132. “We’re $520k in debt—and he hid it from me”

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We were getting ready to start the next episode and I, I looked over to Aldo and I said, how much debt are we in? Because I literally have no idea. When he wrote it all down, I almost fell off the chair. Like I was floored.

I didn't know that everything basically was.

Being charged on credit cards and loans and things.

It's in, I guess, collections.

We haven't been paying it for the last few months. And that scared the crap out of me. And I was like, why? I felt like a little bit of like a false sense of security, you.

Know, for me it was eye opening as well. I mean I should know better.

He's the financial guru, he works in finance, he knows all of this stuff. I have friends that go to him for financial advice. So never would I have ever thought I, we would be in this, in this predicament. So I was very shocked and I haven't really slept that great since, since all of this has come out.

Here's the scenario.

Cassandra and Aldo, 40 and 41 years old. They have two kids, 17 and 10 years old. They're sitting on the couch looking for something to watch. They stumble across my Netflix show, How to Get Rich, and they start watching, surprised that they're really into this money show. And soon she leans over and goes, hey, how much debt do we actually have? Aldo, the money guy in the relationship, tells her, and she is shocked. That's where our story begins. And as you listen to today's conversation, I want you to be compassionate, because so many of us think that we're rational robots when it comes to our money. But listening to Cassandra and Aldo is actually a reminder that most people really don't pay that close of attention to their money. And you're going to find out what happens when they realize the costs of ignoring their finances. Now, before we dive into this episode, I want to let you know a little secret. For the last four weeks, I have been traveling the world, only working one hour per week. You probably did not notice because while I was in India, Italy, and Mexico, this podcast released a new episode every Tuesday. Social media posts went out, newsletters went out. Everything ran as usual. This Saturday, on my newsletter, I'm going.

To tell you how.

I'm going to tell you how we decided to take this trip, how we paid for the tickets all across the world, how we chose the hotels, how. And how I had my business running smoothly while I was gone. You can only get this email on our podcast newsletter this Saturday, December 2nd. You can sign up for free@iwt.com podcast newsletter. I love to take you behind the scenes of how I live my rich life. You can find that this Saturday iwt.com podcast newsletter. Now let's get to the episode.

Yeah, I was sitting on the couch looking for something to watch, and it kind of gives you, like a preview, even though, like, when you, you know, you hover over it and you were talking about owning a home and phantom costs, you know, it's. It's not what everyone makes it out to be. And I was intrigued. I looked over to Aldo and I said, how much debt are we in? Because I literally have no idea. And, you know, he threw some random numbers out there and they were pretty high. I think I had an idea, but not anywhere near what they really are. And I think I was, like, in shock. I right away got a pen and paper and I was like, I want to know everything. He proceeded to tell me about other loans, personal loans, and I vaguely knew about some of them. I thought they were, you know, in the past to consolidate debt. You know, little credit cards that we had. There was a loan that was supposed to be paid off and he mentioned this loan in the amount of $66,000 that is not paid off. And not only is it not paid off, it's in, I guess, collections. We haven't been paying it for the last few months. And that scared the crap out of me. And I was like, why? What. What happened? But when he wrote it all down, I. I almost fell off the chair. Like, I was floored. I didn't know that everything basically was being charged on credit cards and loans and things. I felt like a little bit of. Like, a false sense of security.

Okay, Aldo, what do you remember about that conversation?

It was a tough conversation. I know in the past, I've kind of brought it up, but I know she gets really alarmed or panic when, you know, any number that I put out there. You know, I've been trying to tell her for a couple of years that it's been. Has been challenging, but we've never really sat down, and I've never put enough effort to really sit her down and go over all the numbers. It was a daunting task. You know, I thought of a number, and that number I gave her was scary enough. And then when I started logging into all the accounts and finding everything out, it was twice as much. I should know better, right? So a big part of it is I was just disappointed in myself that, you know, I let it get to this point, this bad, this fast.

Aldo's a very good man, and he's always wanted to give me the thing. Everything, I guess, even the things that I don't ask for. For the most part, he would do it, like, if it was a trip or, you know, I. We have a basement gym that I. You know, I love to collect, like, you know, equipment. He would always make it happen. You know, he would tell me we were tight from time to time. We'll be married almost 18 years now in February. I kind of just, like, let him take care of all that he wanted to, and I. I don't know. I just kind of let him go all in, and I never looked back. All these years.

Why is it so easy to avoid talking about money? Well, for the same reason we don't talk about our health. Just like money. With our health, we see clues everywhere. We feel aches and pains when we get up from sitting down. Maybe our clothes don't fit the same like they used to.

Maybe.

Maybe we get tired faster. But instead of taking an honest look at what we're eating and our activity levels, we actually concoct these very sophisticated, convoluted Stories about how our metabolism is changing and how this is what happens to everybody when you turn 40 and all kinds of other stuff. And the thing is, everyone around us is doing the same, so we genuinely believe it. It's easy to ignore these problems because they're not really acute. They're just little degree by degree.

And.

And that's the same with money, where we have clues like a partner getting anxious when you bring up money, or suddenly you see this $27 overdraft fee in your checking account, you just can't figure out where all the money is going. You would think that a person would whip out a calculator and figure it out, but that's not how humans work. We are not rational robots. And the sooner you understand that, the sooner you will understand human behavior and the sooner you will be able to change your own behavior.

Is it correct that, Aldo, you're the money person in the relationship?

Yeah.

Yeah.

Okay.

And what does that term mean to you? What does that role money person mean to you?

Providing stability, paying the bills, setting the trips, putting the budget together.

Keep a budget?

No, no.

Okay.

In the budget, on what we thought we were going to spend, and then it always blew up.

So your money role is providing stability, planning out the trips. Does Cassandra come to you saying, I want to do this or I want to get this, and then you evaluate that based on money, or is your role to say yes?

