69. “We make almost $300k per year but we can’t afford our mortgage”

If you've recently discovered this podcast and you've wondered how can I get Ramit to answer my specific money question? There are two ways to do it. Number one, you can apply to be on this podcast, although we are already full for the rest of the year. Number two, you can join my Money Coaching membership in this program. We do a ton of cool stuff I want to make sure you know about it. We do a monthly live call with me where I cover some of my favorite money topics that I can't go into publicly in as much detail as and I break down our members conscious spending plans. Plus I answer your questions live. We also have tons of virtual events coming up that cover every aspect of living a rich life. For example, our new event Money for Aging Parents is coming up at the end of October that is included for all Money Coaching members. You get access to our library of all past calls like how to Find an Extra thousand dollars a Month and how to Do a Rich Life annual review. Plus we have a Money Coaching community group where you can see inspiration how other people are spending their money and get your own questions answered if you want to get help. If you want to meet amazing other people in Money Coaching and you want to build your rich life faster and bigger, you should check out Money Coaching today. Go to iwt.commoneycoaching to join right now. That's iwt.com moneycoaching how many of your friends and family and the people around you talk about their house, housing costs, housing investments, etc.

Everybody. It's disgusting.

It's a status thing. If you're not playing that game, then you're what are you doing? Even if it's all fake.

One of the things too leading up to this was one of our friends who, you know, we knew didn't make as much money as we did. They were able to buy a nicer home.

Uh oh.

Can't help but feel a little jealous.

Right when you bought at the peak, did you have a conversation that it might go down?

Not in depth.

It just all kind of came crashing down together like we have been. It's affected all areas of our life. This is a constant state of anxiety every night.

Chris and Camilla are 33 and 31 and collectively they make almost $300,000. They live in a high cost of living area and they recently bought a vacation house. You know, like everyone on TikTok tells you to do, so you can rent it out and make passive income. The only problem is they realized they're losing money. So how should they handle it? And what will other people say? This episode reminded me of another Canadian couple, Eric and Elena, in episodes 49 and 50, who also bought a house they couldn't afford. But I think you'll find this episode fascinating for the differences, especially the numbers. I'm Ramit Sethi, and this is I will teach you to be rich. Just take it back. Who was the one who had the idea to buy the vacation home?

That was me.

Okay, tell me what went through your head years ago when you were thinking about getting this vacation house.

It's always been a bit of a dream for us to kind of be able to do something like this, but to be honest, it was more of a spontaneous thing when we actually kind of got down to it. I just. I go down rabbit holes sometimes and I get very passionate and let's just say passionate about things and going about with it. Once we kind of got in a bit of a position where we were financially, I thought, had the means to do it. You know, I was on maternity leave at that time still, so I had. I had time, even though I was busy. Chris just started a new job that was paying a little bit more, and, you know, I just kind of started daydreaming and looking at houses and working out numbers. And from there we started going to listings, and it just kind of snowballed from there.

What was in your mind about why buying a vacation house would be a good decision for you?

Well, you know, I thought that it would be somewhere that we could take our girls to and build memories. And the way that we kind of worked out the numbers, you know, it was a little aggressive, but we. We thought that it could pay for itself ultimately because we were renting it out, and it has so far. But, you know, we're heading into a different season now, and, yeah, we're kind of stuck without a firm plan of how we're going to take care of the mortgage.

Okay, when you say it was aggressive, tell me a little bit about that.

We had never done this before. Right. So we did research, we did competitive analysis based on what other rental homes were charging, and it was just kind of going with that and then came up with a number, and then, you know, came up with a number in total for the year that we thought we would make. And yeah, I mean, so far it's been good because we got into that summer season, but now that we're heading into winter, for the next little bit here, it's. It's a little bit scary.

Did you factor in winter in your analysis.

We did, we did, But I think there were just other cost that, that we didn't really factor in.

Like what?

Well, you know, for example, the trips to get there and back. And then when we do that, you know, it does end up being a little bit of a vacation as well. Of course. So there's what you would spend on vacation. Right. And also just a phantom cost, I'd say, of just how much work it takes mentally on top of everything else.

If you know the phrase phantom costs, that means you've been listening to my stuff for a while, which I commend you for. So are you telling me that there were even more phantom costs than you had anticipated?

Yes.

Phantom costs are the unexpected costs when you buy something. And I'm obsessed with phantom costs because they profoundly affect how much money you have. But they're engineered to be invisible. And you know, the craziest thing of all, people actually do not want to know about their own phantom costs. To me, it is so crazy that some people actually believe they made hundreds of thousands of dollars from selling their house. But if you show them and factor in those phantom costs, they actually lost $450,000. Of course, those same people will never hear this. They don't listen to podcasts like this. They refuse to have a conversation about how they may have not made the best financial decision. And this is why I love my job. I want to give you a simple example of phantom costs and how profoundly they can affect your finances. When I had a car payment, my monthly car payment was $350. But when I factored in parking, gas, insurance, maintenance, traffic tickets, registration, it added up to over $1,000 per month. Now, when I wrote this earlier, a lot of people left a million comments. Oh, my God. Traffic tickets were meat. That's so bad. Your parking tickets. I don't have parking tickets like that. Listen, the amount of parking tickets I got living in San Francisco was relatively modest, okay? But you have to factor all of it in, even that annual registration, even gas, when the price goes up and goes down. Now, the more expensive the purchase, the higher the phantom costs. Most people cannot believe that a car payment of $350 actually turned into $1,000 a month. And it's true, you may not have a $200 a month parking fee like I did, but you probably also don't drive a four door Honda Accord like I did, with essentially no maintenance costs. So we factor these things in. Now let me talk about how phantom costs work with a house. This is going to Blow your mind. For a house, a basic guideline is you should assume 1% of the purchase price every year for maintenance. That means for a $750,000 house, assume $7,500 per year in maintenance or $625 a month. Are you putting that much money aside in a sub savings account? Of course not. Phantom costs are especially pernicious with a house because they're large and they're hidden. For example, your closing costs may be tens of thousands of dollars. Your taxes will likely go up. And what about those long term phantom costs that remain dormant for years? They're hiding phantoms, but then they hit you. Think of a $25,000 roof repair that hits you 11 years after buying a house that actually costs you $2,272 a year or $189 a month. Again, nobody is putting money aside for repairs like this. My friend Carl Richards says risk is what's left when you think you've thought of everything. So if you're really conservative, you'd calculate out all these things. You would take the worst case scenario, and even then you'd add another 15% to account for all the things you forgot about. Again, nobody does this, but I'm sharing this with you so you know what it would look like. Finally, if you're paying a financial advisor 1 to 2% per year, AUM, that may be the biggest phantom cost of all. You're paying literally hundreds of thousands of dollars. You're getting worse performance than you could get with a simple Vanguard fund, and you don't even know it. Well, unless you've read my book, I will teach you to be rich. Now that we have covered phantom costs, let's understand why Chris and Camila wanted to buy.

