227. “We bought our dream house. Now we’re drowning”

It's that whole cash flow thing. It's going out every month instead of staying with us and building something.

You are missing all of the nuances of money, especially when you have very high holding costs with a house, a car, a baby.

We had a half broken up concrete patio in the backyard. Our deck was now sliced.

What is the state of your backyard now?

Shambles.

Like a big dirt pile.

Basically, it's just like a little bit sliced. Scary knowing that we do have this big income now, but in the future it might not be there.

Your emergency fund wouldn't last you even a week.

Well, at growing up, I got what I wanted when I asked for it and I think that I can do that now.

Every time you have paid off your debt, you've gotten right back into debt. Why is it going to be any different this time? Jason and Katie are a young couple in the Midwest with a baby, an SUV and a big house. Isn't this the American dream? But behind closed doors, their money is crushing them. They've been married for a decade and for all 10 years, they've been stuck in a cycle of debt. They fiddle around with their numbers, but nothing really seems to change. So if you feel like you're taking one step forward and two steps back with your money, I want you to listen to this episode. I'm about to open up their conscious spending plan which breaks down their net worth income and where they spend their money. They you can download and create your own conscious spending plan for free@iwt.com CSP Here's a snapshot of where they stand. Their assets are 554,000, investments 118,000, debt 419,000 and a net worth of 255,000. Their fixed costs are a staggering 83%, savings just 1%. And guilt free spending is at 9% for a couple earning nearly a quarter million dollars a year. Most of their money is already spoken for, which explains why they feel so stressed out. Jason dreams of a future with no debt. Katie struggles to dream at all. How would you handle this conversation? Let's get right into it. Let's talk to Jason and Katie. Have you both been in sync with money since you got married?

Yes. I think because we talk about money every single day.

Every day.

What?

What do you say?

I mean, we talk about every transaction.

Huh? What? What do you mean?

Yeah, but that's, that's only in this current moment.

I want to hear from Katie. What do you mean every transaction?

I don't know, every trip to the grocery store, every Night that we go out, you know, to a restaurant, we talk about it ahead of time.

Besides eating out, what other kind of conversations about money do you have every day?

Well, like for our daughter, for example, she's nine months. She's constantly growing out of her clothes. She needs new toys, you know, for developmental leaps and stuff like that. And so I always want to, you know, get her something new. And then I realize, you know, that we can't. So, you know, just because we don't have a ton of, you know, fun money, you know, everything is allocated to these specific budgets.

Why do you talk about that?

I think it's just important to be transparent with each other about the things that we want and I guess planning for the future if we can't. I guess I always want his approval.

Yeah. I mean, every once in a while, she might ask for extra clothes for her daughter and just, you know, if it's not in the category, I know that it's meant to be used in other places. And so it's really hard to say, like, oh, yeah, go get that. Even though it's something that could be needed, I think we are kind of out of time to just mess around. Like, right now is kind of when we start. Need to start investing and really think seriously about what our money is doing for us. And, like, I feel like if we don't start now, we're not going to have enough to retire with. And so I think it's work. I think it works especially right now, while we're in this. This season of just paying everything down to get to that next step.

You say that it works, but how much debt are you in?

About $30,000.

Oh, okay. So if you. If everything is allocated, what's the problem?

I think we're dealing with our past demons still.

All right, let's talk about. Let's talk about the past.

It definitely started with student loans. I left college in 2010 with about 120k in loans for. From an art school. My whole life since then has just been paying out that debt towards something. And then as our income grew and I feel like we just were kind of like, you know, it can fit our. The monthly payment can fit, you know, and we just kind of like, kept adding things on as we paid things off. We had.

What do you mean specifically? Adding what on?

Adding debt, you know, getting it.

What?

I don't know, going and getting some furniture and getting a credit line at a furniture store. You know, it's just all these, like, little things that are taking away from that cash flow. We don't think about it as cash flow. We thought about it as well. We can afford the minimum, you know, and so, and that's, and that's kind of what got us here is like, oh, we can keep affording the minimum until you're just like stuck in a hole and you're trying to dig yourself out.

Yeah. So that's how most people do their money life. It's a very simple way of looking at the world. You know, it's almost like, should we buy this thing? Does it fit in our house? It's pretty much as simple as that. Don't even take a measuring tape. Just vibes. Does it fit? And the thing is, you can actually fit a lot of stuff, especially if you're just paying a little bit. Until one day you try to open your door on your financial life and it's just full of stuff. Yep. Okay, Katie, what else did you buy during that time?

In 2020, we fully finished paying off his student loans, which was 120k.

Great. How'd you feel about that?

That felt amazing. Yeah. You know, we were in a one bedroom apartment. We were throwing everything we had at our debt. But then we are in a one bedroom apartment, working from home, and we are itching to buy a house.

Why?

Because we wanted to start a family.

What does the two have to do with each other? I'm confused.

Well, we, I guess we wanted more space in order to raise our child.

Okay, so, so you're like, we gotta buy a house. We're ready to start a family. We need more space. Okay, so did you.

Yep. So we were essentially debt free and we bought a house in October of 2020 and you know, we knew that we could afford it as far as our combined income, but then we had a large house and wanted to get furniture. Basically that's what he was referring to, is we wanted to get furniture to.

How large?

Too large.

20, 2900 square feet. I know, coming from New York, I'm sure.

Why, why did you do that? Just, just tell me. 2900 square feet. Why?

Well, the house is beautiful for one. Like we walked in and we were like, we had, we had rose colored glasses. We were just like starstruck by this house. And I think, I think we originally wanted what, four bedrooms or something? I, I can't remember what our list was, but we wanted a lot. And for a starter house, it probably wasn't the best idea.

Okay, so you got a. Almost 3,000 square foot house for the two of you and but you could fit it, financially speaking, you could afford it.

Yeah.

Okay, so you got it, then. The furniture you need to fill the house. How much did the furniture cost in total?

Oh, man, probably 15,000.

Are you sure?

In to. I mean. Yeah, we got a new bed. We got.

We.

Yeah, we did a bed, we did couches, we did chairs. I mean, yeah, 15, 20,000, I would say.

Okay. All right. So had you planned for that when you were evaluating the price of the house?

No.

No.

Okay. All right, so. So that's where you took out a line of credit to get the furniture, is that right?

Well, through the retail. Like a retail card? Yeah.

Oh, okay. So you opened up a card. What'd they give you, like 1 year, 0%? Some BS like that.

I can't remember. All right, yeah, something like that.

Katie's nodding. And did you pay it off?

We did. Oh, yeah, we did, didn't we?

No, we held a balance for a while. Yeah.

How long a while?

I. I think we were paying that thing off for, like two or three years.

Three years?

Yeah. I mean, how come?

Out of curiosity, you have pretty good cash flow, right? Why?

Minimum, I guess, to the minimum payment.

Y' all love a minimum, huh?

I know. So dumb.

Why is that?

I don't like it anymore.

Yeah.

Honestly, I hate. I hate holding a balance on, like, a credit card, especially a high interest card.

But back then, why did you like it?

I guess because it felt like we had more money. It just kind of prolonged. Spreads it out, prolongs it. Yeah.

All right, so you. You got out of debt, paid off the student loans, immediately bought a house, then get furniture, which took a few years to pay off, and then what?

And then we had to have new windows.

Yeah. Because our house or the house.

Yeah. What?

Yeah, our house needed new windows. They had no screens on them.

What's the problem? Sorry. I'm a son of immigrants. I'm like, where's the problem with this screen?

Or in Minnesota, it gets down to negative 20, and they were drafty and. Yeah, I mean, it's like they were cold. It was cold.

Yeah.

Hold on, hold on, hold on, hold on. If my parents were listening right now, they'd be like, how cold? They'd be like, how many coats do you have? Just throw them on. That's the solution. All right, so you fix the windows. That costs what, 10. 10 grand? How much?

55. 55 grand.

Can you explain that? Am I. Am I out of touch, or is this. Oh, you have a 3,000 square foot house.

Yeah, yeah, yeah.

Almost all the windows were replaced. Yeah.

And did you finance that?

We did. Yep.

All right. I'm just trying to understand, like, did you have a conversation where you were like, hey, this is annoying. Annoying, but it's going to cost 5, $55,000 plus interest. How annoying is it?

You know, I. I remember having the meeting with the guy, the guy that sold us the windows or whatever, and he told us the number, and I'm pretty sure we were. I'm pretty sure ramit that I was just like, it fits like our. We can do the. We can do the minimum payment.

Yeah.

And, you know, he really convinced us that it would add equity to our house, so.

So, yeah. Hold on.

Are you saying it's not going to add that roommate?

Katie, can you explain the $55,000 you spent? If you sell your house today, are you going to get $55,000 back for your windows? No. 40. 50. 45.

