156. "We have 2 kids, 3 cars...but only 1 month of savings" (Part 2)

If you've recently discovered this podcast and you've wondered how can I get Ramit to answer my specific money question? There are two ways to do it. Number one, you can apply to be on this podcast although we are already full for the rest of the year. Number two, you can join my Money Coaching membership in this program. We do a ton of cool stuff I want to make sure you know about it. We do a monthly live call with me where I cover some of my favorite money topics that I can't go into publicly in as much detail as and I break down our members conscious spending plans. Plus I answer your questions live. We also have tons of virtual events coming up that cover every aspect of living a rich life. For example, our new event Money for Aging Parents is coming up at the end of October that is included for all Money Coaching members. You get access to our library of all past calls like how to find an extra thousand dollars a month and how to do a Rich Life annual review. Plus we have a Money Coaching community group where you can see inspiration how other people are spending their money and get your own questions answered if you want to get help. If you want to meet amazing other people in Money Coaching and you want to build your rich life faster and bigger, you should check out Money Coaching today. Go to iwt.commoneycoaching to join right now. That's iwt.com moneycoaching. What happens if it doesn't last?

We fall more into debt or have like a bigger issue and then then have to make emergency drastic decisions that.

Are affects our family or affects our family.

Like what?

I guess selling the house or foreclosing on your house. Not having a place like bankruptcy I guess. Right? I don't know.

Our lifestyle would change drastically. Like I can't carry the weight of this anymore and like our relationship would probably crumble apart. I want like big changes. Tell him I want big changes.

Okay, so pick something.

I don't want it to be on me.

Okay Foreign.

Welcome back to my conversation with Paul and Morgan. Paul's 37. Morgan is 33. This is part two of our conversation. Last week we learned that Morgan is the chaser and Paul is the avoider when it comes to money. Interestingly, Paul also constantly reassures Morgan everything's going to be okay without ever really knowing how their finances work. Now I want to point something out about today's conversation. It is striking that we're about to spend so much time talking about how they need three cars. But when I finally actually look at the Numbers, it becomes clear how severe their situation really is. What do you think the psychology is behind debating some random purchase for hours when your financial house is on fire? Well, that's a very common thing, and we're going to explore that in today's conversation. If you're listening, check out the YouTube video, especially today, because we shot this in person in New York. Now to today's conversation. I started by asking them to imagine a different dynamic, one where they're not chasing and avoiding each other. What would it look like?

I think Paul and I both having more discussions and planning and having, like, a clear idea and being more intentional about what we're spending and what we're buying.

Both talking things out and having goals, what we want and how we're gonna get there.

What would it look like and feel like to you if you actually felt good about money?

Feeling like I didn't have to carry.

The weight of all of it like you do now. And that weight you're carrying, like, where do you feel it?

Like, in my chest, in my back, like in my stomach.

And. And you feel that weight because what?

Um. Cause it's like, it's. It feels like it's on me to restrict. Or I could say, all right, whatever, let's go to Florida. Let's do it. And then we have a lot of fun. Then in the back of my head, okay, now we're in this much debt. I don't even know what it is. Cause I can't see the credit card. And, like, we'll just figure it out.

Are you both carrying the weight equally?

No.

You're carrying more of it.

Yeah.

All of it, probably.

Yeah.

That can't feel good.

No.

You carry the. All the weight of parenting.

Not all of it. I carry, like, the emotional weight, I think. Yeah.

You talk about how you kind of spread out the weight of household tasks, parenting, things like that. Both nods. Look at that.

We talk about it a lot. We have a lot of coordination.

Wow.

Like, two kids. We both. Morgan asked to be at work at 7:30. The kids are out at the door. 6:45am Got to do it.

We move.

I am in New York City sometimes 7am okay, back.

And if one of them gets sick, that kind of throws everything off.

We talk about it, and one of us has to take off, and we've gotten.

Hold on. How come you just came to life, Paul? Like, that was really cool. The. The coordination in your nods was, like, in complete unison. What do you think? How come you came to life on that? When I asked about do you two coordinate and share the weight with household tasks?

I think because I'm. I'm confident that that, like, we have that down. Yeah. You know.

So did you all just naturally become good parents who share coordination?

No, I think we've had to have a lot of conversations about it and, like, sharing, like, low, like, load and different responsibilities. It's a lot.

And making a lot of mistakes, too.

And having arguments.

Having arguments and adapting.

Yeah, definitely.

I wonder what it would be like if you were to apply that to money. What do you think it would be?

Less uncertainty and more. Maybe logistical or goal oriented or.

Talk to me about the specifics. Just the same way you talk to me about all the parenting specifics that you do. The kids out the house at this time and that and this and that. Tell me the same thing for money.

What would it look like, Morgan? There's this much in the account right now. This is going to.

This.

That is going to. That. We're going to have this left over for our vacation. We're going to have this in savings.

Okay. Um, I love that. I'm curious. How come you just got, like, very. Almost like. Like a caricature? Why, like, did it feel kind of cartoonish to you to say that?

No, I think I. No, I would love to be like that.

Yeah. I like the way you created that vision. That's basically right. What do you think, Morgan? What would it look like if the two of you were the same with money as you are with parenting and household tasks?

I think we'd have to talk about it a lot more. Like, for us to have gotten to the point where we are now with those tasks, we had to have a lot of hard conversations and really be intentional about divvying it up.

