254 | The Mismanaged Business Directly Impacting Your Money

There’s a business that’s being mismanaged and directly impacts everything that happens with your money.

If you don’t take the right action, you’ll inevitably suffer some negative financial consequences.

In this episode, let’s talk about what that business is and what you need to do now to protect your money.

• • characteristics of the mismanaged business impacting your money
  • what the mismanaged business is
  • what to do now to protect your finances

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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.

Today we are talking about business.

There is a business that has a significant impact on your money, and it is currently being mismanaged. So I want to talk about what’s happening with this business and what we need to do about it.

First, let’s talk about a hypothetical business before we get into this actual business.

So let’s say Company A is a business that gets all its revenue from one customer. The leadership doesn’t make any kind of plan for the revenue. They just spend on whatever they want. They take on debt each month to buy more if the revenue isn’t enough to allow them to spend as much as they want to. The business has no reserves.

So they are just going through month to month relying on this customer actually paying their bill, actually bringing in that money. And they’re not keeping any of it.

So every month they’re starting over from zero.

They are not reinvesting back into the business. So the leadership thinks that it’s more important to buy things from other businesses and invest in other businesses than to invest in this business. They also buy stuff because they think they should. They think the business deserves it. There’s no regard for whether the business can handle what’s going on.

The leadership is also randomly delegating finances to somebody outside the business. Like they think this person is more capable. They don’t want to deal with it, so they’re just letting somebody else do it.

So thinking about Company A, is this a prudent way to run a business? Is this business thriving?

No, right? This business is on the edge. It’s one down month away from going out of business. What if you found out that this is what’s happening behind the scenes at your firm or your company? How would you feel? What would you do?

Like I know I would be looking for another job so fast. Like I got to get out of here. Because we inherently know that this is not a sustainable way to run a business, but the thing is, this is how so many businesses are run. And those businesses are called You, Inc.

Your life is a business. It’s the business that has the biggest impact on your finances. You are the CEO of that business, so it’s your job to make sure that things are running smoothly, that you are managing the finances well, that you’re reinvesting back into the business to make your life better, to make the business grow.

So knowing all these things that we just talked about that are going on with the business, it’s your job to fix them. So how do we do that? The first point we talked about is that the business gets all its revenue from one customer.

So if you’ve just got the money coming in from your job and you don’t have any other way of earning income, then you want to fix that.

And that doesn’t necessarily mean taking on extra jobs, although you could if you wanted to. It doesn’t necessarily mean taking on extra jobs or starting a business or something like that.It could be just investing in assets that can pay you so that you’re bringing in revenue from more than just your job.

You don’t only want to depend on one customer for all your revenue. So if you are in that position, we need to think about how can you bring in more income from somewhere, whether it’s another job, whether it’s a side hustle or a business, whether it’s investing in assets that pay you.

And it might be that you’re not in a position to be able to invest in income producing assets because of some of the other stuff that we talked about. But we do want that to be the ultimate goal.

All right, the next part is we talked about there’s no plan for the revenue, so we’re just spending on whatever. We’re going into debt if we need to because we don’t have enough money to buy the things that we want to buy. We can’t do that.

There needs to be a plan for the money that you have coming in. So we can’t just spend, however, and just hope for the best because if you don’t have a plan for your money, if you don’t tell it what to do, you’re gonna end up not having any money left over at the end of the month.

So you want to create a plan for that money that you’re bringing in that says, I’m going to spend this much on these things. I’m going to spend that much on those things, and I’m going to keep this portion for myself or I’m going to use this portion for things that improve my finances, that move me forward.

The next piece we talked about is the business has no reserves. This means you don’t have savings. You want to have some cushion in place for if something unexpected comes up, if there’s some sort of issue with your income, you want to make sure that you’ve got that backup.

And part of that is like we just talked about having a plan for your revenue. So not just spending on whatever, but you can set aside a portion of that to put into your savings so that you’ve got a cushion, an emergency fund, some sort of backup money that can help you in times of need.

The next thing we talked about is investing back into the business.

So many lawyers are willing to use their money on so many other things. I’m gonna buy this car. I’m gonna go to this restaurant. I’m gonna buy those clothes. I’m gonna do this vacation, spending money on all these things, but won’t spend money on themselves.

Won’t invest in trainings that can help them practice better, won’t invest in coaching that can help them think about things differently, that can help them push through some of the issues that they may be experiencing, that can teach them how to do things better, more efficiently, faster than just trying to figure it out on their own.

You need to be willing to invest in yourself because you are your greatest asset. And if you’re not investing in yourself, if you’re not investing in learning, in growing, you’re staying stagnant.

We get out of school and we think that learning is just done. I believe that we are always learning, we continue to learn, regardless of when you graduated. There’s always something more that you can do, that you can learn, that can improve your life, whether that’s your practice or some other area of your life.

So think about investing in yourself. Don’t value buying all the things or spending on experiences or whatever you like to spend your money on over investing in yourself.

That’s not to say that you can’t spend on those things, but make sure that you’re also making room to improve yourself. Self improvement is so important and again, if you’re not growing, you’re saying stagnant.

The next thing we talked about is buying stuff because the business deserves it without thinking about whether the business can actually handle it. This kind of goes back to the point about not having a plan for the revenue that comes in.

But again, this is something that I see a lot with attorneys where especially if you’re putting in these long hours and you’re making this money, you feel like you deserve to buy this thing to treat yourself. And I don’t think there’s anything wrong with treating yourself, but I have said before, it’s not about whether you deserve it. It’s about whether your finances can actually support this purchase that you want to make.

And it might be that you can’t right now, that your finances are not in a position right now to do this thing that you want to do, but you can plan for it.

Maybe it’s something that you do a few months from now, you just put it off, push it down the road a little bit until you’re in a place that your finances can support doing it. But buying stuff just because you deserve it and you’re not thinking about what’s going on with your finances, what other expenses you have, what else is coming up is not a prudent way of managing your money.

And the final thing we talked about is delegating the business finances to somebody outside of the business that the leadership thinks is more capable. I see this happen a lot with attorneys as well, where they delegate that to a spouse or a partner, they delegate it to a financial advisor. They put it on someone outside of themselves and they don’t think about it at all anymore.

This is your life. This is your money. And yes, having an advisor is great, having a spouse or a partner who enjoys personal finance is wonderful, but you still need to know what’s going on.

You still need to learn about money and know what’s happening with your money because at the end of the day, nobody’s going to take care of your money better than you will.

And again, that’s not to say that you can’t allow an advisor to help you. Have a spouse or a partner who likes doing this stuff, take the lead on it, but still know what’s going on. Don’t just bury your head in the sand and assume that they can do it, they’re more capable. I’m just going to wash my hands of it.

They are not smarter than you. You are a whole lawyer. You can manage your money. You can learn about money because it is nowhere near as hard as practicing law.

So at least know the basics, know what’s going on with your finances. Don’t just completely delegate it to somebody else and hope for the best, because again, this is your life and nobody cares more than you do.

So those are my thoughts on the business that is directly impacting your finances that is currently being mismanaged. As the CEO of that business, I have given you all of the tips on how to improve the business performance so that you don’t end up in financial ruin. So please take these tips, apply them in your finances so that you can turn things around.

Alright, that is it for this week’s episode.

Please share this episode with a friend or two who you think could use this information.I am trying to help all the lawyers. I know how powerful managing your money well is. I know the peace that comes with managing your money well. I know the freedom that comes with managing your money well, and I want that for all of you.

So please share this episode with a friend or two who you think would enjoy it, who could use it. 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.