I don't even know. I think. I mean, he said it would. I think he said a percentage.

Like, oh, your window guy told you he was giving you financial advice. What a shock. Don't take financial advice from window guys. That's pretty much the lesson of today so far. All right. What's done is done. So. All right, you got the windows. So now you're back in debt. You're back in, like, tens of thousands of dollars of debt. You were making the payments. You were good. What happened next?

Then we bought a car. We got a Kia Telluride.

This sounds reasonable. What's the problem?

I mean, we. We kind of went for the top.

The cycle of it.

We went for the top trim. All the bells and whistles.

Oh, how much did this thing cost?

62.

60?

Yeah. $62,000 for a Kia?

What the.

Yo, I am out of touch.

It's an suv. It's an suv.

Yeah, of course it's an suv. We need one for the baby, right?

Yeah, that was our thought. Yeah. Initially. Yeah.

What do you notice, as you tell me the. This story from the last five or so years? What are the patterns?

We just added more and more, I guess. Yeah.

What else?

We're going for things that we don't need.

I think that's probably true, you know, discretionary items. Again, we all get discretionary items. Every single one of us is wearing something discretionary. We don't need the clothes that we are wearing. I don't have anything against discretionary items. I don't even have anything against a $62,000 car, frankly. Okay. But it's the decisions that we make. And the way we make those decisions, that can put us in trouble. Yeah. Jason, what do you notice about the way that you have made financial decisions? Both of you?

Impulsive.

Okay, what else?

Based on the monthly payments, and we're not looking at the, like, the total.

Loan amount, total cost of ownership, tco. It's not just the total amount. It's actually the tco. Because when you bought the house, you didn't consider the windows and you didn't consider the furniture and all that's tco, all of that. Had you known that or even modeled it out a bit, right? Like, hey, the day we walk in here, where are we going to sleep? Oh, we need to buy a bed. How much is. And we need to move for all the bedrooms. Oh, my God. Couches. Then you would start to be like, whoa. Let's. Let's pause for a second. Okay. All right. And then I noticed one other thing. In terms of your decision making, it's very based on stories. We need a house. We need to go from a one bedroom apartment to a 3,000 square foot house because we're ready to start a family. This is a story that we are all fed in America, basically from the day we're born. Your parents have been saying it, their parents have been saying it, and on and on and on. Right. When I asked you like, hey, why? Why a house? There was no more thinking beyond, we're ready to start a family. So let's bring it to today. You have the car, the Kia, you have the windows, you have the furniture and all that stuff. Take me through now to the last year and a half. Two years. Uh, oh, look at the smile on Katie's face. Go ahead, Katie, tell us.

Well. Well, it's a big story. Back in May now, I think we smelled a dead animal in our walls. Had no idea where this animal was coming from. We dealt with it for probably two weeks, and it was unbearable. Like, we didn't want to be on the main level of our house. We were worried about the health of our child. And we had some people come out to clean our vents.

Okay.

Which we. Cash flowed. And then, you know, they didn't find a dead animal in the vents. And then we had two different pest control companies come out and try to find it. Couldn't find it. But they did notice, like a tunnel that was leading underneath our concrete slab in our backyard.

Okay.

And so a family friend came out and he jackhammered part of our deck and found a half decomposed possum.

Oh, my God.

Right up against the edge of our house and under this concrete slab. And immediately the smell was gone. I mean, like within 12 hours the smell was gone. And we were super grateful. But we had a half broken up concrete patio in the backyard. Our deck was now sliced.

How much did it cost?

$4,500. And so luckily he's a family friend and not a contractor that, you know, we would have had to pay all in one lump sum. So we're paying him 1500amonth, you know, for three months just to get it.

When you bought a house, did you factor in the tip? Jason's already like shaking his head. I'm not even asked the question yet. I'm not trying to trap you. I'm legitimately curious. I'm not asking about the deck. Nobody could have predicted a possum would die in there.

Okay. Yeah.

And I'm sorry to the possum too. That sounds like, horrific. Particularly horrific. When you buy a house, there is a typical calculation that's often done that maintenance will cost between 1 to 3% of the price of the house per year. Had you ever heard that or did you factor that in?

No, I don't think so.

How much was the house?

450,000.

Now that you know, 1 to 3%, which would be like roughly 4 or $5,000 to like $15,000 approximately per year. How does that sound to you? And would you be able to set that money aside forever at a thousand bucks a month?

I think the goal is to have an emergency fund for that kind of thing in the future, yeah.

Ah, but like right now we couldn't do it.

We're not right now.

Okay. What is the state of your backyard now?

Shambles.

Yeah, there's like a weed. Weed garden, basically. Like a big dirt pile. Basically.

Okay. All right.

And it's just going to be that way until we can afford it.

Jason and Katie talk about money every single day. Every grocery run, every night out, even buying onesies for their nine month old. They have a conversation about it. Now, I know on this show you understand most people do not talk about money enough. So you might be like, hey, that's great. Good for them. Wrong. Talking about money every single day is freaking exhausting. You think I want to ask my wife about buying. Buying toothpaste? Or should Katie have to ask permission before she buys her daughter a coloring book? No. It feels suffocating. The worst part is they're talking and talking, but the numbers are not really getting better. Okay, yes, they paid off 120k in student loans, which is great. But then the house, then the furniture, then the car, then the $55,000 windows, and then of course the thousands of dollars to unearth a dead possum decomposing under their now destroyed deck. It all stinks. This is the modern American money story. You're working hard, you're doing what you're supposed to do, and somehow you are still behind. Is it because you're lazy? No, I don't think so. I think in general, a lot of people work really hard. And yes, the system is rigged against everyday people, especially the poor and middle class. But let's also be honest, they have never learned how money works. There are tons of books available and at every public library in the country. In fact, that's why I wrote my book, Money for Couples. It shows you how to stop obsessing over every receipt and start building a plan where you can actually connect with your partner. I have a free chapter available for you right now to download@iwt.com mfcpreview what I can tell you is that Jason and Katie do not need another freaking budget category. They don't need to talk about every purchase. What they need is a real plan and we're going to get right into that right after this. 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It's like an agent out there looking for your perfect dinner reservation or flight or hotel booking. It's basically like a virtual assistant who doesn't sleep. I love this. I actually want more agents who are out there in my life, patrolling, making my life easier. That's why I use Delete me. It's basically an agent that patrols for my personal information being leaked and then it automatically cleans it up for me. Here's how Delete Me works. You give them your information once and in about a week they will send you back a full privacy report. Where your data is, what they found and what they are removing. They scan a bunch of people, search sites and data brokers for your personal information, including your name, social media, phone number, old emails, even relatives names. And then they get it removed and they keep going, patrolling, monitoring those sites all year to make sure that it stays gone. Deleteme built their own technology and they have real privacy advisors to help you when you need it. They've been the experts in this for over 15 years and they work with everyone from judges to journalists. I've trusted them to protect my own personal information and my parents too. You'll get 20% off all consumer plans when you go to JoinDeleteMe.com Ramit and use promo code Ramit at checkout. That's JoinDeleteMe.com Ramit code Ramit for 20% off. All right, let's take a look at the CSP. Jason, can you read the word in bold and then the number in full next to it for this entire net worth box, please. Piece.

Yep. Assets, $554,500. Investments, $118,601. Savings, $2,200. Debt, $419,676. Leaving a net worth of $255,625.

What do you think about those numbers?

They're low for where I'd rather be for our age. Mm. Especially the net worth. And I know that most of that is the house. And, you know, we barely have equity on the house. That's kind of getting us above that zero net worth.

What do you think, Katie?

Yeah, it's definitely lower than we want to be.

Okay, let's take a look at the income this time. Katie, I'm going to ask you. Can you read your gross combined monthly income, please?

If it's 20,500.

Okay. So combined, the two of you in your household make $246,000 per year. Who knew that number? Both. Both are putting their hands. I believe you. Well done. I believe you. Well done. Again. 50% of people on this show do not even know their household income. But both of you do. That's great. Is that because you talk about money regularly?

Yeah, I think so.

All right, your take home is $13,321. How do you feel about those numbers in terms of income?

They're fantastic.

Good.

Yeah, we have great income.

Wow. Finally, a rich couple who acknowledges they make a lot of money.

Wow. We feel blessed, honestly.

Fantastic. All right, and just for the breakdown here, both of you make a similar amount of money. Jason makes 10,833amonth gross. Katie makes 9,667. So very close to each other in terms of income. Fantastic. And I see you have. You're doing some pre tax. What are you doing? 401ks?

Yeah, it's just 401ks max. An extra 5% on top of what we get. So we get 3% from our, like just. Our boss just throws in 3% for us. And I'm doing 5% on top of that just to have something rolling.

You're not maxing it out though?

