Pod Insights Money For Couples with Ramit Sethi 182. “We’re $350k in debt & have no savings. Will I have to work until we die?” About this episode Don is 50, Tana is 48, and they’ve struggled to make ends meet their entire adult lives. They have a lot of debt, they’ve never really saved or thought they’d be able to retire… but their income has recently DOUBLED and they’re wondering how to manage the extra money. Throughout this conversation, as Don and Tana work to set aside their scarcity mindset, you’ll hear how hard it can be to change.
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Transcript 14,372 words · 4 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Ramit Sethi? One of my favorite articles in the New York Times was a weekend edition of what this model does on his days off. Now, you look at this guy, he looks beautiful, he looks amazing, super ripped. And on his Saturdays, his day off, what does he do? He does like a seven mile jog, he then does yoga, then he goes and meets friends for brunch. They showed what he eats. And all of it made it very clear why he looks the way he does. I was blown away and I loved it. Because finally, I could see what it takes to look like somebody like that. He shared all the behaviors he does that I had no idea people do. I'm kind of obsessed with what people who are good with something actually do.
0:43 Ramit Sethi? Like, people who are really good with their nutrition, log into the menu of the restaurant they're going to before they get there, so they can decide what they're going to order. What do you do if you're good with money? What are your special behaviors that you do that nobody else is doing? Well, I'm going to show you what those behaviors are, so that you can become good with money as well. On Monday, November 16th, I'll show you what being good with money looks like. You can sign up at iwt.com/live to join these special free events. Recently, my producer told me she's been struggling with sleep, so I asked our sponsor, Lisa, to send her a new mattress. And here's what she said. "I've struggled with insomnia
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2:28 Speaker 01 30 years of barely nose above water. We can't imagine a rich life.
2:33 Speaker 02 We've always been either living like paycheck to paycheck or actually on assistance.
2:38 Ramit Sethi? Dawn is 50, Tana is 48, and they have struggled to make ends meet for their entire adult lives.
2:44 Speaker 01 We've always had hustle, side hustle, and second side hustle.
2:48 Speaker 02 I have always stressed about money. We're kind of always waiting for the other shoe to drop.
2:52 Ramit Sethi? They have a lot of debt. They never really saved. They never actually thought they'd be able to retire.
2:57 Speaker 01 We just never thought we were actually going to be able to retire.
2:59 Speaker 02 Dawn and I had both sort of just given up, just like assumed we were going to work until we were dead.
3:05 Ramit Sethi? Their income increased significantly. And for the first time ever, they are starting to wonder how to handle the extra money.
3:11 Speaker 01 I make more a month now than I made in entire years.
3:15 Speaker 02 We're not used to this. We don't, this isn't our world. We don't know what to do.
3:19 Ramit Sethi? Can Dawn and Tana set aside their scarcity mindset and make an actual plan for the money?
3:24 Speaker 01 It was really hard for me to accept being paid what I'm worth.
3:26 Speaker 02 We need a plan.
3:32 Ramit Sethi? Let's see what we have here. Their assets are $200,000. Investments, $11,000. Okay, quite low for that age. Debt is $387,000. That debt includes $51,000 of credit card debt, $145,000 for the mortgage, $168,000 for student loans. That's at age 50.
4:00 Ramit Sethi? And a $10,000 personal loan plus $12,000 for a lease. It's a lot of debt. Okay, income is $21,500 per month. That's a lot. I think that's recent. That's $258,000 a year. Rent, housing costs are quite low. Debt payments are $5,895 a month. Wow. They have a lot of margin to play with with this income, and they've chosen to put it towards debt. Makes sense. Investments at...
4:30 Ramit Sethi? Zero and they have $0 in savings. Okay. Of course, their guilt free spending is working 20% $2,792. This CSP tells me a lot. It tells me that one of them recently started making a lot of money. That part is good. The part that is problematic is how little they have for investments and how much debt they have. The great news is that if they can keep their expenses low, they can certainly shovel money towards that debt as they're doing. That's great. I think the more psychological problem here is this need to constantly work
5:15 Ramit Sethi? and being more worried now that they're making money than before when they weren't. That's quite interesting. All right. Sometimes when you can actually see a light at the end of the tunnel, you actually feel worse than when you were completely in the dark. We're going to talk about that today. I'm very eager to talk to them.
5:35 Speaker 02 We've always been either living like paycheck to paycheck or actually on assistance. And all of a sudden, we made a huge leap. We're not used to this. We don't. This isn't our world. We don't know what to do.
5:49 Speaker 01 We've always had hustle, side hustle and second side hustle. Just the other day I was out and I was like, oh, I could probably do Uber Eats and pick up a few extra bucks. And I'm like, wait, why, why am I thinking that way? But that's just how we're, we're, we're so wired at this point.
6:05 Ramit Sethi? Can we go to the moment where your financial lives changed? I suspect this happened pretty recently. Don, can you walk me through it?
6:16 Speaker 01 We've always done consulting on the side, just trying to pick up a few extra bucks. And during COVID, someone approached me and said, hey, I'm starting this new business. Would you mind, you know, taking a look? So I signed a small contract to do a look. At the end of it, they offered me the COO role. And so I did that for a little over a year. Company had great success, so much so the investors flipped it and I lost my job. But a contact there remembered me and so that opened a door for a consulting opportunity that with one client and then I've added other clients since then.
6:55 Ramit Sethi? How much did you make as COO?
6:57 Speaker 01 I never made above thirty five thousand dollars a year until that job.
7:05 Speaker 01 When I left there was because at one twenty.
7:09 Ramit Sethi? Wow. So you basically quadrupled, almost quadrupled your salary. How much did you both make as a household for most of your career?
7:17 Speaker 02 We actually had some years where we were under twenty thousand and then the and then we got up to like seventy for a few years. So we were in and out of assistance.
7:34 Ramit Sethi? And as of today, how much household income do you make?
7:38 Speaker 02 Like two forty five?
7:42 Ramit Sethi? Wow. So, so five to ten times more than you used to make?
7:47 Speaker 01 I make more a month now than I made in entire years.
7:52 Ramit Sethi? Wow.
7:54 Speaker 02 Yes.
7:54 Ramit Sethi? First of all, amazing job. That's incredible. How do you feel about that, Don?
8:01 Speaker 01 It's a mixed bag, right? Because, you know, first of all, it was really hard for me to accept being paid what I'm worth. Tana has been my biggest champion, like get paid what you're worth. But there's a part of me that has some bitterness because, you know, I spent so much of my life doing activism and justice work. And so now when I stopped doing that, now all of a sudden I'm benefiting. So it kind of feels a little backwards to me. And there's, there's quite a bit of psychology there that I need to work through.
8:34 Ramit Sethi? It's not often I get to talk to a couple who has 5X to 10X their previous income, especially at the age of 48 and 50. It's quite extraordinary. What has changed?
8:49 Speaker 01 I have some survivor's guilt because I started a nonprofit that work with homeless and food insecurity folks. And so we're now the people I would approach hoping they might consider to care for folks in our community. I never imagined in my life that having money would actually be nearly as complicated mentally, psychologically for me as it is. When you're in nonprofits, when you're in justice work, there's a sense of like it's a call and therefore you shouldn't be in it for the money and make all the sacrifices. And so to then all of a sudden, everything changed and it's been really hard. It's also
9:34 Speaker 01 been really great. We actually went out to dinner tonight before the show and the person said, are you here for a special occasion? We're like, no, just dinner. And I looked at Tana, I was like, what a fun thing to be able to say. No, we're actually just here to eat. It's a Monday night and we're eating.
9:51 Ramit Sethi? I love that you have the appreciation for that. To be able to go out to a restaurant, so many of us take it for granted. And to be able to step back and say, oh, that's not normal. Tana, how has it felt for your household income to increase like this?
10:05 Speaker 02 I have always stressed about money. It's a huge relief to no longer have to worry about paying our basic bills, to no longer have to worry about, do we have enough money in our checking account before the next paycheck comes so that we don't overdraw? So I think that's the biggest change is that sense of relief. There's been some anxiety along with it because I think Don and I had both sort of just...
10:42 Speaker 02 Given up and and just like assumed we were gonna work until we were dead.
10:46 Ramit Sethi? Did you make jokes to people like, we're gonna work till the day we die?
10:50 Speaker 02 I'm sure, yeah.
10:52 Speaker 01 I'm a 50 year old guy. Of course I made that joke like.
10:57 Ramit Sethi? That's a very common joke among people who don't have money. Or and or people who have a lot of student debt. They frequently make that and it's not really a joke. It's a half joke. They do it with a bit of a laugh. But also they kind of believe it. And they say it enough times and it starts to become a self fulfilling prophecy. And just to see if that's true, Tana, after your household income has increased by 510x. Has has your money stress vanished?
11:29 Speaker 02 I wouldn't say it's completely vanished. It's changed. It's gotten better.
11:34 Ramit Sethi? That's good.
11:35 Speaker 02 So the stress now is more so about.
