Pod Insights Money For Couples with Ramit Sethi 185. “My fiancé has no savings at 43. Should we get married?” About this episode Dawn is 48, Richard is 43, and they’re living paycheck to paycheck. Although they're engaged, they’re struggling to combine their finances because of their varied pasts. Dawn is overspending on kids and grandkids, and Richard has deep scars from a financially devastating breakup. Can they move beyond their past money stories and get aggressive about investing for retirement?
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Transcript 17,252 words · 3 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:12 Ramit Sethi? When I was thinking about quitting my last job to do I Will Teach You to Be Rich full-time, I created a rule for myself. I couldn't go full-time with IWT until it earned at least as much as my monthly salary for three months in a row. And this really helped me take my business seriously. Now, for new business owners, I recommend something similar. And as you are getting set up, I also recommend keeping things simple by using Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e-commerce in the US, including brands like Mattel and Jimm Shark. They've got ready-to-go, beautiful templates for important things like your website, landing pages.
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2:32 Speaker 01 We're just not doing any saving or anything. We have no emergency fund. We have nothing.
2:36 Speaker 02 I know I'm behind. You need a 401k. You need finances in the bank.
2:40 Ramit Sethi? In today's episode, meet Dawn and Richard.
2:42 Speaker 01 We're not really sure how to get to the goals that we have with what we have. I also don't know if my expectations are a little too high.
2:50 Ramit Sethi? Dawn is 48, Richard is 43, and they live paycheck to paycheck.
2:54 Speaker 01 When I get his money, the 200 or 250, I feel better, like I can breathe.
2:59 Ramit Sethi? They're engaged, but they're struggling to combine their finances.
3:02 Speaker 01 We almost broke up. I have children and grandchildren. So I have, my money goes many places where he doesn't have the children.
3:11 Ramit Sethi? Dawn wants financial stability, but she overspends on her family.
3:16 Speaker 01 We went on vacation. I brought the whole family. I'd say probably 6,000.
3:21 Ramit Sethi? Richard has deep scars from a financially devastating breakup.
3:25 Speaker 02 Lost the home, lost the money, sold off a camera equipment, and I'm almost afraid to spend money.
3:31 Ramit Sethi? And he isn't sure how to contribute to their household and his retirement with his current income.
3:37 Speaker 02 I haven't made this amount in a year since I was in my early twenties.
3:41 Ramit Sethi? Can they create a financial plan, move beyond their money past, and start getting aggressive about investing? You're losing tons of money every single month by not investing.
3:51 Speaker 01 I don't want to be 70 years old and working a second job.
3:54 Ramit Sethi? Now, let's meet Dawn and Richard.
4:02 Ramit Sethi? Okay, let's take a look here. Dawn is 48, Richard is 43. They live in upstate New York. They want to buy a house in the next one, two years. One of them has three kids, live in a house they're renting to own. They struggle to put their finances together because of past financial trauma. I have trouble saying no to my children, but I also want to save for vacations and I want to buy the house. Rich does not have any retirement and I claimed bankruptcy eight years ago after my divorce. We stress about money constantly and it has caused us to almost break up. Uh, Rich has no children. I'd spend more than I should and my son has no concept of money.
4:47 Ramit Sethi? We've postponed our wedding because of money. I make three times what Rich does. So his go-to answer is he does not make enough money, except he hardly has any bills.
5:00 Ramit Sethi? This is my third marriage, Dawn says. Uh, we'd love to have a budget together and both feel we are contributing to our future. All right, well, let's take a look. Assets of 28,500. Investments of $24,900, okay? Savings of 58,000, wow, and debt of 14,000, total net worth of 97,000, okay? So, this is troubling. It's not necessarily an issue to have a small amount of assets, I don't mind that. But to only have about $25,000 of investments around the age of uh, 43 and 48, that is a problem.
5:42 Ramit Sethi? To also have more savings than investments probably suggests to me that this couple has not been particularly educated about money because why would you have more in savings than in investments around the age of 50? That makes no sense. You're leaving so much money on the table and time is against you. Uh, the debt at least is nominal, 15,000 bucks. We can knock that out if necessary, but we need to take a look at the incomes to understand more. Okay, we have one partner making 6,000 bucks, another making 3,000 bucks for a total of about $10,000. So they make six figures gross.
6:24 Ramit Sethi? Uh, I'm curious why one partner is making $3,000, that's pretty low, $3,000 a month as a 43-year-old, so I'll want to find that out. Going down to the fixed costs, fixed costs are at 74%, that's too high, way too high. Housing costs are fine, 21, 22%, that's not bad. Uh, car payment is 766. Uh, okay, it's not horrible. Debt payments, 557 per month, that's a lot of money.
6:57 Ramit Sethi? Phone is 275, also Y. Subscription is 299. Okay, so we see some sloppiness here. Just out of curiosity, if I drop that subscriptions down to like 50 and I drop that phone down to, let's just say 150, what would happen? Well, their fixed costs would drop down to 68%. Still high, but moving in the right direction. Let me tell you why I did that. What that tells me is there is sloppiness in their spending. If you're at 74% and I just simulate using the CSP and get you down to 68% with a couple of clicks, you could do it. I bet you there's some other various expenses that we'll get to in guilt-free spending. Overall, that's slightly reassuring. Let's keep going.
7:42 Ramit Sethi? Investments are at zero, huge problem. Savings are at zero, huge problem. What the hell? Guilt-free spending is at 32%. I don't even really believe this number. According to the CSP, it says their guilt-free spending is at 32% or $2,200 a month. I don't believe this. I think they're spending discretionary money on eating out, travel, et cetera. But I don't think this properly reflects it. In any case, this tells me they have money to use. So we could redirect this money. We could invest it aggressively. We can save it. We could pay off that debt. There's a lot we can do, which gets me excited. But I suspect that this goes a lot deeper. In Dawn's application, she mentioned that
8:26 Ramit Sethi? she spends too much on her son, who quote, "has no concept of money." She mentioned resentment about how Dawn and Rich spend money together. She mentioned that they've even put off getting married because of money. So we have a lot to unpack here. I'm excited to get a chance to speak to them.
8:45 Speaker 01 I have a family. My money goes to supporting my children, my home, my house. Financial stability is number one on my list of what I need. And we're engaged. And so I think part of me, we haven't gone to the next level. One, for money. But for two, I need to feel secure. So we're not on the same page many times. I'd say back in February.
9:10 Speaker 01 Was one of the times that we're really.
9:11 Speaker 02 Last year.
9:12 Ramit Sethi? What happened in February?
9:14 Speaker 01 He moved in. And that was when it really became more of a struggle of that we're not kind of on the same page where, how much money he should give to, to the household.
9:28 Speaker 02 She would give me just a relative number.
9:30 Speaker 01 Give me 200 a week that will at least help me.
9:32 Speaker 02 Yeah.
9:34 Speaker 01 But then you talked about you didn't want to be without money for yourself.
9:39 Speaker 02 We moved into a house that was, had a lot of love to be put into it. Just a fixer-upper. It wasn't moving ready. So inconsistently, I would give money. I'd give money here and here, but I took money that I would have and put it into the house as far as fixing it.
9:56 Ramit Sethi? Okay. So you're putting money in sporadically in different ways, not necessarily handing over 200 a week, but contributing in other ways?
10:04 Speaker 02 Yes.
10:04 Ramit Sethi? Okay.
10:05 Speaker 01 So I'm struggling to pay, you know, the mortgage and things like that. And so I'm not seeing consistent money coming into me. Like the 200 I wasn't seeing every week. It was like one week it'd be 100, the next week it'd be 200.
10:19 Ramit Sethi? Were you struggling before he moved in?
10:23 Speaker 01 I was struggling before he moved in, but things were different economy-wise. My daughter had lived, we redid the basement, so she had an apartment down there. So she lived down there and was giving me money towards that. She has since moved out. He moved, it was kind of perfect timing. He moved in. So I was like, okay, well, that will help. But then it was very inconsistent. So I never knew if I was getting money from him. So that was definitely, that's been our fight, how to put our money together. Cause I feel like he's paying me rent. He's not really into putting our finances together because of some of his past stuff. So I didn't know how to do it. I've never done that before. I've never had anyone move in with me and I was married. So it was different.
11:08 Ramit Sethi? How many times were you married before?
11:10 Speaker 01 Twice.
11:10 Ramit Sethi? Twice. Okay. So you've never had somebody move in not married and figure out how to deal with the money together?
11:18 Speaker 01 Correct.
11:19 Ramit Sethi? Okay. And when you said it feels like he's paying rent. Is that a good or bad feeling?
11:24 Speaker 01 That's a bad feeling because it just feels like all the financial. I pay all the bills in the house. I pay the household bills. He pays his bills, um, but I pay all the household bills. So if I'm late on something or, you know, can't make rent, that stress is all on me.
11:40 Ramit Sethi? And out of curiosity, if Richard were not here, how would you be dealing financially?
11:47 Speaker 01 I'd be struggling.
11:48 Ramit Sethi? What would you do?
11:50 Speaker 01 Get a second job.
11:51 Ramit Sethi? Okay, so you began these conversations and you said, I'm putting money here, I'm putting money there.
11:57 Speaker 01 Hmm.
11:58 Ramit Sethi? How did you resolve it?
12:01 Speaker 01 We almost broke up. It was very, you know, um, talking about him leaving. But I said, I just need consistency at least. I need you at least to show me consistency. Let's start with that.
12:13 Speaker 02 I've been more consistent as far as like funding and money dispersed in the house. About 250 a week, 225, 250.
12:20 Speaker 01 Yeah, anywhere from 200 to 250 a week he's been giving.
12:23 Ramit Sethi? Okay, so does that work? Is the problem solved?
12:25 Speaker 01 No.
12:26 Speaker 02 Yeah, no.
12:27 Ramit Sethi? Oh, wait, what? This was the problem. You asked for the solution. It sounds like you got the solution you wanted.
12:34 Speaker 01 Yes.
12:35 Ramit Sethi? Why are we here?
12:38 Speaker 01 Because I, I guess I thought we would have like extra money that we could like, because that was our plan. Like, oh, we'll each put like $50 into a savings for this and we'll have an emergency fund. But then I realized when he gives me the 200, um, it, it still just pays the bills. There's still not a lot of extra. We're just not doing any saving or anything. We have, we have no emergency fund. We have nothing.
13:00 Ramit Sethi? Is this a problem for you, Richard?
13:02 Speaker 02 It is. At the end of the day, we just want structure.
13:05 Ramit Sethi? Okay.
13:05 Speaker 02 I have the ability to pay, like, to put money aside, but it's, now where do I put it?
13:10 Ramit Sethi? Hmm, um, you want, you said you wanted structure. Did you have structure in your finances before you met Dawn?
13:19 Speaker 02 I would say yes. There's, there's a lot there. Okay, so I met Dawn. I had an ex-girlfriend. Before that, there was an ex-fiance, a home, uh, finances and just the whole thing was a structure, yes.
13:36 Ramit Sethi? Who ran the finances in that relationship?
13:38 Speaker 02 We had joint finances, but we had a number of different, I would say, accounts that one paid the bills, one for the cars, one for like fun money.
13:46 Ramit Sethi? Uh huh.
13:47 Speaker 02 Like it all just went in. We had money. It was, it was good. We were good financially.
13:51 Ramit Sethi? Hmm.
13:52 Speaker 02 But then after a while, she lost her job and for me, like she wanted to take over the finances and sure, she did that. And then just ultimately in the long run, it didn't end well. She wasn't paying anything and things went into her own accounts. And in the end, when it almost like a fallout, a breakup, lost the home, lost, lost the money, sold off a camera equipment and a lot of different things.
