252. "I’m 35, in debt, and spend everything I make"

Ramit Sethi of I Will Teach You To Be Rich talks to Lina, 35, and Mike, 28, a married couple living in South Florida with their 8-month-old son. Despite earning almost $200,000 annually, they've been entangled in debt since their wedding three years ago. They consistently make plans to conquer their financial woes but never follow through. Their debt has soared to over $750,000, and their fixed costs devour 98% of their take-home pay, leaving them with zero savings. Lina attributes their financial struggles to unexpected events, like her pregnancy, which led to her cutting back on work and an increased focus on comfort and convenience, regardless of the cost. Mike, an accountant, has largely deferred to Lina, resulting in a fractured approach to their shared finances. They both use "comfort" as a justification for their spending, avoiding "sacrifice," yet this mindset is driving them toward a financial cliff. Can Ramit help them confront their real numbers, bridge their communication gap, and finally unite as a financial team to build a rich life? In this episode we uncover: • Why Lina's comfort-first approach to spending is unsustainable • Mike’s "happy wife, happy life" approach to finances • The shocking reality of their $750,000 debt despite a high income • How Mike's "accountant" background has not helped their personal finances • The startling hidden costs of their lifestyle choices • Lina's upbringing with generational wealth and its impact on her money mindset • Mike's immigrant experience and its influence on his spending habits • The unspoken divide in their financial expectations and responsibilities • Ramit's direct challenge to their "comfort over sacrifice" mentality • A dramatic suggestion to overhaul their financial situation • Their raw and vulnerable discussion about making tough decisions • The moment Mike and Lina finally confront their financial reality Chapters: (00:00:00) Introduction (00:04:01) "We make plans and we never follow through" (00:09:00) Understanding their "comfort vs. sacrifice" mentality (00:18:40) Mike's "happy wife, happy life" approach (00:34:50) Unpacking their debt (00:40:11) "If we're a plane, we're about to crash" (00:46:00) Lina's privileged upbringing & generational wealth (01:00:21) Mike's immigrant story and mom's sacrifices (01:26:02) Confronting their high fixed costs and potential solutions (01:17:01) Mike and Lina's dramatic confrontation about spending habits (01:21:00) The power of a shared vision for their future (01:32:14) Follow-ups This episode is brought to you by: Leesa | Go to https://leesa.com for 20% off mattresses PLUS get an extra $50 off with promo code RAMIT, exclusive for my listeners LMNT | Get a free 8-count Sample Pack with any LMNT order at https://drinklmnt.com/RAMIT DeleteMe | Get 20% off all consumer plans when you go to https://joindeleteme.com/ramit and use promo code RAMIT at checkout Factor | Go to https://factormeals.com/ramit50OFF and use code RAMIT50OFF to get 50% off your first box, plus free breakfast for 1 year ZocDoc | Go to https://zocdoc.com/ramit to find and instantly book a top-rated doctor today #sponsored Connect with Ramit • Get my new book, Money For Couples • Get Money Coaching with Ramit • Download the Conscious Spending Plan • Listen to my book—now on Audible • Get my New York Times best-selling book • Get my no-numbers journal • Other episodes • Instagram • Twitter • YouTube If you or your partner get stressed spending $150 on dinner, or are covering up spending, I’d like to help. Apply to be coached for free on this podcast at iwt.com/apply

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Ramit Sethi?

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• 0:41Ramit Sethi?

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• 1:26Ramit Sethi?

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• 2:10Ramit Sethi?

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• 2:36Ramit Sethi?

  You said, "We are spending more than we're making, but we're over $100,000 in debt."

• 2:43Speaker 01

  I'm not very frugal. Comfort is not something that I'm going to cut back on.

• 2:47Speaker 02

  Once I have my mindset on something that I want, I'm very stubborn.

• 2:52Ramit Sethi?

  Lena, you mentioned you're the one on top of these numbers. How can you be on top of them if your fixed costs are at 98%?

• 2:58Speaker 01

  To me, it looks worse than what I feel. I kind of have like the sense of optimism that we're gonna be okay.

• 3:05Ramit Sethi?

  You've taken on some of those attitudes, which are like, "My family was wealthy, I'm gonna be wealthy. I'm not cutting back on freaking grocery delivery." You don't have the finances to actually make that feasible.

• 3:17Speaker 02

  If we're a plane, we're about to crash.

• 3:20Ramit Sethi?

  Yes.

• 3:21Speaker 01

  I'd rather go out and make more money than have to be home cooking every day.

• 3:26Ramit Sethi?

  Hold on. I didn't want to do this, but I'm gonna do this.

• 3:33Ramit Sethi?

  Today I'm speaking with Lena, who's 35, and Mike, who is 28. They're a married couple living in South Florida with their eight month old son. And together, they earn almost $200,000 a year. And yet, they've been in debt their entire marriage. They'll make plans to pay it off. They'll tell themselves it's different this time, but somehow it never is. If you've ever wondered how successful people with high incomes stay stuck in debt for years, this conversation will show you exactly how it happens. And if you don't earn $200,000 yet, I especially want you to listen to this episode to understand that just making more money won't solve all your money problems. I'm about to open up Lena and Mike's Conscious Spending Plan,

• 4:18Ramit Sethi?

  which breaks down their net worth. Income and where they spend. It's the same tool I use in every episode. If you want help with your own CSP, join my money coaching program at IWT.com/moneycoaching. Their assets $845,000. Investments $11,569. Savings $16,037. Debt $755,189, which gives them a total net worth of $117,417. Fixed costs 98%. That is a massive problem. Investments 6%. I'm not sure how that even makes sense. How do you get 98 plus 6? Savings are at 0. Guilt free spending -2%.

• 5:03Ramit Sethi?

  We know that's not true. Now, before we dive in, I want to give a quick shout out to our new listeners. Welcome to the show. Drop a comment below and let us know where you are tuning in from. And here's my question for you. Have you ever been in a relationship where you talked about making changes with money, but nothing actually ever changed? If so, tell me in the comments on YouTube or Spotify. Let me know what happened. I read every comment. Now, let's get started with Lena and Mike. Lena, in your application, you wrote something that caught my eye. You said, "We are spending more than we're making. We're over $100,000 in debt.

• 5:44Ramit Sethi?

  We talk about money, we make plans, and we never follow through."

• 5:52Speaker 01

  Last year, we were on our way to paying down our debts. We just got hit with like a massive curve ball, which was I got pregnant. And ever since that, all the debts that we were paying off and all these things that we were able to do kind of went down the drain and it became all about the baby to make sure that we were ready for when the baby got here and now that the baby's here, to make sure that the baby's comfortable.

• 6:19Ramit Sethi?

  And why don't you think you follow through?

• 6:21Speaker 01

  I feel like we talk about like what we need to do, but then individually, it just stays in the talk. So we don't hold each other accountable.

• 6:30Ramit Sethi?

  Why?

• 6:31Speaker 01

  Most of the things that I buy, the things that I purchase are things more so for comfort, like to make sure that our home is comfortable, that we're comfortable. Like, I don't, I'm not very frugal. Comfort is not something that I'm gonna cut back on. So, for example, our groceries, we don't go buy groceries. Like, I'd rather pay a premium and for them to bring the groceries here.

• 6:52Ramit Sethi?

  Okay, let me, let me pause you. Mike, what do you think?

• 6:55Speaker 02

  I don't wanna fully blame the, the baby. I did notice that there was an inclination towards choosing, hey, what's, what's the more efficient, what's the more comfortable way of getting this task done? Or the tendency that we have to choose comfort over, for lack of a better term, sacrifice. Having pre-made meals, whether it's Uber Eats, a prepaid service instead of actually cooking.

• 7:25Ramit Sethi?

  Okay, what, what do you both, you've used the word comfort a lot. What does comfort mean to you?

• 7:29Speaker 02

  To me, comfort is efficient use of time.

• 7:33Speaker 01

  For me, comfort is delegating tasks that I don't necessarily wanna do.

• 7:39Ramit Sethi?

  For example?

• 7:40Speaker 01

  Cooking. Just don't wanna do it. Cleaning, um, honestly, just don't wanna do it. Like, I prefer to spend that time working.

• 7:50Ramit Sethi?

  How do you know if you can afford to delegate or not?

• 7:54Speaker 01

  We're in the right, you can't?

• 7:57Ramit Sethi?

  Is, is that how you decide?

• 7:58Speaker 01

  Kind of, um, yeah, so I have like a set amount. And for me, that's my baseline, that's my zero. So, anything below that, like, we need to do something, emergency.

• 8:09Ramit Sethi?

  Does it work?

• 8:10Speaker 01

  Most of the time.

• 8:11Ramit Sethi?

  Didn't you tell me you're in a hundred thousand dollars of debt?

• 8:14Speaker 01

  Yeah, what we've done is kind of push, like, we'll get there. Like, we, we will pay it off. We will get there. So, we're kind of, I guess, future focused, thinking that our solution is going to come.

• 8:29Ramit Sethi?

  How long have the two of you been in debt?

• 8:30Speaker 01

  Oh, since we got married.

• 8:32Ramit Sethi?

  How long ago?

• 8:33Speaker 02

  Three years.

• 8:34Speaker 01

  Three years.

• 8:34Ramit Sethi?

  Were you in debt before you got married?

• 8:36Speaker 01

  We were, I wanna say maybe, like, not counting cars or anything like that, just, just debt, probably like twenty, forty thousand, which is-

• 8:46Ramit Sethi?

  Twenty, twenty, forty, which number? We already know it's not twenty.

• 8:51Speaker 01

  So I'm trying to think back. It was probably, I would say it split the difference. It was probably thirty, thirty thousand that we were in debt.

• 9:00Ramit Sethi?

  Okay, so you had tens of thousands of dollars of debt before the baby. Is it possible that the inclination to get in debt is not due solely to the baby?

• 9:16Speaker 01

  No, no, no, no, no. So I found you a few years ago when we had already made like a whole bunch of the mistakes that you're like, don't make this mistake. Like, we had already done that, right? Like, spending too much on a wedding, like, buying a house without really, like, looking at all these costs, all these different things that I was like, crap. Like, I wish I would have known before, right? Because I was brought up in a home where you need to have a home. You need to buy a home. You need to have this big wedding. For me, like, I would have eloped, and that's not an issue. But we have, we're Hispanic, we have big families, like, everybody needs to come and celebrate. So kind of being pressured into having this big wedding. And by the way, loved it, like, it's not a bad thing.

• 9:58Speaker 01

  But because of those things, we started accumulating, like, unnecessary debt. And then that's when I kind of found you on the Netflix show.

• 10:06Ramit Sethi?

  Okay, let me pause you.

• 10:07Speaker 01

  Yeah.

• 10:07Ramit Sethi?

  How much?

• 10:08Speaker 01

  Twenty thousand.

• 10:09Ramit Sethi?

  Twenty thousand in credit card debt for the wedding? Was there a point where you were like, wait, we can't do this? Or was it just like, this is how it's done?

• 10:17Speaker 01

  Yeah, just this is how it's done.

• 10:19Ramit Sethi?

  Okay. Now, you mentioned that the two of you make a plan to get out of debt, but you don't follow through.

• 10:27Speaker 01

  Correct.

• 10:28Ramit Sethi?

  Who is the one who makes the plan?

• 10:30Speaker 01

  Me.

• 10:30Ramit Sethi?

  You initiate the conversations about money and debt?

• 10:34Speaker 01

  Honestly, it's just me kind of telling Mike. And then him just kind of agreeing.

• 10:41Ramit Sethi?

  Okay. What's the first thing you say when it comes to a money conversation?

• 10:46Speaker 01

  Babe, we need to tighten up.

