173. “We spend 113% of what we make—but can’t do anything to fix it” (Part 2)

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We've stopped dreaming.

Most days I'm just trying to survive.

Really is death by a thousand paper cuts.

I think big changes need to be made. I'm a little afraid to make them.

In part two of my conversation, what.

Would be the word to describe this situation of your household?

Chaos.

Chaos.

It's too much stuff.

We have way too much stuff.

They have three young kids which command most of their spending.

This one is water, shoes, baby wipes.

Snacks for the kids, vitamins.

We took them to a little kiddie show, Dunkin Donuts, gymnastics, swimming lessons, all the extracurriculars.

It's obvious they need to make changes.

But they are resisting.

Couples like you do not spend $985 a month at Amazon plus $563 a month at Target plus $1,000 on groceries plus 955 on kids activities plus 648 miscellaneous. It doesn't happen.

You'll notice that I'm dragging them along this process.

I don't see it as realistic.

You don't think chopping $200 off target is possible?

Deprivation is what it feels like.

Each Step of the way. They are resisting. They're totally indecisive.

Feels like wasted effort is better than no progress.

What would it look like 10 out of 10 for the two of you if you had a healthy relationship with money and it was embedded in the fabric of your family, what would that look and feel like?

I have trouble seeing. Seeing that future, but I guess it would be, you know, I'm at a point, let's say with money, where I enjoy coming home and just experiencing life. I guess you could say instead of the kind of coming home and surviving.

I'm not sure I. I could answer that. I don't know. I don't know what that looks like.

You've never seen it?

I've never seen it. I've never envisioned. I've never seen it.

You've seen couples on this podcast?

I've seen that. I actually love the ones where. Where you like the. The after story. Yeah, you know, like the ones who are sitting on, you know, several million and just can't figure out yet how to spend it. Like, man, that's a problem I want to have. When we were dual income, I made sure that we maxed out when we could. We were doing very well. And how old? They didn't exist yet.

Oh, wow. I wonder if that has anything to do with it.

Oh, it has everything to do with it.

Dual income, no kids already, is like an amazing advantageous opportunity for young people to be able to save a ton of money. It is the best time in terms of income versus expenses that you will ever have. Couples who plan to have children, many times they have not yet built the skill of creating a unified financial system. Okay. And they don't actually need to. They're just like, oh, life is pretty simple. Let's go out to pizza. We have so much money, it doesn't really matter, blah, blah, blah, blah, blah. It's fine. The problem is kids come in and the minute they come in, they disrupt everything in every possible way. Now you're tired, stressed. Your system is being constantly stressed with all kinds of expenses you never planned for and you never built a unified rich life system. Something where you both know when there's a shared vision, then you don't have to be the cop, and you don't have to be checking on your phone how much your partner spent because your partner knows they have the same vision because they co created it. Now, here's what I want you to do. I want you to. To talk with each other. I want you to zoom out of your day to day that you're in. And I want you two to create a vision for your children, for their activities, for how you want them to feel.

Yeah.

I would love for them to have free days.

They.

They need to have some free days, for sure. I would love for them to look forward to the activity that they do have. I want them to have skin in the game and ask for the one that they want and enjoy it.

I definitely would like to have them responsible for helping to get this place back on track, cleaner, more organized. I want them to have a say in the activities that they do choose.

I would love for them to have a place to put their stuff.

I want them to be happy too. When they're. When they're here. I want them to take pride in. In their home. I want us to take pride in our home. I know it's not ideal, but it's. It's our home for now.

And what would be the word you would use to describe this situation of your household? The physical situation?

Yes.

Is that how you want to feel at home?

No.

No.

Okay.

No. We don't want to feel like that. Wow. That's a powerful vision. What if, by, let's say, 7pm the house could be relatively clean? As clean as it can get with three kids, but clean.

Clean.

So you could walk around. You won't step on a Lego. Clean enough that you and your children would take pride in your living environment. What do you think?

That'd be awesome.

I would say if ever there was a dream, that's the current dream.

Okay.

Beautiful. I love a relevant dream that we can work on now.

Okay.

Do you see a connection between all the stuff you buy for your kids and the chaos that is in your house?

Yes.

What's the connection? Can you just say it out loud for me?

There's too much stuff.

We have way too much stuff.

Do you both agree or you just saying that because you think I want to hear it?

Oh, no, we say it to each other.

We say it all the time.

Hold on. How do you both say it all the time and then you keep buying all this stuff on Amazon and Target?

Great question. I don't have an answer for you.

A lot of this. I mean, I really don't feel like I'm being delusional either. I don't feel like the stuff that I'm buying from Target and Amazon is. It's mostly consumables on my end.

