291 | Make Your Money Work for You

Are you using your money effectively?

Or do you just view your money as a way to pay bills and buy stuff?

In this episode, let’s talk about changing your view of your money and how to make your money work for you.

• • how people typically think about their money
  • my kids’ bank accounts and how the interest they’re earning
  • how to make your money work for you beyond investing
  • changing your perspective of your money

• 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 making your money work for you. I want to give you a different way of relating to your money or thinking about your money than we typically think about it.

So most people think about having their job, working, and making money periodically, and then using that money to pay bills and do the stuff that they want. And that money starts running out towards the end of the pay period, and you’re waiting for that next paycheck to come in so that you can spend again.

I want you to think about putting your money to work so that eventually you no longer have to work for money. And I started thinking about this because I was showing my kids their savings accounts recently.

So I don’t know if I’ve talked about what we’re doing with our kids with money-still figuring it out, to be honest. I don’t purport to be any sort of expert on teaching kids about money, but we opened checking accounts for them that are in our name, but the kids are able to use it.

So I’ve got those little labels and the debit card for each account. I put the label on there and put each child’s name on it. So then when they’re out and about, and they want to buy something, then it’s like, hey, you’ve got money. And they feel so proud to get their debit card and go to the register and pay and all of that stuff.

But part of that, too, is they each have savings accounts and so when they make money, then they’re putting a portion of that into their savings. And the way that they’re making money, one, they get birthday money or money at holidays and stuff like that.

But then my husband and I also have them doing extra things if they want to make some extra money. So it might be shredding papers for me. Or I told you about us buying a rental property. They’ve done some stuff working at the rental property and earn money that way.

And so they’ll take some of that money and put it into their savings account, but we were looking at their savings accounts recently, and they saw that they’re making 25 cents a month in their savings account, and they’re not doing anything to earn that money. And they were really excited about that. And I was teaching them about earning interest, how the bank pays interest on the money that they put into their savings account.

So now they want to put more money in savings so they can earn more, right?

But I was thinking, one, about money earning interest, which is something that people have talked about before, like the fact that compound interest is the 8th wonder of the world, and how your money can earn more money, and that interest earns money, and all of that. But I think even before you get to that aspect, like even outside of the investment context, you can put your money to work for you just by having that savings cushion so that you’re no longer stressed about what’s going to happen come the end of the pay period, or what’s going to happen if an unexpected expense comes up. Or putting your money to work for you so that you start paying down debt, and you can keep more of it the next month.

Those things are still making your money work for you because when you spend the money, when you pay the bills, that money is gone. You don’t get it back. You don’t get a return on that.

There might be a return in enjoyment, right? If you buy something that you like, or maybe you take a trip, you have some sort of experience where you’re making memories with loved ones, but you don’t get a direct financial return on paying the bill or buying the thing or paying for the experience.

But when you’re talking about debt, there is an amount of money that’s going out each month in the minimum payments on your debt, plus the interest, right? That amount is including interest that’s being charged on what you owe.

And when you pay that debt off, then you no longer owe that monthly payment each month. So now you get to keep that money in your pocket. You basically give yourself a raise. And so I think about making your money work for you in that regard, because when I put that money to work, I get a financial return.

There’s a direct financial reward in putting that money toward paying off debt, because now I’m giving myself a raise because I have fewer monthly payments that have to go out.

With saving, when I put that money to work for me in a savings account, it alleviates stress that I might feel with unexpected expenses. And then on top of that, you’re going to earn some interest, like I was talking about with my boys’ savings accounts, where you’re earning something. It’s not going to be the same as you’ll earn in the stock market, and that’s something that I was telling them too, but you’re earning something.

That money is earning more money for you. And then beyond that, when you put your money to work for you in the stock market, you invest it, you buy these assets, these portions of these companies, you get paid a return for that.

The stock market gives you a greater return. You have the potential to earn more money because it’s riskier. At the bank, you put that money in the bank, you’re probably not going to lose it. Like it’s going to be some crazy circumstance if you lose that money. With the stock market, especially if you’re investing in individual stocks, it’s risky because… you’re dependent on that company staying in business. And so that’s why there’s the greater potential for reward.

The stock market goes up and down. So sometimes you’re going and you’re checking and you’re seeing green, you earned and, you know, blah, blah, blah. But then sometimes you go in there, and you’re seeing red because the stock lost value and whatever else.

So I say that to say, there are many different ways that you can put your money to work for you and it doesn’t only have to be with earning interest.

Another thing, like thinking about the rental property that my husband and I just bought, that’s putting our money to work for us. We invested money in buying this property, and then the property will pay us money from the tenants who live there.

I want us to stop just thinking about money in the context of going to work, trading time to earn money because your money can make more than you ever can. It’s going to work harder than you ever will. And it does it while you sleep.

Like my kids were so excited to see that they were earning this quarter every month and they’re not doing anything extra. All they did was put the money into the account and now they’re earning more. There’s more in there than what they put in.

So thinking about how you relate to your money, how you think about your money, what you think the purpose of money is, is really important. Because I think most people think about money as a means to pay bills and buy stuff. But I don’t think that we’re just meant to pay bills and buy stuff and then we die, right?

And yes, we talk about saving for retirement, but most people are thinking about that in the context of, if I put this money away for 30 or 40 years, when I’m 65, 70, then I can finally live my life. I don’t think that it has to be that.

And I think if you put your money to work for you, you eventually get to the point that you don’t have to work to earn money because that money is earning money. But along the way, you’re seeing benefits as well.

So like we talked about with paying off debt, you get to keep more money in your pocket when you pay off more debt.

We talked about saving. You’re earning some money there, but you also just have that peace of mind of knowing that if something comes up, you’re able to cover it.

Then, with investing, that’s where you really get into being able to earn more with your money than with your time. And that can be investing in the stock market or investing in real estate or whatever other investments that you might be interested in, and that you might know about that I don’t. But the point is that money is a tool that we can use, not just to spend, but to set ourselves up for the lives that we want.

And as you start doing these different things that we’ve been talking about with money, you start to achieve more freedom, you have more options, you have more flexibility in your life where you can live your life and enjoy your money because you’ve taken the steps that you need to take with it.

You don’t have to just pile money away until you’re 60, 70, whatever retirement age is these days. You can enjoy life now, but there’s a balance there, and you want to be smart about it. And part of being smart about it is using the money to work for you, not only using the money to spend.

So that is it for this week’s episode. I hope you have enjoyed it. I hope it’s been helpful for you.

And if you need any help with managing your money, learning how to make your money work for you, schedule a consultation at rhothomas.com/call.

Please take a second and share this episode with a friend or two who you think could use this information. That is how we spread this information to more lawyers, how we grow the show, so that more people can hear this information.

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.