• 10:47Ramit Sethi?

  And then he goes, yeah, that sounds good, you're right. And then, and then what happens?

• 10:52Speaker 01

  Nothing.

• 10:53Ramit Sethi?

  Nothing.

• 10:54Speaker 02

  The depth of the discussion that we have is very surface level. This idea that we might not be comfortable with what it actually entails to tighten up.

• 11:10Speaker 02

  Because if, if a man... That we need to start cooking, we need to start cleaning, we need to start grocery shopping just for our given sake. Then that's something that I don't feel I would be comfortable with. And Lena would, Lena, please correct me if I'm wrong, would be comfortable with.

• 11:28Ramit Sethi?

  When you say you you don't feel you would be comfortable with, do you mean I don't want to do that?

• 11:33Speaker 01

  Mm hmm.

• 11:34Speaker 02

  Yeah.

• 11:35Speaker 01

  I don't want to do it is just kind of like a choice. It's just kind of become, I want to say like routine.

• 11:42Ramit Sethi?

  Mm hmm.

• 11:42Speaker 01

  One of these days it's gonna hit, but we're just not there yet.

• 11:46Ramit Sethi?

  Did you catch what Lena said at the end there? One of these days it's gonna hit, but we're just not there yet. It's kind of a very passive way of talking about life, isn't it? They've been in debt for three years. They've amassed over a hundred thousand dollars in consumer debt. And their plan is to wait for some future version of themselves to magically have the discipline that they don't have today. What really struck me actually was how much they use the word comfort. Comfort to them means not cooking. Comfort means not cleaning. Comfort means paying a premium to have groceries delivered. Personally, I don't mind paying for convenience. I really love it. I pay for lots of things in my life that make my life easier.

• 12:30Ramit Sethi?

  But if you're gonna pay for convenience, you have to be able to afford it. Now, here's the interesting part. If you go deeper, they have positioned comfort as the opposite of sacrifice. And who wants to sacrifice? Nobody. It's an almost unassailable position. That means that once you position the opposite of what you're doing as sacrifice or failure or even hard work, nobody wants to do that. You have already decided it's painful before you even start. It's like when people see paying taxes as losing. They feel like they are losing like taxation is theft. Personally, I see a huge tax bill as a sign that I was successful

• 13:11Ramit Sethi?

  and that I get to live in a society where poor people and middle class people can benefit from roads and medicine. Think about how you position the things in life because it has a profound effect on how you experience that life. For Lena and Mike, there's a huge middle ground between comfort and sacrifice. I think it's about making intentional choices based on what you can actually afford. So reframing that view of the world is going to be critical for them. But first, let me show you a specific example of just how much they are relying on consumer comforts.

• 13:44Speaker 01

  Two weeks ago, Mr. Comes up to me and, "Hey, I want an iPhone, what is it, 17, 18, whatever the heck?" And he's like, "What do you think? Is your phone working?" "Yeah." "Is it cracked?" "No." "So what do you need it for?" "Absolutely not. We could use that money to, for a lot of other things."

• 14:05Ramit Sethi?

  Wow. Lena, the voice of reason. Okay? And Mike, how did you take that?

• 14:10Speaker 01

  He has the iPhone.

• 14:12Ramit Sethi?

  Really? What is that, a 17 Pro Max?

• 14:15Speaker 02

  The Pro Max.

• 14:16Ramit Sethi?

  How much did it cost? Why is everybody so quiet when I ask? It's just a number.

• 14:21Speaker 01

  Because he didn't want to tell me. He hid it from me.

• 14:23Ramit Sethi?

  Oh, really?

• 14:24Speaker 02

  No, I did not.

• 14:26Ramit Sethi?

  How much did it cost? The hell's going on?

• 14:29Speaker 02

  $1,200.

• 14:30Ramit Sethi?

  Why are you so hesitant to share the number?

• 14:33Speaker 02

  Because I can't believe that that's how much it costs. And I still grab it. It's crazy.

• 14:38Ramit Sethi?

  Is it crazy? Why'd you do it?

• 14:41Speaker 02

  Because if somebody asked me, "Hey, what phone is that?" And I could tell them it's the 17.

• 14:45Ramit Sethi?

  Just hold up that phone again. I just want to take a look at that. Hold it right up tight to the camera. Wow, beautiful, beautiful phone. Love it. iPhone 17 Pro Max. What are you feeling right now?

• 14:58Speaker 02

  There is a degree of like affirmation, right, that I like.

• 15:03Ramit Sethi?

  That's an honest answer. Keep going.

• 15:06Speaker 02

  If I'm being transparent here, once I have my mindset on something that I want, I'm very stubborn.

• 15:13Ramit Sethi?

  Lena, do you feel included in his $1,200 purchase?

• 15:16Speaker 01

  Absolutely not. If anything, I feel even worse because I said no. And you went and did it, tried to convince me. I still said no, and you went and you did it anyways.

• 15:28Ramit Sethi?

  If we zoom out and we look at the roles that each of you play when it comes to money in your relationship, almost like your chess pieces on the board. Lena, what role do you play?

• 15:41Speaker 01

  Kind of like the organizer or the attempted organizer, kind of motherly in an aspect. I'm the one that has the budgets. I'm the one that, you know, tries to... Be as aware as possible.

• 15:55Ramit Sethi?

  All right. Mike, what role are you?

• 15:57Speaker 02

  It's it's almost like she tells me kind of, and I digest information. So if I gave an analogy to a chess piece, it'd probably be a pawn. There isn't a lot of back and forth, and that's because I know she's very well on top of our day to day.

• 16:14Ramit Sethi?

  She's on top of the family's numbers. Is that what you're saying?

• 16:17Speaker 02

  Our shared numbers.

• 16:19Ramit Sethi?

  How much debt did she just say that your family has?

• 16:22Speaker 02

  Hundred.

• 16:23Ramit Sethi?

  Is that on top of it?

• 16:24Speaker 02

  No.

• 16:25Ramit Sethi?

  This is kind of a recurring pattern. Have you noticed? There's like a very good explanation for certain things, like very rational reasons. And then we get to the end, I'm like, does it work? You're like, no, it totally does not work. What do you make of that?

• 16:38Speaker 01

  I think you're seeing like our relationship kind of in this little capsule. Where we always talk about the solutions and we're pretty smart people. We we have good ideas, but then we always revert back to what's comfortable and and how kind of we got together in our relationship. And I think that's what we're seeing, like just the cycle of like, oh, no, this is how we fix it. But we go back to, oh, no.

• 17:04Ramit Sethi?

  Mike?

• 17:05Speaker 02

  I just know that there's definitely something here that we're overlooking tremendously.

• 17:10Ramit Sethi?

  Okay, well, that's I appreciate that's why we're here. Is we always have a blind spot in our own lives, always. So that's why getting help, whether it's from a therapist, a trainer, a coach, whoever can be super helpful. What was it like creating the conscious spending plan together?

• 17:28Speaker 02

  Since Selena had all the numbers, it was basically like a copy and paste scenario.

• 17:33Ramit Sethi?

  And Mike, what did you do during this process?

• 17:36Speaker 02

  There were some back and forths.

• 17:37Ramit Sethi?

  Tell me.

• 17:38Speaker 02

  There was some discussion over the number. There was definitely some pushback that she felt uncomfortable with. So at that point, I'm like, okay, whatever the number is, that's the number, right? Happy wife, happy life.

• 17:52Ramit Sethi?

  I feel like there's a lot unspoken happening right now. Let's just tease it out. You guys are here, as well, talk about it. Mike, you've heard that phrase from where?

• 18:00Speaker 02

  My grandfather, my uncle, the male, the male role, role figures in my life.

• 18:07Ramit Sethi?

  Okay, and what does it mean?

• 18:09Speaker 02

  I give in into majority of arguments.

• 18:12Ramit Sethi?

  How long have you been doing this happy wife, happy life thing?

• 18:15Speaker 02

  Two, three years, maybe when we.

• 18:17Speaker 01

  Since I've been a wife. Yeah.

• 18:20Ramit Sethi?

  Right. Lena, how do you feel about this phrase, happy wife, happy life?

• 18:23Speaker 01

  There's a lot of like little contradicting things when it comes to like our relationship, and it's not every single facet. So happy wife, happy life kind of applies to like, oh, hey, babe, I want to hang out with the family. And he's like, yes, like, let's, let's go do what you want. Or can you bring me ice cream? Or like, he doesn't really like, he, he's very attentive. Um, and in that sense, happy wife, happy life, totally agree with it. But when it comes to kind of like decision making or, or like bigger things, for example, the iPhone or other examples that we've had in our relationship. Sure, he, he doesn't push back, but then he goes behind my back. So it's not, he's not trying to please me.

• 19:08Speaker 01

  He's not trying to make me happy.

• 19:10Ramit Sethi?

  Happy wife, happy life, right? I really hate this phrase. It is such a sitcom phrase. You've got the beleaguered husband who just wants his old ball and chain wife to get off his case and leave him alone. So how does he do it? Just agree with the wife. After all, happy wife, happy life. 10 years later, when I ask him what he likes to do for himself, his eyes dart around frantically, can't even remember what he likes to do. And then he whispers the only thing he can possibly imagine that might maybe make him happy. I would like a man cave with a bar. I hate this phrase. I don't simply want a happy wife. I want a happy relationship.

• 19:53Ramit Sethi?

  I want a happy me and a happy wife and a happy family. You know, a lot of the phrases that we use around money are very intellectually lazy. Money doesn't grow on trees. You can't take it with you. And this wretched happy life one. These phrases are repeated over and over, passed down by people who don't even understand how money works. Personally, I am on a mission to get people to understand the holistic part of money. Yeah, the tactical parts like saving and investing, but also the meaningful, almost spiritual aspects of what money represents in our lives. In Lena and Mike's case, look at the situation. He's handed over all the financial responsibilities to her and their debt has only grown. But as long as he believes this simplistic happy wife, happy life phrase,

• 20:38Ramit Sethi?

  he has wiped his hands clean of any responsibility. The crazy thing is he even goes behind your back and buys what he wants anyway. He did it with the iPhone. The irony is that the very men who say happy wife, happy life, almost never have happy wives. How could they? Nobody is happy if you just throw up your arms and say, do whatever you want. I am desperately wanting Americans, and especially American men, to grow a backbone around their finances. Now, we're about to dig into their conscious spending plan. I want to see some numbers. And if you want to follow along with your own numbers, download the free template at iwt.com/csp. Let's take a look at what their numbers really look like. Let's take a look at the numbers.

• 21:20Ramit Sethi?

  Lena, can you read off the word in bold and the number in full next to it for this entire box, please?

• 21:28Speaker 01

  Assets, 845,000. Investments, 11,569. Savings, 16,037. Debt, 755,189. Total net worth, 117,417.

• 21:45Ramit Sethi?

  All right, let's continue on to the income.

• 21:49Speaker 02

  Gross monthly income, 16,583.

• 21:52Ramit Sethi?

  16,583. That means that combined, your household makes $199,000 per year. By show of hands, who knew that number?

• 22:04Ramit Sethi?

  Lena's hand is up. Mike is, his hand is not.

• 22:08Speaker 02

  Nah.

• 22:08Ramit Sethi?

  Fifty percent. Okay, that's right along my statistics. Out of curiosity, Mike, what did you think that you made?

• 22:18Speaker 02

  One forty-nine.

• 22:19Ramit Sethi?

  Does it change the way you feel about money?

• 22:21Speaker 02

  No.

• 22:22Ramit Sethi?

  Fifty thousand dollars more than you thought you'd make. We just, we just rummaged around in the couch cushions and found fifty K a year. Doesn't change the way you feel.

