176 | What to Do When You’re Bleeding Money

It can feel really bad to find yourself in a position where you’re bleeding money.

Lawyers sometimes find themselves in this position for a variety of reasons, but it’s not the end. It’s completely possible to turn things around.

In this episode, let’s talk about 4 steps to take if you find yourself bleeding money.

• • 4 steps to stop bleeding money
    
  • the importance of having a budget when you’re trying to correct overspending

Free budget template

Free training to create your budget

You’re listening to Wealthyesque. We are a community of lawyers who believe that true wealth is having control of our time. 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 what to do when you’re bleeding money. Lawyers can find themselves in this position for a variety of reasons. Sometimes it’s things they had control over sometimes not but how you got there isn’t the point when you’re there. The point is getting yourself out of the situation. So if you are consistently spending more money than you make each month this episode will help you get on track Alright, so the first thing you want to do if you are in this situation is have compassion for yourself. No matter why you’re in this situation, it doesn’t help to beat yourself up about it. That’s not going to change the fact that you’re there. It doesn’t make you go back in time and make different decisions. It does nothing but make you feel bad. And when you’re beating yourself up and feeling bad, you are much less likely to take the steps you need to take to remedy the situation. So give yourself some grace. Have some compassion, and think about how you would treat a loved one who would in the same situation. How would you talk to that person, try to treat yourself and talk to yourself in the same way. So that’s number one. Number two, let’s get a clearer picture of where your money is going and how far over you’re spending or like how much you’re overspending. You want to look at how much money you’ve brought in in the last month, and then how much you spent out and where that money went. And you can get my free budget template at rho thomas.com/budget and use the categories in there to help you with categorizing your spending so you can see what’s happening. Alright, number three. Once you have that we want to analyze where the bleeding is happening. Like what’s going on? Are you going out to eat too often or shopping too much? Is it a situation where your housing or your car is too expensive? Those are two that I’ve seen a number of times where people have gotten into housing or cars or whatever that are just more expensive than their income can handle. Or maybe is that you’ve got a bunch of debt and you got a bunch of debt payments coming out every month. For example, I had 14 different student loans and my husband had consolidate his student loans. So we had that and then I had a car loan and we had a mortgage. So we had a lot of different loans and a lot of different payments coming out. I’ve had clients in the same situation where they had a laundry list of credit cards and loans and all these payments coming out every month. And when you’ve got all these obligations that you have to pay each month. That pulls from the money that you have available and it raises the best the base level amount that you’re spending every month, and it may just be one of these things right the eating out or shopping or the housing or car or the debt or it could be some combination of them. You have to look at that and determine where the bleeding is happening because that’s the only way you’re going to be able to stop it. Alright, and the final step here is to identify and implement a solution. So the key is we’ve got to get your expenses to where they’re lower than your income. Knowing where the bleeding is coming from will help with identifying the strategies you have available to get things under control. So let’s look first at how to lower your expenses. If it’s a situation where you’re spending too much going out to eat or shopping or other things, then you can do those things less often. Or you can go to less expensive restaurants and stores or you can set a limit on how much you’re going to spend something that you can do to get the expenses and those categories down. Those tend to be the easier categories to change. The next up is a situation where your housing or your car is too expensive. So we need to look at how we can decrease those expenses. You could move you could get a roommate, you could rent out a room on Airbnb or whatever other platform you could sell your car and get another one that’s less expensive, that fits your income better. And then if you’ve got a bunch of payments going out on debt, those tend not to be as easy to adjust as the lifestyle things that we just talked about. I can just move and lower my credit card payment, but there are still some strategies you can try. So first, you can call your creditors and ask about what you can do to lower the payment. Sometimes you can extend the term or get a lower interest rate or a temporarily lower payment and that will help to decrease the amount you have going out. You can also get a personal loan or debt consolidation loan with better terms like a lower interest rate and a lower payment or you could do a balance transfer to a credit card with 0% interest. Now you want to be very