Episode 274 Debt Elimination for Lawyers with Rho Thomas
Welcome to the Wealthy Woman Lawyer podcast. What if you could hang out with successful women lawyers? Ask them about growing their firms, managing resources like time, team, and systems, mastering money issues, and more. Then take an insight or 2 to help you build a wealth generating law firm. Each week, your host, Devina Frederick, takes an in-depth look at how to think like a CEO, attract clients who you love to serve and will pay you on time, and create a profitable, sustainable firm you love.
Intro:Davina is founder and CEO of Wealthy Woman Lawyer, and her goal is to give you the information you need to scale your law firm business from 6 to 7 figures in gross annual revenue so you can fully fund and still have time to enjoy the lifestyle of your dreams. Now, here's Devina.
Davina:Hi, everyone, and welcome back to the Wealthy Woman Lawyer podcast. I'm your host, Devina Frederick. And today, my guest is Roe Thomas. Roe Thomas is an attorney and financial coach who believes that true wealth is having control of your time. She helps lawyers get out of debt and manage their money better to create freedom and choice in their lives.
Davina:She also hosts the personal finance for lawyers podcast, where she shares strategies each week for lawyers to improve their money mindset and change their money to achieve true wealth. I'm super happy to have Roe here today. The last time she was on the podcast was way back in 2021, so I'm eager to hear her updates on both her business and her life. So please help me welcome Roe Thomas to the Wealthy Woman Lawyer podcast. Hi, Roe.
Davina:It's so good to see you again.
Rho:Hey, Javeena. It's so good to be back
Davina:with you. Thank you for having me. Yeah. We you I I mentioned in the intro that you were last on in 2021. We've spoken since then, so I've managed to keep a little update here and there on what you're doing.
Davina:But I'm so glad to have you back, because I'm sure many things have changed since 2021. At that time, you were a trademark lawyer, and you're working in big law, and you kind of started this by helping teach lawyers about personal finance on the side. So it was kind of your side hustle. And you also had a lot of debt back then. So we're gonna get into that, and we're gonna talk about your strategies for paying off the debt.
Davina:But why don't you first out just tell us, what you're doing now and and how you help lawyers?
Rho:Yeah. So as you mentioned, I was a trademark lawyer back in 2021, and I never saw myself leaving. I wanted to be a lawyer since I was 7, but at the end of that year in the fall, I left the law to be a financial coach full time. And it has been a wonderful journey over this last 3 years being employed by myself or for myself full time. It's it's been interesting.
Rho:It definitely has been interesting.
Davina:Yeah. Yeah. So you've been doing this for a number of years now. Tell me what first got you interested. I mean, trademark law is a big shift from that to finances and helping other lawyers with their finances.
Davina:So tell me what kind of got you inspired to go down this road.
Rho:Yes. So as you also mentioned, I had a bunch of debt back when we last spoke, and that was really the thing that inspired me to get into helping lawyers with their finances. My husband and I had been paying it off. I think we were maybe about halfway done when I spoke with you back in 2021. And in that time, I had talked with other people who were dealing with maybe not the same amount of debt.
Rho:For those of you listening, if you haven't heard that previous episode, my husband and I had $678,000 of debt, and the majority of it was student loan debt. And so we were about halfway done with it, I think, at the time that we spoke. And just in talking with colleagues at work, friends from law school, there were a lot of lawyers who didn't know how to manage their money, and I thought it was just us. Like, I thought we just didn't know what we were doing, right? And so, because of those conversations that I was having where other people were also struggling with their money, that's where I started kind of this side hustle, and I started my podcast and started helping people with their money.
Rho:And that that personal struggle that I had with my own finances, and I didn't say this, but part of what prompted us to even look at our finances to see what was going on was we had our first child, and I wanted to take advantage of a part time policy that my firm offered, but we couldn't afford the pay cut. And so that's what prompted us to get on this whole journey of paying things off. And so bringing it back full circle, you know, after having those conversations with other lawyers, I realized that I had learned a lot in the time that we had been paying things off that I could teach others. And so I started my business on the side at first and then left the law to do it full time. And I've been helping lawyers get out of debt and manage their money better for a little over 4 years now.
Davina:Wow. Wow. What I that amount of debt at the time had to feel so overwhelming. And I I know I've spoken with many, many attorneys in growing their business through the years, and we have to discuss what personal things could affect growing your business. And one of the personal things that could affect growing your business is if they have huge student loan debt or other types of debt, because they have that can constrain them reinvesting in their business.
Davina:So it's not unusual to hear people talk of 6 figure debt for student loans, plus any credit cards, plus if they buy a house. I mean, it doesn't take much for it to add up. But it had to feel, overwhelming. I mean, I would imagine to face that much in debt. What what did that feel like for you back then?
Rho:Overwhelming is a great way to describe it. We knew that we had the different debts that we had. We just hadn't added it all up together. And so once we added it all up, it was like, oh, wow. That's a big number.
Rho:You know, it was like, oh, I have about this much in student loans, and he has about that much, and our mortgage is about this much, and I still had a car loan. Right? The car loan is that much. But seeing that total, it was just I say all the time, it was a gut punch, you know, because at that point, we thought we were doing the right things with our money. Like, we were, saving for retirement, and we were paying our credit card off in full every month.
Rho:Like, we weren't going deeper into debt, but we weren't really paying attention to the debt that we had, to how we were managing our money. One of the things that I think was really big on that was we paid off the credit card. We, you know, were saving for retirement, but we didn't have any sort of strategy with how we were managing the rest of the money. And so it just got spent. Like, I could not tell you where the money in that time went.
Rho:I know a lot of it probably was restaurants and stuff like that. Right? And so, like, being able to manage your cash flow, I think, is so important because if we had had more of a handle on that cash flow, if we had had more of a handle on the bigger picture of our finances, then I think we wouldn't have been in so much debt or at least we would have already been on the way to paying it off.