• 22:31Speaker 02

  With that number, we're in the situation.

• 22:33Ramit Sethi?

  So what does that make you think?

• 22:35Speaker 02

  We would be in a much worse situation, making less, for sure.

• 22:40Ramit Sethi?

  Mm-hmm. I want to point out for everybody, this happens frequently. People constantly say, hey, if I just made twenty thousand dollars more, I would feel good about money. I wouldn't feel so scarce. But it happens over and over again, right in front of our eyes. Mike, you were just a perfect example. You're making fifty thousand dollars more than you thought. And it did not change a single thing for you about how you feel. The way we feel about money, highly uncorrelated with the amount in our bank. Okay, what do you think of a hundred ninety-nine thousand dollars as a household income? Lena, how would you describe that? Is it good, bad, high, low? What do you think?

• 23:15Speaker 01

  Typically, I would say that that's a decent income. We live in South Florida, which is very, very ridiculously expensive. So it's one of those things where it looks good, but in the reality of where we live, it's not as much as you would think.

• 23:35Speaker 02

  I agree.

• 23:35Ramit Sethi?

  How much would you need to make in order to have a good income?

• 23:39Speaker 01

  My goal is to get two hundred and fifty a year. And I think with that, and just allocate and being smarter, I think that would be manageable.

• 23:50Speaker 02

  I personally want over three hundred thousand.

• 23:53Ramit Sethi?

  I like asking this question because the answers I get are like all over the map, but they're always in the same direction, more. Looking at the incomes, one person makes nine thousand five hundred eighty-three dollars. Who's that?

• 24:07Speaker 01

  Mike.

• 24:08Ramit Sethi?

  Okay, Mike, what do you do for a living?

• 24:09Speaker 02

  I'm an accountant.

• 24:13Ramit Sethi?

  What the, is this serious? Okay. And then Lena, what do you do?

• 24:19Speaker 01

  I'm a licensed mental health counselor.

• 24:22Ramit Sethi?

  Is this for real?

• 24:23Speaker 02

  She likes to excel along. And I deal with numbers 12 hours out of the day.

• 24:30Speaker 01

  Comes on and turns his brain off.

• 24:31Speaker 02

  I turn my brain off, to be honest with me, and I shouldn't.

• 24:35Ramit Sethi?

  Mike, do you understand this stuff? The personal finance? I know accounting is different than personal finance. Do you understand personal finance?

• 24:41Speaker 02

  I don't wanna say fully.

• 24:42Ramit Sethi?

  Okay, that's a fair answer. And then Lena, you're a licensed mental health counselor?

• 24:48Speaker 01

  Yes.

• 24:51Ramit Sethi?

  Any of this stuff we're talking about today sound familiar to you?

• 24:54Speaker 01

  Uh, yeah.

• 24:56Ramit Sethi?

  Okay.

• 24:56Speaker 01

  The irony doesn't escape me.

• 24:59Ramit Sethi?

  Like, what would you tell a couple who is in a dire financial situation? They talk, but they never follow through.

• 25:05Speaker 01

  They needed an action plan. They need to sit together. They need to create accountability with each other.

• 25:10Ramit Sethi?

  All right. Wanna do that?

• 25:12Speaker 01

  Want to, yes.

• 25:13Ramit Sethi?

  Let's do it. All right, let's keep moving along on the CSP. Lena, you mentioned you're the one on top of these numbers. You're managing them. Tell me your fixed cost number, please.

• 25:24Speaker 01

  98%.

• 25:25Ramit Sethi?

  How can you be managing your numbers and on top of them if your fixed costs are at 98%? Serious question.

• 25:32Speaker 01

  The debt that we're in is just not manageable.

• 25:37Ramit Sethi?

  Yeah. But like, you said you have been managing it. You track it. You're the, I, I forget what you described it as, the sort of...

• 25:46Speaker 01

  Organizer.

• 25:47Ramit Sethi?

  Organizer.

• 25:50Ramit Sethi?

  But what value is the organizer if 98% of your take-home income is going to fixed costs?

• 25:55Speaker 01

  Last year,

• 25:58Speaker 01

  our fixed were still high, but it was at like a 70%, which was more manageable. Now, with me not working,

• 26:08Speaker 01

  as much because of having the baby and this past year, instead of organizer, I've been like, like a whole cover, right? Like, I've been just covering all the holes. And we've had to take out loans, which has brought us up to that number. And so like, now it's become to a, a level that, okay, this is not sustainable and, and something needs to get done.

• 26:28Ramit Sethi?

  Mike, where are you on this?

• 26:30Speaker 02

  I think... Not having income for six out of the last 10 months, it's not ideal at all. You personally asked me and I feel horrible about it.

• 26:43Ramit Sethi?

  What changes did you make once Lena went part-time?

• 26:47Speaker 01

  We didn't really make many changes.

• 26:50Speaker 02

  I think that's when we started leaning into, hey, are you comfortable, yes or no? Can this situation be managed easier, faster? And we did not consider the cost implications of that.

• 27:09Speaker 01

  So we did take out loans to cover, like the, I want to say, six months of no work. And that's how we've been able to, to kind of manage for this year. But then that's also why we're at 98%.

• 27:25Ramit Sethi?

  Mm-hmm. Can I point something out? When you have one manager, one money person in the relationship, already it's a big no-no. I talk about that in the new book. It's a big no-no for several reasons. You need both people to have skin in the game. One day, somebody might get hit by a bus and on and on and on. But you can also see the effects of having one money person, when that money person, for example, becomes pregnant, which is all encompassing, has to cut back on work for very rational reasons, makes perfect sense. But then that money person has a conflict of interest. As we can see here, Lena, you wanted to be comfortable, a word that you've both used. So what did you do? You actually started increasing your spending.

• 28:10Ramit Sethi?

  If there were two people working on the money, then the other manager might say, hey, wait a second, wait a second. We need to really look at these numbers. But Mike, you were absent. You were the pawn, you were just doing what she told you. And now she's like, I want more comfort, I want to spend more, we'll deal with it later. And Mike's like, ah, happy wife, happy life, I don't even know what these numbers are. Cool. Accurate or not?

• 28:31Speaker 01

  Very.

• 28:32Ramit Sethi?

  This is the problem, having one person being the money manager. Okay, at 98% of fixed costs, you are broke. Did you know that? Lena says yes. Mike is nodding as well. How long have you had 98% fixed costs?

• 28:49Speaker 01

  This whole year.

• 28:50Ramit Sethi?

  All right, let's keep moving along on the CSP. We have $199,000 a year in income. We have 98% of fixed costs, which means you're spending more than you make every single month. Investments, how much are you contributing per month?

• 29:02Speaker 01

  What is it, like 10% Mike?

• 29:04Speaker 02

  Uh, 6%, 6%.

• 29:06Ramit Sethi?

  Your savings are at zero, but you do have $16,000 saved. And finally, guilt-free spending is at negative 2%, which we know is not true. What is that number actually? Do you have any idea?

• 29:21Speaker 01

  So I would estimate 900 for food.

• 29:25Ramit Sethi?

  Okay.

• 29:25Speaker 01

  We're big food people.

• 29:27Ramit Sethi?

  Oh, you are? Hold on, what the?

• 29:30Speaker 01

  We eat in a lot. We order more than we go out.

• 29:33Ramit Sethi?

  Uh, order means what? Like Uber Eats?

• 29:36Speaker 01

  Yeah.

• 29:37Ramit Sethi?

  Guys, that counts as eating out.

• 29:40Speaker 01

  Eating out in Miami, we're talking like $300, $400 one night. That's what eating out is, because that's a restaurant in Miami, that's a few drinks, that's appetizer, whatever. Versus eating in or like ordering in, where there's not this whole experience. To me, it's different. There's a distinction there. And we're not spending $400. We'll spend like anywhere between 50 and 100.

• 30:05Ramit Sethi?

  Lena, did you really think that was gonna work on me?

• 30:08Speaker 01

  I'm just saying that that's where my brain was at.

• 30:10Ramit Sethi?

  Your brain is wrong.

• 30:12Speaker 01

  Okay.

• 30:12Ramit Sethi?

  Are we gonna get real about these numbers? We haven't even looked at the total amounts yet. Are we gonna get real or not?

• 30:17Speaker 01

  Absolutely.

• 30:18Ramit Sethi?

  All right. Food is 900 a month. That's eating in and eating out.

• 30:23Speaker 01

  Yeah, both. Ordering and going out.

• 30:26Ramit Sethi?

  Okay. What else?

• 30:28Speaker 01

  I might get a little impulsive and buy something like on Amazon that's not necessary. Or he will get impulsive and buy more shoes.

• 30:38Speaker 02

  I had at one point shoes in that category, but I sense I've taken that out.

• 30:44Ramit Sethi?

  What else?

• 30:45Speaker 02

  Gym, supplements.

• 30:48Ramit Sethi?

  Supplements? Okay, how much for those?

• 30:50Speaker 02

  Anywhere from 150 to 200.

• 30:53Ramit Sethi?

  200 a month?

• 30:54Speaker 02

  Yeah.

• 30:55Speaker 01

  I didn't even know we spent that much on it.

• 30:57Ramit Sethi?

  Self-care? Either of you? No.

• 31:01Speaker 02

  Self-care now. For me, my self-care is my gym and my supplement.

• 31:07Speaker 01

  The barber shop, like?

• 31:08Speaker 02

  Barber shop.

• 31:10Speaker 01

  Sixty, what, sixty dollars a month?

• 31:12Speaker 02

  Sixty bucks.

• 31:13Ramit Sethi?

  How often do people get haircuts?

• 31:15Speaker 02

  Once, I do once a month. There's people that do weekly.

• 31:18Ramit Sethi?

  How much is your gym? You mentioned it a couple of times?

• 31:20Speaker 02

  Two hundred dollars.

• 31:21Ramit Sethi?

  Two hundred dollars, alright, fine.

• 31:22Speaker 01

  And like, small miscellaneous stuff, but, like the, the, for example, formula, the, the dog food, wipes, diapers.

• 31:33Ramit Sethi?

  I don't, I don't count that. I count that as fixed costs. I'm struck by the lack of urgency that they have. We just went through some alarming numbers. Ninety-eight percent fixed costs, zero savings contributions. They are spending more than they make every single month. They say that things are bad, but their energy does not match the severity of the situation. When someone finally sees their actual financial reality, and it's bad, but they have no emotional reaction, that tells me they probably don't fully understand what those numbers mean. And it also tells me it hasn't gotten bad enough for them to actually truly change. Neither of those is good.

• 32:17Ramit Sethi?

  Watch what happens now when I push them to confront reality. If we take a look at your CSP, there's some very interesting numbers I want to draw your attention to. First off, your savings, sixteen thousand dollars, that represents one point five months of savings. Meaning if something went wrong, y'all can survive about a month and a half.

• 32:42Speaker 01

  Correct.

• 32:42Ramit Sethi?

  You have a baby. How do you feel about that?

• 32:44Speaker 01

  That is terrible.

• 32:46Ramit Sethi?

  That would be scary to me.

• 32:48Speaker 01

  Very.

• 32:48Ramit Sethi?

  You know, people talk about being able to sleep, go to sleep fast, or like, sleep, whatever that phrase is. I couldn't sleep if I had a little baby and one point five months of savings with high costs. Next, I couldn't sleep if I was spending more than I make every single month. Let's take a look at your housing costs. What is going into the 98%? Well, $5,300, which is 34% of gross or 55% of take-home pay. What do you make of that?

• 33:20Speaker 01

  Pretty high.

• 33:21Ramit Sethi?