Right.

Would you only talk about money at 10pm at night? No. Yeah.

You'd find time.

And would you be the only one bringing it up? No. What do y' all make of this? This analogy between how you handle your household tasks and how you're currently handling money? Find that interesting?

Yeah.

I thought that moment when I asked Paul to take the parenting skills that they've developed and apply it to money was really fascinating. Did you notice how he unconsciously shifted into that cartoonish voice, almost like he couldn't truly accept the role, that he might be someone who was skilled with money, sitting down and calmly, confidently talking about money? So he just unconsciously made it a joke? Of course, I could be wrong, but I thought it was fascinating. What I notice more generally is that every couple has at least one area of life where they are really good. They're totally dialed in. And for two working parents, it's often childcare. They touch base frequently. They know what's going on. They've developed contingency plans if something goes wrong. In my role, the simplest thing I can do is help them connect the dots between their area of competence and money. Because money is just a skill like any other skill, and if you work at it, you can get better at it. We'll be right back after this short break. Real question for you. Do you know how often you're supposed to see your primary care physician? How about the dentist? How about a dermatologist? A lot of us just wait to get a text from the dental hygienist to know it's time to make an appointment. But your health is important and we talk about going from defense to offense with your money. What about with your health? Why not make your life easier and Book this year's appointments today with zocdoc? Zocdoc is a free app and website where you can search and compare high quality in in network doctors and click to instantly book an appointment. They have over 100,000 doctors across every specialty from mental health, dental, primary care and more. Just filter for the doctors based on your insurance, your location, even ratings and find a doctor who's a good fit for your needs. Plus, Zocdoc appointments happen fast, usually within 24 to 72 hours. Instantly click through your options, book the appointment and you are good to go. If I needed to find a new doctor today, this is what I would use. Stop putting off these doctor's appointments and go to Zocdoc.com ramit to find and instantly book a top rated doctor today. That's Z O C D O C.com Ramit Zocdoc.com Ramit 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, 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 you can start earning right now. I wish I had had this when I first started living in New York. Plus, BILT recently announced that homeowners will be able to get rewarded the same way on their mortgage in 2026. So stay tuned. Join the loyalty program for renters at joinbuilt.com ramit that's J-O-I-N-B-I-L-T.com ramit and make sure you use our URL so they know that we sent you. Before we get back to their numbers, I want you to see something. Paul, you went through the CSP and you sent a little update to me on how humbling it was to go through this process. You almost looked a little like Struck after doing the csp. Do you remember that?

Yeah. When putting the numbers into the current spending plan and seeing all our fixed costs, how it's 89% of our income was pretty eye opening. I don't think we've put that all on paper in a long time. We're in just kind of this equilibrium, at least in our minds. Seeing that all into perspective was definitely eye opening, nerve wracking, stressful. When Morgan and I were doing this together, there were a lot of like, definitely the two of us being overwhelmed, coming to kind of hitting walls where we feel like there's not much we can do on these fixed costs.

What did you feel after you got to the end?

Stressed about money. Really? A little bit.

That's. Is that the first time you felt stressed about it?

Probably one of the times where I the the times feeling more stressed about money was after completing this.

Seems like a tough way to live. One partner constantly feeling stressed out by money, trying to use random opportunities to bring up the importance of money to the other partner. Partner number two, feeling like we're good. I don't really want to talk about this. In fact, we're fine. Like it used to be worse. Now we're fine and then never really getting anywhere. Yeah.

Yeah.

That seems like it can go on for decades, but it's not really healthy.

No, totally.

Do you think that it's possible to feel good about money?

I think so. It feels like, I guess, scary just thinking about how to get. For me to get to the point of feeling good about money feels scary because I think there's going to be A lot of changes and steps involved.

This is why I always ask couples about their experience doing the csp. Yes, the numbers help me understand their situation, but I really want to see if you did it together with your partner. I want to see if one partner had to drag the other one to do it, or if one person simply typed all the numbers and the other rolled their eyes and said, okay, whatever, trying to get out of there as soon as they could. There's this phrase, the way you do anything is the way you do everything. And I have started to see this more and more across my life. In fact, when I mentor young people, I share this advice. I tell them someone is always watching. If you're running cross country, your partner's noticing. If you cut corners at practice. If you're at work, your boss is noticing. When you volunteer for a project, they're noticing how communicative you are. And if you deliver excellence, especially if you deliver it early and later in some closed meeting, that boss will use that moment and a hundred others to make decisions about your promotion. You may never know, but she was watching. Ultimately, though, the person watching who really matters is you. Are you performing at your best when you show up to do the csp? Are you simply going to relive the same pattern that you and your partner always have around money, or are you going to show up fresh, ready to make a change and focus on connecting over money together? Someone is always watching, and we see that because the way you do anything is the way you do everything. That shows up with your csp, and it shows up throughout your financial life. What's the number on investments?

1%.

Okay, so you're investing 1%. All right. And your savings?

6%.

6%. Which is going towards home improvements, basically. Whatever. Let's not even get into that. Let's go back to your fixed costs, which are at 84%. Shall we go line by line here? Sure. All right. Your housing is pretty low. 1800. So that's 15 or 16%. Really good.

That's with taxes.

That's taxes.

And Very good. We got a good rate.

It's way higher than that. Do you notice that with. With the renovations and maintenance and all that, it's probably more like 30%. If we were to actually factor in how much you spent in the last 12 months on renovations. Could you ballpark it for me? 10,000?