I think I mostly say yes and then try to figure out how I'm going to make that yes happen.

Okay. Have you ever said no because of money?

Not that I can remember. No.

Okay, well, you've only been married for 18 years, so. Yeah.

That says a lot.

To be honest, I've never thought money was ever. It was never in my mind about that. Like a zoom out. I never thought about money. Even though we need money to do all these things. I would actually say that to, like, my friends and stuff. Like, they would talk about their finances and going to do their taxes, and I'm like, I don't do any of that. You know, I don't know any of anything about it. My husband takes care of it all.

Like, was it. Essentially, I go to work, there's a paycheck, and there's a black box if something happens inside that black box. And, like, I'm good, basically.

Yeah. I'm pretty embarrassed to admit it, but I.

It's very common.

I was a black box, you were the black box.

And I, you know, if something was off in my check, like, you got paid like, you know, 200 less, he would tell me. I never even looked at my paycheck.

But you know, what if, like, a car mechanic asked me, hey, Ramit, what's your understanding of cars? I literally turn the key, it turns on, I fill up the gas once in a while, and, like, that's pretty much as far as it goes. Maybe get an oil change. That's it.

Yeah.

That's how a lot of people are with their money.

It's just as long as it works.

That'S as far as we want to go. But the problem is, I think you realized when you asked Aldo, hey, can we go beneath the surface? How does this car actually work? You discovered that. Oh, my gosh. It's not what I thought.

Yeah, okay.

Aldo, did you ever wish that Cassandra was more curious about money?

Yes. Yeah.

Why?

We've always done a lot of things together, and I feel like this is the one thing that, you know, I just did on my own. I didn't want to stress her out rather than, you know, I just figure I take. Take ownership of it and do what needs to be done.

Can you think of an example where you did talk about money and Cassandra did get stressed out?

I don't know. We, you know, we wanted to do maybe more trips, and, you know, I know we couldn't afford more than one. So they'll be like, no, we're tight. What do you mean we're tight? We always feel tight. Again, well, we're tight. We can't do, you know, we can't do it.

Did you end up doing it?

Well, we took three trips this summer. It started with the Ruba in May.

That was a last minute thing, and it was a good deal, but it ended up costing twice as much.

Thank you for telling me it was a good deal, even though it wasn't.

Go on next.

Then we had a destined Florida trip planned with my family, which we did. And then not even a month later, we went to Cabo with our friends.

Where's the stress? I don't hear any stress from Cassandra about money. Sounds great. Hey, let's go to Destin. Let's go to Cabo. Where's the stress?

I don't think so.

No. You didn't seem. No. Seemed Annoyed. If I say, oh, you have to wait or use a credit card to pay for whatever.

I think I would feel annoyed sometimes because I'd feel like I. I work hard and so do you, and I'm like, like, how. How do we not have the money? And I just, like, naively Thought, you know, we have bills, we have a mortgage, we have, you know, so I. It's annoying to feel like you can't do little things when you work so hard. So I wasn't annoyed at you. I just was annoyed at the fact that, you know, we should be able to do those things, as I know we do make pretty good money.

What's happening here is basically what we do as children when we're young, we imagine living in a palace or flying a fighter jet. And as adults, we actually do a similar thing with money. We literally have beliefs about how we are supposed to live. You know, my parents bought a house, so I should be able to buy a house that's the same size at the same age in the same city. Now, first of all, let me say I want you to be able to buy a house. That's why I'm so vocal about wanting to build more housing and why I'm so politically active. But if you simply use your feelings about your parents situation 40 years ago and you blindly make the biggest purchase of your life without running the numbers, well, then you're doing the same thing as the kid who says, I want to be a fighter jet pilot. You know, we do the same thing with relationships. I knew a guy who was in a relationship with a great woman and he eventually broke up with her. And some of my friends asked him why, and he said, I never saw myself marrying someone like her. He was referring to her religion. Now, don't roll your eyes. We all have a certain concept of how we expect our life to turn out. I expected to be educated. I expected to have money and flexibility, to live wherever I wanted. I expected that from a very young age. Now, if I didn't have money, honestly, I would find that incredibly difficult to accept. I might even ignore the details of my finances and spend as if my vision was true. Because I would have imagined and even believed it for decades. So when you hear somebody break up with a great partner because their religion isn't what they imagined, I mean, I'm not going to tell you not to judge them. I judged. But I can also understand how these deeply held stories affect our behavior, even irrationally. So, so today when you hear them say they're stressed and Cassandra says she's annoyed because they make money and they should be able to spend, what's really happening is, is that their vision of life is not aligned with reality. And in Cassandra and Aldo's case, they've simply chosen to ignore reality and instead spend, spend, spend. Let's take a quick break to hear from our sponsors.

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Now back to the show.

You watch the show, Cassandra, you finally get very curious. You start asking questions, and that night, all the numbers come out. And you are feeling what?

Well, obviously shocked. I wasn't expecting it, but I also felt very hurt. Like, I also knew that I can't just, like, you know, say, oh, this is all his fault. I have to take my part in it. I just kind of sat back and let him deal with everything. And my thing was always like, oh, you know, he's the financial guru. He works in finance. He knows all of this stuff. I have friends that go to him for financial advice. So never would I have ever thought we would be in this. In this predicament. So I was very shocked, and I haven't really slept that great since. Since all of this is. You know, it's been hard, but, yeah, I felt hurt. I felt like I've been living a life that maybe we shouldn't have been living. Like, I think another big thing that made me feel hurt was I kind of left this part out. But what's my fault, too, is I don't check my paycheck, but apparently my check was being garnished. I get paid biweekly, and it was $380 that was coming out of my paycheck. I had no idea for what. For taxes that we had owed.

Oh, wait, they're garnishing your paycheck for back taxes that you owe.

All right. That's not good.