  You know, the overall guidance is you want to have your housing costs, total housing costs, below 28% of gross income. You have $199,000, so it could be feasible for you, but even still, you're at 34%. You could make it work. You could. The problem is each percentage you go up above that becomes increasingly risky. It's less money to put towards savings, towards investment, towards guilt-free spending. And then on top of that, we add in $3,000 per month for debt payments. Talk to me about the debt. You've got $755,000 of debt. Can you break it down?

• 34:00Speaker 01

  Yes.

• 34:01Ramit Sethi?

  Okay, I see $555,000 for the mortgage. The next number is $100,000.

• 34:09Speaker 01

  That one's the loans that we currently have.

• 34:13Ramit Sethi?

  What kind of loan?

• 34:14Speaker 01

  So those are personal loans that we took out.

• 34:17Ramit Sethi?

  What's the interest rate?

• 34:18Speaker 01

  15.5%.

• 34:21Ramit Sethi?

  15.5%, okay. And then you have $50,000?

• 34:23Speaker 01

  That would be my student loans.

• 34:26Ramit Sethi?

  And then what's the last $50,000? My student loans. What's your interest rate on your mortgage?

• 34:32Speaker 01

  6.625%.

• 34:34Ramit Sethi?

  6.625%. You know, can I just tell you something? Like, if this were my CSP, there's only a few key numbers that I would care about.

• 34:45Speaker 01

  Like the percentages?

• 34:46Ramit Sethi?

  Yeah, all the debt. All the debt, I would know the percentages, meaning the interest rates. You know, they have those scary movies where somebody goes into the bathroom and it's all steamed up and there's somebody who wrote something in lipstick. It's like, I'm going to kill you. That's not what my mirror would say. My mirror would say $555,000 at 6.625%. Every morning, I would be like, ah! I would know those numbers. Next up, I'll show you the other numbers I would know. I would know this number, 98%. Because that is the number that I care about right now. It is drowning me.

• 35:25Speaker 01

  Correct.

• 35:26Ramit Sethi?

  And Mike, you're silent, which is actually a good metaphor for your presence when it comes to money in your relationship, right?

• 35:33Speaker 02

  I agree.

• 35:34Ramit Sethi?

  Do you all have a car loan?

• 35:36Speaker 01

  Yes.

• 35:36Ramit Sethi?

  Where's that? I didn't see that in the debt.

• 35:39Speaker 01

  Oh, we need to add that. Mine is $10,000.

• 35:42Speaker 02

  Mine is, I think, 25, ballparking.

• 35:47Ramit Sethi?

  What kind of cars you both drive?

• 35:48Speaker 01

  I have a Chevy Equinox.

• 35:50Ramit Sethi?

  Okay.

• 35:51Speaker 01

  2021.

• 35:53Speaker 02

  And I have a Tesla Model 3, 2022.

• 35:56Ramit Sethi?

  Do you know your debt payoff date?

• 36:00Speaker 01

  Like, late 2027, I believe.

• 36:03Ramit Sethi?

  I don't think so. I think it's past that.

• 36:05Speaker 01

  Probably past, but okay, I'll check.

• 36:07Ramit Sethi?

  The cars themselves will take over four years. You're paying almost $5,000 in interest for the cars. Your personal loan will take three and a half years. You're paying $30,000 in interest. Your student loans, I believe you're not paying at least one, maybe both.

• 36:27Speaker 01

  I'm not paying it. I don't have to.

• 36:29Ramit Sethi?

  Someday you will, right?

• 36:31Speaker 01

  Yeah, eventually, but I'm hoping that it's so far in the future that we're in a better position to pay it off.

• 36:38Ramit Sethi?

  How would you be in a better position specifically?

• 36:42Speaker 01

  Paying down the debt and our CSP would look different.

• 36:46Ramit Sethi?

  The amount you're paying on the personal loan, are you paying the minimum?

• 36:52Speaker 01

  Yeah.

• 36:53Ramit Sethi?

  I think you guys have put yourself in a very tough position. What do you both think about the numbers?

• 36:59Speaker 01

  We need to fix it. I think that they reflect just like poor management.

• 37:05Ramit Sethi?

  Who's poor management?

• 37:06Speaker 01

  Ours.

• 37:07Speaker 02

  Ours.

• 37:08Ramit Sethi?

  And what do you feel looking at the numbers, Lena?

• 37:11Speaker 01

  Doesn't feel great. I'll also say that it kind of surprises me in the sense that it looks worse than what I feel.

• 37:21Ramit Sethi?

  Tell me about that.

• 37:22Speaker 01

  To me, it looks worse than what I feel. And it's always because I kind of have like the sense of optimism, I don't know, delusion that we're gonna be okay.

• 37:33Speaker 01

  Like no matter what, we're gonna be okay. And I think sometimes that that feeling or that mentality helps me in in a lot of situations. And sometimes it can definitely hinder me in some.

• 37:47Ramit Sethi?

  Is it helping or hindering you now?

• 37:49Speaker 01

  Right now, when it comes to our finances, I think it's hurting.

• 37:53Ramit Sethi?

  Okay. What's a different way to approach your money if not unbounded optimism?

• 38:00Speaker 01

  More sense of like urgency?

• 38:05Ramit Sethi?

  Is there currently any urgency around your money?

• 38:07Speaker 01

  There should be.

• 38:08Ramit Sethi?

  Not what I asked.

• 38:09Speaker 01

  Yes, but I don't feel it's as high as it should be.

• 38:12Ramit Sethi?

  What's the example of a sense of urgency?

• 38:15Speaker 01

  Like, we need to make these changes and act on them now.

• 38:22Ramit Sethi?

  If that were true, which I believe you, then isn't it feasible that you could dramatically cut your costs?

• 38:30Speaker 01

  Oh, absolutely.

• 38:31Ramit Sethi?

  Oh, so what are we doing here?

• 38:33Speaker 01

  I can definitely cut costs. It's just very difficult if I don't have my teammate on the same page with me.

• 38:43Ramit Sethi?

  The happy wife, happy life guy?

• 38:45Speaker 01

  Yes.

• 38:46Ramit Sethi?

  Okay, so tell him, tell him what you want.

• 38:48Speaker 01

  I want a teammate. I want somebody to help. I want somebody that sees the numbers, worries about them just as much as I do, and puts, you know, an action plan together with me.

• 38:58Ramit Sethi?

  Mike?

• 38:59Speaker 02

  I feel there and that aspect. I agree with her.

• 39:04Ramit Sethi?

  Keep going.

• 39:05Speaker 02

  I can't excuse myself with the whole idea of like, oh, I work with numbers on an everyday basis and therefore I don't want. No, this is our life that we're talking about here.

• 39:18Speaker 02

  And not just ours or SARS life. So I hear you.

• 39:23Ramit Sethi?

  What do you think of these numbers when you see them?

• 39:24Speaker 02

  I want to vomit.

• 39:26Ramit Sethi?

  Why?

• 39:27Speaker 02

  Because it's it's a presentation of the runway we have. And if we're a plane, we're about to crash.

• 39:35Ramit Sethi?

  Yes.

• 39:36Speaker 02

  We don't have enough time to take off.

• 39:38Ramit Sethi?

  And what do you feel when you look at those numbers?

• 39:40Speaker 02

  Right now, if you looked at my heart rate, beating pretty fast.

• 39:45Ramit Sethi?

  Yeah. Tell me what's going on. What are you feeling?

• 39:48Speaker 02

  Like something needs to needs to change like yesterday.

• 39:52Ramit Sethi?

  Are you feeling? Alarmed, worried, embarrassed?

• 39:58Speaker 02

  Embarrassed. Disappointed in myself.

• 40:02Ramit Sethi?

  Go on, why?

• 40:03Speaker 02

  Cause I let down my partner.

• 40:05Ramit Sethi?

  Okay. Do you feel disappointed in Lena?

• 40:08Speaker 02

  No. Quite the contrary, yes, sense of gratitude because she's had to take a lot. And I know that there is a level of control that she enjoys and she likes and she likes to have. But sitting back and digesting everything. As we're talking, it's almost like I'm doing another service in allowing her to do that.

• 40:28Ramit Sethi?

  She's been trying to tell you, right?

• 40:30Speaker 02

  Yeah.

• 40:31Ramit Sethi?

  Why have you not listened?

• 40:34Speaker 02

  I think my optimism is like, yeah, well, we'll figure it out. And that isn't right at all. That should have never been my mindset.

• 40:45Ramit Sethi?

  Let's try to keep digging. I feel there's more beneath the surface. Does anybody else feel that way? Mike's hand is up. Lena?

• 40:54Speaker 01

  Sure.

• 40:55Ramit Sethi?

  Okay. Mike just said, "We're a plane about to crash. We don't have enough time to take off." I actually find this remarkable. It's the first time either of them has truly acknowledged how dire their situation is. Now, here's something I need to point out. In their application, Lena said they had over $100,000 in debt. The reality is they have over $750,000 of debt. She minimized the problem by a factor of seven. Mike didn't even know they made $199,000 this year. Lena said, "The numbers look worse than I feel." It's like they've been living in a fog of delusional optimism, telling themselves, "We'll figure it out later."

• 41:39Ramit Sethi?

  But they've been doing that for three years straight. What I noticed, though, is that something just shifted. Mike is finally feeling it. His heart rate is up. He's embarrassed. He said he's let down his partner. I'm glad. I'm not here for people to simply feel good. I'm here to help them live a rich life. And sometimes change requires you to face reality. Sometimes change is hard. Lena just told him exactly what she needs. A teammate, someone who sees the numbers and worries about them, or at least focuses on them as much as she does. If you feel that you and maybe your partner are not on the same page about money, if you want help to create a plan that you will actually follow through on together,

• 42:23Ramit Sethi?

  that's exactly what my money coaching program is designed to do. Check it out at iwt.com/moneycoaching. Now, I can feel that there's something else beneath the surface here. I want to dive deeper. I need to go back to where they first learned about money. Let's do that now. I want to understand more about where this unbridled optimism comes from. Lena, what do you remember your family saying about money when you were younger?

• 42:51Speaker 01

  There was never really no. I was very privileged, honestly. When I was born, my parents didn't have a lot, but they built a company together. And I was privileged enough to go to like private schools. I was privileged enough to have a car when I was 16. I was privileged enough to travel the world with my parents. So very seldomly did we ever hear like a no to any of the things that definitely not a no to any of the things that we needed and very seldomly to the things that we wanted. My parents have always been extremely generous.

• 43:24Ramit Sethi?

  Have they given you money as an adult?

• 43:26Speaker 01

  Yes, for example, my dad helped us buy this house.

• 43:29Ramit Sethi?

  How much?

• 43:31Speaker 01

  He gifted us a hundred?

• 43:33Ramit Sethi?

  Thousand?

• 43:34Speaker 01

  Yeah.

• 43:35Ramit Sethi?

  Okay, that's helpful to know. What else as an adult?

• 43:38Speaker 01

  My first apartment, my dad helped me out with with that. But we have it kind of like in a trust. It's a family thing. Those have been like the biggest things.

• 43:46Ramit Sethi?

  Do you know how much you're going to get in your trust and when?

• 43:50Speaker 01

  Yeah.

• 43:50Ramit Sethi?

  And is it a lot?

• 43:52Speaker 01

  Yeah.

• 43:53Ramit Sethi?

  Are you comfortable sharing the amount?

• 43:55Speaker 01

  It'd probably be over, over a billion.

• 43:59Ramit Sethi?

  Over a million, okay. And, and is that when your parents pass or before?

• 44:05Speaker 01

  Not at all, in, in any event of them passing. Of him passing.

• 44:11Ramit Sethi?