11:40 Speaker 02 Not screwing it up. We've had a lot of stuff happen to us throughout the years. And so we're kind of always waiting for the other shoe to drop. And so it took several months for me to kind of get past that, that this like, like, oh, this is just a flash in the pan. And so I'm feeling that a little bit less now, but now the stress is like. Oh, man, we actually be able to retire. So how do we not screw that up?
12:08 Ramit Sethi? Would you say you love money or hate money?
12:12 Speaker 01 It's straddling that fence, right? Because it's a mystery in some ways. And because, you know, I don't know what to do with it.
12:25 Ramit Sethi? Tana, what about you? Love money or hate money?
12:29 Speaker 02 I definitely feel like I have a love hate relationship with money. Uh, just because it's been so difficult to come by for most of our lives. And then I love when I can make life easier because of money. Uh, that's, that's a big thing that would always frustrate me in the past. It'd be like, oh, we broke our whisk. We can't afford to buy a new one.
12:53 Ramit Sethi? Whisk like for pancakes?
12:55 Speaker 02 Yeah. So it's like, well, I guess I'm using a fork now, you know? And now, now it's like, oh, it broke the whisk. Let's go buy a new, new whisk.
13:01 Speaker 01 One of the first things we bought was we replaced our measuring cups.
13:05 Speaker 02 Yes, exactly. Cause you couldn't read them. You couldn't read the numbers anymore.
13:10 Ramit Sethi? Amazing. I appreciate that. Here we have a couple who truly struggled for many, many years. And then suddenly their financial life changed. How do you grapple with those changes? Remember that money is not simply numbers in your bank account. Money is a core part of your identity. It's where you live, it's what you eat, it's what you can do. Try to imagine how you would handle going from being on public assistance to suddenly in your fifties, earning hundreds of thousands of dollars a year. Would you know how to handle the money? Imagine the money is like driving a fast car. Sure, if you've gotten your driver's license and you've practiced on slower cars,
13:56 Ramit Sethi? you might feel confident driving this fast car. But what if you've never driven this fast ever? And suddenly your only car is a supercar? Would you know what to do or how to think or even how to feel?
14:09 Ramit Sethi? I think it's quietly beautiful that the first thing they bought was measuring cups. See, if you've struggled for this long, you can probably relate. The first thing you'd buy is probably not some luxury vacation. It's something simple, like the expensive bread at a grocery store. I gotta tell you, I love hearing my guests' stories. We'll get back to the conversation after a quick pause to support our sponsors.
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17:09 Ramit Sethi? Now, back to Dawn and Tana. What do you remember your parents or your family saying about money when you were young?
17:17 Speaker 02 I got the money doesn't grow on trees, you know? But other than that, there weren't a lot of conversations about money. My parents were both self-employed. So the income went up and down and I could tell where we were at based on what we were eating for dinner. When things were good, there would be the occasional like, oh, we're having filet mignon tonight. You know, and where things were not great, it was meatloaf and spaghetti meatballs.
17:43 Ramit Sethi? Okay. Who did you see dealing with money in your family?
17:47 Speaker 02 My mother.
17:48 Ramit Sethi? Mom, okay. What about dad?
17:50 Speaker 02 My mom did the bookkeeping for his business. In addition to the bookkeeping for her business. And so then she did all the budgeting. So any money negotiations went through mom.
18:00 Ramit Sethi? Dawn, can we go back to your childhood? I'm curious.
18:03 Speaker 01 Sure.
18:04 Ramit Sethi? What do you remember about your family or parents? What they said about money when you were a kid?
18:09 Speaker 01 I grew up in a really poor abusive household. It was like if you finished the last of something in the cereal box, like you finished the last little bit of cereal, you got in trouble. Everything was scarcity to the nth degree. If I wanted to buy something, then I was going to have to go out and make money and buy it myself.
18:28 Speaker 01 Which I started doing at 14. At 14, I found some pottery place that let me fold boxes for a nickel a box. And I would fold it and then I would buy all the kids, all the Swedish fish they wanted at the, at the swimming pool.
18:40 Ramit Sethi? Really? Why'd you do that?
18:43 Speaker 01 I think it's probably because at my house, there wasn't anything and there was no generosity. You know, I think some people, the response goes one direction and for me it went the other, which was then I'm going to give everything away.
18:54 Ramit Sethi? Right.
18:55 Speaker 01 Which Tana can tell you is an unfortunate theme of our life.
18:58 Ramit Sethi? That relate to the activism, to the nonprofit world, et cetera?
19:02 Speaker 01 Yep, yep, yep, very much so.
19:05 Ramit Sethi? Do you ever have a discussion that Tana said something like, "You are so busy giving to everyone else that you don't focus on this family?"
19:15 Speaker 01 Yes, not necessarily in those words. I received it as I'm making choices to give things away or care for someone and our nose are barely above water. And why would we do that? And I want to be very clear, all reasonable questions to ask me, 100%.
19:37 Ramit Sethi? Did you have any values in your relationship, looking back from the beginning?
19:42 Speaker 02 Yeah.
19:42 Speaker 01 I think one of the big values was that we always had people in our home. We were kind of a hub for young people, college age students that were displaced from families. So we would host big Easter meals and have everyone over, which then led us to feeding them. And we didn't have any money to feed them.
19:58 Ramit Sethi? How did you pay for that?
20:01 Speaker 02 Credit cards.
20:02 Ramit Sethi? Credit cards. Tana, what about you? What values did you have in the relationship from the beginning?
20:08 Speaker 02 We both value social justice. We both value giving back. My jobs have almost all been in nonprofits as well. I just earned more than Dawn did. And we, we definitely value creating a community. I think you and I just also have a sense of responsibility to the world, of wanting to leave it a better place than it was when we entered it.
20:38 Ramit Sethi? After hearing about your values, a lot of which I love, like I, I understand community, that's how my family was raised. But it strikes me, and I'm wondering, do either of you have trouble saying no?
20:57 Speaker 02 No.
21:00 Speaker 02 Yes, yes, yes, I do.
21:02 Ramit Sethi? And Dawn?
21:04 Speaker 01 It depends on the circumstance. If it's, if it's, uh, someone is in need, then I, I really struggle saying no.
21:12 Ramit Sethi? You know why I asked that question?
21:14 Speaker 01 No.
21:15 Ramit Sethi? Tana?
21:17 Speaker 02 No.
21:18 Ramit Sethi? Hosting, community, paying for it when you didn't have the money. At some points, feeling obligated, real or perceived. Difficulty saying no is the undercurrent of all those things. Do you see that? Where else did the inability to say no show up specifically in your financial life?
21:42 Speaker 02 I've mostly been the one who's done the finances. We didn't have a lot of money conversations at some point during our marriage. We kind of just stopped having them. But, uh, Don would be like, well, I need this. Can we afford it? And I, even though I'm like, well, no, not really. I would still, you know, be like, yeah, okay.
22:05 Ramit Sethi? And what was your magical phrase that you said? How would you say it to him?
22:10 Speaker 02 I don't know how I would say, I guess, like, yeah, you can get that, or I don't know.
22:14 Speaker 01 I think it was stuff around, it'd be, it's gonna be hard, but we can, we can figure it out.
22:21 Ramit Sethi? Figure it out. Thank you very much. I was looking for the F word. It never fails. We'll figure it out. That's code for, I have no fucking idea how to do this, but I don't want to say no. We'll figure it out. All right?
22:37 Speaker 02 Yeah.
22:37 Ramit Sethi? So Tana, how many times you think that happened?
22:40 Speaker 02 Oh, a lot.
22:41 Ramit Sethi? Lot, right? Dozens, hundreds, et cetera.
22:44 Speaker 02 Probably hundreds, yeah.
22:46 Ramit Sethi? It's pretty interesting that a deeply held worldview, like I struggle to say no, can come up in 10,000 different permutations in our life. And we can chase after him and try to play whack a mole.
23:05 Ramit Sethi? But it's this, it's here and it's here.
23:09 Ramit Sethi? And we have to change this, we have to acknowledge what we believe, but to trace it back to why. And then we have to decide if we want to change it. We could change a lot, we can't change everything, we could change a lot, but we have to have a reason to change it.
23:23 Speaker 02 I think I know where that comes from for me. For a long, long part of my life, very low self-esteem. And being like a people pleaser. And so I felt like, I always felt like I had to prove my worth. And so, you know, um, giving to people, um, saying yes to Don when he wanted things. I always felt like I had to be giving more than I was receiving in order to feel okay about it.
23:54 Ramit Sethi? Because if you're taking more than you're giving, you are what?
24:01 Speaker 02 In my mind, holding myself too highly.
24:07 Ramit Sethi? Right, and I don't deserve to be up here.
24:10 Speaker 02 Yeah.
24:11 Ramit Sethi? Right. So to prove my worth, I need to give more, I need to be adding value all the time.
24:18 Speaker 02 Yes.
24:18 Ramit Sethi? And Don? Some more dynamic exists for you, right?