No, I mean, it's completed now. Actually, my last paycheck was the last one. And I asked him, and he's like. He just casually says, oh, that's. That's the money we owe for taxes. And I'm like, what? What do you mean?

Do you wish that he had brought up financial challenges many years ago?

I wish he would have told me the severity of it, yes.

Cassandra, it's interesting to me because you go, I know we had debt, but I didn't realize the severity of it. What kind of debt did you think that you had?

Well, obviously the mortgage. And I knew we had some credit cards because he would give me credit cards to use, too. More often than not, those credit cards were almost to the max. Whether it was me and him or, you know, or if I needed stuff for the kids or something, he would give me a credit card, and I never thought twice. He would. He would tell me it was for the rewards or the points or whatever you get.

Like, Aldo, it was for the points.

He Always told me that. And I was like, okay, well, you know, what do I know? Just need to get this. I need to go school shopping.

Have you heard me? Absolutely. Roast these people who come on and talk about points when they're in severe credit card debt. Have you heard me?

Yes.

Are you afraid it's about to happen?

Probably.

It is about to happen.

Listen up, you credit card point seeking freaks. If you have credit card debt, forget about your points. Your points are worth $0.01 and you're adding debt to the tune of 26.99%. Do you understand how fast that compounds? Do you understand how many years it will take you to pay that off? Of course you don't. You just want an extra 25,000 points so you can get a free night at a Marriott property that would otherwise cost you $134. What am I even doing on this stupid podcast?

Did you have any concern when you would go on trips or renovate or things like that knowing that you had credit card debt? Like, how did you think about those purchases?

I definitely had concerns. We could start with the reno. The rental was something that we talked about since we bought the house. We had these dreams and visions already and we knew eventually we would get to it.

Who was the first person out of the two of you to say this exact line? Well, it's an investment, so it's going to pay for itself.

I thought it, but I don't think I said it.

You didn't say it word for word, but you made, oh, you know, the home go up, so it's free. Here's the problem.

Okay, tell me.

He.

He happened to be messing around with stocks now. I don't know anything about stocks. All this stuff.

What are you talking about?

What do you call it? Day trading? I don't know.

What the. Is this a joke?

I don't even know. No, this gets better. So he told me that he made a lot of money in the stocks and it could afford us the Renault, but that we needed to take a loan out to like buy all the materials up front. Front. And that his stocks that he was making money on that were going to be big. We're going to pay off this loan.

Okay?

So I'm like, okay, yeah, this is amazing. We can renovate our house.

Free money.

A lot of things happen during the rental. Obviously you budget. Well, we didn't, you know, we had a number in mind. It was nowhere near that. And what number? I don't even know, babe. What was the number?

I don't, I think 25. So we had saved 30. We weren't gonna have enough because our pool had collapsed. But we knew we're gonna need a new pool. So that's why I applied for. For a loan, and I, well, invested half of it. So when I invested that half, I should have taken out. So I put 30,000 to work. I made 189,000.

Okay.

And I didn't take it out, even though Cass told me to take it out.

And this is me not knowing anything about these numbers or anything. He would come to me because he was obsessed on his phone, looking at these. These stocks, and he would say, oh, I should take it out, right? Should I take it out? I'm like, yes, just take it out. Like, I don't trust it. Like, it's volatile, obviously, like. And he didn't take it out. So that's the $66,000 loan that now we have in collections. That terrifies me.

Hold on, let me get these numbers right. You budgeted 25k for a renovation. You had 30k saved up. So you had a little bit of buffer. What happened? Then the. The pool collapsed.

That's another 20,000.

Yeah, 20K. So then you took 30K and put it in the market, which really was in an individual day trader stock. Okay. A meme stock. It went up to 189,000. Wow, that's a good return. You didn't pull it out. And then how much did it end up at the end? Tell us all.

So I ended up taking out 50, and then I lost the rest. I still have them. It's worth three, five grand. Maybe not even. Okay, so I'm just leaving it there, and it is what it is.

Maybe I'll go to the moon another day.

Maybe. Maybe. Doubt it.

Okay, and the renovation, how much did that end up costing total?

So the kitchen. So we ended up doing the kitchen, the living room, and the dining room. So that came out to probably about 70. And then the pool was 20, and the pavers was 13.

5.

Okay, so you budgeted 25, and it was like, 105,000.

I have a few things I'd like to talk about. What does it take for you guys to start listening to what I've been saying for the last 20 years? Do I need to bring on more guests to show you how, essentially nobody in America runs the numbers on their house? Do I need to bring up more statistics showing you that right now, as of currently airing this episode, it is cheaper to rent than to own in almost every city in America? Do I need to Keep posting on Twitter and roasting these anonymous accounts who call me stupid and old fashioned and say renting is throwing money away.

You know what?

No, I don't. And for the roughly 325 million Americans who think it's their God given right to renovate their house, never realizing that even 30 years ago, renovations were incredibly rare. And the only reason you think everybody renovates is that you watch HGTV and in a fit of pluralistic ignorance, you think everyone else renovates their house while in debt, then good luck. Oh, and by the way, when you renovate your house, you almost never make money on the renovations. I'm now done with my commentary on this topic.

I feel stupid. I just never thought that he would do something like that.

Why?

Because he's the finance guy, right? He works in finance. He's been in the finance field as long as I've been in health care. You know what? 20 years.

Cassandra, what do you do in healthcare?

I'm a nurse. An oncology nurse.

So like, let's say that somebody from outside the healthcare field came to you and they were like, cassandra, I fractured my toe and I need to know what metatarsal therapy I should use for this toe. Would you know what to tell them?

Not really.

But it's healthcare.

Yeah, but that's like, you need an ortho.

Yeah, it's totally unrelated now, although, what part of finance are you in this vast field of finance?