Davina:Yeah. Yeah. And it's very interesting when you're talking about, you know, we were up on our credit card credit card payments. You know, we didn't carry credit card debt and, you know, you you felt like you had money, so you're probably eating out, socializing more or whatever. I do think we sort of get into this avoidance, because we hear that more you know, buying a home and investing in your education are good debt.
Davina:Right? So people label that as good debt, and then they label credit cards as bad debt. Did that figure kind of into your thinking that you were where you sort of weren't paying attention to this because you kind of thought it was good debt and normal debt. You
Rho:know? You know, I wouldn't say that that really came into our thinking because we just we took out the loans that we needed to take out to go to school, you know? But we didn't really think about it as, oh, this is good debt, so it's okay for us to have 678,000. Right. And, you know, I tell people all the time, like, I don't actually like those labels of good debt and bad debt because I think it makes people feel really bad when they have the so called bad debt, right?
Rho:And then you also hear these experts talking about, you know, good debt, but when you've got too much, like if you've got half a $1,000,000 of student loans, then that's not so good. You know, it's like, it's all something that somebody just made up one day and then we all decided to go along with it. Like, yeah, that's good. Yeah, that's bad. Yeah, that's bad debt.
Rho:Right. Yeah.
Davina:Right, right, right. I think that's so important. I know that is one of the things that you've discussed, and I think that is tremendous value because sometimes you gotta do what you gotta do to get to next level of where you need to be and all that. But I think the key thing, as you talk about, is sort of a strategy. And how do we manage that, and how do we get out of it?
Davina:What do we do next? And all of that. Because, I think a a lot of people realize, you know, I'm not going to get to where I wanna be in my life if I don't get the education. And I didn't there's nobody to pay for my education. It's gotta be me.
Davina:You know? So what does one do? Right? So and then buying a house, same kind of thing. You know?
Davina:We're sort of taught over and over that buying a house is the American dream. And we buy a house, and we sort of don't think about the mortgage being a part of our debt. You know? Exactly. So, yeah, I think that's really interesting that you guys added it up and and very brave because a lot of people don't add it up.
Davina:They just go, yeah. I know it's there. Right? But they don't add it up. But that was us too.
Rho:Yeah. You know, we were going along. We didn't worry about adding it up. It's like, oh, we're making the payments. It didn't occur to me, Divina, that we could pay it off early.
Rho:Like, that wasn't a thing. I it was just, oh, this is
Davina:how much the bill is. For the next 30, 40 years. Exactly.
Rho:And so we just went on about our business, and it wasn't until we came across stories of people paying off their stuff early that we realized that that was even possible. You know, it's like, oh, you can you can pay your student loans off before the time that it's you know, so that was really an eye opener for us. And I think I mentioned in our last conversation too, one of the stories that always has stuck with me, like, even to this day, was a story of this couple who were both teachers and they wanted for one of them to be able to stay home once they started having kids. And so they bought a house and paid it off in like 5 years. And it was like, okay, these are people on teacher salaries, and we're, you know, a doctor and a lawyer.
Rho:And they're doing something right. Like, clearly we are not doing the duty right. How do they do that? And so that really got us started with, like, oh, we could pay this off early. We can do something different from what we're doing now.
Davina:What is the biggest issue that you come across with lawyers and money with your clients? What what what things sort of pop up that are kind of common and bigger issues?
Rho:Yeah. I think the biggest thing is cash flow. Like we were talking about with us, we didn't have a strategy for how we were managing our money. The money came in, money came in, it went right back out, and we didn't have any sort of plan for how we wanted to use it. And I find a lot of times with my clients it's the same kind of thing where the extent of the strategy is like, is there money in the account?
Rho:Like, can I buy okay, I've got some money? I'm gonna buy that thing. Right? That was what we did too. And so when you don't have a handle on what's happening with your finances, what's happening with the money that's coming in, being intentional about how you spend it out, then you're not able to make progress on the other areas.
Rho:And I say all the time, like, managing your cash flow is the foundation of everything else that you wanna do with your finances. Because if you don't have a handle on your cash flow, you're not going to have money to save. You're not going to have money to pay off debt. You're not going to have money to invest. So, like, that's the first thing that you need to do.
Davina:All right. So let's dig a little deeper into cash flow, because I think a lot of people I know certainly when I'm talking about when talking with women, lawyers who own their own business, a lot of people, men and women, struggle with things like profit and loss statements. They don't really understand gross revenue, profits, expenses, things like that. Cash flow is something that nobody ever talks about. Right?
Davina:Where there's a lot of you know, of the law firm scalers out there, we're talking revenue. We're talking profit. Obviously, when we're working with clients, we're working with all the factors. Right? But tell me what cash flow is because I think a lot of people just aren't familiar with financial terms.
Davina:And I want people some people on here may be familiar. I think there are plenty who aren't. And I know for me at one point, I wasn't. So tell me what cash flow is.
Rho:Yeah. Cash flow is the money that you have available to pay your expenses, to do the things that you wanna do, to achieve your goals, like saving and paying off debt and all of that. And what I find a lot so I work more with the personal side of finances. And what I find is people have a healthy income, but their expenses, what's going out, basically matches that. Right?
Rho:So if you've got, you know, say, $10,000 $20,000 coming in, but you're spending $10,000 or $20,000 you don't have any cash flow. You don't have any money available to do the things that you wanna do. And what I find often happens is it's the debts, right, those minimum payments add up very quickly. And so when you've got student loans, you've got a mortgage, you've got a couple car loans, you've got some credit cards, you've got maybe a personal loan, Like, all of those things can add up to 1,000 of dollars a month. And so when you've got so many expenses and so much of your money tied up with these different expenses on top of going out to eat, which seems to be a big one, like I said, was a big one for me, On top of, you know, maybe things for your kids, whatever other obligations that you have, then you're going to feel like things are going to feel really tight even if you've got a really healthy income.