It's almost like we see chaos on the CSP. Chaos in the house.

100%. That is absolutely accurate.

Deep relationship, deep connection. And I still notice that when I ask you both about it, you do give me some honest answers, but there's a lot of explanation. Those excuses are like quicksand. They will keep you stuck down in the weeds until you both decide. I am sick and of my CSP being at 113 fixed cost. I'm sick of coming home and it looks like this and feels like this. I'm sick of feeling this way. And once you finally get there, which a lot of people it takes, in 20, 30, 40 years, maybe you will decide to make a serious set of changes. I'd like to help you get there now instead of 25 years from now. What do you think?

Yes, please.

All right, let's take a look. I'm going back to your CSP. All right. All right. Savings are at 1%. So you're basically saving nothing and everything else. Your guilt free spending is negative 28%, which just shows again that you are deeply, deeply in the red. I mean, look, you actually listed it out, which is more than most do. Takeout is $500 a month.

Yeah, well, that includes the not ex. I'm not excusing it. I'm telling you. What we threw in there was like, not just Pizza Friday, but like the um, just anything that showed up as like a coffee. You know, like Dunkin Donuts, Starbucks, which is not often, but it's there.

It's often enough to be $500 in a month.

Yeah, that's a lot.

$500 a month on takeout just doesn't make sense for a couple in your situation.

That's it.

Bottom Line stores, $186. Entertainment, that's $264. That's on top of $178 of subscriptions. So you're losing thousands of dollars every month?

Yeah. Okay.

What decisions that one or both of you make with your spending do you think has led to you being in this situation?

Probably buying stuff for the kids.

And when he sees you come home with the. The new bike or the new beads or the new craft stuff, what is your kid's reaction?

He loves it.

He loves you. Don't you think he would love you if you still didn't buy him all this stuff?

Yeah.

Michelle, what do you think?

Yeah, I think he feels like a hero. Daddy's the best. Thanks, Daddy. Love you. Just. I think that's just how he's showing love. I think that's part of how he takes care of them in his eyes.

Is that how you show love, Ryan. Seems to me it's true.

Probably. Yeah.

Now, what if I said you can't spend a cent on your kids for the next year?

That'd be horrible. I would like. I wouldn't want that, you know, because. Because I want to give them. I want them to have the enjoyment and the activities that they enjoy doing that they want to do really, is.

Death by a thousand paper cuts.

You don't stop a thousand paper cuts with a thousand band aids. You stop the knife at the source. By the way, how do you decide how much you spend on each kid for gifts?

We don't. We don't. We don't.

Yes.

We just.

We just buy some stuff and try to even it out.

Okay.

It never feels over the top. It really. It really doesn't.

You don't need a sunshade. You don't need a kid's bike. You don't need flip flops for the Ocean or even $3 beads. Now, can you have them? Could you get them because you want them? Maybe. Maybe we could find out what you can afford. But until you really get honest about the difference between needs and wants, we are stuck here.

I would like to be able to exist outside of being mommy and daddy because I think we've gotten to the point where we've completely lost sight of the marriage and, like, putting any sort of. Any fuel into that, and that fuel being money. I mean, if money existed for child care, you know, we'd still be. We'd be able to enjoy some time without them, even if it. The child care meant that we couldn't afford the restaurant. We'd sit in the car, hang out with the coffee we brought from home. That's fine. I would take. I would have a nice. A nice chat around the corner in the parking lot.

Yeah.

The money that you want to redo your family structure with finances has to come from the money that's going towards your kids.

You know, Last week, Michelle and Ryan were absolutely mystified where their money was going. But now we can see that a lot of it is going towards their kids. And did you notice their money psychology? They're both the hero when they buy their kids something. When I asked what would happen if Ryan couldn't buy anything for his kids.

For a year, he said it would be horrible.

Their lives are overflowing with stuff. It's all over their house. It's all over their csp. They call it chaos. And they can't seem to figure out how to stop it because they don't even truly realize what it's costing them.

Hold that thought.

We'll be right back.

Real question for you do you know.

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Now back to the show.

Interestingly, almost every couple I speak to in credit card debt has a problem saying no to their children. I'm going to try to get them to see exactly what this is costing them and what needs to change.

You have to fundamentally cut. And I don't just mean cut with a little kitchen knife. I mean cut with whatever's a big knife. The knife that I don't even know the name of. Okay, Machete. Like, look at this. The real answer is that if you want to restructure the way your family exists in a relationship with money and with each other, and you actually said you want less stuff, less activities, less, guess what, it's a double win. You get less stuff and you actually have to pay less. But you guys have to change the.

