245 | Making Good Money With Nothing to Show for It

How do you make almost $200k but only have $100 left each month?

In my husband’s and my situation and in what I’ve seen with the lawyers I work with, it all comes down to managing money ineffectively.

In this episode, let’s talk about how to flip the way you typically manage your money on its head so you can actually have something to show for all the money you make.

• • my personal story of making almost $200,000 with $100 left each month
  • how Parkinson’s Law applies to personal finances
  • why most people get raises and still feel like they need to make more
  • the typical way most lawyers manage their money
  • a more effective way to manage your money

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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 to the show. I hope you’re doing well and having an amazing day so far.

Today, we are talking about making good money, but having nothing to show for it.

So, there are a lot of lawyers who are making six figures, even multiple six figures, but they don’t have anything to show for it. They don’t have savings. They don’t have any money in their checking account, like their checking account is getting really close to zero before their next payday.

They haven’t been able to make a lot of progress on their student loans or maybe they’ve even incurred additional debt like credit cards and personal loans.

I see it all the time and this was also my experience. I experienced some of those same things
back at the beginning of our money journey.

So, our journey started in 2016 and at that time I was two years into my practice and my husband was about a year into his residency and we were making almost $200,000 between the two of us, but we only had like 100 or 150 dollars left each month.

We had some savings, but barely, and two good things we were doing was we paid off our credit card in full every month and we were saving for retirement, but beyond that we were just spending.

We hadn’t touched our student loans beyond making the minimum payments and our student loans were almost $500,000 alone.

So, I share all that to say I know what it’s like to make good money, but not have anything to show for it. I have been there and I know exactly how it feels. But, what I’ve learned is there is a way that most people manage their money that’s just really not effective that leads people to being in this position and that is that you make money and then you spend and then you hope that there’s something left to save or pay off debt or invest, like something to put towards your financial goals.

Instead you have to intentionally plan how you’re going to use your money and you have to flip that order of operations with your money. So, let me tell you what I mean by that.

There is this thing called Parkinson’s Law that says that work will expand to fill the amount of time you give for that task. So if you give yourself a day to do something, it’s gonna take you a day to do it. If you give yourself four hours to do it, it’ll take you four hours, etc.

I think that same principle applies with money. Your expenses expand to fill the money that you allow for, right.

So what most people are doing is they get paid and they allow for that entire check to go to expenses, which is exactly what happens. You just keep spending keep spending and then you get to the end of the month and you got $100 left and you don’t have anything to save and invest.

And a lot of times when people are in this position they think if they just get a raise then that’ll make everything okay. Like if I could just make a little bit more money then I’d be alright, but that’s not the case because they’re not changing the way that they’re managing their money.

So then you get that raise, you start bringing in more money, and then your expenses continue to expand, your expenses grow. And then you get in that same situation where you’re making more and you’re still living paycheck to paycheck and still wishing that you made more.

So you have to intentionally plan how you’re gonna use your money. How much are you gonna spend on X thing, on Y thing, right? You divide it out and you plan on how much you’re gonna
spend in each category and you do so in a way that you still have money available for your goals.

From there, you’re gonna flip your typical order of operations meaning instead of make money, spend on your expenses, and then hope there’s something left, you’re gonna make money, and then you’re gonna set money aside for your goals, and you’re gonna spend what’s left.

You’re gonna be able to make more progress on your goals this way because you set that money aside ahead of time.

So like I have my clients set aside the money for their goals at the beginning of the month
or the beginning of the pay period depending on what’s going on with their finances. But, either way, you’re setting that money aside first. That way by getting it out of the way. You’re not looking at it. You’re not like, “oh I’ve got all this money I can spend on this or I can spend on that.” Like, you set that money aside and you protect it from accidentally getting spent.

And then with the rest of the money you wanna follow that plan that you created.

So you decide I’m gonna spend X in this category, and y in that category and you stick to it. And the way you do that is checking in with your plan regularly.

So by doing those things you can flip the switch and stop being in this position where you’re making more, but you don’t see the results of that more, like you don’t see the fruit of that effort
and you’re able to actually benefit from the more that you’re making.

You’re able to keep more of that money for yourself or direct more of that money to your goals so that you continue to move forward with your finances, instead of staying stuck in the same place month after month.

So if you are a lawyer who is making good money, but you keep finding yourself in this place where you don’t have a lot of money left at the end of the month, where you don’t have savings,
where your debt is still in the same place, you’re not making progress on that. You’re not investing all of that kind of stuff, doing these things is gonna get you out of that. Alright.

So I hope that this is helpful for you.

Please take a second, share this episode with a friend or two who you think could use this information because that helps us to get the information in the hands of more lawyers so that more people learn about this show and can get the help they need with their finances.

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.