Davina:Right. Right. And it's got I don't know, I don't know if you eat out very much anymore. We don't for other reasons. We don't eat out as much for health reasons.
Davina:But when we do go out to eat, it's shocking. My husband and I, we don't have kids. It's shocking what the bill is, and we don't drink alcohol. Right? And we don't order appetizers just because we don't eat that much food.
Davina:Right? So we don't order dessert, and yet the bill has doubled what it used to be to go
Rho:eat out.
Davina:And if you're not paying attention, very quickly, I could see where things like that become a problem. And not just that, like you mentioned with kids. I mean, the expenses with kids are always popping up. Tell me what what is one to do? Because I think the solution for a lot of people is I gotta make more money.
Davina:I gotta have a side hustle. I gotta make more money in my current business, whatever. And I thought I think that's where a lot of people come from is we need we each need 2 jobs, you know, which is kind of ridiculous when you're making 6 figure or multi 6 figure incomes, which a lot of lawyers are or can be. So did you at any point feel like you were being punished in kind of paying off having to sort of pay off this debt? Did you had to change your lifestyle to the point where you become monks?
Davina:What did you do?
Rho:So I will say, no. I did not feel like I was being punished. It was a matter of being more mindful of what's actually important to us and spending money on those things and not spending as much on things that aren't as important. So for example, I just got a whole lot of, like, backlash on LinkedIn. So I was talking about buying this pair of, like, luxury designer shoes while we were paying off the $678,000 of debt.
Rho:And the way that I did that was we give ourselves an allowance of sorts. I call it a fun money account. So we each get a set amount of money each month that we can spend however we want to, no questions asked. It started with I don't know if you or maybe any of your listeners have ever experienced this, but when we first put our finances together, we had like a lot of tension over like, oh, why are you spending on this or why are you spending on that? Right?
Rho:Like Rodney, it was the makeup. He's like, why are you buying this lipstick? Why does it cost so much? You know, I really like, MAC products, for example.
Davina:Right. So that's not $25.
Rho:Right? Exactly. And for him, it was like going out to eat, going to get coffee, like, you know, all this kind of stuff. And it was just like, why are you spending so much on that? And so our solution was for us each to get a set amount of money that we could spend however we want to.
Rho:So it comes out of our joint account into separate individual accounts that we can, you know, then go about our business, and it doesn't impact the family finances. Well, when I wanted to buy this pair of shoes, I had been eyeing them since law school, to be in there. So pretty. The Valentino Rockstuds, if anybody out there in the fashion number like me. But I had been eyeing these shoes.
Rho:And so I got my fund money, and it was like, you know, a few $100 or something like that. But I would intentionally not spend it all each month and let that money kind of build up and then buy these shoes. And so, again, it comes back to prioritizing what's important to us. In that situation, I really wanted this pair of shoes, so I'm willing to do a little less. I'm willing to go to brunch less or, you know, buy makeup a little less or whatever it is to be able to have the money for the shoes.
Rho:And I think the same is true in the broader sense of our personal finances, where a lot of times we're just spending and we're not paying attention to whether we actually want this thing, whether we care about this thing. You know, like Amazon, you got the buy now button, and you can just like, you got stuff showing up to your doorstep the next day. You don't even know what's in the package. And so it's being more intentional about that. Mhmm.
Rho:And that's how you're able to achieve goals, but not feel like you're being punished.
Davina:Right. I think that's wonderful. That's great advice because I I do think that comes up a lot for people. I work so hard. I never get to get the things I want because we're paying out this debt because I work so hard.
Davina:And especially in a marriage, one of the things very interesting you said in the marriage, there's this, hey. How are you spending money kind of thing that comes up when you start analyzing as a couple. And I had a, I'm not I don't not really into games, but there was a game I had on my phone that was one of these that every little thing you did, you'd get a little charge here, a little charge there, a little charge there, and it would add up. You know, over time, you'd get your credit card bill, and there'd be these long, you know, a little dollar here, a dollar there, whatever. And it was the first time in my life that I've ever been, like I was embarrassed if my husband saw that credit card because even though I was paying it off, you know, like, it was just it was I use credit card, you know, it's a game, so you have to use it for convenience or whatever.
Davina:I wound up deleting the game from my phone because I was like, I'm so embarrassed that I'm frittering away because I'm very responsible in all other ways. But I asked myself that same question. Is this really what I value? Like, is this really that important to me? There are other thing where there are other things that I'd rather that money go to go toward.
Davina:And so the intentionality of that, I think, is huge. And also asking yourself, because I certainly there's sometimes he buys things and I would go, what? You know? And then, you know, fortunately, we're really good with the we're very generous with each other, but, I can see that as a couple, you know, really, coming into the situation. You guys, I think, are aligned.
Davina:Is that how it always was? You're you're aligned on this goal because I know you each did things, but somehow you had to come together. Do you find when you're dealing with your clients that sometimes when they're married to somebody else who's like a spender and they're a saver or something like that, that it really is hard for them to do as a couple?
Rho:It definitely can be. Before we get to that, I'm I'm gonna come back to it. But something that you said reminded me of something that I wanted to say
Davina:about buying
Rho:things that we want. Mhmm. It's not like, there will be some level of sacrifice. Right? Like, technically, with the income, you might be able to buy a pair of designer shoes every month, right?
Rho:But we're not going to do that because you have these other goals. So maybe I'm going to buy the pair of shoes, and it might not be shoes, right? Maybe whatever it is for you, But maybe you don't do that as often as you technically could because of your income. You're going to sacrifice a little bit to be able to use that money for the goals that you have. So I wanted to say that.
