075 | Rewind: The Biggest Mistake Lawyers Make With Money

Running up credit card debt. Not budgeting or saving. Spending more than we make.

There are a lot of mistakes that we can make with money, but there’s one in particular that influences the others.

In this episode, let’s chat about the biggest mistake lawyers make with money and how it plays out in our cashflow, debt, and savings and investments.

This is the final episode in a series of replays of my best episodes on budgeting and spending in preparation for my live budgeting workshop, Foundation of Wealth, happening on November 27, 2021. Get all the details at https://www.rhothomas.com/foundation.

Lightly edited transcript appears after the show notes.

Topics Discussed

• the biggest mistake lawyers make with money
• how this mistake plays out in our cashflow
• how this mistake plays out in handling our debt
• how this mistake plays out in our savings and investments
• some of my personal experiences with this mistake

Listen to the Episode

Resources mentioned

Foundation of Wealth Live Workshop

Episode 7: Budgeting for Lifestyle Freedom and Financial Independence

Episode 17: How to Budget Using the Zero-Based Budgeting Method for Lawyers

Study: 25% of families making $150,000+ live paycheck to paycheck

Work with me

If you’re ready to learn the mindset and strategies to master your money, let’s schedule a call.

Connect with me

Social media: @iamrhothomas on Instagram, Facebook, Twitter, LinkedIn

Email: hello@rhothomas.com

Recent Episodes

Lightly Edited Transcript

Hey friend. During the month of November, I’m sharing replays of my best episodes on budgeting and managing your money in preparation for my live budgeting workshop, Foundation of Wealth. It’s happening on November 27. These episodes will help you reframe the way you think about budgeting and spending and prepare you to create a budget for 2022 that will serve as a strong foundation for your future wealth-building activities. Even if you’ve heard these episodes before, I encourage you to listen again. You’ll pick up on different information or something I said in the episode will hit differently because you’re in a different space to receive it. And if you haven’t done so already head to rhothomas.com/foundation to get all the details on Foundation of Wealth and to sign up so you don’t miss it. Let’s dive in.

