302 | When Six Figures Is Not Enough

When you make good money but your finances still feel tight, the problem usually isn’t your income.

It’s how you’re using your money.

In this episode, let’s talk about why many lawyers feel stuck, even when they make good money, and a simple roadmap that will make your six-figure income feel like more than enough.

• • talking with lawyers who make six figures but it feels like it’s not enough
  • my personal experience with finances feeling tight despite making six figures
  • discovering people who make less than six figures with six- and seven-figure net worths
  • the truth about our choices and the way our finances feel
  • my roadmap to create more space in your finances, even if you never make more

• 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.

Today, we are talking about when you make six figures, but it still feels like it’s not enough. I wanted to talk about this because it’s a common situation that comes up. Most of the lawyers that I speak with are making six figures, maybe even multiple six figures, or if they’re not making multiple six figures themselves, if they have a spouse or a partner, that household income combined is multiple six figures, and yet and still, it feels like it’s not enough.

Money feels tight. They feel anxious or stressed coming up to the end of the pay period, waiting for that next paycheck to hit, and so I wanted to talk about it. And I have firsthand experience with this, where my husband and I made almost $200,000 back at the beginning of our money journey, and things still felt tight.

I don’t know about you, but growing up, six figures was always talked about, like, this is the place like you’ve made it, if you hit six figures, like you’re just rolling in money. And it doesn’t always feel like that, especially now, as things have increased, as far as price goes. Things have increased in price. They’re more expensive. Your dollars just don’t go as far as they did when we were growing up.

But six figures is still a significant income, and there are still a lot of people in America who don’t make six figures who are doing well for themselves. I mentioned the start of my money journey, how my husband and I were making six figures, and we were fine.

We were paying our bills. We were, you know, doing the things that we were supposed to do with money. We just were in kind of this holding pattern. We weren’t really making progress forward, but we weren’t sliding backward either. We just weren’t doing what we could have been doing with our money because we weren’t paying attention. And I think this is what happens with most lawyers as well.

But I came across all of these people who do not make six figures, who are making average American salaries, and they were doing way better than we were. They were saving and investing, and they had hundreds of thousands of dollars. Some of them had reached millionaire status, and they didn’t make the kind of money that we made.

That was a light bulb moment for me because I realized that it wasn’t about the amount of money that we made. It was about the choices that we make with that money. As I mentioned, we were making the six figures. We were paying our bills. But we had no plan for any of the rest of that money, and so it was just getting spent all around Atlanta. That’s why we were just staying stuck in the same place.

On top of that, we still had a bunch of student loan debt, and the payments on that were taking out a big chunk of our money each month. That’s something that I see with a lot of my clients, too, where they are making six figures. They feel like they don’t have any money. They feel like things are tight. But if you look at where that money’s going, they’ve got thousands of dollars coming out in minimum payments on credit cards and loans and all of these different things.

I often ask people like, you’ve got $2,000, $3,000 here in payments, if you had an extra $2,000 or $3,000 a month, would money feel less tight? And they always say that it would. And so that just goes to show you that the six figures itself is enough. It’s the choices that we’re making with the money, the things that we’re doing with the money, that cause it to feel tight.

In my case, it was having these loans. You know, we chose to take out loans to go to school. We probably would not have been able to go to school had we not taken out those loans. But that was a choice that we made. We didn’t necessarily have to go to as expensive schools as we did. We wouldn’t have had as much.

And I don’t regret taking out the loans, I don’t regret going to the schools that I went to, or any of that, but I recognized that those were choices that we made that led to us having the amount of payments that we had, and that was pulling at our income.

The same with the lawyers that I’ve spoken with, where they’ve made choices over the years where they’re putting things on their credit cards, and so they’ve run up these credit card balances, or it’s the house that they bought, or the car that they bought, like those loan payments that are coming out each month. All of that pulls at your income, and it makes it feel tighter.

And so the thing that I want you to be mindful of is the choices that you’re making and the choices that you’ve made in the past and the ones that you can make going forward. For most people, the choice is spending money. We choose to spend money on things that don’t move us forward with our finances. We’re spending on going out to eat. That was a big one for my husband and me. We’re spending on status symbols like we’ve talked about in previous episodes. We’re spending on these different travel experiences and things like that. I don’t think that there’s anything wrong with those things, but I think that there needs to be balance, which I know I’ve said before.

