wanting your child to have the best, but you can’t neglect your own finances to do it. If your finances can’t support your kid going to that school, being in those activities, doing this vacation, you can’t do that because at the end of the day, you are making things worse for your kid on the back end.

If you think about the amount of people who are having to take care of their parents financially. It’s the sandwich generation, right? People who have children but then are also taking care of their parents. And I’m not talking about people in which this is just the norm in their culture. I’m talking about people whose parents did not prepare themselves financially and now are struggling because they’re out of the workforce and now their kids are helping to subsidize their lifestyles.

When you are putting your financial wellbeing behind creating this life for your child, creating these experiences, making sure that your child is able to take these vacations that you were never able to take, and all of that kind of stuff you’re setting yourself up to be dependent on that child when they grow up. I am certain, I am 100% certain, that your kid would rather do fewer activities, be in a less prestigious school, take fewer vacations than have to support you in adulthood.

Beyond what will happen in the future with the kid having to support you because you’re not setting yourself up financially, I’m also pretty sure that some of that stress, the anxiety, the fear that you’re experiencing in the present is bleeding over into your child. Even if you’re not talking about it, even if you’re putting on a brave face, kids can feel that, and I am sure that they would rather you feel less stressed, feel more secure, than try to give them this so called perfect childhood.

Next, let’s talk about the professional image. So I’ve seen people who want to be in the “right” neighborhood, and they are stretching themselves thin to be able to get a home in this neighborhood, even though their finances can’t afford it. I have seen people who are buying all of this designer stuff, and you guys know, or if you have listened to my podcast, you know, I am not against the luxury designer stuff. I have bought those things myself.

But I think there is a balance. And I talk about balance a lot. There’s a balance that has to be had there where you can’t be buying all of the luxury designer things at the expense of your finances. And I’ve seen people who are buying all of these designers and things and overdrafting their account or their credit card balances are sky high. A lot of times it’s like, “Oh, I needed to buy a new bag for work.” But then the new bag for work is some luxury designer that costs thousands of dollars, and that sets you back financially.

I think sometimes we think that we are just buying this thing out of necessity, right? I’m an attorney. I need to have this level of clothing, this level of bag, this level of house, this level of whatever. But nobody ever said that. There’s no rule that says that, and a lot of times, those purchases are more about status signaling, showing that you are the one who made it, showing that you can make this purchase because you’re an attorney, more than it is about actual necessity.

And so I want you to think about that the next time you are making a purchase, or you’re thinking about these types of things. My kids have to be in this school. They have to do these activities. I have to buy this kind of clothing. I have to be in this social club, whatever it is. Think about whether it’s actually a need or if it’s more a status symbol for you to show that you are an attorney. You have made it. Because a lot of times that professional image does not need to be all that people try to make it out to be.

And again, when you are in a precarious financial situation and digging yourself deeper in a hole for the sake of your professional image, it’s just not a good thing. And at the end of the day, if you end up losing those things, losing the home, the car, whatever it is because of your finances, what does that do for your image?

All right, so now let’s talk about “I deserve it.” And everyone doesn’t necessarily say those words, but there often is this underlying message of, “I work hard. I’m an attorney. I deserve this.”

I think that is what was underlying the woman I talked about who is spending 70% of her take home pay on her home. Because I remember one of the things in that conversation she said was there were cheaper homes available, but they were uncomfortably small, or they were unpleasantly small, or something to that effect. And it was like, okay, I understand wanting to have a certain lifestyle, wanting to have a certain comfort level, whatever, but when you get to the point that you’re spending 70% of your take home pay on a home just because you didn’t like the size of the homes that you could afford, that’s just not a good financial decision.

Another thing that comes up is the vacations that people take because they feel like they work hard and they deserve it, but then they’re overdrafting their account, or they’ve got tens of thousands of dollars in credit card debt from trying to keep up this lifestyle of travel because they work so hard.

The thing is, when you put yourself in that kind of position where you are overspending, you’re spending beyond your means, because you deserve these things, you keep yourself in this cycle of spending and having to work even harder to try to dig yourself out of the hole. I get it. You work hard, right? Attorneys do work hard. I am not disputing that.