14:17 Speaker 01 Shut down your business?
14:18 Speaker 02 Yeah, I shut down my business and there was a lot of things that happened. I was in a rebuilding process.
14:23 Ramit Sethi? Okay.
14:24 Speaker 02 For a long time before I met Dawn. I've been through a lot and um, yeah, if you want to join finances, because I know her good heart, you know what I mean? Good person, beautiful, amazing, you know what I mean? Like I know there's no wrong to be had there in the end.
14:39 Ramit Sethi? Are you saying you are open to joining finances?
14:42 Speaker 02 Absolutely. Absolutely.
14:44 Ramit Sethi? Just out of curiosity, how long have you, two of you been together?
14:47 Speaker 01 Three years.
14:48 Ramit Sethi? Three years and how come you haven't joined it yet?
14:52 Speaker 01 I think a lot of it is his last girlfriend that he lived with was asking him for a lot of money and he was like always like, I gave her everything. He had no money for himself.
15:02 Speaker 02 Yeah.
15:03 Speaker 01 So he's worried.
15:04 Speaker 02 I didn't make a lot because I had, from my previous experience, I had a lot of debt, a lot of wage garnishments and everything like this. Like everything in my past, I've already kind of paid my dues.
15:15 Ramit Sethi? Why were the wages garnished?
15:16 Speaker 02 Um, just ran up credit cards and.
15:19 Ramit Sethi? Why?
15:20 Speaker 02 No fault.
15:21 Speaker 01 Fiance?
15:21 Speaker 02 Yeah.
15:22 Speaker 01 The ex-fiance?
15:23 Speaker 02 It was just, yeah.
15:24 Ramit Sethi? Like for what?
15:25 Speaker 02 Just random things. I, I, I don't know to this day.
15:28 Ramit Sethi? Would you say that you're on top of your finances?
15:31 Speaker 02 I would say yes. It's very minimal.
15:33 Ramit Sethi? Okay.
15:33 Speaker 02 It's very, very minimal.
15:35 Ramit Sethi? Listening to Richard talk about his past experience with finances, did anything surprise you?
15:43 Ramit Sethi? What do you make of the journey that he's been on?
15:48 Speaker 01 I guess a couple of things come to mind. I do think he needs to be a little more aware. Because one happened when we were together, his wages were being garnished. And I was like, well, do you know what it's for? He's like, no. And I'm like, like, fight it. I'm a little different, you know, like I will call and be like, what's this for? And find out and fight it. And you know, like if there's a late fee, I'll call them and say, you know, this happened, can I, you know, not get that? I'm a little more aggressive in that sense.
16:18 Ramit Sethi? Richard, how does your journey with money affect your relationship with it today?
16:23 Speaker 02 A lot of stress, a lot of, uh, there's not one day that goes by where I'm just punching mathematics, doing problems in my head, moving things around, just bills and numbers and yeah. Cause I have the feeling that one day you could lose it. There's been times I will go to the store and like, I'm almost afraid to spend money.
16:46 Ramit Sethi? Have you always thought I could lose it all?
16:50 Speaker 02 No, absolutely. I've always had a pretty, pretty good income, pretty, pretty good, well, single mostly. I mean, I've had my relationships, but uh, yeah, I've always had just, it was a lot more simple. Yeah.
17:03 Ramit Sethi? When you were single, um, did you get ahead with money?
17:08 Speaker 02 There's been some times in my life where, yes, I didn't know I was pretty, pretty ahead with money. Yes.
17:13 Ramit Sethi? What was money like for you then? What'd you do with it?
17:16 Speaker 02 Invested in my business as far as like gear and camera equipment and things like this, upgrade.
17:24 Speaker 02 Clothes.
17:25 Ramit Sethi? Did you save?
17:26 Speaker 02 I did.
17:27 Ramit Sethi? Where'd you put the money?
17:29 Speaker 02 I had a 401k, I had a savings, paid the principal on my car and everything like this. But then what happened to me is just lost it all. There was a lot that happened in a short period of time where I just needed money.
17:43 Ramit Sethi? And you cashed out the 401k?
17:45 Speaker 02 Yes.
17:45 Ramit Sethi? What was that for?
17:47 Speaker 02 There was a house in foreclosure, my car got repossessed, I had credit card debt. Yeah. Well, just a lot of different things.
17:54 Speaker 01 She didn't pay anything?
17:55 Speaker 02 Yeah.
17:56 Speaker 01 Took the money?
17:57 Speaker 02 Took the money.
17:57 Ramit Sethi? That sucks.
17:58 Speaker 02 In the long run, it was almost bittersweet. Because it just, all of it's paid. It's in the past. Not really, as far as like trauma and things you carry. But as far as like everyday life, it almost started me out on a blank slate. I know I'm behind, 43. You need a 401k. You need finances in the bank. And, uh, yeah.
18:21 Speaker 01 I have like a pension with the New York State. So I was like, so what are you gonna do in 20 years? Like, I'm not paying for your retirement.
18:29 Ramit Sethi? Meaning you are not going to pay. If the two of you are married, you're not gonna pay for him.
18:35 Speaker 01 My amount isn't gonna cover mine and his. I don't have that big of a 401k. I don't want him to have to work. Like, I wanna travel some or enjoy our retirement. Not that I'm not gonna pay for the home and stuff with my retirement. But I mean, he's gonna need money. Like, I'm not gonna have enough to give him.
18:53 Ramit Sethi? I get a lot of requests to speak to couples with different income, especially lower incomes. Well, today we have Dawn and Richard. And as you listen, you're gonna hear how money lessons are passed from one generation to another. And at times, today's conversation is gonna be really frustrating. I know it was for me. But I wanna encourage you to keep listening. Let's recap. Dawn has been married twice. Richard moved in and she asked him to pay. And he did. But now she feels like he's paying rent, which, again, he is. Yet that didn't even make her financial situation improve. When I asked what Dawn would be doing if Richard wasn't paying, she admitted she would be struggling. She also acknowledges that Richard helps in non-financial ways around the house.
19:39 Ramit Sethi? Now, Richard has a complex financial background. As he tells it, his previous fiancee caused his wages to get garnished and destroyed his finances. Now, I don't know the details. I can only take his word for it. What I can see is that he's afraid to spend money today. And candidly, he's not in a good financial place. What really stands out to me is the total lack of a shared vision between the two of them. In fact, you'll notice that Dawn uses her finances almost as a weapon, saying, "I have a pension. What are you gonna do in 20 years?" I'm gonna probe on the kind of vision they have together. But first, let's take a quick break to support our sponsors.
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23:14 Ramit Sethi? Now, back to our conversation. What's the vision of the together thing that you want to build?
23:20 Speaker 01 I'd like to do our finances together, so I don't pay all the bills myself and all the stresses on me. I would like to, you know, once a week we sit down and say, okay, this is what we need to pay this week. And he'll be like, okay, I'll, I'll take this and go pay that.
23:34 Ramit Sethi? So share the responsibilities of bill pay. Okay, got it. What else?
23:38 Speaker 01 I'd like to have some joint savings that we're each putting some money into. I don't want to just have me put money in. I make more than him, so that's where we struggle a little bit. I want us both to put some money in. So I feel like when we go on vacation or we, or we have an emergency fund, it's not just all me. Cause then I feel like in time I'm going to build resentments against that.
23:59 Ramit Sethi? Okay. Uh, what else?
24:01 Speaker 02 Get married. Yeah.
24:02 Speaker 01 Get married, purchase the house.
24:03 Speaker 02 Purchase the house, have something you own. Number wise, the house, when you look at it on paper, it's a really good deal. But it's not hers yet.
24:12 Ramit Sethi? Is the house that you're renting to own? You could own it or not. It's up to you.
24:19 Speaker 01 I could walk away. Yes.
24:21 Ramit Sethi? How much have you put into it?
24:23 Speaker 01 I'd say probably 10 to 12,000.
24:27 Ramit Sethi? Okay.
24:27 Speaker 01 Because we already did the base math.
24:29 Ramit Sethi? Ah, and if you were to buy it, how much would it cost?
24:34 Speaker 01 It's my ex-husband. He takes a thousand dollars a month off of the, the house. Like sale price, so he was selling it to me for three hundred and thirty thousand. And now I think we're about three, three seventeen, three fifteen. Um, so the longer I wait, the longer it goes down. So I'm assuming like three, three hundred thousand.
24:53 Ramit Sethi? How much would a house like that cost if you were to buy it?
24:56 Speaker 01 Uh, right now it's about four hundred and ninety five thousand.
24:59 Ramit Sethi? Wow.
24:59 Speaker 01 Yeah.
24:59 Ramit Sethi? So that's a good deal.
25:00 Speaker 01 It's a huge deal. And it's because he's financially in a horrible position. And um, he wants me to have it because it's for our children. I thought about getting out of it.
25:11 Ramit Sethi? Yeah.
25:11 Speaker 01 Um, and I looked around to see, because I want to stay in the school, same school district for my son. And I can't find anything under two hundred and fifty to three hundred thousand.
25:20 Speaker 02 There's nothing close to what we would buy that for.
25:23 Ramit Sethi? If you were to buy that.
25:25 Speaker 01 Yeah.
25:26 Ramit Sethi? How much would it cost you per month?
25:29 Speaker 01 At least two thousand.
25:30 Ramit Sethi? So a little bit more than you're paying right now?
25:32 Speaker 01 Yeah.
25:32 Ramit Sethi? Okay, and if you were to rent?
25:34 Speaker 01 Two bedrooms where we are are about two thousand, somewhere in there.
25:37 Ramit Sethi? This makes sense. In certain low cost of living cities, it can be more expensive to rent or as expensive as it is to own.
25:44 Speaker 01 Right, I'm, I'm in a better financial position, like monthly, I'm gonna pay more when I get a mortgage.
25:51 Ramit Sethi? How would you afford this house? How would you buy it?
25:55 Speaker 01 I have a house savings.
25:56 Ramit Sethi? Okay.
25:57 Speaker 01 I have sixty nine, sixty eight thousand.
26:00 Ramit Sethi? What? You have sixty eight thousand in a house savings account?
26:03 Speaker 01 Yeah, to buy the house.
26:04 Ramit Sethi? Oh.
26:05 Speaker 01 It was a hundred thousand when I started the process, but that's slowly dwindling down. We used it for the basement to, to, for my daughter to have a place down there.
26:15 Ramit Sethi? What do you think of that decision?
26:17 Speaker 01 Yeah, financially, not, not the best. Both my daughters aren't, aren't in stable positions at this point. And they, they both have children. So I was like, it's kind of a spot for them to come back.
26:27 Speaker 02 There's a lot of things with that house because it's very family oriented, where it has a pool, it has the backyard, a patio, there's ten grandchildren.
26:35 Speaker 01 I do have ten grandchildren.
26:37 Speaker 02 There's a lot of get togethers, a lot of parties.
26:40 Speaker 01 It's always at my house.
26:40 Speaker 02 The house totally fits the bill when it comes to that lifestyle.
26:44 Ramit Sethi? I appreciate that. And I know that parents, grandparents, it's, feels amazing to be able to have the house that everybody comes back to.
26:52 Speaker 01 Yes.
26:53 Ramit Sethi? I am trying to understand the financial side. How much did it cost to renovate the basement?
26:57 Speaker 01 I'd say nine thousand.
26:59 Ramit Sethi? Okay, so you renovated for nine thousand?
27:00 Speaker 01 Yep.
27:01 Ramit Sethi? In a house that you're renting?
27:03 Speaker 01 Correct.
27:03 Ramit Sethi? Which I don't mind, I've put money into rentals I've had because I want to live in a nice place.