When you’re thinking about your money and it feeling tight and it feeling like it’s not enough, let’s think about what you’re doing with the money. So I want to give you kind of a roadmap of what to do with your finances that will help them not feel as tight.

The first thing you want to do is figure out how much money you’re actually making. We know it’s six figures, but that is typically your gross income. How much of that money are you seeing? So let’s see what amount hits your account each month. So then you know what you’re working with.

Then figure out where that money’s going. How much of that money is being spent in these different categories? How much is going to your house payment, to your car payment, to gas and car maintenance, to groceries, to eating out and take out and all of that kind of stuff? How much is going to credit card payments and personal loan payments? How much money are you spending in these different categories? Where is that money that you’re making going? Because that’ll tell you why things feel tight, why you don’t have any of the money, because it’s all going out to these other places.

From there, you want to decide, do you like what you see? So you have made this whole list of all the places that your money is going. I recommend that you do at least the last month, but to get a really clear picture, if you do the last three months, you get a good average. This was a quarter of the year. This is where that money went. And it’s good to get a little bit more data, because some months it might be higher. You’ve got birthdays and celebrations. Some months it might be lower because you had a lot going on at work. But over three months, you can get a really good average.

Then you’re going to analyze that and see, do I like what I’m seeing? Do I like that I’m spending $2,000 on takeout? Do I like that half of my income is going to my housing payment? Those kinds of things. Getting clear on the numbers of how much money you actually get in your account and how much money you’re paying out helps you to decide if it’s worth it to you.

Something else you want to think about in that analysis is what’s important to you? What are the things that bring you joy? What are the things that you value? And this is not always monetary things. Sometimes it’s things like spending quality time with my family. Sometimes it’s convenience. Sometimes it’s ease. Whatever it is, you want to think about those intangible and tangible things that you value, that are important to you, because you want to make sure that those things are accounted for when you’re thinking about how you want to use your money.

But then you also want to look at how much of that money is going to stuff that you don’t care anything about. How much of that money is going to the things that aren’t, let’s say, within your top three things that are important to you? Or your top five things? Something like that. Thinking about those things that are the most important to you, how much money is going to those things versus these other things you don’t care about? Because that allows you to make changes with how you’re using that money. You can make sure that you’re using more of it for the things that are important to you, and cut back on your spending on things that you don’t care as much about.

Doing that exercise, that analysis will help you to increase the gap between how much money is coming in, right? We talked about the amount of money that’s actually coming into your account versus how much money is going out. Because when you stop spending as much on things that you don’t care about, then you keep more of that money in your account.

From there, that difference between the amount that you have coming in the amount that you have going out, that’s the money that you’re going to use to make progress on your finances. I suggest that you build up an emergency fund if you don’t have one. So you want to have some money that’s a cushion for yourself in case things hit the fan. In case there’s some unexpected expense, a job loss, something like that, you want to have savings to fall back on, so use that money to build your savings.

But then you can also use that money to cut down those payments that you have by paying off the debt that’s causing you to have those payments. When we finished paying off our student loans, that was $3,500 a month that we no longer had to pay out. As I mentioned, a lot of times, my clients will have credit cards and personal loans and stuff like that on top of their student loans, and that might be another couple thousand.

So once you pay that stuff off, now you’ve freed up thousands of dollars a month that you no longer have to pay out. That gets to stay with you, and you get to decide what you’re doing with it versus having to pay it to whatever institution lent you the money. So you want to use that money that you’re no longer spending, that gap between the money that you bring in and the money that you are spending out, and put that money to work for you, whether it’s saving to have an emergency fund or a cushion, whether it’s paying off debt, so you can decrease the amount of payments that you have, or you can put that money into investments, and so that money starts growing. Your wealth starts earning money for you.

And when you do those things, you’ll find that the six figures actually feels like more than enough. It feels like you’ve got wiggle room, and it’s all because you took control of your finances and you started being more intentional about the way that you’re using the money and the choices that you’re making with it.

All right, so hopefully that is helpful for you. When you’re thinking about, what am I going to do? I make six figures. It doesn’t feel like it. I feel like money is still tight. If you can make some different decisions with how you’re using your money, what you are doing with it, and just being intentional about the way that you direct it, so that you’re making progress instead of staying in the same place or sliding backwards, then you’re going to feel a lot better about your money. And if you need help with that, schedule a consultation at rhothomas.com/call, and I am happy to help.

All right, that is it for this week’s episode. Please take a second and subscribe to the show. Leave a review. That is how we get this information 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.