265 | Money Tips for People Who Like to Spend

Is there any hope for your finances when you love to spend money?

I spoke recently with a friend who told me that her biggest struggle with managing her money has always been her spending habits.

During our conversation, I shared a few tips that I teach my clients that I thought would help her.

In this episode, listen in as I share those same tips with you. If you love to spend but also want to manage your money better, this is the episode for you.

• • my friend’s struggle with managing her money better because she likes to spend
  • a few tips to help people who like to spend get control of their money

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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 am sharing some tips from a conversation that I had with a friend of mine and she was talking about her struggles with spending.

So we were talking the other day. She asked how my business was going and I told her generally how things were going and she said something like her biggest problem has always been her spending.

She’s tried to get on top of her finances in the past, but this always comes up for her as an issue. And so she said, you know, she likes brunch, she likes shopping, taking trips, all that kind of stuff. And the other things that she tried, she thinks didn’t work because they required her to stop all those things and she just wasn’t doing that. Like she couldn’t stick with that.

So I told her that “that deprive yourself of everything” approach doesn’t resonate with me either and when she asked what my approach was, I gave her some tips of things that I have my clients do that I thought would help her in her situation.

So I am going to share an overview of what I told her.

The first thing I told her to do is figure out where her money is going now. So you want to look back and see how much money you brought in and how much you spent in the different categories over the last one to three months. And by categories, I just mean things like your rent or mortgage, groceries, stuff for your kids, your car, restaurants and takeout, household items, debt payments, whatever categories you need.

But you want to get a breakdown of where your money is going so that you can see how much you’re spending in these different categories and decide whether you like what you’re seeing.

The next thing I told her is to create a realistic plan that accounts for her needs, wants, and goals. And we talked about the “figuring out where your money is going” piece first, because what I have found is people want to jump straight into creating the plan and they just pull random numbers out of thin air, like, oh, I should be able to spend this much. I probably spend about that much on groceries. I think I can stay within this number.

And so by creating a plan based on where your money is already going, you can make sure that plan is more realistic. You’ve got actual data to work with, and so when you’re deciding how much you’re going to spend on groceries, you’re not just arbitrarily saying you’re going to spend $100 when your norm is like 500, right? If you decide that you don’t like 500 for your groceries, you can bump it down to say, 450 or 400, and that’s something that’s more realistic for you versus going from $500 to 100.

So you’re going to create a realistic plan that accounts for your needs, wants, and goals.
And I told her the first goal that I want her to have is to create a buffer in her checking account and that kind of goes into the next tip, but I’m going to finish with this one first.

I have all my clients create a $1000 buffer to start, which means that the account is no longer getting down to $0.00 or a couple of $100, or are going negative. $1000 dollars is the new floor.

And the reason that we do that is when you’ve got those situations where you’re spending and your account is dipping into the negative, or you’ve only got a couple $100 and you’re sweating bullets until payday and all of that, it puts a lot of stress on you like that doesn’t feel very good.

And so when you’ve got that $1000 buffer, it’s a cushion between you and unexpected things that might come. And you don’t have to worry so much about what’s happening with your account because you know that $1000 is your new floor.

So with that $1000 as your new floor, if you happen to overspend now, it means that your account is down to, say, $900 or $800 versus it being negative 200.

Okay, so, first you’re going to build that buffer of $1000, and then from there you can build it up to a couple $1000. I’ve had people that go all the way up to a full paycheck, but I want you to start with at least 1000. So that’s your first goal,

And then you might also have other goals, like building an emergency fund or paying off debt or other things like that, but I want you to focus on one goal at a time, starting with building up that buffer.

The next tip I told her is to separate your needs spending from your fun spending or your wants.

So you’re going to have two checking accounts, one for your bills and groceries and debt payments and stuff like that, and then a separate account just for fun spending. And the buffer that we were talking about goes in the needs account and then the plan that you create will show you how much money you can allocate for that fun spending or for your wants. And that money is going to go into the fun account,

And my friend said that this tip alone was gold for her because separating out that fun spending puts kind of a barrier on her, gives her these guardrails so she’s not going overboard with the fun spending.

But then she also doesn’t have to feel guilty like she typically does because she knows that when she spends on fun stuff, the other stuff is already taken care of because that money is protected in a separate account.

That is exactly it. That’s the reason why we separate out that spending from the fun spending and the need spending so that you know, you can spend on the fun stuff and you know that you’re still taking care of the things that you need to take care of.

So you’ve got those two checking accounts now, and then the last piece of the puzzle is your savings account. And I really like to use the savings account for your goals.

And I like savings accounts like the one from Ally Bank that allows you to save for different goals in the same account.

So it’s one account. But, for example with Ally, they call it a bucket. So you can have these different buckets for your different savings goals.

So you might have a bucket for your emergency fund, and a bucket for the down payment on your house, and a bucket for a vacation or whatever it is, but it’s all in one account. And if you’re working on a savings goal, it’s obvious why you use your savings account for it, but if you’re working on something like paying off debt, I like to use the savings account too.

And I’m going to explain that a little bit. But the plan that we talked about before is going to show you how much you can put towards your goals and you’re going to move that amount to savings either at the beginning of the month, or maybe you do half of it at the beginning of one pay period and half at the beginning of the next.

But the point is to get the money for your goals out of your checking account so you don’t end up spending it.

With respect to paying off debt, the reason I like to put the money in your savings account at the beginning of the month or the pay period or however you decide to do it, rather than making an extra payment is if something comes up and you need that money, you can’t just call up Chase or Amex or whoever and get it back, right.

So instead you put it in your savings and then when you get to the end of the month, there’s no unexpected expense, no issues, or anything like that. Then you can use that money for an extra debt payment and start making progress on your debt goals.

So those are the tips that I gave to my friend who likes to spend but wants to get her finances under control. Just a few things that she can implement. I didn’t want to overwhelm her, just wanted to give her some things that will really help her move the needle and hopefully, if you like to spend, they will be helpful for you as well. Alright.

So that is it for this week’s episode. Please take a second and subscribe to the show and leave a review. Both of those things help the show reach more lawyers so that they can get the help they need with their finances as well. 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.