Rho:But back to your point of, you know, sometimes there is that tension in marriage where people aren't on the same page. My husband and I definitely were not on the same page initially. And a lot of times when my clients come in and they are married to someone, the other person is not on the same page. Like the person who gets on the call is the one who's more concerned about the finances and wants to, you know, pay off the debt or save or whatever. The other person is fine.
Rho:My husband was fine. He's like, everybody has student loans. It's fine.
Davina:Right? Right.
Rho:And so what I tell people and what I did, so what I did initially is what I tell people not to do, which was, if we just cut back here, if we just do this, if we just do x, y and z, then we could pay this off. And, you know, showing all the numbers and all that kind of stuff. Don't do that. Do not make my mistake. So what you want to do instead, which is what I came around to, is you want to kind of dream together.
Rho:Talk to your spouse or your partner about what they envision life being like, the things that they want to achieve, the things that they want to maybe buy, you know, whatever that is. And then you kind of back into the financial situation. So for us, it was having our child. And for the first time, I was really able to articulate why it appealed to me to pay things off, and to save, and all of that. It was, I'm thinking about having our kids and wanting to be able to go to their events and not in the back of our minds, thinking about how we gotta get back to work.
Rho:Or, you know, in this situation where I wanted to go part time and we couldn't because of our finances. Like, I wanna be able to make decisions for our family that we want to make that aren't dictated by our money. And so that it was like, oh, okay. You know, I see what you're talking about here. I see what what this could be.
Rho:And so that's what got him on board. And so for anyone out there, if you are the one who's like, you know, you're listening to this conversation, you're like, yeah, like, I want that. I want to pay off debt. I want to save. And your partner or your spouse is not interested.
Rho:Try dreaming with them and talking to them about what it is that they want, what they envision for the future of your family, the goals that they have, all of that, because then we can talk about how if we got our finances in order, then we could achieve x, y, and z in this amount of time.
Davina:Right. I think that's wonderful advice. I have not heard that. So that's that's a great idea because in in relationships with others, I know it often is the case that you have it's always a spender marrying, a saver, whatever. Unfortunately, my husband and I, we we're both spenders and we we got married.
Davina:So we had to figure out how how to save and how to invest. But we and we did that we were able to do that together. Thank goodness. But talk to me about travel, because so many of my clients, their dream and goal is to travel, and they don't want to wait. So we have newer generations who say, I'm not going to wait until I'm retired to travel.
Davina:I want to travel all my life as though I'm already retired, and yet I want to make a good living and do all these other things. How do you advise people in those situations? Because there is a mindset change that's that is, I've noticed that other people have noticed, with younger generations saying, I'm not gonna be working a job or multiple jobs through the years and then wait and I'm gonna travel when I'm older. They say, I want it all now. So how do you help people devise a strategy for that?
Rho:Yes. I love that we're having this conversation because I literally just had a come to Jesus moment with one of my clients on this. So she wants to go to Puerto Rico for her birthday in February, and we're not there in terms of where her finances are for her to be able to do that trip and actually do it well, right? Actually enjoy the trip. And one of the things that we were talking about is how there are a lot of people who you might see on Instagram and Facebook and TikTok and whatever else who are traveling to these places.
Rho:They're technically there, Right? They're taking the picture in front of the thing, but then the rest of the time they're sitting in their hotel room because they can't afford to do anything because they didn't actually have the money for the trip. Or they're putting everything on a credit card. I heard this one story that was so sad. It was a young woman who was traveling and, you know, doing all the things and posting it on her social media.
Rho:It doesn't sound like it was a job or anything like that for her. It was just, you know, this image that she was trying to portray. But she was in tens of 1,000 of dollars of credit card debt because she's trying to keep up this image for her social media followers. Don't be that person.
Davina:Right.
Rho:Don't do that.
Davina:And so Or somebody else is paying or somebody else is paying or someone I always got beef with is that I look at things and I go, somebody's paying for this. If I see somebody kind of of a certain age and you you follow sort of their story, what they do, what they don't do, I had my social media manager said to me one day, she goes, Divina, I kind of think people lie on social media sometime because I was talking about different people and what they were achieving or whatever. I kind of think people lie. I was like, yeah. Wow.
Davina:Ding, ding, ding. Yes.
Rho:And you do have, you know, the the social media influencers who maybe they have a following, you know, a few, you know, 10,000, 50,000, whatever people where, you know, the hotel might give them a sponsorship to go to this, you know, hotel and post about it to their followers. Right? So that's a great point. That happens too. But what I told this client is, like, okay, we're not gonna make it for February.
Rho:Right? That's not with where she is with the debt that she's paying off, with where her savings is, all of that. February is just not realistic. And I told her I don't want her to feel like she's just like, I'm here and I'm like grasping at it, like just barely hanging on. Right?
Rho:I just caught it by the the hem of the the I don't know. This this analogy is not coming together. I hope you guys understand what I'm saying. It's like, I want you to be there and, like, be comfortably there. And so we mapped out what the next year looks like.
Rho:And so, no, we're not going to do the trip February of next year. We can do that trip February 2026. And in the meantime, she could go somewhere that's a little bit closer. Right? She could go to maybe Florida, like Miami or something like that, while she's able to pay down, these debts because it goes back to the cash flow that we were talking about earlier.
Rho:She's got so many different payments coming out that she doesn't have a lot of wiggle room. But we mapped it out, and she'll be done with everything but her student loans by the end of next year if she stays on the trajectory that she's on. And then she's got a couple $1,000 that's freed up every month that she can put aside for a few months and then go on this trip and actually be able to afford it and have a great time and all of that. So I think that there's balance there. And like with my husband and me, when we were paying off all of the debt, we stayed local.