  What effect do you think that growing up privileged and rarely being told no has had on your relationship with money?

• 44:22Speaker 01

  Well, I think that's where a lot of like this optimism kind of comes from because I haven't failed. I haven't had the opportunity to fail. Like I've always had my parents backing and like right now, worst case scenario, we would move in back with my parents. So like

• 44:42Speaker 01

  they've always had my back. Like I never hit the floor. They're always there to catch me.

• 44:47Ramit Sethi?

  And is your mom, are they still together and is she still alive?

• 44:51Speaker 01

  Yes and yes.

• 44:52Ramit Sethi?

  Okay, cool. What's her relationship with money?

• 44:55Speaker 01

  Same. So they built the company together. My mom, both my parents are incredibly, incredibly hardworking. We do value comfort, so.

• 45:06Ramit Sethi?

  Oh, is that a word that you use in your family?

• 45:08Speaker 01

  Well, we just say that we don't want to do stuff.

• 45:11Ramit Sethi?

  Tell me more.

• 45:12Speaker 01

  Yeah, like my mom hates cooking, so no quiero, I don't want to.

• 45:17Ramit Sethi?

  Yeah, so she doesn't?

• 45:20Speaker 01

  So she doesn't know. We had a live-in person with us that would cook and clean and stuff.

• 45:26Ramit Sethi?

  I'm a little surprised. Are you sure it's not more than a million? Just the way you're describing how you grew up, it sounds like it would actually be a lot more than that.

• 45:33Speaker 01

  Probably.

• 45:34Ramit Sethi?

  Like, how much more? Because I don't think it's a million. I think it's.

• 45:39Speaker 01

  But I have my brothers and stuff, like everything's gonna be split.

• 45:42Ramit Sethi?

  What, do you have like forty brothers? Because there's no way.

• 45:45Speaker 01

  Three.

• 45:46Ramit Sethi?

  Three brothers. It's more than a million. Just the way you're talking, I can tell. It's important because if it's one million versus five million versus twenty million, that actually dramatically affects why you are making some of the decisions. That's why I'm asking.

• 46:01Speaker 01

  Yeah.

• 46:02Ramit Sethi?

  Do you have a sense of what is the range you might realistically inherit?

• 46:06Speaker 01

  Maybe closer to the two million because it'd be kind of like I'm dividing like the ten between the four of us. Roughly like two, two and a half, something like that.

• 46:16Ramit Sethi?

  I assume the money is invested and it's growing. So over the next seven or so years, it would double. And then again.

• 46:25Speaker 01

  Well, yeah, I'd have to see what type of because he has majority is real estate investments. Um, and then like some annuities. So it's more of like a fixed fixed growth rate versus like an S and P or anything like that.

• 46:39Ramit Sethi?

  Who is his wealth advisor?

• 46:42Speaker 01

  We're very Hispanic, so he just has a guy.

• 46:45Ramit Sethi?

  Even worse. He has a guy who sold him annuities. $10 million of net worth and he has a guy. Holy. Did your parents immigrate here?

• 46:56Speaker 01

  Not my mom. She's Puerto Rican, so she's American, but my dad came from Colombia. Yeah.

• 47:02Ramit Sethi?

  And where did they meet?

• 47:04Speaker 01

  They met in Texas and got together. That was a whole drama, went to New York, had me and then came to Miami where there was more opportunity of building the company that they wanted.

• 47:14Ramit Sethi?

  This is quite an amazing story. So your dad immigrates here. Your mom moves from Puerto Rico. They meet in Texas, they build fantastic amount of wealth. They have children and they decide like, hey, we don't want to cook. We're not going to cook. We earn enough to not have to cook. I'm all for it. I have no problems. I love hearing this story. They created something amazing. I love it. And then they share that privilege with their kids. Also, totally cool. What's the point of money? It's not to simply hoard it. It's to create a rich life. You grew up, as you put it, privileged. Do you want to continue that level of lifestyle?

• 47:58Ramit Sethi?

  Do you want to increase it or do you want to decrease it?

• 48:01Speaker 01

  No. At the very minimum, same. The same. Um, but ideally I want to increase it.

• 48:09Ramit Sethi?

  As you got older, what did your parents teach you about their journey to building wealth?

• 48:16Speaker 01

  So my dad tried to teach me, not so much teach me, but just do it for me and give it to me. So for example, he's the one that went in and opened up a Roth IRA. And like here, this is how much you're going to put in a month, but he never explained like why. I don't, I don't really even think that he understood. He just knew that this is something that you do. So it's always been like, okay, we buy a home because that's something that you do. Right? You buy a car, not lease it because it's something that you do. You have a Roth IRA or 401k because it's something that like it's. It's not questioned, or it's not explained.

• 48:53Ramit Sethi?

  What I'm noticing is your dad accumulated wealth, your mom and dad. They don't really understand how it works. But they did observe some healthy behaviors. They passed those on to you. You also may not have learned why. So you're basically copying what your dad did for you, didn't even explain it. No, and it's like a game of telephone. No one is really understanding what's happening. Now imagine you do the same thing for your son. Paint the picture for me.

• 49:23Speaker 01

  Like if it continues to be a copy paste, he grows up and he learns the very limited amount that we know. He wouldn't question it, just kind of do it. And he'd be stuck, honestly, he'd get stuck.

• 49:39Ramit Sethi?

  He would be operating from a playbook that his grandfather, who immigrated from Colombia,

• 49:46Ramit Sethi?

  did. Obviously not taking into account the theory behind money, how it actually, just literally copy pasting. I think it's a beautiful way you put it.

• 49:55Speaker 01

  Yeah.

• 49:56Ramit Sethi?

  There's gotta be more. You know, some wealthy families, they simply decide, we're wealthy, our kids are going to be wealthy. That's never going to change. And they behave accordingly. This happens a lot, like in India, for example, and many other countries. If you're wealthy, you're often institutionally wealthy. Like you own the oil company in your country. And in many ways, some of these families are like, why the are we going to teach our kid how to like,

• 50:31Ramit Sethi?

  choose the cheaper item at McDonald's? They are never going to have to do that. And in some ways, Lena, I suspect that is how your family raised you. I see you nodding your head. Would you agree?

• 50:42Speaker 01

  Yeah, 100%.

• 50:44Ramit Sethi?

  There are cultures all around the world with immense generational wealth, where it actually makes very little financial sense for them to learn how to cook or clean. Like, if you live in one of these cultures and you are generationally wealthy, you are never going to clean a toilet in your entire life. You have three maids who live with you. That's going to be your life, your kid's life, your grandkid's life. And I think it's important to acknowledge this because the way we look at wealth in different cultural contexts informs the way that we feel about money and certainly the way we treat it. Like, think about America. We love these pithy little sayings. Shirt sleeves to shirt sleeves in three generations. This is a very common phrase in wealth management in America.

• 51:28Ramit Sethi?

  It means the first generation works hard, makes the money. The second generation spends it. And the third generation loses it all and ends back right where they started, in shirt sleeves, working with their hands. These are cultural invisible scripts. In America, we're terrified that if you make a lot of money, the next generation is going to waste it. So what do we do? In our litigious, legal-based society, we create trusts. We send our kids to wealth camp. And we encourage them to get a summer job, but at an art gallery, not working at Burger King. It's a very Western approach. In other countries, the approach is going to be completely different. You're going to be rich. Your kids are going to be rich. Their kids are going to be rich. We're going to leave you a house. We have this vacation house. There's a bunch of money. And we're not going to talk about it. Why pretend?

• 52:13Ramit Sethi?

  You don't need to work as a delivery driver because you're never going to go without money. Now, each of these approaches has pluses and minuses to it. But if you are not aware of the cultural context or the story that you're operating under, you might be playing a different game than you thought. I can tell Lena's parents are probably operating under South American customs. But Lena and Mike live in America. All the stuff they're dealing with here is US-based. But the parents didn't teach why they were doing any of it. I don't really blame the parents. I mean, what does it matter if I do? It's irrelevant. Young kids never ask to learn. Why would they? The money keeps coming in. And so the whole invisible dynamic works until it doesn't. Right now, it is obviously not working for Lena and Mike.

• 52:58Ramit Sethi?

  So let's keep going. You talk to your parents about money? Today?

• 53:02Speaker 01

  Yeah, me and my parents have a very, very open, candid conversation. They're amazing.

• 53:09Ramit Sethi?

  Do they know that you are losing money every month?

• 53:12Speaker 01

  Yeah.

• 53:12Ramit Sethi?

  You tell them?

• 53:13Speaker 01

  Yeah.

• 53:14Ramit Sethi?

  What do they say?

• 53:15Speaker 01

  My mom advises me as best she can and my dad encourages me. Like I said, I got my license very recently, so they share my optimism and my growth plan for the future.

• 53:29Ramit Sethi?

  Do they offer to write you a check?

• 53:31Speaker 01

  If I needed it.

• 53:32Ramit Sethi?

  How would that come up?

• 53:33Speaker 01

  I just let them know. Mommy, papi, I'm stuck this month. I need this much.

• 53:38Ramit Sethi?

  Oh, okay. And that's interesting. I'm stuck this month. When was the last time you've had this conversation?

• 53:47Speaker 01

  I haven't. I haven't really asked for money like that. But I can.

• 53:53Ramit Sethi?

  You can? And they would, what would they say?

• 53:55Speaker 01

  How much? Here you go.

• 53:56Ramit Sethi?

  Okay, got it.

• 53:57Speaker 01

  Wire, check, Zelle?

• 53:59Ramit Sethi?

  Just out of curiosity, why haven't you asked?

• 54:03Speaker 01

  Like I said, the visual of the numbers don't represent how I felt month to month because I, like, we haven't been in the negative. So.

• 54:14Ramit Sethi?

  What do you mean you haven't been in the negative?

• 54:15Speaker 01

  Like, we haven't had to overdraft or anything like that. Right? So, so I haven't, like, seen like those big urgent signs. Remember I said I have a baseline and if I get under that, that's when I kind of concern myself? So that's when I would probably reach out and ask for help.

• 54:33Ramit Sethi?

  Baseline is what? How much you have in your checking account?

• 54:36Speaker 01

  Uh huh.

• 54:37Ramit Sethi?

  Hold on. I need to.

• 54:43Ramit Sethi?

  Okay. Let me do this. I'm gonna, I didn't want to do this, but I'm gonna do this. We cannot use the amount in our checking account for any meaningful information. We need to take back control. Mike? What's your reaction here? You've been quiet for about forty-five minutes. Get in on this.

• 55:02Speaker 02

  Just upsetting, very upsetting. As someone who understands the importance and delicacy of finances, I can't help to think but the backseat I've taken as huge failure from my part.

• 55:19Ramit Sethi?

  I wanna understand your background, Mike. What do you remember your family saying about money when you were a kid?

• 55:25Speaker 02

  Not a lot, honestly. Total opposite to my wife's upbringing. I grew up up until the age of 11 in Colombia. Then my mom and I migrated here to the US. And seeing her work two, three jobs at a time took a toll on me.

• 55:50Ramit Sethi?

  Where did she work?

• 55:51Speaker 02

  In Colombia, she was the treasury head for a bank. And come here to the United States, obviously. She couldn't really use her education. Currently works in credit collections for a shipping, importing and exporting company.

• 56:08Ramit Sethi?

  And your dad?

• 56:09Speaker 02

  My dad, funny enough, he was an accountant in Colombia. And I mean, he wasn't part of the equation from ever in my life, so.

• 56:22Ramit Sethi?

  So your mom raised you?

• 56:23Speaker 02

  She's been a father and a mother, yeah.

• 56:25Ramit Sethi?