27:08 Speaker 01 Right.
27:09 Ramit Sethi? But I could afford it.
27:10 Speaker 01 Right.
27:11 Ramit Sethi? How did you decide if you could afford that or not?
27:14 Speaker 01 Well, at the time, I'm just looking at, oh, I have a hundred thousand. Like, you know, that's not something I normally have in my bank account. So it was like, it's not that big of a deal.
27:23 Ramit Sethi? So a hundred thousand, and how much is it now?
27:25 Speaker 01 Sixty-eight thousand.
27:27 Ramit Sethi? Ah, what happened to the rest?
27:29 Speaker 01 I mean, we went on vacation.
27:30 Ramit Sethi? Oh, where'd you go?
27:31 Speaker 01 Outer Banks.
27:32 Ramit Sethi? Okay.
27:33 Speaker 01 So that wasn't a huge, but it was, I brought the whole family.
27:36 Ramit Sethi? Ah, how much?
27:37 Speaker 01 Um, I'd say probably six thousand.
27:40 Ramit Sethi? Okay, six K, what else?
27:42 Speaker 02 This was really great that year.
27:45 Speaker 01 Yeah, I just kind of spent, not on anything for like myself. Um, I mean, house things, I paid off my car.
27:52 Ramit Sethi? Ah, what car was that?
27:54 Speaker 01 Um, it's two thousand fifteen Infiniti. I owed like twelve thousand, so I paid that off to put me in a better financial place monthly. It was a high interest. It was nine percent.
28:09 Speaker 01 I claimed bankruptcy eight years ago.
28:11 Ramit Sethi? What?
28:12 Speaker 01 When I got divorced the second time, I was in a home and we had a ton of credit card debt because he had stopped working and wasn't paying any bills. I wasn't making a lot of money, so we lived on credit cards. I did have a prenup, so when he left, he left with nothing, but then it's all on me. I could not afford, um, the bills, I couldn't afford my car payment, so I claimed bankruptcy.
28:37 Ramit Sethi? What did it feel like to make the decision to declare bankruptcy?
28:41 Speaker 01 It was a hard decision for me. In the long run, after it felt good, just because everything, it was like a, like a clean slate. I had my car and my house, but all the credit card debt and all that was gone.
28:54 Ramit Sethi? Do you notice the similarity in your journeys?
28:57 Speaker 01 Yes, it is what brought us kind of together.
29:00 Ramit Sethi? A lot of this is hard for me to hear. When I ask about what they want to build together, I hear, I want us to split the bills, I want us to talk about money, and eventually, I want us to own a home because you should own something of your own. It's a simple set of goals, even simplistic. Then I hear Dawn had a hundred thousand dollars, but tapped into it for vacations and a car and a basement renovation. This is after declaring bankruptcy, which is just another reminder of how hard it is to actually change your financial behavior. Then Dawn says that she and Richard came together after their respective financial history.
29:43 Ramit Sethi? And that is a huge red flag because people who bond over trauma can often solidify and weave that trauma into their own relationship dynamic. Let's hear from Dawn about how growing up with money impacted her money psychology today. What do you remember hearing about money in your household?
30:02 Speaker 01 Only the fighting.
30:03 Ramit Sethi? Okay.
30:04 Speaker 01 It was always, we don't have enough. Money was fought about in my house all the time. My dad owned a business and my mom worked two jobs and his, he never could pay the bills. It was just constant fighting back and forth about not having enough, not having enough, which I understand as a mom, like how that would be if she's working two jobs.
30:25 Ramit Sethi? Yeah.
30:26 Speaker 01 And he was like, well, I am paying the bills.
30:27 Ramit Sethi? Does that sound familiar to you?
30:28 Speaker 01 Yeah.
30:29 Ramit Sethi? In what way?
30:30 Speaker 01 It sounds like me.
30:31 Ramit Sethi? Yeah. And whatever happened with your parents and money?
30:36 Speaker 01 They divorced.
30:37 Ramit Sethi? What else do you remember your family discussing about money?
30:41 Speaker 01 Just we'd never had enough. It was always, we never had enough. Like we'd go grocery shopping and we'd always have to watch what we would buy per se. I mean, I never went without my parents, but my mother did what I do. She never said no.
30:57 Ramit Sethi? Wow.
30:58 Speaker 01 Yeah, I was bratty. And if I wanted something, a new Barbie house or something like that, I would, I would get it, even if they didn't have money. Very similar situation to now.
31:09 Ramit Sethi? What lessons do you take away from that, looking back?
31:11 Speaker 01 I wish my parents taught me more about money and how to be financially stable. I wish I did that to my children because they're in different situations. They had children younger, but I wish there was more talk about it in a positive way.
31:27 Ramit Sethi? What would that have looked like?
31:30 Speaker 01 Instead of fighting about it and me hearing about the fighting, maybe sitting down and like actually knowing what was going on.
31:38 Ramit Sethi? Looking at where you are now and looking back at your journey from growing up to these two marriages, where would you have thought that you would be financially speaking?
31:49 Speaker 01 I'm much better than I thought I would be because I didn't have a degree. I went to college. I went and got my substance abuse counselor after that. And now I'm an investigator. So I make more money now than I ever thought I would ever make. And it's still not compared to some people, it's not a lot, but for me, it's a ton. When you look at me like as a single mom and I've, I've never been without a home. I've never been without a job, a car. My kids don't go without.
32:17 Speaker 02 Works very hard.
32:18 Ramit Sethi? Wow.
32:18 Speaker 02 Very, very ambitious.
32:20 Ramit Sethi? I, I appreciate the gratitude. I really do. That's really cool.
32:24 Speaker 01 Yeah. I try to think of that sometimes, but it's hard because I still struggle. And I'm like, I make this much money. Why am I still struggling? But it's because I live above my means in some ways. I mean, I spend too much.
32:37 Ramit Sethi? You do?
32:38 Speaker 01 Yeah, on my, on my kids. Yeah.
32:39 Ramit Sethi? Okay. How old are your kids?
32:41 Speaker 01 25 and 22 are my girls. And they have, they have children. So my one daughter, my 25 year old has one daughter and then her fiance has five kids. My 22 year old is pregnant with her third child.
32:57 Ramit Sethi? Okay.
32:57 Speaker 01 And then her fiance has one. So they have four.
33:01 Ramit Sethi? And let's talk about your son. How old is he?
33:02 Speaker 01 My son is 12. He's with my second husband. He's tough. He's tough. He wants a lot. Every day, there's something he wants. I mean, I just, just yesterday, he sent me three things he wants. And I'm like, well, maybe for Christmas. They're a hundred, $125 jackets that he wants.
33:20 Ramit Sethi? Can we see?
33:22 Ramit Sethi? Well, he has very good taste. He sends a Nike Tech Men's Full Zip Windrunner hoodie. It looks pretty cool, I have to say. It looks pretty cool. So he doesn't even say like, can I have this, mom?
33:36 Speaker 01 No.
33:36 Ramit Sethi? He just sends the picture and the link.
33:38 Speaker 01 Yep.
33:39 Ramit Sethi? What's your reaction when you get a text like this?
33:42 Speaker 01 Typically, I get upset with him, which doesn't help our relationship. I'll be like, I don't have that kind of money. So if that's something you want for Christmas, I'll add that to your list. Sometimes it's okay, but most of the time, it's a meltdown. And sometimes I give in because I just don't want to deal with the reaction.
34:04 Ramit Sethi? What's your ex-husband's take on this as well?
34:06 Speaker 01 My ex-husband doesn't spend money on him like that. He knows if he reacts poorly, that I'm going to give in. When I had my girls, I was in my twenties. I had a lot more, yeah, that's the word, tolerance. Now I'm tired and I also work and I didn't work with them. So I'm, you know, I'm working hard. I have the house. I'm, you know, I have the grandkids that I'm, yeah. So it's just sometimes I just don't want to deal with it. And I think, and he knows that.
34:32 Ramit Sethi? That's a good explanation. Can you go beyond the explanation and tell me what will happen? As this continues?
34:39 Speaker 01 Oh, I'm creating a monster because he wants what everyone else has. And in a way, I struggled with that for a very long time.
34:47 Ramit Sethi? You did?
34:47 Speaker 01 I really, really struggled with comparing myself. And I still do in some sorts, like Facebook's horrible because I see all these vacations and people are in Italy and Spain and Caribbean. And I'm like, I want to go. Like, I work really hard. I want to go. But, and that's where I go back and forth with some days. I'm like, I need to save and have a future. And then other days, I'm like, can't bring it with you. You know, so that I do struggle with that sometimes.
35:13 Ramit Sethi? Let's trace the pattern here. You were young, you wanted a Barbie house. Mom said, fine. Even though they were fighting about money and never had enough. You wanted X, you wanted Y, you got it. Your 12-year-old wants a Nike tracksuit.
35:30 Ramit Sethi? He's probably gonna get the tracksuit. What, so what happens? What do you see in this story?
35:36 Speaker 01 Well, it's gonna be a repeat. I mean, I know that's part of his issue with combining our incomes. And I don't blame him because he's gonna give me all his money and then I'm gonna spend it all on my kid. And I, I get that. I do get that. But I'm hoping if I, if we're doing it together at that point, I, I wanna change my son's outlook on money.
35:56 Ramit Sethi? So you believe that when you have more money at your disposal, you're going to stop saying yes to your son?
36:02 Speaker 01 Yeah.
36:03 Ramit Sethi? Doesn't strike me as true. We are seeing how easily we can replicate past family patterns right on to the next generation. Dawn's 25-year-old daughter has six kids with her fiance. Her 22-year-old daughter has four kids with her fiance. Her 12-year-old son is extremely spoiled. And Dawn admits that she is creating, quote, "a monster." I was honestly shocked when I saw those text messages. He just sent links of things he wanted. He did not say, "please." He did not even ask. He just added links of what he wanted. And Dawn knows she's a pushover. She tells me that her ex-husband doesn't buy those things for her son. And he wouldn't ask him. Go back to her childhood and her mom bought her everything she wanted.
36:47 Ramit Sethi? Now she's replicating that for her son. Meanwhile, she directs her worries about money towards Richard. I wanna get into their specific numbers. And we're gonna open up their conscious spending plan after this break for our sponsors.
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39:43 Ramit Sethi? Now, let's dig into Dawn and Richard's CSP. Go ahead and read off the word in bold and then the full. Number next to it.
39:50 Speaker 01 Okay, assets, twenty eight thousand five hundred. Investments, twenty four thousand nine hundred eighty five. Savings, fifty eight thousand four hundred eighty four. And debt, fourteen thousand eight hundred and ninety five. Total net worth, ninety seven thousand and seventy four dollars.
40:10 Ramit Sethi? Okay, what do you all think of the numbers?
40:13 Speaker 01 I wish assets was higher, but I don't own a home, so that's why that's so low. Investments is not very big. I would like them all to be bigger.
40:21 Speaker 02 I'm pretty much the same. The debt definitely could be, it could be worse. I mean, it's manageable. I like the assets higher as well as the investments.
40:30 Ramit Sethi? What does this number mean to you, ninety seven thousand dollars?
40:33 Speaker 01 So low, but I guess I never thought of a net worth.
40:37 Ramit Sethi? What'd you think about?
40:39 Speaker 01 Just what I owed, I guess.
40:40 Ramit Sethi? Meaning, how much do I owe every month for my car? How much do I need to pay my bills every month? And that's why you talk about weekly, Richard, pay me two hundred a week. Like, I don't talk to anybody about week, ever. Week is... That's kind of like saying, like, let's go for a walk, let's walk two thousand five hundred and twenty inches.
41:00 Speaker 01 Right.