I guess it's the pride of having something like that as well, you know, it was of. What do you mean?

What is the pride of having a house? I don't understand.

I guess it's just like a sense of, like, it's just like a sense of ownership. Like you, you have another property. Like, it's a pretty big deal to have a property in this area that we live in.

How do you know?

Oh, we just. Well, for example, our current, our primary residence that we live in, you know, it's quite out there in the suburbs, but it increased by 30% in two years. So that's really partially also, I guess we didn't even cover that part. That's also partially how we got this place was we took out a loan from our primary residence because the value went up so much.

I think, you know, it was sort of. It started as one decision that we were very much aligned on and it was this sense of like capitalizing on the real estate sector in our area because it's just historically done well forever.

What area is this?

This is in Vancouver.

Okay.

Canada. Yeah. So like Camilla said, like our primary residence, it actually went up like 65%.

Really?

In two years. Okay. And so it was this idea of like, okay, well let's get another iron in the fire here and like, try to maximize, like bring in, get another property. That one's going to go up in value too.

Wait a minute. Are you guys on TikTok?

No.

You don't follow any of these crackpots who tell you buy a house, then just buy 10 other houses and then they pay your rent and you're a millionaire. You don't hear people like this.

No, I know those people exist, but.

Come on, you don't hear any of these people.

We're too old for a TikTok.

First of all, you can stop listening to these people. Second, I actually started a TikTok account. I'm not very good yet, but where I shine is roasting these fools and showing how they only present real estate and whole life insurance as a surefire way to make millions overnight. You can follow me on TikTok, Amit Sethi, and do me a favor, tag me with the worst advice you see so that I can eviscerate them. Real question for you. Do you know how often you're supposed to see your primary care physician? How about the dentist? How about a dermatologist? A lot of us just wait to get a text from the dental hygienist to know it's time to make an appointment. But your health is important and we talk about going from defense to offense with your money. What about with your health? Why not make your life easier and book this year's appointments today with Zocdoc. Zocdoc is a free app and website where you can search and compare high quality in network doctors and click to instantly book an appointment. They have over 100,000 doctors across every specialty from mental health, dental, primary care and more. Just filter for the doctors based on your insurance, your location, even ratings and find a doctor who's a good fit for your needs. Plus, Zocdoc appointments happen fast, usually within 24 to 72 hours. Instantly click through your options, book the appointment and you are good to go. If I needed to find a new doctor today, this is what I Would use. Stop putting off these doctor's appointments and go to Zocdoc.com ramit to find and instantly book a top rated doctor today. That's z o c-o c.com ramit zocdoc.com ramit 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. Gelt 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 G, you get a proactive year round strategy, not just a one time filing. Credits, deductions, business structure. It's handled. And their tech platform makes it easy to stay organized. You'll also get access to G's full tax library with guides on retirement plans, QBI and more. So if you've got a business or you filed for an extension, this is the window to take control of your tax plan. Head to joingelt.com ramit to book a consultation. And as a member of my community, you get to skip the waitlist. Again, that's joingelt.com ramit join G-E-L-T.com ramit taxes don't have to be a task with Gelt. They can be a tool to build wealth. How many of your friends and family and the people around you talk about their house, housing costs, housing, investments, et cetera, Everybody?

It's disgusting.

Yeah, okay. It's disgusting. What are we talking about right now exactly? Oh, okay.

So.

So you were like, if you can't beat them, join them. We got to get a house.

Okay, pretty much.

When you heard that kind of stuff going on around you, everyone talking about real estate, what did it make you.

Feel like you need to be a part of it? Like for me at least it was. It's a status thing. Like it's. If you're not playing that game, then you're, what are you doing?

You're a loser. Yeah. Where do you see that status reflected? For example, when can you tell that someone is impressed that the two of you own your place?

I mean, I guess it's just like in little conversations with people.

How does it go?

I mean, especially when we bought that second property. You know, you get a lot of people that are like, wow, so young. Got that second property. Like, congrats. You know, that's huge.

Beautiful. Well done.

Yeah, so it's like this affirmation that, like, yeah, we're winning. It's just little things. Like, it's just people around you. Friends, family, all the people that were trying to get this deal done, like.

The realtor, you know, congratulations, you gave me my commission.

Yeah. I mean, yeah, it's. It's just. It's around you.

And did the same thing happen when you bought the vacation house?

Yeah. Yeah, for sure. You know, your family is proud of you showing off to their friends.

What'd they say? Our son, they have two properties, that kind of thing.

Yeah, yeah.

Our daughter, they. They got a vacation house now they can. They're gonna have that for generational wealth.

Yeah, that's right. And people know. Yeah, because people know real estate is expensive here. It's. It's. It's kind of a status thing. Even if it's all fake, whenever someone.

Says, I don't care what other people think, you have to treat it like a toddler babbling. You let them say their thing, blah, blah, blah. Then you just ignore what they said because it was completely meaningless anyway, and you carry on. Nobody thinks they're affected by the people around them, but of course we are. Did you know, when I ask people, what's your money dial, most people say eating out or travel, but nobody has ever said status yet. When I look at what we spend our money on, it's obvious that we all crave status in certain situations. This is why you're listening to this podcast on a certain phone. This is why you are wearing what the people around you are wearing and why you eat at certain restaurants and have that haircut and even talk the way you talk. I would rather people just get honest about why they're buying something rather than cover up all the real reasons with some logical nonsense. Truck owners, I'm talking to you people who buy a primary residence because it's a great investment, but you haven't ever run a buy versus rent calculation. I'm also talking to you, by the way. If you're curious what I'm talking about with the buy versus rent thing, go to.iwt.com/house. Get my three step guide to buying a house and learn how to run the numbers yourself. How did you come up with the idea of taking a home equity line of credit?

We didn't have the cash for sitting aside for a down payment, so we, that was where we were going to get the down payment from.

Any concerns about taking a heloc?

No, because we felt it was a pretty safe bet considering they only let you take. You can only mortgage as much or you can only go up to about 80% of what your home is currently worth.

When did you buy Your primary residence?

2019.

Okay. And do you believe that real estate prices only go up here in Vancouver?

Yes.

And you believed it in 2019. Do you believe it now?

I think over, like, I think in short term, no. Prices do fluctuate. They're going down right now. They were peaking when we bought this other property, unfortunately. Um, but when you look at like pricing over 5, 10, 20 years, like, yeah, it feels like it's historically speaking, they do go up consistently. Here.

I have a question for you. This is like, you know, I don't get a chance to talk to people who buy at the peak that often, so this is my own personal fantasy right now. When you bought at the peak, did you consider for a moment that you might be at a buying at a very, very high price?

Yeah, but we just didn't think that that was the tail end of it, you know, like we just didn't think it was going to be going down as quick as it did. Uhhuh.

