Why Many Lawyers Struggle to Build Wealth

There’s this thought in our society that when you make a lot of money then personal finance is easy. People who make a lot of money are well-off. They’re rich. They don’t have money struggles.

But a 2015 Nielsen study found that 25% of households making $150,000 a year or more are living paycheck-to-paycheck.

That’s such a shocking statistic because it goes against what we would expect, right? The average household income in America is about $60,000, so there’s this disconnect when we think of households making 2.5 times that amount struggling.

So let’s talk about it. We’re going to look at this high-income struggle from the angle of lawyers in particular, and I think there are two overarching things that stand in the way of lawyers building wealth, and that’s mindset and behaviors

Today, we’re going to look at specific mindsets and behaviors that are common to lawyers and hinder wealth-building.

We’re going to talk about:

limiting beliefs around money
the way lawyers often view money
the “I work hard. I deserve it.” mentality
living the lawyer lifestyle
not budgeting
ignoring student loans and
why any of this matters anyway.

Limiting beliefs around money

So jumping in, let’s talk about limiting beliefs. And in particular, we’re talking about the things we believe about money that have a negative impact on our money.

We talked a little bit about this in episode 2, how your beliefs drive your feelings and feelings drive your actions and actions drive your outcomes and then those outcomes reinforce your beliefs.

So any limiting beliefs we have around money ultimately influence the way that we act with our money and the outcomes we see with our money.

“Money is the root of all evil.”

Let me know if this one sounds familiar: “Money is the root of all evil.”

I hate this one so much because it’s a misquote from the Bible. Someone may have told you that the Bible says that money is the root of all evil, but the Bible doesn’t say that.

1 Timothy 6:10 says, “The love of money is a root of all kinds of evil.”

So what’s the love of money? Greed, right? So, greed can lead to all kinds of evil. I agree with that. Money itself is just a resource.

If you subconsciously believe that money is the root of all evil, then how does that affect the way you view money? How does that affect the way you view wealth?

You’re going to be reluctant to hold onto money too long. You will unconsciously sabotage wealth-building because in your mind, money and evil are one and the same.

It’s one thing to consider holding onto the root of all evil versus holding onto a resource that will help you get control of your life and make a difference in the world.

“Rich people are dishonest.”

How about this one: “Rich people are dishonest.” Or evil. Or crooked. Or whatever you want to say.

If you believe that people with a lot of money are inherently bad then you’re not going to want to be a person with a lot of money. The stereotype of the mean, crooked rich guy is perpetuated in the media and really shapes the way we view wealth.

But think about this: churches and other religious institutions and non-profits and all these organizations that do good in the world…need money!

How are we going to effect change in the world if we’re all sitting around looking at each other broke?

“The only way to have wealth is to inherit it.”

Another one is “The only way to have wealth is to inherit it, win the lottery, or invent something.”

If you believe that all wealthy people got inheritances or won their money or came up with some novel invention, then you won’t be looking at ways that you can build wealth in your own every day job.

Think about how much money you’ve made in your career so far. It’s probably a much larger number than you realized, right?

The point is you don’t have to do any of those things to build wealth. It’s possible to build wealth by working a normal job, managing your money well, and investing.

Consider this: teaching is among the top professions held by millionaires in America, according to a study conducted by Ramsey Solutions last year.

The way lawyers view money

Switching gears, let’s talk about the way we tend to view money.

High income vs. wealth

We tend to equate a high income with being wealthy or at least being well-off.

But even if your income is $1 million dollars, if you spend all of it and have nothing to show for all that money you brought in, you’re not wealthy or well-off.

When we assume that we’re doing well because we have a high income, we probably aren’t paying attention to our money.

That’s exactly what happened with my husband and me. We didn’t think that we were wealthy or anything, but we knew that we were bringing in a high income and so we felt like we were doing well.

But when we started paying closer attention to our money, we found that we were in a lot of debt, and we weren’t well-off at all. We were actually quite broke.

So we can’t equate a high income and wealth. They’re not the same.

You can have a high income and be broke. You can have a lower income and be wealthy.

It really comes down to how you manage the money you bring in. And we’ll get more into managing money a little later when we talk about budgeting.

Buying stuff vs. buying your time

Another thing with the way we view money is that we often look at it primarily as a tool to buy stuff.

For example, what happens when you get a raise or a bonus? For many of us, we’re looking at this thing we’ve been wanting to buy that we can now afford.