Hey friend. Happy Friday. How are you, I hope you’re doing well and had an amazing week my week was pretty good. It was very busy, like unusually busy for some reason, but it was a good week overall. So today I want to talk about the biggest mistake that lawyers make with their money. And honestly, it’s not just lawyers, this is the biggest mistake that people make with money. In general, and that mistake is simply not paying attention, not being intentional. We have talked about this before, but I wanted to just dive a little bit deeper and really show you how this plays out in our finances. So we talk about things like you know credit card debt and not saving and, you know, putting off. Starting your budget or whatever the thing is, and these are all missteps that we make with our money, but all of those things are often impacted by just the not being intentional piece. And the truth is, we can talk about all of the reasons everything outside of us. That’s the cause of us not being where we want to be you know the student loan crisis and we don’t get paid enough and the government and all the rich people and the top 1% and whatever else. But the truth is, it’s ultimately us right we are responsible for the state of our own finances. We make choices, and those choices impact our finances. And so, if we’re not where we want to be with our money, then we have to take responsibility for our actions and get control of our money. Take control of our finances. And there are three main areas that I want to hit on how this not being intentional really impacts us in our finances and that’s our cash flow, our debt, and our savings and investments. So turning to the cash flow side, you often hear statements like oh there’s too much month left at the end of the money, or if I could just get this raise, then things would be better, all of that and that comes from people at all income levels. And if you have trouble paying your expenses each month, covering everything that you’re responsible for. Then one of two things is true. Either your income is too low or your expenses are too high. And I want to pause here because having a low income and barely making enough to survive is a real issue in America. I know that. I’m not talking about people who truly don’t make enough, and are barely scraping by right that’s an issue, but I’m talking about people who make enough money, and just have a really high standard of living their expenses are really high. There was a study that I know I have told you about multiple times now, but the study showed that 25% of families making $150,000 or more live paycheck to paycheck. And then, for people making between $50,000 and $100,000. It was 33%, living paycheck to paycheck. So those are people who are making enough, but probably are not paying attention to their money and don’t know where their money is going. You know, there’s not a plan for the money. A lot of times we assume, just because we make a good income, then everything will work out fine. And then, you know, we wonder why we can’t make progress, and I will raise my hand here and say that was my husband and me, like we were these people four years ago, and some change. We weren’t living paycheck to paycheck. But we were making six figures, and we weren’t paying attention to where it was going. We had no idea what we were spending on we didn’t have a budget. And so, we could have been a lot further along in our money journey, had we started paying attention sooner right like had we really been paying attention. When we first started making money. And so, that just goes to show you how. It doesn’t matter how much money you make. If you’re not intentional with it if you’re not paying attention you don’t know where it’s going. You’re not going to make progress, you’re not going to see the results that you want with your money. I think I’ve said before, like, it doesn’t matter if you make six figures if you spend it all and have nothing to show for it. Alright so the next thing I want to talk about is debt. You guys know we got a lot of debt, we have brought that debt number down considerably but there is a way to purchase just about anything we want. Without having enough money, we’ve got student loans which you know is my story but then credit cards and, you know, car loans and store credit cards and all of that stuff, and back in the day, like it was hard to buy things if you didn’t actually have the money. And now we just have credit card companies like giving out credit cards like candy and, you know, students are able to borrow as much money as they want. And there’s not really any education or at least when I was going to school there was no real education around loans and borrowing money I just signed the papers right because I needed the money to go to school. So a lot of us just aren’t paying attention, and we end up in a bunch of debt. And at one point. A couple of years ago that total debt was like $13 trillion. And there was an average of like $48,000 in student loans per household, and honestly when I saw that number I was like, I wish, like $48,000 would be nice, but a lot of times because we have so much access to credit and loans and all of that, then instead of saving up for things, then we just borrowed the money, right, or we just put it on the credit card. And if we aren’t paying attention, then we might think as long as we can afford the payments we’re doing fine. And that’s exactly where my husband and I were where we you know had just gone through school we were signing the papers to take out our debt we weren’t really paying attention to how much we really owed. We could afford the payments and so we were paying the payments and the rest of the money we were just spending on whatever we wanted to spend on. And so, you know, having the ability to make payments is great because there are a lot of people who aren’t in that position. But that’s not going to help you make progress on your money, because those payments are not set up in a way where you can pay the loans off quickly right they’re set up in a way to advantage, the lenders because a lot of that payment is going to pay interest. Like I told you guys my story where I had a little over $100,000 in student loan debt, and my minimum payment was like $1,000, but after two years of paying that minimum payment, the balance on my loans had only decreased like $6,000, even though I have paid almost 24,000, so just be mindful, like, even though you can afford. Whatever the payment is on your debts that if you are not paying attention, like I wasn’t, then you probably are not making as much progress with your money as you could be. The final thing I want to talk about is saving and investing. So, despite making good incomes. So there was a study, a few years ago that said that 40% of Americans could not cover a $400 emergency without going into debt. And I think about the average income in America which is something like $50,000. And then for lawyers you’ve got you know on one side about $60,000 and then on the other side with big Law Attorneys, you know well into six figures. I know that there are a lot of people on all ends of, I guess all ends of the spectrum doesn’t make sense at all income levels, who fall within this group that the study was talking about people who can’t cover a $400 emergency. And so I would say the first two issues that we talked about with cash flow and debt bear directly on this last one. So if we pay closer attention to our cash flow, then we can tell our money where to go with our budget right and head back to I think it’s episode seven or Episode 17, both of those have to do with budgeting but one specifically walks through how to do a zero based budget. If you have a budget and you are saying, I want X amount to go to groceries, and y amount to go to shopping or whatever the case may be, right, you are making sure that you’re putting money toward the areas that matter most to you. And then on top of that, if you’re paying attention to your debt in combination with paying attention to your cash flow, then you can make a plan to pay your debt off, which then frees up more money each month that you can put toward areas that matter to you. A lot of times people are quote surprised by their kids college. Coming up, or retirement being right around the corner. But if you’re paying attention to your cash flow and your debt, then you’re able to set aside your emergency funds so a $400 emergency doesn’t take you into debt, or you have college savings for your kids or you’re well on your way to saving for retirement. Right, none of those are unexpected expenses. We know that emergencies happen if we have kids we know that they might go to college, we know that we don’t want to work forever. So instead of waiting for those expenses to arise and then try to figure out what to do. Why not plan for them little by little over time. And again, that just goes back to being intentional right making that intentional plan for your life for your money, so that you don’t have to be stressed when these things pop up, you actually know how to handle you’ve got to plan for them. So, overall, I think we just need to be proactive with our money, as opposed to reactive the way that we tend to be. So making a plan for your money each month with your budget, making a plan for your debts and figuring out how you want to pay them off and you know what method you want to use to do that. And then you can also look at your savings and make sure that you’re not, you know, completely ignoring it until it’s too late. My goal is that you’re able to take control of your life right take control of your time by just being really careful intentional with your money. And I want you to make progress with your money, rather than living, check to check. You are in a wonderful profession, you are making a great income. So let’s have something to show for it. And look friend if you need help with figuring out how to be intentional with your finances, I am a coach. I can help you. Head to rho thomas.com slash coaching, let’s set up a call and talk about how coaching can help. I would love to walk with you on this journey. All right, so let’s recap. Number one, the biggest mistake that lawyers are making with our money is not paying attention. Number two, not paying attention affects our cash flow, our debt balances and our savings and investments. Number three, we often don’t have a plan for our money because we assume that by making good incomes everything will work out fine. Number four, paying attention to our cash flow, and our debt will help us to make a plan for our savings and investments. And finally, being proactive with our money, rather than reactive will help us to make sure that we are setting ourselves up to have the control of our lives that we are looking for. Okay, so that’s it for today’s episode of Wealthyesque comm join me over in our private Facebook community, the wealthiest community, and let’s talk more about the biggest mistake that lawyers are making with their money. I would love to hear your thoughts, and you can find us at rho Thomas comm slash community. If you got value from today’s episode please consider sharing with a friend who you think would also enjoy it. And if you share on social media, or if you just want to connect my handle is at I am rho Thomas, and I’m most active on Instagram. Please subscribe to the show on whatever platform you listen on and leave me a rating and review those reviews, especially are super helpful. They tell the platform’s and other potential listeners that this show is worth listening to. And I just greatly appreciate it. Okay, friend, as we close out. I pray that you will take some time to look at your finances and really pay attention to what’s going on. I pray that you will make a plan to improve your finances and get to the level that you want to be at. And as always, I pray that you continue to take steps to regain control of your time, build wealth and live the life of freedom and choice, you deserve. Talk to you later.