Yeah, probably 10,000.

So this number here is not fully accurate.

Right.

Your rent and mortgage. Your mortgage amount. If you were to actually factor in all the other phantom costs, it Would be at least 2,800. Yeah. So do you now see that you're basically spending every dollar you make on your fixed costs? Yeah. That's the haunting reality.

We bought this house with plans to do stuff to it. And, you know, we're in it four years now, and we're not where we want to be. So, like, saying, okay, we need to fix. Not fix the finances, Fix the house now and start moving it in the direction that we want it.

Right. Because fixing the house will mean what?

Gratification, I guess.

Will it?

In my head, maybe.

Or. Have you ever walked in your house and felt gratified?

You do?

Yeah, sometimes.

What kind of answer is that?

More gratification? Duh.

I don't know. I feel overwhelmed in our house because it is, like, not a very functional home.

Yeah.

So when you walk in and when you look around, what do you feel.

Like, overwhelmed and stressed.

Yeah.

Okay.

Paul, what do you think? I would think you feel a little pride. You were able to save up a lot of money.

It is a functional house. We've lived in it for four years. It's our home. It. It's safe and it works. And.

And then there. There are moments of, like. I know. I feel like I'm being negative. There's moments of appreciation. We live in a really beautiful place. Our kids are outside. Like, we have this lake near our house, and it is like, it has the potential to be something really great. But we've always been, like, holding. I've been holding onto, like, the potential of what it could be.

Yeah.

Versus appreciating what so, like, fantasizing, like, when we bought the house, we're like, okay, great. We're going to do this, we're going to do that. It's going to be like this and not being there yet.

And even, like, how we bought the house was really impulsive. Like, we had the money saved, but it was not, like, okay, we found a realtor. We're going house hunting. It was like, Saturday night, we're hanging out. I'm on, like, redfin or something, and I see, like, oh, look. Look at this house. It's in this area on a lake. Let's go look at it. We went to look at this house. The realtor was like, sharky and was like, hold on.

Is there any other kind of realtor?

No.

Okay.

But she was very much like, let me take you these other houses. And then all of a sudden, it was like, oh, we're house hunting yet again.

I am shocked at how casually people make Life changing decisions with their money on this podcast. People routinely go out for a casual weekend looky loo or around the neighborhood, and then suddenly it's like they trip and fall and buy a house. Do you know how many years I've been tracking real estate prices and calculating TCO of ownership in multiple cities? Yet people will agonize over the extra $30 they spent at Safeway last week. I simply do not get it. Let's take a look here. You have a car payments of 775 bucks.

That's gas.

That's gas. We don't have car payment. That's your truck.

Gas. Yes.

Well, we have three cars.

I know.

How many driving adults in your household just who. Two adults, three cars. What am I missing?

So Morgan, she got a new car. What car?

A supra. How much?

35.

Okay.

Yeah.

All right.

The Herald car. I took it as 270,000 miles on it. It's an Acura. I use it, I commute with it. So it's kind of like the beater car. Okay. If something big goes on it, it's. We'll trash it.

Okay. What's number three?

The Toyota Tacoma, which was my primary car. And we're. There's nothing owed on that that I. It has 175000 miles. I just want to use it as. As needed. Getting rid of the. The beater, it's.

But it's costing money to upkeep. Like we just had to take it in. Like it's just. It feels like it's just probably get a thousand.

Two thousand.

We're talking about the Acura.

Yeah.

$2,000.

Okay, so what's the.

And it takes premium gas.

So what's the conclusion? Are you. What are you doing with it?

I. I use it to commute.

I want to get rid of it.

How do you make this decision?

Like, even when we were making this, this conversation came up, this exact one. And I think Paul speaks in very like extreme like, no, I need this. I need this other car. And it's like. Doesn't feel like there's room for negotiation.

Paul.

It's. The truck has like a small cabinet. We have two kids. So ideally commuting and like bringing the kids around. It has a full back seat. So have the two car seats in.

There for the truck.

For the Acura.

Okay.

He wants the truck for work.

No, the truck. I mean, there's like.

Yeah.

Stuff I pick up or if we go. We go camping a lot. And it holds like a lot of stuff.

You guys realize you have three cars for two adults?

Yeah, we spin the wheels in, like.

Kind of frustration, but there was no discussion on getting rid of the car until we started going through these numbers.

Right.

That's when it came up.