Way you see it.

What's the first feeling that comes to mind when I say that?

Feel bad.

You feel bad. Exactly.

Right?

Yeah, the word that comes to mind. But no, it feels like that's the right emotion for it.

Deprivation is what it feels like. I mean, me, I, it's funny for me to say that because look, I didn't do any of that. I don't know, it feels, it feels wrong to take it away from them.

Until you both create a new vision, you will not really be able to move forward. For me, I look at it totally differently. I'm like, you're adding something, you're adding tons. Let me tell you what you're adding to them. If you were to pull them out of, I don't know, a bunch of this stuff, okay, you are adding free time into their schedule. You are adding the ability for them to select out of two or three curated options that you have pre selected what they. I also see if you were to unify together and you were to say, hey, this is the kind of life we both want to live, we want to have healthy cash flow every month, we want to have a healthy savings account, we don't want to feel stressed anymore, we want to have a babysitter every so often, etc. Etc. Etc. So you two get unified. Then you go to the family and you say, look, we're going to make some changes in this family. Luckily they're young. If they were 15 years old, you'd have a whole different problem on your hands. Okay, that's really hard. At 7, 5 and 3, this is quite easy. If you two can get a line and you say, look, we're going to have some changes. We need your help. You make it exciting. I need you to help empty the dishwasher, et cetera, et cetera, et cetera. They start taking ownership. So you're giving them that. You're giving them responsibility. You're giving them pride. Meanwhile, mom and dad get time to be together, be unified, be happy, even just hold hands and go for a walk for 10 minutes, come back, feel rejuvenated, feel connected. Kids see the mom and dad smiling. Oh, it's so beautiful. So that is what I see. I don't see you taking away swim lessons. I see you giving them all of those things. What do you think?

I like that. I like. I like that. I like the. I like the involvement. I like the working togetherness. I like the partnership of it and less of the. Less of the division.

Yeah, but. Yeah, and I think that's. I explained it away a lot as it's just temporary. But, like, the problem with it's just temporary is that at what point does it become permanent?

Right.

And then you can't undo.

I'm going to put the CSP up on screen. You told me you want them to have skin in the game. Free time, responsibility for getting the place on track, have a say in the activities, a place for things, take pride.

And on and on.

And you've lost sight of the marriage. You have an opportunity to change where you spend your money, which affects where you spend your time, your love, your attention. Are you guys ready to take a look at the CSP and make some changes?

Yeah. All right, We've got to basically cut everything in half. Ballpark. All right. Rent, utilities, insurance.

I've already optimized.

Yeah, those. Those really aren't going anywhere. We have no debt. If we were to drop, let's say.

200 from target, I'm not sure, though, that any of that is going to make a significant. You know, it's. If you like, if you zero out kid activities, that's where you see it.

Goes from 113% to 101%.

Yeah, it's significant.

Big.

What did that tell you just now?

That's extremely impactful. That it is a huge. I don't think, you know, until. Until this, I really didn't notice.

I think we can drastically cut takeout if we scroll down.

You want to go down to.

I mean, I know it's not up to. Not up there, but, I mean, that's in the red also.

I'll tell you what, let's Stick with fixed costs for a second. I need you to get these numbers. Michelle, where are you? You seem a little down.

Yes, the day to day is chaos. But if I zoom out from that for a few minutes, you know, do I even need to continue the investment?

Okay, let me stop you right there. I understand that you probably have.

I'm overwhelmed.

But you're.

You're overwhelming yourself.

Yes.

Okay, I want you to listen to me because I'm going to walk you through this step by step. Yes, it's probably true that you're over investing. Okay. And we can run those calculations and I can help you figure that out. But you need to attack the fire that is burning in your house right now before you go out to the back and prune the rose bushes. Okay. The fire that is burning is that you. You just cut off a hundred percent of kit activities, which we all know is not going to happen. And you're still at 101% of fixed costs. We need to take it one step at a time.

So what if we tried just dropping 200 from Target, 200 from Amazon? It could probably go more 200 from groceries.

I'll do it if you both agree.

Oh yeah, I would. I'd agree in seeing it. Sure.

And that took your fixed cost number from 101% to 94%.

We could probably realistically trim more from Amazon. I think we.

Do you realistically think that Amazon could drop more than that?

All right, so couples like you who have an income like you do not spend $985 a month at Amazon, plus $563 a month at Target, plus a thousand dollars thirty cents on groceries, plus 955 on kids activities, plus 648 miscellaneous. It doesn't happen miscellaneous.

Without looking at the detailed things. I mean we could probably chop miscellaneous probably in. In half.