  Got it. And she was working two, three jobs. Was there a point where she did not work three jobs? She only worked one job, got more stable?

• 56:36Speaker 02

  No.

• 56:37Ramit Sethi?

  Mike's shaking his head, no. Is that true even today?

• 56:42Speaker 02

  No, not today.

• 56:44Ramit Sethi?

  When did it change? Take a second if you need to. We're in no rush.

• 56:48Speaker 02

  When I started working?

• 56:51Ramit Sethi?

  Sorry, what's happening right now? I noticed that this is getting a little tough for you to talk about. Why is that?

• 56:58Speaker 02

  Just looking at this scenario, it upsets me because it's almost like the sacrifice.

• 57:05Ramit Sethi?

  Your mom's sacrifice.

• 57:07Speaker 02

  It's not, it's not, you know, paying its dividends.

• 57:10Ramit Sethi?

  Uh huh. Meaning what? Meaning she came here, she worked three jobs and now?

• 57:16Speaker 02

  And now I put my family in a situation that's not ideal. And that's not the idea my mom had.

• 57:25Ramit Sethi?

  What was her idea?

• 57:27Speaker 02

  That I'll be in a position to assist my partner and not have this be the scenario we constantly.

• 57:37Ramit Sethi?

  That's a difficult realization to have, you know, that your mom came here, gave you the gift of being able to accomplish what you've accomplished, what both of you have, and that you, maybe both of you together, have not put yourself in the position that you thought you would. The good news is this is not at the end of this story. Mike has not been the most particularly talkative person that I have had on this show, but one thing he said earlier rings in my ears now. His line about prioritizing comfort over sacrifice. At this moment, he's realizing the impact his mom's sacrifices have had on his life. And I think he's having a hard time squaring that fact with their current circumstances

• 58:21Ramit Sethi?

  and lifestyle choices. Earlier on, it was almost like I had to pull emotions out of him, but in this moment, you can see it on his face, you can see the pain, you can hear it. Hearing about their backgrounds, another thing is obviously clear. They both have very different inherited money mindsets. Lena grew up with generational wealth. She never hit the floor because her parents are always there to catch her. She can call them right now, say, mommy, poppy, I'm stuck this month. They'll send money, no questions asked. Mike grew up watching his mom work two, three jobs at a time. She came here from Columbia, couldn't use her education and worked herself to the bone so he could have a better life. Two completely different stories. And both of them led to a similar place.

• 59:06Ramit Sethi?

  A lack of urgency around money. For Lena, there's always a safety net. For Mike, he spent his whole life watching someone else carry the weight. So he learned to check out. Did Mike even know about the millions Lena stands to inherit when they got married? Let's find out. Did you know she came from serious family wealth?

• 59:27Speaker 02

  To the degree that I'm finding out now, I did not.

• 59:30Ramit Sethi?

  What? You only found that out just now?

• 59:33Speaker 02

  I knew that they would take their trips, their family trips. I always knew that the family business was around. But the blanket check idea or that sort of, that isn't news to me.

• 59:49Ramit Sethi?

  I'm like, I'm more shocked than the two of you.

• 59:52Speaker 02

  It's like, what?

• 59:54Ramit Sethi?

  I didn't know that the family had this much money. How could you not?

• 59:58Speaker 01

  They're not crazy wealthy.

• 1:00:00Ramit Sethi?

  Lena, how big is your parents' house? Is it big?

• 1:00:04Speaker 01

  Yeah.

• 1:00:05Ramit Sethi?

  Look at that smile. It's huge. How big?

• 1:00:07Speaker 01

  No, it's not huge. It's not huge. Remember where we live, so it's not huge.

• 1:00:12Ramit Sethi?

  Mike, how big or nice is her parents' house?

• 1:00:15Speaker 02

  Very nice, very nice.

• 1:00:17Ramit Sethi?

  He goes, everybody, if you can't see this right now, he goes, very nice. Okay. They're obviously very wealthy. You can tell from the house. This didn't cause conversations between the two of you? Like, you're literally totally different financially speaking. You didn't talk about this?

• 1:00:35Speaker 02

  No.

• 1:00:35Speaker 01

  Not to the degree that I think we should have, probably?

• 1:00:39Ramit Sethi?

  Just a modest amount of over $10 million.

• 1:00:43Speaker 01

  But that's like in the future.

• 1:00:46Ramit Sethi?

  Not really. In fact, it's gonna be a lot more. And because the two of you have never talked about it, each of you are playing by different rules. I think we need to recalibrate a lot. In your case, it is immediately obvious that there are two socioeconomic realities here. The fact that you have not talked about this, what do you think it has cost you as a couple?

• 1:01:12Speaker 02

  We miss these discussions that could help us better.

• 1:01:19Speaker 02

  Prioritize our spending in the sense if we want our son to go to a private school because both Lena and her brother went to private schools, then we need to assess where we are present and what action items can we do, right? What are immediate things that need to change that are hindering us from that?

• 1:01:46Ramit Sethi?

  Agreed. What else?

• 1:01:48Speaker 01

  A lot of missed opportunities.

• 1:01:49Speaker 02

  Yeah.

• 1:01:50Speaker 01

  A lot of missed opportunities of being able to work as a team and grow a wealth earlier on instead of growing debt.

• 1:01:58Ramit Sethi?

  The problem, Lena, is that you've taken on some of those attitudes, which are like, my family was wealthy, I'm gonna be wealthy, my kid's gonna be wealthy, everyone's gonna be wealthy forever. So like, I'm not cutting back on freaking grocery delivery and food delivery, not gonna happen. But you don't have the finances to actually make that feasible. Now, if your parents wrote you a check for $200,000 a year, you could do it. But you can't right now. You're losing money every single month. How does that strike you?

• 1:02:30Speaker 01

  I would say mostly accurate.

• 1:02:32Ramit Sethi?

  And then Mike, what is your playbook? What is your invisible script for how you are operating with money?

• 1:02:40Speaker 02

  I don't understand why, Ramit. Hopefully you could help me steal the light here. But because growing up, it was very much a, hey, let's make sure if we're gonna eat out, then maybe we don't do it again in a month from now. That when I started making my own money and got access to capital, it's almost like, you know, like, I went crazy. I was like, oh, I could buy this and I could buy that. And those practices.

• 1:03:15Speaker 02

  Stuck with me.

• 1:03:18Speaker 02

  To my detriment, of course.

• 1:03:19Ramit Sethi?

  Let me tell you what I've seen. Speaking to people who grew up poor. They often go one of two ways and they are radically different directions. The first way is they say to themselves, I've been poor before. I can do it again. That's one direction. The other direction is I've been poor before. I am never going back there again. And they will do any number of things. Sometimes they will spend a lot to distance themselves from where they were. Here's the key.

• 1:03:47Ramit Sethi?

  If you were spending $60,000 a year, you could do that. You could grind it out using the same principles that your mom did. Just work harder. You can't do that when you are spending over $200,000 a year. You cannot simply grind it out because your fixed costs are so high. And that is the old playbook that you are operating on. That is not congruent with today's reality. So here's a question to you, Lena. Do you want to continue? Your relationship with money benefiting from your parents generosity? Or do you want to do it yourself? You and Mike together?

• 1:04:25Speaker 01

  Independently us.

• 1:04:27Ramit Sethi?

  Mike, how do you feel about that?

• 1:04:28Speaker 02

  I'll hardly agree.

• 1:04:30Ramit Sethi?

  If you discovered that you have to reduce your lifestyle. Compared to how you grew up. If you discovered that you could not buy the same things that you got as a child? Or even in the last five years? What would that feel like to you?

• 1:04:44Speaker 01

  I don't mind that because to me. It's not so much the material things.

• 1:04:50Ramit Sethi?

  What about the comfort issues that you just said?

• 1:04:52Speaker 01

  That's where I would. Be very difficult in sacrificing. Not that I wouldn't. I can definitely find a happy medium, but I wouldn't be able to kind of just all of a sudden. Do everything myself. I'd rather go out and make more money. Then.

• 1:05:13Speaker 01

  Have to be home cooking every day.

• 1:05:15Ramit Sethi?

  That's what everybody says. And you're, she's like, yeah, that's what I say too. Okay. All right. So you, okay, so I'm hearing you loud and clear. You're saying, look, I will not cut back on the convenience items. Those are minimum requirements. I'm not going to stop with the, for example, food delivery, grocery delivery, that kind of thing.

• 1:05:37Speaker 01

  I wouldn't a hundred percent. But if we're a team, like, it's not all gonna fall on me.

• 1:05:44Ramit Sethi?

  Fair enough.

• 1:05:44Speaker 01

  Like, I can get rid of the material things. I don't mind it. I don't need a big house. I don't need a nice car. I don't need those things.

• 1:05:50Ramit Sethi?

  Well, your mortgage is $5,300 a month. Could you get rid of that?

• 1:05:55Speaker 01

  Yes, I could.

• 1:05:56Ramit Sethi?

  You think Mike would be the one to be resistant?

• 1:05:58Speaker 01

  I think it would be a very long conversation. I think he's always had my back. And I feel like if that was a choice that we both came to a conclusion that needed to be done, I think he'd, he'd be okay with it.

• 1:06:13Ramit Sethi?

  All right. With the two of you operating as a team, I'm gonna put these numbers up again. And I would like you to tell me what you would like to do. Again, to summarize, debt is at $755,000, including a personal loan of 100K at 15.5%. Fixed costs at 98%, including $3,000 a month in debt payments. Investments are like three, maybe 6%. And savings are at zero, and you are spending more than you make every single month. What would your approach be? Mike, then Lena?

• 1:06:48Speaker 02

  Tackle that fixed cost, that we lower that 98%.

• 1:06:53Ramit Sethi?

  Okay. How would you do it conceptually?

• 1:06:57Speaker 02

  15% on a 100K loan is a lot.

• 1:07:01Ramit Sethi?

  Yep.

• 1:07:02Speaker 02

  Realistically speaking, that timeline is much longer.

• 1:07:07Ramit Sethi?

  Yep.

• 1:07:07Speaker 02

  Than revising the rent, the mortgage.

• 1:07:11Ramit Sethi?

  What does that mean?

• 1:07:12Speaker 02

  That would probably be able to lower the mortgage, but.

• 1:07:17Speaker 02

  By downsizing before we pay off the debt.

• 1:07:21Ramit Sethi?

  Agreed. Mortgage can be done immediately. You could sell. Lena, what would your conceptual approach be to your CSP?

• 1:07:29Speaker 01

  Ideally, obviously, just make more money. But something that's more immediate and more effective would definitely be probably the housing.

• 1:07:39Ramit Sethi?

  How much would you make if you sold your house?

• 1:07:41Speaker 01

  Hmm, like three hundred?

• 1:07:43Ramit Sethi?

  Three hundred K?

• 1:07:44Speaker 01

  Uh huh.

• 1:07:44Ramit Sethi?

  That's after all fees, realtor, staging, moving, all that?

• 1:07:49Speaker 01

  Yeah, we don't really have to stage.

• 1:07:51Ramit Sethi?

  Okay, okay, that's cool. That's what, that's what a rich person says. Stage. Our house is immaculate. I love it.

• 1:07:59Speaker 01

  Well, not just, not so much that, but more so where we live.

• 1:08:02Ramit Sethi?

  Yeah.

• 1:08:02Speaker 01

  Like, it could be spider webs and everything and people are gonna buy it.

• 1:08:07Ramit Sethi?

  Okay. Why'd you buy such a big house, such an expensive house?

• 1:08:13Speaker 01

  A little dental pressure from, from my parents. It's in the same community. We're really close by.

• 1:08:18Ramit Sethi?