In general, people don't understand that owning things, especially expensive things, costs you in lots of ways that don't immediately show up on your monthly spending. Think about it. If you have an extra car, you have to maintain it. You have to pay for gas registration. You also have the mental load of deciding which car to take and, oh, no, we gotta go to the junkyard to get that extra part because it's about to break on the car. You also have the opportunity cost of using that money for something else, like paying off debt. Now, in this conversation, I hear two things. I hear a lot of stories, and I hear a lot of sloppiness. They both admit that the $750 in the spreadsheet for debt payments is inaccurate. Instead, they both randomly throw money at the debt, along with kids and renovation, and that's why the balance never really seems to change. Then groceries on the CSP, they put 1500amonth. Morgan admits that it's not correct stories and sloppiness. We also got into a bunch of details about their cats, which I'm going to spare you, including in today's conversation, they wrote 300 bucks a month. But as you can imagine, like most people, they are spending a lot more on their pets than they realize. Overall, they're not being honest with themselves about where the money's really going. And one critical thing to living a rich life is you've got to be honest. Honest with yourself and honest with the people around you. Hold that thought. We'll be right back. When I talk to new business owners, I hear a lot of the same motivations. I want to make extra money. I want more freedom. I want flexibility. But I will tell you something that I've never heard. I want to start a business so I can fill out a bunch of tax forms. That sounds like my hell. The good news is you don't need to be a tax expert to start your own business. Instead, you can use Gusto, this episode's sponsor. Gusto is online payroll and benefits software built for small businesses. It's all in one. It's remote, friendly, and it's incredibly easy to use. So you can pay, hire onboard, and support your team from anywhere. They offer automatic payroll tax filing, simple direct deposits, health benefits, workers comp 401k matches, you name it. They can help. Plus, it's quick and easy to switch to Gusto. Just transfer your existing data and get up and running fast with no hidden fees and no surprises. Try gusto today@gusto.com ramit and get three months free when you run your first payroll. That's three months of free payroll@gusto.com ramIt Once more gusto.com ramit what comes to mind when I share these specific moments? Renewing your passport. Scheduling a dentist appointment. Replacing that light bulb that's been out for six months and you're not sure what's the right bulb. We all procrastinate on weird stuff and taxes are usually right at the top of that list. We wait until the last second that we get overwhelmed. We got to pull all this paperwork and we're panicked because the deadline is approaching. That's why I recommend Gilt. Now that tax season's over, this is actually the best time to get ahead. If you run a business or you filed for a tax extension, one small move right now could save you thousands later. Gelt is not just another CPA firm. They helped one of my colleagues rethink his entire tax setup. Now he's saving more than he spends on tax prep. With Gelt, you get a proactive yield year round strategy, not just a one time filing. Credits, deductions, Business structure. It's handled. And their tech platform makes it easy to stay organized. You'll also get access to G's full tax library with guides on retirement plans, QBI and more. So if you've got a business or you filed for an extension, this is the window to take control of your tax plan. Head to joingelt.com ramit to book a consultation. And as a member of my community, you get to skip the wait list. Again. That's joingelt.com ramit join G E L T.com ramit taxes don't have to be a task with Gelt. They can be a tool to build wealth. Now back to Paul and Morgan. Can I show you what it would look like if we actually added in $1,000 a month to your mortgage? Okay, I'm going to add it right here. I want you to look at the fixed cost number. What just happened?

It went up to 93%.

Yeah, from 84% to 93%. So that's a lot. Now who knows? Are you actually spending an extra thousand dollars a month? Is it 800, 500? Who knows? But it's probably at. I know for a fact it's at least 500amonth. Because you told me you spent 5,000 on the renovation so far.

Yeah.

And then Childcare is big. $1,440 per month. That's for one.

The cost is 1,996 per month.

2,000Amonth.

Okay.

So one child is in childcare and then we pay $180 for like before care for the older daughter.

I gotcha.

And then there's a camp. Have to pay for camp for her now. Okay, so that's the1996 is camp and all the child care.

There's nothing in here for miscellaneous expenses that you haven't counted, which we know there's a lot when it comes to pets, cars, home, kids. Kids. We're talking hundreds and hundreds of dollars a month in here. If we added an extra, can we say 500 bucks a month?

Yeah.

Would that be fair? I'm just going to add it right here under blank. I want you to look at the fixed cost number. What just happened?

It's everything.

That's all our money.

98% of your take home pay is going to fixed costs. Makes sense that there's nothing being invested. There's essentially nothing being saved because that money's just going to.

Yeah.

To the other thing, home stuff. I mean, you did account for it here. So we could take out a little bit here. Let's drop this down to 400. All right. You're back down to 92%. Fine. And then you have 1% or $60 on guilt free spending. I don't think so. No, we all know that that's, that's just what's left over in the spreadsheet.

Right.

All right, so I just want to zoom out for a second. How would you describe the state of your finances right now, Paul?

Drastically in bad shape.

Okay. Morgan?

Yeah, It's a mess.

It sounds like there's no urgency to change at all. Why would you. You have three cars, you have a house, you're renovating it, you're taking trips. Why change?

Because it's not gonna last.

Yeah.

What happens if it doesn't last?

I think I get, you know, I worry.

Let me ask it again. What happens if it doesn't last?

We the. We fall more into debt or have like a bigger issue and then. Then have to make emergency drastic decisions.

That are affects our family.

Affects our family.

Like what?

I don't know if super drastic would be like I guess selling the house or foreclosing on your house, not having a place to live. Yeah, it's not that far not being able. Did you know that from what, from.

Where you are today?

No, I didn't.

One of you loses your job.

Yeah.

How long do you have with the amount of cash you have in savings?

Oh, no.

A month.

And I like, on my salary, I don't afford to like live.

Did you hear what, did you hear what Paul just said?

Less than a month.

Less than a month.

So you can see why it's striking to me that we're over here having a 10 minute discussion about three cars when I'm sitting here saying if one of you loses your job for any reason, you have less than one month of money in savings. And the whole like, let's spin and spin and not make decisions. You can keep doing it, just skating closer to the edge and hopefully things don't go bad. But if they do, they go really bad really fast.

Yeah.

Yeah.

Our lifestyle would change drastically and I think, like, I can't carry the weight of this anymore and like our relationship would probably crumble apart.

