239 | Closing Out 2024: Your Financial Year in Review

Don’t make the same financial mistake that a lot of lawyers make by not reviewing or evaluating your finances. It’s a sure fire way to keep repeating the same mistakes and the same bad money habits year after year.

Whatever happened with your finances in 2024 will give you important clues about what your money plan needs to be for 2025. Don’t miss it.

In this episode, let’s talk about reviewing your 2024 finances to prepare for 2025.

• • the importance of reviewing your finances at the end of the year
  • six areas to reflect on in reviewing your finances
  • how to evaluate your finances
  • the importance of conducting a review to prepare your finances for 2025

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. By the way, if you’re a lawyer who’s struggling with debt, you’re probably making at least one of five common mistakes. Grab my free guide on how to correct those mistakes and finally get out of debt for good. Head on over to rhothomas.com/guide. That’s G-U-I-D-E.

Hey friend. Welcome back to the show. I hope you’re doing well and having an amazing day so far. The end of the year is upon us. I cannot believe that 2024 is already almost over. So today we’re talking about reviewing and evaluating what happened with your finances this year to prepare for next year. Don’t make the same mistake that a lot of lawyers make, which is not reviewing, not evaluating what happened with your finances and repeating the same mistakes, the same bad money habits, over and over again, year after year. It is not productive. It’s not useful. So I want you to get the most out of 2024 to learn the lessons that you need to learn so that you can make 2025 the best year that you can for your finances. So take this time as we close out the year to reflect on the current state of your finances and what’s happened with them this year. And in this episode, we are going to talk about some key areas that you want to look at as you review your finances. I The first step is your spending. I teach my clients to review their spending weekly and to evaluate what happened with them monthly, or to evaluate what happened with their spending monthly. But if you haven’t been doing that, you can still do it now. A lot of credit card companies and banks will offer the spending analysis where you can see where you spent your money, what percentage of money you spent in these different categories and things like that. So you can see a really good overview of your spending for this year, so you can decide if you like what you see there. You also want to look at your savings. Do you have the amount and savings that you want to have? You know? Do you have more than you had last year? Are your savings tracking the way that you want them to do? Another area is your debt. How much debt do you have now, as compared to a year ago? Is that number tracking the way you want it to? Are you surprised by where you are? Like, look at your debt and determine how you’re feeling about it. Your net worth is another area to review. So your net worth, if you are not familiar, is your assets. So everything that you own, your bank accounts, your retirement accounts, the value of your property, of vehicles, anything that you have of value minus liabilities, so basically debt, things like mortgage, student loans, credit cards, personal loans, anything like that. So your net worth is your assets minus your liabilities. And when you look at your net worth, you want to see is that tracking toward where you want it to be, is it increasing over time, or is it staying the same or even going backwards? I also want you to look at your banking system. Something that I’ve talked about before is the fact that a lot of banks, especially brick and mortar banks, will charge you a bunch of fees and nickel and dime you for every little thing, and they pay very little in interest. Look at your bank accounts and see what fees you were charged over the course of 2024 look at how much interest you earned on your savings account. Look at whether you like those numbers, right? If you’re with a bank that’s charging you a bunch of fees, they’re not paying you a lot of interest, there are plenty of other banks that you could switch to if you want to that do not charge all the fees that do pay more in interest and that would support you more in your wealth building journey, in your money journey. I just want you to make sure that your banking system is actually helping you get to where you want to go, and not taking you backwards. I want you to think about how you managed your money from day to day in 2024 and how you made spending decisions. So was it just a matter of looking at your account and seeing what’s in there and deciding whether or not you could spend? Was it a matter of not looking at your account at all and just spending? Was it actually creating a plan for your money and sticking to it? Or did you create a plan and never follow it again? Did you just fly by the seat of your pants? Did you create a plan and beat yourself up with it? Because sometimes people will create these plans, but then they use it in a negative way, like they use it against themselves, and that’s not good either, right? Like we want to be kind of in the middle where we’re using our plan to guide our spending decisions, but we’re not using it in such a way that we’re weaponizing it against ourselves and making ourselves feel guilty if we happen to get off track. So those are a few areas that you want to review, and what we are looking for here is three things. I did two. Three things. So first, we’re looking at what went well this year. What are those things that you were doing that moved you towards your goals? What do you want to keep doing as you come into 2025 what are those things that are pushing you forward that you want to double down on next we’re looking at what didn’t go so well. So what are those things that are taking you further away from your goals, the things that are not helping you in your plan, the things that are not helping you to save and pay off debt and invest? Those are things that you want to stop doing. And finally, looking at those things, the things that didn’t go so well, you’re going to determine what you want to do differently in 2025 so that you can take the steps you need to take to fix those things, so that way you get closer to your goals in 2025 so you’re going to double down on the things that were doing well, or that were going well. You’re going to stop doing the things that weren’t going so well, and then you’re going to tweak what you were doing, figure out what you want to do differently in 2025 that’s going to get you closer to your goals. Doing this kind of evaluation, and taking the time to reflect on your year and reflect on your finances and reflect on what you have and haven’t been able to accomplish this year, and deciding what you want to do about it is so helpful because it gives you a very clear plan of what you need to keep doing, what you need to stop doing, and the different things that you want to try next year. And if you didn’t have a plan for your finances this year, you want to make sure that you’re creating a plan for next year so that you can be in the position that you want to be in, that does not just happen, okay, like, you can’t just wish that you had a higher net worth or wish that you had less debt, or wish that you had savings. And I think a lot of times people assume, especially like, if you’re making a lot of money, especially if you’re making a lot of money, it’s easy to assume that you’ll just have a high net worth, or you’ll just be able to get out of debt, you’ll be able to build your savings, but it takes doing the right things with your money. It doesn’t happen just because you make a certain amount. For example, that was me, like, I just knew when my husband and I calculated our net worth for the first time, it was going to be six figures, because we were making six figures. So why wouldn’t it be six figures? It was not six figures. It was actually very below six figures. It was negative six figures. And the thing was, we didn’t have any sort of plan with our money. So even though we thought we were doing the right things, we weren’t paying attention to what happened to the rest of it. We didn’t know how all of the debt that we had factored into our net worth. We basically were letting all this money slip through our fingers, because although we were saving for retirement, all the rest of the money, like if it wasn’t going to bills, it was basically getting spent. And so we weren’t really moving forward like I said we were saving for retirement, but the interest that was accruing on all the debt that we had was basically canceling out what we were doing in retirement anyway, and then we weren’t doing the things that we needed to do with the rest of the money to be able to build our savings or to be able to make extra debt payments or to invest outside of the retirement accounts or any of that. So we were just stuck in the same cycle month after month. And the point here is you have to have a plan with your money, because if you don’t, you’re going to end up spinning your wheels too, thinking you’re doing the right things, but actually you’re not, and you’re just staying stuck. Taking the time to review what happened with your finances in 2024 is a great starting point for the plan that will take your finances to the next level in 2025. All right, so that is it for this week’s episode. Please share this episode with a friend or two who could use this information. Maybe you can even do your review and your evaluation with that friend, or you can be each other’s accountability partners or whatever. Completely up to you, but I hope that in any event, you do the evaluation, you do that review, so that you can get a good start on your finances for 2025. 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 regain control of your time, build wealth and live the life of freedom and choice you deserve. Talk to you later.