  They said, we want you to buy here. We'll give you a hundred thousand dollars to make it easier for you. And you were like, yep, sounds good.

• 1:08:25Speaker 01

  Pretty much, yeah.

• 1:08:26Ramit Sethi?

  Did you, why am I even asking? I was gonna say, did you run the numbers? Of course you didn't. Nobody does.

• 1:08:30Speaker 01

  Nope. Because like, the American dream is to have a house. Like, that's the concept that we kind of grew up with.

• 1:08:40Ramit Sethi?

  Copy and paste it.

• 1:08:41Speaker 01

  Exactly.

• 1:08:42Ramit Sethi?

  No understanding of why, no understanding, whereas in South Florida, it may or may not make financial sense. Just copy and paste it.

• 1:08:52Speaker 01

  Correct.

• 1:08:53Ramit Sethi?

  Where, where would you move?

• 1:08:54Speaker 01

  Honestly, my parents' house.

• 1:08:57Ramit Sethi?

  Okay. Mike, are you cool with that?

• 1:08:59Speaker 01

  We lived there. We lived there before, uh, until right when we got married.

• 1:09:05Ramit Sethi?

  All right, so you're gonna live with your parents for how many years?

• 1:09:08Speaker 01

  Hmm, I'd say at least a year.

• 1:09:10Ramit Sethi?

  And what would you do with the uh the extra money that you're currently spending on your mortgage?

• 1:09:16Speaker 01

  Build up the savings first of all, have at least six months of savings.

• 1:09:20Ramit Sethi?

  Nice.

• 1:09:21Speaker 01

  Just in case anything were to happen and also save up um to I to move out of my parents' house too.

• 1:09:27Ramit Sethi?

  What about the debt?

• 1:09:28Speaker 01

  Oh, no, that I mean, considering that we already paid that, I thought that was given, sorry.

• 1:09:32Ramit Sethi?

  Oh, oh, oh, with the house. You're right, you're right. I stand corrected.

• 1:09:35Speaker 01

  Yeah.

• 1:09:36Ramit Sethi?

  You're getting the 300K, you're paying off a bunch of the debt, amazing.

• 1:09:39Speaker 01

  A bunch? No, like the hundred, everything that we can pay off.

• 1:09:42Ramit Sethi?

  Uh huh.

• 1:09:43Speaker 01

  And then all the extra builds up the savings and and what we're saving a month. Put that max out what we can.

• 1:09:53Ramit Sethi?

  Are your student loans accumulating uh a balance as time goes on?

• 1:09:58Speaker 01

  No.

• 1:09:58Ramit Sethi?

  No, okay.

• 1:09:59Speaker 01

  No.

• 1:10:00Ramit Sethi?

  Mike?

• 1:10:00Speaker 02

  Mine are.

• 1:10:01Ramit Sethi?

  Then we're gonna pay that off. 50K at 7%, we're not gonna let that sit around, that getting paid off too.

• 1:10:08Speaker 01

  Mine because of mental health, um it's not.

• 1:10:11Ramit Sethi?

  Oh, great. Will it get um forgiven?

• 1:10:14Speaker 01

  Well, that's what what I'm pending. That's why I don't have to make any payments yet.

• 1:10:17Ramit Sethi?

  All right, that's pretty convenient. Are both of you willing to sell the house? It's like kind of a big deal.

• 1:10:23Speaker 01

  Yeah, the position that we are right now, yes.

• 1:10:27Ramit Sethi?

  Okay, Mike? What is it? I don't mind.

• 1:10:30Speaker 02

  Lack of better terms, like a two-step back.

• 1:10:34Ramit Sethi?

  Mm-hmm.

• 1:10:35Speaker 02

  I don't know, it's perhaps maybe it doesn't need to be that we go back to living with the in-laws and and maybe we rent a place.

• 1:10:45Ramit Sethi?

  What's the hesitation with moving in with the in-laws, out of curiosity?

• 1:10:48Speaker 02

  This is, it's tough.

• 1:10:50Speaker 01

  It's an ego hit, but who cares, dude?

• 1:10:54Speaker 02

  Ego, not a, that's not an ego hit. It's more of a personal thing to be honest with me.

• 1:10:59Ramit Sethi?

  Okay, you have your own house right now, it's your own family unit. Not only would you sell that house, you would move back in with your in-laws, which I can see. To some, that would be considered two steps back. How would you deal with that?

• 1:11:14Speaker 02

  Ultimately, putting myself in, in the idea that this is a short term plan. This is gonna set us up for a better future.

• 1:11:24Ramit Sethi?

  You believe that?

• 1:11:25Speaker 02

  I do. And it don't have to be that because it can't be that nothing changes if we make such a drastic change. I cannot accept that at that point. Lena, we're gonna fight, we're gonna go back and forth and I don't care.

• 1:11:39Ramit Sethi?

  Whoa. What's, I like this. What is this energy?

• 1:11:43Speaker 02

  If, you know, being back with your in-laws, I mean, with my in-laws, it's gonna be sort of like, oh, comfort. Okay, we're back with the in-laws, like comfort could stay the same. No.

• 1:11:54Ramit Sethi?

  Should we talk about that right now? I've been waiting. Okay, I just wanna cut in here because for this entire conversation, I thought they were being real. But watching what happened next showed me what real actually looks like for the two of them. This is the only show where you will see real people sharing real numbers from behind closed doors. Because even hours into this conversation, it was only right now that they finally showed me how they really talk about money. Just watch. What's the comfort right now? The comfort that you currently spend? Let me just reflect what you told me here. Food, this is delivery, et cetera, is $900 a month.

• 1:12:39Speaker 01

  Yeah.

• 1:12:40Ramit Sethi?

  What would you do if you moved in with your parents?

• 1:12:42Speaker 02

  We'll have to start cooking. We'll have to start like, instead of eating out so much, like own in on what we're spending for food. What's the better alternative? I mean, cook.

• 1:12:55Speaker 01

  I don't, I don't necessarily agree with that. If we're making such a drastic change.

• 1:13:00Speaker 02

  But that's the thing, that it can't just be we make change here and we don't make the change here. Because if we continue.

• 1:13:09Speaker 02

  This sort of habit. What do you think is gonna happen once we accumulated? If we do, right? Once we, in the year time, where we've, we could have used this transition period to really hone in on our habits? And what, and like, once we see the house that we're gonna make the jump to? Now is when we start assessing whether or not to change?

• 1:13:32Speaker 01

  No, like, I don't agree in the sense that, okay, we sell the house, we take down the one hundred K that we're not paying five thousand three hundred dollars a month, right? Our costs, our expenses have gone significantly, like ridiculously significantly down. We can spend on food. Yeah, maybe not spend as much, but we don't have to sacrifice.

• 1:13:56Speaker 02

  I, I feel like, to me, it's, we're cooking at, at our house. We're not sacrificing anything.

• 1:14:03Speaker 01

  To me, cooking is a sacrifice. I don't like doing it.

• 1:14:06Speaker 02

  I'm just afraid that

• 1:14:10Speaker 02

  if we don't look at the habits that got us in the scenario in the first place, and we make an effort to at least put them out on the table and see what's wrong and what's right, that we might find ourselves in the same scenario in the future.

• 1:14:24Speaker 01

  I agree, but I don't think food is the habit that we should be looking at. I think the habits that we should be looking at is buying a really expensive phone for no reason and not talking about it. I think communication is the habit that needs to change, not necessarily the spending of the food that's trivial, in my opinion. I don't know.

• 1:14:44Speaker 02

  Do you know how much I pay monthly for the phone?

• 1:14:47Speaker 01

  Hey, it doesn't matter. Interesting, oh, that you're paying a ridiculous amount for a phone that you don't need because the other one you had worked.

• 1:14:57Speaker 02

  It didn't work perfectly fine.

• 1:14:58Speaker 01

  It did, but when, uh, when the iPhone seventeen came out, all of a sudden, oh, you know what? I can't hear, like.

• 1:15:04Speaker 02

  It's not even. Remy, apologize to cut you off.

• 1:15:08Ramit Sethi?

  Not at all. I'm in, I'm learning from this conversation. What did you both notice happened in that conversation?

• 1:15:15Speaker 01

  We disagreed.

• 1:15:16Ramit Sethi?

  And did you come to a conclusion?

• 1:15:19Speaker 01

  No, not yet.

• 1:15:20Speaker 02

  Not yet.

• 1:15:21Ramit Sethi?

  Would you like to?

• 1:15:22Speaker 01

  Yes.

• 1:15:23Ramit Sethi?

  Okay, go ahead.

• 1:15:23Speaker 02

  I agree with you. That's, that's the whole point of me wanting to throw into the table what the habits are that need to change, right? So I appreciate you calling me out on this particular habit. Right? But I also like to think that. Sometimes the comfort monetarily speaking also puts a dent, right? I feel like identifying those non-negotiables, identifying which items are negotiable in this whole concept or umbrella, what we consider comfort.

• 1:15:54Ramit Sethi?

  Mike, be specific. Just name it if you think there's a negotiable.

• 1:15:58Speaker 02

  I was gonna say we're eat, but I feel like that's, that's another, what is it? Is it non-negotiable?

• 1:16:05Speaker 01

  It's not a non-negotiable and see, this is where like you're getting hyper fixated and it has to be zero because that's what you've been saying, like we have to eradicate it. No, we can sit down and we can compromise, but it's about the communication.

• 1:16:20Ramit Sethi?

  Should we do it right now since we're here?

• 1:16:21Speaker 01

  Yeah.

• 1:16:23Ramit Sethi?

  Okay. Right now, what I'm hearing is a lot of people getting increasingly heated just sharing their opinions. Everyone is cementing their opinions in their corner of the ring. Do you notice that? First of all, you probably don't have these conversations very often. I can tell you avoid them or Mike goes happy wife, et cetera. So the first time you're doing this, it's a bit clunky, but I appreciate it. Mike, I especially appreciate you finding that voice of yours and you're, you're doing it. You're not giving up both of you. So that's awesome. What I noticed is there's no, it's all in the ether. It's in the clouds. Is anyone gonna use some real numbers?

• 1:17:04Speaker 01

  Yeah.

• 1:17:05Speaker 02

  Yeah.

• 1:17:06Ramit Sethi?

  This exchange just revealed a power dynamic that has been there dormant or invisible to me the whole time. There's a seven year age gap between them, different levels of sophistication in the way they communicate. They've got contrasting financial family backgrounds. When Mike speaks up about maybe renting a place or cutting down on comforts, did you see what happened? Lena pounces. She puts him back in his place.

• 1:17:33Ramit Sethi?

  I suspect Mike probably doesn't have the skills to communicate how that makes him feel. And I relate to this. It took me years of working on myself and getting the help of a therapist to be able to articulate my own feelings. And I would consider myself like a beginner, maybe intermediate. This is where the help of a couples therapist would be profoundly useful. And I truly hope they see one. Because a power dynamic like this is going to make alignment really, really hard. Now, I want to shift the focus back to the numbers. So let's see if we can paint a picture, something shared that they can both get excited about. What changes should I make in this CSP to reflect the current plan that you're thinking of?

• 1:18:16Speaker 01

  Okay, so what we're discussing currently is selling the house. So we wouldn't have that 5,300.

• 1:18:24Ramit Sethi?

  This would go to zero. Great, I'm dropping 5,300 to zero. Let's just see what happens to your fixed costs. Whoa, what just happened to that number?

• 1:18:31Speaker 01

  It went from 98 to 47, which is amazing.

• 1:18:33Ramit Sethi?

  That's huge. Great.

• 1:18:35Speaker 01

  And if we were to do that, we would eradicate the debt, the 100, the 3,000 that we're paying a month.

