37. “My love language is spending money I don’t have”

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I just feel sorry that I owe her so much because I've been away from her that we got separated and I owe her so much time that I try to buy things for her and I see that it's a mistake.

I would say that this is a 10 out of 10 situation.

I don't know what else to say. Jessica, if you want to break out with me right now and live your life and then we'll talk about it because I really. I don't have the capacity to say anything else. I'm sorry.

Welcome to this week's episode of I Will Teach youh to Be Rich. Today you're going to meet Jessica and Javier. I'll talk to both of them, but Javier really is the focus of today's episode. Jessica makes $80,000 a year. Javier makes 3. $33,000 a year. Jessica has 15k in savings and 175k invested. Javier has 0 now. In the next 6 months, they plan to move back to Javier's home country of Colombia in Bogota. But Javier's reckless spending is worrying Jessica. He's $21,000 in debt. That might not sound like a lot, but compared to some of the numbers you've heard on this podcast. But Javier accrued $9,000 of that debt on a single trip to Colombia. What happens when someone has no concept of credit as real money? What happens when they can't see the consequences of their own spending? Jessica has told me that she can't commit to the move unless Javier fixes his finances. And if he can't do that, that might mean the end of this relationship. I'm Ramit Sethi and this is I Will Teach youh to Be Rich.

I made a promise to myself that I've been working incredibly hard for the past five years. I'm a contract employee. I don't get holidays, I don't get sick days, vacation days. I work as much as physically possible. I've. I've made myself a really nice path in terms of my investments and my financial situation. And I think the stressor for me, in addition to wondering how he's going to handle this debt, is I'm trying to decide for myself. I made a promise that I would not continue my current job past this June, when my contract ends and it's up for renewal. I've done my time. I've worked very hard. I'm ready to switch. Leading up to our Christmas vacation, we did discuss budgets and we had kind of set aside a little bit of savings. We were planning to meet some credit card spending amounts so that we could get some bonus rewards. And when we got on our trip, a lot more money was spent than we were expecting or that I was expecting ahead of time. And it did cause a lot of issues because not only when we were there was the spending almost sometimes at an uncomfortable level that it made me uncomfortable, it made Javier's family a little bit uncomfortable in some situations. But it also is now having a long lasting result because we are now home with these very large credit card bills that now need to be paid down. We had set aside about $600 in our savings and then we were planning to meet about 3, 3 or $4,000 on the credit card bonuses. So in that range. And Javier put the majority of the expenses on his cards. His cards, I believe, between the two of them are now at $9,000 from this trip. And I had about 1,000 on my cards because of the accommodations went on mine. So about 10,000 total. I think that when a Javier is close with his family and when there's an opportunity to do something that's really exciting with them, especially living far away from them, he just wants to seize that opportunity, which I can understand because he doesn't know the next time he'll see them. And so if an opportunity presents itself, he just wants to go 100% into it, no matter what the cost is. One of the things that we went to is we wanted to spend the night in a fancy hotel and we wanted to invite his parents to come along as well. And just for the logistics of it, the hotel was offering a New Year's Eve party for us to attend. That party ended up being $600 for us and his family to attend that Javier put on his credit card. I find that a little bit excessive of a price, but I understand we were trying to create a nice, nice memory for everybody. Another thing is that when we were down there, there's a particular whiskey that Javier and his father really like. And I said, oh, in the future you can get a bottle of that to celebrate once we're moving down here. And he happened to find a good sale on it compared to other stores. So that was a $200 purchase that I was thinking would be in the future. And it just got purchased in the moment. So it's just a bunch of small things like that. If he sees the opportunity, he takes it. And it doesn't matter how it affects the finances so much.

Walk me through this situation where you sat down and you actually talked about how much you had spent.

We were still down visiting his family and we brought up both of our credit card transactions and went line by line to say, okay, this was your personal expense versus this was a shared expense. And this is something that we have never been able to do in the past. This was actually a great improvement for us to be able to sit down and have a level headed conversation. And in the end we were only about $50 off in what I had spent versus what he had spent for our joint expenses. We settled that up and I came home. He stayed down visiting for an extra week or so. And when he got home, I happened to see his bank account information because I was handling a bill for him and I see this $9,000 combined bill and that really freaked me out. I brought it up to him and he said, don't worry about it, I have a plan, I'm going to get all of this paid off in the next three to four months. And I'm freaking out because according to math, I don't see that there's physically any way for him to be able to pay this bill in the next three to four months. And we're planning on moving six months from now. It really just made me reflect on how do we move forward with our plans and how do we overcome, because this is a pattern that's repeated for the past seven and a half years in terms of not agreeing on how money is spent.

Javier, can you share your perspective on that same trip?

One of the things that I told Jessica before is that I just got an approval for the first time for a $5,000 credit card with my miles. So I told her, I said I want to gather some mileage so I can travel in the future. And I felt proud.

Let me step in right here. Just in these few lines, I hear lots of red flags.

Now.

First, I want to acknowledge that on a past episode I used the phrase unsophisticated with money. And I read a lot of your comments. Some of you really did not like that phrase and some of you were okay with the phrase unsophisticated with money. But when I called someone unsophisticated, you really didn't like that. So I decided I wanted to hear more from you. I asked a lot of you to share your opinions with me and I read thousands of your comments. And you know what? You are right.

I apologize.