But when we equate money with buying power and are constantly looking for ways to spend it, it will be more difficult to build wealth.

For many of us, as our incomes go up, our perceived needs go up, as well. So we end up spending more as we earn more, rather than saving and investing more.

If you’re going for financial independence and lifestyle freedom, you want to look at your money as a tool or resource to buy back your time rather than buying stuff. The more you spend on stuff, the less you have to build wealth.

Also, most of the time we buy the thing and then we’re quickly over it. We don’t even care about it down the line because we didn’t really value it in the first place.

Instead of viewing money as a way to buy more stuff we don’t care about, let’s look at it as a tool to buy back our time and build wealth.

“I work hard. I deserve it.”

So now let’s look at the “I work hard. I deserve it” mentality. This way of thinking can be detrimental to building wealth because we typically use it as a way to justify or make ourselves feel better about buying expensive things.

If you’re only focused on buying the things and don’t have a plan in place for your money, you’ll look up and have nothing to show for the money you’ve worked hard for except all the stuff you “deserved.”

Yes, I agree you work hard. As a lawyer, you have a lot going on. A lot on your plate. You’re managing your clients, partners, more junior associates, paralegals and other staff, your overall caseload. Not to mention your spouse, your kids, your other family, your friends, your interests outside work.

But don’t use the fact that you’re working hard and juggling a lot as an excuse to go and buy a bunch of stuff that you don’t really care about.

You work hard, but I think ultimately what you deserve is to have something to show for all the hard work that you do. You deserve to have money in your account that ultimately helps you to have more control over your time.

The lawyer lifestyle

Alright along the same lines, let’s talk about living the lawyer lifestyle.

I posted on Instagram earlier this week (@iamrhothomas, if you’re not following me) but anyway I posted on Instagram about my husband’s and my first few years after I finished law school, and the things that we were doing that played into this lawyer lifestyle.

We got a nicer apartment in a wealthier part of town. We paid for this amazing wedding and went to St. Lucia for our honeymoon.

We went to all the nice restaurants weekly for date night. We went to Paris and London for our first anniversary. And we were just living the life.

After our son was born, about 2 years later, we started looking at the way we want to raise our kids and the lifestyle we want to live going forward. We sit down to look at our finances to see how we can get there and found that we were broke.

And the problem was that we didn’t have a plan for our money. We had all of this money coming in, and it afforded us this great lifestyle, but we didn’t have anything to show for it at the end, right?

I don’t regret those things that we did. We had a lot of fun, and we’ve learned a lot from this experience of finding ourselves broke making six figures. And we did value those things that we were spending on, which I think is important when you’re buying things.

But I wish we had been intentional with our money from the beginning, and we would be a lot further along in this financial plan and this quest for lifestyle freedom.

And that’s the whole point, right?

I’m not saying don’t buy things, but I think that we’ve got this tendency to look at what all of our colleagues are doing and what our colleagues are buying, and we decide that we need those things, too, but don’t really consider whether we actually care about them.

So yes spend on things that you truly care about, that you actually value, that bring joy to your life.

But don’t get caught up in buying things just for the sake of buying them and living this particular lifestyle because you “deserve it,” going back to that mindset piece, or because everyone around you is buying it. If you don’t care about it then who cares what they bought, right?

Now let’s look at some common behaviors around money that hinder lawyers from building wealth.

Not budgeting

One of the biggest ones is not having a budget. We talked about budgeting back in episode 7, so I won’t go too deep into it here.

But not having a budget really hinders your ability to build wealth because it’s really easy for your expenses to creep up to the point that they equal or exceed your income when you’re not paying attention.

When you don’t know what is coming in and what’s going out and when you’re not paying attention then it’s going to be hard for you to tell whether you are actually making progress on your money or not.

Going back to that statistic I quoted earlier, 25% of households making $150,000 or more are living paycheck-to-paycheck.

It’s probably not paycheck-to-paycheck in the sense we typically think about it, but it’s probably more like spending next month’s money on this month’s expenses. If you’re not budgeting, you may not realize that’s what’s happening.

We talked about a number of different budget types and who each one is right for in episode 7, so head back there and check that out if you haven’t already.

And if you need some help getting started, you can download the exact budget template my husband and I use at rhothomas.com/budget.

Ignoring student loans

Okay, the final thing I want to look at is this tendency we have to ignore our student loans. If you’re like most of us, you probably came out of law school with six figure student loans.

A lot of times people come out and just pretend that that debt isn’t there. They come out and jump right into living life, paying that minimum payment, and keeping it moving.