41:01 Ramit Sethi? Why would I talk in that term of measure?
41:03 Speaker 01 Right, right, it's very small.
41:04 Ramit Sethi? Yeah.
41:05 Speaker 01 Yes.
41:05 Ramit Sethi? But often, people who were not taught about money, they shrink their world down to the month, or in your case, even the week. And what is the effect of that when you talk about things on a weekly basis?
41:19 Speaker 01 I don't think it allows us to look towards a future at all. It's, it's just paying what you pay. It's almost like going into a car salesman and saying, I don't want my payment to be over five hundred.
41:30 Ramit Sethi? Yeah.
41:30 Speaker 01 Instead of actually looking at the numbers.
41:32 Ramit Sethi? That's right.
41:33 Speaker 02 It shrinks your bubble, it shrinks your world. It's almost like it distorts your vision to look out into the future and what, like, the big picture.
41:41 Ramit Sethi? Right.
41:42 Speaker 02 Mm-hmm.
41:43 Ramit Sethi? So out of curiosity, how come you haven't looked at the big picture of money? Both of you?
41:49 Speaker 01 I've been single in a sense of living alone for almost twelve years, so I've never had to talk about it with anybody.
41:57 Speaker 02 I would say my case was just adapting to it. Like, I'm big on adapting and fitting in.
42:02 Ramit Sethi? When you say that you adapt. So when Dawn comes to you and says, I want 200 or 250 a week, your method of adapting is to kind of do the fence, et cetera, but then eventually say like, okay, here's 225 a week, right? Did you say to her, this is how much I can afford?
42:27 Speaker 02 Not really. Just that I don't really make a lot of money. So my money only stretches so far.
42:32 Ramit Sethi? Do you know how much you can afford?
42:35 Speaker 01 We did it together.
42:36 Speaker 02 Yeah.
42:36 Speaker 01 Like I sat down and I said, let's sit down and figure out. So I wanted to make sure he still had money for himself because that was a big thing. I'm like, so if we do your bills and what you get paid and you give me 200 a week, that leaves you enough for what you need.
42:50 Ramit Sethi? How much do you have left over every week?
42:54 Speaker 02 Oh, 150.
42:55 Ramit Sethi? Okay. And what do you do with that 150?
42:57 Speaker 02 Gas. I'm a smoker.
42:59 Ramit Sethi? Do you notice that the way that both of you talk, there is no discussion about savings rate or that. It's, I have 150, it's enough to pay my gas and to smoke.
43:11 Speaker 01 Right. It's very, very weekly. It's just getting by.
43:15 Ramit Sethi? Is that okay with you?
43:16 Speaker 01 No.
43:16 Speaker 02 No. We have the dream.
43:18 Speaker 01 I've tried to do budgets. I've tried to do apps. I don't know if I just don't follow through.
43:22 Ramit Sethi? Do you think it's a budget that's the problem? That you don't have the right spreadsheet set up? I don't think it is.
43:27 Speaker 01 Probably not.
43:28 Ramit Sethi? What is it?
43:30 Speaker 01 I guess I don't really know. I mean, saying no and actually taking control, like you said, of my finances and being like, no, this is going to go in here and being disciplined.
43:41 Ramit Sethi? Okay. What about for you, Richard? Why haven't you gone beyond the weekly basis? It's been 40 plus years.
43:49 Speaker 02 In my case, it's what I make. I haven't made this amount in a year since I was in my early twenties. With what I make a year, like my ability like to put money and save money, like it's, how far can it actually stretch?
44:04 Ramit Sethi? You're right. Maybe your income isn't high enough. We're going to get to that in a second. But if, if, if I were in your situation and I were talking to a partner who said, hey, I, I want you to contribute something to the household, I would definitely have that conversation. But if I can't afford to save any money every month, then I can't afford to contribute. I need to be paying myself first, right? Meaning I need to be saving. Twenty bucks a week, fifty bucks a week, fifty bucks a month, whatever the number is, that's how I would think about it.
44:36 Speaker 02 Okay.
44:38 Ramit Sethi? Anybody teach you that ever?
44:40 Speaker 02 Not really, no.
44:42 Ramit Sethi? I'm really glad that I get the chance to talk to Dawn and Richard because I want you to understand how most people in America grow up with money. Most people have never heard the word investment in their household, ever. Their parents don't talk about it because they don't even know what investments are. What's a savings rate? How does retirement work? Parents don't know, so kids don't know, so their kids don't know. And the cycle simply continues. The truth is, most people grow up with simple money messages, very simple. Save money, make your own coffee at home, buy a house. And then they enter into a complex world with words like mortgages and deductibles
45:26 Ramit Sethi? and expense ratios. It's almost unfair, almost. You'll notice that Dawn and Richard have not made a serious effort to learn about money. This is why I say that we can simultaneously call for systemic reform while encouraging personal responsibility. Pick up a book, listen to podcasts, start to focus time, at least an hour a week at the beginning, on your personal finances. It's one of the most important uses of your time in your entire life. Dawn and Richard are focused on paying weekly bills while the real problems are much, much bigger, but they don't even realize it.
46:12 Ramit Sethi? Dawn, that urge you have to combine finances so that you can pay the bills, what do you notice about that?
46:19 Speaker 01 It's me.
46:21 Speaker 01 Probably because I've had to do things on my own. So it's just I take control. I do it in the house, too. Everything needs to be planned. You know, if there's anything going on, I just kinda.
46:31 Ramit Sethi? Why didn't you plan more investments?
46:33 Speaker 01 I never really thought about it. Growing up, it was just the bills. It was always the bills. It was never investments. It was never, you know, like I said, go to college to get a better job. You know, I try to instill that in my children.
46:44 Ramit Sethi? You instill the saving, investing part in them?
46:47 Speaker 01 I think I try to, but not with [BLEEP]. I don't.
46:51 Ramit Sethi? What's gonna end up with his financial situation when he becomes an adult?
46:55 Speaker 01 He's gonna struggle. I mean, because if he wants, you know, a hundred dollars this, a hundred dollar that every day, he better make a lot of money.
47:03 Speaker 02 You come accustomed to getting what you want.
47:05 Speaker 01 Which I was.
47:07 Ramit Sethi? And now he will, and probably his kids will.
47:11 Speaker 01 Probably, which I'd like to stop that.
47:13 Ramit Sethi? Really?
47:14 Speaker 01 I would like to make a plan and do it. I have, I have been putting my foot down more like with that. I was like, you're not getting it. I don't have the money.
47:22 Ramit Sethi? You said that?
47:23 Speaker 01 Yes.
47:23 Ramit Sethi? And how did that go?
47:24 Speaker 01 A couple of weeks ago, I had a surprise bill taken out. So my bank account was like, nothing. And I'm like, [BLEEP]. I literally have like eight dollars in my bank account. Like, I don't have it. You know, and then he's like, oh, well, you should have told me.
47:40 Ramit Sethi? What has happened with the fact that he asks you for things all the time and he doesn't ask your ex?
47:46 Speaker 01 I think because his father wasn't around.
47:49 Ramit Sethi? Uh huh.
47:49 Speaker 01 And I overcompensated.
47:51 Ramit Sethi? First, I wish it wasn't guilt. I wish it was caring, and I wish you had that same care for yourself. The reason I wish you had that care for yourself is that by prioritizing yourself, you actually create a model for everyone in your family.
48:04 Speaker 01 Right.
48:05 Ramit Sethi? To see what it's like to have healthy boundaries, to see what it's like to prioritize things that are important for you. Still be generous. But to prioritize a healthy, rich life.
48:17 Speaker 01 Right.
48:17 Ramit Sethi? Let's look at the income. Uh, Richard, can you, uh, read off the, uh, combined current monthly income?
48:23 Speaker 02 Ten thousand, two hundred and fifty-one.
48:26 Ramit Sethi? I know you two have not combined your income, but just for simplicity, if you did, your household income would be a hundred and twenty-three thousand dollars. Did you know that?
48:34 Speaker 01 Not really.
48:35 Ramit Sethi? Richard?
48:36 Speaker 02 No.
48:36 Speaker 01 It took, it took a long time for him to even tell me what he made.
48:39 Ramit Sethi? Why?
48:41 Speaker 02 I'm not comfortable with what I make.
48:43 Ramit Sethi? Okay, so the income split here is sixty-seven hundred is for you, Dawn.
48:47 Speaker 01 Yes.
48:48 Ramit Sethi? Thirty-five is for you, Richard. All right, and, um, and you net about seven thousand dollars a month. Again, combined, but if you look at that, we make a hundred and twenty-three thousand dollars. What do you say?
49:02 Speaker 01 I don't think it's terrible. Of course, I'd want to make more.
49:04 Speaker 02 I'd say it's almost average.
49:06 Ramit Sethi? I don't know too many small towns that make a hundred and twenty-three K average. That's a lot of money. You want me to look it up right now?
49:12 Speaker 01 Sure.
49:13 Ramit Sethi? The median income in your city is fifty-seven thousand dollars. What does that tell you?
49:18 Speaker 01 That we're not doing poorly for where we live. So we might live above our means.
49:26 Ramit Sethi? What do you make of it, Richard? The fact that the two of you combined make double the median income in your town?
49:32 Speaker 02 Very eye-opening. It's, it's good. Good news.
49:36 Ramit Sethi? For me, if I had just sat down and discovered that I make twice the median household income as what I thought, I would feel a lot of gratitude. We should give ourselves a pat on the back. We should appreciate how far we've come.
49:52 Speaker 01 Yeah.
49:52 Ramit Sethi? How hard we've worked. And, you know, sometimes people become addicted to the feeling of struggle. It is all they know. And when I ask them, like, what if you didn't worry about money? What would you do? They go, I have no idea. The second thing I would feel is anger. Anger at why do we feel so behind if we make more than a lot of people in our area? What are we doing? And I would start to get bad. If I make that much, where's it going?
50:25 Speaker 01 Yeah.
50:26 Ramit Sethi? What are we doing wrong? Because it shouldn't be like this if we're making double what other people are making.
50:31 Speaker 01 Right. Yeah.
50:32 Ramit Sethi? All right.
50:32 Speaker 01 Absolutely.
50:33 Ramit Sethi? Shall we take a look at the fixed costs? All right, what was that laugh?
50:37 Speaker 01 Because mine are 100%.
50:40 Ramit Sethi? Wow, your fixed costs are 100%.
50:42 Speaker 01 Mm hmm.
50:43 Ramit Sethi? Okay, what does that tell you right there?
50:44 Speaker 01 That I have too much for what I make.
50:48 Ramit Sethi? Yeah, it tells me you're broke. You are literally spending more than you make every month.
50:52 Speaker 01 Absolutely.
50:52 Ramit Sethi? That's where the money from your $100,000 is going.
50:54 Speaker 01 Mm hmm.
50:55 Ramit Sethi? It will go away and you will be left in extreme peril.
50:59 Speaker 01 It scares me and I think that's where my stress comes up. And maybe that's where I portray it onto him. Like I need, I need more money.
51:07 Ramit Sethi? Yeah, that is. You'll also see that stress manifesting in other ways in your financial life. How many times a week do you log into your accounts? Look at the numbers, run calculations?
51:19 Speaker 01 I have it on my phone, right on the, right on the screen.
51:23 Ramit Sethi? Does it get you anything?
51:24 Speaker 01 No. I mean, stress is what it gets me.
51:28 Ramit Sethi? Why do you do it then?
51:29 Speaker 01 Maybe have it.
51:30 Ramit Sethi? Remember when your kids were young, they have a blankie?
51:33 Speaker 01 Mm hmm.