No, not currently.

Because of cash flow needs.

That's the goal. To max it out for sure.

Okay, cool.

Yeah.

Let's take a look at the rest. Katie, your fixed cost, what's this number here?

83%.

83% fixed costs on $246,000 income. We're going to come back to that. Investments. Zero. Not great. I know you have some 401k, so that helps. But overall, with this type of income, like to see a little bit more. Quite a bit more, actually. Savings are at 1%. Huh. And that 1% is $100 a month for gifts. Okay. And then finally, guilt free spending is at 16% or $2,098 per month, I believe. Is this number accurate?

It's actually really accurate.

Yeah. Yeah, Okay. I believe it. All right. So the good news is we have accurate numbers. That's great. But we got a bigger problem than a lack of precision. Got 83% on fixed costs. Jason, what do you think?

Yeah, it's. It's that whole cash flow thing. Like, honestly, it's. It's going out every month instead of staying with us and building something.

Okay. What do you both do for a living?

Well, we both work at the same company. We're in content creation. So I'm a producer and project manager, account manager, and then Jason is a 3D animator.

Okay, great. How do you evaluate the risk of both being employed at the same company?

Yeah, that's the. That's a tricky question, actually, because with, like, the advent of AI and everything, especially being content creation, video, animation, all that stuff is starting to be able to be done by a hundred dollars a month and a prompt, you know, and so it's just like, a little bit scary knowing that we do have this big income now, but in the future it might not be there because, you know, the need for our product is decreasing.

So I hear two. Two levels of risk, at least. One is you have skills that may be getting replaced by AI. And two, you both work at the same company, which is a very high amount of concentrated risk. It happens. I mean, the good news is you're making a lot of money. But if I were in your position, one thing that I try to do is take a look at risk, and where there are big pockets of risk, how do we evaluate away? Because I don't ever want to get in a position where my wife and I both get laid off from the same company at the same time, where we have really high fixed cost. My reaction to that would be, damn, we better build a fat emergency fund. Because it's only a matter of time until a company contracts. Every company does, and we do not want to be on the rough end of that decision. All right, let's take a look at the rest of the numbers here. You have $2,200 in savings. That's really tight.

That's literally just a basic emergency fund.

Your emergency fund wouldn't last you even a week.

I know. Yeah. I mean, it's meant to just do very, very minor things. Right now, the goal is to get a 40, $50,000 emergency fund once all of this stuff is paid down.

Yeah, I agree. But can I ask you something? Like, you have major amounts of risk in your financial situation, employed at the same company, 83% fixed costs, basically no emergency fund. Yet you're tracking everything down to the penny. Is it working?

The tracking right now is working to make sure that we stay on target with paying off our debt. But it's not working as far as building something because everything's going. Everything is going out, building a savings.

So you're like tracking extremely intentionally. I find this with a lot of people who love budgets. I find this with a lot of people who are in the frugality community. They're really proud of their ability to track. They're really good at tracking. But by tracking every single number very, very carefully, they actually do not zoom out and look at the big picture. Like, I could be tracking myself into doom. Is it working? The answer surely is no. If I'm tracking myself into having less than a week's worth of an emergency fund, this is not working. I don't care if you know the price of freaking apples, you have no emergency fund that's not working. What do you think of that?

Well, I think we do. We have done like a projection plan to like, see what it would look like once we're debt free again.

Okay.

Like the plan is to be debt free by what, March, April of next year. And then we kind of did a projection to kind of see, you know, how. How much catch up we need to do as far as investments and how.

Quickly we can build that emergency fund.

Yeah.

And what was the answer?

I think we could probably build that emergency fund in like a year and a half once our debt is gone.

Okay. How do you feel about that?

It feels fine, but it's still going to meet. It's still going to mean that the cash flow is still taken by, tied up by this emergency fund, but at least it's going positive and not, not negative.

What about the behavioral part of it? Every time you have paid off your debt, you've gotten right back into debt. Why is it going to be any different this time?

It's going to be.

It has to be.

It has to be.

I hate to say it, but that was probably the least convincing answer I've ever heard. It's going to be. It has to be. I'm like, okay, how we're really trying.

To change our habits.

Tell me about around it.

We haven't taken any big debts out in the past few years. Like all this stuff, like I said, is our past demons that we're paying down, Barring the backyard construction.

Okay. Everyone says this time will be different. Jason says it right now, he's tracking every expense. He's got a debt free plan. He swears his habits are changing. Maybe I hope so. But I examine behavior, I study patterns. And right now all I hear are Jason's own words from just a few weeks ago telling me exactly how he could fall right back into a cycle of debt. Listen to this phrase. Why is it going to be different this time? If you are trying to make a change and you've tried something before, whether it's your money or beginning a fitness journey or anything that matters to you, ask yourself that question. Why is it going to be different this time? You need to have a crisp, specific answer if you truly want to be successful at making a change. Jason, you wrote this in your application. You wrote, now that we have a dirt pile in our backyard. My wife plays small with what it could become when talking to a landscape designer. She scoffs at the fun stuff I mention because she just sees the dollar signs, not the dream backyard it could be.

I know why you're saying that, because ultimately the. That sounds like we're going to go into more debt to renovate our backyard. But that's not the case. That's going to be. We're going to be saving for that.

So when you have an extra 1 or 2000 or however much per month of cash flow, you're not going to look out your back window and see all those weeds and the jackhammered concrete and go, we should fix that. It'll only cost us 400 bucks a month.

No, no, because we, we already said that we're going to do like a tiered approach. Like we're going to save up for. We're going to get estimates. We're going to do just the base level, like just get a patio, like basic stuff. And then do the next, you know, next phase. Next phase. Once we have, you know, cash flow built up.

But can you guys stop using the word cash flow?

So sorry.

It's not, it's not the word. It's. People who use the word cash flow throw off major red flags. Major. Let me tell you why I'm saying this. The idea that you are using with cash flow is as long as we have money coming in, then we have cash flow so that we can spend it. You're treating it like, you know, money is a river and we have some extra water coming in. Let's divert it and, and use the water. The whole concept of cash flow, which I can tell you've been inculcated with, is in Some ways helpful. You should know how much cash you have coming in and out. Yes, but people who use the word cash flow as much as you, especially you, Jason, they tend to not focus on net worth. They tend to not look for long term investments, savings, or even spending on big stuff in the future, like a really nice house. House or vacation or whatever it is they love. They just look at the short term, month to month cash flow. Do you notice that pattern with how you both look at money in the past?

For sure.

How about right now? Because you just talked about cash flow with a patio.

Yeah, you're right. Yeah, definitely. The phrase maybe in the past has been like, that's, you know, we have that let's, we have the cash flow, let's do it type of thing. But now I want it to mean that this cash flow can go towards savings in the future or saving for something in the future.

I would just ban the word cash flow. Sorry I keep saying it, I just wouldn't use it.

What can I say instead?

Jason, do you know why you keep saying it?

It's ingrained in me.

Why, why do you keep saying cash flow? What does it get you? What does cash flow get you?

Options.

Yeah, what else?

I mean it just. Yeah, it just allows you to breathe a little.

I think, I think that your world view of money using the word cash flow is as long as we have enough coming in and we're spending below that going out, we're okay.

Yeah.

That's your view, right? And Katie, you're nodding too. That's. That's basically most Americans view of money is kind of a very simplistic way of looking at the world. If we have money coming in and we're spending less than that going out, we are okay. That is essentially, in fact, we see it in the csp, you are way overspending on fixed costs. But guess what? We know our exact amount of guilt free spending. We're tracking everything. Our cash flow is okay, so we're fine. But you are missing all of the nuances of money. Especially when you have very high holding costs with a house, a car, a baby, all this stuff you're missing that expenses do not just appear on a monthly basis. You have a $55,000 discretionary purchase you make that now gets financed over many, many, many months. You have emergencies that come up like a dead possum. Cash flow. That view alone does not solve these problems. You need a more sophisticated, sophisticated way of looking at money. A more savvy way of looking at money. Do you See that?

I agree. Yeah.