And so as you said, you know, you were putting rose colored glasses on, you thought, it's going to keep going up, we'll make money. Did you have a conversation that it might go down?

Not in depth.

God, I really have the greatest job in the world. I get to talk to people who bought at the peak who never really thought about the price going down. They're actually honest about it. I cannot say this enough. House prices do not only go up, they also go down. Rent does not only go up, it also goes down. On what universe, on what planet do I live where I have to actually say this? Guys, things don't only go up, they also come down. But for some reason, AKA the nar, using decades of propaganda to brainwash Americans, I have to remind you that house prices also go down. You must realize this when you're deciding whether it makes sense to buy or rent. And if you believe that, then you have to question the other advice you've gotten over time. Because much of it was likely misleading or just plain wrong. This is kind of a complicated thing to take out this debt. Who was giving you advice? Were you asking for help from people? Talk me through that.

Yeah, I mean, we had a mortgage specialist that we just kept going back to and asking questions to.

What, What, What's a mortgage specialist? Is that the person who gives you the mortgage?

Yeah, basically the salesperson for the bank.

Oh, God. A lot of sheepish looks on this call right now for anyone who can't see it, what is the incentive for a mortgage specialist?

Well, they get paid, right? They get paid off of what we have.

Let me share a few lessons of life for you all. First of all, there is more to Indian food than chicken tikka masala and garlic naan. Yes, yes, we know you love it, but there are other dishes you've never even tried. Get an Indian friend, go to an Indian restaurant, prepare to have your mind blown. Second, if you bank with Wells Fargo or Bank of America, you are asking to be ripped off. It's just a matter of time. And third, you should not trust anyone. When you're buying a house, every single person involved in the transaction looks at you as prey. You are their next BMW payment. So no matter how nice they are and how they helped your mom buy her house in Dallas in 1983, and it's appreciated by double, and that's a really good return, right? It's not. You do not trust any of them. You know, part of life is really understanding people's incentives. A mortgage specialist wants you to take out the largest loan you can, so they get paid the most. That's fine. Once we understand it. We know that they are coin operated. And once you understand their job on this planet, you can deal with them because you know what motivates them. The problem is you guys cover up these incentives with all kinds of bullshit. Oh, this guy Ted, he's really nice. He helped us get a better rate than the other guy. I don't care if Ted is nice. I don't care if a scorpion is nice either. His job on this earth is to sting me. So you ask Ted, how did you get me a better rate? What's the catch? How are you compensated differently than my old broker? Forget it. You know what? None of you are going to do this. Who cares? I'm done with this. Go get ripped off by your buddy Chet if you want to. Camille goes on to explain that the interest rate has risen from 2% at the time they purchased their vacation home to about 4.5% now, which would add thousand dollars to their monthly mortgage bill. Could you afford a surprise extra thousand dollar a month payment? Did you consider that rates might go up when you were taking out the loan?

Definitely, but I think we just chose to look at it with a glass half full type of attitude. It was a big bet.

It was a big bet.

Tell me more about this. This is very interesting to me because, you know, there are certain times where people will only look at what can go right. And then interestingly, the very same people in other parts of life will only look at what could go wrong. And I'm fascinated by how situationally we change. So tell me about how you looked at this analysis with as you put it, the glass half full similar to Camilla.

You know, it's. If this works out and we're able to keep this property, it'd be great to. For creating memories with the family. Like that was by far the. Although if it was purely an investment, then we would have just gone with a. A long term rental apartment turnkey that we don't even really care about.

Camila, you're agreeing over here?

Yeah.

Okay, so the memory is part of it. Do either of you grow up going to a vacation house?

No.

Where did this come from then?

Chris and I. And yeah, I think that's one of the things that we really value and enjoy in life is, is that. And you know, we didn't, we didn't do a lot of that growing up when we were younger.

How old are your children?

Four and one and a half.

Oh, okay. Congratulations.

Thanks.

Do you travel with them now?

A lot of local travel with COVID and all that. We haven't done too much flying out of the country, but yeah, I mean, we definitely love to go up just to some of the local destinations quite a bit.

Okay, okay, I get it. I get the idea that you could create memories. You have this beautiful place a little bit outside the city and you could go there repeatedly. I get it. And if everything fell into place and worked out correctly, the value of the property would go up. You could be renting it, cash flow positive. You're essentially staying there for free. It all kind of paints this beautiful picture. I get it. Listen, I love a good dream, but if the dream costs hundreds of thousands of dollars, I also love running the numbers so I can sleep at night. I want you to remember something. Not everything has to be positive, Roi. Sometimes it's fine to buy something just because you want to or for non financial reasons, but you've got to run the numbers.

I guess the other thing I'll just add, too, is that we actually, you know, considering you can call it our environment, our surroundings, our friends and our family, we live in a pretty modest home, you know, our primary residence. And, you know, out of our group of friends, we. Yeah, we live in the most modest home. They have larger homes than us or in better neighborhoods or cities. Right. And then leading, like, one of the things, too, leading up to this was one of our friends who, you know, we knew didn't make as much money as we did. They were able to buy a nicer home.

Oh, this is the beginning of every financial disaster, because we all know this. In the financial world, the worst thing in the world is finding out your friend who's stupider than you, has more money. This is a classic story in the financial world. Okay, so you found this out, and then what'd you do?

Oh, you can't help but feel a little jealous, right? Like, wow, they get to get that.

You know, How'd they do it? What do they know? That we know it?

Yeah.

You know, we. We knew, though, that they obviously, they had a couple. They had years ahead of us. Like, you know, there were circumstances of why. Like, we knew the whys. Right. But, you know, it just. You can't help but compare.

What did that feel like to you? Like, where did you feel that jealousy?

Oh, just, you know, for example, being able to have a backyard for your kids. Right. Like, that's a pretty nice thing to have.

It's like you're writing a real estate ad right now. You know what I mean? I want to have a backyard for the kids and the dog. When did you realize that it wasn't working out the way you thought it would?

We. I mean, looking at our bank account, we. So we have a separate bank account where the funds for this property comes in and out of. And then just kind of looking at that account, you know, as the season ended and was like, yeah, there's not enough cash in here to get us through the next busy season.

How much was in it?

Well, how much is in it right now is probably around $6,500.

How much would. How much should be in that account?

So 3,500 times. What is it now? November, December, January, February, March. Times five.

So 17. 500.

Yeah.

Okay, so it's over $10,000 shortfall.

Yeah, it just all kind of came crashing down together. Like, we have been. It's affected all areas of our life. Like, I'm going through my own counseling for my anxiety we're going through couples counseling together. I mean, you know, there's just a lot of things that is all of a sudden like, oh, where can we alleviate? Like what is, what is one big thing here that's contributing to kind of everything that's going on in our lives. So there wasn't a specific moment. But if you were to look at our lives now versus pre property. Yeah, I think there's a pretty big difference of our way of being on the inside.