Okay, you want to do that? Your miscellaneous is $650?

Yes. If we drop to it with 325.

All right, 325 it is. You feel okay with that, Michelle?

No, because it doesn't. It's not impactful.

So shouldn't we at least. Well hold on. Shouldn't we at least. See, I mean, because if it's not, what do you want to do that is impactful? If you don't want to change 300 bucks a month off of this, what do you want to do? I'm willing to entertain anything.

I want to say. It's an income problem. I don't want you to yell at me.

I mean, look at your income. Like, maybe it is an income problem, but the fact is you have one income right now and you have three young kids. So unless you're planning to go get a second income tomorrow, we got to work with what we got, right?

Yeah. Yeah.

You guys are back up to 105% because I added your kids activities back in.

Yeah, like you. We were going back and forth, should the kid activities be in fixed costs or should it be in guilt free spending? And then we ultimately were like, it doesn't matter because if something had to go, like if we, if tomorrow your income was gone, it would be gone.

Okay, so technically, technically they should be in guilt free spending. Would you like to move them down there?

I mean, it was, it's not gonna, you know, whether it's 113 in fixed costs or you take that 10 and throw it down, it's. It still exists.

Trying to think, how can we drop another 10% to get this down to, to 80 without touching rent, Morgan utilities, insurance.

So, like, just to show you what I'm thinking when he says that, right? So he says, like to drop it now to get it to 80, but then I'm thinking, but it's still 80.

So at least get to 80 then we'll deal with it then.

Okay.

What's up with this, you guys? I know. I feel like you guys are playing small and it's just. Honestly, it's wasting your own time.

This is what happens when you let your spending get out of control. It becomes incredibly difficult to downsize because the human mind convinces you that everything you have accumulated is absolutely necessary. I mean, did you hear how glum.

Both of them sounded?

That's normal human nature. When you take something away from someone, you can see it when you take a little toy away from a baby. And you can see it when you talk about cutting just $200 per month from their target bill. Now, the best scenario is to never get into this situation in the first place. But if you are come up with a new vision and cut mercilessly, do not prolong the pain. The next conversation with Michelle I find absolutely fascinating. Notice her psychological resistance to making changes.

Okay, so, Michelle, I guess I need you to be constructive here because you're telling me all the reasons that this won't work. But you are winning. But you're ultimately losing. You're winning at us doing nothing, but you are losing at the ultimate battle here.

I'm, I'm really staring at the entire column.

You're staring at that whole column of.

Numbers and fixed costs. Like what. What can drop? Aside from.

Can I give you some feedback?

Yes, please.

You are thinking, first of all, you are thinking nothing will work. Okay. And that is the entire energy that you're communicating right now.

This is where the stress lies. It like, it feels like, no, none of the small changes are going to make a big enough overall change. And yet it's a bunch of small things that have added up to make it this bad to begin with.

Michelle, you have a lot of all or nothing thinking, right?

Yes. I don't. I don't see it actually getting to 60. So it feels like wasted effort.

Like if I can't do it perfectly, I might as well not do it at all.

You know, it wasn't. It wasn't like this until the income dropped. So in my mind, because it's temporary, it's kind of the goal is to slow the burn until I can make money again.

Okay, well, slowing the burn, you could slow the burn at 63% or even 70%. You can't slow the burn at 90 or 100%. So you may have that belief, but 90% is not sustainable at all. And it puts you at immense risk because if Ryan loses his job, you two are done. I don't know. I see it as an opportunity here. It's like, okay, like, we can do this. We can get on our feet. We don't have any debt. We have reasonable price housing. For now, let's figure out how to really dig deep and build a healthy family culture without spending a lot of money. We could do it. And if we could do that, then when we start to earn more money, oh, my God, we are going to be in a phenomenal place. I don't know. That's how I think about it. I see it as a challenge. I see it as an opportunity. Sh. What do you think? You don't feel it? It's okay if you don't tell me the truth. You don't have to tell just what I think. I want to hear what you think.

I don't know. I think because I haven't. I haven't felt. It hasn't felt catastrophic.

Now that's honest.

So I don't see a need to.

To.

I don't see a need to put out a fire. I don't. I don't see.

That's honest.

Well, I don't feel the heat from it. I see it, but I don't feel the heat from it yet.

It's interesting that you were the one who approached me and you told me you worried constantly about money. You're always feeling bad. You know, you have these physical feelings about money. And yet when we are here actually making changes, you're the one who seems to be the most resistant.

I don't feel resistant to it.

You don't think you're being resistant to the process of cutting your spending?

