Kenna has $50 in savings and $400,000 in debt. Ramit Sethi finds she's spending 86% of take-home pay on fixed costs, well above the recommended 50-60%, and questions past financial decisions like using a condo profit for a down payment instead of building a safety net.
$50
$400,000
86%
50–60%
Your savings?
50 bucks.
And your debt?
400,000.
Okay, what is that 400,000?
Our house, our credit cards, and our personal loan.
The personal loan was to make improvements to the condo that they sold. And the condo is the one that they claimed to make a $78,000 profit on, which obviously is not true because they didn't really calculate the phantom costs. They then used that profit to put a down payment on the next house and to pay off a card or two and Kenneth's car. But they elected not to pay off the loan itself. What's that big number, Kenna, you see on the right side? Oh, 86%. 86%. So you're spending 86% of your take home pay on your fixed costs. What does that number tell you?
That's too high.
That's correct. What number should it be, theoretically? 50 to 60. Yeah, that's what I like to see. You know, we can all argue if I'm right or wrong, but 50 to 60 is a really healthy range.