What's the difference? Can you paint the picture for us?

Yeah. I mean you're. This is a constant state of anxiety every night when the kids, when once the kids are in bed.

Yeah. I mean, I do remember the moment that at least you communicated it to me. And it was a couple months ago. We went for dinner and we were working through our finances over a glass of wine to make it a little bit more tolerable.

This is the most romantic story I've ever heard, by the way. I, I never hear couples talking about this and I wish they did what you did. Fantastic. Keep going.

And that was the first moment that you had expressed that you were actually open to selling this property, which I know is a big step for you because you're the one that was like challenging me. Babe, stop thinking about the things that could go wrong and think about what could go right. Yeah.

Wait, that sounds like a line I use. Did you take my line and use it for your own weird investment scheme, Camilla?

No.

No.

Okay.

And yeah, I remember driving home from the restaurant thinking like, wow, okay, I feel like we can actually talk about this thing now. And I remember looking through the finances and for sure this house put us in a tough spot. But it's also just all the other costs in our life. Even though we make okay money.

I.

Don'T think we were in a position to take on something like this when I already feel like our fixed costs are way too high.

I just thought it was another phase in our relationship because we've had many instances like this in our 10, 11 years of being together where I'm the over optimistic, you know, reassuring person. It's going to be fine, it's going to work out. And he's a bit more risk averse person. So I just thought this was one of those because up until this point in our lives it had, it has, you know.

So what are the other examples where you're the optimistic one and he's not.

Well, even buying this property that our primary property. Right. Like we, we, we barely had the down payment for that as well. But I. I know I was the one that was kind of the reassuring person that said, we got to just do it. It's going to be tight. But we've always found a way to make more money and make it work and make it happen.

Yeah. And I think. I don't think we were expecting it to go up that much in value. Like, when we first bought it, I remember thinking like, and this is a little bit further out from the city. Like, I hope it actually, you know, it's good out here. And. And then with COVID it just like, there's a sense of FOMO in our market where, like, every. Anything that was listed was getting 10 different offers, and everything was going way above listing price or asking price. So it was this, like, you could feel it in the. In the. In the city. Like, people were just buying whatever they could buy. And so that really, the prices just went through the roof. Like, over the course of, like, 60 days, a place in our townhouse complex sold for 800,000. And then, I mean, 35 days later, that same unit is going for a million dollars. Like, it was just insane. And so we felt really good about the decision we made. Like, hey, this is great. Like, no index fund could have done this. And look at us. Thank God we made this decision. And so I think it was just sort of like riding that.

Well, the other side of that, I remember just thinking now, too, was like, you know, yeah, like what you said, capitalizing on that, on that money that we were able to get. Right. It's like, what if. What if for some reason we. Because the other option was we. We sold our house for that much more, and then we had that extra cash, then what would we have done with it? Would we have, like, bought a bigger property than at that point with that extra cash? That was the other kind of option that we were looking at as well.

Out of curiosity, if you had sold at that time, how much would you have in the bank right now?

We would have had about 400 and 400 to 420,000.

How much you have in the bank right now?

Cash? Maybe 12, 13,000. Yeah.

I don't usually find it useful to look back and wonder what if? Because, you know, hindsight's 2020 and all that, but just from outlining the different options you could have taken, the different paths you could have chosen, what occurs to you?

I mean, there was a very safe, comfortable avenue to go with, but we decided to go with what seems like the hardest, most high risk option instead.

And High risk gets you what?

Well, you could win big, but you could also lose big.

Here's what I noticed from their experience. First, they're very candid, very self perceptive. They're mostly honest about what they did and why they did it. I also noticed that there's a lot of hot emotions. I don't think they sound frenetic, but they definitely got carried away by all the hype surrounding real estate, particularly in their area. And you can hear this in the stories they tell about how everyone was talking about real estate, how proud people would be that they bought a second house, how jealous they might be of other people. And I remember what this is like because the same thing happened in Sacramento. Sacramento is one of those boom towns like Phoenix, Vegas, etc. That go boom and it goes bust. And there's a variety of reasons that that happens there. I remember during the boom, 06 07, there would be developments in a neighborhood. People would be standing in line to put their names in a lottery. And if you won the lottery, you got the chance to buy the house. Just think about that. Think about how supply and demand are affected when somebody's selling something. In this case, the developer makes you stand in line to put an offer down on a house. And you know what people said? They said this all the time. They would say, well we, we got to put an offer in now because it's going to go up by $50,000 next month. It's going up $50,000 every month. And then they would say if we don't get in now, we might get priced out. I want you to think about that. In what other part of life would you say that? Would you say that about peanut butter? No. And if peanut butter gets too expensive, what do you do? You don't use it or you find a cheaper alternative. But when it comes to housing, people narrow their vision. It's almost like they got punched. And you know, you start to, your, your field of vision starts to narrow. That's what they do with housing. They go, well Ramit, everybody needs to live somewhere so we need to buy now. We don't want to get priced out. Very true. And everybody should have affordable housing. That's why I'm such a proponent of building way more housing to increase supply, which brings prices down. But beside that, you know, you have other alternatives. You could rent. They go, why would I rent? And this is where you can see that they've gone down a funnel. If you believe that something's going up $50,000 a month, it would be far foolish not to get on board. And this is exactly how ordinary Ma and Pa put a bid in for something they can't afford and then end up losing a ton of money because nothing goes up forever. I know that some of us think better when we write our thoughts out, but for a lot of us, including me, I'm better when I can think out loud. If that's you, I recommend you check out Whisper Flow to save you tons of time to bring your ideas to to the page. 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. Try it for free at whisperflow AI ramit. That's whisperflow AI/ramit w I s p r flow AI/ramit or click the link in the description below. 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, 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. Gusto.com ramit.

We've talked to a realtor as well, and they still figure that we can get what we paid for it. But of course, we would have hoped that it would have gone up already by now.

Yeah.

So it's just hard to say what the future looks like.

Do they. When they tell you that, do they factor in how much you would take home?

We ran the numbers on that.

Yeah.

Okay, What'd it look like?

I mean, we'd be taking a pretty big hit. Even if we sell it for what. What it. What we bought it for. When you factor in the cost we had of, like, furnishing it and. And all those at the front end and now paying the fees for early termination of the mortgage, as well as the realtor fees, that's about $40,000 there's. And we had to pay GST, so we had to pay a tax as if it was a new property when we bought it because they had done such extensive renovations that the government likes to collect another tax off the purchase of that. So we're probably going to lose that. And that was about 40 grand right there. So all in all, we could lose, you know, like, $100,000.

If we listed now and if we sell it for.

What we bought it at.

Yeah.

As far as, like, the list price, asking price, we'd lose a hundred grand.

How much was the list price that you bought it for?

796.

Okay.

So you bought it for 800,000, and if you sold it for 800,000 right now, you would lose a hundred thousand dollars.

Yep.