51:34 Ramit Sethi? That's your blankie. You log in, feel this intensity. You click the button, you see this, the same familiar numbers. But there's this, there's that, it's a bit of stress. And then what do you feel at the end?
51:49 Speaker 01 Still stressed.
51:50 Ramit Sethi? Still stressed, but?
51:52 Speaker 01 Well, a little relief that I've done it.
51:54 Ramit Sethi? I can make it this week.
51:56 Speaker 01 Correct, correct.
51:59 Speaker 01 I have a little calendar that I have everything that comes out and I look at it almost daily of, okay, this comes out today.
52:04 Ramit Sethi? Making $123,000, but talking about making calendars like, like a child would make them to make sure they did their homework.
52:12 Speaker 01 Correct.
52:13 Ramit Sethi? I think there's a different way. One of the reasons I wanted to get a chance to speak to you was that sometimes we're just not taught this and we are passed down conscious and unconscious messages from our family. And, you know, we've talked about them. Mom did this, I do this, now my kids do this, right? In your case, Richard, things happen to you in your relationships. You were not in control of your money. It almost was like you were a passenger for some of this. Oddly enough, the journey you went through brought you two together, but you haven't rewritten the chapter of your life that you're in now. And you're just continuing the same trends, being passive with money, mistaking.
53:00 Ramit Sethi? Observing your finances for being in control of your finances. And so I see this and I get alarmed. I look at your fixed costs, Dawn, I see 100%. I look at yours, Richard. Is this right? Dawn, are you paying less than Richard pays?
53:16 Speaker 01 Well, I pay all the other bills, so I guess when it comes to just rent.
53:19 Speaker 02 The money I give her, I don't know where it goes. I'll just say bills.
53:24 Ramit Sethi? No, that's not acceptable to just say she wants 250, so I gave her 250. And as long as she's okay, that's okay with. No, you're in your 40s. You have to prioritize yourself first. You're not married. And similarly, Dawn, it's not acceptable to just say, I need 250 to cover my weekly bills, because you'll be covering your weekly bills until one day you can't work anymore and now you're screwed. So this isn't acceptable. $723 a month for rent is what Dawn is paying. Richard is paying $1,000 a month. All right. That doesn't make sense to me, but let's keep going down the list. Utilities, Dawn is paying all of them. $486 a month. Okay, so you're picking up more of the housing proportionally. I get it.
54:09 Ramit Sethi? Insurance, you're paying 238, Dawn. Car payments, 260 is what Dawn is paying per month. So I assume you have a paid off car. This is just your gas. And then, Richard, you've got 506. You have a car payment still?
54:21 Speaker 02 Yes.
54:21 Ramit Sethi? What kind of car?
54:22 Speaker 02 It's a 2015 Jeep Cherokee.
54:25 Ramit Sethi? Does the thing break down a lot?
54:27 Speaker 02 It's pretty good.
54:28 Speaker 01 It's starting to break down and we want a truck.
54:31 Ramit Sethi? Wait, hold on, just explain the logic. We need a truck because we own. What's the connection?
54:35 Speaker 01 Well, I own a camper.
54:37 Ramit Sethi? Explain these words to me. What's a camper?
54:40 Speaker 01 An RV that you pull behind a truck.
54:42 Ramit Sethi? Oh, my God, is this a joke? How many couples do I talk to that tell me they own a truck? I go, why do you own a truck? They go, I gotta pull the boat. Okay, so you currently tow it behind. What?
54:54 Speaker 01 I have to pay somebody to tow it.
54:56 Ramit Sethi? Okay, where do you?
54:57 Speaker 01 So I have a membership to a campground.
54:59 Ramit Sethi? Okay.
54:59 Speaker 01 So we camp for free. We go camping for a couple of weeks in the summer.
55:03 Ramit Sethi? Okay.
55:04 Speaker 01 And that's kind of our vacation.
55:06 Ramit Sethi? And how much does this camper cost in maintenance fees?
55:09 Speaker 01 I pay 500 a season to have it towed.
55:12 Ramit Sethi? And then you want to get a truck because you want to stop paying someone to tow it for you?
55:16 Speaker 01 Some of it, yes. And then just household, like when we're doing household things, like we have no way to get stuff to our, like lumber and things like that.
55:23 Ramit Sethi? Okay, um, can I just say, without even looking at the rest of the numbers, don't buy a truck, okay? Do not buy a freaking truck right now.
55:30 Speaker 01 Okay.
55:30 Ramit Sethi? All right, 517 a month in debt payments for Dawn, what is that for?
55:35 Speaker 01 Uh, credit cards.
55:37 Ramit Sethi? What? How many? How much in debt?
55:39 Speaker 01 I have a loan on my 401k because I needed the money back before my, um, before my bankruptcy.
55:45 Ramit Sethi? Okay.
55:46 Speaker 01 I tried to do it that way first, pay things.
55:49 Ramit Sethi? Okay.
55:49 Speaker 01 Um, and then I took out the rest for the camper.
55:53 Ramit Sethi? Why'd you do that?
55:54 Speaker 01 Um, because I wanted a camper.
55:57 Speaker 02 What she grew up with?
55:58 Speaker 01 I had this membership, what was I gonna do with it?
56:00 Ramit Sethi? So, I grew up eating Indian food five times a week, it doesn't mean I do it now.
56:04 Speaker 01 Well, that, that's my spoiledness of that part.
56:07 Ramit Sethi? Okay, I wanted the Barbie house, I got the Barbie house.
56:09 Speaker 01 Correct.
56:09 Ramit Sethi? I wanted a camper, I got the camper. Okay. Well, I, I will say, that was a horrible decision, but a lot of people who take loans out don't even pay themselves back. So the fact that you're paying yourself back is better than most, and you have 40 bucks a month. Uh, Richard, in debt, what's that?
56:27 Speaker 02 I have a personal loan, yeah.
56:28 Ramit Sethi? How much is it for?
56:29 Speaker 02 Um, right now, the debt, the total is about 800, 850.
56:34 Ramit Sethi? All right.
56:34 Speaker 02 Around there.
56:36 Ramit Sethi? Groceries are 800 a month. That's for the three of you?
56:42 Speaker 01 I would love to get that down.
56:43 Ramit Sethi? Uh, groceries are not the problem. That's fine. I have no comments. Eight hundred bucks a month? Fine. I'll take it all day.
56:49 Speaker 01 Okay. Yeah, that's the three of us. And if the kids come over, I'll make dinner.
56:53 Ramit Sethi? Phone is a hundred and fifty for you and a hundred and twenty-five for you, Richard. That's two hundred and seventy-five total. Why is it so much?
56:59 Speaker 01 I pay for my children and then they pay me. We're on one together.
57:03 Ramit Sethi? And do they actually pay you?
57:04 Speaker 01 Well, they didn't used to, but I just took on my other daughter. So they said, let me know when you get it and I'll pay it. So it's more me having to ask for it.
57:14 Ramit Sethi? How many text messages are you sending? Pay, time to pay me. How many meetings are you having with Richard? Time to pay me.
57:21 Speaker 01 It's a lot. I would love to not do that ever because that makes me feel like I'm like a debt collector.
57:27 Ramit Sethi? You are a debt collector. That's the role you've given yourself. Remember when I told you that the, the way you feel about money, that stress will manifest itself in certain ways? What is this?
57:39 Speaker 01 More stress.
57:40 Ramit Sethi? Yeah. But what are you getting out of it? You go around to everyone. You knock on the town's doors, including your fiance. Hey, it's time to pay me again. I feel horrible doing this, but in the end, what happens?
57:53 Speaker 01 I feel better once I get it.
57:54 Ramit Sethi? Yeah. Ah, let that temporary sense of money wash over me and give me control.
58:01 Speaker 01 That's absolutely right. When I do get, like, when I get his money, the two hundred or two fifty, it just, like,
58:09 Speaker 01 I feel better.
58:10 Ramit Sethi? Yeah.
58:11 Speaker 01 Like I can breathe.
58:12 Ramit Sethi? Richard, I can see, I can see you are very observant about what's going on in the studio.
58:16 Speaker 02 Mm-hmm. Love it.
58:18 Ramit Sethi? How long has it been since you've been in the photography business?
58:23 Speaker 02 Four or five years.
58:25 Ramit Sethi? What if you just never start the business?
58:26 Speaker 02 If I never start the business, then I'd have to kind of dive into something that made a little more money.
58:33 Ramit Sethi? What do you do?
58:34 Speaker 02 I do assets protection and logistics and.
58:39 Speaker 02 They're 12-hour days, Saturday, Sunday, Monday, Tuesday through Friday have open, all that's open to start a business.
58:45 Ramit Sethi? What do you currently do during that time?
58:47 Speaker 02 Just the housework, organization, renovations, that's kinda nothing. I always say that's nothing for me.
58:55 Ramit Sethi? Well, it's something for me. I don't know how to do any of that stuff. If somebody was doing that, that's worth a lot of money. You know what I mean?
59:02 Speaker 02 Yeah.
59:02 Speaker 01 He works very hard at the house.
59:04 Speaker 02 Yeah, I don't stop.
59:05 Ramit Sethi? Is there value in that?
59:06 Speaker 01 Oh, absolutely.
59:07 Speaker 02 I save money. Yeah, that's, there's money saved.
59:10 Ramit Sethi? Is there financial value besides just the money saved?
59:13 Speaker 01 I've told him when we first talked about him starting his business, I'm like, why don't you get something like part-time? And he's like, well, I couldn't pay the bills. I'm like, all you need to do is pay your bills and just kinda help out a little. But what you do in the house is so much more to me than like financially, but at the same time, I don't wanna struggle.
59:32 Ramit Sethi? What's the balance that you've decided on?
59:34 Speaker 02 I work now and the struggles there, even though I'm giving the money.
59:38 Ramit Sethi? And it's still a struggle.
59:40 Speaker 02 But I'm told to work part-time, grind my business. But we all know when you're starting out, it's up and down.
59:44 Ramit Sethi? What if Richard told you that looking at his finances, he can't contribute 250 a week? He can contribute 100 a week because he needs to prioritize his own retirement.
59:55 Speaker 01 I would be okay with that if I could get my finances under control more.
1:00:01 Ramit Sethi? You can see that a lot of Dawn's financial struggles are due to her own decisions. She took out a loan on her 401K for a camper. When I asked her why, she said, because I wanted a camper. Now, of course, I'm getting frustrated listening, and I know a lot of you want me to scream at Dawn and Richard, but this isn't a zoo. I'm not here to create a spectacle with my guests. It might feel good to you, but I'm not here to scream at them. I'm here to try to help them live a rich life. This is why I'm asking them lots of questions, and I'm going slowly. I'm letting them hear their own responses. When we get back from this short break, I'm gonna talk to Richard about what he wants.
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1:02:05 Ramit Sethi? Let's keep going.
1:02:07 Speaker 02 If we didn't work out, I have the ability to bank half of my income.
1:02:13 Ramit Sethi? How?
1:02:14 Speaker 02 My family owns a duplex apartment. I can move in there rent-free.
1:02:18 Ramit Sethi? How long can you do that for?
1:02:20 Speaker 02 Ever. But that's not what I want.
1:02:22 Ramit Sethi? Okay, very interesting. You want to live together and you're willing to contribute in some way, financial, logistical, all the above, so that you two can do that.
1:02:33 Speaker 02 Yes.
1:02:33 Ramit Sethi? Okay. Hear you loud and clear. Let's keep going down the numbers here.
1:02:39 Ramit Sethi? So we are currently at 74% fixed costs, which is a lot. Well, it's 77% for Dawn, which is high, but fixable. And 69% for Richard, which is also high, but we can work with that. Okay. 74% joint fixed costs, although again, you're not joint expenses. Uh, your subscriptions, by the way, are 161 and 138 per month. Let's go down to the investments. Investments are zero. Zero dollars being invested.