24:22 Speaker 01 Yeah, 100%. I had the advantage of my job was giving and caring and, um, you know, helping people. But the number of times that we, we said yes to things, um, that we didn't have any business saying yes to, but we just trusted it would work out. And you know, the hard part for me is it worked out because now we're earning. And that lie plays in my head of like, you know, they see it did work out.
24:51 Ramit Sethi? I love that Don and Tana are service minded. But their relationship to giving reveals something pretty interesting. Generosity to others can be a good thing, but taken too far, it can become very harmful. In Don's case, he's generous, but he's gone into debt to help other people. He and Tana struggle to say no. And that shows up in lots of places in their lives. When they had little money, they were generous and they went into debt to help others. If they continue that same behavior of giving, but now they make hundreds of thousands of dollars. How long do you think the money will last? This is why I love the phrase, "Money changes you."
25:35 Ramit Sethi? Most people say it with a sneer, but money should change you. It's made me more adventurous, more spontaneous, more generous. In their cases, money should change them. And one of the things it should help them do is to set boundaries, so they can prioritize their own rich life. Did it work out? You two are earning a high income, I agree. But your financial status is still pretty tumultuous and problematic, right?
26:05 Speaker 01 100%.
26:06 Speaker 02 Yeah, The Washington Post came out with this thing like, "Are you rich?"
26:10 Ramit Sethi? They didn't contact me for that. Washington Post! Literally, who are you gonna call if the headline has the word "rich" in? There's only one person to call. I didn't get a call. All right, go on.
26:22 Speaker 02 So it's a thing where you fill out your net worth and your income, and it tells you how you compare to other Americans. And we're literally in the bottom percent for net worth, and then like, top 6% for income.
26:38 Ramit Sethi? Yeah, your income is quite high, and your net worth is quite low. It's like, my take from that, Dawn and Tana, is it hasn't worked out.
26:45 Speaker 01 Agreed.
26:46 Ramit Sethi? You've gotten very lucky in many different ways, and you have a chance to change your trajectory, but you have to make several intentional changes. I'm not just talking about where money goes, we'll talk about that too, but it's this. Who are we if we have money? What changes do we need to make in the way we approach the world, the way we approach each other, the way we approach our money? It's basically, in a way, like you won the lottery. You all heard stories about lottery winners, and they all, you know, a lot of them go broke. Why? Because money alone isn't gonna change a lot. But changing money and your approach to the world will. Right?
27:30 Speaker 02 Yeah.
27:30 Ramit Sethi? Okay, all right. What do you say we take a look at the numbers? Dawn, can you read off the word in bold, and then the number in full next to it?
27:41 Speaker 01 Assets, $202,824.
27:46 Speaker 01 Investments $11,043. Savings zero. Debt $387,990. Total net worth negative $174,123.
28:04 Ramit Sethi? It's scary to hear those actual numbers read out loud, right?
28:08 Speaker 02 Yes.
28:11 Ramit Sethi? I think one of the things a lot of people don't get about money, about fitness, about relationships, about these big things in life is when things are not going well, we don't want to talk about them or think about them. That's why I have a lot of compassion for people who are in a bad financial state and they ignore it. It's because you have to have a real pressing reason to want to engage with negative $174,000 at the age of 48 and 50.
28:38 Speaker 02 Yeah.
28:39 Ramit Sethi? I want to break down your assets for a second. $202,000, is that a house?
28:45 Speaker 02 Yeah.
28:45 Speaker 01 Yes.
28:46 Ramit Sethi? Okay. And your debt, let's work through this for a second. So we have $145,000 mortgage. We have $168,000 of student loans. $51,000 of credit card debt. $12,000 lease and $10,000 personal loan.
29:08 Speaker 02 Yes.
29:09 Ramit Sethi? Okay. I have to ask a few questions. $51,000 of credit card debt, what's that for?
29:15 Speaker 02 That has built up over time.
29:18 Speaker 01 I think it came from like 30 years of barely keeping our nose above water and just $2,000 underwater one year, 3,000 under the next year.
29:27 Speaker 02 And we went up like 20, 25,000 during the time of unemployment, just buying groceries and...
29:38 Speaker 01 Because we had no safety net.
29:40 Speaker 02 Paying medical bills.
29:43 Ramit Sethi? When that happened afterwards, did you take any lessons away from that?
29:49 Speaker 01 Sort of. I mean, I think yes, but it's the conflicting information you get online, right? Of like, do you pay off your high debt credit cards? And that's what we did with our first go around of getting good, getting healthy financially, was we just put everything towards our debt. But that meant nothing to catch us when we both lost our jobs. The safety net became the credit card space that we created by being aggressive about paying our debts. And that's exactly what we're doing right now. And that's part of the reason we're like, we don't know. Like, is that the right thing to just pay off as fast as we can? Or should we be splitting that up and putting some in a emergency?
30:31 Speaker 01 So I think we've learned to ask the question better. I just don't know that we've made any changes yet because we're uncertain.
30:40 Ramit Sethi? You can see that they're paralyzed by these basic questions. And they're still trying to make decisions as if a job loss is right around the corner, not as a powerful couple that makes hundreds of thousands of dollars per year. We'll be right back after this short break. I'm gonna take a wild guess. Maybe you've been putting off seeing a doctor for a while for some unexplained condition. Hey, why is my left eye blurry? Do I have toe fungus or is it just gross toenails? Whatever it is, stop wondering if you should get it checked out. Go see someone right now. You can use our sponsor, Zocdoc. They make it really easy. You don't even have to get on the phone to schedule an appointment.
31:22 Ramit Sethi? Zocdoc lets you search and compare local in-network doctors. Whether you're looking for primary care, dentistry, eye care, or anything else, you can easily search by specialty or symptoms. And you can book in-network appointments with more than 150,000 providers across all 50 states. Getting an actual appointment is easy. You just look through the real appointment openings, click what works for your schedule, and book it instantly. And what's great is their appointments happen fast, usually within 24 to 72 hours. No more waiting months and months to get the care that you need. Your health matters and taking care of yourself should not be complicated. Find and book the right doctor with Zocdoc.
32:04 Ramit Sethi? Head to zocdoc.com/ramit to get started and check that appointment off your to do list. That's Z O C D O C dot com slash ramit.
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33:37 Ramit Sethi? Welcome back. Let's keep going. All right, let's go on to your income. Tana, read me off this combined monthly income.
33:45 Speaker 02 Okay, gross monthly income, $21,500.
33:49 Ramit Sethi? So that's $258,000 per year. Who knew that you make that much?
33:58 Speaker 01 We both did.
34:00 Ramit Sethi? Wow, really? Literally 50% of the people on this show don't know how much money they make, so.
34:04 Speaker 02 Are you serious? How could you not know?
34:06 Speaker 01 And not only that, we make, we make more than that.
34:11 Ramit Sethi? Why? What? Why?
34:13 Speaker 01 Because I'm, I'm, I do consulting and that's the number that I felt comfortable saying that I could have.
34:20 Ramit Sethi? Yeah, I love a good, uh, you know, conservative planner. And for everyone listening, what do I mean by conservative? I'm talking about, it's almost like running with a weight vest. If you're going to train to run a marathon, I'm speaking as a guy who doesn't run a freaking marathon, okay? But you want to train in harder conditions than you're actually going to run the race in. So when you're putting numbers on your CSP, if you're putting your income and you're not sure, round down, round down, because it's better to end up with more than to end up with less. And if you have expenses, you're not sure, round up. You'd rather end up with more money than less at the end of the year. So that's how we do. That's conservative planning. Alright, so it says you make 258,000. How much are you actually going to make?
35:04 Ramit Sethi? Give me the range from 258 to what?
35:08 Speaker 01 Um, 320, 325.
35:12 Ramit Sethi? What the [bleep]? It's like $60,000 of buffer? Didn't you guys used to make $60,000 in like two years?
35:22 Speaker 02 Yes.
35:22 Ramit Sethi? What the hell kind of planning is this?
35:25 Speaker 02 Well, to be fair, he's a consultant, so he doesn't like get paid for vacation. So he's trying to find a way to establish a number that won't make him stressed out.
35:38 Speaker 01 I, I can't take off work, Rameed, because a day of work off was the equivalent of over a month, like a month's salary sometimes. And so I can't, in my mind, I can't even take a day off. I can be sick and I'm, I'm gonna work or even take off a day just to go for a walk in the park because I'm like, is, is that walk in the park really gonna be worth X number of dollars?
36:02 Ramit Sethi? You remind me of me, uh, except it's when I was in college. Back then, I rated everything. In terms of loads of laundry, like those tacos from Jack in the, we did Jack in the Bucks right off campus.
36:13 Speaker 01 Yep.
36:13 Ramit Sethi? That's like two loads of laundry, right? And so people who earn variable income, they become really weird. They're like, I can't go to my son's soccer game. That my, my son is going to cost me $1,500. I'm like, um, I'm not a parent, but I'm not sure that's a healthy way to look at your relationship with your son. And they're like, yeah, but what about the cash?
36:37 Speaker 01 I can tell you tonight at dinner, I was like, I knew exactly how many minutes it took me to earn that dinner.