No, I'm, it's. I don't see it as realistic. I would have to see it in practice during actual months. You know, is this actually doable? You know, it's very easy to say, let's chop 200 off of target. I have to see in practice if it's actually.

You don't think chopping $200 off target is possible?

No.

$200 off. $763 a month for a family of five, not ten.

Five.

I know, I know. They feel these feel like such small changes. They feel so small. I think that's my biggest. I see the kid activities as being impactful. It's very hard for me to see like a couple of hundred here and there being impactful, which is why I'm kind of quiet and watching.

Because if I don't get to 60, then I'm a failure.

Right.

I'd rather not try and keep it at 113 because at least I can spend everything I want on the kids. I don't feel restricted and they could be happy and I can have some flexibility versus like 60 where I would have to crunch and give up everything and we still wouldn't hit it. Is that right?

Yeah.

I think any progress is better than no progress. So. Although I think 60 would just be really, really, really hard. If we can get it to 75. Way better than 113. Way better.

Even if we get it to 80.

That'S way better than 113.

Ask her if she believes you.

Do you believe me? Do you believe me that if we.

Can get it to 80, do you think 80 is doable?

I don't know.

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Now back to Michelle and Ryan.

Okay, let's recalibrate. We're trying to create a new culture for our family around money. In order to do that, we have to make some difficult decisions. Going to feel uncomfortable to us. We still probably need to make those decisions. Let's try. Here we are on fixed costs. What would you like to tackle next?

So what if we move the kid activities to guilt free spending?

All right, so your kids activities are gone from your fixed cost. You're now at 90%. Okay. Well again, this is good. We're, we'll deal with one problem at a time. Right now we're dealing with the fire. So you're at 90%. Go ahead. What do you want to change next?

Let's try to cut Amazon in half. Right. That was, what was the original 1185. So what if we drop that? Let's cut that down to 600.

Okay, done. You're at 85%. Can I tell. Can I give you a couple of hints?

Yeah.

Couples who are at 85% of fixed costs do not have $325 in miscellaneous expenses ever.

Let's take that to 50.

You're at miscellaneous. 50 bucks. You're now at 81% fixed costs. Now I go back and I look at the groceries. $1,030. Who buys the groceries?

Mostly me. Mostly me.

So, Michelle, when you go to shop for groceries, you don't have an amount that you're targeting to spend, right?

No. Always a list of what I'm getting and I stick to that. But never an amount.

What if you had an amount?

I've lived it.

Maybe it's time to live it again.

Yeah.

Do you see what the resistance to this really is? I lived that lifestyle. I don't want to go back there because it feels bad. Because you know, as you told me, you didn't have a good experience with family, that your, your parents let you down, etc, so you want to do anything to avoid that. But the truth is the very place you need to go to get your money under control is to set constraints for yourself.

Sucks, but it's true.

Sometimes we got to walk through the fire. That's what this is. So since you are the primary shopper for the family, I need you to tell me what number could you realistically go and get groceries for the family on? I want you to be really thoughtful with your answer.

A thousand is my go to. That's, that's really where, like true. If we're being honest and realistic, a thousand is where I go to.

Okay, great. A Thousand it is. But let's now talk about Target. Can't double up. We can't have 1500 bucks a month on groceries.

I'm just looking at some of the other. Go ahead. The other Target things. So snacks for the kids. So I'm looking at pretzels. Pretzels. Granola bars. More pretzels. They like pretzels. We could definitely cut some of that stuff out. They don't need one, two, three bags of pretzels bought on July 26th.

Like, can I just tell you something? Like, just out of curiosity, when was the last time you said to the kids, like, we don't. We're done with pretzels for the week. We're not getting any more. This is how much you have?

Never, never, never out.

All right. Why is that?

Let me put more on the thing.

Why we've never.

I've never said that. Because we were out of snacks for. We're out of snacks. Part of it. And to be honest is, again, I shift back to survival. A little bit of mental sanity when they're screaming, I'm hungry, I want a snack. I'm hungry. I want a snack. I did. But this, a lot of this, I going to call it junk food as a whole.

Ryan, look at me.

Can be cut. You're.

You're, you're spinning right now. Just a lot of this. I don't think you guys are truly hearing what I'm saying. What's the lesson right now? Like, what are you hearing? You've never told your kids we're out of pretzels for the week? Not once. They're seven years old. What's the lesson?

They don't know how to go without.

Yes. And you don't know how to say no. Where do you think this goes 10 years from now?

Goes like this.

They're 17 years old. They're not just throwing a tantrum. They're now entitled, spoiled. And where do you think it goes when they're, let's say 27 or 35. What do you think happens to them when it. As it relates to money?