Okay. So I would probably take off the cash flow lenses that actually, it's not serving you anymore. We need to develop a savvier way of developing a relationship with money and probably our decisions with money. That's another reason that you did the minimums on everything, because you looked at cash flow. A savvier view would be, let's look at tco, tco, total cost of ownership. Does this couch, which appears to cost, I don't know, 3,000 bucks, but when we factor everything in, including interest, delivery fee, maintenance, all of it, that's actually like $5,500. Do we want a $5,500 couch right now? That's how we want to approach money. Jason and Katie bring home an amazing income, but the status of their money tells a different story. 83% of it goes to fixed costs. Their savings wouldn't last a week. And also, have you noticed how they cannot stop saying the word cash flow? For me, whenever I hear cash flow, like 20 times over and over, it's a big red flag. Just so you know, cash flow is basically money in, money out. When you're making a quarter million dollars but still don't have a lot of money left over, focusing on cash flow can seem like the right decision. But obviously it's not working. So maybe there's a different way to look at their finances, like the fact maybe that they're living the typical all American debt story. Babies, cars, big houses, swallowing up huge incomes while the big picture gets lost in tiny details. Now, you and I know that these habits come from somewhere. Let's find out how they both grew up with money. Here's what I didn't expect. After getting my Leesa mattress, I woke up feeling amazing. And I stopped thinking about my back. No more low level stiffness from workouts, travel. And once it was gone, I started to feel better. All day, I would sleep deeper. At night, I would wake up just feeling good. And this is what I love about this Leesa mattress, which my wife and I personally bought. We use a Leesa mattress that's really firm and I can tell how much we love it because whenever we travel and we come back, first night feels so good. Lisa has models for your side back and stomach sleepers, so you can find the right one for you. They are supportive without sinking. They're designed and assembled in the US And Wirecutter named them the best hybrid mattress. Plus, Lisa donates thousands of mattresses every year to people in need right now. Go to leesa.com and use code RAMIT to get 25% off mattresses for the Labor Day extended sale. Plus just for my listeners, an extra $50 off. That's L E E S a.com promo code RAMIT for 25% off mattresses plus an extra $50 off. And don't forget to enter our show name after checkout so they know that we sent you Lisa.com promo code Ramit here's a DM I got from one of my listeners about this episode's sponsor. Element I love it. After my sauna cold plunge sessions I do two rounds of sauna, then cold plunge. I love drinking Element after my sessions. Another person said sometimes I use it the morning after I've had a few too many drinks. I appreciate the feedback. If you like to sweat it out in the sauna or you need to feel a little better after a night out, Element can be a great way to replace your electrolytes. Element is a zero sugar electrolyte mix that comes in easy to use packets in great flavors like citrus salt and watermelon. When you're sweating like you're at the gym or hiking or just in the heat, you're losing more than water. Element helps you stay sharp, avoid cramps and feel better. It's used by Navy Seals, Olympic athletes and pro sports teams. And now what started as a seasonal drop Lemonade salt is officially a favorite. It's perfect with iced tea. For a salty Arnold Palmer, get a free 8 count sample pack of Elements Most popular drink mix flavors with any purchase@drinklmnt.com Ramit that's drinklmnt.com Ramit find your favorite element flavor or share with a friend and you can try it totally risk free. If you don't like it, they will give you your money back, no questions asked. Katie can we go back to your childhood and let's think back to what your family said about money when you were young. What phrases do you remember?

We can't afford it yet? I felt like my entire childhood I was given what I needed. You know, we went to restaurants, we went on vacations, my brother and I both played sports and I did dance. So I never felt like limited in my childhood, but I did hear that phrase like we can't afford it quite often.

Who said it?

My mom.

Where was your dad in this? What was his relationship with money and your family?

Basically, like if I wanted something, I would ask my dad and he would always give in and give me what I what I asked for, I guess.

What'd you take Away from that instant.

Gratification that I got what I wanted when I asked for it.

Do you think you've carried that financial lesson into this relationship?

Yeah, probably. Yeah. I mean, one time, Jason and I were at, like, a home garden center with my parents, and both my mom and I. Both my mom and I wanted a certain bird feeder for our houses. And my mom and I both had the same, like, oh, can we get it? Kind of thing. And Jason's like, this is exactly where you get it from.

Whoa.

We both did not leave with said bird feeder, but we both had the same reaction. Yeah.

Can you deconstruct it for me? So what do you think was going on there? If you zoom up, almost like you're an omniscient observer and you look down at yourself and your mom both employing the same tactic. Analyze it for me.

We were both asking for permission to get something.

From whom?

From our spouse.

Why?

Because it was a want, not a need. Like, what we were asking for. We knew it was something that we didn't absolutely need, so we were asking for permission.

Okay, and what about if you need something? Do you ask them for permission?

I do, but that's just because we're. I mean, I can't speak for my mom, but I do. Just because we're trying to be really conscious about our spending.

So do you think that there's a day where you will not ask for permission for something you need?

I think so.

What's that day?

I would say once, you know, we have a really good savings, we're contributing to our, you know, fully investing or maxing out our investments, our savings are in a good place, and the rest of our funds are not tied up in other ways. You know, like, until I feel really good about what's remaining, I guess, in our monthly budget.

Sorry, was it a certain number that you need to achieve, or was it you feeling really good? Which one?

I would say. Well, I don't have, like, a set number. No.

Is it possible that you will always ask for permission for even things you need?

I mean, it's definitely possible because that's how it. It's always been.

Do you want to. No, you don't want to ask for permission?

I want to have a conversation about it because I think that, you know, it's a respectful thing to do because it's not just my money.

We talk about stuff, we communicate about that. And it's not permission as much as it is just like having a conversation.

Do you know that I don't have these conversations with my wife, like, not at all. Not the ones that you're having. I'm not saying yours are wrong or I'm right. I'm not saying that at all. I'm just saying it's quite striking the different types of conversations that we have. So if my wife sees something she wants or needs, she's buying it. I don't usually even know about it, but the conversations we have are, what is the percentage of our take home pay that we are investing? That's a conversation we have. How much do we want to put aside for major things coming up next year, such as travel or whatever it is that's important to us? Those are the conversations we have. How does that strike you, hearing that?

It sounds amazing. That's the goal.

Yeah.

What? What? This is quite shocking. How come you're both amazed? You just spent two hours defending how you are great communicators about money. What do you mean?

In the current phase that we're in, I'm really. I really like the way that we communicate now, but the way that you and your wife communicate, that would be the goal in the future once we feel really good about where everything else is at.

Have you ever heard me say that the way you feel about money is highly uncorrelated to the amount in your bank account?

I haven't.

You make a lot of money. I agree. You do not have enough savings and all that stuff, but you're going to have a million dollars in net worth. 2 million. You're still going to feel the same way about money. You can be meticulous and still broke. Jason and Katie can tell you every number in their budget. They track it all. They don't make a purchase without talking about it. But guys, it's not working. I see this time and time again on this podcast. People obsess over the small stuff and. And they miss the big picture. They're proud of how complicated their budget is. Ooh, it's so precise. Yeah, well, you're in $180,000 of debt. What does it matter that you track your corn nuts down to the penny? Real financial security comes from strategy, not from knowing where every single penny is going. And I have to say, together, they might actually be too aligned. Same company, same spending habits, same blind spots. You know, a lot of people like to say we want to get on the same page, but if that same page says debt, no savings, and being stressed, you do not want to be on the same page. Sometimes having a little bit of antagonism or a little bit of push and pull can actually be really helpful. I got to tell you, that kind of thinking doesn't just show up magically when you become an adult. It usually starts way earlier with money lessons that we learned in childhood. Now, to understand why Jason and Katie make the choices they do today, I want to go back in time to understand the money messages they received when they were growing up. Let's go to Jason. Jason, take me back. What do you remember your family saying about money when you were young?

Yeah, I mean, it literally was like we couldn't afford it. And I knew we couldn't. We were pretty low, low income, maybe. Maybe lower middle class. But it was. It was the conversation where, like, you know, we can't get it for you. But then, you know, know, a new TV shows up in the house. You know, like, it was definitely, like. It was like a. A very kind of selfish use, I guess, of. Of the money that they did have. And who knows if that was all on credit or what. But I do remember, you know, just little things like, no, you can't go to the swimming pool today. We don't have it. We don't have the money. And that's like two and a half dollars to get into the pool for a day of fun or whatever, you know, uh, to the point where me and my sister would sometimes gather up pop bottles and pop cans and take it to, like, a redemption center and get the cash to go to the pool for the day. And it was, you know, you know, it was. It was nice to do the work to. To get it ourselves. But, like, you know, it would have been nice to just, you know, have the 70 a year for a membership or whatever it is, so we could go anytime. And so that's what we want to give to our daughter. I think ultimately, what is that? The ability to have more. More experiences, not just sit at home all day during the summer, you know, actually go out and do things and I guess have a good.

Not.

Not that I didn't have a good childhood. Just. Just have a more, I guess, adventurous childhood, you know, just something more interesting.

I'm a little bit puzzled by this. This ending of your origin story with money. So you're like. We were lower middle class. My parents also sent mixed messages. They told us they couldn't afford, like, two and a half bucks to go to the pool for an entire day, and yet sometimes a new TV would show up. So like a very confusing set of messages about money. You were resourceful. You know, you would go out with your Sister and bottles. And so that, that was a source of accomplishment for you. And then I was with you, all of that. I was with you. But then you pivoted to. That's what we want to do for our daughter. We want to give her more. Which I'm like, okay, I kind of get that. Every parent says that. And yet when I look at your CSP, I actually see the opposite. Yeah, I see 83% in fixed costs. I see debt upon debt upon debt for things like a $62,000 car, a 2900 square foot house. I see so much fixed cost, $55,000 windows deck. And I see essentially no money left over for experiences with the three of you. Yeah. How do you reconcile that?

