237. “We bought our dream house. Then he lost his job.”

Chad lost his job in tech, was laid off. It's been a 50% cut.

We're in this house, we're in this neighborhood because we were indexed on a different salary before, you know, and buying.

Necessary things even makes me feel terrible and guilty.

We were paying an interest only amount on heloc. I asked for help from my family. They helped us pay that off.

How much?

$180,000. It was a hard call to make for me.

It feels dishonest because not everything is okay all the time.

It's the same conversation you always have. There's nothing to be done.

We definite could struggle in the next few months to make that mortgage payment.

How the am I talking to a.

Couple with $0 in savings who has a 4,200 square foot house?

Maybe we're just poor now and we're just going to be poor for a little bit till we're not.

What would you do if your income went down by 50% just like that? What if you suddenly couldn't afford the life that you've become accustomed to? This is a deep American fear. The idea of going backwards socioeconomically terrifies us, especially the higher up we go. That's one reason that you'll meet people who, even though they recently suffered a job loss, keep spending the same amount of money eating out and traveling. They cannot stop spending on those items because to confront the reality that they have gone financially backwards is one of the most shameful ideas in American culture today. I'm about to speak to Karen and chad. They are 45 and 44 years old. They have three children and they are scrambling to afford the life they've built together since their combined income unexpectedly dropped. I'm looking at their conscious spending plan, or csp. It's the same tool that I use in every episode and I'm going to go through their numbers right now. Assets 1.2 million. Investments 665,000. Savings 0 and debt $514,000. Total net worth is 1.37 million. Combined income 175,000. What do you notice? Yes, they have a high net worth and a high income, especially for a couple in their mid-40s. But they have $0 in savings. They are in trouble. I suspect that because they have a large investment portfolio but nothing in savings, that they have recently drained that savings.

Account to pay for life.

We'll find out though, before I speak to them. I want to hear from you in the comments. What would you do if you lost half of your income? Could you still afford the life you've built, Would you have to move? Would you have to downsize? How many months could you draw from your emergency fund before it hit zero? And I want to ask you in your comment below, be realistic, because it's really tempting to say, oh, me, I'm so perfect. I would immediately cut out all of our discretionary expenses. But in truth, almost nobody does that. Now let's get started with Karen and Chad.

Karen, on your application, you wrote something that caught my eye.

You wrote, we are no longer able to invest or save.

We have no emergency savings. It feels as though we are one paycheck away from disaster. Can you take me through the circumstances that led to this situation?

Sure. Absolutely. So about three years ago, Chad lost his job in tech, was laid off, and found a really great startup to be a part of. However, he took a 50% pay cut, and up to that point, we had been living the lifestyle that met the previous salary for the past three years. We've done well. We had been smart and saved and had what we needed. I picked up extra work. However, after three years, we're finally out.

Ah, so for three years you were using your savings and now you are out.

We're out.

Okay.

Yep. I'm proud of us that it lasted as long as it did, but there are circumstances in our life that we can't necessarily change because we made purchases while we were making quite a bit more money.

Got it.

Okay. Chad, as you hear Karen's description, do you agree with that?

I agree that, yeah, we were kind of indexed into a different income previously. I would agree with the characterization that we haven't really changed our lifestyle since then. We've had to kind of draw. We have a HELOC home equity line of credit, which a couple of times, last few months have had to, I call it draw forward, but like, borrow against the HELOC in a short term way to pay the mortgage, and then I pay it back a few weeks later. We're running a little bit close to the wire here and we need to change something about how we're operating.

How does it feel for you?

I mean, I guess I have mixed feelings. On one hand, I'm pretty comfortable with taking a little bit of risk. On the other hand, I don't want to be reckless. I want to do the right thing. And I want Karen to be aligned with me on the choices that we're making and that we're not spending recklessly.

So I'm struck by. My question was, how do you feel about it? And you gave me A very cerebral answer about risk tolerance. Is there a feeling where you are right now or. No.

The feeling would be a little bit scared that we're going to get ourselves into a dangerous situation pretty quickly.

You're scared or the two of you are scared?

We're collectively scared.

How about you specifically, Chad?

I'm nervous. More than scared, I would say.

Nervous about what?

Primarily getting ourselves into a situation where we can't pay the mortgage anymore, which.

Has happened a couple of times. And you had to pull from the heloc.

Yes, which I pay back quickly.

But what happens if nothing changes? Like, if we end this call and nothing changes, what will happen?

So right now, if we don't do anything, I think we'll still stay afloat, but we're not hitting any of our goals. Still saving for retirement, saving for a rainy day, or any of those other things that Karen's looking for.

Most people don't hit their retirement goals. They don't even have a retirement goal. So what's the big deal?

I guess the big deal is we have three young children who I don't want to burden if we get older and don't have retirement and can't take care of ourselves financially. And it's more than the retirement goal. I'd like to have an emergency savings in case Chad, for whatever reason, if something happens with his job. I am not in a career where I can make up the difference and support our family where we currently live. So the emergency savings, even more than the retirement, is very important to me. I just. And I don't feel like we're planning a very solid future financially for our children as well as ourselves. I'm also kind of tired of living in this more austere lifestyle where every penny we spend, we feel guilty about.

I'm kind of struck at the difference between what you both just said to me and what's in the application that you wrote to me. What you said in the application, Karen, is this is dire.

I feel as though we may lose.

Our home in the next few months. Compare that to what you both told me about. We may not be able to provide for our children, and I'm tired of living this austere lifestyle. It seemed quite different, don't you think?

Yes.

Why the difference?

I think one of the differences is we did have a large payment fortunately taken off of our shoulders. However, we definitely could struggle in the next few months to make that mortgage payment.

Ah, well, okay. So I do want to clarify a couple things.

One.

One is we did take a hard look at where our money drain was happening. One of the biggest drains was this remodel we had done a couple years ago before I got laid off. We were paying an interest only amount of $1300 a month on HELOC. We were very fortunate. I asked for help from my family, and they helped us pay that off. I do have an obligation to pay them back, but we don't have that ongoing payment now, so that did swing the tip the scales a little bit for us.

That's what's going to keep us afloat. We no longer have to borrow to pay our mortgage.

Is that the first time you've had family help?

Yes.

It was a hard call to make for me.

Oh, that. Was that your family, Chad?

Yes.

What do you remember feeling when you were about to ask for help?

Nervous. Shame. You know, I did not want to do it. I thought, hey, I'm an independent person. I've been surviving 30 years. I don't want to ask for help now.

But you did it.

I. But I did it because I. There was a few times where I had to draw on the heloc, which gave firm empirical proof to the severity of the situation, and that was the biggest lever we could pull on. So that's what I did.

I wish, Chad, that you didn't feel shame or bad about this. You were dealt a bad blow. This was all Elon freaking Musk laying you off.

Oh, Elon did it.

Yeah, and he cut my work, too. So what the.

This guy.

The company formerly known as Twitter.

All right?

And Chad should not feel guilt or shame about that. That's not.

Well, we also did the remodel right before. Yeah, but maybe we should have had cash in hand.

How did they receive it when you asked for help?

My father said he'd have to look into it, which is perfectly reasonable. And then he said he'd have to sell some assets to help us out. Actually, that made me feel pretty bad, actually. And then he took over the payments for a while, but then he didn't like how we had structured the deal where we're just paying interest only right now, which is admittedly shortsighted. So he felt more comfortable just paying it off. And now we have an obligation back to him.

How much?

$180,000.

What if your family had said no, Chad?

