TRP 299: [Legal] Avoiding Pitfalls Related to Personal Finances for Lawyers with Darren Wurz

[00:00:10] You're listening to The Rainmaking Podcast, hosted by high-stakes headhunter, author, and professional speaker, Scott Love. You're listening to The Rainmaking Podcast, and my name is Scott Love. I'm so glad you're here. Thank you for joining me on the show. This episode is part of our Tuesday series, Only to the Legal Industry. And our guest today is Darren Wurtz. Now, Darren has been a guest on the show before.

[00:00:38] He works in the wealth management industry, and his niche is just those that are in the legal profession, attorneys. He helps them to manage their wealth, to grow it. And our topic title today is Avoiding Pitfalls Related to Personal Finances for Lawyers. Now, Darren's book, The Lawyer Millionaire, The Complete Guide for Attorneys on Maximizing Wealth, Minimizing Taxes, and Retirement with Confidence, that's a book I'd recommend.

[00:01:02] I've read it. I actually put the link to order Darren's book on the show notes, as well as all of his contact information. So if you want to connect with Darren, just go to the show notes wherever you hear this podcast, and connect with him and read his book. If you have a minute, I'd certainly appreciate you sharing this particular episode, liking it. Go to our YouTube channel. You can find that in the show notes also. Did you know we have a YouTube channel? Over 5,500 subscribers.

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[00:01:56] Visit therainmakingmagazine.com today to chart your course to greater rainmaking success. Thanks for listening, and I hope you get some great ideas from my conversation with my friend Darren today. Hey, this is Scott Love with The Rainmaking Podcast. Our special guest today is a previous guest we've had. His name is Darren Wurtz, and we're talking about avoiding pitfalls related to personal finances for lawyers. Darren, thanks for joining me on the show again.

[00:02:24] Hey, Scott. It's so great to be back with you. Thank you so much for having me. Absolutely right. And the feedback from people that have listened to your show before has been very positive. People that have spoken with you in the past have spoken highly of you. And I like the fact that you're niched within legal, and this is a part of our sometimes Tuesday's legal-focused niche, just for those people that work in the legal industry, because that's where you work too. Yeah. And so we're talking about pitfalls, and I know you've seen the whole spectrum of how lawyers have managed their personal finances.

[00:02:54] What do you think, starting with the biggest pitfall most attorneys have to deal with, what do you think that number one pitfall is that most attorneys need to watch out for with respect to personal finances? Well, there's a lot, and I'm trying to think what order I want to go in here. I'll start with the biggest one. And I think none of these are going to be especially particular to legal,

[00:03:21] but I think in the legal sphere, these are ones that I often see. So the first one is expanding your lifestyle with your income level. I see this a lot. I see, especially among law firm owners, as your income has grown, your lifestyle has kept up. You've had this lifestyle creep, right? And so you find yourself in your mid-40s, maybe 50s. You've got the huge house. You've got the really nice cars.

[00:03:51] You've got all the toys and tools. And now there's kids and there's college and there's, you know, their vehicles to think about. And there's all kinds of things going on. And your cash flow is just crazy. And you're not, you haven't really been, you know, keeping track of it. But before you know it, holy smokes, you're spending 20, 30 grand a month on things. And you haven't, there's no savings in there. And you haven't started to really accumulate wealth apart from your work.

[00:04:20] And so that is a situation I find a lot of folks in, especially in the legal world. And I think, I'm not sure exactly why I see that a lot, but it does seem to be somewhat of a trend. And so let's say somebody finds themselves in that situation. Their kids are getting older. And I remember this, when I started legal recruiting, this is 2009. I was in recruiting since 95. I got in legal in 09.

[00:04:48] And around that time, I remember hearing a partner tell me for the very first time, he said, for me to be able to pay all my bills and cover anything I need to, I can't make less than $400,000 a year. And I'm like, oh my gosh. But, and now I'm like, I kind of get that. And so let's say somebody's in that situation. Where should they start? Should they start cutting back? Should they start making more? I mean, what's the first thing you think they should do to get out of that dilemma?