I guess all I can say is that's the goal is, is to get rid of all this, this monkey on our back and, and she, she's a reason that, you know, we want to do that. Originally I didn't even want to have kids until we were out of debt. And that was mainly to not be able to have the same childhood as I did, you know, to actually be able to do more. But yeah, I, I, I guess looking at our CSP right now, that's very true. It doesn't look like that's what we're doing, but that is ultimately, ultimately the goal.

What do you think, Katie?

Yeah, well, I was going to say that, you know, we did get nearly debt free minus the small amount of my student loans in 2020. And then the goal was to have kids right away. And I think we probably, if we were successfully able to have a kid right. In 2020, 2021. Like if we would have had the child before we like bought the house and bought the car and did the windows and stuff, if we would have had the child first, then we probably would, it would have been a reverse. Like we would have gotten her what she needed and then we would have realized like we can't spend as much on windows, car, et cetera.

I think so. I actually think it's the opposite, Katie. I think that once you had a baby, suddenly the entire world is, we have to give her what we didn't have, we have to protect her. And so if the window costs 55k. Here you go, 60k. Fine. Deck, fix it. We don't care. We'll figure it out because our daughter needs the things we didn't have. I think it's the opposite of what you think. How does that strike you?

I mean, I can see how you see. I mean I can see that what.

Are you realizing as you say this out loud for both of you?

I mean, I'm just. I just realized that I'm done. I'm ready to. To not do this anymore.

I'm with you. But you're not still yet understanding your own motivation. You're not understanding why you have made the decisions you've made. In fact, just a minute ago, Katie, you said if we had had a baby first, we would have been thoughtful and wise and careful with our numbers. I don't believe that. So I'm asking you, what are you realizing as you are saying this out loud?

Katie, we have a bad outlook, I guess. You know, when we're debt free, we need to do the work now so that when we're debt free come the spring, that we just, like, don't do this cycle again?

It's kind of great insight. And I see Jason nodding over there. Katie, I love what you just said. I totally agree. Can I make a couple of minor tweaks to that that might give you. It might connect with you? So you said, bad, bad. I'm bad because I spend too much bad. This is a very common thing in the Midwest. And I am almost certain you grew up hearing that's good and that's bad with money. If you do that. Look at the nod on her face. She's smiling.

Yeah, yeah, it's true, right?

This is a common thing. And I actually don't love this puritanical, you know, go good and bad view. It actually makes us all walk on eggshells. We feel guilty. We feel a lot of shame. This is common also with people who grew up religious. And the ironic thing is we actually end up spending the money anyway. So you feel bad, but then you spend $55,000 on Windows, right? That, like, it's actually the worst of all worlds. We might as well develop a healthier relationship with money. You know, I don't think you have a bad outlook on money. I think that you can develop a savvier outlook with money. And one of the things I notice is that you both ascribe your behavior to certain external things going on. You've done it repeatedly today. You've said, back then, we did this, and it was like, well, there was this and there was that, and then we got the house. And it's always about a time period or something happening. You also then move and do the same thing looking forward. Well, once our debt is paid off, then we will magically change. And if I can just be really blunt, you're going to be stuck in the same pattern until you take a hard look in the mirror and realize, oh, it's actually us. It's not tripping and falling in West Elm and getting a credit card to buy a cash. It's not that. It's us. It's not us tripping and falling and spending $55,000 on Windows. It's us. And if we don't acknowledge that and get honest about it, we're just going to find ourselves in the exact same situation we've been for the last decade. When you put Jason's story next to Katie's, there are a lot of parallels. Both grew up with confusing messages about money, and now, as adults, they are repeating them in new ways. Jason doesn't even realize that he's running the same playbook as his dad. He's refusing small everyday joys while while making massive, inconsistent purchases. Think about it. What's really the difference between saying no to a $2 pool pass back then and no to a $20 baby outfit today? All while dropping tens of thousands of dollars on cars and windows for a 3,000 square foot house? This is the real trap of childhood money lessons. One, we don't examine them. Two, we think we're doing something different. But unless we really study them closely, we often end up recreating the same patterns in our life. And that's the challenge they're facing right now as they start to connect the dots between their childhoods and the way that they handle money today. One of my favorite phrases to use in my company is check the box and move on. Just think about all the things that are on your to do list. And they've been sitting there for months, sometimes years. Now. Imagine instead of thinking you need time to get it perfect, you just get it done. It's handled now so you can check the box and move on. A great example of this is estate planning. A lot of people put this off. What's a trust? Do I need a will? I don't know where to go. But once this is done, there is total peace of mind in knowing that it's handled. That's why I recommend trust and will. There's no scheduling appointments, there's no digging through legal forms. You go online, answer a few questions, and it walks you through everything in less than an hour. My coworker actually recently created a will for her and her family on trust and will. Here's what she told me. Getting started was incredibly easy. I just followed their prompts, provided the info they needed about my beneficiaries my assets and my preferences. In less than an hour, I had a will, power of attorney, documents, last will and testament, and HIPAA authorizations, all of which I easily downloaded, and I could have them executed or checked by an attorney if I wanted to. Now, I personally used an attorney for my own estate plan, but not everyone has access to a great estate attorney, so if that's you, trust and will is a great option because they make estate planning accessible and affordable. With trust and will, you can create and manage a custom estate plan starting at $199. Let trust and will uncomplicate the process for you. Protect what matters most in minutes@trustandwill.com Ramit and get 10% off plus free shipping. That's 10% off and free shipping. @trustandwill.com SL Ramit thinking back to your upbringing with money, how do you think your upbringing affected your view of money today?

Well, at growing up, I got what I wanted when I asked for it. And I think that I can do that now when I asked for it.

Wow. Tell me more. That's pretty insightful.

I mean, I think that's, you know, probably why I asked Jason. Cause then, you know, it's the same as me asking my dad. And now I'm just asking Jason.

Wow. So I noticed you just took a very deep breath in and out. Tell me what's going on, Katie. What are you realizing?

Well, I'm realizing that it's. I'm repeating a cycle. That I did it growing up as a child and now I'm doing it as an adult, and I need to change my habits maybe.

I mean, why would you. You get what you want, right? We want the house and we want the windows, and we want this and that. Why would you stop?

I think now we just have bigger goals.

Oh, like what?

Like investing so that we can retire. And, you know, we want to obviously have a, you know, a savings so that if something were to happen, one of our jobs or both of our jobs, like you said, like, just so we have more security, I think that's way more important to us now than like, a new couch or, you know, like, I barely even want to buy clothes for myself anymore.

When you were growing up, did your mom buy clothes for herself?

I think so, but probably not a lot. She still only buys what she needs, I would say, for clothes.

Do you see yourself unconsciously adopting the same patterns as your mom?

Yes.

What do you see?

Caring more about others than myself?

Yes. It's a classic thing for moms. Especially Midwest moms. And you even said it as a point of pride, like, for me, I don't even need to buy clothes. You're shifting right into that right. And it coincides perfectly with the arrival of your daughter. I don't need it for me. Me, I'll just sacrifice. I'm a martyr. We'll devote all of our resources to our baby, all of them. Giving her things she likely doesn't even need. But we have created a story that she needs them. She needs a 2900 square foot house, a nine month old. She needs an SUV, a nine month old. Soon she's going to need all the things that the typical American parent spends all of their money on, not actually stopping to say, like what? What does she need? What does she want? And also what do we want? To set a great example for our daughter. Katie, you're right on the cusp of giving up the things you actually want for no reason.

And I know, yeah, tell me. I know that that's the case because you know, I turned Jason down when we talked about the backyard. If he talks about wanting to like go on a vacation a year from now, I'm like, we can't afford it.

Where did we hear that before? Who said that prior?

My mom. My mom or he even set money in our budget for me to get clothes for myself postpartum. And slowly I ate away from that budget. Not for clothes for myself, but for things for her daughter, Katie. And I know that that's the pattern.

Yeah, I hate this. I hate this for everybody, but especially for moms, especially for women, because I see it too often. They put everybody else first and they have reshaped this into a virtue. I'm virtuous because I'm giving more to my daughter, to my spouse, to my family. And I go, we need to reprioritize. Because actually for a family, it's important for them to see their mom spending on the things she loves, to be inspiring for herself. Whether that be taking a one hour walk, getting childcare for. For a half evening, whatever. It's important for dads too, but specifically for moms, because I just see it too much. Katie, this is, I can tell very much resonating with you very much.