We might be looking at more dramatic options, which would include downgrading our house. I think would be the next thing we'd be looking at.

Okay. How often do the two of you talk about money?

Pretty frequently. I would say daily. In little ways. Just yesterday, we were talking about my son's upcoming birthday party and his concern that what we had was too simple. And most of his friends, because of the area we live in, have kind of bigger, fancier parties. And ours was pretty simple. And I think Chad was much more interested in just throwing money at it.

Okay.

And blowing the budget to buy our way out of that. And I was very uncomfortable with that. And we did have to hash that out because I felt like it was keeping up with the Joneses.

And then, Chad, where are you in these conversations? What was your reaction?

I think my reaction was, I don't want to disappoint him. You know, I want him to have a great birthday. He kind of came to the same conclusion once he saw the facts laid out in front of him. So I was a little bit proud of him for that, actually. Wow.

I think we handled it well. But my concern was that he felt the tension between us. When I was saying no and Chad was saying yes.

I wasn't saying yes. I was, I was talking it out.

It seemed like you were instantly googling options for bigger event like parties.

You're right. I, I, I probably was. I don't want to disappoint my son, I guess. Yeah. Like the birthday party thing, like, the emotions can drive in the moment. Like, I want to have, I want to make sure he's happy. He has the best possible birthday.

What's your ethnic background, Chad?

Scandinavian is what we like to joke. So cool. Filipino on my mom's side and Scandinavian on the other side.

Talk about feelings when you grew up?

No.

The reason I ask is not just that. When I asked earlier about, like, how would you feel? And you gave me a cerebral answer. But even when you describe feelings, it's abstracted. You're like, the emotions can cause. As if emotions are this thing over here. You know, as somebody who was raised in an Indian family where we don't really talk about feelings, certainly not guys really talking about feelings that much. I just recognize some of my own way of talking about it in the same way that you are describing it.

Yeah, sounds about right. We never talked about feelings growing up. I remember distinctly, like, when I graduated high school, my mom wrote me a letter, and she's like, basically, will you talk to me about your feelings more?

Your mom said that in the letter? Yeah.

I want to jump in here because Chad's mom calling him out for not talking about his feelings is a huge clue. And I personally relate to this. I had a hard time talking about my own feelings or even acknowledging them until I actively started working on them, especially getting help in therapy. And that shows up in multiple ways. And as we're discovering with Chad, it shows up in how he communicates, how he speaks. Have you noticed the kind of vocabulary that he's using? It's clinical, maybe even a little robotic. He definitely struggles to articulate what he's feeling. Notice the story of Chad having to reach out to his dad for money. And you also notice the feeling of shame. Now I'm curious how this plays out when they don't agree, especially about money. Those moments really reveal a dynamic between them. So let's dig deeper. There's this myth that if you rent, it means you haven't made it. I don't really believe that I rent and I want you to know that you are not a failure if you choose to rent. In fact, I want more freedom right now than buying a 30 year mortgage. But if I'm spending thousands of dollars a month, I want to get some of the perks that homeowners get. And that is where BILT comes in. BILT is a loyalty program for renters. You pay your rent through BILT and you can earn points for it. Think about it, you're earning points for your biggest expense every single month. And you can redeem those built points towards flights, hotels, Lyft rides, or even future rent payments. BILT has evolved into a complete rewards ecosystem where you get rewarded for the first time as a renter. And it's easy. Almost every any payment method is compatible.

So you can start earning right now.

I wish I had had this when I first started living in New York. Plus, BILT recently announced that homeowners will be able to get rewarded the same way on their mortgage in 2026.

So stay tuned.

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Can you think of a time in the last three, six months where you were not on the same page with money?

Chad, do you want to go ahead and lead that one?

You know, I'm working at a startup right now, so I was like, oh, once we get some, we book some revenue, I think I can ask for a raise. So I was kind of selling that dream a little bit. And Karen, who's much more pragmatic, was like, I'm not comfortable with that. That's banking on a dream. So that did ultimately force the decision to ask for help.

Karen, what was it like for you when Chad, as he put it, was, quote, selling the dream?

Here we go again.

Oh, wow.

Here we go again. This has been a constant, I think, in our marriage of, don't worry, the next raise is around the corner. Don't worry, I'm getting a bonus. When we chose to do the remodel on the house, there were concerns there financially if that was a good idea to take out money. But he said, don't worry, I've got a bonus coming. It's a frequent thing, but the reassurance that, don't worry, there's money around the corner, don't worry, there will be a windfall or this idea of mine will take off and we'll bring in tons of money to support me.

Does it work? No. She says no. Chad, is that a phrase you use commonly, don't worry?

Yes. I think it means that I got us, like, I'll make sure we're. We're going to be safe and secure.

Do you?

I think so, but maybe I don't.

It just feels like a record on repeat.

Okay.

I don't feel like I'm being heard. I don't feel like my opinion is valued or my intelligence or my ability to See things clearly.

I can see by the reaction. You two have talked about this before.

We have. This is how our conversations always start.

Oh, it starts and then what happens?

It devolves. It will devolve eventually as I get frustrated and feel like maybe I'm talking to a brick wall and like I need to be more direct. Yeah. I find it. It feels dishonest because not everything is okay all the time.

Right.

And sometimes we do need to sit down and talk about it. And sometimes worry is warranted.

Okay.

And when I'm being told don't worry all the time, that reads as untrue to me.

Probably what we are looking for is more communication to work together to build a common understanding. So we have kind of a common reality that we agree this is what reality looks like. And then jointly survey our options to decide what decisions, if any. You know, a lot of times doing nothing is perfectly reasonable.

Are you all this polite when it comes to other parts of life, parenting and day to day life and food and all that stuff?

I think my interactions with Chad are different because I have noticed if I don't handle it in a certain way, he takes it as a personal attack, whereas my kids don't.

Hmm.

They're. They're much better about understanding, I think where I'm coming from.

Got it.

How old are your children?

They are 5, 8 and 10.

11.

11.

And Chad, what about for you? Why the careful diction and the walking on eggshells today? The abstraction to things like we probably need to communicate better. Why? What's going on?

I mean, maybe I'm protecting my ego, to be perfectly honest. Like if I am incompetent, I'm trying to protect my ego. Wow.

What else?

Karen's right. I. I do get defensive. I feel like she's attacking maybe me personally and. But I also feel like maybe she's complaining about things that we don't have short term control over sometimes. Like what can we really do? Is this complaining just for complaining sake? There's certain things we can do in the short term and maybe more dramatic things we could do in the long run. And we don't seem to lay those options out and drive a decision in any way. We just complain.

We don't.

Or she doesn't.

We don't.

Do you lay out the options?

I would say that I put a lot of options out of bounds. Like I don't want to sell the house. Everything else that we can cut, I feel like we've cut. We used to have things like maids. Those are Gone. I had a gym membership gone. We had some laundry services gone. Like, I don't know. We've cut everything we can. I can possibly think of.

So you're saying.

I'm kind of saying we don't have any more options. I'm saying we've done everything we can do beyond selling the house because we're already locked in. We got this path dependence thing where we're, we're in this house, we're in this neighborhood because we were indexed on a different salary before. So we're kind of like locked into a different standard. I guess. I guess that gets to the heart of what we're trying to accomplish here is like, if we sell the house downgrade, Karen seems to think this is going to magically solve our problems. I think we're going to be back in the same boat because we haven't actually identified the route of the problem. Selling the house will just be a bigger band aid than we've done to date.