Do you think people know this, that if they sell a house for the same price they bought it at, they can lose $100,000?

No, I don't think so. You have to ask the right questions.

Yeah.

You have to. You have to seek this information out.

It sucks. It really sucks. You know, there's, like, the one piece is dealing with all the emotional stuff with it. Right. Because it was such a big deal of what it was made out to be. And then the other piece is, like, the regret of. That's a lot of money. But then the other piece of that, too, is. It is a lot of money. But would we just rather. Rather cut our losses now than wait this out and it could get better? It still could.

Yeah.

But we don't know that.

Yeah. Yeah.

It's scary.

Huge kudos to Chris and Camila for being so honest. And sharing their mistake with everyone. Let me ask you, would you be willing to go on a podcast and share your biggest financial mistake? I really, really appreciate the couples who come on here and open themselves up to me. I try to help them, but I think in many ways they're actually helping all of us by being honest with their money decisions. All of us have made bad financial mistakes, and these couples are doing a service by sharing what they did and why. You know, most people have never, ever considered that they can buy a house, sell it for the same price, and actually lose tens of thousands of dollars. It just doesn't make intuitive sense. And that is exactly why I named the term phantom costs. They're invisible. And it's highly possible that you think you made way, way more than you actually did. But guess what? Even if Chris and Camilla lose $100,000, the realtor still gets paid, the mortgage specialist still gets paid, the bank still gets paid. You need to know this stuff. And when you face the cold, stark numbers like they are, suddenly you lose those visions of a backyard and kids playing by the pool. Those visions evaporate. Even worse, you start to ask yourself, could we have gotten the same thing for a few thousand dollars at a hotel or even rented an Airbnb ourselves? Was it worth it? This is why I insist. For the biggest purchase of your life, you must understand how the math works. I put together a guide on knowing if you're ready to buy a house. It's free. I'm going to add it to the show notes. Let's see what we learn by running through Chris and Camilla's numbers. Before I had them come on the show, I asked them to fill out a conscious spending plan which breaks down their spending into four categories. Fixed costs, investing, saving, and guilt free spending. You can get your own conscious spending plan and instructions for filling it out at iwt.com/episode69. Now, normally I like to see fixed costs between 50 to 60% of take home investing, 5 to 10% minimum savings, 5 to 10% minimum, and guilt free spending between 20 to 35%. Listen in. So how much do you have in assets?

About 1.74 million.

Okay. And your investments.

Down to just under $11,000.

Okay. Your savings?

About $13,000.

And how much debt do you owe?

1.48 million.

All right, so your total net worth is about $280,000. How old are both of you?

I am 31.

Okay. Chris is 33, Camilla's 31. And your incomes? Let's go, Chris, then Camilla.

So My base salary is 135 and then my bonus, which is annual, is around 50,000.

Okay, awesome. Camilla, what's your income?

100,000 annual salary.

Great. All right, so the two of you collectively make around 280, maybe a little higher gross. And you're in your early 30s. How do you feel about that?

Pretty good. But also we are in Vancouver, so it's just, it's just making us live a comfortable life.

Okay. Chris, how do you feel about it?

Yeah, same. I think 10 years ago I would have been thrilled to know that. But now actually making that money and seeing the quality of life we have, it's, it's not all that impressive.

Yeah.

Yeah.

I do want to say, I. Listen, I live in high cost of living cities too. And I think for someone who doesn't, they're just like off. You make $280,000 a year. What are you talking about? And the fact is that is a lot of money. It is. And we'll look at your expenses. You know, some of the expenses you're spending, okay, they might be considered luxuries, premium things, et cetera. But I do want to acknowledge that high cost of living cities have expenses that are often extremely costly. You know, I'm talking about everything from the comparative price of a sandwich to childcare. It is extremely expensive. Now you don't have to have child care. That is a choice. Some people have the option to do a variety of things, but fact of the matter is living in some of these cities, very, very expensive. The least interesting thing in my life is some dude living in a city with 480 people munching on his month old pickle, having the avatar of a piece of cheese and then listing off all the reasons he wouldn't ever live in New York City or LA or Vancouver. We get it, dude. You're scared of crime at the Santa Monica farmers market. But at the same time, almost nobody living in these high cost of living cities acknowledges that you're wealthy. 280k a year. In your 30s, you are wealthy. So let's just get it out on the table. Let's be honest, then we can decide what to do. Can somebody tell me the percentage of your take home that your fixed costs represent? Just before you tell me that number as a comparison, I like to see that number between 50 to 60% of your take home. What is your number of fixed costs?

84%.

Oh, wow. Wow. Are you telling me that the conscious spending plan has automatically narrowed in on the problem here? That is so Crazy. I wonder who came up with this conscious spending plan, which you can find on iwt.com podcast. All right, so let's, let's take it from the top here. So your rent, well, your primary house mortgage costs you roughly $3,000 a month. And your vacation home costs you $3,500 a month. Okay. Anybody find that interesting?

Vacation home was more expensive than our primary home.

Yeah. And again, the thinking there was we're gonna just like print money and it's going to be profitable, etc, right?

It's gonna pay for itself.

It's gonna pay for itself. That's. That's the favorite word of people, you know, on the Internet. It's, it's gonna pay for itself. It cash flows. I go, do you even know what that word means? Cash flow? They just throw it around. There are a few words that people throw around in the financial industry that almost like, I don't know these Marvel comic people, but I can imagine there's some Marvel superstar who has some trick where they throw their hands up and it just blinds people. That's what this is in the financial industry. These words, blind people. Let me, let me share them. Passive income, cash flow. What else? Tax benefit. Tax benefit. Radicalized anti tax weirdos. What else? Anyone else have another one? If you have a magic word that people use to blind others to reality in the financial world, go to my Instagram page and leave a comment there. On today's episode. I want to get a list of all these phrases people use with money. Now listen to me talk about the season of life they're currently in. I think you might be surprised. 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 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. 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. All right, no one likes it when I talk about death, but listen closely. You're going to die. Let's just talk about it. Let's acknowledge it. Let's plan for it. Like if I were hit by a bus tomorrow, I want to know that my family is set up and protected because I'm willing to have these awkward conversations and talk about what would happen next. If you have kids or if you have people who depend on your income, that could include getting term life insurance from Fabric by Gerber Life Fabric by Gerber Life is term life insurance you can get done today. It's made for busy parents like you. It's all online on your schedule, right from your couch. You could be covered in under 10 minutes with no health exam required. If you've got kids, especially if you are young and healthy, now may be the best time to lock in low rates. And even if you have life insurance through your employer, that may not be enough to protect your family, especially if you leave your job. Fabric offers flexible, high quality coverage for less than a dollar a day. And it's backed by Gerber Life, trusted by millions of families from for over 50 years. Join the thousands of parents who trust Fabric to help protect their family. Apply today in just minutes@meetfabric.com Ramit that's meatfabric.com Ramit M E-E-T fabric.com policies issued by Western Southern Life Assurance Company not available in certain states. Prices subject to underwriting and health questions. Overall, you're just in this phase of life and one thing you'll never hear me do, I'm not going to berate some two young parents who are like, I don't have a lot of time. Like I can't even imagine how difficult it is for you to do what you do with your kids. You really nailed it. Camila, when you said this is our season of life right now it might be a little more expensive, it might be a little less time, but if you can have a long vision, you'll get through this part.