Rho:So, like, we went to Nashville. I live in Atlanta, for those of you who who are listening. And so, like, we went to Nashville. We went to New Orleans. We went to places that were closer that we could drive to, but was still a trip.
Rho:We still took the vacation. But now that we've paid everything off, right, doing those smaller trips that gave us more money to pay on our debt and to save and all of that, now we've been to Puerto Rico and the Virgin Islands and we're headed to Jamaica. You know, just all of these different things.
Davina:Right.
Rho:But we're able to do it without the financial stress because we don't have so many payments coming out. Like, at one point, our minimum payments were $35100 a month. So paying that off, that's $35100 that are freed up that we can Well, and that's
Davina:if that's minimum payments, you're not paying anything off. Right? So Exactly. That's that's the other piece too. I think I'd love to have you talk about that because I think a lot of people think I'm paying the minimum, so eventually I will pay this off.
Davina:And they don't realize the minimum is just keeping you in a holding pattern for that interest to add up. So credit card companies love it when you do that because they make a lot more money. Why don't you talk about that a little bit?
Rho:Yeah. Well, actually, I don't know if every credit card company does this, but I know mine does, where when you get your statement, they'll show you if you pay the minimum, it will take you this long to pay it off, and it'll be this astronomical amount that you end up paying. And so I think I encourage everyone to look at that, or if it's not on your statement, to go to maybe a loan, or like a debt calculator where you can put in, you know, this is how much my minimum payment is, this is how much the balance is, and it'll tell you how long it'll take to pay it off and how much you actually end up paying. If you're paying the minimum payment, you are not making very much progress unless you have some crazy low interest rate, you know, 1% or something like that.
Davina:If you're And she's got that on the credit card.
Rho:Right. Exactly. With a credit card, you're looking at 20, 30%, and you're just not gonna make a lot of progress. And so you've gotta be making extra payments, which comes back to what we were talking about with being intentional with how you're spending your money so that you've got that money available to make the extra payment to pay that debt off.
Davina:Right. Right. What are your thoughts on investing as you or saving, investing as you are paying off debt? Because there's a lot of financial gurus who say, you have to pay off your debt first, and then you save or invest later. What are your thoughts on them?
Rho:Well, so I have to first caveat by saying I'm not licensed to give investment advice. So this is not any sort of specific investment advice.
Davina:Right.
Rho:But I always tell my clients that they need to save first. Because what happens is if you don't have savings and you go straight to paying off debt, like everyone is so anxious to, like, get to the paying off the debt part. But if you do that and you don't have any savings, when some unexpected expense comes up, you're going to have to put it back on the credit card, and that takes you back. So I always have my clients save at least some sort of cushion so that they've got something to fall back on if an unexpected something pops up, some sort of emergency expense, something like that. Then as far as debt versus investing, the way that I think about it is looking at the interest rates.
Rho:So for example, I told you that my husband and I had been saving for retirement when we realized we had all this debt. We'd actually been doing the maximum amount that we could save for retirement. I think it was, like, 19,000 at the time. But when we looked at how much we were putting into our retirement accounts and the rate that we were getting the return, the rate of return on that, versus how much interest we were accruing, basically everything that we were putting into retirement was being canceled out because our loans had 6.87.9 percent interest rates. And on average, the stock market returns about 8%.
Rho:And so we decided to actually pull back our investments. We still did enough to get the match, but we pulled back on investing to free up that money so that we could put it on our debt. And I think with respect to, like, if we had had a credit card with a 20, 30 percent interest, well, now you're accruing more interest on the credit card than in your investment. So I think it's a matter of personal preference. I've heard the advice that you're saying of, like, you know, stop investing altogether until you pay everything off.
Rho:But then I've also seen people who have continued to invest like we did just on a smaller scale to be able to have more money available to pay things off. But, ultimately, I do think it's a matter of personal preference, and I know that there are a lot of financial planners and financial advisors who can do all of the different calculations and tell you exactly for your situation what's the best route to go.
Davina:I want to as somebody who's, you know, on the dawn of my sixties, I want to throw this little caveat out, something for people to think of. Also not a financial advisor, just speaking from my own personal experience. One of the things that, as my husband and I are both very entrepreneurial and spenders, as I mentioned. One of the mistakes that we we've made in our the course of our finances that if I were to go back in time to my 20 year old self, 30 year old self, 40 year old self, 50 year old self, is we have paid off large amounts of debt more than once. And so my advice to people is to be saving and investing and all along because you will think to yourself, I will pay off this debt, and then I will save, and then I will invest.
Davina:And then you find yourself running up cards again, or investing in something, or buying some whether it's buying a house, or buying something to fix up the house, or whatever it is for you. Trips, vacations, you'll find yourself using that debt again because now all the cards are paid off. Right? And so I've I I we've done that. And so now I tell people, like, you have to save.
Davina:You have to invest. You have to be doing other things that I know the interest rates are not gonna balance out for you. But, ultimately, I'm not the only one, and I've seen other people do this too. They pay off enormous amount of debt, and then they go into debt again, and they pay that off, and they do it again. And and and after a while you know?
Davina:And so much of it comes from you have to use credit cards. This idea that for convenience, for shopping online, for, going to traveling or whatever using credit cards. And before you know it, you've got credit cards. You gotta pay them off. And then you don't have that cash flow that you need to put into your investments.
Davina:And so we change for us was automating investments. And we just automate investments no matter what. And that is an intentional direction of our cash flow, which then helps us be more conscious and aware of debt. Right? Yes.
Davina:So oh,
Rho:go ahead. I'm sorry.
Davina:No. Go ahead.