• 1:18:41Ramit Sethi?

  Let's take that down to zero.

• 1:18:43Speaker 01

  Which, that's what I'm saying, like, where are, what's our percentage right now? 18%? We could spend on food. It's the communication aspect of it.

• 1:18:50Ramit Sethi?

  Okay, we're not done yet.

• 1:18:51Speaker 01

  Yes.

• 1:18:52Ramit Sethi?

  When you approach the conversation, already having committed that you are not willing to budge on something, it does not set up teamwork. It sets up Mike to be adversarial, and that's not what you want right now.

• 1:19:08Speaker 01

  Yeah.

• 1:19:09Ramit Sethi?

  To put it in another way, I would rather that the two of you be united, even if each of you has to compromise, than for each of you to be adamant about an iPhone and food and not be connected, which is exactly what is happening today.

• 1:19:22Speaker 01

  Yeah.

• 1:19:22Ramit Sethi?

  Let's continue. So you now have $8,000 per month to allocate.

• 1:19:28Ramit Sethi?

  And didn't the two of you tell me you want to be wealthy?

• 1:19:31Speaker 01

  Mm-hmm.

• 1:19:32Ramit Sethi?

  What are you gonna do with the money?

• 1:19:33Speaker 01

  First of all, I would build up the savings. I wouldn't invest everything all right away. I would put some in investment, but not all of it.

• 1:19:39Ramit Sethi?

  Hold on, I'm sorry. Are we fighting about having $8,000 extra per month? What in the hell is happening right now? Can we recalibrate the tone happening right now for all of us?

• 1:19:49Speaker 01

  Yes.

• 1:19:49Ramit Sethi?

  We are grateful to be able to have $8,000 per month. What do we get the gift of allocating this money towards? Who would like to go first? Go, Lena.

• 1:20:02Speaker 01

  Savings first.

• 1:20:03Ramit Sethi?

  Savings. How much would you put in savings?

• 1:20:06Speaker 01

  Honestly, 50% of it until we're able to build it up to something that we're comfortable with.

• 1:20:10Ramit Sethi?

  Great. 50%, so we're gonna save $4,000 bucks a month. And how long would you go?

• 1:20:16Speaker 01

  I want to build up, uh, six months.

• 1:20:18Ramit Sethi?

  Hold on, you're about to be surprised right now, cuz you already have like 10 months. But that's because you cut your fixed cost down to $1,800 a month. So it's artificially low. It also artificially reduces your fixed cost because one day you're gonna rent or buy a place. You actually need to be preparing for that future, not the fake future. I call it fake. It's a temporary future where you have no housing cost whatsoever.

• 1:20:46Speaker 01

  Correct.

• 1:20:46Ramit Sethi?

  I think that's what Mike is getting at. When he says, yes, of course, we can afford the food costs. But if we were to add on housing and spend $1,500, $2,000 a month on food, we would be right back in the same position we are now. Do you see?

• 1:21:02Speaker 01

  Yeah.

• 1:21:02Ramit Sethi?

  You would only get to that if you look at the numbers. So Lena, go ahead and tell me what you would like to do.

• 1:21:07Speaker 01

  So taking that into account, I would say we would need at least $10,000 a month. That's 60,000, so we have six months.

• 1:21:15Ramit Sethi?

  Okay.

• 1:21:16Speaker 01

  So keep the $4,000 into the savings until we're able to build that 60,000 up.

• 1:21:23Ramit Sethi?

  What else?

• 1:21:23Speaker 01

  And then I would definitely invest.

• 1:21:27Ramit Sethi?

  Uh huh.

• 1:21:27Speaker 01

  Not all of it, but I would say at the very least 2,000.

• 1:21:31Ramit Sethi?

  2,000, alright, let's do that. Okay, that's at 23% of take home. That's a nice number. I mean, great. That leaves you with $2,134 a month or 21% guilt free spending. Thoughts?

• 1:21:45Speaker 01

  I think that would be very comfortable, especially for the year where we're able to build up and get to a position where we're okay.

• 1:21:52Ramit Sethi?

  Alright, and just to do the final thing on that, let's say you stay there for a year. Paint the picture for me. So you would have 50,000 plus 16,000 in savings. So about $65,000 in savings.

• 1:22:09Speaker 01

  Beautiful.

• 1:22:10Ramit Sethi?

  Okay, your rent or mortgage at the time, how much if you were to get a place, how much would it cost?

• 1:22:16Speaker 01

  So let's put 4,000. I think that's a safe number.

• 1:22:21Ramit Sethi?

  Alright, 4,000, watch what happens. 4,000, you're back at 56%. And you know, you would need to reduce your emergency fund.

• 1:22:30Speaker 01

  By that time, we would have already the 60K target. So I would say at least like maybe 500 a month in savings.

• 1:22:38Ramit Sethi?

  Okay, yeah, that will work.

• 1:22:40Speaker 01

  That's kind of maintenance.

• 1:22:41Ramit Sethi?

  Uh huh. 500 would work. That would leave you with 16%. That would mean less guilt free spending if the two of you moved into this new place compared to when you lived with your parents. Would you be willing to go down in guilt free spending?

• 1:22:59Speaker 01

  Yes.

• 1:23:00Ramit Sethi?

  Really?

• 1:23:01Speaker 01

  Yeah.

• 1:23:02Ramit Sethi?

  That would mean probably less eating out.

• 1:23:04Speaker 01

  That's okay. I don't, I can compromise. I just don't want to sacrifice it completely.

• 1:23:09Ramit Sethi?

  Okay, fair enough. What I like about it is you didn't factor in any income increases, which is great.

• 1:23:18Speaker 01

  No.

• 1:23:18Ramit Sethi?

  So anything you made would be icing on the cake and that could be, you could create a rule for that. You know, we take 50 or 70% of it, put it towards investments. That's what I would do. Take 20% savings and 10% have fun. That's nice. I like that your investments in this scenario, even when you move into a new place, still at 23% of take home plus an extra $6,000 a year for your 401K. That's a nice, healthy number. Like wow, wow, wow, wow. You do that for a few more years at that number.

• 1:23:54Ramit Sethi?

  You will be setting yourself up for a very, very nice life in the long term. And honestly, if you do this for like seven, eight years, at 23 or like 25%, you could even start reducing that number by 1% every year. Most people increase the number. You could actually decrease the number and then take that money and freaking go on trips or buy whatever you want. You could really relish it. Okay, great. How do you feel about that, Lena? If that were the plan?

• 1:24:21Speaker 01

  I love that.

• 1:24:22Ramit Sethi?

  Okay, great. That's how we talk about a plan. It doesn't mean that's what you have to do. But do you notice the difference in what just happened? Way more constructive, way more focused on the numbers. You can paint a vision and we even can discover some surprising things like, yeah, I'm actually okay cutting back on food if XYZ, ABC. Beautiful. Take it out of the clouds, bring it down to the street. That's what we're trying to do. Mike, it's your turn. What would you want to do?

• 1:24:50Speaker 02

  Sorry, just have a bunch of ideas. The gist of it is that, yeah, we'll probably need to sell the house most likely to be able to plan for the long term.

• 1:25:02Ramit Sethi?

  Is this hitting you right now?

• 1:25:04Speaker 02

  Yeah, it was, was hitting me when I started realizing the gravity of, of what that mortgage payment was doing to our fixed costs.

• 1:25:14Ramit Sethi?

  Yes. You might be able to afford it if you had no debt. And if you were both extremely meticulous about your guilt-free spending. You are neither of those things. So finish the program with me. What do you want to do, Mike?

• 1:25:30Speaker 02

  It'd be a sacrifice, but what puts us in the best scenario? Honestly, it's not what I want or like, I'll get over it. It's just like, okay, we're back with the end loss. Like this is just a temporary thing. That's why I keep saying that to myself. But it's not to appease her. I mean, at the end of the day, like this is gonna help our future. And that's the important thing.

• 1:25:56Ramit Sethi?

  Finish the sentence for me here, if you would, and use the full phrase. I feel what?

• 1:26:01Speaker 02

  I feel like there's been some weight lifted.

• 1:26:06Ramit Sethi?

  Cool. Lena?

• 1:26:09Speaker 01

  I feel grateful.

• 1:26:12Ramit Sethi?

  What will happen? Honestly, I would be surprised if they sell the house. Selling your house is one of the hardest financial decisions that you can make. It's not just about the numbers, it's deeply emotional. In this case, it's admitting that what you've been doing is not working. And then there's the practical questions like, where do we go? Do we move in with family? Do we rent? What do we tell people? I will say, I was very impressed that they got real with each other today. For the first time, they actually disagreed. They argued about food spending. Mike found his voice and he pushed back. Lena didn't just steamroll him. They realized there's a massive gap in how they communicate about money, and that's progress. So the question is, can they actually build towards being aligned? Because what they were doing was easy.

• 1:26:55Ramit Sethi?

  They were essentially living separate financial lives. Happy wife, happy life is a good metaphor for washing your hands of a rich life together. But as you can see, they cannot fix this separately. It has to be done together. So now, let's check in on their follow-up videos to see how they're doing.

• 1:27:16Speaker 01

  So it's been about a week since our session with Ramit.

• 1:27:20Speaker 01

  And I can say that one of the big surprises that I took out of it is my lack of understanding in a lot of areas and just needing to get more educated in order to be able to organize things better for myself and my family. Key takeaways was definitely the copy paste model of how my parents were able to acquire their wealth and how I just kind of copy pasted without really understanding everything behind that and how it's just not working out. Definitely, there's a lot of differences. There's been a lot of changes, you know, from the time that they grew their wealth to now. Overall, it's been great and Mike and I were able to sit down and have a conversation with my parents and how they acquired their wealth and everything like that.

• 1:28:04Speaker 01

  And I think we both have a better understanding. And I think that conversation is definitely a blueprint as to how we want to have conversations with our son later on to make sure that he has a healthier relationship with money. Hey, so it's been about three weeks since we met with Ramit and we've made decisions after a lot of talking. We finally put our house for sale and we moved back in with my parents, which has been amazing. We can kind of reset and just start making better decisions moving forward for us, for our family, for our child. Communication when it comes to finances and like the budgeting and all these things still hasn't really changed.

• 1:28:45Speaker 01

  Still the same dynamic, although with the sale, I think that might change. And we're also looking for a couples counselor to see, to start couples therapy. Other than that, we're kind of moving forward with what we discussed with Ramit. So, thank you so much and I'll keep you updated.

• 1:29:04Ramit Sethi?

  Wow, I did not expect that. I stand corrected. They put the house on the market. That is incredible. I am very impressed. And I'm happy to hear back from Lena. One thing I want to point out is despite repeated requests, we never heard back from Mike. And this is very concerning for me, especially with Lena and Mike, because there's a power dynamic here and it's critical that both of them work on this together. So it concerns me that I only heard back from Lena, not from Mike. Mike, we want to hear back from you. Please write back, send us a video update. We would love to hear how things are going for you as well. Lena and Mike, I want to thank both of you for coming on the show and of course, everyone for listening to Money for Couples.

• 1:29:48Ramit Sethi?

  One thing I want to suggest to you, if you enjoy this show, get the book Money for Couples. You can get it at Amazon, you can get it at bookshop.org or any public library. Start using it, it will blow your mind. Listen up. If you want my help with your specific money questions, there are only two ways to get it. First, you can apply to be on this podcast at iwt.com/apply. Or second, you can join my money coaching program instantly at iwt.com/moneycoaching. In that program, you get access to live virtual events, monthly group coaching calls, live Q and As, and an amazing, huge community of other people like you. Check it out at iwt.com/moneycoaching.