273 | Your Ethical Duty to Manage Your Money Well

Do lawyers have an ethical duty to manage their money well?

I’ve been thinking about this lately—specifically whether our duty to act with integrity is invoked in the way we handle our day-to-day personal finances.

In this episode, let’s talk about this question and what to do if you think you’re acting out of integrity with your money.

• • whether lawyers have an ethical duty to manage their money well

Email me to set up a time to talk: hello@rhothomas.com

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 want to talk about this idea that I’ve been thinking about, which is whether lawyers have an ethical duty to manage their money well.

As lawyers, we are held to a higher standard. We’ve got the code of ethics that we have to abide by, things that we do outside of the practice of law can still impact us in our practice. Like you can be sanctioned by the State Bar for activities that you do that don’t have anything to do with the practice of law or your clients or whatever, but are somehow unethical or things like that.

And so I’m thinking about that with respect to personal finance.

And let me say that this is not related to those situations where you just get into a bad spot – you know you’re going through a divorce or a job loss or some sort of medical event or something like that where you know, you just having a tough time with your finances. I’m not thinking about that. I’m thinking about the people who have the money, they are in a fine position in terms of making money and things like that, but it’s the way that they’re managing it that they are choosing to manage it in a way that puts them kind of in that tougher position.

You have enough money, but you’re spending decisions are making your finances tighter. It’s not allowing you to move forward with your finances and meeting the obligations that you’ve taken on.

So the thing that came to mind when I was thinking about this is the promissory notes that we signed for our student loans. We literally signed notes that said I promised to pay this money back. Like if you give me this money to go to school, I promise that I’m going to pay it back.

And I have heard people say they are never going to get this money. I need my money. And it’s people who have enough money that they could pay their student loans back, but they would rather take a vacation or go shopping or buy this bigger house or this nicer car.

But you were loaned the money because you made a promise that if they gave you the money, you would pay it back. And now that you’ve gotten the money, you’ve gone through school, you’ve gotten your degree, you’re making money – you decide that you’re not going to pay it back. Is that unethical?

You said that you were going to pay this money back and you decided not to. You lied to them.

Or let’s say it’s not student loans. I have seen this a lot more commonly in the credit card space. With credit cards, you sign an agreement that says that you’re going to pay their money back. Credit cards are like loans. They’re kind of these revolving loans where the bank is loaning you this money for you to make whatever purchase with the understanding, the agreement that you’re going to pay that money back.

And so when you are putting charges on a credit card and not paying it back and deciding that you’re going to use that money for another trip to go shopping, to upgrade your lifestyle somehow, to go to this restaurant or do that thing. You lied to those people. Because you you took the money to make the purchases, you said you were going to pay it back, and when you had the money to pay it back instead of giving it back to them, you went and spent it on something else.

And I’m not talking to anybody directly here. I know I’m saying you, but just thinking through this like, when that happens, you’re actually lying to those people, and I don’t think we think about it that way.

Another situation that comes up is when you overdraft your bank account. Where you have enough money coming in, but because of the way that you chose to spend it, you overdrafted your account. Well, when you swipe that debit card, you’re telling them that there’s money in the account for this purchase that I’m making, but there’s not.

And it was just this really interesting thing to think about where there is a lot of dishonesty happening within the personal finance space unintentionally. Right? Like, I don’t think that anyone, especially anyone in the law, is like, you know what I’m going to sign this thing, and I’m going to say that I’m going to do this, but I’m going to not do it, you know.

But that’s the effect of what happens when you take out a loan or credit card or whatever the case may be and then you don’t abide by that agreement that you made. You don’t uphold your end of the bargain. You effectively lied on the front end when you took it out.

So do we, as lawyers, have an ethical duty to manage our money well. To make sure that when money comes in that we are spending within our means, to make sure that we have money available to fulfill our obligations like our student loans or credit card payments, or making sure that we’re not overdrafting our accounts because we are effectively lying if we don’t do those things.

We are taking people’s money and not paying it back as agreed. If someone intentionally did that, we would call them a scammer or some other unsavory name. But is it much different even if we’re doing it unintentionally if the effect is the same?

And like I said at the outset, I don’t have the answer here. It’s just something that I was thinking about specifically starting with that, the fact that we sign a promissory note and promise to pay money back. And there are some people who straight out say those people are never going to get that money.

So I want you to think about this. If you are in this situation where you’ve got student loans or credit cards or you’re managing your money in a way that you’re overdrafting your account. Think about how you can make sure that you’re upholding the promises that you made to those institutions to repay their money.

Because if we put it in the context of individuals, right? Sally told Susie that she was going to borrow her money. Right, Sally’s going to borrow $10,000 from Susie and she promises to pay it back. And then when she gets into a position to pay it back, she’s like, oh, Susie’s never going to get that money. We would say that’s not right.

So why is it that when we’re talking about a bank or some sort of financial institution, it’s OK? Why is it OK for us to not repay the money that we borrowed because we would rather use the money to buy ourselves something else or to pay for some sort of experience for ourselves.

I know that we have this, this mindset or this attitude, this view of corporations as these bad people and you know all that kind of thing, these bad actors. But at the end of the day, if we are making promises, even if it’s a so-called bad actor or if they’ve got all this money and they’re not going to miss it or whatever, the thought might be.

If we as lawyers are bound to these ethical duties then it would seem, regardless of who the person is on the other side, if we made the promise, then we should keep that promise.

And I know from my work that often people do want to keep those promises. They do want to be able to pay off their loans or pay off their credit cards and things like that, and they just don’t know how. And I completely get that.

And so make sure that you are seeking out the information. You’re already listening to this podcast where I share a lot of tips and things that. I’ve done and things that my clients are doing. You know, seek out that information, seek out help if you need help, and you’re not sure how to apply what you’re learning to your own situation.

You can reach out to me. My e-mail address is hello@rhothomas.com, and we can talk about that. Or you can find someone else who can help you.

But I think about the fact that the character and fitness portion of the application for the bar requires a credit check. And I think part of that is this idea that we’re talking about with upholding your word, doing what you say you’re going to do, because some people have not been able to sit for the bar exam because of what’s going on with their credit history.

I also think that when people are in a tough financial situation, it can sometimes lead to choices that they wouldn’t make otherwise, and in the case of lawyers, it might be that some people are, you know, kind of taking a little bit of money from the client account. I know that people have been disbarred for stuff like that. Or if you are a time keeper, maybe it’s inflating your time a little bit to reflect more hours, which means that you get maybe a larger bonus. I know people have been sanctioned for that as well.

And so just thinking through all of this. I know that I have kind of been all over the place because this is an idea that I had that I’ve been thinking about. But I want you to think about how you’re managing your money and how you can make sure that you are managing it well and in a way that is…that’s in line with the promises that you’ve made and the obligations that you have.

And again, if you need help, please reach out to me or another financial coach that you would like to work with to make sure that you get those finances in order because it’s helpful for you personally, but I do think that it’s helpful professionally as well.

So that is what I have for you this week. I hope that it was interesting to you, it was helpful and gets you thinking. Please take a second and leave a review for the podcast. Those things help more people to find this podcast so that we can share this information with as many lawyers as possible. 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.