I can do a better job focusing on helping people with their money psychology without using the phrase unsophisticated with money. I think there are lots of better things I can say to help people become more effective with money. So thanks for all your feedback and doing this podcast. I'm learning as much from my guests as they are from me. Let's talk about Javier. It's a huge tip off that someone isn't effective with money when they're in debt and they are talking about credit card points. Guys, these programs are designed to hook you. You should never spend on something simply to get the points that that is the tail wagging the dog. You can hear him talking about being proud of getting a credit card with a $5,000 limit, almost as if it's a prize. This is a big tip off of someone who hasn't been educated about money and especially how credit cards really work. Listen, as Javier continues, they said I'm.

Going to spend a lot of different things, but I'm going to pay them myself. I'm not planning on you to be part of paying this. This is besides the joint. So that's the part where we have the discrepancy. Because when she said, oh, I'm freaking out because now you owe all this money and blah blah blah about the whiskey that I got for my fire. It was the blue label Johnnie Walker. She was with me and she said it was a really elegant box. And she said to me, why wait if you could, if you want to buy right now or you shouldn't wait until we move here, just buy it and drink it in New Year's with your dad. And I said, oh, well, yeah. And I was thinking, I'm like, well, she's actually giving me the Ana. I was like, why not? I'm always like that. I leave the present. I say, yeah, why not? Yes. I'm not gonna say no.

Why not? This is such an interesting concept in many ways. More of us should adopt this life philosophy.

Why not?

Why not try that new dish? Why not take a risk and go out on that date? Why not spend on something that's really meaningful? You can see how we can create a rich tapestry of life by saying yes to more opportunities. But what happens if you say yes too much or if you say yes to the wrong things? Well, you can end up in debt. And there's another even more subtle problem. If you say yes and you end up in debt, it's very difficult to mentally turn the page and realize that you have to change the way you behave. This happens to a lot of people. They make decision after decision, then end up with bad consequences. But for some reason, they can't make the connection between their attitudes and where they've ended up. Let's look at it here. Javier loves his family. He wants to buy something nice. Also notice that Jessica encouraged him to get that bottle. He takes that as permission. In the end, he spends a lot. Now he's in debt and he's facing a very tough conversation with Jessica.

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So that was the motivation of course. I'm not blaming Jessica about this at all. No, it was my my my gift for me and for my dad and I don't reg but the situation with owing the $9,000 in my head. I make about $4,000 a month and in four months or in three months I can make $12,000 and leave 3,000 for other expenses and kind of pay that amount of money not to be short on anything. It's also because since the COVID started I was away for one year. I usually go four times a year to visit my family. My sister has a special condition.

And.

She'S my my only sister so I love to go and see her is very important and Jessica knows this 100% and she supports me. So that's clear. But with since the COVID started, I went the first year, the first Christmas, and I spent a lot of money buying gifts. I was inside, I got, when am I going to see my family again? This is the time I had some money saved and I spent them on gifts for my family.

Okay, so you had $600 saved up.

Fine.

How did you go from $600 to $10,000 on this trip?

In my credit cards. She's adding all the expenses of my credit cards with the hotels with the gifts.

Let me ask you a couple questions about those, Javier. When you spend money on your credit cards, do you count that as spending money?

Yes.

I'm curious because you mentioned your credit cards as almost a separate category several times. Why is that?

I think that's a mistake that I have in my head, which to me is a money that is like a gift, which is not a gift, it's a loan. And they're going to charge me a lot of credit. And I do know that I have that problem. You write the moment I don't care about, how am I going to pay it? So, yeah, your question makes me think that I don't really see that as money that I'm going to have to pay. Pay even though I know it.

Do you know how I knew that?

How?

Want me to give you a hint? How much credit card debt do you have right now?

9,000? 10,000?

You have $10,000 in credit card debt and you're over here talking about getting a mileage card and spending enough to get to the mile limit on your car? Those two things don't add up. You should not be using a credit card to accumulate a bunch of miles when you have credit card debt of almost $10,000.

No, I already did that. To make it up to. So that's part of the $10,000. The $10,000 debt.

You're just proving my point here. Let me give you an example here. Give me $10,000 and I'll give you $150 back. Does that sound like a good deal?

No. No.

But that's exactly what you've done with your credit card debt. In fact, give me $25,000, because that's how much your credit card debt is actually going to cost you because you're going to pay it off really slowly. So with interest rates of probably 15%, it's going to cost you 20 grand, and I'll give you $450 in free flights. How does that sound? No, that's a shit Deal. You and I both know we would never take that deal. So why do you think you took it with the credit cards?

By being ignorant? Just thinking that, not thinking.

That's actually a pretty good answer. That's a very good answer. Okay, I appreciate that. Being ignorant. Very honest. Now, I'm not going to hold it against anybody for not knowing the intricacies of how credit works, but I appreciate your honesty. That's great. If you're honest, at least we can work with that. You said you have a plan and you got upset because you had talked about the plan. So what? What is the plan? I need to understand this plan a little bit. So walk me through it.

Work a lot. Make the at least $4,000 a month. In three months, have 12,000. Out of the 12,000, I would pay 9,000 to a credit card and 3,000 would be for $1,000 per month for the expenses here in the house and utilities.

Maybe I can wait. That's the plan.

Yeah.

How rigorous of a plan does that sound?

Like I'm going to have to work a lot.

In the past. How much do you usually earn per month?

About 3,4000. Okay, 3500 for them.