Rho:I was gonna say 2 things came to mind as you were talking. I think, generally, yes, that makes a lot of sense. And like I said, we pulled back on how much we were investing, but we didn't completely stop because we knew it was gonna take us a long time to pay that off. And so we didn't wanna just completely stop, you know, saving for retirement in that time. So we did something like 2% or 3% to keep it going, but we put the majority of it on paying off the debt so that we could get it out.
Rho:Because like I said, we had that $35100 a month payment. That was a whole lot of money that was going out. Yeah. But I have had a couple of clients where the amount that they were investing was actually part of why they were going into debt because of that cash flow, like you just said. Right?
Rho:So, like, they had too much going into investments based on what else was going on with their finances, specifically the minimum payments on their debts and stuff like that. And so they actually paused their investments completely because they had been investing so aggressively for a while, right? Like that money is going to continue to work for them. But they decided to pause so that they could have a little bit more income coming into their account so they can actually make progress with the debt that they had. So that's why I say what you said is generally, I think, great advice, but there are some times where,
Davina:you know, you need It's very individualized. What you're doing is very individualized. And I think the it also depends on your age too. Right? Because, my I give the first thing I did with both my nephews is gave them a stack of financial books, you know, when they going off to college.
Davina:I'm like, read these. And I gave them both the books. And, and it's interesting the difference between the 2 of them and how they manage their money as a result of that. Because at 21, 22, they can make decisions now that are gonna have long term impacts that I didn't make at that age. So I'm able to look with hindsight and go.
Davina:And and a lot of the literature around investing is geared toward people in their 20s 30s when they have time as a factor. When you get to be in your forties, fifties, sixties, time is not your factor anymore. It's not it's not on your side anymore. And so some of the things that, you know, you might get as advice when you're much younger changes over time too. So I think it's very individualized, which is why it's so important to work out a strategy that is tailored to you.
Davina:Right?
Rho:Yes.
Davina:And the things that you like. For me, I'm not a designer shoe person. I mean, I love fashion. I love beauty. I love beautiful things.
Davina:I have too many clothes in my wardrobe, and I have too many over the years, I've given away very expensive things that I bought and that I'm like, okay. This no longer works for me, or it's no longer in style or whatever. So I'm a fashionista in that way. So we all have our things. Right?
Davina:So while I would never spend that kind of money on a shoe, I've got, you know, 30 blazers that I no longer wear.
Rho:So that I'm sure look great.
Davina:They look great. Well and as you get older too, things your you start your body starts to change, and you're like, wait a minute. What used to work for me does not work for me, and so that's another another fun thing. Right? Our big, we recently moved cross country.
Davina:So we moved from Florida to Colorado, and my mother-in-law moved with us. And she lived for 60 years in in that area of Florida. And so we have all been in the confronted with the the lack of value that our stuff has. Right? You think your stuff is valuable, and then you go to move and you realize you can't you have to pay people to haul it off.
Davina:Even liquidators, you'll have 1,000 of dollars worth of furniture or whatever liquidators will go, well, I'll give you $500. Right? Or we had a liquidator said that you can pay me $500, and then we'll split it 50.50. But the 50.50 is only gonna be $500. Right?
Davina:Right. Right? So you're really confronted with the waste of your life. And, and so I wish earlier in my life, I understood these lessons because it would have made such a difference in my life as a whole. So now, fortunately, I'm in a a good position, but it but I'm still working.
Davina:So Yeah. You know? So I do think it is very individual, and I the sooner you can sort of get on to a plan to deal with this because it doesn't go away, and it really impacts you later. I had a client who owed a lot of money in credit card debt. I think it was around a quarter million, which is typical for a lot of people in not credit card, student loan debt.
Davina:And she had some other debts, and then she wanted to buy a house. And that student loan had been in forbearance. It had been she just wasn't paying it, I think, was what her forbearance was. Like, she made her own forbearance, and she wasn't paying it. And then suddenly, she had to fix that problem before she could buy a house.
Davina:So it does have a way of rearing its ugly head if we just avoid and ignore things. Exactly.
Rho:We cannot avoid. We cannot ignore. Like, that does not work. It's not a good strategy. And something that I wanted to come back to too was when you were talking about, you know, you pay off debt and then you get back into it and you pay it off again and you, you know, run it back up again.
Rho:I have seen that so many times. And where I've often seen it is where people will take out like a a consolidation loan or a personal loan or something like that to pay off their credit cards. When I'm doing the air quotes, quote, pay off their credit cards, And then it's like, Oh, I've paid off this credit card. And then they go and run it back up. Yeah.
Davina:Yeah. Yeah.
Rho:And now they have more debt than they started with because they never created a strategy to actually deal with the debt. They just kind of moved it. Right? Right. And so, to your point, you can get in that cycle.
Rho:It is very common, especially if you're looking at it as like, Oh, now I've got all this available and I can buy some more stuff. But either way, you've got to have a strategy. You've gotta have a plan for how to actually address the debt. Like, not just, I've got this, you know, loan, and so now it's not on the credit card anymore, but, like, what are we actually doing to bring down that debt balance? So I just wanted to to do that or to say No.
Davina:That's a great no. That's a great that's a great point. Unfortunately, we didn't do that, but we certainly pay paid off a lot, and then things come up. You know, if you don't have, you know, money saved, you don't have enough saved. Like you mentioned earlier, things come up, and then you go, okay.
Davina:Well, I have to do this, so I have to put it on a credit card. Right? And then you're back into that before you know it. And especially especially if you are in a relationship with somebody else and you're share you're blending finances, they may do it, and then you may do it. And the next thing you know.
Davina:Right? And you're both responsible for it if you're married, like, if it's a legal thing. Right? So, I wanna move on and talk about big ticket items and stuff like that again. I wanna get into the world is a lot more expensive, and so you gotta have a car to get to work.