It's a different thing every Month. It's like, oh, kids are going to start a dance class. Okay, that's $100 a month extra. Oh, we got to buy a uniform. Great. Oh, Halloween's coming up. Let's get costume birthdays. Just random life stuff.

Does it feel like it's one step forward, two steps back?

Yes.

Yeah, yeah, yeah. Well, that's common in different parts of life, having kids. It's very common. I think if you had more time and more room to breathe, the two of you would be able to zoom out and think further than the 50ft that you're thinking ahead right now. It very much feels like you're driving in the fog. You can only see 50ft ahead of you. And one of the things that I get to do with you is to help you see beyond that. If you had time and energy, you would be able to focus on, okay, what's going to happen every month for the next 12 months? There's a class that we're going to enroll in here, and there's a Halloween costume. Let's plan for it. Let's put a little money aside. What would that feel like versus what you're doing today?

Oh, my God, it feels so good. Sense of relief and just, like, confidence. The at peace feeling, like you just kind of know each. There's a plan in place. I didn't even like. Yeah, we've just never done that. That feels. That seems so far off at this point.

When people have young children, their savings rate drops. It's very predictable, and that's okay. There are seasons of life where you can't be this super disciplined machine when you have kids. Most people are just trying to get by. And if they have to cut their savings rate by a few percentage points to make life easier, fine. The important thing is to acknowledge that and to make a plan. And it might go something like this for the next two years, we're going to cut our monthly savings from $500 a month to $200 a month. And we're going to spend that $300 a month on other expenses. It might be hiring a babysitter, maybe. It might be things we can't even predict right now. And we know that this won't last forever, but this change is going to help us get through the next couple of years. And after that, we will return to our normal savings rate. So let's discuss what we can discuss now, which is that every month you're spending more than you make and it's likely to get worse. Would we agree?

Yes.

All right.

It's going to get worse because you have winter coming. What else?

That feels like the big one, right? It's a big ticket item. With winter coming, we're not going to collect as much income from the rental.

Okay, what about the non financial part? What's going to get worse about that?

Like, just the stress.

Yeah.

Yeah. We don't have a. We don't have a lot of capacity for any more stress in our life, so. Yep.

Yeah, we're not going to get any less busier either. Yeah.

Boy, that's a really great point you just made. Sometimes our future selves, you know, we eat perfectly, we work out every day, we're perfect parents and friends and sons and daughters and all that. But I think what you just said, Camilla, is right on the money. The best predictor of our future selves is our current self. But let's give ourselves a little bit of grace that you're not terrible people. It's a really hard time, right? It's like I don't run marathons, but I would imagine, you know, mile 20 to 24. Oh, wow, that must be really hard. But you know that you're going to get through it if you can keep putting one step in front of the other. Okay, but what else, Camila? Why are you stressed out? Why are you spending all this money on food? Why do you both feel so tired?

Because we're dealing with too many things on our plate and one of them is the vacation home.

Very good. It's not often that I talked to some couple and one of the issues they have is like a blaring red light and we can instantly identify it and we can just chop it off. It seems pretty obvious to me that this vacation house is a problem. You're losing money. It's not really living up to the story you told yourself that it was going to be passive and print money and whatever. So what is stopping you from immediately selling this? What's going through your mind?

It's just the loss of funds, right? Like. Like you heard the number, that's a hundred thousand dollars that if, if we did sell it now and got that number, that's, that's a big chunk of money that we're for sure gonna lose versus there's a chance of us salvaging that still if the market picked up again. And I don't know, we worked really hard to get rentals for winter and just. It's a bunch of them, you know, if there's a will, there's a way, right? Like I'd need. I would need to spend. Spend time in, like, pulling together another marketing strategy or just, like, coming up with, like, a business plan. Like, again. Right.

Is this. Are you selling this on Airbnb?

Yes.

All right. Are you aware of what's going on with Airbnb and all the owners who are not getting any rentals anymore?

No.

Okay. How do I know more about Airbnbs than you do?

When do I have time to read on things? Is this very current? Oh, my goodness.

Okay, so you don't have time to read the Airbnb forums and stuff like that, but you're going to come up with a magical marketing strategy for the winter?

Apparently. Now I feel very dumb.

No, you don't have to feel dumb. You don't have to feel dumb. Not everybody keeps totally current. This is my business. And, you know, I love to hear what's going on with the real estate market. I love it when it's going up. I definitely love it when it's going down, and I want to know what's going on. So, okay, maybe not everyone's like that, but you do have an Airbnb that's costing you thousands of dollars every month. It's definitely a problem that you're not aware of what's going on in the market. And I think it's possible, although it might be optimistic thinking, to believe that some magical marketing strategy will fill up this Airbnb at the rates you need. But I also think that what we're seeing is this dynamic play out of Camilla comes up with the, if we just try harder, we can make it work. Do you see that trend playing out here? She's not here. She's not.

Yeah, yeah.

But is there a different way to make big financial decisions in a relationship? Besides, one person is optimistic and says, we should do this because it'll work out in the end, and the other person says, I don't know. All right, fine, I'll do it because I want you to be happy.

I mean, you could probably take a bit more of an objective outlook on something. Just really run the numbers and compare. Like, does these numbers. Is this aligned with where we want to be? Like, where do we want to be in five years, 10 years?

You're telling me that you're suggesting for the biggest purchases of your life, you should actually run the numbers? Hold on a second. This is blowing my mind. Camila, what do you think?

I remember running the numbers, and. But I don't remember. And correct me if I'm wrong, Chris, but I don't Remember you taking a crack at it on your own too? And I don't want to say that to call you out, but, you know, I did my own version of running the numbers and then you looked at it and you gave feedback as well. But I don't recall you taking a crack at it in the same way that I did.

Yeah, yeah. I mean, I think that's because I didn't want to really do this. When we talk about running the numbers, like, in hindsight looking at this, we looked at like an monthly operating costs type of numbers, like, how much could we get from rent? How much are the monthly utilities, mortgage? But I don't think what. I think what we missed was like, what does this look like in four years, five years, six years? And like, what are we actually trying to get out? What are we trying to get out of this thing instead of like, can we survive on a monthly basis if we do this?

Well, do you see any similarities with what you're doing right now and how you made this decision to buy a vacation house?

Yeah.

What do you see?

There's no long term planning.