Okay, so you're picking a number that is reasonable. It's in the realm of possibility.

Yeah.

And then what about the expenses that you contribute towards joint expenses? Housing or financing, food or things like that? How much do you normally contribute?

$1,000.

Okay, so your plan is basically do what you've been doing and take the money you make and pay off the debt.

Correct.

Okay, fine. I'm with you so far. What have you been doing in the past with the $4,000 a month that you earn?

I go to Colombia like five times a year. I travel a lot. I try to save some money.

How much do you have in savings?

Right now? We don't have anything. Right.

So is this where your plan kind of falls apart?

Yeah. I mean, yeah, there's no say. I don't have any savings. I had some savings, and a year and a half ago, I spend it. Spend them in Colombia.

So do you see how this is what I call magical thinking. You have this plan, which is I'm going to work really hard. Okay, I'm with you. You've done that in the past. You're going to make 4,000 bucks a month. I'm with you. You've done that in the past. You're going to contribute $1,000 towards expenses. You've done that in the past. And you're going to take the money you make and save it or pay off your debt. But you've never done that in the past. So it's magical thinking. It's like this plan is totally different than anything you've ever done.

I mean, in three months. Yeah. I mean, I have to, like, sacrifice a lot of things. Not traveling, not go anywhere. Try to minimize costs as much as possible to try to come up with this. But yeah, in the past, I have not done any strategic plan like that to cut off everything, every. Every little thing that I. That I have to spend.

If I told you that my plan was to become an NFL football player, I mean, look at me. How likely does that seem?

You have to train a lad.

Yeah. And I've never played football since I was in seventh grade. How likely do you think that is?

It ain't going to happen.

So then, now translate that to your plan. How likely is it?

There's a chance that I could make $1,000 more. Okay. To make it better, but it's probably going to take more than three months. Probably like five months.

Okay, I'm with you. I think you could do it, but I think it'll take longer than you think. And by the way, what's the interest rate on your credit card?

I have to check. I don't know.

For everyone listening, you can't see this big smile on Javier's face. What's that smile about?

I don't know. I don't check those things.

You don't check it. Okay, so that number is not going to stay at $9,000. It's going up fast.

Let me give you a quick example of how credit cards work. Let's say you buy an iPhone for $1,000 on your credit card, and you only make the minimum payments. Guess how long it'll take you to pay that off? The answer is nine years and two months. And during that time, your thousand dollar iPhone will actually cost you more than $700 in interest. You basically paid twice the price for that phone. This is from page 33 of my book, I Will Teach youh to Be Rich, where you can learn how credit cards really work, including how to pay off debt, how to automate your bills, and some of the secret perks that your credit card offers you. With Javier, if he doesn't understand this, there's no way his plan will actually succeed. He's already lost the game and he doesn't even know it.

Do you see why Jessica might be uncomfortable with the plan that you suggested?

Yes, totally.

Tell her.

I understand. Jessica. Why the point of View that, you know, I don't look at something so simple yet so important. Line, date, like the interest. I don't, I don't know. I cannot tell you if it's 4%, 5%, 17%, 15%. And that's really sad because I understand your point. And just you look at these numbers all the time and I think I'm getting it because my plan for the $9,000 is not $9,000. It's going to be a lot more money. So it's going to be probably like three times that time. If it's, or if it's double the, if it's 18,000, it's going to take me now, not three months or four, eight months. Yeah, right, I understand. Okay, thank you. I never, I never really analyzed this aspect as I said, something so simple as the interest. Interest rate.

Yeah. Okay, I appreciate that. Jessica, what do you think about what Javier just said?

I think he's starting to realize a little bit of what's going on in my head and what's making me panic. I also think still his plan is not very practical and that he is not taking into account that his $4,000 a month is pre tax. He is self employed, so he's not accounting for his 2021 taxes that he still owes, his 2022 taxes that he's currently incurring and several other personal debts that he has to pay off. So he does not have $3,000 a month to put towards this credit card.

Yeah, that's probably true. So we could probably take that number down by half just to be safe. Javier. So instead of making $3,000 a month worth of payments, you could probably practically make $1,500 a month worth of payments. Meanwhile, you're not just paying off $9,000, you're paying off $9,000. That's compounding very quickly. So you're paying less towards more. Do you see how it's like giving money to one of those bad guys and every week you owe them more.

And more and more and more and.

If you don't, they're going to break your kneecap. In this case, it's the credit card company.

Well, I'm shocked. I mean, I, and I didn't even think about the tax part when I got the credit card, especially the last one. It's metal, it's heavy. It's like metal.

Oh my.

It's like I'm like a little kid, you know? So I was like, it's my credit card, I'm gonna spend it the way I want it.

I know.

Listen, I can hear you, the way you talk about it.

You know, the credit card gives you that limit.

Do you know what, why they give you that limit?

Why?