I just want to pause here to reflect on the difference between what their concern was when they walked in versus now. Remember that on our last episode, part one of this conversation, we spent a ton of time talking about some random $12 a month music subscription. And now in today's conversation, we realize they are essentially spending everything they make every single month. Most couples I speak to who are in financial trouble do exactly the same thing. They fixate on one random expense because frankly, it's easier than facing the truth of their real financial troubles. My wish for everyone who listens to this podcast is that you have the courage to get honest. Honest about how much money you're making, honest about where the money is going, honest about what your rich life is. If you know those things, then you can redo your puzzle and make sure the pieces are going exactly where you want. Can we talk about your accounts? The way you have your account set up, how does it work?

It was Morgan's original account and the way she describes it, and I agree, is she, her responsibility was daycare and that money would be in there and she wanted to make sure it was always there to pay daycare on time and was worried that if we co mingled both accounts, there would be times where daycare couldn't get paid paid on time.

So reading back what I just heard, Morgan, you were concerned that you needed to split out an account just for childcare because that's. You were decided to take responsibility for that. And if you had left all the money in one account, like A checking account, you thought it just would have gotten spent.

Yeah. Like it are the check. The joint checking feels very like volatile.

And up until this past year we had two kids in daycare, so the cost was.

It was about.

It was double that. Yeah.

That's a lot. What do you make of that? The fact that you had to create a separate account for childcare because you were worried that the money in your checking account would all get spent.

Part of it feels validating of like why I'm stressed about money, but it like. Like I wish it didn't have to be that way.

Yeah. Does it have to be that way?

No.

Why?

Why is it?

I think because there hasn't been conversations or behavior change to like have that. Like we just. I had to adapt to what was happening versus, like us adapt to our life.

Yeah.

If that makes sense.

Yeah, it makes sense. Sounds like it's been pretty tough to have to basically set up a whole separate account and squirrel money away so that, you know, your kids are taken care of instead of having a series of real conversations with your adult partner. What do you think, Paul?

Yeah.

Why is child care Morgan's responsibility? Why do couples split their money up by random expenses? And why does childcare and kids clothes always fall to women? I'm so sick of this. I'm going to tell you exactly why this is such a bad idea. Most couples simply slide into combining their financial lives together. They actually don't have a serious single conversation about money. So what happens is one person starts to say, oh, I'll take care of the groceries. The other person says, oh, I'll take care of the rent. One person pays for childcare, et cetera. But as things change, like instead of having one kid in childcare, they have two, or they get another car, they have higher car payments, they never talk about it. They simply struggle more and more with one person paying a disproportionate amount, the other not paying enough, and then one day they just blow up. What if instead you actually combined your income and you could have a single bird's eye view of your finances? Wouldn't that make it easier? And wouldn't it make it easier for both of you to be able to handle life's inevitable changes together instead of separately? You have to remember that most people are not bad people, they're good. But when you set your accounts up to be separate, you will handle your finances separately, change your accounts to be combined, and you will be structurally aligned, financially aligned, and in fact even much more intimately aligned too. It Suggests two things. First of all, lack of communication about the fact that you're not talking about this in a healthy way. And second, it also suggests to me that, wow, you really put your kids first because you knew childcare needs to get covered. So I'm gonna move heaven and earth to make that happen. You ever missed a childcare payment?

No.

Hmm.

We don't really. We haven't missed payments, but we're like, just there. Like, we're just at that point, like the credit, like my student loan debt, I just, like, pretend it doesn't exist. That's how I've, like, lived the last 10, 15 years of, like, this doesn't exist.

But on the flip side, like, like, mortgage and taxes have always been my responsibility out of my paycheck also.

So why do you all have different responsibilities? Why don't just combine your money?

I think it was an evolution of, like, we're not married. We had a kid, like, earlier in our. We were together like four years.

And.

It just kind of like evolved. Like, again, like, adapting to the situation, not like us adapting the situation, you know, like.

Yeah, yeah.

And I think it was just passed from years ago that that's just what we were doing. Morgan made X. She covered this, this, and that from that paycheck.

Yeah.

And I covered this, this, and that from that paycheck.

You see why that doesn't work in the long term, right? One person makes more money or less money. You have expenses that come that go, and you never really adapt it. I guarantee you never sat down and said, oh, wow, like, all are. We have extra renovation costs, therefore we should talk about how to apportion that or child care has changed. Let's talk about it. No, it doesn't scale. It's not a healthy way of doing things. One person paying for groceries, one person paying for childcare. It seems like it makes sense in that instant moment, but it never makes sense over the long term. Is either of you passive in real life? Like in day to day life at work, things like that?

No, I have to. As a manager, I'm in charge of people. So I think, like, I. I have to be direct. I think sometimes I try to put a line between work and personal, and then I regress when I get into my personal life because it's it. That's my job to do that.

And he manages the budget at work. Like, really, he manages projects. That's his job.

Okay. It's funny because usually when I talk to project managers, they're the ones who are really proud to show me their conscious spending plan. They totally took my conscious spending plan and made it into a Frankenstein monster. It has, like, 500 categories. I'm like, that's not the point of the CSP. My point is to protect you from you.

Right.

But in this case, opposite. You're saying, I make a ton of decisions at work. When I come home, I don't want to have to make all those decisions. Therefore, Morgan, she's good with money.