What do you think the real problem is?

I think we don't have any discipline right now in how we spend. When we were preparing our csp, you know, we're kind of looking into Amazon. Like, look, we're spending like thousands of dollars on Amazon. What is this? And Karen got very defensive. She's like, whoa, why are we nitpicking all these purchases? This isn't the spirit of the csp. And I was like, well, I'd like to identify the general theme. Like, if this is all like shampoo, can we like, put it in? Spending $100 on shampoo and you know, can we, can we get a theme out of this or not? Right now it's opaque. It's just like Amazon.

So that's is, that's what's going on here. Amazon purchases, I don't know.

We have $3,700 a month that is in your catch all bucket at the bottom there. Seems like a lot to me.

Okay, we'll go through it for sure. I want to understand it as well as anybody, trust me. But you, you mentioned something which I thought was a really strong hypothesis. Hey, even if we downgrade the house, we may be back in the same situation in the first place. So what is the root cause problem here? Just overspending on miscellaneous items.

Yeah, I feel like there's a lot of kind of reactive buying in the day to day on Amazon. Maybe buying things to solve perceived problems that aren't actually problems, like, oh, we need new lunch boxes or we need, I don't know, cat Scratching protectors or things like these aren't problems we actually need to solve. These are just things we can live with, in my opinion.

I want to quickly explain why I'm pushing Chad here to tell me what he thinks the problem is. The way that he talks about what he perceives the problem to be is just so matter of fact, just a little too clever that it is evident he is staying on the surface level. In fact, I think he's minimizing the very issues that brought them here today. Nope. It's not that they struggle to pay their mortgage with a salary that's been cut in half. Nope. It's not the $180,000 family loan that they needed to stay afloat. Nope. I think it's the Amazon lunchboxes. He's minimizing what they actually need and I want him to grapple with the fact that he doesn't know what the solution is to Because I can't help someone who thinks they know everything. Sometimes the hardest part of getting help is admitting that you actually need it, that you actually don't know the answer or sometimes even the problem. I see this all the time. People who think they've got it all figured out and are probably very smart in other parts of life, but they don't even understand the main issue. It takes me back to one of my high school classes where our teacher told us that if we take our car into the shop to get fixed, don't tell them, hey, I think it's a gas line. Just be quiet. In fact, the only thing you tell them is, hey, my car is making a pinging noise every time I go above 25 miles per hour. Let them figure out the solution. You just tell them what you notice. Turns out lots of people are obsessed with finding the perfect teacher, the perfect coach, the perfect book, but they spend a lot less time obsessing over becoming the perfect student. And being a good student means admitting you need help, that you can't do it alone, and that you are ready to trust someone else. Chad isn't there yet though, so I have to push him. Because if you're just here because your wife wants you to be, we're probably not going to get anywhere. If you are hearing this and you're thinking, that sounds like us, but we don't know how to fix it. That's exactly why I created my Money coaching program. It's a monthly program where you get expert guidance, accountability, and a community that will help couples break through these blocks and create a clear, actionable plan. Towards their rich life. If you are ready to take control of your money and you are ready to admit you need help, check it out at iwt.com/money coaching.

You mind if we take a look at the numbers?

Right.

What was it like doing the csp? I know that there was a little bit of conflict around the Amazon numbers. We'll get to those.

What was it like?

Like, what was the tenor of the conversation?

It was polite. Oh, it was polite. But it was good. I mean, we. Nothing surprised us.

I would like to ask Chad to.

Read off the word in bold and.

Then the number in full next to it for this entire box, please.

Assets $1,225,976. Investments, $665,685. Savings, zero. Debt, 514,000. Total net worth, $1,377,661.

Speaking of debt, $514,000. Can you break that down for me?

It's the mortgage. That's where we owe on the house.

Where's the family obligation?

We didn't put that in there.

Yeah. We just wiped it out. Yeah, we should put that in there.

180K. You're just like dad.

Doesn't count. What is that?

Because the agreement we wrote upon was we would pay it back if we sold the house.

It's secured against the house. Yeah, but it should be in that.

There'S no payment plan. Yeah.

So yes, you would add 180k even though your payments don't reflect it because that will decrease the amount you will make when you sell your house.

Decreases the equity. Yeah, yeah, yeah.

All right. Net worth 1.3 million. What do you think about that?

I think that's great.

Yeah. It's all non liquid assets. But non liquid assets means we can't blow it. Wow.

Interesting response. It's non liquid assets, which is like kind of implied to be bad. But because it's non liquid, we can't.

Spend it protecting us from ourselves, which.

Seems to be good. Did I read that right?

I think so.

So you both agree that the number is sounds like good, but it's stalled.

Stalled?

Yeah. We have not contributed 401k since I got laid off from my job.

So if anything, it's going down by tiny increments, which is not where we should be.

It's also heavily indexed on windfalls from the house, which, you know, we rode this wave of housing appreciation over the last seven years.

Okay.

Wow.

I appreciate the nuance. So the numbers tell us one thing, but what you're saying is. It's the quality of those numbers.

It's largely illiquid.

It's actually declining. You've been pulling from your savings, which is now at zero. You're not contributing to your investments much, and that may even be decreasing. And then the illiquidity, the house appreciation may have stalled.

Yes.

Okay, good to know. Obviously, you're pretty in sync with your numbers. That's good. Let's go to income now. Karen, can you read off the combined monthly income, please?

The combined is 14,642.

All right, so the two of you make $175,000 together. Did you know that?

Yes.

Okay. What do both you do for a living, Chad?

Data scientist. I work for a startup.

Great.

My income is firm. It's a base salary.

And Karen, I'm an RN and I do clinical research monitoring. My contracts tend to be anywhere from two to six months and then I'll have a large break, depending on if There's a study.

$25,000 a year. What do you think about that?

That's been a conscious choice.

Tell me.

When we started having kids, we made the agreement that one parent would be home. Whoever was making more would be the, you know, the so called breadwinner. And I wanted to be home with my kids while they were young and while they wanted me. And while Chad was making a good income, it was fine, totally comfortable. It was kind of idyllic.

Did you grieve the loss of income?

I did not me so much. It was more like the. The job change was kind of a welcome, welcome change foisted upon me.

I would say part of what's happening is that you're comparing yourselves to when you used to earn hundreds of thousands of dollars. Coming down from that income level is actually emotionally catastrophic. Your socioeconomic status has changed.

Literally.

The things you buy off the shelf may have changed. And that is grief. It sounds shallow. Oh, just stop buying the premium cheese. But in America, especially, a lot of the things we buy, whether for ourselves, our pets, our kids, define who we are. That's part of the culture, like it or not. And to not be able to do those things that we used to be able to do feels sad.

It feels draining, it feels empty, it feels lonely.

And I think maybe Chad hasn't gone through that or acknowledged that and tends to dismiss my feelings around that when I feel like I have kind of grieved and a lot of it is thrown back as well. It's just material things. It's not a big deal.

Yeah, I totally do that.

So I haven't really felt like I'm allowed to grieve about it without feeling materialistic and shallow.

I mean, it's just stuff, I guess.

But what about. Okay, so we have one of our daughters has a learning disability and she may need extra intensive schooling, and I'd like to provide that for her. And I feel like we could if we weren't so stuck on living at the level we were when we were making more. I don't know if I'm articulating that well, but it's not just the things. It's about offering our kids resources that they might need.