1:03:13 Speaker 01 I have a 401k, but it's pre-tax.
1:03:15 Ramit Sethi? All right, so how much are you putting in that 401k?
1:03:18 Speaker 01 It's about a hundred and 20 a check.
1:03:21 Ramit Sethi? So like, uh, 3,000 a year, ballpark. Okay, fine. And what about you, Richard? Investments?
1:03:28 Speaker 02 Nothing.
1:03:29 Ramit Sethi? How come?
1:03:31 Speaker 02 Trying to, uh, just trying to rebuild after things.
1:03:37 Ramit Sethi? Okay. Savings are at zero for everybody.
1:03:41 Speaker 01 Besides the my house savings, which needs to go to buy the house. That's all. There's no savings.
1:03:47 Ramit Sethi? Down from 100 to 58. Okay, and going down every month, probably. Okay, let's look at guilt-free spending. Whoa. So first of all, I don't believe these numbers. I know you're spending more than 993 a month on eating out, travel, et cetera. Stuff for the kids. What happens at Christmas?
1:04:07 Speaker 01 Last Christmas, I probably took out of my savings.
1:04:11 Speaker 02 It was either that or credit cards.
1:04:13 Speaker 01 Yeah, one or the other. It's very stressful.
1:04:16 Speaker 02 Lot of kids, lot of family members.
1:04:19 Ramit Sethi? What I took away from that was,
1:04:23 Ramit Sethi? life happens to me.
1:04:26 Ramit Sethi? Not I decide what happens at Christmas. Another couple I could speak to could be making half of what you make, even a third of what you make, and they could say something like this. You know what? We talked about it and we save up for the whole year and each child gets one gift and we really spend Christmas together. We all watch a movie. A fraction of what I'm sure you pay, but they decided. The world didn't decide. I also noticed that you said, I don't know what's gonna happen this Christmas. What's that saying to me? So by saying, "I don't know what happens. Uh, life is out of control for me. I don't know."
1:05:02 Speaker 01 Other people are gonna tell me what happens.
1:05:04 Ramit Sethi? Exactly.
1:05:07 Ramit Sethi? And why is it that you're so afraid to decide what happens with your own money?
1:05:11 Speaker 01 I don't wanna disappoint my children, maybe, and other people.
1:05:16 Ramit Sethi? Mm-hmm. What would be disappointing to them?
1:05:18 Speaker 01 I don't know with my girls if they would be disappointed, really, because they're older and they're like, "Don't buy for me this year. Buy for the kids instead." Like, I think they'd be okay if I really said I don't have money. My son? It depends with him. He might, he might be disappointed. It's the guilt. It's, it's that overcompensating.
1:05:36 Ramit Sethi? If guilt is the primary driver for your financial behavior, you're gonna guilt yourself right into running out of money.
1:05:42 Speaker 01 Which I've done.
1:05:44 Ramit Sethi? Yeah. Look at this number. You're down from a hundred K.
1:05:46 Speaker 01 Yeah.
1:05:47 Ramit Sethi? To fifty-eight K. It's going down.
1:05:48 Speaker 01 Yeah.
1:05:49 Ramit Sethi? I don't know about you. I, I, I would not wanna live my life based on reactive guilt. It just seems like you're always one step behind. No matter what you do, it's never enough.
1:06:00 Speaker 01 That's exactly how I feel.
1:06:01 Ramit Sethi? If we were to speak about money in a combined sense, you have a hundred and twenty-three thousand dollars. It's a good salary. Particularly relative to the median salary in your area. You have an enviable housing situation.
1:06:17 Speaker 01 Mm-hmm.
1:06:17 Ramit Sethi? Like, unbelievable. And in your case, Richard, if you need to, you could always go and live back for free. So you both have an enviable situation housing-wise.
1:06:28 Speaker 01 Correct.
1:06:29 Ramit Sethi? But you have only twenty-four thousand dollars in investments. And you're investing very little.
1:06:38 Speaker 01 Yeah.
1:06:38 Ramit Sethi? And if we run a calculation on how much you will have, I can show you, but it's gonna be very little. You have a pension?
1:06:45 Speaker 01 Yes.
1:06:46 Ramit Sethi? How much is the pension gonna pay you?
1:06:47 Speaker 01 Maybe eleven hundred a month.
1:06:50 Ramit Sethi? Okay.
1:06:50 Speaker 01 Twelve hundred a month.
1:06:51 Ramit Sethi? And just so everybody knows, you're currently making sixty-seven hundred a month gross. So to go from that to eleven hundred, what would you do?
1:06:58 Speaker 01 I wouldn't be able to afford to live or get a job.
1:07:01 Ramit Sethi? So right now, you don't have enough money to retire?
1:07:04 Speaker 01 Correct.
1:07:04 Ramit Sethi? You're not on track to have enough money.
1:07:07 Speaker 01 Right.
1:07:07 Ramit Sethi? So I guess I'm, I feel like from the reactions you're both giving me, I feel more alarmed for your situation than you are. Why is that?
1:07:14 Speaker 01 I've never had to really think about the future much, you know? It's more like you said, living the day.
1:07:20 Ramit Sethi? So here we are. What do you want to do? This is your chance.
1:07:25 Speaker 01 We want help.
1:07:26 Ramit Sethi? Okay, tell me what you want to do.
1:07:27 Speaker 01 I don't want to be seventy years old and working a second job.
1:07:30 Ramit Sethi? Right now, you're on track to do that.
1:07:31 Speaker 01 Yes. Um, so I need to start putting more money into my 401K.
1:07:36 Ramit Sethi? Mm-hmm.
1:07:37 Speaker 01 And investments.
1:07:37 Ramit Sethi? Mm-hmm. How are you gonna do that?
1:07:40 Speaker 01 I need to get some of my fixed costs down, so I have the money to put in there. If I didn't have the debt payments, but I do, so I don't know how to get those down besides just paying them off.
1:07:50 Ramit Sethi? Well, you could pay that off today if you wanted.
1:07:53 Speaker 01 With my fifty-eight thousand.
1:07:54 Ramit Sethi? Mm-hmm.
1:07:54 Speaker 01 Yes, which is what I did with my car. I don't think I can be in a better spot rent-wise, mortgage-wise, financially.
1:08:02 Ramit Sethi? I agree, even if you were to downsize to a two or three bedroom, you'd pretty much be paying the same.
1:08:06 Speaker 01 Right.
1:08:07 Ramit Sethi? But what about the basement that you spent nine thousand dollars on? Is there an opportunity there?
1:08:12 Speaker 01 There is an opportunity there. It's just finding some way to utilize that with somebody.
1:08:20 Ramit Sethi? Yeah, somebody you trust, I totally hear you on that.
1:08:22 Speaker 01 Mm-hmm.
1:08:22 Ramit Sethi? But getting aggressive, putting the word out, but if somebody were to come in, how much rent would they pay you?
1:08:30 Ramit Sethi? Eight hundred? Let's even say seven hundred.
1:08:32 Speaker 01 Okay.
1:08:34 Ramit Sethi? That changes the whole game.
1:08:35 Speaker 01 Absolutely, it does.
1:08:37 Ramit Sethi? Okay, so that's a huge lever you have to pull, as long as it is safe for your family.
1:08:42 Speaker 01 Right.
1:08:42 Ramit Sethi? Mm-hmm.
1:08:42 Speaker 01 Yeah, I have no problem with that.
1:08:44 Ramit Sethi? Okay, what else?
1:08:45 Speaker 01 Not pay for my kid's phone.
1:08:47 Ramit Sethi? Agreed. Every bit helps, just to show you, instead of one fifty, if we take it down to eighty, that drops you from seventy-seven percent fixed cost to seventy-five percent. So it actually is meaningful.
1:08:59 Speaker 01 Right.
1:09:00 Ramit Sethi? But what's more important about that? Can you imagine sending a text message to your kids and letting them know? They're gonna be responsible for covering their own phone?
1:09:09 Speaker 01 I try to help them out because to be on mine, it's cheaper than if they went on their own.
1:09:13 Ramit Sethi? Look, it's your money. You could do what you choose. It's your family. But the way you are currently managing your money, you will run out of money.
1:09:22 Speaker 01 Right.
1:09:24 Ramit Sethi? This is the easiest decision you will make out of the things that we're gonna talk about.
1:09:28 Speaker 01 Right.
1:09:29 Ramit Sethi? So would you be willing to do it?
1:09:31 Speaker 01 Yes, I would be willing to do it.
1:09:32 Ramit Sethi? Are you ready to turn the page on that chapter of them being little kids and you helping them with everything?
1:09:37 Speaker 01 Yes, I think it would be good for them.
1:09:40 Ramit Sethi? Can we do it right now? Can you send the text?
1:09:43 Speaker 01 Oh, boy.
1:09:47 Speaker 01 I mean, I will.
1:09:50 Ramit Sethi? Tell me what you're gonna say in this text message.
1:09:54 Speaker 01 Looking at my finances, it would be financially in my favor if everyone had their own phone plan and pay.
1:10:05 Ramit Sethi? Okay. Was that difficult?
1:10:07 Speaker 01 It's very difficult. Now I'm gonna cry.
1:10:11 Ramit Sethi? It's okay to cry.
1:10:15 Speaker 01 I just wanna help my kids.
1:10:18 Speaker 01 And I don't have a lot of money to help them. And that's really like
1:10:23 Speaker 01 small amount. And I do ask them for the money that they pay, but I just at least feel like I'm helping a little.
1:10:29 Ramit Sethi? I think everyone wants to take care of her kids, and that changes over time.
1:10:36 Ramit Sethi? Seems like you are providing a place for the whole family to come.
1:10:40 Speaker 02 That's kind of what the house is. That's kind of what that place, everybody gathers, grandkids, everybody, pool, yard, anything like that. That's the hub.
1:10:49 Ramit Sethi? So you are living that dream with this house?
1:10:53 Speaker 01 My house right now is my, I would say is my dream.
1:10:55 Ramit Sethi? Okay. In order to keep that dream, would you be willing to make other changes?
1:11:01 Speaker 01 Yes.
1:11:02 Ramit Sethi? Which ones?
1:11:04 Speaker 01 Um, like sell the camper, things like that.
1:11:08 Ramit Sethi? Okay.
1:11:09 Speaker 01 I can sell the camper.
1:11:10 Ramit Sethi? How much would you get?
1:11:12 Speaker 01 Somewhere between ten and twelve thousand.
1:11:14 Ramit Sethi? Let's say ten thousand. Ten thousand, what do you do with the money?
1:11:17 Speaker 01 I, that's where I'm not sure if I would put it into the house fund to make my mortgage go lower when I do buy it, or put it into 401K.
1:11:25 Ramit Sethi? Like, is anyone looking at the credit card debt here?
1:11:27 Speaker 01 Oh, definitely get rid of the credit cards and pay, pay back my 401K.
1:11:32 Ramit Sethi? Yeah, that would be good.
1:11:33 Speaker 01 Um, and then the rest, put into my savings.
1:11:37 Ramit Sethi? I think that you should probably be investing more and a lot more. And I think that you probably don't understand how investments work. And I'm gonna be willing to bet, both of you, you haven't read a book, my book, or anyone's book on personal finance, stuff like that, right?
1:11:55 Speaker 01 I've read the book.
1:11:56 Ramit Sethi? Yeah?
1:11:56 Speaker 01 Yeah.
1:11:56 Ramit Sethi? Oh, what'd it tell you?
1:11:58 Speaker 01 Well, it told me a lot of things, but I have to put it into play.
