287 | Making Financial Decisions from the Future

What if you could pay off all of your credit card debt in the next year? How would that change the choices you make today?

The thing is: short-term spending decisions can make or break that goal. One of my clients experienced this firsthand.

In this episode, let’s talk about why prioritizing the present over your future goals leads to regret and the importance of keeping your ultimate goals at the forefront.

• • how my client prioritized spending in the present and sabotaged her ultimate goal
  • the sacrifice required to achieve a goal
  • personal sacrifices that my husband and I made to get out of debt
  • the importance of making decisions with your ultimate goals in mind
  • how keeping our ultimate goals in mind led to long-term gains
  • what sacrifice looks like (it’s not what you think)

• 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 the importance of keeping your ultimate goals in mind as you’re making decisions for your money.

I had the idea to do this episode because of a come-to-Jesus moment that I had with one of my clients where this particular client was supposed to pay off all of her debt by her student loans by the end of this year. And then she was going to take a special trip that she wanted to take for her birthday at the beginning of next year.

But because of the way that she has spent her money throughout this year, she is not on track for that goal. She’s made some progress, but she hasn’t made nearly the progress that she could have made.

And so we were just talking about the fact that she was thinking about what she wanted right then in those moments versus thinking about this ultimate goal that she had. So she’s done a few different trips this year. She has done these designer pop-ups, like she’s into designer fashion. She’s done some of these pop-up sales and stuff like that. And she got these things and she enjoyed doing those things in that moment, but now she’s kind of regretting that she hasn’t made the progress that she could have made this year.

And there’s still time left in the end of the year. She still has time to make more progress, but she’s definitely not going to hit that goal of paying off everything but her student loans by the end of the year.

One of the things that we talked about in that conversation is the fact that there is some sacrifice required when you are managing your money better, when you have a big goal like getting out of debt, or if you want to leave your job, if you want to buy a house, like these things that require money require you to make some level of sacrifice.

You’ve got to do something different from what you’re doing now, especially if the way you’re managing your money now has you in a situation where you haven’t been able to save the way that you want it to, or you’ve accumulated a bunch of debt, or your checking account gets close to 0 each month, that kind of stuff. You got to make a change.

And I was telling her about my personal story, where my husband and I—for those of you who are not familiar with my story, we started back in 2016 after our first child was born because I wanted to go part-time at my job. And we were looking at the finances to see if we could make that work. And it just wasn’t gonna work. We needed my full income.

But before that point, we had gone to St. Lucia for our honeymoon. We went to Paris. We went to London. We were traveling, doing all of this stuff, living the life because we were making this money. But we weren’t paying attention to our finances and so when we came to this point where I wanted to be able to do, I was thinking something like 75, 80% at work, which would have meant that I would get 75 to 80% of my salary, I wasn’t able to do that.

And I didn’t like not being able to do what I wanted to do.

And so that required us to make some changes with how we were managing our money. And so our trips went from St. Lucia and London and Paris to Nashville, New Orleans, right? More domestic places that were closer that we could drive to. We live in Atlanta, and so we picked places that were near enough that we could drive.

That was a sacrifice. It wasn’t a complete sacrifice. Like some people say, you just can’t go on vacation at all, or you can’t go out to eat at all or whatever. But it was a sacrifice because we could have done bigger vacations or more expensive vacations because technically the money was there. But we now had this goal of getting our finances in order, paying down our debt so we didn’t have so much going out, so that we didn’t need every dollar that was coming in.

And so that meant that we were going to spend less on vacations and things like that, so that we could use that money for our goals. But it was a sacrifice that has led to us having way more options in life.

And that’s something that this client and I were talking about, because with the amount of debt that she has, like the minimum payments that are going out are a couple $1,000 a month. And so that would be a couple $1,000 back in her pocket if she had been able to pay it off by the end of the year. And then she could use that money for the trip that she wants to take for her birthday, and that kind of thing.

And she said something like she wants to be able to do both. Like she wants to be able to pay off her debt and do as many trips as she did, and the shopping and all of that kind of stuff, but that’s just not how life works. And it’s something that would be nice, right? I would love to be able to just spend however, do whatever, and still, you know, make money and pay off debt and build wealth and blah, blah, blah.