I'm. I'm not good with money, though. That's where. That's where I'm, like, constantly feel like I'm sounding like alarms, like I'm not good with money.

And have you told him that?

Yeah.

And have you received that?

Yeah, I think I'm. I'm aware of that.

But then how come your response is, we're going to be okay. We'll figure it out?

Because I'll have to figure it out. I guess not. I guess I will have to figure it out when.

It's been a decade. Yeah.

It's like another reactive. Like we're just reacting to what we've made versus being proactive.

Yes. Let's buy a house impulsively. Then let's react to all these expenses that come up. Let's get a car, and then let's react.

Let's have a kid. Let's. Everything.

Yeah.

Yeah.

Right. You think it's possible to make big, big changes with your money and get on top of it?

I do.

Okay.

Yeah. What would it look like?

There would have to be, like, a fundamental shift in how we're communicating.

Yeah.

The conversations we're having and, like, where.

We'Re prioritizing it and staying on top of it. Like, not letting it. Taking the initiative.

Yeah. Like, we could easily slip back into. Well, I wanted that. So it's, you know, let's do that.

Yeah. Do you think you'd be willing to make big changes right now in order to get in a healthier position with your money?

I would.

Okay. I would be open to that.

We can do that. It's your money. I'm simply here to help. I can't drive you anywhere you don't want to go.

Right.

This is your rich life. So why don't we make some small changes, and then let's see what happens.

Okay.

Right here we are. At your fixed costs, which are at 92%, what would you like to change?

Groceries.

Groceries.

Okay. Right now it's 1,500.

I would love for it to be 700.

This isn't fantasy world.

No.

I Know, this is. Pick a realistic number that you can actually hit.

I think like 800.

That's basically half of what you're spending right now.

Can you do that in the conscious spending plan? We calculated it. We calculated how much we would spend at the farmer's market, how much we would spend at Trader Joe's to supplement. And I think it was. We came to a thousand a month.

Can I just ask, y' all are spending 100% of what you make, basically. And you're talking about shopping at the farmer's market.

Just for produce in the summer, spring.

I know.

Want to change it to a thousand bucks? I'll change it to a thousand bucks. I'm just telling you it's not going to do much. Watch the numbers. Fixed costs are currently 92%. I just changed it. You drop 500 bucks a month, you're at 88%. Okay, we're moving in the right direction. What do you want to change next?

I want to take some cash that we have and pay off the debt. So after a couple months to be debt free. So we won't need debt payments anymore.

Let's talk about that. Where is the money coming from?

It would come from savings. And in May I would get about $3,000 commission. Okay, $3,000 plus another 3,000 from savings puts debt at $500.

I think that's like going back to what we've been doing versus, like making real changes.

But I'm saying after a couple months, the 750 debt payment wouldn't be on there.

Well, we have a choice right now to make changes. The behavior has to change, which it's not. We're not doing that in this conversation. Like, we're just kind of spinning the wheels. Feels like right now.

Ask him what you want him to do. You're totally right. You are spinning. Tell him what you want.

I want like, big changes. Tell him I want big changes.

Okay, so pick something.

I don't want it to be on me.

Okay.

Paul, it's up to you now.

Can you go down?

Pause. Let's get you a tissue. If you need to take a break.

No, no, no.

How you doing?

I'm okay.

Okay.

Let me know anytime you need to. Thank you.

Yeah.

I can see it's difficult for you looking at these numbers. It is difficult, but if I'm here as an observer and I know Morgan is here, she's trying to get inside your head and understand what's going on. It's difficult if we can't get anything from you. So do us a favor. Talk out loud. She's dropped 500 bucks a month off groceries. What do you want to do?

I guess we have the. The car payment, the. The gas expense, insurance expense of three cars we can sell. Get rid of one of the cars, recoup that money. I'm not sure how much it would go down.

I'm taking your car payment down by 3. 300 bucks a month. Okay. Look at the fixed cost number. What just happened? Not much. Dropped from 88 to 85.

I'm avoidant on wanting to change the mortgage or child care cost. Those are the big numbers.

It doesn't feel like how.

I don't feel like I could and I. Those are the big expenses. Right.

What would you do at work? What? Take off your home hat and put on your work hat. Where? You're a project manager, managing people. I come to you, I go, I got this problem. And I just. I'm spending 85% of my budget on blank, blank, blank. Manage me drive it like you would drive it at work.

Well, we see what, what the total cost is of the job, and we would have to make changes to get to that cost. And you wouldn't just wait. No, you can't. You have to do it. And you'd have to forecast in advance what the changes are going to be.

What the happening right now. I like this. I like this. Okay, tell me more. So how does that apply here?

We have to make drastic decisions.

What all it took was me asking, what do you do at work? And suddenly you turn into this killer. What is happening?

Yeah.

All right. What do you call yourself at work? I feel like you have a nickname at work.

What do you mean?

Killer Paul. PM all day long. What is it?

No.

Well, now, that's your name. Killer Paul. Tell everyone at work, send them an email. Killer Paul's on the. On the case. All right, tell us, what are we going to do, Paul?

We're going to make bigger changes.

Tell her.

Yep. So.

So tell me.

I'm going to tell you right now what to do. Okay, Take out the four. I just want to run a.

Do it.

Run a formula scenario. Take out the 400.

The 400 for the rent, mortgage.

Just take it out.

All right, zero it out.

Okay. Take out the 500 for miscellaneous.