You should be able to enjoy the fruits of your labor, but how much are you enjoying it when you are stressed about money? When you’ve got these rising credit card balances? When you’re always worried about what’s going to happen with your paycheck, and when that next paycheck is going to come? And you’re counting on getting a tax refund, you’re counting on getting a bonus, because you need that infusion of money, because you have not learned to manage the money that you already make. You’re spending beyond your means. You’re spending more than you’re able to spend, and it’s not sustainable.

And then the final situation, the final justification that I see a lot, is that comparison. They were able to do it, so I should be able to do it, too. You see your co-worker upgrading their house, or you see these people on social media who are portraying a certain lifestyle, and you’re trying to keep up. I remember talking with a friend of mine, Davina Frederick, and that conversation is actually on the podcast, but she was talking about how some of her friends who have adult children are bringing their children on vacation with them.

If someone who is friends with the children sees that the children are on vacation, they may not realize that their parents actually financed the entire thing. When you’re seeing your co-workers upgrading their homes, or you’re seeing your friends go on these different vacations or buy different purchases, or you’re seeing these influencers or whoever buying things, you don’t know how they’re doing that. And for you to base your spending decisions on what someone else is doing is short sighted.

Too often we are comparing our actual lives to other people’s highlight reels. You know what’s going on behind the scenes in your life, and how you’re juggling and I’m going to pay it on this credit card, and I’m going to juggle this, and I’m going to use this to pay that one off so that I can put this on. All of that stuff is very stressful.

And you are looking at that and looking at, okay, I can’t afford this type of vacation, or I can’t afford these types of clothes, or I can’t afford that house, but this person can. They’re in my same position. If they’re able to do it, I should be able to do it, too. But again, you don’t know how they’re doing it. I want you to really think about the decisions that you’re making and the impact that those decisions have on your life and your finances while you’re worried about trying to keep up with somebody else who’s not even thinking about you.

At the end of the day, every time we justify a bad spending decision, we dig ourselves further and further in the hole, and we put off actually finding a real solution. You stay stuck in the paycheck-to-paycheck cycle. You stay buried under credit card debt. You don’t have an emergency fund, so you’re just one bad thing, one unexpected expense away from disaster. You’re constantly stressed, constantly feeling anxious about how you’re going to pay your bills. If you have a spouse or partner, a lot of times there’s tension there in the relationship because you’re always fighting about money, always worried about money. You feel stuck in jobs.

I’ve talked to so many attorneys who don’t want to practice law anymore, but they can’t afford to do something else. It should not be this way. When you make six figures, multiple six figures, there is no reason that you should be feeling stuck and anxious and not have savings and be in all of this credit card debt and all of that.

And again, I think a big part of it comes down to justifying bad spending decisions, because I’m a lawyer, because I deserve it, because I’ve got to do this for my kids, because these people are doing it, and they’re not even lawyers. You’ve got to change the way that you think about money and spending. And rather than thinking, “Oh, can I justify this?” Rather than coming up with the reasons why this purchase is “necessary,” I want you to start thinking about, “does this purchase move me closer to my financial goals or take me further away from them?” Think about, “am I actually buying this for a necessity reason, or am I buying this for the way that other people are going to think about it? Would I still buy this if nobody else saw it?”

Because so many of our spending decisions are based on trying to portray this image to other people, rather than things that we actually want or things that we actually need. Instead of always thinking that spending is the solution, maybe start thinking about your financial security and what that looks like. Start thinking about your money differently. And again, this is not to say that you can’t spend on things that you want. You only have to spend on necessities. That is not the way that I think at all. I don’t think that that is sustainable, but I also know it’s not sustainable to keep justifying bad spending decisions and keep yourself stuck.

If you try hard enough, you can justify just about anything. There’s always a good reason, right? You can come up with a good reason for why I had to buy this, why I had to spend that, but justification does not change math. The fact that you live in a high cost of living city doesn’t change the fact that you can’t afford to spend 70% of your income on a single bill in your life. If your spending decisions are keeping you anxious and stressed and broke. The best thing you can do is to stop justifying them and start making different decisions.

All right, so that is it for this week’s episode. Please take a second, share this episode with a friend or two who you think could use this information. I greatly 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.