36:45 Ramit Sethi? Okay, listen, that's super unhealthy, but I understand it. I understand, especially right now, like money is top of mind because for the first time you have some, you have light at the end of the tunnel. I get it, but I just need you to know that's not healthy and we need to put a plan in place so you don't think that way because that's a real messed up way to think about money. Okay?
37:06 Speaker 01 Agreed.
37:07 Ramit Sethi? So let's say I like your plan here, 258,000, probably going to make more. That's awesome. We can make a plan for what to do with the additional income. We always have a plan and let's keep working our way down. So your net income is 13,675. So that means what? You're taking a lot of pre-tax, 401k type of stuff?
37:30 Speaker 02 Um, I, I have pre-tax health insurance and 401k through my job. And then we pay estimated taxes for his consulting income.
37:43 Ramit Sethi? Oh, okay. All right, that makes sense. Let's look at your fixed costs, shall we? What's this number right next to the fixed cost, Don?
37:50 Speaker 01 79%.
37:51 Ramit Sethi? What do you think of that number?
37:53 Speaker 01 I think it's really high, but I'd like to defend it with the debt payments.
37:58 Ramit Sethi? Yeah, that's correct.
37:59 Speaker 01 That is an extra 4,000.
38:01 Ramit Sethi? Yeah, that is correct. Your debt payments are an extra $4,000 a month. You are paying it aggressively to pay off your debt. I understand that. And if we took that down by 4,000 bucks, let's watch what happens to this number here. That's 79%. Read it off to me now, Don. What does it turn into?
38:18 Speaker 01 50%.
38:19 Ramit Sethi? 50%, five zero. All right, so that's like, right now with your income, 50%, great.
38:28 Ramit Sethi? And let's talk about this for a second. So why is your fixed cost 50%? Well, your mortgage is really low. It's $1,125 a month. Let's look at a couple of other things here. You got a car payment, 441. What kind of car do you have?
38:43 Speaker 02 It's an electric SUV.
38:45 Ramit Sethi? Oh, okay. That's why you're leasing because it's electric?
38:49 Speaker 02 Yes. We lease, honestly, because that is a security item for me of not wanting to deal with surprise repairs and stuff like that.
39:03 Ramit Sethi? What, what, what car did you have when you were a teenager?
39:06 Speaker 02 I had.
39:07 Ramit Sethi? Okay, hold on. Let me just guess. I'm just going to guess here because I know it's a horrible car because of the way you talk about car repairs. Was it a Chevy Lumina?
39:15 Speaker 02 No, it was not. It was actually a Honda Civic was my first car.
39:19 Ramit Sethi? Blasphemy! I don't believe you.
39:22 Speaker 02 But no, that's the one I, that's the one I totaled.
39:24 Ramit Sethi? Okay, okay, okay. Then what was the next one?
39:27 Speaker 02 And then I got a Toyota Tercel.
39:28 Ramit Sethi? What the, those are good cars. How do you have a Honda and a Toyota and you have this view about car repairs?
39:34 Speaker 02 I got a really old Toyota Tercel.
39:37 Ramit Sethi? I'm sorry Honda and Toyota. I didn't know this would happen. Okay. That's, these shows are not scripted. Okay. I'm trying to make friends with Honda and Toyota. I love you guys. I love you. All right, listen. So, all right, I understand that, uh, look, first of all, the lease isn't that much. So I'm just going to move on past it. All right. Groceries are 1,200 for two people?
40:00 Speaker 02 Mm hmm.
40:01 Ramit Sethi? Clothes, whatever, zero subscriptions, 235. Cleaning and lawn care? Was this like house cleaning?
40:09 Speaker 02 Yes, that is my, my one thing I did, right? Almost right away, the, my one, like, luxury.
40:19 Ramit Sethi? All right, fine. Medical's 335 and haircuts and hygiene, 125. All right. So you're paying 10,783 a month. I have no comments right now, except I recognize that you're overpaying, quote, overpaying towards your debt. You're doing it intentionally. Fine. Let's go down to the rest of it, though. Your investments are at zero.
40:40 Speaker 01 Yep.
40:40 Ramit Sethi? And if we look at your total investments, you have 11,000 bucks at the age of 50.
40:46 Speaker 01 Crushing it.
40:47 Ramit Sethi? Yeah, that's a problem, right?
40:49 Speaker 01 Yeah, a big problem.
40:50 Ramit Sethi? Okay, good. Savings are, now, this was another clue that was quite interesting. You're saving $100 per month. This is the only savings and it's going to a contribution for son.
41:04 Speaker 01 So our son gives rent, pays rent. And we decided that we would take $100 of that rent and put it in a high yield savings for him.
41:15 Ramit Sethi? Okay, I appreciate that. Let's go down to, so that's all the savings you have. That's, uh, and you currently have zero in savings.
41:24 Speaker 01 Yes, other than the account for the tax.
41:27 Speaker 02 Yeah, we have a, we have a high yield savings account. We put our estimated taxes in, we set aside until it's time to pay them.
41:34 Ramit Sethi? So you're all like dialed in on, uh, you know, Uncle Sam. You're like, okay, uh, we're not gonna mess that one up. How about your own freaking savings? What about that?
41:44 Speaker 02 That's one of the reasons why we wanted to do this is because we don't know. It feels like anytime I put money in savings, I feel like, oh, the cards are charging so much more interest. What's the value of this stuff sitting here when it could pay down interest and save us that money every month?
42:08 Ramit Sethi? But it's interesting that you only started thinking that way now and not for the last 30 years.
42:12 Speaker 02 No, we did.
42:14 Ramit Sethi? You have $51,000 of credit card debt that, that you've had.
42:17 Speaker 02 Oh, yeah, but we just didn't, we didn't have a lot of money to do that. We were living paycheck to paycheck.
42:26 Ramit Sethi? Other couples might say, we didn't have the money, so one of us went out and got a different job.
42:32 Speaker 02 Oh, we've done that.
42:34 Ramit Sethi? Where'd the money go?
42:36 Speaker 02 We did not make a lot. Like, like, I don't, I don't, I don't think I can emphasize enough just how little money Don made. I'm not trying to like, throw him under the bus. It's just that, you know, part of the time I had a decent paying job. Other parts of the time I, uh, I did not. And so, um, for most, most of our adulthood, we've each been working two, three jobs.
43:03 Ramit Sethi? Something odd is going on, but I can't figure out what. Can you feel it? My antennas are going up because I can't understand how they ended up with so much debt, even though they both held multiple jobs. What were the jobs? Why did they have so much debt for so long? I keep asking and then suddenly I find the answer. What was the pay disparity between the two of you?
43:29 Speaker 02 Uh.
43:29 Speaker 01 Double or triple?
43:31 Speaker 02 I think it was more than that, Don. It was more.
43:34 Speaker 01 Sure.
43:36 Speaker 02 Five times.
43:39 Ramit Sethi? You made five times more, Tana, than Don?
43:42 Speaker 02 Yeah.
43:42 Ramit Sethi? And was there a discussion about like, hey, like, in order for us to pay our bills, like, this is how much we need to be bringing in together? This is how much I make, so this is how much you probably need to make?
43:53 Speaker 01 Don't think so. And I think a lot of that goes back to, you know, this sense of call.
44:01 Speaker 01 So, Rameen, part of this is I was a pastor for 20 years. I walked away from the church, right? So, um, and there was a, a real sense of guilt and shame. I got defrocked for actually doing inclusion, for doing LGBTQ weddings, right? So that I got my credentials stripped. I got, you know, blackballed in a lot of places, right? And so, but there was a sense of these people that we helped and we cared for that were like, you can't walk away from this. Like, the number of times that Tana and I would have conversations, I'd be like, I'm done. I'm just gonna go get a job. I'm done. I can't do this anymore. But then people were like, what you did, or the conversations we had, blah, blah, blah.
44:42 Speaker 01 We were stuck in this weird spiritual guilt and shame. And the sense that if, if I left, how could someone like me who has done so much? How could I go and walk away? I will say the one thing I'm proud of is I was very progressive and was racial reconciliation and LGBTQ inclusion and fought a lot of people in that. But that also embedded it even more, right? Because you're the one person that's doing that or saying that. And, you know, I got played like a fiddle and emotionally, spiritually, mentally.
45:25 Speaker 01 And I'm also really bitter about that, Renee. I'm so angry.
45:30 Ramit Sethi? Wow, okay, now I get it. Imagine all the invisible scripts associated with growing up religious. And not just religious, but being a pastor. And then what it took to speak out and get defrocked or basically kicked out of what was your life's work. Honestly, I want to acknowledge how brave it was for Don to speak out and for him to share his story here, something I really appreciate about my guests. And I cannot begin to imagine how difficult that decision was. It's not just a political or religious statement. For someone who's a member of the church, it's often socially devastating. Let's hear what Tana has to say.
