It’s common for many of us in the legal profession to bring in a healthy income and still struggle financially. It’s also common to have little control of our time.
But your money and your time are linked. Learning to manage your money well is a major key to gaining more flexibility and control of your time.
In this episode, I share my own story of making good money and having little to show for it, reasons why this happens, and what to do if you find yourself in that place.
Lightly edited transcript appears after the show notes.
Topics Discussed
- my story of having little to show for a six-figure income
- reasons why we struggle financially, even when we have a good income
- tips to turn things around and get your money on track
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Lightly Edited Transcript
Hey friend, welcome back to the show, I hope you are doing well. So today, I want to talk about having money, but being broke or making money, but being broke. This is very common within the legal profession and other professions as well where you’re bringing in a good income, but you are spending it out, and so you don’t have anything to show for what you’re bringing in. So I’m going to start with my story. As you know I came out of law school, making six figures, I’ve been in big law, my entire career. I actually went from kindergarten to law school, so I’ve been in school for like 20 years by the time I finally started practicing. I’ve been in school for like 20 years by the time I finally started practicing and making some money. And when I came out of law school, my husband was in his last year of medical school. And so, I was the only person bringing in money at the time, But even so, our household income was more than either of us had ever seen. Right. We grew up in single parent households and so we didn’t have a whole lot growing up, and you can tell us that we didn’t make it, making six figures at that point, right, we were doing everything we were doing date nights at the nicest restaurants, well not the nicest restaurants but some pretty nice restaurants, and our honeymoon was in St Lucia and we went to Paris, in London, and just doing all the things at the same time, we were doing what we were supposed to do with our money based on traditional financial advice, like we paid all of our credit cards in full we paid all our bills on time. We were maxing out our 401k. Once my husband came out of med school. And we just, you know, did all of that. And we saved a little bit. But even so, we were broke. When we calculated our net worth, maybe two years or so into our careers, It was after we had our first child. We had a negative $342,000 net worth, we were over $670,000 in debt. And that was a big turning point for us, because we had made all that money over the previous two years and had almost nothing to show for it. Like we didn’t even buy a lot of stuff so we literally had nothing to show for it. And it’s not to say that if we had been doing something differently over that two years we wouldn’t have been $670,000 in debt, but we would have been further along. Right. I don’t regret that time that we spent that two years because we spent our money on things that were important to us, and things that we really enjoyed. But at the same time have we been more intentional earlier on, then we would have been in a different position financially. Everything happens for a reason, though, because if I had not had that experience, I wouldn’t be here with you. And I say all that to say though that our story is really common. Often when we are making a lot of money, we fall into the same trap. You know we equate making a lot of money with being wealthy, and that’s not necessarily the case. You can make a lot of money, but if you spend a lot of money and have nothing left over, then you won’t be wealthy. You can make a smaller amount of money and be investing and doing all of those kinds of things, saving more of your money, and really building wealth. I’ve told you before that 25% of households making $150,000 or more are living paycheck to paycheck. The amount of income that you bring in really doesn’t matter. Right, it’s your money management habits, what you’re doing with the money that you bring in. And if you’re making the most of it. For most people, we increase our expenses as our income increases, we start to look at things that were once luxuries. At one point, as needs. Often I think too in professions like law and medicine. We want to show that we’ve made it right we want to appear wealthy and so we’ll put a lot of money into that appearance, spending on nicer houses and cars and clothes and trips and all of that stuff. And we don’t then put a lot of money into actually building wealth. And that’s not to say that there’s anything wrong necessarily with the houses and the cars and all that, but we should be intentional, but we want to be intentional with our spending, and make sure that we’re buying those things because we actually want them, and not because our neighbor our colleague or whoever is buying the thing. Because when we are spending all of our money on all of the things and we’re not able to get ahead. And so then we end up not having the flexibility, the options. The control of our time. You know I say all the time true wealth is having control of your time. But you can’t have that control. When you need every dollar you make and then some. When you’re spending all the money and have nothing to show for the money that you’ve made. I really want us to start looking at money as a way to buy our time, as opposed to a way to buy things. Like if we viewed money as a tool to buy back our time, it would change a lot about the way we manage our money. So, when you get a raise or a bonus instead of immediately going and buying this thing that you’ve been wanting to buy. You’re putting that money aside to buy back your time to invest in your future and get that control you want. Because again, the more we spend on things, the less we have to build wealth. Another point and this is something that we’ve talked about before, to how you really want something, you’ve been wanting for so long, and then you finally get it, and you’re really excited for a little while and then after a while you don’t care about it anymore, like you’re over. I think that happens so often, where the desire for the thing is almost better than having the thing itself. But again, if we look at our money as a way to invest in our future. And as a tool to buy our time instead of the things, then we are setting ourselves up for having more control later. Okay, so if you are in the position that my husband and I were in. Here’s what you can do one live