[00:05:17] It's so hard to go backwards. You know, it's much easier to expand your lifestyle than it is to reduce it. And so that is really, really tough, especially because maybe you have loans on assets, you know, that you've accumulated. And so, you know, how do you go backwards? And you get accustomed to a certain lifestyle. Right. You have to make some big choices. You have to first think about what really makes you happy.

[00:05:47] I think that's where you need to start in the beginning because, you know, we accumulate all these things and we add all these expenses to our budgets without even realizing it. And a lot of it is just clutter and it doesn't really make us happy. So I think there's a philosophical point where we have to start and really think about what do I really need to be happy? And then think about the future you, you know, 20 years from now, how do I want to make sure

[00:06:15] that I'm taking care of that person? And I like to put a I like to put a number on it. Right. You know, it's easy to say, you know, 10 years from now, what do you want life to look like or whatever? But I like to put some numbers on it. Let's you know, what age will you be in 10 years? And then that makes it real somehow, because like, oh, wow, the the 47 year old me, what's that going to be like? Right. Or the 60 year old me. How am I going to take care of that person? Yeah. Right.

[00:06:45] And that's interesting. That's something I've even told my son's 25. My daughter's 14. I tell them in any decision you make, you need to think about taking care of the old Dex and taking care of the old my, I mean, 14, she can't think beyond 15, but 25, you know, that's when you start seeing, oh, I'm an adult, but you still think like you're invincible. But then when you hit your 30s, your 40s, you realize, oh, I've got responsibilities, things like that. That's something I've done is always think about taking care of the old Scott.

[00:07:14] And that's something when you were on the show before, some of the ideas you shared, I took those and I went through and I audited my whole expenses and I was able and I track it better and I'm able to love the categories and I do it every month instead of at the end of the year to my CPA, here's the digital shoe bot. Oh, yeah. And I'm sorry. You know, just trying to trying to take control of that. And I think just I remember one of the things you said was find out what you're spending the money on to see where it's going. That helps. See where it's going. Yeah.

[00:07:43] And I think even just knowing where it is, that releases, I think that gives you more control. You feel like you feel less stressed because you know where it is and all that stuff. And so, yeah, let's say somebody they're in that spot. Okay. They're in their mid 40s and they're thinking of the old Alex or the old Joseph and they're thinking of who they're going to be 20 years or even 10 years from there. And they've got all these expenses. Should they look at liquidating assets to pay down debt?

[00:08:12] Should they cancel the country club membership? Should they terminate the lease early and get a Camry instead of a Lexus? I mean, what have you seen? What have you seen people that you work with do when they make these these changes? Well, it's really about priorities. Right. Because at the end of the day, money is a limited resource and time is a limited resource. Right. So think about time. Right. You only have so many hours in a day.

[00:08:39] Yes, there are a thousand things you would love to do, but you're going to prioritize the most important things. Now, time is a great example because unlike money, we can't borrow more time. Right. Right. So with money, that's one area we get into trouble because we can we can borrow more money. We can max out the credit cards. You know, we can obtain things that we don't have. So I think we really have to think about money as a limited resource.

[00:09:05] You know, even the most wealthy individuals have limits in terms of what they can spend. I think one of the most sinister kind of lies that we fall prey to is is this this concept that we want to get to this place where we don't have to worry about spending. I can just I can spend whatever I can go anywhere. I don't have to think about it consciously. And yes, to some degree, you may be there already at a certain point, like you can go

[00:09:33] to the grocery store and you can buy dinner and you don't have to be concerned about, you know, the money in the bank, perhaps. But at the same time, we'll never get to a place where you can just spend whatever you want and not have to consciously think about it. And I think one of the key areas where this is really challenging is around credit cards, because it's really easy to swipe a card. You know, you don't have to worry about it.