So.

Okay, yeah, I can work with your numbers and help you find a way to do this, but what I'm really trying to show you is this is not just about, you know, cash flow. It has nothing to do with it. It's a way of looking at the world that your mom and likely her mom have taken on and unconsciously passed on to you? Okay. Jason, how do you think that your upbringing has affected your relationship with money today?

I didn't get a lot of what I wanted when I was a kid, and so now I have the money to do so, and so I just got it. You know, I think that that that directly correlates in that sense.

I agree with your assessment, Jason. I think that's pretty spot on. What's interesting is that you also track things really carefully.

Yeah, my dad had a budget, but the difference is I feel like it was a budget that was like, aspirational of just like, this is when we're gonna get the car paid off. This is when we're gonna get this and this paid off. And then probably opening up the word. I'm not supposed to say for him, you know, cash flow.

But.

Yeah, I.

Sorry, is this your dad's budget or your budget? Sound. Eerily.

Sounds very similar. I know, but the. I think the difference between his budget and my budget is that his was. Mine is connected to a bank account. And so I can see when stuff is, like, taking stuff down. And maybe we're just a little bit too granular with the way we do it, but I think at our certain. Our certain stage, it just. It's just smarter to do. Well, we do.

How many categories do you have in your budget?

You don't want to know.

Okay, put it up on screen. I know you have it open anyway. You never go more than four feet away from a budget. Both of you. True or false. I know it. I don't even have to answer the question. Show me the budget on screen. Oh, my God. The amount of numbers on this page is more numbers than I use to run my entire business. Okay, yeah. All right, hold on, hold on, hold on. Slow down, slow down.

Okay, okay, take me to.

I know you're adept at this. I'm not. I don't look at budgets. I look at CSPs. Not a budget, everybody. All right, let me tell you what I see on the screen. First of all, this is a very nice looking budget. Thank you. I mean, as budgets go, it's kind of like me saying, this is a nice looking coffin. I mean.

Yeah.

All right, so at the top, we have uncategorized transactions is only $7.70. Keep in mind, this couple makes a lot of money. So you're clearly tracking everything I see. Yeah. Okay. You know, some categories including mortgage, daycare, electric, natural gas, dental, car insurance, Internet, phone, groceries, gas, household. I'm Starting to get overwhelmed now, but I'm going to keep going, moving down. We have cats. We have monthly subscriptions. I just want to read the number of subscriptions here, everybody. These are broken down by category. Gym membership, Hulu, Disney, HBO, SimpliSafe, Spotify, iCloud, Car Wash, Dropbox One, Password, Apple TV, Copilot, and YouTube Premium. Okay, let's keep going. True expenses. These are things like home maintenance, therapy, clothing, contacts, glasses. Contacts and glasses are two separate categories. Makeup, haircuts, broken out by each person. I mean, I don't know if I have enough tape to record how many categories there are. Just go all the way down. I'm. I'm even running out of my.

That's it.

How many categories? Is there a way to count how many there are?

Yes.

Great. Tell me.

84.

Holy. All right, you could take this off screen. 84 categories?

Yeah.

Why? What does it get you?

Right. Yeah. Right now it's just staying on target.

I think it gives us control of what we do have, and it allows us to. To not overspend. Like, it. It allows us to have the conversations. And we know that we don't want to be this granular once we're out of debt. Like, we've already talked about it. We absolutely don't want to be this granular.

Can I just ask like, a. A very pointed question? Why don't you just start simplifying right now?

We thought about it. I think what we like about having it this granular right now is just to be like, what could we remove from our budget? Like, if we were to get rid of some of those subscriptions, just to tighten it up even more, like, throw more at debt and get out even sooner. It's nice to be able to see every expense.

Can I just say something? Y' all have a lot of debt. You have basically no emergency fund. You have 84 categories. And you told me you have that because you like to be able to look at it and say, what could we cut? You spend $475 a month on subscriptions.

Yeah.

If you were going to cut them by having each one laid out in a granular fashion, you would have cut them. You've structurally set yourselves up to play small. I would rather have you saying, let's talk about the big questions. How are we going to increase our savings rate right now? How are we going to diversify our risk? Right now you actually keep $475 of subscriptions, so you're living in the worst of both worlds. Let's Play small and actually not make any substantive changes. We'll just wait, and then when external circumstances change, we will magically change internally. That's my assessment. What do you think? Feel free to push back if you think I'm wrong.

No, I think you're spot on.

Yeah, there's. You're not wrong. Yeah, we. We are. We are doing a lot of waiting and hoping for an environmental change before we. Before we change ourselves. I think it would be cool if, like, our budget literally reflected the CSP and we had those. Those numbers instead.

I would love that. Jason and Katie believe that their budget gives them control. I think it just gives them tunnel vision. They're, like, replacing the batteries in their smoke alarm. They're proudly checking off yet another to do item. But the freaking house is on fire. And the more they obsess over tiny expenses, the more. The less energy they have to actually ask the big questions. Are we saving for our future? Are we building stability for our daughter? Tracking yet another number won't tell them this. In fact, the skills of thinking big are deteriorating day by day. If they want any hope of saving and investing, they need to break out of this small way of looking at money. Otherwise, all that freaking precision will leave them with beautiful budgets but nothing of lasting value. That is why we are going back to the CSP to confront the truth that is hiding in plain sight. Okay, can we look at the numbers again? So let's remember the following. You have $118,000 in investments today. In your 30s, you got $419,000 of debt. Can we break that debt down? What is that?

Mostly the mortgage. 380,000 or so on the mortgage. Credit card debt, 2K and student loans, about 5K. Okay, so that's. I mean, that's literally those. And then, so beyond that, our car is. We got about 15k left. Our windows, we have about 5k left.

What about the patio?

We have 1500 remaining on that, but it'll be paid off next, like, August 10th.

Cool. Let's look at the rest. So we got 83%. Your housing costs are actually not out of control. They're, you know, they're pretty reasonable. You're at 22%. I do want to point out a couple things that are notable. So you have your mortgage, but then you also have $1,173 of car payment. And then on top of that, you have $1,683 a month of debt. Debt payments. So now we're really starting to add up, even with a High income. It's really starting to get up there. Then you have something called possum issues, which is fifteen hundred dollars. I understand that that's going to be paid off soon, but that's still a lot. This is every month, by the way. Then we have daycare at 1560. That's unavoidable. Okay. All of that really starts to push those numbers way up. So that hopefully explains at a big picture level why you have 83% fixed costs even with $20,500 a month of gross income or 13,321 net. Are we all on the same page here?

Yeah.

100.

When I read that stuff off to you, what do you think as you hear it?

Once. Yeah, I'm. Once I. The 83% is temporary. I know once that debt's paid off, it's going to be back down to 60% or something.

We know that once the debt is paid off, we have actually a good amount of money that we can build a savings and then, you know, throw out investments like we actually have the ability to do that.

Okay, let's look. So your possum issues, I'm going to just zero that out so we see how that drops the number down. Okay, that takes you down to 72%. That's a big change. That's great. Let's take debt payments. When is this going to be paid off? The $1,683 a month.

So that should be gone by in March.

Okay, great. Let me zero that out just to see what we got. Wow. That takes you exactly down to 60% right on the money. Okay. Yep. Okay. How many more on the car payment?

So that one's probably going to go longer. There's 15,000 left on that.

And so we'll leave that. Oh, wait, that's like a year.

But that has. But that has gas it as well. 240 for gas.

So, all right, let's just put 400. I like to add a buffer.

Yeah.

That takes you down to 54%. All right. You're in a very healthy position at 54% once those three things are paid off. So mathematically you will be in a healthy position, especially with your income. I'm not concerned with the math part of this.

Yeah.

I'm concerned with the way that you both treat money. Agreed. Based on your history, evidence would suggest that as soon as you become debt free, you're going to spend it on something else. If I had to guess, it would be something around the house or something for your daughter. And like a big. I'm talking big 25, 000 plus. Wow. From the smiles and nods, I think you both agree with me. In fact, what is it?

No, I mean, we know we need to do something with the backyard. It's just, you can't leave it as a dirt pile. It has to be something.

Americans love to buy land. I love land. And then they love to spend all of their money maintaining this land that like an average of 4 people per year. See?

Yeah.

All right. I mean, it's up to you again, it's your money, your rich life.

I think we want to do. We should just do something modest in the backyard. Like, we don't even have stairs going down to the ground. Like, we need to at least do something like that, you know, but maybe it's not a full $25,000 makeover.

And that's why I think we talked about making sure that it was more of a tiered approach and just doing the bare minimum of, you know, a concrete slab or pavers or something, you know, but not. We're not going to put a kitchen out there. Like, that could be like tier 5 if we really.