Look at the situation you're in now. You're probably going to end up paying them over $25,000. They gave you the rope so that you could hang yourself. And you know what? You said, thanks for the rope. Can I have a little bit more? That's how it works. Now, I hate that most of us don't understand how credit works, works. And I appreciate you saying, hey, ignorance, okay? We're going to quickly learn about how this works, okay? I'm not here to judge you. I want you to understand what's going on and then decide if you want to make some changes because you can get out of this situation. It's absolutely possible. 100% suggest you don't need to be playing the mileage game. This mileage game is going to cost you tens of thousands of dollars to get a few airline tickets. It's not worth it. This whole idea of we need to spend to hit our minimum. Stop that. If you cannot afford to pay it off that month, then don't buy it. It's really as simple as that. I hate that credit cards take advantage of people who don't know any better. I hate that they engineer their marketing to take advantage of people who are ignorant about it. But I also think you got to take responsibility. Deep down, you knew you're going to have to pay this off. You knew it, and you mentally put it in a different bucket and you use all these clever techniques. Have you noticed I wanted Jessica to have a great time? Okay, Jessica would have had probably just as nice of a time at a hotel that was half the price. If you said to her, you know what? I have a plan. We're going to have an amazing time this time. And next time when we come back with even more money, we're going to stay at an even nicer place. Jessica, I love you. How do you think she would have felt if you'd said that?

A lot safer.

A little better. So it's the credit cards taking advantage of you, the ignorant, but it's also you who want the benefit that the credit card is offering you, which seems like free money in the short term, but it is truly too good to be true.

I think I'm a little bit shocked because I have been working with him for the past seven and a half years to get his finances in control and to try to teach him Some financial responsibility. He has made significant improvements to the point that I thought with him getting this travel card right before this trip, that he would be responsible with it. We don't discuss interest rates because I pay off my entire bill every single month, so I never have to worry about interest. We had that discussion ahead of time. That's why before the trip, we talked about, okay, we want to meet the spending limit. And in my mind, that's all you're spending. And then it would have been reasonable to split that amount in half and pay it off. I never even imagined that his concept of it is just to spend to the max of the card. So I'm learning a lot. I'm a little sad that what we've talked about in the past hasn't sunk in more, but it's also very eye opening to hear his perspective and to see where he is at. I think we're actually very involved with the financial independence community here in Cincinnati. We go to a lot of meetings, a lot of conferences. We have a lot of friends through this, and he attends them with me. And so I feel like he's on that same path and wanting to be in a really strong financial position, to have more flexibility with our future. And then just behaviors like this or experiences like this and to realize that he might say that he agrees with me, or he might, you know, agree to a spinning plan that we have and then do the complete opposite. You know, it's surprising, but it is what it is. It helps explain it a lot more so that I understand why he has been spinning the way he has.

We're going to flip that dynamic, and I want you to start being skeptical of what you hear. So when you get a credit card offer in the mail before, how did you use to act? Yeah, exactly.

Yeah.

I'm going to get this. This is so cool. And now, now I want you to be skeptical. Why would I get this credit card? Why do I need this? What's the gimmick?

How are they going to get me?

Rip this thing up. I don't need a new credit card.

I believe that I. Because I had so much, like, my credit was really bad. I had. I applied for bankruptcy, like, five years ago. And I've been so good to try to get my score, my credit score higher and higher. And when I got the first credit card, the silver one, I started looking at it and trying to pay it everything in time. And it went up so good that it tricked me when I saw the blue car, because I was like, I'm being awarded for being so good. And that's where I tricked my head, because I took it like an award and it was a big mistake.

Nobody in the financial industry wants to give you an award.

They want to take your money and bleed you dry.

Your money habits need to radically change. This is going to require some real work. So I want you to start getting skeptical. They're not your friend.

I have to make a change right now. Otherwise I can lose Jessica. I feel that I'm slowing her down on her finance, and I don't want to do it to anyone. As much as I love you, Jessica, I need to make a change. And I'm sorry about my ignorance. It's bad and I understand. And I need to make a change because it makes me feel like when there's a soccer team and all the players are good and you have the guy that sucks the defense and you can get scores like that. So I feel like that guy right now. And I need to train to become better because it is affecting me a lot right now.

Listen, I appreciate you being so honest. Honest with me, honest with yourself. I love that you acknowledge I don't want to be the person in this relationship holding us back. I also appreciate that you use that soccer metaphor and said, hey, right now I may not be the best, but I need to train harder so that I can be as good as everybody else on the field. I think that there are definitely ways to transform this situation into something positive. I have seen it many times.

Javier's approach is very emotional. He talks about love and excitement and happiness and guilt. There's nothing wrong with emotions, but you can't build a rich life purely based on what you feel. You have to pair that with knowledge, with some real analysis to see if what you want is possible. Sometimes people are too focused on spreadsheets. But I don't think Javier has looked at a spreadsheet in a long time. Let me see if I can find out why he treats his money this way.

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.

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So stay tuned.

Join the loyalty program for renters@joinbuilt.com Ramit that's J-O I N B I L T.com Ramit and make sure you use our URL so they know that we sent you. What comes to mind when I share these specific moments? Renewing your passport. Scheduling a dentist appointment. Replacing that light bulb that's been out for six months and you're not sure what's the right bulb. We all procrastinate on weird stuff and taxes are usually right at the top of that list. We wait until the last second, then we get overwhelmed, we gotta pull all this paperwork and we're panicked because the deadline is approaching. That's why I recommend gilt. Now that tax season's over, this is actually the best time to get ahead. If you run a business or you filed for a tax extension, one small move right now could save you thousands later. G is not just another CPA firm. They helped one of my colleagues rethink his entire tax setup. Now he's saving more than he spends on tax prep. With gilt you get a proactive use year round strategy, not just a one time filing. Credits, deductions, business structure.

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What do you remember about money when you were young?

