327 | The Plan for Sticking to Your Budget

If you’re one of the many lawyers who struggles to stick to a budget, I have a plan for you.

Typically, one of three things is keeping you from staying on track.

In this episode, let’s talk about what these things are and how to fix them.

• • 3 things that keep people from staying on track with their budgets

  • how to fix the 3 things and stick to your budget

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 why so many people find it hard to stick to a budget or a spending plan. This is something that I have talked with many lawyers about so I know it’s a common problem. And there are three top reasons that I see that lawyers have trouble sticking to their budget. So we’re going to talk about what those are and we’re going to talk about how to fix them.

Number one, your budget or your spending plan is only in your head. So you have thought about how you want to spend, you’ve thought about how much you want to spend in this category, you’ve thought about the fact that you want to spend less than you earn, but you’ve never put anything on paper or on a computer, and so it’s all living in your head.

A plan in your head may as well not exist. You need to get your plans out on paper because you will inevitably forget what it is that you’re supposed to be doing, what that plan was. So get your budget on paper, get it on a computer screen, on an app, somewhere tangible where it’s out of your head and it’s somewhere that you can refer back to.

Once you do that, then you will have a much easier time with sticking to it because you’ll remember what it actually was to be begin with.

Number two, your budget is unrealistic. When lawyers are first getting on top of their finances, they often create these idealized plans for what they should be spending, how much they should be able to do in this category, to spend on their groceries, whatever it is. But they’re just pulling numbers out of thin air.

When you are operating in that way, when you’re just making stuff up, it’s not gonna be realistic and it’s gonna be a lot harder to stick to. So we wanna make your budget realistic. And the way that you do that is you look at what you’ve actually been spending. So let’s look at how much you spent over the last month or so. Pull real numbers, pull up your credit card statements, pull up your bank statements, look at how much you’re spending, categorize that spending.

This was groceries, this was gas, this was entertainment and so on. Because when you can categorize that spending and you see how much you’ve actually spent in these different categories, now I can adjust that. I’ve got real numbers to work with. So when I make adjustments to them, when I create my plan, it’s going to be more realistic because it’s tied to what I’ve already spent in the past.

If you’ve been spending $1,000 on groceries every month and you decide arbitrarily that you should be spending $400, it’s going to be real hard to stick to that. You are setting yourself up for failure. But if you can see, because you looked at your past spending, you see that you spend $1,000, maybe you can bump that to $900, $800, something that makes it a little bit better, a little bit less if you don’t like how much you’re spending on groceries, but it’s not more than half of what you’ve been spending, or less than half, less than half of what you’ve been spending.

You want those numbers to be realistic so that you are able to stick to them.

All right, number three. I think this is similar to number one where you’ve got the budget in your head. So many times people will create the budget, so they write it down, they put it on their computer, they put it in their app, and then they never look at it again.

If you create a budget and you never look at it, you may as well have not created the budget because part of having that plan is mapping it to what you actually do. So once you get your budget out of your head, you put it down on paper in some tangible medium, some tangible way that you can look at it, you can’t just set it to the side and think you’re done.

Creating the budget is only the first step. When you get those numbers down, you get that plan, that’s great. You’ve taken steps to improve your finances. But If you don’t look at it, then you’re not actually applying it to your finances. So you’ve got to check in periodically with your plan to make sure that you are staying on track with it. You want your spending to track what you were planning to spend.

And I always taught my clients to do this weekly. So at the end of the week or whatever day worked for them, they would check in with their spending over the previous week and they would categorize that spending according to the plan that they had created and then that let them know how to move in the next week.

For example, I had a client who was really big on going out to eat, go to bars and clubs and all of that, like the entertainment scene on the weekends. And so he would look at his spending for the previous week on Friday so that he knew going into the weekend where he stood with that entertainment budget. And if he was kind of over in that budget, let’s say that he’s halfway through the month, but he’s 3/4 of the way through the budget, then he would dial it back a little bit for that weekend.

I had another client who weekly felt too long for her. Like she did not like how many transactions she was categorizing when she did it weekly. So she actually did it daily. And when you do this weekly, it might take you 10, 15 minutes, something like that. Doing it daily, it took her less than five. And this was just the first thing that she would do in the morning. She would go ahead, categorize her transactions from the day before, and then she knew exactly what she was doing moving into that day.

So whatever the cadence is that you want to do, you’ve got to check in with the plan that you’ve made so that you can make sure you’re staying on track with it. If you don’t check in, you don’t know what the plan is, and so you’re inevitably not going to stick with it.

All right, so those are the three biggest mistakes that I see people make with respect to their budgets or their spending plans. This is the reason why most people are not staying on track with it. So once you fix those three things, then you will be much more likely to stay on track with your plan and start seeing the progress that you wanna make with your finances.

And if you need some help, you can sign up for a coaching session at rhothomas.com/apply. All right, that is it for this week’s episode. Thank you for being here.

Please, if you have not done so already, subscribe to the show, leave a review. Both of those things help this show to get in the hands of more lawyers 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.