What Karen is describing here, potentially not being able to afford resources for their children is the emotional toll of losing a big part of your income. We know that it can be financially devastating, but it can also be psychologically devastating. I'll never forget this LA Times article that I read during the 2008 recession. And it was about these wealthy women whose husbands used to make a lot of money and they lost their jobs and the families lost everything. No more country clubs, no more eating out. Their social circle immediately shrunk and the life they knew went away. And I remember commentary about this article, a lot of people saying, boo hoo, rich people can't go to the country club anymore. But I remember thinking, no, this is actually real loss. And in many ways, regardless of whether you are wealthy or you are working class, not being able to live the lifestyle that you used to can be incredibly painful. In fact, it can actually feel like losing a part of your body. Because in America, what we spend reflects who we are. The car we drive is not just a car. It is the status of what we have achieved in society. The food we eat, the streaming subscriptions we have, the toys we buy for our kids, they make up who we are. And to be very candid, if somebody told me that I could never stay at really nice hotels anymore, I would be devastated. It sounds silly. Is it superficial? Maybe. But it's also real. So if this happens to you, if your income drops, the tactic that you need to embrace is to make immediate changes. Do not wait, hoping things will get better. They might. But they also might get worse. And I learned this in a very difficult way in my own business. Years ago, my business took a steep downturn, way worse than anything I had ever projected. And I realized it can always get worse. Even Karen and Chad, they've been able to sustain for three years because they had savings, which is amazing. But things haven't gotten better, they've gotten worse. So when you face a financial emergency, the first step is to admit it. Hey, this is a major red flag. We have to stop and change things immediately. We have to slash our guilt free spending. That's why you have the conscious spending plan. It's already at the bottom. Cut it immediately. Trim your fixed costs that are above what you can afford. Go into survival mode. Treat it like you are stranded on a mountain with limited rations. I would ration every damn thing because I don't know if rescue is coming in a day, a week or a month. And I would rather get rescued with extra rations and be a little skinny when the rescue team comes around, then run out of food after a week. This is how you survive an income drop. Have you ever tried to respond to a message while you're walking using the voice option? You hit send, you realize, oh, that voice recognition was not that good. You got one huge paragraph, tons of typos, no punctuation. You sound like a freaking serial killer. Well, there's actually a much better way. Whisper Flow. Whisper Flow turns your voice into clean final draft writing inside whatever app you're already using. Email, Slack Docs, even text messages. And it works on Mac, Windows, and iPhone. So instead of spending all of your time responding to messages, especially while sitting at a computer, you can hit a hotkey, speak, and the text appears. It's accurate, it's fast, it's all formatted so you can get back to work. Here's what my friend said about it. Whisper is amazing because it learns the way you speak. So you can send this rambling note as a text message and it kills all the filler words and it perfectly formats it for you. They said it's much better than using the Apple voice to text feature. The spelling is way better. If you want to buy your time back and get back to what matters.

Check out Whisper Flow.

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Up, it's about getting ahead. All right, so you're making $175,000 a year. And what is that number, that fixed cost number, Karen?

The fixed cost, that's 70%.

Okay, 70%. So it's a bit high.

I can see why you feel stressed out.

Let's go down to investments at zero, savings at zero, and then guilt free spending at 30% or $3,400 a month, savings are at zero. Why is that?

I feel like every time I try to bring it up as something we should do because we are so polite, it doesn't go anywhere.

Let's just do it right now. I'd love to see a polite conversation. Go ahead, show me the last time you talked about savings. Go ahead, Karen.

Let's do it as if you were.

Actually having the conversation. Go ahead.

Okay. I am very concerned that we don't have savings, but I'm not sure where we're going to get that money from. So we need to kind of sit down and look and figure out where we can get money to move into savings.

Okay, we can look at that. I feel like we've cut basically everything we can cut. Where do you think we can get money out of Exactly.

If we reverse engineer this and maybe pull the savings aside first.

Okay.

But I do agree it might be tight because we are down to last dollar most months. You know, we talked about how if the kids ate school lunch, we could save $240 a month. Even if we could take that small amount and start putting it into savings, maybe a savings account that has some interest or money back, maybe it might take a while, but it's a start.

Okay. School lunch is definitely a good option. Two and a few days.

And I know the kids aren't going to like it, but we can't just say no.

Yes. You have to eat the boiled hot dogs today.

You know, and we've talked about me working more so that we can have savings.

Kids are only young for so long. So part of me is like, okay, well, the kids are only young for so long. Maybe we're just poor now, and we're just going to be poor for a little bit until we're not.

But it makes me very nervous to not even have a month's worth of savings in case something happens.

Yeah.

I mean, ideally we want three. Right. Because we've seen how hard it can be to find work.

So what would that be? So $30,000.

Yeah.

So 250 bucks a month. How long does it take us to get to $30,000?

Quite a while.

Yeah. I can hear myself, and basically I sound like I'm making excuses for us not do anything.

Yeah, but like you said, we've already done this. We've already really dug in, and we've cut a lot of subscriptions. We've cut a lot of extras. So my big question is, how. How many austerity measures do we really want to put in place before we're just not enjoying life anymore?

That was, like, even more polite than usual or more involved again.

It always starts like that.

Well, what does it get to.

Usually it'll get to me being frustrated because I don't feel like Chad always will contribute ideas outside of. It'll be fine. We're just going to be poor for a while.

It's the same conversation you always have. Like, there's nothing to be done.

It's got to be frustrating to talk about the same thing over and over and over and over and not really make any progress on it.

Very.

It makes me not want to talk about it. Like we're just going to come to the same conclusion and do nothing. So we. What's the point of talking about it?

So what's the solution?

I don't have an answer right now.

And yet you are in the financial situation that you are in. What's the disconnect?

I think the biggest one is we bought this house indexed on a different salary.

And you didn't make any changes substantively after your income dropped.

Yeah, totally.

In fact, you've resisted making any changes by taking it out of the equation.

By. By having the family help, you mean?

No, by saying, like, we don't want to get rid of this house.

Like that's off the table.

Let's talk about, you know, cutting our Amazon spending instead.

Yeah, I have resisted that, that change, I guess when I've evaluated our options, I've come to the conclusion changing our house. Well, first of all, we'd be trading a two, two and a quarter interest rate for whatever it is right now, six and a half. So I backed into if we wanted a reasonable house in this area, it would save us on the order of like $700 to maybe $1,200 a month.

Seems like a lot, I thought.

It didn't sound like that much, I guess.

Are the two of you a financial team?

I would like to be, but I often feel like we're almost adversaries.

Chad.

No, not really. We don't. We don't. I do. I do the taxes and I just show it to her before I file it. But she's not involved with that at all.

I thought. You talk about money every day, though.

We talk about spending, but like planning wise, we don't do any planning right now.

It's very difficult to get ahead if you are adversaries. It's very difficult to get ahead if you don't have a shared vision.

Again, I thought we did. The past few years have maybe shown me a different side of chat than what we in theory talked about.

Has your financial status shown you a different side of you?

Definitely. I think I've become more of a worrier than I expected. I feel like I've become, I don't know if I can come up with a better word or articulate it, but much more uptight about it. Much more concerned about the future than I used to be.

Uptight means what?

Just always stressed about it. I always want to talk about it. Just constantly carrying that heavy load. And I feel terribly guilty even when I go to buy the kids a new pair of shoes because their shoes wore out. And buying necessary things even makes me feel terrible and guilty. And that is not, I don't think, how I used to feel about it. Even though I've always been fairly frugal, I never felt kind of an existential dread over it.

Gotcha.

Chad, how about you?