below your means. And it does not have to mean cutting out everything that you enjoy. Alright, I think that’s where most of us go where we start talking about being better with our money and we automatically think that we have to cut out all the things that we love. I think you can take a more balanced approach. So rather than cutting out everything altogether, then you look at the things that really matter to you and spend on those things and then cut everything else or you know cut down on everything else. The first way to do that is by tracking your spending. Looking at where your money is actually going now, because most of us don’t know, or at least we didn’t know when you track your spending and you see where your money’s actually going, you’ll probably be shocked to see what you’re spending on, and it will be clear, the areas where you’re spending more than you would like to or spending on things that you don’t care about. So just look at each of the expenses. Make sure that it’s worth it to you to spend the amount that you’re spending, and if not then make changes as necessary. Then once you have looked at where you’re actually spending your money now, right, that’s your starting point. The next step is to create your budget. And you can plan then where your money is going. I always recommend the zero based budget, which means that you are giving every dollar that comes in a job so some of that will be your expenses, your bills, all of that but then some of that will be your ultimate goals, whether it’s saving or investing or paying off debt or whatever. I also always recommend having fun in your budget, like have a category for fun. If you plan for fun, then you’re less likely to just throw the budget out the window, and do whatever you want. Right, it goes back to what we were talking about where being in control or managing your money better does not have to be about deprivation and cutting all your stuff out. So make sure you include fun money in your budget, you can spend on the things that you want. And that also just gives you kind of freedom to spend the money, because there’s no guilt in spending it because you’ve already planned for it. If you are managing your money with a partner. I recommend having separate money that you each can spend kind of an allowance is what my husband and I do, and I talked back in episode 21 about getting on the same page with your spouse about money. Having that separate amount of money, where we can each spend however we want to the other person doesn’t have a say in it they, you know, no questions asked, has been so helpful for us in our marriage. Again, planning for all of that. It allows you to have the things that you want and not feel bad about it, and not beat yourself up because you’re not able to stick to this super restrictive budget. And if you need help with setting up your budget head to episode 17 If you head back to Episode 17 I talk about how to create a zero based budget the type of budget that I was just talking about, again, it’s super helpful because you’ve got all your expenses counted for. You’ve got all of your expenses accounted for. You’ve got all of your expenses accounted for and then you’ve also got room in there for fun and for your ultimate goals. The final tip is to track your net worth, so you can see, whether you’re making progress. If you follow the tips that I already gave you, then you should be making progress, because whether you’re paying down debt or increasing the amount that you invest your net worth will be going up. If it’s not, if your net worth is staying the same, or if it’s decreasing, then that means something in your system is not working. And so, make sure that you. And so you’ll want to go back and tweak, whatever it is, it’s not working. But tracking your net worth is super motivating because, as you see it increasing, then you want to keep seeing it increase so you’ll be even more motivated to stay on track with your plan. So if you’re not tracking your net worth. I highly recommend that you do so. The main point in all of this is that when you’re not spending all your money on things you don’t even care about. You can keep more of it for yourself, and open up options for yourself, right when you’re living below your means when you have lower cost expenses or, you know your expenses don’t cost as much, then you need less money to live on, and that gives you a lot of flexibility in your career opportunities, and how you spend your time, you’re not stressed about money. You’re making more than enough than you need to live on. Ultimately, when you are spending all your money, you’re not paying attention to where it’s going. You’re not being intentional with trying to make progress on your financial goals. You’re going to have way less flexibility way fewer options in your life. And so when you can manage your money better than it will help you get to that point of having more flexibility and more control and taking. So when you can manage your money better, it will allow you to get to that point of having more flexibility and more control of your time. If you need help with figuring out how to manage your money better head to rho Thomas comm slash coaching, and let’s set up a call to chat, I can definitely help you get on the right track. Alright so I hope that this is helpful if you haven’t done so already, please take a second to subscribe to the show on whatever platform you’re listening on and leave a review those reviews help more people to see this show, come on over and connect with me on social media, I’m on Instagram at I am rho Thomas, and you can also connect with me on LinkedIn. Think of one friend who would get value from this episode and please take a second to share it with them, just let them know what we’re doing over here. We want to get this message out. I want to me. I want to help as many people as possible to improve their lives. And as we close out friend, I pray that you will really explore your relationship with money. And the way you think about your money. I pray that you will commit to managing your money in a way that leads to you building wealth, and having more options in your life. And as always, I pray that you continue to take steps to regain control of your time, build wealth and live a life of freedom and choice, you deserve. Talk to you later.
Hi, I’m Rho! I’m a wife, mom, and Biglaw associate who believes that true wealth is having control of your time. I help busy lawyers like you take back control of your time by teaching you how to achieve lifestyle freedom through mindset shifts and financial independence. Read a little more about me here.
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