They're grasshoppers.

Yeah, they're. They're financial disasters because that's the way they were brought up.

That's right. And it started with a bag of pretzels.

And it's not like they don't go without other snacks.

It's not like freaking chocolate chips, Greek yogurt. Like, what? That's nice. That's good.

No, it's the ch. Right? It's the, it's the Pretzels. It's trying to take a. I can't believe I'm drawing a blank. Ryan, they have other stuff.

It's.

Yeah. Yeah.

That you don't say no.

No.

And more importantly, it's that the two of you aren't actually communicating about where you want your money to go. It's just going everywhere. It's not even about the csp.

We can.

We still need to finish this, but it's about the two of you deciding what are our boundaries, what is part of our rich life and what is not. Do you see how the CSP is not really the issue?

The real issues are much, much deeper. Michelle feels like she has no real agency over her life. They both have an inability to say no. In fact, they've never told their kids no more snacks. And they have no real vision of money. It's just there to get spent. And with kids, you will spend every last cent you bring in unless you have a powerful, compelling vision.

I don't know. I feel like. Because the. The income now is way more significant than the income was when I was a kid, and yet I still have to be sort of the same way. I feel like back then, though, it wasn't that it was intentional. There was no choice. It's just that's how it was, you know? And now. Now that has to be intentional. That's a very hard shift.

When you were a kid, Amazon did not exist. I can guarantee your parents were not spending, like, $3,000 a month on random groceries.

No.

No way.

No.

But when I now ask you, you're like, oh, we absolutely need it. Like, we need these freaking chocolate chips. They are the backbone of our family, and they're not. And what I'm trying to get you to see is they're not. They're actually causing more trouble than you realize. Take all the pretzels you would have spent, and you two could have gone on a nice date night. That's what I mean when I say.

Rich life versus not rich life.

Spend extravagantly on things you love, but cut cost mercilessly on the things you don't. Okay, so can we continue on target at $563 a month? There's no way. What do you want to do?

Can we drop it to half? Three? Something, something.

Yeah.

380. Yeah.

You want to.

Yeah. Yeah.

Okay. 380. All right. We're down to 79%. Guys. We're in the sevens.

All right.

We're getting there.

Good.

Okay.

It's better.

Good.

Yeah. It's let's move on to some other stuff and then I think we can make some changes and. All right, we're down to, I'm skipping down to guilt free spending. All right, let's do kids activities. What do you want to do about. This is the hard one, right?

Yeah. So for that one, I would. So the reason, when I, I've said this before, like, if we had, if we were forced to.

All I need is a number.

So it's one or the other. So you figure like 450 if they, if they drop to one activity.

So from $960 to 450 figure 450 is a good.

All right.

450. Okay, cool. Stores says $186.

That was like, what was that, like, random?

Yeah, that was like the random.

We were accounting for the, the stuff that didn't qualify in the other categories, so we gave it its own.

There's, I, I, I guess I, how do I say this? If you're trying to make massive financial progress, there is no more of that. It can't happen. But of course it's your money. You're going to do what you're going to do. But if it were me, I would never do it.

I think we could definitely drop that probably to at least, you know, a hundred.

You'll notice that I'm dragging them along.

This process and at each step of the way, they are resisting me. They're trying to negotiate with me. They're totally indecisive. And that is a big sign that they're not actually going to do this. Frankly, it's starting to get a little frustrating. Ryan and Michelle cannot afford novelty shopping. And families in this situation do not have hundreds of dollars that they randomly spend on miscellaneous items. I know because I grew up in a family with immigrant parents and one income. It's time to get much more serious about their spending changes.

Neither of you want to close doors. Have you noticed that, like, there's all this, like, cajoling and negotiating? Well, we could take this away, but what about that? And like, guys, you're not in that position. And actually that very attitude is what.

Had led you to having all this.

Chaos in the house. Definitive answers are just like, yes or no, black or white. Not like maybe not like, oh, we can figure it out. It's like, no, mom and I have decided that's not what we're doing, or dad and I have decided that's not what we're doing.

That's it.

But you two have to be aligned with it in your Own head and then with each other. And that's what you guys told me you wanted. You wanted simplicity and clarity. So that's what I'm trying to help you get.

So let's chop that to zero.

Great.

Love hearing that. Thank you. Take that to zero. Beautiful. Okay, good, Good, good. Entertainment at 264. What's this? I thought you all, you had some subscriptions.

That's again, it averages for the year. So that's probably like little day trips that we've done. Oh, that's right out of town. You know, take kids to a theme park here.

Okay, so what do you guys think of that now, knowing what we spent the last four hours talking about?