Didn't have to worry about a thing. My dad was a president of A company. I study at a private school. I had a school bus, full kitchen. I live, like, not as a rich kid, but my school was, like, very expensive. My family's middle class. We had a housemate. It was not until I moved to the USA when I was 18 that I had to prepare my own breakfast, do my laundry, stuff like that. So I work when I started here, so I didn't have any financial education at all. Even my dad never sat down with me and said, hey, you know, what are you gonna do in the future?

Javier moved to his aunt and uncle's house in Florida before moving out and becoming a valet.

Sounds like it was a pretty nice house.

Huge. Yes, huge.

Jessica's at pretty nice house. She's nodding her head and showing me the money sign.

Yeah, they're millionaires.

Okay, so you go from this millionaire.

House to being a valet parker.

How much were you making when you were doing valet, Javier?

$6 an hour.

Okay, great. And so what was that change like?

It was hard. The thing is that my dad lost his job because of the situation with the FARC, with the guerrillas. This is in the early 2000s. So he left everything and came back at that moment and asked for asylum, political asylum. So we moved, and it was very impacting for me to see. We rented a room, and my dad came from being a president of this company in our house to live with me in this trailer home. We both worked at the valet parking. Me seeing my dad running, parking cars when he used to go to the club and get his car, you know, it was very, very. But it gave me also a lot of effort, a lot of love to work, to see my dad doing that because he's warrior. And we both made it. Then we finally, after six months, we. We rented an apartment. But that change was really hard. It was really, really hard. And I just. All the money I made in that moment was to get an apartment. I remember saving it, saving it. The first time I made $300 in cash, I went to, like, a Best Buy and buy a TV with a VHS incorporated. And when my dad came home, I was proud. I bought a TV because I wanted us to have a TV in this small room between a single bed and each bed. And all the money I did was for that. So it's probably. I never made money for thinking about me.

Did the two of you live in the same room?

Yes.

Yeah.

For a year almost. Yeah.

I appreciate you sharing your story. That cannot have been easy for your dad to have been president of a company going to A club valeting his car. Now he's the valet. And the two of you, grown men living in a room. I don't think a lot of Americans who were born here can fathom that. It's not the same way that most people in America grew up. You know, whether you're at the upper end or the lower end of the socioeconomic spectrum in America, it's expected that at a certain point, you're going to have your own place. And even if you're living with your parents, you're not living in their bedroom. That is almost unheard of.

Right.

And out of necessity, that's a huge difference. So that leaves scars. What happened?

After a year, then we got this apartment closed just for us. And then we were expecting my mother and my sister because the asylum, they were in Colombia, so they flew. But I wasn't gonna. We were not gonna have them move to a room. So we had an apartment. This is in South Florida, in Lantana. So then we got the apartment they came in. We kept working, working. They couldn't work because my sister, when she was a baby, she's 42, but when she was a baby, the housemaid let the stroller fall and she had a concussion on her head. It caused her paralysis. So she cannot run or walk. It's like down syndrome. But she doesn't. She was born okay, which is another something. Well, but she and my mom and her, they move here or Florida. And then the government didn't give the paperwork to my sister. They start denying her because they say anybody older than 18, they have to fill out their own paperwork and sign and where is her? And we're like, okay. So we send the doctor's letters explaining that she depends 100% of my parents. And the government sent back article number the same thing. So we hired a lawyer. And the lawyer said, look, the government is not going to issue the paperwork for her because her condition, she's already 30. So we appealed and they denied again. So my mom went back to Colombia with my sister because they were here in the apartment doing nothing. And my sister, my mom, she renounced to her paperwork because her citizenship, her citizenship because she wasn't gonna leave my sister in law. So when we sent her to Colombia with my mom and my sister, it broke my heart. And you have no idea how much I love my sister.

Is your dad still in the U.S.

No, he's in Colombia. He retired. He worked. He was here for 14 years. He said, I don't wanna be here alone. So I'm going Back with my daughter. And that's one of the reasons that I. That we want to move to Bogota. Jessica loves Bogota. She's in love with that city. But I also want to be closer to my sister because she cannot talk. Every time that I go and I come back, I cried for days, man. It really hurts me. So we've been talking about this for years. We were going to do it right before COVID and I think that's one of the main things or reasons that I want to be, you know, down there with her.

What a journey for Javier, going from wealthy in Colombia to wealthy in Florida to suddenly becoming a valet and then living in the same room with his dad, who also became a valet. That journey is incomprehensible to most of us, including me. Here's what I noticed. Javier loves his family. When he talks about spending, it's not really on extravagant things for himself. It's for his family. It's for his sister. He shows love by spending. I also noticed that his spending isn't financially responsible. It's unsustainable. And if he keeps spending on his family to show his love, he'll probably lose Jessica. I suspect Javier has never really faced any consequences for his spending in the past. Sure, he's run out of money, but he could just borrow more if he really needs it. If he loses Jessica, that'll be the first time his spending has ever actually cost him something that he truly cares about. And thankfully, he's starting to realize that. That this isn't just theoretical.

He's got a good heart. It's just not logical for his current financial situation to spend like that. I think I need to take a step back, and I need to see him take a step forward and really put in the effort on his part to make the changes that need to happen.

Yeah, I'm gonna try to do my best. Or not try. I'm going to my best to. Again, the only thing that I can think about right now is minimize expenses, put the credit cards away, and try to. To talk about every. Every time I get my check, how I'm going to spend, spend it. And if. If I cannot come up with a solution in the next five or six months and everything is going the same. I don't know what else to say than to work my butt off and bring as much as money as I can. I have. Yeah, but I already. Then we're done. Then we're done.