[00:10:03] Just swipe it up and then we'll pay it, you know, at the end of the month. Well, it's really easy to get into that bad credit card cycle. And maybe a lot of this is generational, too, because a lot of my clients are, you know, in their 50s, you know, maybe early to late 50s, maybe early 60s. They're thinking about retirement, maybe late 40s. And I think their parents didn't have access to credit cards the way we do now.

[00:10:28] And I think that we have this generation has a greater access to affluence that parents didn't have. You know, you think about your grandparents. They didn't have the same affluence that we do today that many of us enjoy today. And so there's some psychology that plays into that. There was, you know, we have access to these things that we didn't have before. And so we feel like maybe we deserve them.

[00:10:56] So there's a lot that plays into it, I think. Yeah, that's interesting. Let's say, let me ask you about how someone can put together a budget. Because I think knowing where things are going, knowing how much they spend on that, if they want to be proactive, are there any tools that you see that have helped them to track and manage and kind of predict and set limits on spending in certain categories? Well, Scott, I'm going to be honest. I hate budgeting.

[00:11:25] And I think most people do, too. So let's make it really simple. At a minimal level, you want to be tracking what you're spending and you want to be reviewing it because, you know, three months from now, you don't want to be looking at your transactions and like, what is that? What did I spend? And we forget, right? You look back a few months and you're not going to recognize anything you spend money on. It's the funniest thing, right? So at a minimal level, have some awareness. One of my favorite tools is Monarch Money.

[00:11:53] We use it with clients to help them understand where the money is going. And here's something I want you to understand as the listener. Every dollar goes somewhere. It either goes to expenses, it goes to taxes, or it goes to savings. There's only three places that a dollar can go. And every dollar has got to go somewhere.

[00:12:19] And so you can't just magically create dollars like the Federal Reserve can. There's a limited supply of them coming in. Now, I know budgeting is a headache. Like, so one of my favorite ways to do budgeting is with bank accounts. Okay. And so we call this bank-based budgeting or something like that. And basically what you do is you set up a number of different accounts for yourself. So the way I do this is I have one bank account that receives all the money.

[00:12:49] I call that my income account. And then I have it flow into separate individual accounts. So I have a savings account that's a money market. A certain percentage I'll throw over there. I have a spending account. Let's get to that later. I have a bills account. The bills account, a certain percentage goes there. The bills account is anything that's on a recurring basis. My mortgage, my car payment, my Hulu subscription, right?

[00:13:15] The bills, the utilities, the recurring stuff that I have to pay. Okay. And then I have a third account called a spending account. The spending account is just that. I put a certain percentage there and I can spend that on anything, whatever I want. There's nothing that's going to come out of that account. There's no checks written from that account. There's no subscriptions coming from that account. So when I see that account and I see there's $1,000 in there, I know I have $1,000 to spend.

[00:13:43] And that just makes it so easy because I don't have to necessarily sit and crunch the numbers, but I can pull up my, you know, with technology today, I can open my Ally Bank account app and I can see, oh, I have X amount of dollars. Great. We're in good shape or we're a little bit low. Maybe I'll just wait a few days, wait a week for some new money to come in. Right. And that helps keep me on track.

[00:14:10] And I think that's kind of an easy way to do budgeting for those who are a little bit scared of budgeting. Yeah, that's great. I like that. Very simple. So you just contact your bank, have them set up new accounts for you. Does this work within your personal account or within your business account or both? Or kind of a mix? What have you seen? Both. So this is actually a version of a business system called Profit First.

[00:14:34] There's actually a book called Profit First and Profit First is all about instilling cash flow discipline in your business. And it's the same concept. Money comes into an account, a certain percentage goes here, here, here, and here. Right. And we, and for businesses, we make sure we're putting money in a profit account, in an owner's compensation account, in a taxes account. So we have money to pay taxes when it's time to pay taxes.

