300 | Money Is Freedom

I left my multiple-six-figure job. My finances played a big part in my ability to do that.

Money buys options. It creates freedom.

In this 300th episode, we discuss why money is freedom, a concept that underlies all the work I do.

• • making good money and feeling stuck
  • my realization about money after learning about people who made less but were in better financial positions
  • why I was able to leave my Biglaw job
  • aligning your spending with your values
  • what to do with your money to create freedom
  • how thinking about money a little bit differently will change your life

   

• 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 to the show.

This is episode 300, which is so crazy to me.

And today I wanted to talk about freedom because that’s a big part of why I started this podcast and started my business. There are so many lawyers who feel trapped and like they can’t do anything differently because of their finances. And I found in my own life that getting on top of my finances and managing my money better and paying off debt and building my investments and my savings, like all of that has led to more freedom in my life.

And so I figured what better way to celebrate 300 episodes than to talk about this topic underlies all the work that I do.

When I think about money, I think about it in terms of having freedom, of having options, having flexibility. And I think very often, especially in professions like law or medicine or these other fields where you sacrificed more on the front end in terms of going to school longer and all of that for this benefit of a higher income.

Sometimes I think we get out and we get that higher income and then we want to buy all the things and do all the things and experience that wealthy lifestyle that we worked so hard to get. But in doing so, we end up creating this trap for ourselves, because then you get so caught up with the payments for the house, and the car, and this club, and this private school, and this level of wardrobe, and just all of these different choices that we sometimes make that end up constraining the choices that we have available to us in our professions.

And I talk to a lot of people who feel stuck. Like, they feel like they make good money, but they don’t have anything to show for it. And I know that’s a terrible feeling. I have been there. I remember being in this job making more than I had ever made, you know, than I ever thought I would make, and not having a whole lot to show for it. We still had our student loans.

We had $100 left at the end of the month when we did our budget. And when I say that, I’ve talked about that before, and I don’t mean that we had $100 in our account because we’ve always had a buffer in our account. But in terms of when we mapped out, this is how much money came in this month and this is how much went out, there was like $100 left from the money that we made.

And it’s like when you’re making six figures, you don’t expect to be in that kind of position. You know, six figures feels like it’s all this money and you know, you’ve got so much and you should be able to do whatever you want to do. But when you’re not managing your money well, then that six figures, one, goes really quickly, but, two, is golden handcuffs because you’ve got to keep up all of these different payments to keep up this lifestyle that you’ve created.

And so learning about people who were making less than us, like I’ve talked many times about the school teachers who paid off their house, but there were a lot of other examples too of people who were making just your average income. They weren’t making these huge amounts of money, but they were making decent money, making less than us, and had significant wealth, had multiple six-figure net worths and million-dollar net worths.

There was a site that people used to keep track of their net worth, like update their net worth, and would show their progress.

So if you were in this personal finance space and you had a blog where you were sharing your story and all of that, people would put their net worth on that site. And I’m seeing these people and they’re, like I said, they’re making good money, they’re in good professions, but they weren’t lawyers, they weren’t doctors, and they were way better off than we were and doing way more with the money that they made than we were.

And so seeing that and seeing people who were taking sabbaticals and traveling and who were retiring early and able to do all this stuff that they wanted to do, but they’re doing it on lower incomes than we had. That was a turning point for me.

And so I realized that what you do with your money has a much bigger impact on your finances, on your ability to build wealth, on the freedom that you’re able to have than the amount of money that you make. Because these people were doing different things with their money, and they were in a better position than we were.

And as I said, I see a lot of times when we get into these professional fields and there’s a certain image that you want to portray, especially if other people within your office or wherever you work, if they’re all buying this type of item, right, this type of bag, this type of car, they’re doing this type of dinner, like you want to keep up sometimes.

But I think that there is power in deciding what you want to do for your finances. And maybe some of that is buying the things that the co-workers are buying or whatever. But I think being more intentional about it and not just spending everything can lead to so much change, so much freedom, so much flexibility in your life.

It’s a big part of why I was able to leave my Biglaw job. Well, even before I left, it’s a big part of why I was able to go down to 50% at the firm. And then why I was able to leave and do this business that I will be honest, does not make Biglaw money, right?