All this talk about making a plan got me curious. I know Jessica gave him a copy of my book. Did he read it?

A little bit.

That's a no. I asked him, why?

Because sometimes I go to work and I don't have that much free time. It's an excuse. I could come home and sit down, but I'm not into. It's hard for me to try to read finance books. She gave me different ones. I tried.

Hold on, hold on.

I'm not a good reader.

Did you give him Rich Dad, Poor Dad? Did you give him these shitty books? What'd you give him?

I did not. He actually showed that book to me and I said, this is not the book that you need to be using as a model.

Because if you start someone on Rich Dad, Poor dad, it's no surprise. After they lose all their money, they're going to go, oh, these personal finance books are terrible. Yes, some of them are. So start with a good one. You know, Javier, first of all, it doesn't matter to me if you read my book or somebody else's book.

And I understand some people don't like to read.

Fine.

I'm not going to force you to read a book. But did you know there's audiobooks?

Did you know there's podcasts? There's a solution, and she's not going to deliver it to you.

Usually, I don't get into the financial weeds. On this podcast. We don't calculate interest rates because, well, I can't think of a more boring audio experience than listening to me sitting here typing on a calculator. But Javier doesn't understand his numbers, not even the basics, and I want to help him. We all have someone in our lives who asks for help, and then when you try to help them, they ignore your advice, and three months later, they're back asking you for more help. It can be exhausting.

I don't know the answer to that.

Situation, but I have learned a few things in the last 20 years of my business. I've learned that if someone asks you for help and you want to help them, you might have to show them in a way that feels free, frustrating to you. After all, why don't they just trust you? Why don't they just do what you say? Well, the answer is that when someone is starting out, they have all kinds of fears and objections and barriers that hold them back. You've already gone through them. You know what it's like on the other side of that. But they don't. So I want to help Javier, and as a result, I'm going to work through some of these calculations with him. But there's just one twist. I'm going to make him do the calculations so that he has skin in the game.

When I talk to new business owners, I hear a lot of the same motivations. I want to make extra money. I want more freedom. I want flexibility. But I will tell you something that I've never heard. I want to start a business so I can fill out a bunch of tax forms. That sounds like my hell. The good news is you don't need to be a tax expert to start your own business. Instead, you can use Gusto, this episode's sponsor. Gusto is online payroll and benefits software built for small businesses. It's all in one. It's remote, friendly and it's incredibly easy to use so you can pay, hire, onboard and support your team from anywhere. They offer automatic payroll tax filing, simple direct deposits and health benefits, workers comp 401k matches, you name it, they can help. Plus, it's quick and easy to switch to Gusto. Just transfer your existing data and get up and running fast with no hidden fees and no surprises. Try gusto today@gusto.com ramit and get three months free when you run your first payroll. That's three months of free payroll@gusto.com ramIt once more. Go gusto.com ramit I think one of the best characteristics for people who actually end up living a rich life is being curious. Like lots of people will say their rich life is traveling more, but I think that's just a word. Where do you want to go? What specifically do you want to see? And if I were to ask you, what could you do to make your trip 25% more amazing? If you want to explore your curiosity, I recommend checking out Masterclass. I love Masterclass. I've gifted memberships to family before and very soon my own masterclass called Financial Wellness will be added to their library. With Masterclass you can learn from the best to become your best. Plans start at just $10 a month and you get unlimited access to over 200 classes taught by the world's best business leaders, writers, chefs and more. Plus, there's no risk. Every new membership comes with a free 30 day money back guarantee so you can try it out before you commit. One class that I recently watched was Prepare to Be Unprepared with Amy Poehler. What I learned in that masterclass was how to adjust to situations on the fly. Very similar to what people in Improv do. Masterclass always has great offers during the holidays, sometimes up to as much as 50% off. Head over to masterclass.com ramit for their current offer. That's up to 50% off at masterclass.com/ramit masterclass.com/ramit.

If I make $4,000 a month in three months, that's $12,000 right? Out of that, $3,000 have to go to expenses. So that leaves me with 9,000. Out of the 9,000, I have to get half for taxes. So that leave me with only $5,000 in four months. So in order to make $10,000 free to make that those credit cards go away, it's going to take me seven months.

How much is the interest going to be?

I have to check. How much is the interest?

That's the interest rate.

2399.

Okay, and what do you think about that number?

High.

It's really high. So you know those tickets that you got?

You got.

We're about to find out exactly how much it is.

Okay. For every $5,000, I have to pay 1200 in interest. Okay, how do you get that 9,000 times 24%?

Now, it doesn't work like that. Let me explain how it works. It's worse than you think. So you remember when you've gone to these financial independence meetups and you hear about compound interest, you know, you invest $100 today and it grows like that. You remember all those charts and stuff you've seen. Have you ever seen something like that? Okay, it's the same thing with your debt. So if you have $100 worth of debt, every month you're accumulating interest, more money on that debt, and it compounds.

Every month and every year.

So it compounds. Meaning that debt is growing. Not only do you have to pay off the amount you owe, you have to pay off the interest as well. And that interest is growing. You're running a race against your own debt. Okay, so at 24%, that is a really high interest rate. You have to pay a huge amount of money in order to make a dent in that debt. Otherwise it will continue going up. Okay, so it's not simply $9,000 times 24.