Davina:You got to have a house if you got a family. What does one do to sort of not get in the debt in the additional debt?
Rho:I don't know that it's possible. Maybe it's possible. Some people say it's possible to not get into debt. Right? Maybe it is.
Rho:But like you said earlier, if I didn't have student loans, I wouldn't have gone to school. Like, I would not have been able to become a lawyer. I didn't have money to pay for it. My family didn't have money to pay for it. I I didn't just have 100 of 1,000 of dollars to drop on a house.
Rho:You know, I I took out a mortgage for it, and I didn't have the money to just go and buy a car off the lot. I took out, you know, a car loan for it. So I do think that some debt is inevitable or more inevitable than others. Right. Like I think the mortgage, the student loans, the car loans are probably most people are probably going to incur those types of debt.
Rho:So if we're talking about that, I don't know that there is really a way to avoid it unless you're willing to just, you know, sit back and wait and continue to save until you've got all the money to purchase this house in cash or all the money to purchase the car in cash and that kind
Davina:of thing. I wonder I wonder this, my husband and I were driving back from the gym this morning, and we were pat a lot of he we were commenting on the number of cars that we've trucks that we've seen, you know, since we've moved to Colorado, we've seen a lot more trucks. And he says these trucks are 80, a100, a $120,000. And he says, I wonder what these people are doing for a living to buy these trucks. And we started talking about how a lot of them are probably going into debt.
Davina:They're valuing that expensive truck, but they're parking it in front of a house that may not be that expensive. Right? And, I'm driving my I have a Lexus that is I think we're celebrating our 10th anniversary. And I did not buy it new. I did not buy it new, but it's a really beautiful, nice car.
Davina:And now that we moved here, I think to myself, boy, it'd be nice to have, like, an SUV again because I'm in this car. I can't really drive in the snow, but it doesn't snow as much where I live. And I keep thinking, I love not having a car payment. I love it more than a new car. And it's golfing me that if I get a new car, I drive off the lot.
Davina:It's already devalued the minute I drive off. So I'm one of those
Rho:That too.
Davina:Those people. Right?
Rho:Well, no. But I think to your point, like, what you just said comes back to, like, that being intentional about what's important to you. Because for some people right? I don't know if if all the people around you are having that conversation or asking themselves that question. But for some people, having the SUV might be more important to them than having the car note, and that's okay.
Rho:Right? But I think we need to be making the decisions intentionally. And then I think also to a point that you may have been alluding to, All the people around you have these, you know, big fancy trucks that are $80,100,000 and whatever else. We might need a car. We don't need that car.
Rho:We might need a house. We don't need, you know, the $1,000,000 house or whatever. And that's not to say that we shouldn't have those things. I think it's perfectly fine if people do wanna have an expensive house, an expensive car, whatever else. But then we need to look at what else is going on with your finances and where are you willing to sacrifice a little bit or cut if this is something that's important to you.
Rho:Like, it always, for me, comes back to being intentional about spending on the things that are important to you, but then cutting the things that aren't. So like you, I also drive. My car is 11 years old now,
Davina:but
Rho:it's a Honda Accord. It's a car that I bought. You know, I bought mine actually brand new. It was one of the things that I didn't know about at the time because I bought it before all of this learning about personal finance and stuff. But I paid it off and I've had it ever since, and it's been fine.
Rho:It runs just fine. But I'm also not a car person, So I'm okay with that. You know?
Davina:Same here.
Rho:I will get his design to a car person. Mine too.
Davina:And he spot he there was a time in his life when he was younger. He came of age at a time when personal computers became a thing. And so he built a business around, doing computers, setting up computers for law firms and lawyers. And he made a lot of money. And he was young, and he bought a lot of I used to say he changed cars like he other people change shirts.
Davina:He was always buying a car away. And I didn't I wasn't in his life at that time. But you would sit and talk with him. He he's, oh, yeah. I've had one of those.
Davina:Oh, yes. I've had one of those. Oh, yes. Good for years. Right?
Davina:Fortunately, since we've been married, he's not quite the same over time. But it is really, you know, it is really thinking about what it is that you want, what will make you happy. And I often think that sometimes we think the new thing will be the thing that makes us happy. And then when we get it, it's there's another new thing that we're wanting. And, so some of that is also dealing with the emotional work, I'm sure, of of what really parsing through what you really value instead of, like, what you impulsively want.
Davina:Like, I see this
Rho:Or what you think you should
Davina:Yeah.
Rho:Because everybody else has it. Because I said that a lot too.
Davina:Yeah. Yeah. Well, like these trucks. I mean, I think there are a lot of people in here who think I have to have, I have to have a truck, and I have to have the ones that I see other people driving so that they'll know I too can afford the thing. Now I'm making assumptions about truck drivers in in Northern Colorado, but still, what kind of before we end today, give us leave us with a little bit of advice if we are realizing worse.
Davina:If we sit down and add up our debt and we realize that it's more than we thought it was, or it's as much as we thought it was, what should we do? What are some next steps that we should take if we really wanna get our finances in order and get this debt paid off?
Rho:My first one is this might sound counterintuitive, but it's to be calm and compassionate with yourself. Because I find, especially as lawyers, we are so hard on ourselves. Like, I think, generally, people are really hard on ourselves, but lawyers, like, take it up a notch. You know?
Davina:We do. Everything we do, it's a little bit we're we're perfectionists. So if we're hypercritical, we're perfectionist at being critical.
Rho:And, like, there are so many people who come to me and they're beating themselves up. Like, how could I have been so stupid? How could I have done this? Like, you know, made this kind of mistake, etcetera, etcetera. And I felt the same.
