312 | The Mindset of a Wealthy Lawyer

Building wealth is about way more than your income. It starts with the way you think about money.

In this episode, I’m sharing a lesson from one of my group programs about the importance of changing the way you think about money to align with wealth-building.

• • statistics on people living paycheck to paycheck in America, Canada, the UK, and Australia
  • why you can’t do what everyone else is doing if you want to build wealth
  • why the common way of thinking about money keeps people broke
  • a different way of thinking about money that builds wealth
  • how two multimillionaires think about money
  • how my husband and I have used similar thinking in our own finances
  • enjoying your money without stress
  • making atypical decisions to build wealth

• Apply for a strategy session

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 I’m bringing you a lesson from the vault. This is a lesson from a group program that I ran a few years ago, and it was all about the importance of changing the way you think about your money on your wealth building journey.

This was one of the first lessons in the program, and the point of it was to show the participants how important your mindset is in managing your finances better and building wealth.

So, please enjoy this lesson, “The Mindset of a Wealthy Lawyer.”

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We are talking about developing the mindset of a wealthy lawyer.

Building wealth is not about how much you make. It’s about what you do with the money you make and how much of it you’re able to use to improve your finances.

There have been numerous studies that show that 60 to 78% of people in America are living paycheck to paycheck and an appreciable number of people who are making six and even multi six figures are as well. One study found that 25% of households making $150,000 a year or more are in this position. And another found that a little over a third of people making $250,000 or more are as well.

Now these stats are for America because I’m based in America, and I have worked primarily with lawyers in America. But while I don’t have numbers for every single country, I have worked with some lawyers outside of America and I found similar numbers.

A little over 50% of Canadians are living paycheck to paycheck, about 40% of people in the UK are, and about 50% of people in Australia. And I know that those numbers are not representative of every single country, but those are the figures that I have.

All that to say that managing your money well and building wealth is not the norm for most people, so you can’t manage your money and build wealth doing what everyone else is doing. There is a difference between the way wealthy people manage their money and the way people are struggling to get by or just barely managing kind of treading water, manage theirs.

We want to tap into the way the wealthy people manage their money and it starts with thinking about money differently from the way that you may be used to thinking about it.

The common way of thinking about money is get everything I can, get the biggest I can, as soon as I can, trade up to get even bigger and better. There are so many people who are stretching their finances to the limit trying to keep up. And that’s what keeps a lot of people in the paycheck-to-paycheck cycle, even when they’re making six and multi six figures.

So many people look at money as a way to buy more and better stuff. We want to get to this place of living the fancy lifestyle as soon as possible and we will overextend ourselves trying to get there before we’ve actually put ourselves in a strong enough position to be able to do it. That’s one of the biggest reasons that people feel so stressed and anxious and worried about their money.

And fancy is relative, right? Sometimes you may not necessarily consider what you’re doing to be fancy, but it may still be a little more than your income is able to afford in this moment. When you’ve got so much of your income tied up in bigger rent or mortgage payments or car payments or brunch or trips or whatever it is for you, you end up having a lot less wiggle room in your budget because your cash flow is tight, which means you’re not able to make progress as quickly as you want to on your financial goals.

Instead, you want to always be living on less than you can technically afford. You want to delay taking on those larger and more expensive purchases until you’re in a comfortable position to do so. We’re not just scraping by to be able to pay for things, and if the money is there or the credit’s available, then we’re going to buy it. That’s how most of society is managing their money, but that’s not what we’re doing here, alright?

We are making sure that we are in a strong financial position before we make the purchase in the first place. We are building wealth, not just having a bunch of cool stuff and looking like we have money.

To illustrate this, I want to share an example from an interview I heard with an entrepreneur who is a multimillionaire. He was talking about when he and his wife hit their first million, and at the time, he was still driving an old beat up Toyota Camry. He said somebody saw their car and was like, you know, “Oh, I thought business was good. I thought you were getting rich.”

That statement is an example of the common way of viewing money. There’s this emphasis on looking wealthy, spending money, buying the nice things, but those things don’t necessarily equate to having wealth.

The guy actually had a million dollars, but he didn’t fit this person’s image of what a wealthy person should look like, what that person should be driving. The entrepreneur went on to talk about how he and his wife eventually did buy the fancy, million-dollar house and the luxury car and all of that stuff, but they did it when buying those things was such a small blip in their finances that it didn’t really affect them.

I also heard another multimillionaire talk about a similar view on money management. He said something to the effect of, “If you’re paying 40% of your income to taxes, why not also pay yourself 40% and use that money to invest? Then you live on the remaining 20%.”

I think this is just another great example of the way wealthy people think about money. Even if you don’t like the specific percentages that he outlined, the key point he’s making is you live on substantially less than you make, substantially less than you technically could, and you use the bulk of your money to improve your own financial position and build wealth.

My husband and I took a similar approach with our finances. I always say that one of the best decisions that we made was the house we decided to buy. If we had bought the biggest house we could afford based on what the bank was willing to lend us, there’s no way we would have been able to pay off all of our student loans as quickly as we did.

We bought a house that was a fraction of the amount the bank wanted to lend us which allowed us to put way more money toward our financial goals. Do we want to stay in this house forever? Probably not.

But when we get the next house, we don’t want it to be a stressor. We want to make sure that we are in a position that when we get that house it’s going to be insignificant to our finances.

So, I want you to switch from the way people typically think about money, and I want you to develop the mindset of a wealthy lawyer. I want you to buy things that are well within your means rather than things that stretch you beyond your means. I want you to practice delayed gratification.

All of that will help to put you in a pretty good position to build wealth. And as you improve your finances, you strengthen your financial position. You might decide that you’re going to upgrade or you’re going to buy the more expensive thing or whatever. But when you do, I don’t want it to feel like a strain. You will be able to enjoy your money and the things you buy without the underlying stress that often comes with it with the way that people typically manage their money.

Please don’t take this to mean that you can’t enjoy your life now. I think that enjoying your money is important and we’re going to talk about ways to do that without negatively impacting your finances. But I do want you to think about the decisions that you make that can be different from what you typically see in your circles, right?

Those types of decisions are going to set you up better financially in the long run. So, if you can make more of those decisions, those atypical decisions, rather than living the way that’s most common in our society, you will have a much better experience with your money and the things you buy, you’ll build wealth, and you’ll feel much more at peace.

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All right, I hope you enjoyed that lesson. If you would like some help with getting your mindset on track and creating a plan for your finances, head to rhothomas.com/apply, and you can apply for a coaching session.

All right, that is it for this week’s episode. Please take a second and share this episode with a friend or two who you think could use the information. That is how we get this information in the hands of as many lawyers as possible, 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.