46:13 Speaker 02 We had a great community and everything, but he was treated very terribly in many of our, the church contexts. And we both grew up in a more conservative Christian context. And so we both had it ingrained in us about tithing and you tithe even if it hurts. And so some of our original, original debt is because we were tithing and we couldn't afford to. And this idea that if you're in ministry, it is because it's a calling and you have decided to take a vow of poverty. There is a church we were at that we got like a used car from someone for a really
46:55 Speaker 02 good deal and like some of those church people were like, well, that's a fancy car.
46:59 Speaker 01 It was 1980 BMW that it was rusted out completely, but it was a BMW, so.
47:06 Speaker 02 Right, so it was like there was criticism of, you know, what you spend your money on. And so that caused other issues for us as well in what we purchase and how we talk about money.
47:17 Ramit Sethi? Can I say, first off, I did not know any of this. It now helps me understand so much of what I see because...
47:26 Ramit Sethi? You know, I'm over here like, that income Don was earning was really low, like really low. Now I get it.
47:34 Speaker 01 Yeah.
47:35 Ramit Sethi? And why is there this need for service, service? I love service. I get it. I love community. I get it, but now it makes sense. I mean, hell, I speak to people who are religious frequently on this podcast. And I understand being religious comes with certain feelings about money. I get that. But I don't often speak to someone who was a pastor.
47:57 Speaker 01 Yeah.
47:57 Ramit Sethi? That is like tying a knot. It's like two people pulling at the knot. And the more you tried to become inclusive, which I totally appreciate, and support LGBTQ and all kinds of communities, the more you become embedded by saying like, I'm fighting for this ministry and now I can't leave because look at what I did. It's a very tricky knot that you've constructed. Okay. Wow.
48:26 Speaker 01 Our church closing after COVID was what finally I went back into the business world. And I started earning what I could make now.
48:37 Ramit Sethi? Wow. So had the church stayed open, would you still be there?
48:42 Speaker 01 It was getting dicey. So I think it was, it was coming to an end for me. But there's a chance because it was a church we started.
48:51 Ramit Sethi? For people listening, I don't think they can understand how powerful of force religion is. I don't think people can truly understand what a pull it has on you. It's not like, hey, look at the CSP. It's so obvious. You need to go earn more money. Like, that's a different language. That's a different planet.
49:12 Speaker 01 Yes.
49:12 Ramit Sethi? Versus you being in the church, serving people, serving God, all these things. And like, you're actually even affirmatively taught, money is not what you're here for. In fact, if you have a nice car, a 1980 BMW, you must have done something wrong.
49:32 Speaker 01 Yep.
49:32 Ramit Sethi? That's fancy.
49:33 Speaker 02 Yeah.
49:34 Ramit Sethi? Your values are opposite.
49:36 Speaker 01 I rode a bicycle for 20 years instead of having a car.
49:41 Ramit Sethi? Okay. Wow. I'm so glad I know this. It really helps me understand these numbers. Giving me the story behind the numbers is why I do what I do. Because I can sit here and look at spreadsheets all day. It's boring. Hearing your story, wow, I feel like I just saw color for the first time. Okay, let's look at these numbers again. We gotta take it from the top. This is wow. I feel reinvigorated. All right.
50:05 Speaker 01 Okay.
50:06 Ramit Sethi? Okay, you got a house. Fine. You have only $11,000 of investments at age 50. Okay, we'll fix that. Savings at zero. No way we're gonna fix that too. Debt, we got a lot of debt. We're gonna make a plan for that. The income is high. It's high. It's at $258,000 and probably higher than that. Fixed costs are at 50%, but you're adding $4,000 a month towards debt. Okay, great. Investments are effectively at zero. You have some pre-tax, a few thousand bucks, fine. We'll tackle that. Savings at basically zero, we're gonna fix that. And then your guilt-free spending is at 20%, $2,792 a month. What's that? That's a lot.
50:47 Speaker 01 It is a lot.
50:48 Speaker 02 So that's the, um, where we just sort of shoved it all down there and are hoping for guidance on what to do.
50:57 Ramit Sethi? Y'all are not in the church anymore. This isn't the Lord coming and telling you what to do. Now it's your turn.
51:04 Speaker 01 Listen, that carefree, that carefree spending is also a mind job. It really is.
51:11 Speaker 02 It is, because it doesn't feel carefree.
51:14 Ramit Sethi? Let's talk about it. Let's talk. So just so I understand, it says that you have $2,792 left. I'm gonna just assume that you are spending $2,792 a month. Would it be more than that?
51:30 Speaker 02 There were a couple of months that it went over and we didn't pay as much of the stuff towards credit cards.
51:37 Ramit Sethi? Aha. We are going to fix this. So that is simply repeating the pattern of what you used to do, but with bigger numbers.
51:45 Speaker 02 Right.
51:45 Ramit Sethi? That's a no-go. Okay? So part of what we're gonna do is reinvent yourselves. And I would actually guess that you two are pretty comfortable with reinvention. So, good. Look at those nods. Big smiles, big nods. Love it. That's the energy.
51:59 Speaker 02 The only constant is change.
52:01 Ramit Sethi? Yeah. Reinvention is good. We get. And the best part is we get to choose what we reinvent ourselves to be amazing. At forty eight and fifty, you have an opportunity, you have time, you have high earnings, and probably more than even is shown on here. So there's a possibility of some really great stuff happening. Okay. But you'll notice some of these loose offhand comments you make reveal a way of looking at the world. Like, there have been months where we spent too much, so we cut back on paying our debt as much. Red alert! These are ways that the old Don and Tana behaved.
52:39 Ramit Sethi? The new Don and Tana do not. So before we get into the specific plans, can you just tell me who are Don and Tana now? As it relates to money? We are... Finish the end of that sentence for me.
52:55 Speaker 01 Determined.
52:56 Speaker 02 Responsible.
52:58 Speaker 01 Savvy.
52:59 Ramit Sethi? Savvy. Good.
53:00 Speaker 02 That's a good word. That's a good word. Um, what do we want to be? Uh, balanced?
53:07 Ramit Sethi? Okay, good. Keep going.
53:10 Speaker 01 Relaxed.
53:10 Ramit Sethi? Relaxed, nice.
53:14 Ramit Sethi? Tana?
53:15 Speaker 02 I want to be comfortable, not having to worry about the small stuff. Um, feeling confident that we are saving for retirement, but also able to enjoy, um, extra special things.
53:36 Ramit Sethi? I love that. Don, anything else?
53:39 Speaker 01 I think up until now, it's always just been today. Are we secure today? And the idea of actually having any kind of future looking is, is, would be wonderful.
53:49 Ramit Sethi? Yeah, I love that. It's very much like you two have been driving in, in thick fog for most of your lives. You could only see fifteen feet ahead. And if I were to ask you, what's a mile down the road? You're like, a mile? Well, I'm just trying to get the next fifteen feet. And suddenly the fog has cleared. Do you realize? And yet you are still driving as if you can only see fifteen feet ahead. And all I'm saying is, Don and Tana, open your eyes. Look at that beautiful vista. We can see miles. We gotta make a couple of changes, but we can see further than we've ever seen. That's what I want you to recognize here. Okay, we'll make some changes to help you feel determined, responsible, savvy, balanced, relaxed, confident, enjoying extra special things and feeling secure today and tomorrow.
54:34 Ramit Sethi? Doesn't that sound like a vision? We'll be right back after this short break.
54:39 Ramit Sethi? I'm gonna take a wild guess. Maybe you've been putting off seeing a doctor for a while for some unexplained condition. Hey, why is my left eye blurry? Do I have toe fungus? Or is it just gross toenails? Whatever it is, stop wondering if you should get it checked out. Go see someone right now. You can use our sponsor Zocdoc. They make it really easy. You don't even have to get on the phone to schedule an appointment. Zocdoc lets you search and compare local in-network doctors. Whether you're looking for primary care, dentistry, eye care, or anything else, you can easily search by specialty or symptoms and you can book in-network appointments with more than 150,000 providers across all 50 states. Getting an actual appointment is easy.
55:23 Ramit Sethi? You just look through the real appointment openings, click what works for your schedule and book it instantly. And what's great is their appointments happen fast, usually within 24 to 72 hours. No more waiting months and months to get the care that you need. Your health matters and taking care of yourself should not be complicated. Find and book the right doctor with Zocdoc. Head to zocdoc.com/ramit to get started and check that appointment off your to-do list. That's Z O C D O C dot com slash ramit.
55:58 Ramit Sethi? Now, back to the show. So you currently have a bunch of debt. Do you know how long until this debt that you are paying $5,895 a month towards will be paid off?
56:12 Speaker 01 July next year.
56:14 Ramit Sethi? Whoa, you ran the calculations. Okay, very impressive. I'm pleasantly surprised. Who ran the calculations?
56:23 Speaker 02 I think we both did.
56:24 Ramit Sethi? That's amazing. That's quite advanced. I ran your debt payoff as well and I got a different answer, but you have more information than I do.
56:32 Speaker 01 So that July number or date does not include the student loans?
56:38 Ramit Sethi? Oh.