I don't think I've changed too much. I think I haven't really, to be honest, thought too much about money for the most part, which is probably why we're here. I've been focused a little bit more on trying to achieve impact in my. My job and make sure the family is happy, healthy and the kids are doing well, but I don't specifically think about money. The kids come first, the marriage comes second.

In my opinion, they do at this point because I see more return on my investment there.

It's a pretty striking comment. What if that just keeps up the two of you, the way you described it? We have one person who describes herself as worried, concerned uptie. Another describes himself as not really thinking about money, focusing on having impact at work, making sure the kids are okay. Just play it out two years from now, five years from now. Where does that leave us?

I mean, the tension will continue. It will continue. And it's not good for my health and well being or his or the families in general, not to mention the financial implications, but it will impact our relationship, how we relate to each other. That feeling of not being heard definitely permeates the rest of the marriage, which is obviously destructive. So I think it will get worse and I may just kind of tune out, turn off and do my own thing. And I think you see that when we start talking separately, we're not saying we when we talk about certain things. Because I do feel I've approached Chad many times and it's almost dismissive, like, oh, here she goes again with this. And what does she know? She's just worrying again. So I'm just going to reassure her and pat her on the head and say it's going to be fine. So it's just a really unhealthy dynamic.

What would you want him to know if he could actually hear you?

I would want him to really know. I know the numbers. I am smart. I do have valuable opinions. I do have a pretty solid grasp on our situation. I am not overwhelmed and I'm not overreacting.

Chad, I'm going to say an answer I know you're going to shoot me down for, but hoping for a windfall eventually that will solve all our problems. But yeah, barring that, Karen's absolutely right on this trajectory where we're going to probably increasingly resent each other because we're not. We're not on the same page, we're not pointing in the same direction, we're not moving in the same direction.

Is there anything you would want to tell Karen if you could be uncharacteristically honest?

I mean, I love that you're at home with our kids as much as you can be. I think that kids are the most important thing. And I don't care for poor. I guess at the end of the day right now, I don't care for poor. I think it's more important to spend time with the kids. So I really appreciate that you do that and they're here for us.

But your actions aren't reflecting those words. You're not willing to make any changes to make that a long term possibility. You are shut off. Or. Or you shut me down. You won't. How do I want to word this? You're not willing to come up with ideas with me to make that possible or even sit down and talk it through well enough to decide if that is possible. It's kind of a vague statement of, I love that you're here and with the kids and I don't mind being poor, but what does that mean? Because that's what we're doing right now and it's not sustainable. That's. That's not a place we can move forward from. I'm looking for solutions, not platitudes.

I don't know what to say, like, let's come up with a plan is all I can say.

What if Chad doesn't change? And what if you still need to build up savings for your family?

I'll. I'll just have to go it alone.

Wow.

I have to say that I love the honesty that I'm hearing from Karen. We are finally moving past polite. And I am a little bit puzzled by Chad's responses. Like, what'd you notice in that interaction? I noticed that Karen is crying out for partnership. She's saying, give me a seat at the table. Notice that we are in trouble. Believe me when I say that I'm smart and I understand the numbers. What she's really saying is, connect with me. And Chad responded with, we're going to have another windfall. It's going to be fine, and I don't care if we're poor. He's abstracting the severity of the situation to these pat little phrases like, I love my wife and I'm glad she gets to be home with our kids. It's like watching a politician wave away millions of people losing their SNAP benefits and instead say some abstract comment like, we should all have the opportunity to work in America. Okay, the issue here is becoming clear to me. The spending alone is not the problem. The disconnect is a much bigger problem. And until we bridge that, no amount of calculating numbers is going to fix it. When we come back, we're going to go way back to their childhoods to see if we can get to the root of this dynamic. Have you ever met somebody who tries.

To fix everything with duct tape?

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Karen, what do you remember your family saying about money when you were young?

They didn't talk a lot about it. I would say we were solidly middle class until I was about 12 when my parents divorced. And then there was definitely a transition there financially.

What happened?

My mom pretty much stayed where she was, but then my dad basically moved into like basement apartments, studios, stuff like that. So I would visit him there and he kind of worked his way up to buying smaller, more modest homes in not the nicest neighborhoods. And I lived with him primarily. So, you know, it was definitely a more modest lifestyle. I needed to get a job fairly early if I wanted to pay for gas or clothing of my own, any extras I had to work for.

What did it feel like that your mom was at a certain level and your dad was literally in a basement?

It felt unfair. It did. It felt unfair. But also he seemed happier and the money didn't really matter because he had more peace of mind, he had more freedom.

The money didn't matter.

Right.

It's just ringing in my ears because I heard something very similar just a few, few minutes ago. Do you remember that? What did Chad say? I don't care if we're.

You don't care about the money as long as the kids are okay.

Yeah. Quite similar. What do you make of that?

Well, and that's what I mean by previously, I thought we kind of had that shared vision of it's not about the money. It's not about all the nice things. It's not about being able to keep up with the Joneses and. But more about safety and security and freedom and time to spend together. Mostly it's that freedom. Freedom of time, which is, I guess, what I'm pointing out with my dad. I saw him have more of that.

Less money, but more freedom of time. Okay.

Yeah, yeah. More relaxed and more like, you know, I have these things and I can afford them.

And why aren't you more relaxed with less money now?

Because we still have the same high amounts of bills to pay.

I see.

And so we don't have that freedom of time or we can't go do things as a family because we are constantly working. Including me, I'd like to point out, I am working and I am working full time.

Do you want that? Like, less money, more freedom of time?

Yeah. Or the same amount of money that we have now, but, yeah, more freedom of time.

Well, okay, what. I mean, why don't you just move to a much smaller apartment and you'd have more money? Would you be down for that?

Yeah.

Okay.

We come from. We have different views on that. I think we can stay within our community and move to a smaller, more modest house, but still enough space for our family and still be within our school system. Not much would change. And I think our kids are really flexible and adaptable, and they'd probably just see it as an adventure, and maybe they'd see that mom and dad are more relaxed and happier and have more time for them, which I think is healthier than.

Than what it is today. What phrases ring when you think about money as a kid, as a teenager, what phrases echo from your family?

Gosh. You know, one that I think of specifically was my dad being pretty apologetic that he couldn't pay for my college or help with college. And a lot of that guilt that I still think he cares carries today that he couldn't help more financially to kind of set me on a better footing in my young adult life.

Were you angry or resentful at him?

No, I figured it out.

Figured it out.

I joined the military. I got a GI Bill. It all turned out fine.

You know, quite interesting.

Was raised resilient, and then on my mom's side, the opposite. As far as she very Much would say you have to make your own money. You have to be very careful with money. At any time, the other shoe could drop and you could find yourself with nothing.

How did you internalize that? How did you make sense of that?

Definitely felt very insecure. I think about that. As far as. Yeah, you're right. Tomorrow something could happen, and I could have nothing. And I can't really rely on my partner to be the one in charge of it and to always be a little bit cautious about what they're saying.

And how did that come up when the two of you met each other and you were dating?

I don't think we were particularly challenged by it because we both were making fairly solid incomes on our own, so we never really had to face it until recently.

Gotcha. That's a pretty honest answer. Karen, when you look back and you reflect on the lessons that you took away from your family about money, what occurs to you? What surprises you? What sticks with you?

Again, I think it's that how quickly your fortunes can change.

It happened for you when you were 12. It happened for you just recently when Chad downsize to a different job.

