253 | Breaking the Golden Handcuffs

It sucks to feel trapped in a situation you no longer want to be in.

But too many lawyers find themselves in exactly this place because of golden handcuffs—they make a lot of money and need all of it to maintain their lifestyle.

There’s a simple solution to break free if you value your freedom, and it’s all in how you use your money.

In this episode, let’s talk about how to use your money more strategically to break the golden handcuffs.

• • definition of golden handcuffs
  • why so many lawyers get caught in golden handcuffs
  • how to break the golden handcuffs

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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.

So today we are talking about the concept of golden handcuffs.

If you’re not familiar with golden handcuffs, it is when your job pays you a lot of money, there are other financial incentives, things like that. They’re basically throwing money at you to prevent you from leaving.

And this often comes up in fields like law or in other professional fields where a lot of times you’re making six figures straight out of school. And this is why so many lawyers get caught in golden handcuff situations.

And what I mean by that is they are building their lifestyle around the income that they have and they are dependent on that income. So even if they want to leave, like there are a lot of lawyers who are in positions that they don’t want to be in anymore, but they feel like they can’t afford to leave because of how much their lifestyle costs.

So when you’re making six figures, multiple six figures, a lot of times people will start buying more stuff, especially if you are like me where you went straight through kindergarten to law school. And so becoming a lawyer is your first real job and you’re dropped into this six-figure or multiple six-figure salary.

It’s like, “oh man, I’ve never had this much money before.” And you start spending and you don’t realize how quickly things can add up.

And so you start buying more stuff, you buy bigger stuff, you start upgrading stuff. And I think a lot of times we are keeping up the appearance of what we think a lawyer is supposed to look like. A lawyer is supposed to drive this kind of car or live in this kind of house or where these kinds of clothes. And a lot of lawyers end up stretching their income to its limits because they are buying more and more things and they’ve got more and more payments coming out and they don’t end up having money for themselves.

On top of that, when you get raises or you get bonuses, a lot of times people are already planning how they’re going to spend that money. So you get this additional income, but you don’t see the benefit of having additional income, because it’s already getting spent out.

So what I really want to talk about is how to break free from golden handcuffs, because there are a lot of lawyers who are in positions that they don’t want to be in, but they feel like there isn’t a way out. And I’m here to tell you that there is.

Alright, the first thing though is you have to decide that it’s actually worth it to you. Cause there are some lawyers who are like, I like my lifestyle. I am willing to continue to do this, to continue to be in this job, even though I hate it because I would rather have this house, this car, this whatever, that’s perfectly fine if that’s you, you don’t need to listen any further.

But if you do want to change it, right? You don’t want to stay in the same place, then you have to decide that you’re going to get out of it and that it’s worth it to you to make the necessary changes because there will be lifestyle changes required.

If you’re spending everything you make right now and you are dependent on this level of income from your job, then you’re going to have to change something to be dependent on that job anymore.

So once you decide that is actually worth it to you to make the necessary changes, you’re going to have to figure out where your money’s going because we know it’s not in your account. So where is it? Right? Where are you spending the money? Who is it that you’re giving that money to?

Let’s figure that out first because until you figure out where the money’s going, you’re not going to be able to redirect it to where you want it to go. So that’s your first step.

Then from there, we are going to increase your cash flow, meaning we’re going to create space between your income and expenses. That space is necessary to break free from golden handcuffs because the whole reason that you’re trapped in the golden handcuffs is you have to keep making this amount of money to sustain your lifestyle. But when we increase that cash flow, when we’ve got a bigger space between your income and expenses, now you’re breaking free of that, you don’t need all of the money that you’re making. All right?

So the only way to create that space to increase your cash flow is you’re going to make more, you’re going to spend less, or both. And this goes back to the lifestyle change that we talked about a minute ago.

Like, it might require something like getting a second job or getting another job that pays more, but the key is you can’t start spending the additional money you’re making. So if you do get a second job or if you do get a job that pays more, or if you start a side hustle or something like that, that additional money that’s coming in can’t then go to fueling more lifestyle. We need that money to start breaking free and start creating that space for you.

Increasing your cash flow also will likely mean cutting expenses. So we need to figure out what are the things that you’re spending on that aren’t as important to you as this goal? What are the things that you’re willing to give up temporarily or to cut back on to get your expenses down? Because you can’t keep spending everything if you want to break the golden handcuffs.

For me, I’d rather live in a less nice home than I could or drive a less nice car, have less nice clothes, right? If it means that I’m not trapped somewhere that I no longer want to be. So that means that we live a more modest lifestyle than our income technically could afford because the way we choose to manage our money, we don’t want to pay for all the things and then have nothing left over.

Like we have been in that situation before. That’s where our money journey started, actually, which was why I wasn’t able to reduce my hours when my son was born like I wanted to. We needed all the money and reducing my hours would have come with a pay cut.

So I want you to think about what is it in your lifestyle that you’re willing to change to be able to break free from the golden handcuffs so that you don’t require all of the money that you’re making.

I do, though, want you to still make room to spend on things that are important to you, but there’s likely a whole lot that you’re spending on now that doesn’t fit that description. So we got to figure out what those things are that are important to you, what those things are that aren’t as important to you that you’re willing to give up or cut back on, so that we can create more space between your income and expenses and increase that cash flow.

Once you increase your cash flow and you build that gap between your income and expenses, now we’re going to start directing that money toward improving your finances. So we’re going to build up your savings. We are paying down any debt that you have, which is also going to increase your cash flow even more because you’ll no longer owe the minimum payments on that debt.

We are going to start investing that money so that it can start earning more money for you. So as you do those things, you are loosening the golden handcuffs more and more until you eventually break free of them because you’re no longer reliant on this same level of income. So your base expenses are lower. That means you don’t need to continue making the same amount that you’re making now just to be able to live. Not saying that you go and quit your job as soon as you get your expenses down, but saying now you’re no longer required to make this amount of money, right?

I used to have to make X to be able to pay all my bills and all my expenses, and now I don’t need that same level. You also have savings that you can fall back on in case of an emergency. So because you decrease those expenses, maybe you started making more. You had money that you were able to put away for yourself. So now you can cover an emergency or an unexpected expense because you’ve got the savings cushion there.

You are paying down your debt, so you don’t have as many payments going out, which means that you’re keeping more of your money for yourself and that’s huge. You’re also putting your money to work for you by investing. So now you’re making money that you didn’t actively earn. You didn’t have to actually go to work and earn that money. Your money is starting to earn money for you.

And when you break free from the golden handcuffs, you can make choices for your life that weren’t available to you before and that is the best part of this entire process.

So if you are in a golden handcuff situation where you feel like you have to make this level of income to be able to live, I want you to think about how you can apply these things that we talked about today to your finances so you can start breaking free. Because as you do then you’ll be able to do other things that you may be want to do, but don’t feel possible right now.

And as you have more and more options, you create more freedom for yourself. Alright?

So that is it for this week’s episode. I hope you find it helpful, especially if you find yourself in a golden handcuff situation that you want to get out of.

If you would like to learn how to use your money to grow your net worth and achieve more freedom in your life, make sure you join me for the Money Moves Masterclass. Just head to rhothomas.com/moneymoves to sign up for the next one.

Also, please share this episode with a friend or two who could use this information. That is how we grow, how we get the word out to other lawyers so that they can get their money in order 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.