Rho:Right? But at the end of the day, we all are making the best decisions we can with the information that we have. So if you didn't know at the time, or like, I didn't know to think about interest rates, or I didn't know that you could pay more than the minimum payment, that sounds silly, but I didn't. Right? And so we can't judge I think most people have that.
Rho:Version. Exactly. We can't judge that past version of ourselves from, like, the more complete information that we have now. Right? It's not fair for us to have information, have knowledge now, and then judge this version of ourselves that didn't have that information for making decisions.
Rho:So I would say have compassion for yourself. Like, it is okay. Like we talked about with the good debt, bad debt conversation, it's not good or bad. It just is. Right?
Rho:We have talked a few times already about how having student loan debt allowed us to go to school. Having, you know, a car loan allowed me to buy a car. Having a mortgage allowed me to buy a house. Even if you've got credit card debt, the so called bad debt, that allowed you to do some things that you wouldn't have been able to do if you had done that.
Davina:It may be a trip. It may be investing in a business. It may be Exactly. It's not all credit card debt is, you know, dinners out and shoes and blazers, you know.
Rho:But even if it is blazers, it's luxury shoes. Right? Like, it allowed you to do that, and that's okay. And so you're making a decision now that you wanna do something different. You can do that without beating yourself up and shaming yourself and all of that.
Rho:So that's the first tip. The second one is getting clear on what's going on with your money, that cash flow we talked about. Right? So how much is coming in? How much is going out?
Rho:Where is it going? And do you like where it's going? Because for most people, myself included, I was shocked at how much was going to these restaurants. Like, you don't expect you know, you have an idea in your mind. Oh, it's probably x and it'll be like 2x or 1.5x.
Rho:Right? So do you like where the money is going? If not, then you can make some changes. It's the the question, Divina, that you asked yourself that I've asked myself that I teach my clients to ask, like, is this important to me? And sometimes I'll even put it as, is this more important to me than my goal of getting out of debt?
Rho:Or is this more important to me than my goal of saving? Sometimes it is like, I don't know if you remember, was it last year when Taylor Swift and Beyonce had their tours and like everybody was all crazy over that? For some of my clients, they were like, yes. Getting these Taylor Swift tickets is more important to me than paying off some debt this month. And that's alright.
Rho:It's okay for us to like the things that we like. I think we get so into judging ourselves and it's like, I should be doing this. I should be doing that. You don't have to do anything. You know, you don't have to do anything that you don't want to do.
Rho:All of this with your money is your decision. It's you deciding how you want to use your money. And so it's asking yourself, is this thing more important than to me than that goal of whatever, you know, paying off debt or saving or whatever it is? Once you get that all dialed in, then you can create a plan for how you wanna use your money going forward and start paying off the debt. And the way that I always teach my clients so there are so many different approaches to debt.
Rho:There's the debt snowball, which is paying it off from smallest to largest balance. There's the avalanche, which is paying it off from, you know, largest interest rate to lowest interest rate. I am not particular about which method you wanna use. I am particular that you pay off one at a time. A lot of times, we try to take this, like, throw spaghetti at the wall approach to our debt, where it's like, I'm gonna pay extra on this one or, you know, I'm paying extra on debt number 1 this month, then I'm paying extra on debt number 3 next month.
Rho:And, oh, I got this, you know, bonus, and I'm gonna split it across 5 different no. We're gonna focus on 1. Right? So whichever method you wanna do for some of my clients like, I remember one in particular, her mom had cosigned on a loan for her, and that felt really bad. And so she was more focused on paying that one off first.
Rho:It wasn't the lowest balance. It wasn't the highest interest rate, but it bothered her. And so she focused on that one. That's perfectly fine. Pay them off, though, one at a time.
Rho:You're gonna make much faster progress. You're gonna start freeing up more of that cash flow that we've talked about, right, when you don't have that minimum payment anymore. Now that money can go toward paying off another debt, or it can just go back in your pocket for your family to use for your household finances. We're gonna pay them off 1 at a time. And then the final thing is celebrate along the way because that's gonna keep you motivated to keep going.
Rho:So we had a chart of all of our debts, and as we paid one off, then we highlighted it in green. And then over the years, like, as we're paying things off, we watch that green start taking over the chart. And it's like, oh, man, we're really making progress. And we kept each version of the chart so that we could go back. Like, you know, when you're slogging through, it feels like, oh, I'm not making any progress.
Rho:You can go back a year ago and see where you were. Progress, where you are now. Exactly. So I am huge on celebrating your progress because that is always gonna keep you motivated. Like, it's showing you that what you're doing is working, that you're on the right track, and that if you keep going, then you're going to eventually achieve your goal.
Davina:So those are my tips. Those are great, great tips. And you also have something that you put together, especially for our listeners. You want to tell us what that is?
Rho:Yes. I have a free guide on my best tips for getting out of debt. If you head to roethomas.com/wwlforwealthywomanlawyer, then you can get a copy of that. So I hope that you enjoy it.
Davina:Thank you so much. I really appreciate it. And, Roe, I always enjoy talking with you, so I'm so glad you were able to come back on and give us an update because I think that's also, for you to to reflect back and go, we owed over $600,000 in debt. And when you and I first talked, you still had about 300 left. And then to be where you are today, I think, is gonna give a lot of people a lot of hope.
Davina:And if they want to get some help in addition to the hope, they can reach out to you. So I tell us what tell us how they can best connect with you.
Rho:Yes. So if you come over to LinkedIn, I'm most active over there, and I'm Ro Thomas. That's r h o, Thomas. Or if you wanna go to my website at roethomas.com, you can check out what I've got going on there with my podcast and all of the other things.
Davina:Great. And we have those links in the show notes for anybody who wants to do that, make it super easy for you. So, Ro, thanks again for being here. I enjoyed it.
Rho:Thank you so much, Devine. It's always a pleasure chatting with you.
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