But we don’t have this infinite fountain of money where we can just do all of these things because we have a set amount of money that we’re bringing in. Of course, you can make more, right? You can take on side hustles or take on second jobs or things like that. But I’m saying working with the money that you have, you have to make choices and trade-offs with how you’re going to use that money.

So if you want to use it for a goal like paying down your debt or you’re trying to build your savings or build your investment so that you can start making money from your money, you have to decide how you’re going to spend less on the things that you’re currently spending, so that you have money to do those things.

You have to make decisions about how you’re going to use your money with those ultimate goals in mind. My client has not done that this year. She was doing all the things, living the life, had a great time. But as I said, now that we are getting to the end of the year and the point that she was supposed to be done with all of her consumer debt, she’s kind of regretting that.

And so I bring that up to encourage you, if you are in a situation where you’ve got a goal that you’re working toward, you want to have a certain savings goal, you want to pay off your credit cards, you want to build your investments to X, you want to buy a house or buy an investment property, whatever the financial goal is for you, you need to be thinking about that goal when you’re thinking about your present day decisions.

Because if you’re not, then the decisions that you make now with your money can hinder your ability to achieve your goal in the time frame that you want to.

So, going back to my own situation, as I said, we traded international vacations for domestic ones that we could drive to. And that’s just one of the things that we did. And I used that specific example in this conversation with my client because a lot of her stuff revolved around travel.

But we made those decisions thinking about the cost of that fancier vacation, that international trip, versus the cost of a closer trip, and being able to use that money for our goals. Because we did that, we were able to pay off everything but our mortgage in a little under six years. And because we paid everything off, it significantly decreased how much money we needed to cover our base level expenses, because we no longer had all those minimum payments that were going out for those different loans.

So then we have that money available to do the things that we want to do. And so then we resumed taking fancier trips, doing more international travel, and things like that. I also was able to drop down at work.

I went down to 80% initially when the firm increased the hours requirement. I dropped down enough so that I was at the same hours requirement that we were at before. And then during the pandemic, I was able to go down to 50% when I had a three-year-old and a one-year-old at home, and it was tough trying to balance it all.

And then I was able to leave the law altogether and go full-time in this business, even though I wasn’t making anything near what I was making in Big Law.

And more recently, I’ve started taking on contract law positions. Like I’ve had a lot more flexibility in my career because of those decisions that we made about how we were going to use our money.

We use the money with those ultimate goals in mind of being able to have more control over our time and our lives. That was the thing that kind of clicked for us when we realized that I couldn’t drop down after having our first child. It was that our decisions for our family were being dictated by the need for money. And we didn’t like that. And we wanted to be able to make decisions how we want to.

And because we had that ultimate goal in mind, it changed the way that we use our money from day-to-day. And it resulted in us being able to make the decisions that we want to make for our family.

You can’t keep doing the same things, spending the same way, not make any changes to how you’re using your money, and expect things to change. It doesn’t work that way. There is some level of change that’s required, some level of sacrifice that’s required. And that doesn’t mean sacrificing everything and never going out to eat and never going on vacation, but it might mean decreasing the level, right? Maybe you’re not going out to eat as often. Maybe you’re not going on as expensive of a vacation or for as long or something like that.

There is a measure of sacrifice there because technically you have the money to do that higher level that you’re used to, but you’re going to do this lower level so that you can achieve that ultimate goal that you have. So I just want you to remember, when you have a financial goal in mind, you have something that you’re trying to do, and you have these decisions in the present that arise that you can choose how you handle them.

Make sure that you’re thinking about that ultimate goal, and you’re not just doing this thing right now because I really want to, and it leads to you not being able to achieve your ultimate goal.

If you would like help with getting on track with your finances, getting out of debt, building your net worth, schedule a consultation at rhothomas.com/call, and let’s talk about how I can help.

Alright, so that is it for this week’s episode. Please take a second, subscribe to the show, leave a review. Both of those things help the show to get in front of more people, helps more lawyers to get this information. 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.