Right. And both times were very uncomfortable. And it's frustrating because I thought we had future proofed. I thought we had done a pretty good job, and I still do think we did pretty well, but we do seem stuck.

Okay, Karen, thank you very much. Chad, what do you remember about your family when you were young? What did they say about money?

My dad said, I can't remember the exact number, but I think he said, every paycheck, always save 10%. That's one thing I definitely remember. Second thing I remember is don't bank with the banks. Bank with the credit union, because the banks rip you off. Third thing is don't buy American cars, Japanese cars.

Wait.

This guy has great advice. I agree with 100% of what he said. Out of curiosity, what happened to the 10% rule? I don't see that happening in your finances.

I have not followed his advice.

I suppose y' all drive an American car. Please don't say yes.

No.

Oh, thank God. All right.

And what.

What about your mom?

She wasn't really involved with the financial planning so much.

Yeah, your dad was the money person. And what was your mom's role when it came to family and finances?

My mom was a homemaker. My. My dad, I'll call him a company man.

Mm.

So she would keep the house going, and he would work long hours at work. I would say, like 60 plus hours a week. So we wouldn't see him that much during the week and a little bit on the weekends, I guess.

But did you like that or resent it?

It's all I knew. So I don't. I don't know. He was working for us, as far as I could tell. Yeah.

Okay. And did your mom spend money for the family? How did she go about that? Did she have to ask your dad or what was the arrangement there?

Yeah. So it is an arrangement that I've carried forward to today, which is that my dad had an account, and he would move money over to her account when she needed it.

And you do that today.

We have a joint account, but right now, my paycheck goes into my account I've had all my life, which is an accredited union. And when Karen needs money, I do move it over. But we don't manage a joint account actively right now.

Yeah, on the occasions, which isn't all the time or frequent, I will just text them and say, hey, I need X amount. Can you transfer that over today?

How do you. Since you earn less? Karen, you mentioned you don't frequently have to ask for money. But, like, how. How does that work? Because your expenses are relatively high compared to your income.

My expenses are mostly, what do I take care of? I take care of the car insurance and the phone bill, most of the kid stuff. So I actually wouldn't say my expenses are high.

Just want to point out this is very, very common in a way that I hate. Dad pays the mortgage, mom pays the kid expenses. And then when as the kids get older, which means they're more expensive, in a lot of cases, nothing changes. And then mom is now put in.

The position to, please, please, can you.

Transfer an extra $500?

And then dad's like, why do you need the extra $500?

Why aren't you being efficient with them? And it just gets perpetuated. Why are you both nodding so much right now?

I could see that dynamic.

I could see it, too.

Yeah. Okay, Chad, back to you growing up. Are your parents both alive?

Yes.

Okay. How are they doing financially? They're.

They're doing well. I called. I characterize them as upper middle class.

Okay. And what about debt in your family? Was there any debt as you were growing up?

No. No. I mean, I would almost say my dad's, like, allergic to debt, but I mean, other than the mortgage. No, we don't never run. Apparently my mom did have some credit card debt when they got married, but he paid it off immediately. So no debt.

Your dad seems very methodical about Money.

He's an engineer. Yeah, he's an engineer.

But you're a data scientist, right?

Yeah, I call, characterize myself as a quasi engineer. He's the type of engineer where you have to get everything right or the chemical factory blows up. I'm more in the. Trying to look for the insights in the trends in the data and yeah, trying to see the big picture in what's going on in the product or the system and trying to. And trying to derive insights to affect change in the system and then follow up to make sure those insights are actually acted upon.

Do you do that at home with your finances?

No.

There are so many parallels to draw from, from Karen and Chad's early experiences with money. Karen is almost mirroring what her own dad went through. He was forced into a more modest lifestyle. But do you remember what she said? He emotionally thrived with more time and less money. It's no surprise that these are the very things Karen says she would be fine with. I can also understand why she said earlier that she would go it alone if she has to. Those messages of resilience, of not relying on anyone else, those have been ingrained in her for decades. Interestingly, Chad has done almost the exact opposite of what his parents did with money. His own father was debt avoidant, yet Chad took out a home equity line of credit and borrowed from the family. He skirted past the advice to save and invest 10%. But one thing though that he has replicated is his father's commitment to work. Chad himself admitted that he would rather focus on work related goals than work through the financial issues that affect his entire family. One thing I'll say that I've noticed is it is very interesting. When people grow up with strong money messages, one of two things often happens. One, they follow them exactly. They basically recreate what they grew up with. Or two, they go completely the opposite direction. But here's the fascinating part. You can never predict what is going to happen. There is no rhyme or reason to which approach someone is going to choose. Okay, let's shift our focus now back to the numbers. Their housing costs are 33.6%, a little bit higher than the 28% I recommend. They've hinted at it multiple times, but we finally need to address the elephant in the room, which is their house.

What does the house mean to you?

It means a stable place for the kids, I guess is the main thing I think about. I think safety is something maybe we take a little bit for granted here. We just assume everything's safe. We don't even lock our doors here. I don't want to be moving to a place that's not safe, that's not worth any amount of money to me. The house, I mean, I've been working out of the house for the last five years, so it's like also a place to work out of. If I didn't have that, I'd have to figure something out, get a co working space or something to that effect. Yeah. We haven't had a conscious plan, so if we can come up with an actual plan, that would go a long ways to addressing those concerns. Do you agree?

It's more than a plan, Chad.

And action. Plan. And action.

More than action.

Before any of that.

You could have come up with a plan before you even saw me.

If you look at your csp, it's.

Quite obvious what to do. It literally jumps off the page. I'll show you.

Why you haven't been able to get.

To the plan is the crux of.

Why we are here today, y'.

All.

The plan is not the hard part. You're both very intelligent. And the idea that, oh, it's just things. Well, let me try to take that argument with you, Chad. Why don't you just get rid of your house? It's just a thing.

Yeah. I mean, it should be on the table for sure.

Yeah, but why haven't you. Why have you been so resistant to getting rid of the house, including in this conversation? It's just a thing.

It feels like short term thinking, I guess.

Well, you have $0 in savings. Don't you need to think short term right now?

Maybe, yeah.

Yes. Like the house is on fire because.

We don't have the savings. That's why the house is on fire.

Yes.

Three kids, one person who's already lost.

A job in the past. That's a massive risk. Massive. And it's not the two of you.

Even if it was the two of.

You, you would be in a really, really precarious position.

But with three children.

It is red alert level of risk.

Okay.

Finally.

When you think about the financial environment that you want to raise your kids in, what kind of environment comes to mind?

I want them to learn responsibility, I guess. And maybe that's not something I'm teaching them through my actions right now. What should we do different?

Great question.

I can propose ideas.

Go ahead, I'm listening.

One, we start a written doc so we can document it. Just throwing ideas. Maybe we can each have, like, little soft targets. Right. Like. Okay, well, I'm going to try to save $300 a month. You're going to save $300 a month. We'll bring our receipts to a little, like, party at the end of the month, and we can have a little, like, celebration to jointly. So, like, we can have a special beer or something. I don't know.

Keep going. It's great.

So we need a forum for that. Right. So I think a standing meeting. That's what we do at work. Right. With documentation. Let's put some process around it. Let's have some goals. Let's do some goal tracking, some metrics tracking.

What is the goal?

I think the goal personally is to hit that 10 and 10 number. That's. That's where we'd like to be.

10% investments, 10% savings.

Yep.

Is that enough? How do we know?

It's a starting point.

Okay, fair enough. It's a starting point. I agree.