I pretty much refer people with solutions that will work for their retirement or custodian accounts or college accounts. So I don't do the management of it. I just put them in the platform that would do that.

You see my point?

Yeah.

I can also understand, Cassandra, why you were like, he's the money guy in our relationship. He's in finance. So like, he's got it under control. But let me ask you this. Like, were you ever concerned? Because we've all heard stories about, you know, somebody's husband or wife dies. In our parents generation, often it was the husband managing the money.

Right.

Husband dies, wife is left a grieving widow, totally defenseless. Did this ever come up for you, Cassandra, Concern about that?

Yes, it has. My own life and my parents. My parents are still together. They're very happy right now. But when I was about 17, 18, they were going through a divorce, and I remember my mom saying, I don't even know how to write a check. I don't know what bills we have. I don't know. I don't know if I could survive without your Father, I don't. I don't know. And I remember thinking, oh, my God. Like, my dad sat me down when I was old enough to. When I got my first job and old enough to save for my first car. And he sat me down and talked to me about these things, about bills, about credit cards. And it felt like so wrong to me that my mom didn't even know what a check was, how to balance a checkbook, how to do anything, and, you know, regards to money. So you would think that knowing that and the feeling that I got from that, I would, you know, take that into my adulthood and not want to go that route and be involved. But I. I don't know. I guess.

Aldo, why do you think that Cassandra went through that very formative experience.

And.

Yet chose to almost replicate that in your relationship? What's your take?

I think I came into the picture when we got together and bought our first house. I started, you know, taking care of all the bills. She was in nursing school, so again, I didn't want to give her that stress. So I just took on the job of just, you know, doing it all.

Where's this word, stress? Tell me about your family, Aldo.

My family?

Yeah. What do you remember about money growing up as a kid?

Oh, that. That was stressful with my parents. I mean, they, you know, they came from Peru. Okay. And I remember we. We lived with one of my uncles in a two bedroom apartment for maybe six months that we got there. I never asked for anything because I. They were always stressing, you know, how they're going to pay the rent and electric and they say that out loud. Yeah. I would always hear them, you know, argue about it. My dad is not great with money. He's always just spending. And I always would see my mom just fight with him because she was more, I guess, on top of it than he was. And then I remember when he got. He got fired from his moving company, something happened. I would never really knew what happened, but he was let go from there. So he started working with one of my uncles that had a cleaning company, and they started their own cleaning business and it took off. I never saw them argue as much until, you know, things, I guess, slow down. They couldn't keep up with it. And that's, you know, where I would see them argue a lot.

What did they say?

I could say it in Spanish, but it probably won't get much out of it. But the whole gist of it was that my dad was just spending without knowing where it's coming from. He Would bounce checks all the time. I remember seeing a statement, they had, like, $3,200 in overdraft fees. Wow. Just on overdraft, that's money gone. And my mom would just always be in the. They had a little office in the basement and just so angry.

Oh.

All the time. So it was always something like that. Like, I think.

I think a lot of Spanish speakers listening are going to. They're going to identify with that.

Yeah, yeah. But my dad is kind of retired. Right. My brother took over the cleaning business. He made it his own. When my parents bought the house they had. They bordered with my mom and my brother. So when she passed, my brother became the sole owner, but has let my dad stay there, you know, rent free, because I guess that was the agreement they had financially. From time to time, you know, we're all trying to help, me and my sister and my brother.

Okay, you'll occasionally send money to your dad, things like that.

Yeah, yeah. Okay. You know, that's. That's what I remember, you know, financially.

How did money feel as a kid? What was the word you used to describe it.

As a kid? We just didn't have it.

You had it sometimes, right. But then sometimes not.

Yeah. It's funny because I've never really asked my. My parents for anything because I know how stressed they were. Right. I never really cared to go buy expensive things. I do remember once wanting one pair of sneakers, like a Nike Air something.

Yeah, yeah, yeah.

Because I knew they, you know, they can't afford that. It was, I don't know, a hundred and something dollars. I don't remember ever asking them that. I want something. You know, it's just. It just got it.

How about now when your wife asks you for something? How do you react to that?

Oh, yeah, we could do it. Yeah.

Is there any connection here?

Yes.

Okay. I don't think I need to belabor the point.

Aldo has seen money as a source of stress for literally decades now. He doesn't talk about money with his wife because he wants to protect her from the stress. In a way, it's kind of a loving gesture by Aldo to take it all on himself. But probably the wrong approach, because ironically, by not talking about money, he's caused even more stress.

We'll be right back. There's this myth that if you rent, it means you haven't made it. I don't really believe that I rent. And I want you to know that you are not a failure if you choose to rent. In fact, I want more freedom right now than buying a 30 year mortgage. But if I'm spending thousands of dollars a month, I want to get some of the perks that homeowners get. And that is where BILT comes in. BILT is a loyalty program for renters. You pay your rent through Bilt and you can earn points for it. Think about it. You're earning points for your biggest expense every single month. And you can redeem those built points towards flights, host hotels, Lyft rides, or even future rent payments. BILT has evolved into a complete rewards ecosystem where you get rewarded for the first time as a renter. And it's easy. Almost any payment method is compatible so.

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Now back to Cassandra and Aldo.

This idea of stress is really interesting, Aldo. From what I hear, money was stressful in your family. And now as a grown man, you've taken on the role of protecting Cassandra from the stress of money.

That's pretty spot on.

How do you do that? Give me a couple of examples of how you protect SHIELD Cassandra from the stress of money.

I see where you're going. It's really not. Because now, at the end of the day, you know, we're in. We're in debt. I thought I was protecting, but I was just delaying that, you know, and now it's a lot worse than had. I brought it up two years ago and said, you know, maybe we can't do the kitchen yet or, well, the pool. We had to, because that was dangerous.