This was me.

I don’t recall exactly how much I had when I graduated, but I know it was under $110,000. Let’s just say $110,000 for the sake of this discussion.

So my minimum payment was a little under $1,000/month, and I paid the minimum payment from November 2014 (once my grace period was up) until December 2016 when we sat down to look at our finances and see what was going on.

And if you’re not familiar with the story of how my husband and I looked into our finances and found that we were over $670,000 in debt, head back to episode 1 where I dig into that story a bit.

But anyway my minimum payment was a little under $1,000. I paid the minimum payment for two years, and when we looked at our finances, my student loan balance was at $104,000.

So assuming that it was at $110,000 when I started, and I paid $24,000 over the course of two years, you can imagine that I expected my loan balance to be a little lower than $104,000. I knew that with interest it wouldn’t be in the $80,000s, but I thought it would at least be in the $90,000s.

But that’s where it was, and so I say all of that to encourage you to pay attention to your student loans and to use your money to pay them off quickly.

You’re paying so much money in interest when you just pay the minimum payment. All that money going to interest could be going toward your goals.

I’m not gonna lie: it sucks sending these super large payments in, but at the same time, it feels amazing to watch the balance go down.

We paid my student loans off in a little over a year and a half once we decided to get our finances together. Still working on my husband’s mortgage from med school, though.

If you want to get the exact debt repayment tracker we use, download my Finance Basics Bundle. It includes the debt repayment tracker, budget template, and the net worth calculator we use. You can head to rhothomas.com/financebasics to pick it up.

Who cares?

So why does any of this matter? It matters because not fixing our relationship with money is holding us back from what we really want in life.

The point is not the money. It’s not building wealth to say that we’re wealthy. We’re aiming for lifestyle freedom. That point that we have control over our time. We have options in our lives.

And yes we can get some of that just by changing our mindset around our time and setting boundaries and things like that, but it’s a whole different ballgame when you have enough money saved that you don’t need your job.

It’s a whole different conversation when you’re in a toxic environment or are truly miserable in your job or whatever if you’ve got a year’s worth of expenses saved, five years’ worth of expenses invested, or you’re completely financially independent where you don’t need the job at all.

That’s a whole different conversation than if you’re still on that paycheck-to-paycheck cycle, and you need the income.

You’re going to approach those situations differently, and unfortunately you’ll likely end up staying in a situation that doesn’t serve you because you can’t afford to leave. That’s what I don’t want for you, friend.

So not fixing our mindset and behaviors around money is keeping us from building wealth and holding us back from what we ultimately want, which is the control of our time. Having money allows you to have that control. It gives you options.

Let’s recap:

1. Limiting beliefs will always hold you back from building wealth. Until you figure out what your limiting beliefs are around money and overcome them, it’ll be difficult for you to make progress toward your goals.

2. Having a large income is not the same as being wealthy. You can bring in a lot of money, spend it all, and not build wealth. You can bring in a lower income, save it, and build wealth.

3. Rather than looking at money as a way to buy more stuff, look at it as a resource to buy back your time and change the world.

4. Get out of the “I work hard. I deserve it” mentality. That’s just a way to justify buying more stuff. What you deserve is having control of your time and having something to show for the hard work you do.

5. Don’t worry about what your colleagues are buying and spending on. Buy things that make you happy and that you value.

6. Good money habits like budgeting and paying off your student loans or any other debt help move the needle toward building wealth. You’re actually paying attention to what’s happening with your money and can correct course if things aren’t going the way you want.

7. Remember the ultimate goal is not the money. It’s having control over your time.

Okay that’s it for this episode. Join me over in our private Facebook community, The Wealthyesque Community. I’d love to talk more about how we can stop struggling to build wealth. You can head to rhothomas.com/community.

If you got value from today’s episode, please subscribe to the show on whatever platform you’re listening on so you’ll be notified when new episodes are released. I’d also love if you leave me a written review to help others find the show.

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As we close out friend, I pray that you will dig deep and really reflect on the mindsets and limiting beliefs that you have around money that are hindering you from building wealth.

I pray that you will review your money habits and commit to managing your money better.

And as always, I pray that you will 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.

Rho

Hi, I’m Rho! I’m a wife, mom, and Biglaw associate who believes that true wealth is having control of your time. I help busy lawyers like you take back control of your time by teaching you how to achieve lifestyle freedom through mindset shifts and financial independence. Read a little more about me here.