Yeah. No vision. You're living month to month and you're looking 50ft ahead. You've been doing it for so long that now that's all you know. But I am also saying it's not that surprising that you feel behind and busy. And objectively speaking, you're losing money every single month. That's a problem. So you tell me, what would you like to do?

Just have a better plan and like, I mean, and like, kind of do it. I just feel like we've gone so far in one direction and it's. We've got this mess, and I feel like the mess needs to be cleaned up. Even if it means that we, you know, come out of it with some very expensive lessons that we, you know, that we've had to learn. But just to have like, simplicity, almost like. And like, here's what we do. This what we spend money on. Just have a plan and really think about how, like, we're doing this for a purpose. Because in five years we want to have X or we want to be in an X position. Yeah. I feel like there's some cleanup that needs to be done.

It almost seems too good to be true. But I, I want that. Like, it's. Yeah. I mean, the simplicity that's. I, I desire that.

The more advanced I've become with money, the more I've had to fight for simplicity. And I would imagine that you both intuitively understand this as parents, the more children you have and the older they get, you have to fight for simplicity. Otherwise, you'll just have a bunch of stuff in your house. Endless amounts of stuff. You're both nodding. Okay, so you get it. The same is true of parenting. The same is true of money. I have a million different things I could do. Some of it could be all these weird investment options. Some of it could be as simple as let me open up an Amazon credit card, because I would get $800 cash back over the next year. That sounds like a lot of money. But when I think about all the stuff I would have to do to maintain that, and what if I forget the number? What if I lose the card and all this stuff, I go, is it worth it for me? No. So I have to fight for simplicity, sometimes turning down free money. And I think when I look at the way you've set your money up, it is so complicated that you can't even put all the expenses on the spreadsheet. And it's so complicated that the way you talk about it has no joy. It's just stress. And I don't want that for you. I want you to actually feel really good about money. I want, when you go to sushi, that the two of you are like, hey, we can get sake tonight. We already planned for it. Let's not worry about it, because our investments are being handled, even our debt is being paid off, and we can still live a rich life today. Camila, tell me what's going through your mind right now.

Yeah, I think it's just. Yeah. Like when you say. When you say fight for simplicity, like that just. That just resonates so much.

Yeah. You want to do it together?

Yeah. All right.

Anything else on your mind, Camilla? You look like you're very deep in thought. I want to hear what's. What you're thinking.

No, I just. I, I, that was it. That was. I mean, ultimately, again, I, I feel like I'm like a preacher here. That's my new word that I'm going after, is just at peace. Right? It's like, you're right. Everything that you just said, like, her money is so complicated. Like, we can't even organize our expenses. Like, I don't want it to be like that. And, and it's almost like we just need to. Even if it does mean there's a hundred thousand dollars of debt that we're trying to pay down, it's all. It seems counterintuitive, but if that is going to simplify a bunch of Things. It's weird, but it's weird that I kind of get how that works. Even though it sucks.

Yeah.

Does that make sense?

Everything you said makes perfect. Sometimes in order to go forward, you have to take a couple steps back. You know, the thing. The thing that also stands out to me, which I don't think you both have reckoned with, is that you have high incomes. And so even though you may have made a financial mistake, a high income solves a lot of financial problems. You two are so young that you have a long life ahead of you. And I think we can make some changes that will really enable you to thrive. Isn't it fascinating that the big houses, the cars, the sushi, the vacations, all these things are what get glorified as things that should be our end goal. But when I mentioned simplicity, Camilla started crying. If you had to describe what a rich life is for you in a single word, what would it be? Now back to Chris and Camilla. Open up the conscious spending plan. Let's look at it together, and you two can come up with a plan. I'll advise on what you want to do. So I see both of you are in there. All right, so look at it and tell me what your options are.

I mean, keep on moving. Vacation home is one.

I think we're both ready to take that step, but, you know, I'm ready.

To take that step.

Okay, do it and let's see what happens. What I want you to do is remove it and look at that 84%. See what happens to the number. Can you tell me what was the before number in your fixed cost and what's the after number?

It was 84 to 76.

Okay, so you went from 84% fixed costs to 76%. What do you think about that?

It's a good start.

It's good start. I agree. I say we give everybody a round of applause so far. All right, I'll take the win. It's going in the right direction, at least. Still a little high. Talk to me about your other options.

I mean, child care is one that's going to get affected once in December and then once next September.

So play that out for me. What's going to happen in September?

So in December, it's going to drop to 2360 because of a new government credit.

And how's that going to change your fixed cost number?

So we're down to 69%.

Whoa, that's pretty good. All right, and then what about the rest?

I imagine that goes down to about 1800.

Let's just say 1,800 to be safe.

So 65% now.

That'S pretty good. We're within striking distance, although it's going to take a while for you to get there. What else? Keep going.

I mean, I don't really see anything else.

I mean, we spend a lot of money like on food and online shopping.

And really online shopping. How much could that be cut down by?

Pretty conservatively, probably two to 300amonth.

Yeah.

Which one is it? Two or 300?

Call it 200 because make the change conservative.

I like it. I like being conservative. Very good. I don't want you to go from 60 miles an hour to zero overnight. I like being conservative. Slow, gradual. Well, what are we at right now in fixed costs?

63%.

That feels pretty amazing to me. Can we do another round of applause please? Because you went from 84 to 63. Wow. This is such a great example of the IWT process at work. We could have jumped right into the conscious spending plan, but if we did that, it would just be some guy berating them and telling them all the areas of life they should stop spending money on. So instead we spent a lot of time digging into why they're in this current situation and how they see money and even what their vision of a rich life is. And now that we're getting to the numbers, everything is so much easier. They can literally change their lives in 10 minutes. Let's look at your guilt free spending, which is just called everything else. It's. Holy shit. Am I reading this right? It's $5,000 a month.

We're actually spending closer to like 6,600amonth on this category.

Okay. So this seems like an opportunity that has a lot of places you could cut. Would you agree?

Yes.

Yeah.

Like what? Sushi?

Yeah. The amount of times we do take out.

How are you going to do that? So it's not just a wish, but it's actually going to be something that you follow through on. Who's meal prepping?

No one right now.

Well, let's make a decision. Who's going to meal prep and when's it going to happen?

Because we. Yeah, no one wants to commit to this right now.

Well, I know you've been living in the fog for so long that when I'm asking you to actually make a plan for something ahead, it's really hard to think like that.

Yeah.

So come up with a way that both of you feel good about it.

Yeah.

Yeah. Maybe we need to just. If we actually do it together, I would do it. I just can't do it by myself.

Like, I do feel like that's the only way it's going to work is if we're doing this together.

When.

I mean, I feel like Sunday's probably. Man, it's hard. This is hard for me.

Supposed to be hard.

It'll be at night at some point.

What day?

Yeah, that's a good question. Okay, well, if we do Sunday, there's just. We just have to commit. It's like a no fly zone for any plans whatsoever for other people, which I'm okay with. It becomes just a family ritual that we do meal prep on Sundays. Otherwise.