Well, I could think of a recent instance where you. It was the Cabo trip. You know, good friends of ours were going to celebrate their daughter's sweet 16, and they had come to our daughter's sweet 16. We took a vacation to Dominican Republic the summer before that, and we.

This is what people are doing at 16 now. Damn, I'm out of touch.

I know.

Okay, good to know.

Bad, you know, you get seven days versus, like one big, you know, wedding party, basically. So we both felt really bad and wanted to say yes because, you know, we really, you know, these are good friends of ours. And I remember being stressed about it because I was like, we just took. Like, we're gonna be taking. Well, Aruba wasn't planned. That was like a last minute. But I knew Destin was in July and this Cabo trip was in August. You know, I'm like, I don't think we could do this. Oh, when I get my bonus, we'll just pay this off. So we took that trip. And that trip, you know, was a little. It was expensive. And how much? Come to find out, it's all on a credit card.

How much was it?

$7,000. It was supposed to be 3,500.

Yeah, and that's what he came to me. He's like, oh, the Most is like 4,000.

We did. Aruba was. Wasn't planned. It was what I thought was a great deal, and we ended up spending twice as much.

Kind of seems to be a recurring theme. We thought it was going to be 25k. It's 105k. Thought it's going to be 3507k, probably 9k if you factor in everything.

Those phantom costs.

Yeah, they really get you. Here's what I'm noticing. Although I think that you have an identity that you have unconsciously and consciously constructed of your provider. You said that to me explicitly. That's very common. You are the protector against stress, money, stress. So you absorb it all yourself. And when you come around and say yes. Yes, we can do this renovation. Yes, we can go on this trip. You become the. What was that? Cassandra?

Hero.

Yeah, the hero. Cassandra, do you think that that's true?

I do, yeah.

That's kind of interesting, isn't it, Cassandra, that the person who you thought was the money expert might actually not be as skilled as you thought.

Very interesting.

I mean, there's some valiant things to it. Being a protector, being a provider, being a hero. Those are all positive words.

Yeah.

So where has it gone wrong so far? You're going on a lot of vacations. You got a nice house. What can't you do?

We've gone on these vacations and we've got nice things, but they're all on credit cards and loans.

And so what? Can't keep getting them.

Can't do it. We can't do it anymore.

You know, in many relationships, the hero when it comes to money is the person who says yes. They always figure out a way to let you get what you want. They never say no. But in my view, the real hero is one who builds a partnership with their spouse to talk about money regularly. And they truly include their spouse in decision making. If they're a parent, they talk about money regularly, positively, proactively. They teach their kids how to think about money. They teach them what the family thinks is important to spend money on, and they set boundaries. To me, that's a real financial hero. Let's take a look at their numbers. Assets, 703,800. Investments, 115,000. Savings, 1,000. Debt, 520,000, for a total net worth of $300,000.

So combined monthly is 13,784.

All right, so that's. Read that out. How much do you make per year, total?

165,408.

Did you know that?

Yes, but that doesn't count my commission.

Well, how much is that?

This year is 70,000.

70,000?

Yeah.

Okay.

I think it's actually more. It's going to end up. My salary is going to end up at 160 this year, total.

What the hell? How much is the Bonus? You said 70,000 quarterly.

It varies. So my first quarter was 40. My second quarter was 25, my third one was 31, and this one I just got was 32.

You didn't just get. Right, you're getting it.

I'm getting it in November. But the Numbers just ended.

40 +25 +62 is 127,000.

Yeah.

All right, fine. I'm adding it just on the side. That's positive. Really positive. We can make some serious changes with this kind of income. Your investments are 115k. What does that investment consist of?

401Ks.

Okay, what else?

That's it.

How much are you putting in your 401k?

10% each.

Yeah.

So what's up with the debt? It's $2,482 per month.

It's a lot. Personal loans and credit cards.

So there's one that's 8,127. So 8,000. There's another one that's 16,000. And these are personal. The Apple loan is another 16,000 at 13%. Did I say that both of those are 13%. The 16,000. And then there's his student loan, about 14,000 at 7%. Oh yeah, the mortgage.

Yeah, but that's not everything.

Okay, so we have a Capital One credit card. He has an American Express business card, bank of America credit card, another American Express card. 1700. 0%.

Huh.

This one gets me. It's Capital One. It's 13. It's about 14,000 at 29.99.

We're still paying off my daughters and Cassie's phone.

And then we have Macy's which is 6200 at 31.74%.

What, what, what do you buy for 6400 bucks at Macy's?

We do a lot of Christmas shopping. There's if the kids need clothes or whatever, we usually go there for gifts.

Did anybody teach either of you how to how interest works with credit cards?

Yeah, my dad sat me down and talked to me about it. So I know.

Aldo, what about you?

Yes, yes, I do know it very well.

But that's good. I'm glad I didn't know.

I mean like that's one of the credit cards that he would give me. That one is under your name. Right. And he would give me that whenever I needed.

Like you. You had a card for it.

Yeah, but it wasn't. You gave that to me.

How did I just ask for an explanation of your understanding of interest and now you're both like pointing the finger at each other. The numbers terrify me if I'm honest. You're currently spending 94% of your take home pay on fixed costs.

Which is mostly the debt payments. Right. And the mortgage.

Well, let's just zero out the debt and see what happens, shall we? I'm going to turn this into zero just to see. Takes you down to 62. That's nice.

There's going to be this business loan that's going to come up where we're going to have to either settle or start paying it again. And that's an additional thousand a month to our debt expenses.

What is that? Business loan?

It was a business loan that we took out. Well, I took out two years ago on a business that I had that closed down.

Can you settle?

No, not yet. We have a year to settle because I missed three payments. They sued for the entire thing. So that's, you know, that's the, the like is the big debt that we're, we're not going to be able to make it unless we can pay as much debt as we can in the next year.

Well, that's what you have to do. So you're right. Right now the over overage is almost all debt. And if we look at the debt which we've now wrote written down here, we have a bunch of personal loans, we have student loans.