There's a different calculation.

It's too complicated really, to do on your own. All right, what do you see?

Your estimated monthly payments. Months to pay off 19 months. Total principal paid 9,000. Total interest paid 1,867,62.

What does that mean to you?

That's going to take me forever to pay 19 months, 19 more than a more than a year and a half, and I'm going to pay $2,000 on top. So I Would need to pay way more than that monthly.

Okay, go ahead.

Okay, this. Okay. If I make a payment, an expected payment of $1500 a month, I can pay that, paid off in seven months, and I would only be paying $778 of interest. Okay, so the goal is going to be if I do a $2,000 payment a month.

Is that reasonable? So that's 50% of your paycheck. You're not considering living expenses or either year's taxes that you need to be setting aside.

I know what you're trying to say, and you know, I would have to get a second job, I guess.

Hold on. You're doing great, Javier. Let's take this step by step. Is it realistic that you work 16 hours a day and then you get a second job?

No, of course not.

Your inability to be realistic is what has gotten you into this situation. The real underlying issue is the magical thinking. We'll do this, we'll do that, and it will work itself out somehow. But now here you are, for maybe the first time, facing real consequence, that magical thinking stops working. So what do you want to do?

I mean, the only thing I can offer, really, is to be proactive and try to analyze and plan ahead about how am I going to pay these cards and not use them ever again. Work as much as I can again. I know that I said this before. I don't know what else to say. I'm being honest. And. Jessica, if you want to break out with me right now and live your life and then we'll talk about it, because I really. I don't have the capacity to say anything else. I'm sorry.

You do.

I don't. I don't. I don't know what else to say.

Why don't you ask? So, what's the common pattern? When do things go bad?

They went bad when I spent those savings.

Okay. When you go. When it's with your family, you spend way more than you can afford. Would that be fair to say?

Yeah.

Is that not the crux of this whole thing?

So what do we want to do about it?

Don't spend more than I can afford. Okay.

That's easy to say. Is that realistic? If you went home tomorrow, what would you do? Tell the truth.

Probably. What I do when I get there was we plan to go out, you know, going out of the city for a couple of days with my parents, and we share expenses. Tell my dad, can you cover the trip for the family? I'm gonna come, but, you know. But if I was by Myself, without knowing anything. Tomorrow I would probably take them to dinner, to lunch.

Yes, I know.

I don't think you know. I know you would take all your.

Money and spend it.

I think you're just saying words, but.

You'Re not actually hearing yourself. You're six months away from not being in a relationship because your partner is making some very honest, fair demands and expectations, and you're just kind of going with the flow. Yeah.

I would go home and I would.

Probably take my family out to dinner. What is the crux of the issue here? How do you see money when it comes to your family?

If I have it and I want to have a detailed or an invitation with them, then I want to do it.

If I have money, the way I show love is by spending it on them. Try that one on.

Yeah, 100%.

If I see my family and I don't lavish them with gifts and trips, then it means. Finish the sentence.

For me. It means that I don't love them.

Yeah. Do you really believe that? Deep down?

No.

But your behavior says it. When was the last time you went to see your family and you just stayed at home with them and you were just there? No trips, no expensive orthopedic gifts, just you spending time with them?

Five months ago, October.

You wanna spend any money?

Not really. My father had a surgery, so I just went to take him to the hospital and I just. I didn't really go anywhere. No, I mean. Good. He was great. Do they love you anymore? Yeah, of course. I mean, they'll love me even if I don't have one Penny. I know that.

How about Jessica? Would she love you if you kept on going the way you've been going?

I think so.

I think she would love you. Would you two be together?

I hope so. I know this is becoming to an end if I continue doing this. I know, I know. I'm very aware.

Okay.

Before six months.

So if you went home and you didn't lavish your family with gifts and trips, would they still love you?

Yes. Okay.

What is all this spending on them really about?

When I go out, I look for a nice hotel that has the best pool possible for my sister. Solely for her, not for me. I don't care if I stay in a shitty hotel. I don't care. But I find the best for my sister because I want to have her. I want her to have a good time. Time. My parents are not together as a couple, so they don't really share time.

Sorry. It's okay. Take your time. I want to hear what's going on in your head?

I'm taking more responsibility than I should because my father exists and my sister is not my daughter. I just feel I'm sorry that I owe her so much because I've been away from her, that we get separated and I owe her so much time that I try to buy things for her. And I see that is a mistake because I'm ruining Jessica's relationship. So what's fair in life, man? Be good with your family and sacrifice your love or just don't mind.

I'm with you on every step of what you just said. Except for that last sentence. I'm with you. You are spending money because of the guilt of not being able to be there with your sister.

You love her.

You want the best for her. I can tell. You don't need to live in the fanciest place.

You lived in an apartment with your dad. I know you don't need it.

But there's one thing you said at that last moment that reveals everything you said. So what is it? Spend money on my family and ruin what I have with Jessica? Or what's the alternative?

Or be limited, you basically said.

Or just give up. Right now you're spending all of your money and even money you don't have for your family, driving a wedge in your own relationship here. What is the alternative?

Not to spend money on my family.

Really?

Not to spend any money at all?

No, no, no. Just like maybe 30% of what I usually plan to do and have my dad pay for most of the trip because at the end it's his responsibility to which he does. He always, you know, we don't have any issues, but he probably should lead those expenses.

Could you make that happen?

Yeah.