Katie, what if the yard guy comes over, he goes, listen, first of all, this is an investment, okay? And when you put the grill out here with the tent over it and the stairs with the ADA approved, whatever, this all, you know, it's all equity. What are you going to say?

I'm going to say we can't afford it. That's what I say now.

Well, I can offer you a payment plan. You know, I can do a four year payment plan. So certain. Certainly would.

I've turned my ears off. Like, whoa. When we're at like a retail store and they're like, they're starting to do their spiel about a credit card, I'm like, nope, no thanks.

Great.

Before they even finish their sentence or, you know, I turn my ears off now.

Love it.

Yeah.

All right, back to the CSP daycare. Can't be changed. Let's leave that groceries at 900. I mean, sounds reasonable to me. Could you. Do you think you could cut that down by 100 or 200? I'm just asking. What do you think?

I don't know.

Probably if we did more planning, maybe.

You know what, you can cut your groceries down. All right. I'm not the grocery grinch, but almost every couple I talk to, they just literally go to the grocery store. Like, as if they are literally blind. They have. They just pick stuff out. Ah, I'll take This. Ah, I like the feeling of the box. Ah, just shop to a number. Okay. I'm taking that down to what. What's the number you can reasonably get if you were to actually planet.

Let's do like how much? 700.

Yeah.

Cut 200 bucks off.

How does that feel to you, Katie?

Yeah, it feels good.

700. All right. I already can see all the angry people in the comments. R so out of touch. Clothes at 100. I mean, you have a baby. That seems pretty reasonable to me. Is that for your baby's clothes?

That's not even including the baby's clothes.

Oh, well, I think. Well, the baby's clothes that comes out, I think of the. The very bottom.

The guilt free spending.

Oh, guilt free.

Yeah.

All right, fine. All right. So 100 bucks a month. I mean, fine. I don't have any comments on that phone. Fine. Subscriptions. 475. No way. Not when you have that much debt.

Well, we've already talked about it. Where our Gym membership is 200amonth.

Okay.

And on top of that we have like a app, like a personal trainer app thing that's like $50 a month. And, and so we talked. We already talked about getting rid of our gym membership just using that phone app. That's $50. And working out in our basement because, you know, we can do that instead.

All right, so just to be. Just to confirm, I am not telling you you have to cut your gym membership, but I do think the amount is in the right place. Like if I were you. And I got $475 of subscriptions and I got debt. I'm aiming to cut it down to like about 100 bucks a month, truthfully. You think you can do that?

I think we could do it.

You want to just do it right now?

Yeah.

All those freaking lines on your budget and they didn't. It didn't happen there. It's going to happen here in the csp, my friends. All right. What are you going to cut?

Well, the gym membership.

Give me 200. What's next?

So probably a car wash. We could.

Cut that great 45Amazon prime, because we don't need it. Okay. That's what. Isn't that like. How much is that?

Yeah, Amazon is. It's like 150 a year. So.

So let's say 10 bucks. What else? You want to cut that. You can cut it. What else?

There's not really any big, big numbers left. Like it's all just nickel and diming at this point.

All right. You're down to 225. All right. You're down to 80%. Not great, but okay.

Yeah.

Let's go down to investments. You got something going into 401ks. That's fine. That's for your match. Right.

And that just comes out of our net.

Yeah. Savings at 100. I guess. I mean, personally, I would put that money towards an emergency fund. I know it doesn't add up a lot, but it starts to get the habit going.

Yeah.

And finally, at your guilt free spending, my opinion is way too high because not only is it 19% when I typically recommend 20 to 35%, but that's for people who don't do not have big amounts of debt. You also make a huge amount of money. So the denominator is gigantic. 19% of your take home pay is. Which is 13,000 bucks. That means you have $2,548 a month on guilt free spending.

But that number 20, it says 25 now, but since we removed stuff, I think it was around 2000. So it's gone up $500.

Oh, that's because we eliminated like 500 bucks from above. Okay, so let's, let's fix that. Let me show you what. Yeah, you're right. Let me show you. So everybody listening? When you cut costs from your fixed costs or any other place on the csp, it naturally flows down to guilt free spending because that shows you what you have left. So the fact that you now have an extra 500 bucks a month is actually something we should do something with, in my opinion. We do not just want to let it sit there because it will get absorbed. That's the way things happen. So we want to direct it somewhere. Where do you want to put that extra 500 bucks?

Emergency fund.

Emergency fund.

Agreed. 500 bucks. Okay. That makes things much better. Let's take a look. Now we're at 80% on fixed costs. Investments are still at zero. Even acknowledging that we have a little bit going through pre tax 401ks savings are now at 5%. 500 bucks a month going towards an emergency fund, which is nice. And then you have 15% being spent on guilt free spending, which is $2,048.

Yeah.

So far so good. Can I get a little bit more aggressive? Yeah, like the reason I want to get more aggressive is that the way you both look at money. You're living in this chapter of like, God, we got to get this debt off our backs. Let's do it. So why don't we take some of that money and either pay off the Debt faster or fund your emergency fund. What do you think?

Love it.

Yeah, I mean that, that is the goal. And because you said we were cleaning house earlier, you know, getting ready to talk to you, we've started kind of doing that where we only want to go out on Fridays.

Great. Where do you go?

We're trying to do a different place every week.

Like how much does it cost when you go?

Oh, like 60 bucks.

60 bucks all in tip, everything included. Yeah, it's very reasonable. So how much are you actually spending on guilt free spending every month?

As far as guilt free, then we aren't. I mean, restaurants is probably where it ends.

Oh, and then we do have. I mean, I have a hundred dollars for makeup every month.

Okay. 500 bucks often.

I'm not even spending that whole amount.

That tracks. How much for kids clothes per month?

Probably around 100.

Yeah, great. We're at 600 bucks. Perfect. Yeah. All have $2,048 allocated for guilt free spending. You see how ridiculous it is?

Yes.

What does it tell you?

That it needs to be allocated elsewhere.

Exactly. But more importantly, it tells you that this fixation on looking at every single line is actually not serving you. Because by looking at the big picture and asking the big questions, not getting stuck in the wee. Oh, how much does this thing cost versus that? We're going to cancel. No, the big picture. Hey, we're spending now 2. $2,000 a month on guilt free spending. That sounds a bit weird. What are we actually doing? We go out to eat, we get kids clothes, we do this makeup. Oh, my God. There's 1500 extra dollars. What should we actually allocate that money towards? This is how we ask the big questions. Okay.

Yeah.

What do you want to do with the 1500? I'm actually going to leave a little bit of extra money. I'm not trying to strip you down to the bone, but what do you want to do with it? Appears we have at least $1,000 a month to else allocate.

Yeah.

What do you want to do with it?

Or guilt free? Let's get massages, get the nails done.

Okay. That didn't go the direction I thought, but I'm down.

That's not what you're saying.

No, no, it's good. You want to get a massage once a month. How much does that cost, Jason?

I don't know, 200 bucks.

And then Katie, something about nails. How much does that cost?

$120, probably with tip.

All right, so we got 320. Call 350. You guys still have $11,000 a month to allocate from guilt free spending to somewhere else. What do you want to do with the money?

Oh, that's what he was asking.

I mean, yeah, we don't. I don't.

Debt payments.

Debt payment. That's what we want to put it towards.

Oh, all of it?

Yeah. I mean, I. I can sacrifice getting my nails done until that's done. I. Oh, sorry. I know that's not what you want.

We already got your nails. You're already getting the massage. Okay, that's already coming from guilt free spending and you still have $1,000 a month. Okay, think about it. Katie makes great money. She's working hard. Yes, there's debt and yes, they need to pay the debt down, which is why we attacked the CSP the way we did. But Katie's instinct is to immediately sacrifice her nails and clothes. Okay, maybe it's your money, it's your choice. But cutting 50 bucks a month is not really going to move the needle. And actually doing that represents something very sad to me. Something that I see on this show way too often, which is moms putting themselves last over and over. Katie's mom did that, by the way. And now Katie. And what do you think would happen to her daughter as her daughter grows up and sees her mom doing exactly that? These outdated gender norms need to go. Moms giving up your nails is probably not going to give you a rich life. More importantly, you deserve to think bigger than that. If I were you, I would take 700 of those dollars and put it towards debt because you can accelerate that. But I would put 300 towards emergency fund because I want to build the habit of starting to pay off my emergency fund. Do you see what just happened? You actually have more money than you think.

Yeah.