56:39 Speaker 02 Oh, yeah, no, that's just credit cards and personal loan.
56:42 Ramit Sethi? And I was wondering why I got such a different answer. Why did you choose not to include student loans?
56:48 Speaker 01 Because Tana works in nonprofit and after 10 years, student loans are forgiven.
56:53 Ramit Sethi? Ah, good answer. Okay, so let's zero that out. Okay, I get basically the same thing as you. It's gonna be paid off in about a year.
57:04 Ramit Sethi? All right, round of applause. This is good. You guys, this is really good. I'm starting to see a plan here. Okay, this is great. You guys will be 51 and 49 roughly, and this debt will be paid off. Isn't that cool?
57:21 Speaker 02 Yeah.
57:22 Ramit Sethi? Oh, oh, my God. All right.
57:26 Ramit Sethi? I'm too excited. I gotta calm down.
57:31 Ramit Sethi? Wow. You know, I rarely get like a very pleasant surprise when I'm looking at multiple sources of debt. And here I am, it's like, yeah, wipe the 168K and take that away. It's gonna be forgiven. I'm like, this is great. Okay, so amazing.
57:49 Ramit Sethi? So knowing what we all now know, that your debt is gonna be paid off in roughly a year. If you had to decide on a plan, what would you do?
58:00 Speaker 01 Our plan with limited knowledge was to just continue to put every penny we can into the high interest rate debt, get that paid off. And then as soon as that's paid off, then split that same money, that same pool of money, just start putting it into investment and savings. But it feels terrible right now not to be putting anything in investment. But logically, it also makes sense to pay off all that debt first. So, yeah, we're just really confused.
58:34 Ramit Sethi? And Tana, what about you?
58:36 Speaker 02 I've sort of been floundering on what the best move is. I would probably do more of the retirement.
58:45 Ramit Sethi? Why?
58:47 Speaker 02 Uh, cuz that terrifies me.
58:52 Ramit Sethi? Y'all find what's going on here kind of interesting? It's just, you know, we don't know anything about money. And tell us, guide us. Now, I am here to help, for sure. But it's time for you to step into the fact that you make over $250,000 a year. Okay? And nobody's coming to save you. So like getting paralyzed by should we put money here or there? You might as well just pick one and do it. Okay? 50 years old, time is not on your side. You need motion and you need to move fast. That's what we're gonna work on today. It's time for us to embrace that we have money and we need to start getting in motion. Nobody's gonna push us and make us go. We've got to do it. You agree?
59:38 Speaker 02 Yeah.
59:39 Ramit Sethi? Okay. It's okay if things go wrong a little bit. You might make a wrong decision and lose 1,500 bucks. Guys, 1,500 bucks is chump change compared to what we're talking about here. Okay? Smart people move fast. Why are you laughing?
59:54 Speaker 02 Yeah, I just can't believe 1,500 dollars is chump change.
59:59 Ramit Sethi? Yeah. I know that Don and Tana 1.0, they would have been laughing. Don and Tana 2.0 are like, oh, this guy's right. 1,500 bucks is like a, it's a tiny percentage of what we make in a year. It's crazy to think, right? It's crazy to hear. But it's also true.
1:00:16 Speaker 02 I am having a little bit of a hard time adjusting. Don and I were just having a conversation at dinner tonight where he was like, I feel like in some cases, we're still buying like the cheap thing that we're gonna have to replace rather than save, like saving, waiting, whatever, and buying like the nicer thing.
1:00:36 Speaker 01 We're not thinking about how do we buy something for the next 20 years? I think we're still purchasing for today. And, you know, tomorrow, if we, if it lasts a long time, great, we got lucky. And if it doesn't, then we'll replace it. But yeah.
1:00:49 Ramit Sethi? I think it speaks to the two of you actually believing that you deserve to live a rich life and that you have the agency and control to actually do it.
1:01:04 Speaker 01 Yeah, I definitely don't feel like I deserve.
1:01:05 Ramit Sethi? And so if you don't feel you deserve, which I can understand so many decades of why, then every time
1:01:16 Ramit Sethi? You try to make plans about money. They could be even investing money.
1:01:22 Speaker 02 Mm-hmm.
1:01:23 Ramit Sethi? Why would we? I don't deserve to have $500,000. We don't deserve to be millionaires. And you will self-sabotage yourself. Then the second part, to believe that you have the agency to actually cause things to happen. You know, for so long, you were kind of the recipients of whatever was given to you. And to now be faced here with extra money and go, "We have, we can make a choice." I can see that it's paralyzing to you.
1:02:00 Ramit Sethi? Like, I want to acknowledge that. I understand why it's so scary. Again, you, for the first time ever, you can see a mile down the road. But I also need you to keep moving.
1:02:13 Ramit Sethi? That's the key. That's the mindset I need you to adopt.
1:02:19 Ramit Sethi? I think that we need to talk about the numbers of where you can go. Because right now, like, there's so many infinite number of decisions you could make. And you're just like, "What do we do? For the first time, we have money. We don't know how to decide these things." Okay, one thing is, we need to focus on what's most urgent. So 50 years old, you're gonna want to retire at some point. And for the first time, you're realizing, "Oh, my God, it's possible." Have you calculated how much money you will have in retirement?
1:02:46 Speaker 01 I did. If we, if we put away 5,000 or 6,000 a month from now until I'm 67, at 7%, that'll put us right around $2 million.
1:02:57 Ramit Sethi? What? Good job! Round of applause. $2 million bucks coming from $11,043 at age 50 to having $2 million at, what age did you say?
1:03:10 Speaker 01 67.
1:03:11 Ramit Sethi? Damn. So what are you, what are you telling America, Don? Hold on, let me get my mic. Tell them, tell them, Don, what does everybody need to do to go from zero to $2 million in, uh, what was it? Uh, 15, 17 years? How much do they need to make, Don? Tell them.
1:03:27 Speaker 01 Uh, $258,000.
1:03:32 Ramit Sethi? People are gonna get so mad at me right now.
1:03:35 Speaker 01 And me, that's fine.
1:03:37 Ramit Sethi? Guys, hey, America, don't get mad at my guests. It's not their fault. That was my joke. I set that one up. You do not have to make $258,000 a year, okay? But what I do love about that example is it shows that a high income solves a lot of financial problems. Okay? The only way that a couple who's roughly 50 years old, with basically nothing invested, could have a very comfortable retirement. The only way is they have a very high income and carefully managed expenses. There is no other trick. The only other ways would be to extend retirement, probably into their 70s,
1:04:21 Ramit Sethi? and to decrease the amount spent in that retirement. In your case, amazing calculation, Don. You do have the possibility of having pretty healthy retirement at $2 million, you know, plus social security, et cetera, et cetera, et cetera.
1:04:38 Speaker 02 I was wondering if that calculation was based on doing that now? Because we're not putting that much money in now. What would we have to do to catch up if we start a year from now?
1:04:49 Ramit Sethi? I want you to remove the catch-up concept from your head. You're not going to catch up with what you would have done if you started investing at age 22. Why are we thinking of that? It makes no sense. You can decide right now. We have roughly $4,000 a month extra. We could put $3,000 towards debt and $1,000 a month towards retirement. Let's play it out. Let's run the calculation and let's decide. But let's not use the word "catch up", because when people use "catch up", it's always looking backwards. It always makes them feel bad and it always makes them do really destructive things with their money.
1:05:31 Ramit Sethi? I personally, I always like to be investing something. 500 bucks a month. 100 bucks a month, if that's what you can do. Just the habit, okay? And then I like, that way, the factory is already moving and I can just turn the speed up. Easier to go from 100 to 5,000 than 0 to 100. Look, there's no right or wrong answer for this because while time matters a lot to you...
1:06:03 Ramit Sethi? One year, in the grand scheme, it's one year. What's more important is to get your habits correct. That matters a lot. I'll just tell you what I would personally do. Okay, I can't tell you what you should do, but I'll tell you what I would do. If it were me and I had your CSP, which I'm going to put up on screen right now. This is what I would do.
1:06:26 Speaker 02 Okay.
1:06:27 Ramit Sethi? I would take this number, your guilt free spending $2,792. Let's just say that that's 3,000 bucks, okay? Just for easy math. I would cut that thing in half. Because I guarantee you've been living on less than that for a long time, right?
1:06:45 Speaker 01 Oh, yes.
1:06:46 Ramit Sethi? Yeah, like way less. So you know, remember that, uh, remember that movie where everybody got, uh, trapped in the Andes Mountains and they started eating each other? And like, they brought them back to the hospital and they were very careful not to overfeed them immediately because it's really dangerous. That's the same thing here. You don't want to go from spending like $50 a month to $2,792 a month. You want to go up very gradually and build the skill of what it's like to spend. Same thing I would tell athletes or lottery winners. So if it were me, I would take half of that and I will put that right into savings. In my opinion, savings is more important to you right now than investing 12 months ahead.