That is correct.

It screws us over for the weekend. We just. We're only available.

Yes.

Other nights of the week.

Yep. Now, you know, you could adapt it. You could say, oh, we can join you after 8pm Whatever. But the time for this is sacred for the two of you because you can see that if you don't create a time that's on your calendar and both of you honor it, that it trickles into every other part of the week, and it all starts to add up into you losing money every single month. It's funny. We have a couple who make $280,000 a year. They have over a million dollars in real estate, and here we are talking about who buys the cereal. But I want you to notice what's going on here. We spent a lot of time on the vision, the big picture. Now, to make this a reality, we have to get into the absolute tiniest details, including what time they're going to get their groceries every Sunday. Behavior change is this beautiful combination of high, low, it's big picture, and excruciatingly small details. And I am infinitely patient at this point because I know we're at the cusp of a huge breakthrough. My proposal, you know, is build your. Your plan for at least six days a week. That would be my recommendation. And then at least on your seventh day, you have something to look forward to, et cetera. But I would not just give yourself two days, because two days often turns into three days, and now you're basically back where you are right now. All right, so my suggestion would be like, a big meal prep Sunday and then a mini meal prep Thursday. But that's up to you. Yeah, two hours. Let's be conservative. How's the food getting to your place?

Yeah, I mean, we played around with, like, grocery delivery or, like, those actual meal kits.

Don't do the meal kits. You guys can't afford that.

What Else, grocery delivery.

Okay, you want to get Costco?

Costco?

Which one? Let's. Guys, can we just make some decisions? I hate this indecision. It's driving me insane. What did we say 10 minutes ago? Fight for simplicity. We can't even pick where we're getting the groceries from.

I would say let's go to the grocery store. Yeah, let's go to Costco. Let's buy them where it's. It's cheaper.

Okay, what time are you going to Costco on? Sundays.

Morning.

Sunday morning.

Sunday morning with the kids, or one of us goes and the other one stays?

Yeah, yeah, play around with that.

Can you guys just tell me what's the decision? No, we're not gonna play around with it. You guys, come on. You make $300,000 a year. Just tell me what your plan is.

Sunday morning, we're all going together.

All right, so you go. You do the Costco thing. Great. I mean, you guys just want to meal prep, right? Then you come home, you just do it, or you want to wait till night? The reason I'm pushing them for clarity on the details is that if they don't get crystal clear on how they're going to implement this, the entire plan will fall apart. You all know what I mean. Think of the last time you decided to do something new. Maybe it was start a fitness journey or learn a new language. That is the time where you're at your most vulnerable, because your body and your mind will do anything to bring you back to a place of comfort. Oops, I forgot. I don't have a clean gym shirt. I guess that means I can't work out today. Wrong. You can work out wearing a normal cotton shirt. But more importantly, what we want to do here is walk through every single step of what you're likely to encounter so you can visualize success and also any potential barriers.

Well, Chris isn't going to like this, but we could do it when the kids nap.

Yeah, I mean, look, it's got to be done. Like, I think what's important is thinking about this. It's not just about, like, we need to eat better. This is like. This is. Yeah, this is. We're doing this for a reason, so that our. You know, from the financial aspect, like, it gives it a purpose.

Right?

So, like, that. That helps fight the.

Okay, I'm game. If. If you're gonna go at this with excitement with me.

Hey, I didn't say I was gonna be excited.

Well, hey, I. I have to say, I think you both seem pretty enthusiastic. Just to share my perspective, I do notice the. You know, it's fun going through this exercise because it really tells me a lot about how you make decisions. For example, you both are totally in tune with the other. Like, oh, we have to do it around when they nap. Or like, what if family calls on Sunday? Like, you know what's going on in each other's lives, which is beautiful. At the same time, you both kick the can down the road. You're like, we'll have to figure that out. I'm like, let's just figure it out right now.

Yeah.

And I notice a lack of decisive actions, and that's what will trap you. I want you to start investing money. Every month, you're going to have to start paying off some debt, probably. And every month you check in with each other. Okay, we may have debt. How are we tracking? We know that it's supposed to be paid off in this many months or years. How are we tracking? How are our investments doing? Each month you're building up a little buffer. You're also paying down any debt that you may have. And most importantly, you have a future. You can see, this is when we're going to be zero. This is when we're going to have a million dollars. You can create these milestones and you can know the exact month and year. That's how you do it. How would that feel to be able to do that? Camilla first, then Chris.

Pretty exciting. Like, just.

Yeah.

To come up with a plan like that and just actually see it. Like, I think we would actually be energized to stick to a plan.

Yeah, Chris.

Just to get out of the fog, you know, like, it's. It's just to have that. Just give that confidence and peace of mind and purpose to everything that we do. So that when you sacrifice, you feel like it's actually for something.

Yeah, I agree. Okay, great. So you've got a plan. Sounds like in the next five to 10 days, you're gonna assign things milestones, come up with a decision. Sounds good to me. Great.

I'm okay with it. If. Especially if we know it's by design.

There you go.

Then that changes everything.

That's exactly right. You know what a great comment. Great comment, Chris. We are willing to take on situations that might even be unthinkable to other people if we know that we chose it. And if we know that there may be a light at the end of the tunnel. Right now, there's just not.

Yeah.

With these changes. Oh, my gosh, you wouldn't believe how much the two of you can handle together knowing that you have chosen this path and you're in control. It is such a joy to hear my lessons really sink in like this. We went on to run the investment calculator and with some back of the napkin math it was apparent that they could have an easy $3 million by the time they turned 60 and we tweaked them and that number turned into $6 million. This is what's at stake for Chris and Camilla. We are talking millions and millions of dollars. Now. We didn't spend much time on their investments because they aren't adding to them with this vacation house weighing them down. But it was important that I show them this calculation as one of the final pieces here that they may have to make uncomfortable decisions in the short term, but there's a much bigger rich life vision that they are working towards. After our call, Chris and Camilla sent me follow up messages. You can read the full follow ups@iwt.com follow ups but here's what Chris said. Quote top lesson for us was to have a clear why behind our decision making. Meal prepping on a Sunday when all we want to do is relax is hard, but it's only hard because it's being viewed as a burden and a shitty task that needs doing. I'm changing my mindset to something more like we are meal prepping today because we want to pay ourselves more via investing and saving, ultimately to become millionaires, retire young, and do whatever we want. You can read the full letters@iwt.com follow ups and thank you for listening to I Will Teach you to be Rich. Thanks for listening to I Will Teach youh To Be Rich. I'm Ramit Seti. Please follow the show on Apple, Spotify or wherever you listen to podcasts. If you haven't read I Will Teach youh To Be Rich my book. Pick up a copy. You can get it at any bookstore or any library and it will show you the specific tactics for how to build the I Will Teach youh To Be Rich system into your personal finances.