But you have not been able to see it because you're so in the weeds. You actually have more money than you think. So you actually can get a massage and do your nails and pay off your debt faster and save for an emergency fund. If you can do that, then you can be disciplined about nails, which for a lot of people, you actually have to be disciplined about spending your guilt free money. Katie, when you tell me I have the makeup money, but I don't even spend it, to me that's not impressive. I don't consider that a virtue. I actually think you're failing at the skill of spending money. Spend it if it's allocated and also pay that debt off aggressively. Set that emergency fund up aggressively, and as soon as those debts get paid off, shift that money, 90 plus percent of it, into your emergency fund. And when you do that, your debt's going to be paid off even months faster than you thought. Your emergency fund is going to be getting built up while your debt is paid off. And as soon as your debts are paid off, that 90 plus percent of it gets shifted to the emergency fund. So that starts getting built up faster too.

I think that's a good way to, to not repeat the cycle, to like start exercising those muscles. Muscles. Thank you. Now.

Yeah.

So that we're ready when the time comes.

Life is a series of fluid decisions, right? You don't wait until Your daughter is 7 years old for her to start making friends. That's not how it works. You don't wait until she is cognitively able to read everything. To start reading. You do it before. Same thing with money. We don't wait until the magical day where we can do it. We start doing a little bit of it now. Build the habit, then turn that dial up. That's exactly what you're doing. How do you feel about that?

Yeah, I think it's baby steps. You know, the emergency fund is a great first step and then once that's completely allocated, then that money can go towards the future.

Exactly. And really that the biggest and most important step right now is actually changing the way that you both feel about money. So it's like you're going to fill your emergency fund up. I have no doubt about that. Mathematically, you both know how to do it. But can you feel happy on the way to doing that? Can you simplify the numbers that you track on the way there? Can you actually make sure that you both are resourceful and disciplined enough to actually spend on things that are important to each of you individually? If you can do that and start to feel good about money, your chances of accumulating a lot actually go way up. A couple of questions for you. What stood out to you about today's conversation? Katie?

I guess I'm surprised that we don't talk about money. Well, like I. I always thought that we talked about money well, but I'm seeing all the flaws in how we talk about money. I see that I am completely repeating the cycle of what I was taught growing up. And I mean, I guess it's not a surprise, but I don't know how to plan for the future.

That's pretty insightful. It might knock me a bit off balance, you know, if I. If I realize those things about myself because we all have a vision of who we are and what we know, but I actually think sometimes the way you receive it, I can tell, is pretty healthy. Jason, how about for you?

We're focusing on the wrong thing. We need to zoom out and look at the big picture and get out of the weeds ultimately, you know, think about our goals and our. Our future rather than the now and how much groceries are costing or whatever, you know, And I'm finding that, yeah, like, we talk about it, but we're not really communicating effectively about it. I think that's the biggest thing I've realized.

I think that's an awesome lesson. I think that's actually awesome. To me, I think you're very perceptive about it, Jason. It's like, we talk about it, but it's not effective. It's not accomplishing the things we want it to accomplish. And I see the same pattern with your budget. We track everything carefully, but it's not accomplishing the things we want it to accomplish. And sometimes the hardest part is actually saying, wow, that thing that I've been doing and doing well for a long time, we might not even need to do it at all. Okay, I want to give you guys a little bit of homework. I recommend that when you talk about money, before you jump into the normal type of conversations that you have, I recommend you both zoom out. Probably different situ. Go in the backyard or go wherever is comfortable. No numbers needed. And just start by saying, how do we want to show up in these conversations? How do we want to make these conversations amazing, effective, fun, connective, and spend 10, 15 minutes really talking about that? What do we want to do to make these conversations amazing? Then, and only then, you can start talking about it. And remember, you don't have to talk about it all at once. Keep the conversation like 30 minutes. Talk about it again later. I have a lot of confidence in the two of you making changes. I really do. I know your. Your debt's going to be paid off, your emergency fund's going to be filled, but above all, you're actually going to start having fun with money. That, to me, is, like, the best part. We've already gotten updates from Jason and Katie since this conversation. I'm going to share them with you in just a minute. Let's not forget that their dream house came with more than a mortgage. $55,000 windows, a $62,000 SUV, and of course, the dead possum rotting under the deck. I think that's quite a metaphor for what's going on. The hidden costs of the American dream quietly eating away at money and Causing more and more anxiety. And predictably, parents pass their relationship with money onto their kids here. Thinking small, missing the big picture, constantly worrying. These are things that get passed on, but I know they can change it so they have work ahead of them. Let's see how Jason and Katie have been doing.

You know, I always thought that Jason and I talked about money so openly and effectively with each other, but I never really thought that talking about each individual transaction was actually an ineffective way to talk about money. And we should actually zoom out and focus on the big picture and the future goals for our family. I also never thought about that working at the same company carries a lot of financial risk. And so we are going to be starting to put more money towards our emergency fund now while we're paying off our loans, so that when the time comes, when we reach that next phase and our loans are paid off, then you know, we have an emergency fund and we're more likely to be successful and not fall into similar patterns.

Your voice has been ringing in my head for several days and I find it interesting how you pegged us almost perfectly. We are almost out of debt, but there's a high chance that we could fall right back into it unless we change our habits and how we think about money and just the overall vision of what we want our money to be. Thinking about the future rather than just the present. We need to think bigger and we know that now we're working daily to think about our rich life and what we want it to be. I feel like we've been so under for a while that we haven't been able to think what we want it to be. And so I've really been challenging myself to think better about that. We are going to be doing the Money for Couples Book Club and then following that with the I'll Teach youh Be Rich book club. So we're both on the same page for everything and we know where to go from here.

Hi Ramit, we're here for our three week follow up since our conversation with you. One of the things that we've implemented so far is that we got the Money for Couples book and we've been doing a book club nearly every night. We're already on chapter eight and you know, it's been really fun taking turns, leading discussion and doing the different exercises together. Found out that I am an optimizer and, and a worrier and I'm an.

Optimizer and a dreamer. One of the biggest things we added, we talked about in our conversation was that we needed to simplify our budget. And our budget was 84 categories, and we've gotten it down to 23, kind of reflecting the CSP as as much as we could. It's really nice to see, like, all of these, like, bigger buckets and we have more of a bird's eye view of our money rather than just being down in the weeds like we talked about.

One of the things that we talked about during our conversation was cutting costs in a couple ways so that we could start putting some money towards our emergency fund and a little bit here and there for a rich life. And we found that we could cut $200 from our subscriptions. And then also we were able to reduce our grocery budget.

And I think we've stuck to it pretty well. We're trying to be more intentional about the groceries that we're getting. And so emergency fund hit the top of our priority list, and we're starting to add to it as we pay down our debt now instead of waiting for one step to be done before we start the next. And so, along with that, our debt, our high interest debt should be paid off by this fall, and then by next spring, we should have all of our debt paid off while also keeping in mind our rich life. And so because that's always going to be at the top of our Am I now?

And speaking of our rich life, we realized that the examples that we brought up on the call with you were actually quite sad. And, you know, after reading the book, we were able to, like, reflect on what we actually want our rich life to look like. And we were able to figure out quite a good list.

You'll be happy to hear that we no longer talk about money every day. We've been trying to pick a really good point, point of keeping those conversations to a minimum. And we're going to start doing monthly money meetings. We get paid monthly, and so that's going to coincide with our budget meeting perfectly.

Yeah. So it's been a really fun last few weeks since our conversation with you. It's been fun to read the book and do the exercises together and kind of start diving in headfirst into what our rich life can look like.

If Jason and Katie give their future this level of focus and the same level of focus they used to give to their massive budget, then the two of them have a really good shot at living a beautifully rich life together. If this episode has you thinking about your own rich life, I've got another one that you should watch right here. You know, travel is one of my top money dials or the area of life that I love to spend money on. Over the last few years, some very memorable trips we've taken Italy, we took a design tour in Japan, safari in Kenya and Tanzania. If travel is one of your money dials too, I want to tell you about a podcast that I love. It's called all the Hacks and it teaches you the hacks, tips and tactics you need to upgrade your life, money and travel. All while spending less and saving more. All the Hacks is an award winning podcast trusted by more than a million listeners that turns big ideas into quick tactical moves you can start using today. The host is my friend Chris Hutchins, a financial optimizer who has sold two companies and and racked up millions of rewards points. I call him sometimes when I have a really tricky question about travel or points, he knows the answer. A great place to start is with the episode where Chris shares his top 50 ways to upgrade your life, money and travel. I actually joined Chris recently on the show to share how to actually spend your money in a way that creates joy. Whether you're earning 40k or 400k. We talked about the four numbers you need to know, why lifestyle creep is a myth and how to find your worry free number, including how to start living your rich life. Now you can check it out. It's episode 237, how to design a rich life at any Income. On Chris's podcast, every episode delivers at least one tactic you can plug right into your own life. Could be a money hack that increases your net worth or routine that boosts your productivity. Search for all the hacks, that's all the hacks in your podcast app. Hit follow and start upgrading your life today.