1:07:30 Ramit Sethi? Cause you're gonna, you're already investing a bit and you're going to start investing a lot of money soon. But you have no savings and that's a problem. Okay, why would I not immediately put all my money towards high interest credit card debt? In most cases I would, but Dawn and Tana have a unique situation. They never built the skills of saving and investing, but those are the skills that are absolutely critical right now. In my opinion, even if it means paying slightly more in high interest debt. See, the goal here isn't just to pay off the debt. It's for them to build the habits of saving and investing and starting to gradually think further ahead. It's like cultivating a garden. You don't just aggressively water your plants once a year and then expect them to be okay.
1:08:15 Ramit Sethi? You have to nurture them over time, which allows them to develop strong roots. That is what I want for Dawn and Tana. You may disagree with my suggestion. You might choose to pay off all your credit card debt all at once. Fine. That's not what I would do in their situation. Let's get back to the conversation.
1:08:34 Speaker 02 If a surprise repair comes out up, is that like from the carefree spending or should that come out of savings?
1:08:41 Ramit Sethi? So let me put it very bluntly, couples that make $258,000. They don't have surprise expenses on their $1,125 a month house that they haven't planned for. Okay, now you'll get there. You're not there right now. I understand that you have an old house and things have come up. I'm trying to show you what it should be like and what it is going to be like in about two years. So here I am in a in a relationship where I make $258 to $300,000 a year. I know a lot of stuff's gonna go wrong. I've already anticipated it. I've put money aside. I have a specific sub savings account called this damn house.
1:09:25 Ramit Sethi? And every month, how much am I putting in there? Tell me. Forget about all these numbers, just in general. How much should I be putting in that house fund?
1:09:33 Speaker 01 $500?
1:09:34 Ramit Sethi? Yeah, something like that. You know, typically they say 1% to 3% of the value of a house per year for maintenance. Now, your house might be older, blah, blah, blah. But that includes things that break. That includes the roof that will break 11 years from now. So when that happens, you will have the money saved up. That's how we think we start being proactive. Okay, now you can't save 500 bucks a month right now for your house because you have other things that needs to go towards, but you can save how much?
1:10:07 Speaker 02 200?
1:10:08 Ramit Sethi? Sure, 200 bucks. Put it aside, create a house fund, get the factory moving. Okay, so you have a I love vivid names for accounts, you know, this damn house. And whatever you want to call it, and it's 200 bucks a month. And if something goes wrong, that's where you look. But you really need to be aware if something, if you have 500 bucks in that account. And you have a thousand dollar problem. What are you gonna do?
1:10:39 Speaker 01 Take out our care free spending.
1:10:41 Ramit Sethi? Yeah, that's correct. It comes out of guilt free. It does not come out of an emergency fund. Nothing ever comes out of an emergency fund unless it's an emergency. That's exactly how you do it. Beautiful.
1:10:53 Ramit Sethi? You're gonna pay off your debt in a year. Let's talk about what's gonna happen once that's paid off. You have options. You can split it. You could invest all of it. I'll tell you what I would do. If I had 4,000 bucks extra per month, the way I'm thinking about this is how much do I need to retire at age 67? Like, how much is gonna be comfortable for me? And I know you've already factored in your social security and those things. So I'm just like, how much do we need at age 67? I'm also prioritizing a savings account. I want to get to six months of an emergency fund. Six months. And I say that because you've had some tough times. Caused a lot of problems when you had unemployment. Okay?
1:11:35 Speaker 02 There's a part of me that's like, we're finally making money.
1:11:39 Ramit Sethi? Yeah.
1:11:39 Speaker 02 I want to enjoy it. Like, and so there's things that don't necessarily need repaired around the house, but I would like to improve or...
1:11:47 Ramit Sethi? Wait, what? How? Hold on. I swear to God, I could talk to people in any situation and no matter what, no matter what, we're always gonna end up in the same place. Ramit, I gotta renovate my house.
1:11:59 Speaker 02 Well, I will add, we also have taken one vacation in our entire marriage.
1:12:05 Ramit Sethi? Listen, if you want to renovate your house, we can make that happen. Okay? But this is one of the clues that I see on your CSP, which is sloppiness. A lot of things that have been mushed together and they shouldn't. So when I have an emergency fund, that is an emergency fund. I don't touch that. Okay? When I have guilt free spending, that is guilt free spending. You want to renovate? Love it. Love it. I support it. Afford it.
1:12:34 Ramit Sethi? Which means in your case, you would probably put money aside.
1:12:38 Ramit Sethi? Once you have the money, you spend it. Simple as that, but you don't go into debt for it.
1:12:44 Speaker 02 Yeah, we're done doing that.
1:12:45 Ramit Sethi? Okay, it sounds simple, right? Is there any hesitation?
1:12:50 Speaker 02 I feel muddied when it comes to the guilt free because because things like, you know, house repairs and additional medical bills and stuff like that is coming out of that.
1:13:00 Ramit Sethi? That's because you don't have your accounts set up to properly reflect your priorities. So you are constantly feeling behind because you have been financially behind for the last 30 years. But I have to, I have to tell you that it would be a tragedy to go the rest of your life feeling behind. Without actually changing your account structure and then changing your psychology of money.
1:13:28 Speaker 02 Yeah.
1:13:29 Ramit Sethi? We need clear lines of demarcation when it comes to spending. Do you know how I think about my money when it comes to this guilt free stuff? Every time I go out to spend money on something that I like, it's guilt free for me. I'm not thinking about, oh, my God, I could be doing this. I could be doing that because I already handled all that stuff. The fixed costs are already handled. They're automatically being paid every month. Savings automatically being done, investments automatically being done, and I already know how much I need. And I've built a healthy buffer, all that stuff. So what's left is meant to be spent.
1:14:05 Ramit Sethi? Have you internalized that with your money?
1:14:08 Speaker 02 No.
1:14:08 Speaker 01 Definitely not.
1:14:09 Ramit Sethi? Okay. So we need to do that. Let's look at the numbers again because there's one big, there's one big thing we haven't talked about. Don, you mentioned that you might make up to $60,000 more than we see on the CSP.
1:14:23 Speaker 01 Correct.
1:14:24 Ramit Sethi? Okay, what are you all going to do with that money?
1:14:25 Speaker 01 Well, we, we've had that conversation about do we split half of it and pay it towards additional money towards debt? And then take the other half and figure out investments, savings, carefree or guilt free.
1:14:40 Ramit Sethi? I would like to hear the two of you have this conversation about what to do with any unexpected income.
1:14:47 Speaker 01 What do you want to do? Do you want to, would it make you feel better? Make us feel better to, to put it in? Investments.
1:14:57 Speaker 02 I see us like doing splitting up three different percentages. So like savings, retirement and carefree spending.
1:15:06 Speaker 01 It's guilt free. We keep saying carefree. It's guilt free.
1:15:08 Ramit Sethi? You all have an aversion to the word guilt because of the religious stuff. What is that?
1:15:12 Speaker 01 Probably. Probably. That's probably what it is.
1:15:16 Speaker 02 Guilt free.
1:15:17 Ramit Sethi? Adapted. Adapted. Go on.
1:15:19 Speaker 02 Maybe the guilt free part includes some of these bigger ticket things we want to do like, like maybe we add an extra chunk to savings for a vacation or we add an extra chunk to savings for things we want to do around the house or whatever.
1:15:36 Speaker 01 Tana, I like, I like the idea of us being super aggressive. We do 80% into investments and 20% into savings. How does that sound to you? What do you want to do?
1:15:47 Speaker 02 There is a part of me that wants to have like some portion of it, even if it's small. That's like, oh, here's a little extra. So we can get the things that, that we want, you know, that we can do the things that we want.
1:16:02 Ramit Sethi? Let's see the number.
1:16:03 Speaker 02 Like 60 retirement, 20 savings, 20.
1:16:06 Speaker 01 Let's do it. Let's do it. 60, 20, 20, six months we'll review. And maybe we'll see then that we can do more in one place over the other. But I, I love the idea of returning six months.
1:16:19 Speaker 02 Yeah, I like that too. Yeah.
1:16:21 Ramit Sethi? Great. Everybody take a round of applause. That was very decisive. Amazing. One thing that I think is part of your core values, who you are in 2.0 is we are decisive.
1:16:37 Ramit Sethi? We make decisions. We make them informed. We make them educated, but we make decisions. And you just did a great job of that. That was awesome. 60, 20, 20. I love it. I'm really proud of both of you for just that last exercise. That was really cool.
1:16:52 Speaker 02 Thank you.
1:16:53 Ramit Sethi? How'd you feel about that?
1:16:55 Speaker 01 I feel good. I feel like there's clarity. I feel like we've hemmed and hawed around the extra income and like, kind of, what are we gonna do? What are we gonna do? And even if it's something we change in six months, I'm so glad that we have, we have something. We have a number.
1:17:12 Speaker 02 I just feel bad that I'm, that I was like hemming and hawing.
1:17:18 Ramit Sethi? I understand that temptation is like, as you start to become more adept with your money, just having money, first of all, building these decisive plans, it's gonna be very tempting for you to, to feel bad, like, why didn't we do this 30 years ago? We should have done this, like, oh my god.