1:12:03 Ramit Sethi? This isn't a hypothetical life, this is your life. Either I want that and I'm going to do it, or I'm not. You can also say I'm not. I like the way it is, I don't want to make any changes, I want to pay the cellphone and keep the camper. I will respect that.
1:12:18 Speaker 01 No, I want to do it. And I will do it. I want savings. I, I want to get married.
1:12:23 Ramit Sethi? You guys talk a lot about what you want, but you don't talk about what you're willing to do.
1:12:26 Speaker 01 True.
1:12:27 Ramit Sethi? And I have a lot of compassion for both of the things that you've gone through in your journeys. I feel for that, because not everyone grows up learning about this stuff when you're a kid. But at a certain point, you have made decisions that have kept you here. And even when we have this time together, which I want to help you, you're reliving the past and you are telling me what you want. But kids want unicorns. That doesn't mean they're going to get them. And kids want everything.
1:12:59 Ramit Sethi? That's not a plan. So I'm begging you to tell me, what changes specifically are you willing to make? Let's start with Richard now.
1:13:09 Speaker 02 Sell the camper, um, ten, ten, five, eleven at most, pay your 401K, but you look at the money you're already putting into the camper. As far as like towing it, the expenses, the money that you would spend doing that. Put it where you want.
1:13:25 Ramit Sethi? Oh, wow. Okay, so normally during summer, let's just say you would spend, I'm gonna make it up, three hundred bucks a month on XYZ assorted expenses. So that's three months, that's nine hundred bucks you would have normally spent. You take that, three hundred bucks a month, and you, what?
1:13:40 Speaker 02 Put it, put it in your 401K, put it towards your wedding, put it in an emergency fund.
1:13:45 Ramit Sethi? It's either one of two things, save it or invest it. In your case, because you are starting later than most, but you still have time. Forty-eight years old and forty-three. So you have time, you have, you know, fifteen to twenty years to let money compound and grow. That's a long time before potentially you retire. For me, if I'm looking at, I'm investing aggressively. I'm finding an extra five thousand, six thousand, or more per year to be invested. And that's right there. I love what you said, nine hundred. Pull it, put it in there. Okay, what's next? Let's go back and forth.
1:14:21 Speaker 01 I need to stop buying stuff for my family.
1:14:25 Ramit Sethi? How?
1:14:26 Speaker 01 Well, the phones, like you said.
1:14:28 Ramit Sethi? Is that a done deal, or no?
1:14:32 Ramit Sethi? If you are serious about making these changes, you're probably going to make a series of changes to recalibrate the financial relationship between you and your loved ones.
1:14:43 Speaker 01 Correct.
1:14:43 Ramit Sethi? It's not just about the cellphone.
1:14:44 Speaker 01 Correct.
1:14:45 Ramit Sethi? So this is a great opportunity to let them know that you're going to recalibrate it. It's not just about the cellphone, because if it's just about the cellphone, then it's gonna be just about this and this, and they're just gonna feel like she's constantly just stabbing me.
1:14:59 Speaker 01 Yes.
1:15:00 Ramit Sethi? So let's set the tone. Hey, I'm in New York, I'm meeting with this guy. I've realized I need to make some big changes with my finances. The first thing that I'm gonna do is I'd like for each of you to be responsible for your own phone plan. And I'd like for you to switch over to your own plans by the end of the month.
1:15:27 Speaker 01 Okay, I'm in New York and meeting with me and I need to make some big financial changes. I would like you both to switch to your own phone plans.
1:15:39 Ramit Sethi? Mm-hmm. Before you send it, at the very end, put this. This is important to me. I love you.
1:15:46 Speaker 01 I'm like, I'm crying.
1:15:49 Speaker 01 Am I sending it?
1:15:49 Ramit Sethi? Yeah. Good work.
1:15:52 Speaker 01 You think I'm taking away their dog or something?
1:15:56 Ramit Sethi? It goes a lot deeper than just a cellphone bill, doesn't it? What is it to you?
1:16:02 Speaker 01 Being there for them.
1:16:05 Speaker 01 It was just me and them for a long time, like 11 years.
1:16:08 Ramit Sethi? Yeah.
1:16:10 Speaker 01 I went through a lot with the divorce, like emotionally. If it wasn't for them, I don't know how I would have gotten through it.
1:16:16 Ramit Sethi? You know you're still there for them. You're there physically. You're there emotionally.
1:16:23 Speaker 01 Yeah, I have a great relationship with them.
1:16:25 Ramit Sethi? Mom is mom. You're gonna be there. But you're going to change the dynamics. It's the same way every parent has done when they were little kids, you used to feed them. You don't feed them anymore, right? Same way that you used to pay for them to go back to school shopping. You don't do that anymore. And this is just another evolution of that. Okay, so what feels big to you, I get it, it feels big because you're just, it's just closing the door on one more chapter of parenting, but you are actually giving them the keys to start their own chapter. They're gonna figure things out now with their spouses and fiancés. They've got to figure it out, just as you're doing it right now.
1:17:10 Ramit Sethi? Not everybody has a chance to come to New York and talk to me and others. You had that chance. Now, you're passing that gift along to them. Yes, it's gonna be tough for them. It is. There's no doubt, especially with the incomes they make, the number of kids, it's gonna be tough.
1:17:24 Speaker 01 Yeah.
1:17:25 Ramit Sethi? But let's remember. They have a house that they can go to where mom, where grandma's there. They're loved.
1:17:32 Speaker 01 Mm-hmm.
1:17:34 Ramit Sethi? And a cellphone bill? They will figure out a way to make it work.
1:17:39 Speaker 01 Yeah.
1:17:40 Ramit Sethi? All right. Richard, what do you say? I noticed you were holding her hand during that process.
1:17:45 Speaker 02 It's a really big deal. Like, I know what family is to her. It's everything.
1:17:49 Ramit Sethi? Yeah, I kind of love watching the two of you. I love that you reached over and comforted her. And Dawn, I love that. I think when we were talking about the numbers, you were quite stoic, even though I was becoming alarmed. But this, this really tells me so much about you. It is family. And just the fact that it is so challenging for you to send this text message.
1:18:08 Speaker 01 Yeah. I've never realized that that would be so hard.
1:18:11 Ramit Sethi? Yeah.
1:18:12 Speaker 02 It's like kind of standing up. It's like me first.
1:18:16 Ramit Sethi? Yeah, that's right.
1:18:17 Speaker 01 I don't do that.
1:18:19 Ramit Sethi? That conversation was really hard for me, but it was 10 times harder for Dawn. Truthfully, looking back on the recording, I don't know if it was the right call. Think about it. Her daughters are engaged. They seem to be responsible. They have big families. They don't make a lot of money. Why are they being penalized? Let me tell you why I decided for Dawn to start with her daughters. They're grown up. They have their own families. And Dawn is my guest. Dawn, she's my focus today, along with Richard. Without making a change, it is a certainty that Dawn will run out of money. She doesn't have enough saved. She doesn't own a house. She is at extreme risk of living in poverty when she gets older. And I know that her saving $50 a month
1:19:05 Ramit Sethi? on cellphone bills will not materially change her financial situation. But I need her to take an action, a hard one, to show herself that she can put herself first. Also, I intentionally did not tackle her relationship with her son. The fact that she spoils him, that a 12-year-old essentially orders her around, that she has allowed him to control the financial dynamic at home, that goes much deeper than this. Scope of this show and that needs the help of a therapist. Back to Dawn, standing up for herself. What could be a new definition for you of who Dawn is going to be?
1:19:44 Speaker 01 Somebody that takes control of my own life. But is still there for my children and still a good mom.
1:19:52 Ramit Sethi? It's not a but, you're taking control of your life and you're going to continue to be there. But in a different way. You'll be there to hug them, you'll be there to talk to them, you're not going to be there to pay their bills.
1:20:04 Speaker 01 Right.
1:20:05 Ramit Sethi? And you're not probably going to be there with your son when it comes to what?
1:20:12 Speaker 01 Things that he wants every day.
1:20:13 Ramit Sethi? Yeah, that's going to be really challenging, right?
1:20:16 Speaker 01 It's going to be challenging, but I think it's going to be easier than sending that text. I think it's just the bond with my girls and like they they're in college and trying so hard and I do feel like I financially failed them. I wasn't able to pay for their colleges. You know, I look at like my brother's situation and he's done so well. His house is paid off. He paid for his kids to go to college. He's got a ton of, you know, money and savings and all in one income.
1:20:45 Speaker 01 I just wasn't able to give them any of that and I could have if I did things differently.
1:20:51 Ramit Sethi? Don't you think that's what we're doing right now? You can give them cellphone payment and you can do that for the rest of your life and put yourself into complete debt.
1:20:59 Speaker 01 Right.
1:20:59 Ramit Sethi? Or you can actually give them something even more valuable than 50 bucks a month. You can give them what I think is the opposite of a doormat is being a role model with money. Can you imagine they look and saying, wow, mom took total control of her money? Mom went through so much and look at now, her retirement account is growing. She feels confident and believe it or not, I guarantee your family will respect you when you start to have very clear boundaries of what you will and will not do. With your son, I think that that's probably outside of the scope of what we could talk about today. But I've noticed that there is no therapy on this as well. Is that something that the two of you have done before?
1:21:40 Speaker 01 Oh, yes.
1:21:41 Speaker 02 We're very big into mental health.
1:21:42 Ramit Sethi? Love it. I'm so happy. If you haven't already, although I assume you have, talking about the financial relationship with your son, is that something you could bring up comfortably in therapy?
1:21:52 Speaker 01 Yes.
1:21:53 Ramit Sethi? Highly encourage you to do that because you'll get some great tools to have conversations with him. And I think that will be fantastic.
1:22:00 Speaker 01 Yes.
1:22:00 Ramit Sethi? What about you, Richard? If you want to live together, then that makes it difficult for you to start a business or have the financial security in order to. You're investing zero, you're saving zero. So what's the plan?
1:22:17 Speaker 02 God, I can almost say like, not even pursue the business.
1:22:21 Ramit Sethi? Really?
1:22:23 Speaker 02 It's time. That's the balance issue with me. Where do you fit it all in as far as like house care and renovations and grinding a business?
1:22:32 Ramit Sethi? Maybe what's the point of the renovations? What if you stop doing that? What would you do instead?
1:22:38 Speaker 02 Probably that.
1:22:39 Ramit Sethi? What?
1:22:39 Speaker 02 The business, taking pictures, creating content, doing things for myself.
1:22:44 Ramit Sethi? All right. And if you do that, how long will you give it? And how much do you need to make to know if it's the right financial decision or not?
1:22:55 Speaker 02 That I don't know.
1:22:56 Ramit Sethi? Let's pick it.
1:22:57 Speaker 02 Enough to pay bills, obviously. I'd have to pay my bills first and foremost.
1:23:02 Ramit Sethi? If I were going to start a business, let's forget video, audio, it doesn't matter. It's just a business at a certain level. You currently make $3,500 a month.
1:23:09 Speaker 02 Yes.
1:23:10 Ramit Sethi? Okay, so that's like roughly 40K a year. Thing is like, we can start to make some choices about finances by just looking at the high level. We go making roughly 40K a year, you can make 20 bucks an hour. And I don't know what, you know, places around you pay for minimum wage and things like that. Probably what?
1:23:31 Speaker 01 Eighteen.
1:23:31 Ramit Sethi? Eighteen. So that's close to it. That's right there. You could make minimum wage and make similar to what you're making.