We need feedback from the stakeholders on whether that's. That's where we want to be, but that's where we're headed right now. Okay. And we need accountability on the. On the results. So that's where we need the metrics tracking. And then the crux of it is we need a strategy. So what is the strategy? A strategy is identifying a point of leverage over the problem. Right. It's a single. I won't call it a single thing we can do. There's no silver bullet, but a set of tactics that jointly work together to solve the challenge.

What are some example tactics that you will probably have to do in order to hit the 10% savings and 10% investment goals?

Sell the house. Downgrade the house. Go somewhere with your schools. Because, I mean, that's the only way you get a cheaper house is you go to a school district with schools.

Oh, I didn't realize we're insulting our options. I thought we were just putting them out on the table.

Right. It feels a little bit taboo.

I like Taboo.

What do you think this freaking podcast is?

Sometimes the truth is only found in the taboo.

Sometimes taboo is where the truth is.

You shouldn't run away from Taboo.

You should actually run towards it with.

A big old flashlight.

And the key insight here is that.

Money is deeply emotional.

It's not the numbers on the page. The numbers on the page are the least interesting thing of this whole conversation. We can knock those out in five seconds, and you're going to see that the fact of why you have not.

Been able to look at it is that you both are locked into a.

Dynamic where each of you has their own role. You can't move any different squares in this game. And what I'm saying is you all are not actually playing chess. You can move any direction you want.

But you have to be able to.

Talk about what are the rules of the game here.

What is the even game we're playing. We are not playing a game of.

We need $250 a month in savings. That's a boring game and nobody wants to play it.

That's why the two of you don't play because it sucks. That's not actually fun. I think the game that you are playing here should be much bigger.

How does that strike both of you?

Yeah, I think that makes sense.

Yeah. We're just kind of winging it right now, to be honest, being very reactive. If we start from a common vision, then we can work backwards to understand what we need to do to achieve that.

Y' all want to do it real quick? What's the rich life vision?

To keep emphasizing time. I would rather have freedom and time to spend with my kids. To be home after school to give them a snack, to help them with their homework.

Great.

That's good. Freedom in time. Let's go. We're going to go rapidly, Chad.

I don't have to go back to a 9 to 5. I can do my own startup ideas.

Run my own startup, let's say.

Yep.

Okay. Karen.

Opportunities to be healthy and be outside.

Chad.

Be able to pay for a kid's college. Don't have to worry about that.

Being able to provide that extra schooling and education if we need to.

I'd love to take a gap here with the kids and take them around the world.

Yeah, that would be amazing. Ooh. And I want to volunteer my time doing things I'm passionate about rather than going to a job that I don't love.

Great.

To me, this is personal.

Also, I want to note that you probably can't do all these things right now.

That's also okay. Your rich life is a vision.

Some of the things you may not.

Be able to do today, but you.

Can do 10 years from now with savings and investment.

The real secret is that the rich.

Life is in the journey, not necessarily in checking off the boxes.

What I see here is just a.

Powerful vision of a family that wants.

To be able to do a lot.

Of things with kids, a lot of things with freedom. It's so clear what the two of you value. Here's my question for you. Compare the rich life I just wrote down versus where you are spending your money. What do you notice?

All of our money is Going to bills and things to supporting our current life, our current lifestyle.

Not even current life. You're. You're supporting a past life when you used to live. Make hundreds of thousands of dollars more. Nothing about the future. Very little money being spent on the vision of any of this. Like y' all want to take a look at the CSP and make some changes?

Yes.

Yeah.

So here we are with your CSP.

Up on the screen as a refresher. You make $14,000 a month gross. Fixed costs are 70%. Investments and savings are zero. Guilt free spending 30%. Chad, tell me the first thing you'd like to change.

I guess. I mean cut that mortgage in half. Be nice.

What? How are you going to do that?

Downgrade the house. It's the only option.

Damn. Hold on. This is crazy. I never had anyone who ever started with the house ever. This is crazy. Can you get housing for your family for $2,000 a month?

We could if we take the equity we have and put it as a down payment on a. A smaller place here.

I. I need the. The number that you would actually walk away with.

$500,000. That's minus the $180,000, I believe, minus the transaction costs.

That's a lot.

Say the number.

72 grand.

All right. $72,000 in fees. What else? Isn't there some other fees associated with selling?

I think we dodge the cap gains if it's under 500.

Right.

Then I mean. Yeah. I don't know how you want to think about it. If you want to move over to renting or buying a new place. But you're going to buy a new house, There's a lot of fees involved with that transaction too.

Okay, so you. You have some math to run. But seems to me that's one big option immediately.

I'm thinking of all the friends that the kids play with every day across the street. And we won't have that anymore. And that seems sad to me.

You might not.

If we can find a way around it. I would love to. It is so ingrained in us to have home ownership. That's the pinnacle of adulthood in this country. Right. And that's success.

And to pay for your kids college.

Right.

But who paid for your college, Karen?

Me.

You paid.

And did you build responsibility?

Were you resourceful?

Yes.

You know, one of the ideas I had to bear with me here was we can rent out our house for a fairly big chunk of money, like our current house. And then we could rent something more affordable and more within our current budget.

Nice.

How Much could you rent it out for?

Comps around here were about 6,500amonth.

6,000, 6,500. And if you could rent something, how much could you rent? A place that you all would need. How much?

Between three and four.

Whoa.

Yeah.

Have to run the calculations more carefully because it'd be.

Basically, you could just scale it by square footage. If we're in a 3,000 square foot house, it'd be scaling down to a 2,000 square foot house. So a third less.

3,000 square feet. What the.

No, we're actually in 4,200 square feet.

All right. The basement. Yeah.

What the.

Chad thinks that this is a normal sized house in a. A modest house in a modest neighborhood.

How the.

Am I talking to a couple with $0 in savings who has a 4,200 square foot house? This is crazy.

This is what I've been screaming.

Chad, do you not. Do you see my reaction? Why do you think I'm reacting the way I am?

Seems like a big house.

It's like in the top 1% of.

The size of houses in the entire world.

And also your income. I don't know the exact decile or.

Whatever, but it's up there really high. And you know what's at zero? The 0% percentile?

Your savings. All right, so we put the house. That's an option. Whether you would choose to sell and buy another place, whether you would choose to sell and rent, or whether you would choose to keep the house and then potentially rent another place. Those are three very interesting options. Let's keep going. I think there's more options this time. Karen, what would you do?

I could pick up my work.

1500 is your net right now. How much would you make? I could make up to6.6000amonth net.

What the. But I wouldn't be home ever. Or I'd be working night shift at the hospital.

Something in the middle.

Maybe something in the middle. If I could find reliable part time work, I could make something in the middle.

All right, what else, Karen?

I think groceries.

Groceries.

$2,000.

I think we can get that down. But not much less than 1500-1800.

Pick a number.

1800.

What the. No, I know I told you. Pick a number. But that number. I'm not taking 1800. Come on. What food do you guys order? Tell me.

We do Amazon grocery delivery through Whole Foods.

I think the reason I picked that number is I looked up the average that a family of five spends around here and went with that.

I don't care what that family Makes maybe more money than you do.

Oh, they all do here.

No, that, that, that number's anchored in reality. That's our long term average.

Yeah. When you were spending without looking at prices, you are living a different life now. I certainly didn't hear that in your rich life vision. Let's go fill up our cart with a bunch of. Don't even look at the price of.

So you think we can realistically bring that down?

Way down.

And I'm honestly openly asking that because it's.