Okay, 500's gone.

500 is gone. And take out, hypothetically, take out the 700 debt payment. And I want to see what it looks like. All right, so we took out what? We took out nine, sixteen hundred dollars. Right.

All right, tell us what the fixed cost number was at 89. It was at 88%. Now what is it at?

It's at 69. All right, so it went somewhere.

It definitely went somewhere. Tell us what you just did.

I ran a scenario.

All right, what was the scenario?

I wanted to see if, hypothetically, if the debt was paid off and we didn't have to make a debt payment, the 500 that's in there, it was thrown in as miscellaneous, but it's a number. Assuming that there's a cost in there, fine.

We took it out. Okay, and what was this? Rent. 400 bucks. You took off the mortgage.

That was for maintenance for the house. Right.

Okay, tell us, why did you make that?

I like what you're doing right now. It's a hypothetical cost. Okay. It's not. Yes, there's maintenance within the house. The home improvement right now has been on a credit card that's going. That's. That's not even in this cost. That's. That's. We're associating with. With debt right now. Not.

Say it in plain English and say it to the person who actually cares about home renovations. Look at her.

Okay, the. That $400 that was put in this spreadsheet was already accounted for in our debt. So we're double counting it right now.

Okay, that was good.

Right?

And what does it mean for the next two or three years of your life that you just made that change as it relates to your home renovation?

We're not going to be able to renovate the home in the timeframe that we want to.

Ask her what she thinks about that. Toss the ball back to her.

Are you okay with that?

Like I have to be okay?

Yeah. Ask her again. That's. That's an interesting answer, but this is. This is where you have to be honest about how you feel.

Yeah.

Ask her again.

Are you okay with not renovating the house?

And Because. Tell her why.

Because it is a higher. It's a cost right now that we cannot afford.

Yeah, tell them more. Tell them more. You care about it right now.

I care about it.

Tell him.

Yeah, I do care about it. I want to prioritize the house, but I want to plan forward. I don't want to just do it.

No, we're not spending money on renovating.

We're not.

Where there is 600, there's no money.

To spend on it.

There's no money to spend on renovating. We're not going to renovate right now. We will use.

I'll look at her.

We will use one the $600 for one month will go to a toilet. So there's the toilet there. And then we're not. We're not renovating the house until we have money associated for it. I have to buy a toilet.

You do?

You have to. I have to put one toilet.

You have to? Yes, have to.

You don't have to.

You have to buy a toilet. You have to shop at the farmer's market. You have to buy specialty food for your cats. You have to have three cars. How much stuff do you have to do?

You really don't have to do anything.

Well, we have to do some things that are necessities.

Paul, did you hear what she just said?

We don't have to do anything.

Take that and run with it. Don't. Don't just naturally be adversarial with her.

Okay.

What she's saying is I might be open to not renovating the toilet.

Okay. We will not renovate.

Ask her. Ask her. Don't tell her.

Are you okay with leaving the bathroom the way it is? Until we get our fixed costs down and we have more of a plan to renovate the bathroom and the remainder of the house.

It feels stressful because we're in the middle of a renovation. So that's where the hesitation was.

So that's what it is.

If you were going to get really aggressive about it.

Yeah.

You could take your guilt free spending, which is about $1,100 a month, and you could say, right now we need to buckle down.

Yeah.

We need to not eat out. We need to not travel for a while, and we need to go like pretty bare bones as a family. Right? That's it. That's reality. There's no more easy decisions to make. Right. You got the groceries down. You knocked a number off. Great. All other decisions are now difficult. First of all, what the hell? Have you ever seen a transformation like that? I asked Paul to pretend this was work and it was like he kicked over a table and started using words like forecast and scenario. I have literally never seen anything like this. Is anyone else kind of impressed? What I like is how he suddenly took control. Now, obviously, one exercise is not going to change anything, but for me, it was quite revealing that he can exert that kind of agency. Let's take a quick break to support our sponsors. I know that some of us think better when we write our thoughts out, but for a lot of us, including me, I'm better when I can think out loud. If that's you, I recommend you check out Whisper Flow to save you tons of time to bring your ideas to the page. Whisper Flow turns your voice into clean final draft writing inside whatever app you're already using. Email, Slack Docs, even text messages. And it works on Mac, Windows, and iPhone. So instead of spending all of your time responding to messages, especially while sitting at a computer, you can hit a hotkey, speak, and the text appears. It's accurate, it's fast, it's all formatted so you can get back to work. Here's what my friend said about it. Whisper is amazing because it learns the way you speak. So you can send this rambling note as a text message and it kills all the filler words and it perfectly formats it for you. They said it's much better than using the Apple voice to text feature. The spelling is way better. If you want to buy your time back and get back to what matters, check out Whisper Flow. Try it for free at WhisperFlow AI Ramit. That's WhisperFlow AI Ramit. W, I S P R Flow AI Ramit. Or click the link in the description below. Thanks for your patience. Let's get back into it. Reality means you can't just zero out debt, especially considering that Morgan has $15,000 in student loan debt that we haven't even talked about. So to make sure they leave this conversation with a rock solid picture of the truth, I reverted the CSP back to its usual state. Let's keep going from there. Can I just say, these clothes at 180 bucks a month, we can get rid of that. No fucking way.

There's no. I haven't bought clothes in four or five years.

Zero.

I don't know.