careful with these strategies because I have seen too many situations where people utilize one of those but then they don’t do anything to address the debt or to change the underlying habits that got them into debt in the first place and then they end up increasing their debt. So for example, if you do a personal loan to pay off your credit card, but then you keep spending, you run the credit card back up and now you have not just the credit card debt but a personal loan too. So we want to make sure that if you’re going to use one of these strategies, you are viewing it as a tool and not a solution in itself. So you’re not in the clear just because you did a consolidation, loan or balance transfer we still need to address the debt itself. That comes with having a budget and managing your money in a way that allows you to pay the debt off. This strategy just gives you the advantage of having a lower payment so that you have more money in your budget to work with. So those are my suggestions on the lower inexpensive side. Another thing you could do in this situation is to bring in more income. And this is what my husband and I did. Now full transparency. It wasn’t purely for financial reasons for us. My husband was in residency at the time and he wanted to get more experience with making patient care decisions without supervision. So he took on a second job at an urgent care clinic, but it also was personal because we had a lot of money going out in payments and we didn’t have a lot of wiggle room in our budget to get out of debt with so he took on that second job for a while. I also brought in a little extra income by selling things around our house. Our son was a baby at the time and for anyone who has kids, you know babies grow really fast, especially in that first year. So we had clothes that he was only able to wear a few times before he outgrew them and I sold those things online. And then we put all of that additional income towards our debt to start freeing up some cash flow. We went in a second job and side hustle route which tends to be a little bit faster than getting another a better paying job. But even better if you just get a new job that pays more. If you do go the second job or side hustle route though, the goal here is not for you to do that forever. This is a strategic move to get your expenses down so we’re not using that money to make it rain and go out more and buy more stuff and increase your lifestyle let’s make sure that if you take on the additional time and effort and energy to bring in more income, you make it worth it that you’re in a better position for doing it. And to do that we are temporarily bringing in more income so you can pay off some of that debt because once you pay off a credit card or a loan in full, that’s money that no longer has to go out. So you reduce your expenses because you no longer have that minimum payment and the ultimate goal is to get you to a situation where you’re making more than you’re spending. We want to get your expenses below your normal income. And again, this is where having a budget comes in. So I don’t want you putting out all that work and doing all that extra for nothing. The episode before this one is going to be my interview with my clients Vanessa and Joe and Joe talks in that conversation about how he was doing a lot of overtime before we work together. And he was bringing in more money but they weren’t using it effectively. So all of the overtime money was basically just going to them having a nicer lifestyle, but it didn’t change anything for them financially. That is not what we want. We are doing this for a season to get you out of the situation where you’re bleeding money. Having a budget is gonna be crucial to make sure that the extra money you’re making is helping you improve your situation and get your finances to where you want them to be. And if you’re not sure how to create a budget get my free training that teaches you exactly how to do that you can go to rho thomas.com/training. Alright, so those are the tips I have for you. If you find yourself bleeding money, first, have compassion for yourself. beating yourself up is not going to change anything. It’s not gonna help the situation. Second, get a lay of the land and figure out how much you’re bringing in each month and where it’s actually going. Third, identify where the bleeding is happening. And finally look at ways to reduce your expenses and or bring in more income. And if you are in a position where you’re bleeding money, please know it is completely possible for you to get out of it. I have helped people get out of that situation and I will help you to join us in Money Mastery and let me help you plan and execute your strategy to get yourself on the right foot, just head to rho thomas.com/join To get started. All right, that is it for this week’s episode. Thank you so much for being here. I really appreciate you and if you haven’t done so already, please share the podcast with a friend or two so we can get this information in the hands of more lawyers and make a bigger impact on the legal profession. Having control of your finances leads to so much freedom and I want every lawyer to experience that. All right. As we close out friend I pray that you take the information you learned 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 a life of freedom and choice you deserve. Talk to you later.