It’s in how we manage our money and in living below our means, where we might not have every single thing that all of our coworkers have, but I think you can kind of pick and choose which of these things is important to me and which aren’t. And you spend on those things that are important to you, and you cut back on those things that aren’t.

That’s one of the things that I talk to my clients about all the time. It’s like, what’s important to you? And when you identify what’s actually important to you and you align your spending, your money management, like all of that with those things, you don’t feel deprived. You don’t feel like you’re missing out on things, but then you also often find yourself, typically find yourself, spending less.

And then that money that you’re not spending, now you use that to build up your savings so you’ve got an emergency fund or a safety net. You use that to start chunking away at your debt so that there’s not always, you know, these banks and bill collectors with their hand out as soon as you get paid. And now I’m having to pay out, you know, all of this money in minimum payments. So you pay that stuff off.

Then you’re able to start putting that money towards your investments, so that your money starts making more money for you. And now you are having to work less because you’re earning more money through your investments.

And that’s not to say that you automatically start working less, but it’s no longer just your time put in at work that’s earning you money. You’re able to have that money working for you as well.

And compound interest is often called the 8th wonder of the world. And when you are paying on debt, that compound interest is working against you. You’re owing more and more, paying more and more because you’re holding on to that debt, and it’s accruing more interest. So you’re paying back more than what you actually borrowed.

But when you’re putting that money into investments, now compound interest is on your side, and you’re earning more and more. That balance is growing, even though you’re not putting all of that money in.

And when you get to that point where your money is bringing in more money for you, this is where financial independence starts coming in, because people who are building their investments, they are achieving financial independence based off of how much money they have invested and the money that their investments is earning.

When you’re able to cover your living expenses from your investments, right? And I don’t have to work to cover my living expenses. Now I don’t need that job. Now I don’t need to work. And that can be in investments like in the stock market. That’s where financial independence is typically talked about, but it can also be in investing in other assets. Like I’ve heard about people doing it in real estate, where they’ve got certain real estate, you know, rental properties, and they’re bringing in this amount in rent and then that’s covering their living expenses so they don’t need to work.

And then the other thing to think about there is the lower your living expenses are, the less those assets need to be bringing in for you to be able to cover those living expenses.

My whole point in all of this is to get you to think about your money a little bit differently. I like nice stuff as much as the next person. I like to travel. I like to eat good. I like nice things, you know, all of that. But I think that there can be more balance than there often is.

So rather than making money and then immediately buying this thing or buying that thing or upgrading to this next thing or whatever, how can you flip that a little bit and think about how that money can start earning you more freedom? How that money can start putting you in a better financial position?

Because even before you get to the full out financial independence place, just having money in savings, having your debt paid down or paid completely off, starting to build your investments, like where your net worth is growing, that gives you more freedom. Sure, it might not be, “oh, I’m retiring tomorrow and I’m never working again,” but you’ve got a lot more freedom, a lot more options when you are in that place where you’ve got money in the bank, you’ve got no debt or very little debt, versus if you are living paycheck to paycheck and you need every dollar that’s coming in and you’re counting down the days for the next payday and all of that.

So I want you to think about your money a little bit differently and start thinking about it in terms of how it can create more freedom or more options for you, how it allows you to make different decisions that aren’t only dictated by money.

Because when all of your decisions are dictated by money, when you need this job, you need this next paycheck coming in, that is not freedom. And if you would like help in getting your finances to that place to where you start unlocking more freedom for yourself, schedule your consultation at rhothomas.com/call.

All right, but again, I just wanted to kind of revisit this theme that underlies all of the work that I do and why I think personal finance is so important for lawyers. Too many of us are feeling trapped in positions that we don’t want to be in, wishing that we could do something else. And it really is within your reach as long as you will just change the way that you’re handling your finances.

Like if people outside of the law can do it, if people who are making school teacher salaries can do it, you can definitely do it. It just takes making that little bit, that little switch, right? Thinking about things a little bit differently than we’ve been taught to think about them.

Anyway, that is it for this week’s episode. Thank you for being here with me. Thank you for all of your support in the past, if you are a longtime listener. Thank you for giving me a try, if you are a new listener.

Please take a second and subscribe to the show and leave a review if you have not done so already. Those things help to bring this show more visibility. It helps to get this information in front of more lawyers. As the show gets more reviews, it is recommended to more people. 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.