We can't do theme parks. Okay. There's. Unfortunately, there's no money.

Good.

Take it out.

Whoa. Okay, let's take it out. Let's see what happens.

I feel bad.

Yeah, well, I feel good. So if we're gonna go with one of our feelings, let's go with mine.

Zero.

Okay.

Takeout is at $490 a month. Somebody please change this number for me.

So what if we cut it to pizza once a month?

Okay.

And it's. Why can't I do the. And it's $30 for. For takeout.

That is reasonable. That is what I would expect for a couple who goes, we are in a rebuilding phase. Like, we need to chop it all down. We need to get healthy financial habits.

Plus, we're cutting out the McDonald's drive thru stuff.

I love this. Ryan, you are the fucking man. I love this.

It wasn't just the pizza that was in there. But that means you realize that's cutting. Like, that's none of the. No coffee runs on your break. That's no, because that was all takeout. Everything labeled with a Dunkin or a Starbucks. Pizza, McDonald's, all of it. That's all takeout in there. Remember that.

You good with that, Ryan?

You're talking.

Just have to be.

Right now, I'm taking this down to 30.

I love it.

I love how aggressive you guys are being now. This is amazing. Oh, wow. We got something. We got something going on here. Your guilt free spending right now is at 6%. Now, that's quite low. Okay, usually I recommend 20 to 35%, but for a couple in your situation, I would recommend that number be lower. My kind of back of the napkin number would have said something like 10%. Okay. In your case, you're at 6. But you also spend $2,000 a month when you combine groceries, Amazon and Target. So that's part of your guilt free spending. So far your CSP says you're at fixed cost of 79%, which is still high, but it's way better than 113. Your investments are at 14%, savings are at 1% and guilt free spending is at 6%.

Okay, 6% guilt free spending is restrictive and it's hard, especially for a couple that's used to spending on whatever they want with essentially no constraints. Now if you want to cut back on your guilt free spending, here's what I would do. I would pick your biggest two, discretionary expenses.

Usually this is eating out.

And one other category. I would target cutting that spending by 50% within six months.

All right.

That way it gives you a gradual approach to sustainable change. In their case, I might target six weeks because there's actually a lot of urgency.

Now I like this gradual approach.

50% over time. Six weeks, six months. Because you're not going from 100 to zero. You're reducing eating out, for example, by one to two times per week, stabilizing. Then do it again next week.

So Michelle, tell me how much you calculated you're going to have if you continue on your current path.

You want it all?

Tell me.

So that one, the 467 should by retirement be. I think it was about $2,200,000 for that one alone.

Okay, that's $2.2 million. So everyone knows.

Yes, sorry. So that one's $2.2 million, which drawn down at about 4%.

That first pension is going to draw about $88,000 a year in income.

Right.

And another one which is basically duplicate, that's another $88,000. Okay, that's really good.

That's 100 doubling our income every.

Yeah, that's crazy. Right? So.

And that doesn't include Social Security. I actually mapped that out today. If we start drawing Social Security at age 67, that was, I think mine was 14. Mine was 1400. His was 3500. It was about 5000 even a month.

All right.

So you two will be having a very high income in retirement, which is great. But the irony is that right now you're underwater. Yeah. So shall we fix that?

Yes, please.

So that's quite amazing.

Yeah.

That actually opens up a lot of possibilities. That tells me theoretically you could stop contributing to your 403B. Theoretically, that's an extra 433 bucks a month in income or $5,000 a year. You could also stop contributing 1,167 in post tax retirement. What do you think about that?

I just like that it was tax free. Although I did calculate that, too. It seems it's not smart to not invest in a tax deferred account, an account that's going to grow tax free. It doesn't seem like a smart decision to not take advantage of that.

Does it seem like a smart decision to spend 113% on fixed costs?

No.

No.

We'll be right back after this short break. 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.

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I don't think you see the big picture of money like you're. But you're really good at each individual silo. Like the calculations, you know, you just rattled them off and your calculations were all correct. And you even factored in Social Security, which almost nobody does. So great. I mean, amazing. Definitely. Top 5% of people that I talk to, you're dialed in on these smaller areas. You know, he spent this much on Amazon, but I spent this much. You know that. But the big picture is, when it comes to your spending, you're spending way too much. And when it comes to your investments, you already have enough. If you were to literally stop today, what is it? What's missing? It's the confidence to be able to zoom up, draw the conclusion, and be decisive about what needs to happen. That's why you're looking for me to tell you what to do. But you Already know the answer. What is it?

That in retirement we're set and right now we screwed.

That's exactly right. Now I want you to tell me. Now I want you to tell me exactly what to do with your csp.