Now we're still missing some cards.

Yeah, I didn't finish.

Oh, you didn't finish.

Oh my God. Sorry.

I got. Okay, what else besides Macy?

I think you. Yeah, Macy's scared you. What else? Island Federal, 2300 at 12.99. Care Credit. And then the last one is City Credit Card, which is about 10,000 at 29.99.

All right, what's the total amount of all those loans added up?

70 maybe?

No, it was.

It was 90.

1,882.

Does that include your mortgage?

No.

I'll put it back up on screen.

Oh, the 66,000 from the loan, the loan that we're not paying, and then the 2500 that's in collections for JC Pennies.

What, did you shop there in 1998 last time?

Yeah.

JCPenney.

Oh my God.

My mom took me there when I was in sixth grade.

I've never gone in that store.

This is amazing.

Is it still around?

No, they went bankrupt.

So he tells me. Oh, they forget about it. Don't worry about it. And I'm, I, I got a phone call the other day.

I don't believe they just forget about it. They just sell their debt. All right, so 60. Oh, yeah, we just forgot about $66,000 in debt. We forgot about that one. Okay.

And 2,500 JC pennies. And then I think it was 800 in like city MD bills. That's. That should be around, right? One hundred and ten.

Okay, that sounds about right.

So you have 110,000 in debt.

No, no, it's more than that. The 110 is without that.

That loan can't be. Babe, there's no way.

Can we all agree that the fact that you don't even know within $20,000 how much debt you owe is a problem. Whether it's 120 or 200,000 doesn't change the fact that we need to come up with a plan for it. Would you agree?

Yeah.

Yes.

All right. Should I just tell you what. What's going to happen here? Because I'm just going to like. Let's just cut to the chase. Stop using your credit cards like, none.

End it.

No more charging stuff. What do you think of me saying that? I'm getting very interesting looks on both of your faces.

I'm totally on board for that. I. Yeah, there's something else that, like, I mean, it's. I guess it's a good and a bad thing, but we last month, and I don't know if this is a good idea. This is before we knew that we were going to get to speak to you. We took 10, 13,000 out of my 401k. Right.

Why did you do this? No pay off. To pay off two big credit cards.

You took a loan out of your four against your 401k. You took an early withdrawal.

Yeah, because we weren't going to be able to make it to pay off all our debts and not put anything on cards.

What happens when you take a loan from your 401k or withdrawal from your 401k? What happens?

Well, the withdrawal costs us a lot because there's a penalty and there's interest with the loan. We're paying ourselves back, but not at the rate of whatever the market's growing.

Yeah, right.

It's a fixed rate. But the reason we were trying to pay off more debt is to help improve the credit and apply for a home equity line to put all the debt into one.

You know, I'm very. I'm always weary of quick fixes, which is again, why I didn't really want to pull out from my 401k. It kind of like, you know, hurt me to do that. But I, you know, I thought maybe it was faster or, you know, the way Aloe put it, like it made sense.

That was a bit of a Freudian slip, wasn't it?

I know.

Sorry, I'm not for get rich quick.

Stuff, but I thought this would be faster.

This is one of my favorite categories of responses in personal finance. When someone says, I know we're not supposed to time the market, but.

But.

And then whatever they say after the word but is going to be 100% market timing. Here in Cassandra's case, she says, I'm wary of quick fixes. But here's this quick trick to get us out of debt faster. Let's take a quick pause to hear from our sponsors.

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Back to the episode.

The real value is in you two understanding what series of decisions got you into roughly 150 to $200,000 of debt. What do you think it was?

Just spending?

Yeah. Carelessness, not making enough money and always.

Wanting to get the kids, you know, everything they want, everything that they need.

Why?

Why do you want to get them everything they want and need?

As a parent, you don't want them to, you know, not have new clothes for the school, new sneakers and, or.

You know, and there's expensive, you know, electronics things. It's just a lot of nonsense that we've been.

Yeah, we're like making memories with them and doing the trips and taking them out. Okay.

These kids have jobs?

Yeah, my daughter does.

My daughter just got her first job over the summer.

What's she making?

Minimum wage, 15 an hour.

Yeah, she's.

She's saving for a car.

That's not bad. 15 an hour. Great place to start. I don't mind that. Teach her some saving skills, which you yourself are going to be talking about with your family. That's awesome. So actually a very formative moment. What do you think, Day? If I were to ask your oldest 17 year old, what have you learned about money from your parents? What would she tell me?

Probably to save. Keep telling her to save her money and not spend it.

Hold on, hold on. I got to pull this up real quick. What's that number right there in your savings?

$1,000. She has more than that.

Your daughter has more than you in savings.

Yes.

And you two earn over $200,000 per year. What else would she tell me she's learned about money from her parents?

Just had a bank account. So she's 13. So she budget. She's never overdrawn.

I feel like we could learn more from her because she's even just little babysitting jobs here and there. She puts it away.

Aldo, remember how we spent some time Talking about your family growing up and what. What kind of influence that had, you know, the word stress coming up and things like that. Let's fast forward 10, 15 years in your daughter's future. Okay. Cassandra, you too, right? 10, 15 years in your daughter's future. Maybe she's in a serious relationship. Money is starting to come up. What is she flashing back to that she learned about money from. From her parents?

I feel like it's a big. It's a big part of our lives. We talk about it. I mean, not just now, even before. Like, I feel like if she would have asked for things. I mean, I'm guilty of. My first thing is, oh, we don't have the money for that.

I don't know. I. I don't know if I read it somewhere that it wasn't, you know, a good thing to have your kids think that, you know, we're not financially stable when we say we don't have this or we don't have money for that.

Are you financially stable?

No, no, No, I don't think so.