[00:15:02] And then finally, an OPEX account. Right. And you can do the same thing personally. You can have as many different accounts as you want for different purposes, especially for those big one-time expenses that occur. You know, maybe you pay estimated taxes on a quarterly basis. Okay. Let's create a tax account. And every month, let's have a certain amount go in there. And when it's time to pay estimated tax payments, whoo, there's money there. I don't have to, you know, go scrounging around looking for it. Can't put that off, right? Right.

[00:15:32] And you know, Scott, it's funny, but here's the thing. I find so many lawyers and law firm owners who are behind on their taxes. And I think it's just because when you make a lot of money, it's easy to do. And you're making $600,000, $700,000 a year. Your estimated tax payments are pretty substantial. And if you're not prepared for them, you're going to have a big, nasty surprise.

[00:16:01] And so a lot of people get into a lot of trouble that way. Yeah, right. I bet. I bet. And let me ask you this question then. Let's say in terms of reviewing their books, reviewing their accounts, how often should they do that, both on their personal side and also on the business side? Oh, yes. I recommend a twice monthly schedule. I like weekly for some people. You got to do what works for you. Weekly is nice because you have less opportunity to forget what your transactions were.

[00:16:30] So like every Saturday morning, right? You know, have a cup of coffee and go through your transactions, right? That's a nice, you know, make it a ritual. Make it something that's just part of your routine. If that's too much for you, you know, I suggest maybe twice a month, maybe on the 10th and the 25th. That's a nice cycle because on the 25th, we're reviewing everything. We're getting ready for those beginning of the month things that are going to come out. We're making sure we're prepared.

[00:16:56] And then on the 10th, we're kind of past that cycle and we can review things again. This is terrific. Let me ask you this question then. These are really good, solid, tactical action steps people can take. Tell us about someone that you've worked with. You don't have to mention their name, of course, but what was their situation before you started working with them? How did they implement these ideas that you've shared and what was the result of that, Darren? So one of my first law firm owner clients had a pretty decent size law firm.

[00:17:25] The firm itself was doing a few million in revenue. This individual himself was taking home, you know, $700,000, $800,000 a year. But he was really in a position of starting over, had been through a divorce, had very little in investable assets, had several kids, getting ready to go to college, driving cars, right? And so just a lot of things.

[00:17:52] And an Amazon bill that was, you know, about $30,000 a year. So, you know, what we did initially is we just did an audit. We went through all the, you know, statements just to kind of identify where the money is going, where are some areas we can be a little bit more disciplined. But I think the most powerful thing we did was create a cash flow system.

[00:18:16] We helped this person, just like I mentioned, set up a systematic way of funneling cash, right? You get paid. It goes into an account. We're going to send a certain amount to a tax account to get ready for taxes. We're going to send a certain amount to an emergency fund so we can build that up. And the same thing in the business. We set up an automatic distribution into a business emergency fund because, by the way, your business needs liquidity, okay?

[00:18:46] So a few years, let's fast forward a few years, right? And this individual has accumulated several hundred thousands of dollars in extra investable assets. We filled up the emergency fund. Once that was filled up, we started funneling money into a brokerage account and backdoor Roth IRAs and other investments. And so, you know, it's about having a system and also automation. I think that was a really, really big, powerful thing of it.

[00:19:16] And in the beginning, it was rough, right? This client would call our office a few times a month. Hey, I got to take some money out, you know, from the emergency fund. I've got a shortfall, whatever. But because we were forcing that discipline, after a while, those calls became less and less frequent. To now, we don't get those calls at all. You know, the system is there, it's running, and we're building wealth.

[00:19:42] And it's not rocket science, but sometimes it takes someone to hold your hand and help you through the process. That's terrific. I totally understand that, and I agree. And I bet you're going to get a lot of people reach out to you after this recording, because what you've described, I'm sure, is very common. And you just need somebody there to help coach you and guide you through this, which is what you do for a living, which is great.