I can tell you have a very supportive family, and I can tell there's a lot of love between you and your family, and vice versa. That's fantastic. It just seems like some of the patterns that you have fallen into are not serving you. You go, you buy all these expensive things. Some of them really, you can't afford them. You just plain cannot afford them. Some of them, they come from the heart. But there's lots of ways to show your love. If you are not in a good financial position, your family wants the best for you. They don't want you to take every penny you've got and go into debt. So they can go stay at a nice hotel, save your money, invest it, and one day soon, you'll have more money than you know what to do with. Then you can take them and treat them to the nice hotel.

Okay.

But until then, just be there.

Put yourself in Javier's shoes. He deeply loves his family. He lives in a different country. On the rare occasions where he sees them, he wants to show him how much he loves them. And by coincidence, he just got a credit card that gives him free miles and a $5,000 credit limit.

Interest payments? Sure.

He'll think about all that stuff later. For now, it's time to spend time and show his love for his family. You don't have to agree with Javier to understand why he acts this way with his money. This is one of the most common sticking points for people who spend more than they make. They often use money to make to represent something else in their lives. Like love.

Love.

Love's a great thing. Who can argue with love? Nobody. So when they conflate money with love, you can see how hard it is to unwind that connection. The truth is, Javier can still love his family without spending thousands of dollars on them.

Okay, now let's talk about Jessica. Do you believe that if you don't pay off this debt in six months. Exactly. That Jessica will break up with you?

No. Okay.

What do you believe?

I believe that if I show her my intentions, organizations and even that if it's going to take me one month or two, she'll be flexible and say, okay, don't worry, we'll do it in seven, in seven months or eight, or whatever.

Okay.

I have to show her and show her in the first two months that actually I'm doing the plan. Okay.

Jessica, is that true?

That is absolutely true. I just want to see that is taking the steps and he's making progress. It does not have to be six months on the dot.

I wish everyone could see me because I'm cheering right now. I'm cheering. I love it.

I knew. Yes, this six months is kind of important.

Jessica has her metrics. She has her own vision. But I also can tell with the two of you, there's a lot of love.

And it's not that there's a hard.

Line at six months. In fact, Jessica has said repeatedly today, hey, our income disparity is not an issue. It's that I want him to make a plan, to take responsibility, to step up.

That's awesome.

That's the light we've been looking for. So if you need a couple of extra months because of math, fine.

I don't think Jessica.

I had a hunch Jessica would not penalize you. And I'm glad to see that smile.

On Jessica's face that, you know.

Yeah, she can be flexible. But Javier, this is where we really need to get into it. What does Jessica really want from you?

Change. She wants me to take leadership on the payments. She wants me to like really give her a whole explanation of how much interest and paying. That way she can know that I'm there paying attention and executing the plan, you know, rule by rule, with precision.

Yes. Well, this is great.

That make me very happy and very hopeful that we'll be able to follow our dreams sooner rather than later.

That's beautiful. That's what I want to hear.

I never saved money. So realizing this, it's an eye opening for me. It's also. It touched my heart because I know that I don't have any necessity to show off in front of my family with money or trips like that. And my father can help me and I will do that. It's a big thing that is going to help me with 50% of my or more of the expenses that I have when I go down there. I think that I'm acting like my sister's father, taking that responsibility that I don't have because they don't have any necessities of transport of their good. My dad has a car. They're good. So they don't need. Even if I was to die tomorrow, they're financially fine. They don't need anything from me. So I don't think. I think that's what impacted me the most, that I act like their dad, their father, and I'm not.

I'm so happy to hear you say that.

Everything.

To be able to trace back your behavior to the past and you had some things happen to you and to be able to really connect, that is really hard. But it's so obvious. It's screaming to me as you talk. You know, you came from a situation which was very wealthy and then not wealthy.

You know, living in a million dollar.

House and then being a valet, that's a radical shift. And to never have been taught how money works. And I can hear it. I'll never blame anybody for being ignorant about something.

Never. Because we all know more about something.

And less about another thing. What I'm really happy to hear is you want to take responsibility.

I don't know what will happen with Jessica and Javier. I was personally surprised by a lot in this conversation. I was surprised when Jessica realized the extent of Javier's understanding and she almost looked sick. She'd mentioned that they've talked about this a lot. They even regularly attend financial independence events. But only in this conversation did she realize how much Javier actually understands about money. And although that can be painful to hear, I also think it gives them an honest opportunity to recalibrate and to get on the same page. As I always say, a rich life involves being honest with yourself and honest with the people around you. One big lesson for everyone listening when you're creating your rich life, emotions matter, but you can't only rely on them to become confident with your money, you have to become competent. For Javier, I suspected there was something deeper to his overspending than just being irresponsible. And when he told me about his family history, it was eye opening. Suddenly a lot of what he was doing with money started to make sense. At the end of our call, I stayed on the line and I worked worked with them to develop a plan. I gave them some homework to create a simple financial plan for Javier's debt, and I also asked Jessica to write down her expectations for what she expects from Javier. I'm hopeful for them and I thank them for coming on the podcast. Thanks for listening to I WILL teach you to be Rich. I'm Ramit Sethi. Please follow the show on Apple, Spotify or wherever you listen to podcasts. If you haven't read I will teach you to be rich my book. Pick up a copy. You can get it at any bookstore or any library and it will show you the specific tactics for how to build the I will teach you to be rich system into your personal finances.

Sa.