There's definitely ways like a thousand percent. You know, you can just search cheap grocery food and you'll find people. There's entire subreddits about how to order food that is healthy for a family. For a much, much, much cheaper place. Probably one of the ways would be just to not shop at Whole Foods as well.

What would be a range on groceries? Like maybe you're like 50 to 75 percentiles.

The magic number, believe it or not, is 800 to $1,200 a month. Almost everybody falls between that number, regardless of whether they're two people or five people. That seems to be the magic number.

I think that if the two of.

You were like, hey, we want to get more discipline, but we also do really like having X or Y. You know, we're probably going to end up being at like 1300, maybe 14.

Okay, that's still huge.

Yeah, it's a big savings.

Yeah, that's great.

Let's take groceries and turn it into 1400. Okay. I'm going to give you a little leeway. I think you get a lower but 1400, nice and easy. Look at your fixed cost number.

It dropped from 70 to 64% right there.

Amazing.

That's great.

It's great.

You know, especially with your housing cost. Fine investments. What do you all want to do?

I mean, it'd be great if we could get back up to that. 10% investments.

10%. All right. Let's just say you're investing about 1100 bucks a month savings.

I want to get that up to at least 30,000. So we have three months.

Okay, so how much you want to put here Notice, by the way, that we are now drawing from down here, your guilt free spending. You can see it decreased it. You're now at 27%, but you have 10% that moved up to investments. Not bad savings. How much?

500Amonth.

500Amonth. Be nice.

All right, let's do it. 500 bucks a month on savings. You're at 4% savings. Seems a bit Low to me, considering you have zero. I don't like it. What do you think?

So we need at least 10%?

I think so. All right, so now you're at 10% savings, which is 1100 bucks a month. And you have 17% in guilt free spending, which is $1988. What do you think about that?

I think that looks good. I do worry about one off medical emergencies.

They don't come out of guilt free spending. We need clear lines of demarcation. We need to be saving for medical emergencies.

You have three kids.

Things come up.

I need to jump in and clarify this really quickly. Okay. First off, if you have several small kids, your financial risk is way higher than a single person or a couple with no children. Like emergencies when you have kids aren't just oops, I forgot to pay a bill. They are medical bills, urgent travel, even job loss that can blow up your finances overnight like it did with Chad and Karen. And the stakes are much higher. With kids. You can't afford to be caught off guard. You absolutely want a six plus month emergency fund that covers your bare essentials, including medical emergencies. Automate it. Make it non negotiable. That is how you build real financial freedom. For Chad and Karen, we set aside $250 a month. Now I want to hear from you in the comments. What is your current setup for emergency savings? Do you have anything automated right now? And what are the numbers that you are aiming for? Tell me in the comments below.

Let's keep moving along.

Okay.

You are at 65% on the fixed cost, which while not ideal, is okay. It's fine. Savings at 10%. Good. Good. Investments are at 10%. That's good. That's way better than it was before.

That's great.

Your investments, using your current strategy of contributing zero, will yield you about $2.68 million at retirement. Thanks to the work that you've done contributing over the years. That puts you in a pretty good position. Your current CSP, by the way, by adding the extra eleven hundred dollars a month, you will. Instead of having 2.68 million, you'll have 3.26 million. So it's a considerable amount more just with that simple change that. Not bad. Especially if you own a house. Kids are out. Not bad. I would like it to be more. I get the sense based on your description, you know, you probably want to live a pretty nice life, but that part is not on fire.

Great.

You could even contribute a little bit less to your investments. You could model it all out if we, if we did 500amonth instead of a thousand a month, what would it look like? If we paused for one year, really built up our emergency fund, what would that look like? If I were in this situation, I would run all the calculations, but just instinctively I would probably sell the house or rent the house out. Probably sell it because renting it out has a lot of expenses that you're not going to cover or predict. And historically you have not been particularly effective at putting that money aside for those big house expense. I would sell that freaking house.

I would pay off the debt.

I would take most of the money and invest it. I would go rent a place that is somewhere around but cheaper.

Way smaller.

Way smaller. You have a lot of options on that side. The problem is that the challenge is actually talking about money in a way that aligns with your vision.

Gotcha.

So it's going deeper than just the math like you said.

Yeah. I mean, that's the thing.

It's interesting. Like now, seeing the pieces come together. When I asked you, Chad, were you.

Resentful of your dad because he was working all the time, and your answer was, that's all we knew. I might ask your kids, 20 years from now, were you resentful that your parents created a family mission? We're going to actually start to spend more time together. We're going to do more arts and crafts together. We're going to do all this stuff together. And by the way, we're going to have a cozier house where we can actually spend more time together, which is going to be, let's just say, 2200 square feet. Were you resentful? They're like, resentful.

We loved it.

We got to spend more time with our parents.

We got to travel more. We got to do all this stuff.

What are you talking about? Resentful?

That was awesome. We didn't know any different.

What do you think? Karen's got a big smile on her face. Chad, what about you?

Sounds good. I think our financial situation hadn't sunk in quite yet.

Has it sunk in now?

Yes. I think you really got into the heart of it, which is communication between Karen and I needs to improve. And without that, we don't have anything.

We're going to get to their follow ups in just a second. But first I want to share my analysis. Their story goes a lot deeper than the numbers in the way that they truly feel. Feel about money. They're stuck in a cycle of fear and pride and miscommunication. The house is not just a Mortgage. It's a symbol of identity and security, but one that is also keeping them potentially trapped. The real problem, of course, is not the Amazon spending or even zero savings. Karen and Chad have a chance at taking back control because they're finally naming the real issues. But in my opinion, it's going to take a lot of honesty and some really tough choices. That is the path to a rich life. Now let's check their follow ups where the real progress begins.

Thanks again for spending time with Karen and I really appreciate it. The opportunity to go deep on our money problems. Biggest takeaway is that, you know, Karen and I, we really need to come together as a team and improve our communication around money. And we really need to solve this problem of getting us on a better financial footing to move forward in our relationship and our marriage to keep it strong. So gonna take it seriously, gonna act with some intentionality. We're gonna take some concrete steps. We are gonna start some marital counseling to help improve our communication. We are actively now contributing $1,000 a month to our emergency savings fund with a goal to get that up to $30,000 or so as quickly as possible. And then once we have that kind of going, we'll start to look at some of the other secondary goals like re engaging on the 401k and college savings and things like that. Yeah, I think those are the main things. So thanks again.

My biggest surprise from the conversation was that a lot of our issues actually boiled down to communication. Not the situation we're in, but how Chad and I communicate about money and our own kind of money psychology and how that's getting in the way. Our biggest takeaways was that we need to work together as partners and watch our tone. We do tend to be adversarial when we talk about money and I think that shuts down the conversation and we can't move forward. Specific changes we've decided to make is we are now allocating a lump sum of money to savings every month, paying ourselves first, which fortunately we can do now is I've picked up more work hours. So we are taking that money and saving it for our emergency fund. And we are also going to try to work on that grocery budget and kind of take that challenge on to see if we can cut down on those costs. Anyhow, it was an absolute pleasure working with Ramit a couple weeks ago and we really appreciate the time that he took.

If you want my help with your specific money questions, you can apply to be on this podcast@iwt.com apply or you can become a member of my Money Coaching program instantly@iwt.com Money coaching. In money coaching, you get access to monthly calls where I answer your questions directly on a private call. And I get the chance to go much deeper on the concepts of money that have made a huge change in my life. Plus, you'll get access to a community of other people like you who who will inspire you and push you to.

Live your rich life.

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