We're taking that away. We're at 82%. All right.

I think we were trying to account for what we have.

How about just no clothes.

No clothes.

Can you find some free clothes for the kids? I don't.

Yeah, we can figure it out.

Okay.

Yeah.

This is the kind of attitude. It's like, yeah, we could figure this out.

The grandparents. The grandparents, yes. Okay. They love buying.

Bingo. Done. And you're like. You're like. By the way, can you also make our car payment?

Yeah.

And take a cash.

Please take them.

Okay. I don't know, guys. You're still at 82%. I know. If you were at like 71, 72, 73 even, I'd be like, okay, because you have child care. But you're at 82% and the debt's not going away. You're going to pay off your credit card debt, but now you have student loans. I can just tell you that 82% is not sustainable.

Right.

And. And right now we're being pretty charitable here. There's no miscellaneous costs. Yeah. I don't know. What do you think?

Based on what we've done here, we're going to have to live with the high fixed cost temporarily until we can drop some of those items like the debt, and then. Then that that line item would come out and that. That's what we have to do.

You know what's amazing? Each of you has had a moment of brilliance with your money. You realize that each of you, Paul, what was yours? When were you at your best with money?

Right before we had a kid.

What was happening then?

I was putting a lot more away. I also made a decision, like, financially, once Morgan got pregnant, to, like, we need to save money. And we moved in with our parents to get rid of rent altogether. That was a big change, and that was hard.

We did, like, the max we could do there until we were like, we're losing our mind. We gotta leave.

You saved up enough for a 20% down payment. Very impressive. Your moment of brilliance, Morgan, was when you said, I need to set up a separate account for childcare because I'm concerned that everything else is going to get spent. You moved heaven and earth to make that happen. You never missed a payment. What that tells me is that the two of you have the ability to make huge changes when it is important. Would you be both aligned with that?

Yeah. We have to.

Yeah.

Nice. What if one of you comes and says, like, I really want to go to this concert.

Then we call a grandparent and cry to them.

I hate that. I think we need to change our behavior.

Say it. What would you do? He comes to you, he says, let's go to fish.

We'd have to say no.

We'd have to say no.

Truthfully, for the next 18 to 24 months. Not really. Like, life is what it is for the next couple of years while you pay this debt off. And the only thing I can do here today is to show you what will happen if you continue down this path. I can't make the changes for you. I can't shop at the grocery store for you. I can't do any of that. What I can show you is that if one of you loses your job for one month, that's it.

Totally.

It's end of, end of story. Lose the house. Car's gone. Move in with family. If you're so lucky. Cats are gone. All of it. That's one month.

Yeah.

Right.

And let's not even talk about what your kids pick up from that experience. Definitely. When they're Talking to me 30 years from now on this podcast, I don't want that.

Sounds good.

All right. You think you can make these changes? They are quite large.

I worry that we can't, but I feel we have to, like, create it. So there's no choice.

Yeah, we. We don't have another choice.

This was a tough conversation and there weren't any easy answers, but that's actually to be expected. When you don't talk about money for years, you often leave yourself with your back against the wall. No easy answers are available now. This podcast is not about finding a magic circle solution to problems. Sometimes I see comments saying it doesn't seem like Ramit was able to help them. I'm not a magician. I'm here to help couples talk about money. Sometimes for the first time ever, I'm here to help them find the truth. The truth is, some things just take a lot of hard work and a lot of time. Paul and Morgan can make a change, but it will take both of them talking about money in a totally different way. It means they have to talk about money regularly, positively, and proactively together. Now, if the biggest thing that I did for them was to help them realize the severity of their situation, I'll be satisfied. Let's take a listen to their follow ups, starting with Paul.

The most surprising thing about the conversation with Ramit was that Morgan and I are way more removed from each other's finances than I had imagined. Neither one of us knows what transactions are taking place and when they're taking place or when they're anticipated to take place within each other's accounts. The biggest takeaway from this is for Morgan and I to have regular conversations about our finances. Whether they're difficult conversations, there's still positive conversations. If we're working toward a goal and trying to correct our finances in the short term and the long term, changes we will be making to our conscious spending plan, definitely tightening up the fixed costs as much as we can, taking out anything additional for what we're trying to save toward home improvements and house maintenance, and really trying to put that stuff toward the debt and get the debt paid off as quick as possible. I would love to be out of credit card debt by this summer and Morgan's student loan debt by beginning of.

Next year and now Morgan's follow up.

What surprised me most was just how difficult the conversation was for me. I knew it was going to be challenging I didn't realize it was going to be as emotional for me. Ramit was really good at being very direct and getting to the root causes of everything very quickly, and he was able to really facilitate a really important and hard conversation between Paul and I. I left the meeting feeling very defeated and the next day feeling pretty hopeless. But after really sitting and reflecting, I'm feeling more positive and hopeful that with these conversations and with time, Paul and I can really turn it around and I think our rich life is definitely within reach. Some changes that we're going to make we talked about meeting more regularly, especially in these beginning stages, weekly, twice a week. We also talked about selling the Acura, making some more lifestyle changes to get those fixed costs down. We're both working hard on finishing the book, changing our bank accounts around, changing that, our weird banking situation, and being more united as team.

They have some difficult changes to make, but I do have confidence that if they stick with it and they do it together that they can radically transform their relationship with money. Thanks for listening to today's conversation and stay tuned for next week. 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.