I'm not saying you have to tell your kids every little detail, but there's also the. Going the complete opposite direction and saying, well, we have unlimited money. There's a magic box, and all you have to do is ask. And if you want a car, vacation, this or that, clothes, you might have to ask twice. We might tell you we don't have the money, but if you ask three times, it's always a yes. The dynamics, I think I don't even know your daughter. I've never spoken to her, but I think if she comes on my podcast in 20 years, I think what she would tell me would be, I observed that my mom didn't really log into the accounts, and she earned money and it went into the family account. And if she ever wanted anything, she asked dad, and dad always said yes. And therefore, what do you think her conclusion from that would be?

Therefore, I'll just.

She'll form the same pattern, buy what.

I want, and deal with it later.

Correct. Not really what we want to teach our kids.

I want her to say that I. If I don't. Well, I want her to say that I've put. I've invested some of my money.

Nice.

And then I would want her to say that if I don't have the means for it, I'm not going to spend it unless, you know, I have budgeted and saved for it.

Love it.

It might be.

Aldo, what about you?

Yeah, I want her to learn to use money properly. So she can enjoy her life, get whatever she wants, knowing that she could do it. You know, have that confidence of knowing what. What to do. Right, right.

What if she can't get it? What if she can't afford it?

Then she shouldn't get it. Or work harder to get it. Not put on a credit card. Really?

Tell me about that. You. Have you ever told her that?

No, I don't think I have.

It's kind of hard for parents to be like, don't put it on a credit card when you have, like, $50,000 of credit card debt.

Yeah, I think that's probably why I didn't ever write it up.

Every parent has a little bit of do as I say, not as I do, but there's a limit where even you're like, look, I can't even BS you about this. Like, what are we going to say?

Okay, And.

And what's up with your college? I mean, your daughter's college. She going to college?

She wants to. Yeah. We're talking about community college for the first two years, and then she would want to make a decision where she would go from there.

Have you two made any commitments about funding?

Oh, we feel about bad about that. I mean, it's something we wanted to do. We just didn't plan it right.

That's the unfortunate reality. I am glad I have to say that, you know, you haven't told her, hey, I'll. We'll pay for everything. I'm really glad that you seem to have had some discussions about community college. I think there's a lot of amazing options. And listen, I hope that after a couple of years, if you were to be extremely aggressive about your payments, you might be in a better position to at least offer a little bit of help. But right now, it'll be very difficult to do that. Any reactions to that, Cassandra?

It's hard. I never thought that I would be, like, in this. This position where I could help her, so it's hard to hear.

Okay.

When I first saw all of this, I told Aldo, I said, I don't see us getting out of this anytime soon. And he has this, like, you know, he always tries to, like, make it look better. And he's like, no, we could do this in two. I don't see it being more than two, three years. And I'm like. I'm thinking more like 10 years. Like, I don't see how we can get out of this.

Well, the good news is we can fix it. We can fix some of the personal loans, the credit card loans. All these loans and then we can start off at least feeling a bit more breathing room to create a new chapter with your money. I think that would feel a lot better, don't you think?

Yes.

And you're going to show her what you are doing about it so that she can see, oh, my gosh, my parents are really having to change their lifestyle, but they're doing it. It's also a very positive message. And I think that's the kind of message that she would be lucky to have 10, 15 years from now.

Okay.

Let'S talk about what you can do. Two things that occur to me. Number one, I don't hear you talking about dramatically cutting back on expenses, which I'd like to talk about. But two, you know, you have these credit cards that you took the 401k withdrawal for. What about all these bonuses that are coming your way every quarter? What about using that money?

That's the plan. I'm gonna get 17,000 after all taxes in November and we wanted to take two cards off in November.

Where's the $127,000, Aldo, that you're making this year in bonuses we've spent?

I mean, it's the end of the year already, so we've used it up. I would pay off cards and reuse them for trips or expenses. It's just been a cycle.

If I were sitting in your situation, every additional bit of income that I got would be split between debt and building up a savings account. Like, I would make a black and white rule. That'd be rule number one. And we can talk about what percentage that can be. But if it were me, it would be something like 85% debt, 15% savings. That's what I would do, number one. Number two rule would be no more spending on credit cards at all. Put the credit cards, lock them away, no more using them. All they are is one directional. You're paying them off as quickly as possible. And the minute they get paid off personally, I would close the accounts and then black and white. Rule number three is I would become extremely honest about where we are going to spend our discretionary money.

Because I think the two of you.

Spend a lot more than you realize. Clothes, trips, et cetera. All that money that you have spent, I would take it going forward and.

As much as possible, I would direct.

It towards the credit cards and the savings. Simple. Three rules. What do you think?

I agree.

I wanted to close credit cards. I told him I think I thought.

I would hurt your credit for the future.

Like what though? Tell me what concerns you about that.

Are, like I said, our plan was to improve credit so we can get the home equity line and then pay everything off. And at that point we could close everything and just have one big loan with a lower rate and try to tackle just that one loan with everything we can put into it.

What could go wrong with that plan.

If we don't pay was the house? Then we, you know, we would have to sell the house.

Mm, you'd fall back into debt if you didn't close all the cards off?

Well, no, we would have to close the cards. The plan was to close them and just put it all in the home equity. But yes, I mean, there is the risk if we, if we can't make the payment, then it's, you know, it's a risk we're taking that we could, we would be forced to sell the house to pay off that than that.

Would your past spending suggest that this would be a successful way to go or not?

The past, no. But I think both of us being hyper aware on our expenses I think will give us a chance to lower our minimums from 2400 to 1000 and now put that additional 1400 to pay down the principal.

It's possible. It's possible. In the best scenario it could work.

But you don't think we can make it work?

I think that I look at people's spending behavior and it tells me the best predictor of their future behavior is what they currently do.

Today.

Today I see debt upon debt upon debt. A home equity line seems essentially like another get rich quick opportunity. It's yet another thing that's going to come down from heaven and save us. And I don't love it.