[00:20:03] Right. And speaking of that, Darren, as we bring this to a close, if you could share three action steps our listeners can take to really start making those changes, what would those three action steps be? Okay, so three action steps. Number one, I would say create an awareness of your finances. You know, not just your cash flow, but that's a big area, but an awareness of everything.

[00:20:27] You know, a lot of times we are burying our head in the sand, but get an awareness of your investments, of where things are invested, what your fees and expenses are, your insurance policies, your taxes, everything. And create a ritual of going through these things on a regular basis and reviewing these things on a regular basis. So I think that's step number one. Yeah.

[00:20:52] Step two would be to enforce some automation and some systems in your financial life. One easy way to do that is your corporate 401k. You know, that's great because the money is coming out. You don't even have to think about it. It doesn't even hit your bank account. Before you even see it, it's gone. A lot of companies do automatic enrollment.

[00:21:16] So you're automatically enrolled and then your percentage automatically goes up each month or each year, you know, as your income rises. If that's not the case, help yourself by doing that yourself. Right. So, you know, make sure you're enrolled. Make sure you're getting the full match. And then each year you should be trying to push that percentage up. Right. As your income grows. Don't let your lifestyle expand with your income so much. I mean, a little bit is okay.

[00:21:46] Right. We want to live a little. We want to have some fun. But we want to also be increasing our savings as time goes on. That's great. Yeah. And the third thing, the third thing I would say, and this is, I want to speak to the age and the era that we're in right now. Okay. The third thing is be a disciplined investor. You know, Warren Buffett is one of the greatest investors of all time.

[00:22:15] And he did achieve a very decent rate of return on his investments over time. But he's not, he hasn't, you know, if you're using rate of return as the measure, he's not the best. But what he has on everyone else is time. And time is your biggest friend. It's tough to beat the market. You can't beat the market. You know, some people do, but that's what we would expect from random chance. But by the majority, for the most part, in general, beating the market is a gamble. Right.

[00:22:44] The best thing you can do is own the whole market. And you hear this advice a lot, so I'm not telling you anything you haven't heard already. But it's easy to discard this advice, especially in a time when, you know, you see these individual stocks that are soaring. There's AI. There's all kinds of things to draw us in and get us to make mistakes. And it can be real easy to make a real bad mistake. Right.

[00:23:11] So one of the things I read this in The Psychology of Money by Morgan Housel. He says, you know, I can't afford, I can afford not to be the world's best investor. But what I can't afford is to be a bad investor. Yeah. That's great. That's good wisdom. And Darren, this is great wisdom from you also. I want to tell you again, thank you for sharing this. I know this is going to be very helpful to people in a very personal and significant way. And tell us about your offerings. What do you have? What do you do?

[00:23:41] What would you like our listeners to know about in terms of what you can do for them, Darren? Thank you so much, Scott. So our business is Lawyer Millionaire Wealth Advisors. And what we do is we bring an entire financial and business team to law firm owners and lawyers as well. So we are your one-stop solution for all your financial and business needs. When you work with our team, you get a CPA, you get a certified financial planner,

[00:24:09] you get an investment advisor, you get a business advisor as well. So we bring the entire team to you to help you across everything. That helps you save a lot of time and headache. You're not having to coordinate between multiple advisors. You get everything done under one roof. We're really, really excited about what we're building and the team that we've created and what we're doing for lawyers and law firm owners. That's great, Darren. And I'm excited about having you here on the show today. Thank you so much. We're going to put all of your contact info in the show notes.

[00:24:36] So for everybody listening, go there and you'll be able to connect with Darren directly. And also, I'd highly recommend Darren's book. I've read it before. We'll put the link in the show notes also. And Darren, thanks again for being a guest on the show today. Thank you so much, Scott. I really appreciate the opportunity to come and speak to your audience. Thank you for listening to The Rainmaking Podcast. For more information about our recruiting services for international law firms,

[00:25:04] visit our website at attorneysearchgroup.com. To inquire about having Scott speak at your next convention, conference, sales meeting, or executive retreat, visit therainmakingpodcast.com. Thank you.