1:23:38 Ramit Sethi? No grinding, no nothing, just go to work and after work is done, you're over. But you're working, you know, full time. The real reason that I think there's so much confusion in your mind about what to choose is that there's no clear end goal. Like the two of you haven't talked about what is the actual lifestyle we want? Do we actually want to buy this house? If so, how much is it actually going to cost us? And when are we going to do it? That means you need to make this much and I need to make this much. That means we need to be contributing this much every month. Right now, it's, it's a lot of, you know, like, I'd like to do this and travel. You guys are in your 40s. So either you decide now or you just coast into the rest of your life and close off lots of doors.
1:24:22 Speaker 01 Right, which I don't want.
1:24:24 Ramit Sethi? Richard, for you, if, if I were in your situation, I would say, I have six months to be making more than I currently make at my job. Right now, I make 3,500 bucks a month. I need to be making 3,500 bucks a month within six months. Otherwise, close the business down. It's not working. And if you can make 3,500, you could probably make 5,000 and on and on and on. Set a time limit and an income goal because that forces me to be really specific about what I'm doing in my business. Otherwise, I'm just like doing random stuff and hoping one day it will take off. I don't have time for that.
1:25:00 Speaker 01 Right.
1:25:01 Ramit Sethi? I'm getting aggressive with my business. I'm getting aggressive with my finances. What do y'all notice about the way I'm talking?
1:25:07 Speaker 02 Confident. Aggressive.
1:25:10 Ramit Sethi? I'm gonna do this and, and hey, it won't always work, but if it doesn't work, here's my plan.
1:25:16 Speaker 01 Right.
1:25:17 Ramit Sethi? Close it down or change approach, et cetera, et cetera. Timeline, specific numbers. If you look back over the last 10 years, you know, financially speaking, what's changed? It, it sounds like you've gone through, well, you've gone through a lot of relationship changes and things like that, yes. But I want the next 10 years, I want you to be able to live this amazing life. Now, amazing might be different than what you envisioned when you were 20, but it, it, it might be, look, being able to be in your dream house and have your family over X, Y, Z times per year. Maybe it's not fighting about money. Maybe it's taking a camping trip. Fine, but you gotta be intentional about it. If it were me with the numbers, I would not combine my finances until I got married.
1:26:02 Ramit Sethi? I would not get married financially speaking until I had a shared vision about what we're gonna do. And the fact that you can't afford a wedding right now, I mean, this is where I think you need to start talking about compromises. I would never let the cost of a wedding get in the way of getting married. A wedding is a wedding. If I didn't have money when I got married, I still would have gotten married. I should have done it in a courthouse. If having a wedding in your fashion is important to you, fine. What choices are you willing to make to do it?
1:26:36 Ramit Sethi? So I would make the changes to cut this number down to roughly, you know, 60%. That would be difficult. That would involve raising incomes. In your case, Dawn, you mentioned that if you didn't have Richard, you would get a second job. I would hate to see a 48-year-old mom have to get a second job
1:26:57 Ramit Sethi? simply because of her inability to say no. It's like, let me just take on more and more and more so that I can just give, give, give to others. And then what happens to you?
1:27:08 Speaker 01 I get lost in it.
1:27:11 Ramit Sethi? You are lost in it. Nobody can get you out except you, not even me. I would increase my savings and my investments. I would take this house payment and I would say, look, I don't know if we're gonna get a house or not. But right now, what's more important is we have an emergency fund. That emergency fund is gonna be roughly 30K because that is six months of expenses. Again, I'm speaking jointly. I know you'd have to divide it for the two of you.
1:27:39 Speaker 01 Right.
1:27:40 Ramit Sethi? Richard, since you don't have any savings, that would be first priority for you is to build up those savings. And that is why you cannot afford to be paying a thousand dollars a month. There are a lot of things here that need to change if you two want to be financially secure, a lot. And it's difficult. We saw the text message, difficult. It's difficult gonna be for your son. It's gonna be really difficult for you. This is where the two of you can actually show that you are partners. And it's like, hey, I know this is so tough for you to say this. Let me help role play with you, what you're gonna say to your kids before they come over. Hey, I know it's tough for you to quit smoking. How can I help? How can I support? This is where partners can step up.
1:28:23 Speaker 01 Right.
1:28:23 Ramit Sethi? And you can do it together. But what's important is you've got to have a vision together. If we're going to get married, this is what it's going to take.
1:28:33 Speaker 01 Right.
1:28:33 Ramit Sethi? If I were in your position, I would be putting a lot more money towards investments than savings.
1:28:39 Speaker 01 Okay.
1:28:39 Ramit Sethi? Why? Because savings make you very little. You need time for these investments to compound. Typically, historically, these numbers have returned roughly 7% per year after inflation and all that stuff. That doesn't sound like a lot, but it adds up to a lot. And that, and in your case, you're 48, presuming you retire at 65, 68. That number could turn out to be quite a bit. Would you like to see?
1:29:07 Speaker 01 Sure.
1:29:08 Ramit Sethi? All right.
1:29:08 Speaker 01 I'd love to see that.
1:29:09 Ramit Sethi? I'm gonna show you the math really quickly here. You have 25,000. You are putting in, let's say, 6,000.
1:29:14 Speaker 01 Okay.
1:29:15 Ramit Sethi? You wanna retire 65?
1:29:17 Speaker 01 That would be my goal, but I don't know if that's doable.
1:29:21 Ramit Sethi? All right, so you'll currently have $276,000. That means you will have $11,000 a year in income. Plus your extra 12,000, we're talking about $22,000 a year in income.
1:29:36 Speaker 01 Be hard to live on that.
1:29:37 Ramit Sethi? Can't live on that.
1:29:38 Speaker 01 You can't.
1:29:39 Ramit Sethi? What's going through your mind right now?
1:29:41 Speaker 01 I'm in a really bad place.
1:29:43 Ramit Sethi? You see why I've been in such a hurry? You can't live on this. It's not a good life. Can we make some changes?
1:29:50 Speaker 01 Yes.
1:29:52 Ramit Sethi? Instead of 6,000 a year, you put 12,000 a year. That's a thousand dollars a month. Okay? That's pre-tax, it's extra money you have, all of it to your 401K. Let's just say, keep it simple. 17 years, you're now at 474,000. It's growing. Still not enough.
1:30:08 Speaker 01 Right.
1:30:09 Ramit Sethi? What else could we do? Let's assume for the moment that you are not gonna buy a house.
1:30:13 Speaker 01 Okay.
1:30:14 Ramit Sethi? So we take 30K out of here and put it into the investments. Watch what happens. You're now at 569. All right.
1:30:25 Ramit Sethi? What else?
1:30:27 Speaker 01 Like put more money in?
1:30:28 Ramit Sethi? Yes, 18,000 a year. We're now at 767,000, which means you could have $30,000 of income. Plus, your pension plus social security.
1:30:40 Speaker 01 It's doable. I can live.
1:30:42 Ramit Sethi? You can live. You know what else you can do? You can stay working for a couple more years. Why don't we do that? Watch what happens. Instead of 767,000, a million bucks. You see what just happened? It grew a lot in three years. You're up to 40,000 a year in income, plus all that other stuff. Now, why? Because we're in a hurry.
1:31:00 Speaker 01 Mm-hmm.
1:31:01 Ramit Sethi? Compounding needs time. It's like cooking a turkey. You can't just do it in five minutes. That's why, that's why I'm getting so passionate about like, oh, are we talking about sending a text message? Like, send the text. We got bigger things to worry about. We need to be putting well over $1,000 a month into investments. We need to be decisive and making big moves with our money needs to become a regular thing. And these conversations that feel so existential right now, they're actually the tiniest conversations in the grand scheme of what's important. What's, what are you all taking away from this? Dawn?
1:31:35 Speaker 01 I just need to be more aggressive with what I do with my money and take control of it. I have to not make impulse decisions when it comes to, you know, my family and buying, even buying for myself in the house. I love to buy things for the house.
1:31:49 Ramit Sethi? Mm-hmm.
1:31:49 Speaker 01 Um, but I just have to look at my future more.
1:31:53 Ramit Sethi? Richard?
1:31:55 Speaker 02 Know about your money. Be more aware where you want it to go.
1:31:58 Ramit Sethi? Yes.
1:31:59 Speaker 02 Be more aggressive.
1:32:00 Ramit Sethi? I like that you said be aware of where you want to go. Because it's not enough to just be aware of what's going on today. We have to be aware of where we want to go. And in your case, because you have 20-plus years to do it. You have a chance to actually build a pretty healthy financial life.
1:32:21 Speaker 01 Right, right.
1:32:23 Ramit Sethi? In this calculation, I didn't even combine the two of you. If you were to combine, makes things even better.
1:32:30 Speaker 01 Oh, absolutely.
1:32:31 Ramit Sethi? But you can't combine it until you each get control of your money right now.
1:32:36 Ramit Sethi? The real issue with Dawn and Richard is that they don't believe they have agency or control over their lives. This is very common with people who grow up low income, who often see the world as happening to them, not as something they can influence. And this explains so much of some people's passive behavior with money. You'll hear them talking about their decisions and you'll say, "Why don't you just do X or Y?" And they'll have an answer for everything. You're basically playing financial whack-a-mole. And after a while, you realize there's a deep lack of agency. And it goes something like this. "Nothing I ever did made any difference, so why bother?"
1:33:21 Ramit Sethi? It's haunting, really, when you think about it. And these messages are passed down generationally. So even when you get someone trying to make a change, they often lack the basic fundamentals. Sometimes they try to make a change, but they end up fixating on how much money they're spending on groceries that week. This is where we really have to have compassion for the different ways that we grew up. I grew up knowing that I could make an impact on the world. It was an expectation. My parents told us, "Of course, you're going to college. Of course, you're going to get a good job. Of course, you're going to get As." That's an expectation. I knew that I could work and that I could get results. But that was taught to me from my parents,
1:34:05 Ramit Sethi? whose parents taught them, and on and on and on. And we have to remember that not everybody grew up the same way. In this conversation, I also wish I'd gotten to the retirement numbers earlier. It was only at the last minute that I showed Dawn these numbers. And did you see her reaction? She looked alarmed. All that talk about their situation, but it was only when she realized she'd have to live on a fraction of what she makes now that she sat up and realized she was in trouble. I want to thank Dawn and Richard for asking for help. I truly hope they're able to make the changes they need to. Time is not on their side, and if they want to live comfortably as they get older, they will need to make aggressive, sweeping changes very quickly.
1:34:50 Ramit Sethi? Let's hear what they have to say, starting with Dawn's follow-up.
1:34:54 Speaker 01 I guess Rich and I came into it thinking that it would be more of like a plan of what we're due to move forward, more like a idea or blueprint of what we are to put our finances together. So it doesn't feel like I'm paying all the house bills and he's just giving me money. We did come up with a solution. He is going to actually pay certain bills because the money he gives me doesn't go solely to rent, does have to go to food and electricity, things like that. So he is going to actually take on some of those bills and be responsible for those. So that takes a little weight off me. I don't have to ask him for the money. That did make us open up a conversation about that, and we were happy with the outcome of that.
1:35:37 Speaker 01 When it comes to my retirement, I did look into that, and I actually have a New York State pension, which is so much better than I thought. I am going to be putting into a 401K, but I get a pretty high percent of my top three years that I work for New York State. So looking at that now, I know how to actually navigate that. Rich has started putting money into his 401K, and so we are well on our way. So, thank you. Bye.
1:36:06 Ramit Sethi? Unfortunately, we never got a follow-up from Richard, even after my team reached out several times. And I have to tell you, I am very, very disappointed to hear that. Dawn and Richard, I'm wishing you the best.
1:36:21 Speaker 01 I would love to stay in touch and I would love for you to keep me updated. Thank you again for coming on the show.
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