In almost all cases where I speak to people in severe debt, they look for a magic bullet. The first thing they say to me always is, we just need to earn more money. And then the second thing they talk about is some type of credit card game, usually either consolidation or balance transfers. Now those can be useful tools, but candidly, that's just wishful thinking for most people in these situations. People in severe debt will talk about every other option except actually changing their spending and making an automatic debt payoff plan. This is literally in chapter one of my book. If you are listening to this or you're watching this on YouTube and you're in a lot of debt, the one message I want you to hear today is that there is freedom in going through the fire. That means if you want to truly pay off your debt, there are no gimmicks and there are no tricks. You have to take a hard look in the mirror. You have to ask yourself what decisions brought you here? And then you have to change your entire relationship with money and debt. It will be hard, but you can learn this skill and you can get stronger. And I know, having worked with many people who were in debt and have paid it off, that there is a light at the end of the tunnel.

In this case, if you were to plug in all of your debt into a debt payoff calculator. Okay, I'm going to encourage you to do that. And what you can do is you can start to play with first off, which should you pay off first? If you're the most sophisticated, you would pay off the one with the highest interest rate first. You can also see how much would it help you to pay off an extra hundred dollars a month, an extra $250 a month with the balances you have, an extra $250 a month would make a massive, massive change. Have you run a calculation like that before?

No, but we were looking at doing the snowball effect and the avalanche one. Yep, the snowball and the smallest one. And try to focus on that. And we were doing the minimums on everything else. And when I get my bonus, pay off the one with the highest interest.

Okay, let's take a look.

All right.

You can pay off your debts in five years if you pay off $3,200 per month. Now, keep in mind, that's more than you're paying, but actually somewhat reasonable. Do you know why? Why is it reasonable to be able to pay off 3,200 instead of 2,500 that you're currently paying off?

Because of my bonuses?

Yep. And any reduced spending, travel, all the groceries, all the stuff. Hellofresh. That used to spend. This is five years of aggressive debt payments. It shows that you'll pay 41% in interest alone. Totally wasted money. $80,000 of interest you're going to pay just from not looking at money.

It's so crazy. Money thrown away.

I mean, that's why we completely stopped using credit cards and change our mindset to pay as much as we can with anything we have additional.

Yeah, so go ahead.

If you ran the same numbers at, say, 10% with the home equity, you still wouldn't like that idea? No, I think we could get out faster.

It's like swapping money around, isn't it? My concern is that that number seems very high a month, and I feel like it would leave us with nothing left to do. Anything at all. I know my habits aren't going to be anywhere near what they've been. But I also know that there's holidays and there's things that come up and you know, just the thought of not being able to take the kids away like on one vacation, like I'm just nervous that there's not going to be any leftover for living, you know, I don't want to be miserable either. The next five years, you think we'll.

Fall back in the same pattern?

Yeah, I think you'll lose your house and I think you'll find a new way to get into debt.

I want to recap why I am being so direct with Cassandra and Aldo in this very moment, in this conversation. Because in their history they have a failed meme stock, they have loans and credit cards that have gone to collections, they have garnished wages for back taxes, credit card debt, we couldn't even calculate out of control spending and a 401k withdrawal, not to mention many other huge red flags. Recall that they are 38 and 42, two kids, $540,000 in debt and they make about $165,000 a year. But as you just heard, they were not satisfied when they found out that to pay off their debt it would take them over five years. So I gave them another option, a more extreme option. I suggested that they take 80% of their bonuses and put it towards debt. But I also pointed out what it would mean for them. It would severely limit their day to day spending. I suggested that they commit to no vacations for two years. Keep in mind that they took three trips this summer. I told them that under this plan nobody can get laid off. I suggested that they have to stop using credit cards immediately. And I suggested that they cut their phone bills, subscriptions, clothes, groceries and guilt free spending to the bone. And if they did all of these things and they executed perfectly, their debt payoff would take about two and a half years. Let's take a listen to what they had to say in their follow ups.

What I learned was that, you know, by setting some automation can really help us not only stay on focus but handle our finances much better. What surprised me the most is in how short of a time frame we can really get out of all this debt. What our plan is to, you know, set some rules and definitely stay focused on our debt calculator schedule, right? By putting 80% of our income come into bills and expenses and 20% to savings, it's really going to help us, you know, tackle all this debt and get out of it and, you know, hopefully under three years. So, yeah, definitely excited to, you know, put all this knowledge in play and, you know, learn for whatever ways to handle our finances so we can teach our children to do that, you know, moving forward. So thank you again and we'll chat soon.

Mostly what I learned is that I can't just sit on the sidelines. You know, we're a married couple. We've been married for 18 years, and I should have been more involved in our finances and not just kind of pretend or ignore it, really. I think what surprised me the most is that we can get out of this without any, you know, quick fixes. I think the right way to do it is how you said we can aggressively pay off our debt. And we plugged in the numbers again, adding a little more to our debt each month. You know, if it's whether it means taking off from certain expenses or not eating out as much, maybe, you know, skipping vacation this year, the difference that it makes on the timeline as far as paying off our debt. So our plan is to pay off our debt debt in two years and 11 months. You know, we plan on sticking to this so we have a whole payment schedule. We use the debt payoff calculator, and we plan on sticking to it. And, you know, hopefully everything goes smoothly and we'll be out of debt in less than three years, which is amazing. I did not expect that.

Now here's my question to you. Do you think they can do it? Thanks for listening to I will teach you to be rich. I'm Ramit Sethi. Please follow the show on Apple, Spotify or wherever you listen to podcasts if you haven't read I will teach you to be rich. My book. Pick up a copy.

You can get it at any bookstore.

Or any library, and it will show you the specific tactics for how to build the I will teach you to be rich system into your personal finances.