1:17:36 Ramit Sethi? But I think that many people who have felt bad about money for so long, when they have the opportunity to feel good, they go back to another permutation of feeling bad. Do you know why?
1:17:48 Speaker 01 Comfortable.
1:17:49 Speaker 02 Yeah, I was gonna say, it's what you're used to.
1:17:52 Ramit Sethi? It's comfort. It's the same reason many people stay in poor relationships, one after another. I've known feeling bad. At least I know how to deal with that. What was that thing you said, Tana? When's the next shoe gonna drop?
1:18:08 Ramit Sethi? 2.0 says, "We work hard. We deserve to have money. We spend time talking about our money regularly. We, we expect our family to have a healthy savings account, a healthy investment account, to be able to go out and eat every so often and get something nice for the house." We expect it. We deserve it. If we work hard and are lucky and fortunate and put the time in, all those things.
1:18:35 Speaker 02 Yeah.
1:18:36 Ramit Sethi? Okay, it's gonna take a while, but I'm just trying to paint a picture of what it will look like.
1:18:40 Speaker 02 Yeah.
1:18:41 Ramit Sethi? On the guilt-free spending side, one thing I might suggest to each of you is, you have, let's just say it's a hundred dollars a month guilt-free spending. I'm making up a number, it's obviously more than that, but, you know...
1:18:54 Ramit Sethi? 20 bucks of that might go towards Tana, 20 bucks towards Don, and then 60 bucks towards the two of you. Something to consider. You probably want some sort of allocation in there. And that way, if Tana's like, "I really want these beautiful things for the bedroom", fantastic. Guilt-free spending. And you two should decide, is it the family or is it Tana's? But I also think it's important to have some joint guilt-free money that the two of you, you know, or you want to use it with your family, that's for you. Yeah. There's one other thing I want to talk about, which is, Don, you mentioned that you feel the need to work all the time. And if, you know, you take a day off,
1:19:37 Ramit Sethi? you're losing, you know, potentially 800 bucks a day, 1,000 bucks a day, something like that. What are your thoughts on that in light of all the things we've talked about?
1:19:46 Speaker 01 Right now, I would like to imagine that I have a better perspective on it. And Don 2.0 is not going to have those same issues. I think the area that is still complicated in my brain for mathematical reasons is that then it makes me want to reduce the amount that I count on every month to give room for a day off, to give room for a week vacation or something, and possibly adjust our budget to make that feel like that is more approachable. Whereas right now, I feel like the budget we have, I'm pretty much locked into every day putting in at least a chunk of hours every single day. I would like to be able to take off a Friday
1:20:32 Speaker 01 and not spend all weekend sweating about, "Man, I shouldn't have taken off Friday."
1:20:37 Ramit Sethi? Well, the numbers-wise, you can make this model work on $258,000 a year.
1:20:46 Ramit Sethi? You don't need even the extra income, right? That's all gravy.
1:20:49 Speaker 01 Correct.
1:20:50 Ramit Sethi? So doesn't that answer your question right there? You can take a Friday off right now.
1:20:56 Speaker 01 Yeah, I think it does all come down to psychology. The idea of me sitting on my front porch and reading a book all afternoon on a Friday instead of earning money. It's hard to switch to say that was a worthwhile spend of my afternoon.
1:21:12 Ramit Sethi? Yeah, well, fortunately, you're talking to the world's foremost expert in leisure. Me, okay? I fucking love it and I'm really good at it. And we're going to talk about this because it's actually very important. Numbers are numbers. Great, we talked about that. But I want to emphasize something very important to you.
1:21:32 Ramit Sethi? One of the values you need to really start to internalize is I am running a marathon. Okay? And if there's one thing that you cannot do in this entire model we talked about, you know what it is?
1:21:48 Speaker 01 Die.
1:21:49 Ramit Sethi? Yeah. Basically, you cannot lose your job. Let me jump in here to make this point crystal clear. Don and Tana's aggressive retirement plan will only work if Don keeps his job. He cannot lose the job. If they did not have this high income, this conversation would not be nearly as positive. In fact, they would be in serious trouble, candidly with no way out. They would be in serious debt. They would be unable to pay it off. They would have no real retirement savings and their future would be very bleak. Thankfully, they have a high income now and that is why it is so important to protect it. Now, I don't say this to discourage anyone from starting to invest later in life.
1:22:34 Ramit Sethi? Of course, the best time to start investing is your twenties. It's also true that the second best time to start investing is right now. In this case, Don and Tana are going to be financially okay. In fact, better than okay. And if you're in the same situation, you can do it too. What I want you to understand is that the longer you wait, the harder it gets. And it's not just a little harder. It gets really, really hard. So start early if you can and focus on building the skill of increasing your income and set up automatic investments. I teach all of these things in exhaustive detail on the programs on my website. Let me talk to Don about his money psychology now. You're like an athlete. You cannot get injured.
1:23:20 Ramit Sethi? So what do athletes do?
1:23:21 Speaker 01 Recover.
1:23:22 Ramit Sethi? Exactly. That's the way you have to think about it. So if a Friday reading on the porch is what provides you recovery, then you actually have to prioritize it and fight for it and make it happen. This is the same reason, you know, I joke about leisure, but I'm actually take it very seriously. I happily watch TV for hours at a time. And to anyone else, they're like this guy, what the hell's wrong with this guy? But the way I mentally construct it is I'm rejuvenating. I'm recuperating, recovering. And when the time calls for it, I'm ready. When Netflix called and it was get on a plane to all these different cities. You better look good.
1:24:07 Ramit Sethi? You better be ready to go show up on time at grueling hours for six, seven days a week. I'm ready. And that's how I want you to think. As an athlete, recovery is a priority. That change anything for you in terms of time?
1:24:26 Speaker 01 It's interesting because when, when this financial shift happened, we did things such as get a cleaner. Right to, to buy time back. Right? That's been helping me think about if, if I'm willing to pay for a cleaner, am I willing to pay for my, my afternoon off? Basically, but that would be like my first step. That'd be like my baby step to embracing that leisure.
1:24:50 Ramit Sethi? I like that. I, I really like the baby steps you're taking. I think buying back time, that's a great, great idea. I'm glad you did it. I want to paint a vision for you that eventually
1:25:03 Ramit Sethi? your leisure time is not a transactional value to be calculated.
1:25:08 Ramit Sethi? There's value in leisure for the sake of leisure. We are human beings who need enjoyment and fulfillment.
1:25:16 Ramit Sethi? And ironically, the money guys here telling you it's not all about money.
1:25:22 Ramit Sethi? You know that. You know that because you lived it for so many years. But I actually need you to kind of bring that back and realize my enjoyment, whether it's with my wife, my son, my dog, or just walking around somewhere. It's worthwhile. I deserve it. Part of Dawn and Tana 2.0 is that if you achieve all the things we talked about, you're actually not behind.
1:25:48 Speaker 01 You can preach, Ramit.
1:25:52 Ramit Sethi? Now, that is high praise. I appreciate that.
1:25:57 Ramit Sethi? Thank you to Dawn and Tana for sharing their story with us. And I want to remind you, it can be really hard to share these intimate details of your finances, especially when they don't seem so great on paper. But sharing those stories is what allows all of us to learn from other couples. So, big thanks to Dawn and Tana and to all the guests who come on the show every single week and take us into your rich lives. Let's check in and see how things are going. First, Dawn's follow-up.
1:26:28 Speaker 01 Tana and I have had some amazing conversations. We actually have some excitement around our future. We still feel like there's a lot of work to do. And it's going to take a lot of effort and it's going to depend on us being consistent. But it is doable and manageable in that we actually really have a good shot at retiring. We thought through the ways that we were going to split up the additional income that was above and beyond what we were accounting for. We have a good plan now, which is nice. We were just kind of paralyzed by some unknowns that, you know, just really took a little bit of nudging. And once the nudging happened, it kind of opened up the gates for us to make some really solid decisions. So, thank you for everything. We appreciate you. Thank you so much.
1:27:13 Ramit Sethi? And now, Tana's follow-up.
1:27:16 Speaker 03 And we are actually in good shape for retirement, which was a relief to hear. And we should no longer view ourselves as catching up. I think it'll be a little difficult to fully overcome that mindset after years of struggling, but we are going to do it. We're committed to doing it. It's gonna happen. We realized that our guilt-free spending category was really a catch-all for anything that wasn't in fixed costs. So we created a 5% buffer in our budget for small repairs, maintenance, extra medicals, small unexpected, that kind of thing. And then we made our guilt-free spending category a mix of giving money away plus purchases that are truly guilt-free.
1:27:59 Speaker 03 In addition, we set aside $500 a month for our long-term emergency savings. And then any additional income either of us earns will be split 60/40 between retirement and long-term emergency. And then we plan on reevaluating in January. So, thank you so much for your help.
Next 183. “I saved $5k for an engagement ring, but she secretly took the money” Page updated November 7, 2026 · transcript and summary are machine-generated