Take it out.

What do you want to do with it?

It's got to go back into net monthly.

Let's call it like 350. All right, watch what happens to your fixed cost number. Right now it's at 79%. Whoa, what'd that number say now?

Honestly, I didn't think it was going to impact that much. It's 76%.

Okay, I'm impressed. So far. Let's go down to your post tax investments. Got $1,167. What do you want to do?

I mean, take it out if we don't need it? We need it now.

Well, you have 135,000. What the fuck is all that money doing?

That's what I'm saying. It's high.

So if I were in your situation, I would fund the next two years of date nights because that is priority number one in this relationship. Would you agree?

Yes.

Fund it. You have the money sitting in savings. Fund it. Give yourself a nice little thing, 100 bucks each time. So right there that money is funded. It's put aside in a separate account. You can draw from it every single week. So I would definitely keep like six to eight months of savings. Just as an emergency fund. I would probably, You might put some money aside for certain kids activities where you're like, this is really important, okay, swim stuff, etc. You could fund it. I would probably end up, if it were me, I would probably keep like an extra, I don't know, 20 grand or so. Just like in it. We don't know what's going to happen here. It's not an emergency fund. We're probably going to use this for something. Etc.

Hush.

So your, your struggle. That's my struggle right now.

Michelle, the answers are right here in front of you. You know them. I have total confidence in you. You know these. And what makes it exciting for me now, now that we're really getting into the, like, we're really polishing this beautiful painting that the two of you created, is that the two of you get to do this. And actually watching Ryan, I was very impressed. Ryan, I want to take a second and tell you too, we came on here, you know, a little bit into the conversation, I learned like, oh my God, you're like overspending tons on your kids. And I was like, oh man, this is going to be tough. It's very hard to get parents who spend a lot on their kids to stop. And then we started looking at the CSP and I was extremely, pleasantly surprised. You just like came to life and you were like, let's chop it, let's chop it. We got to stop this. I got to stop this. And you played ball. That was amazing. Then I turned to Michelle. Michelle, you rise up when it comes to the investment stuff. Like you two are actually, you two are a good team in your individual domains. And the thing is, you could become an unbeatable team if you all work together. I can see it. I don't know if you can see it, but I can see it. And I want you guys to do this together. It will, it will change the trajectory of your family's future for generations.

In my opinion, the biggest breakthrough happened when they finally realized that they actually have control over their spending. That is when they got decisive and they started to cut things rapidly and importantly together. It's a nice cherry on top that that they are over investing so they can reallocate their cash. But the real issue and the one they need to work on regardless of their income and retirement savings, is that they don't have a vision of a rich life and they can't say no to their kids. In other words, they're not using their money consciously.

Let's see what Michelle had to say.

In her follow up video.

My biggest surprise was just how much of an issue the 113% fixed costs really is. I think it felt like such a small issue because of the safety net of our savings account. But really we have to reverse that now before it becomes more difficult to do. I was also very surprised to learn that the CSP really is a direct extension of how we feel right now. Which kind of leads me into my takeaways. Firstly, the CSP really is as chaotic as we feel right now. There's almost no intention behind our spending. And while we didn't really notice that it was glaringly obvious to Ramit simply by looking over our csp, Ryan and I were nowhere to be found on there. We had line items for Target, Amazon and kid activities. And yet there was no money directed toward our marriage. I've heard Vermeet say many times before that if it doesn't show up on your CSP or on your calendar, that it isn't happening. And that's so true. As for the changes we plan to make, if it's important to us, then it becomes a line item in the CSP and that it gets put in the calendar. And first up is date nights. We'll tighten up our overall spending, especially when it comes to takeout groceries, Target and Amazon. We have several different accounts held at three three different banks and I'm realizing after our call that that's yet another symptom of the overall chaos. We'll be fixing that one within the month. We will pull back on retirement contributions since that's pretty much fully funded. We'll take some of our savings and move it into a brokerage account and then we'll put the rest of the savings into a high yield savings account and use that interest to help fund kid activities, the ones that they choose to keep.

And now Ryan's follow up.

One of my biggest surprises was at the end when we started talking about the savings and investments and that we could buffer our spending a little bit within reason and use some of that savings to invest it to try to get to some of our more immediate goals. This is really a behavioral and psychological change more than anything else. It's going to take some hard work to shift that current mindset. A couple of my key action steps is to really cut in those areas that we talked about, particularly in the area of dining out. I really think that that money is much better off being reinvested into our marriage and our family to really get us in a good place. So thank you again for talking with us. I really appreciate it.

Thanks for listening to I Will Teach youh 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 youh 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.