80. “If I add any more to our $50,000 credit card debt, he will ask for a divorce” (Part 1)

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Yeah.

You paid off $130,000 of credit card debt six months ago and now you have $50,000 of credit card debt just six months later.

Yeah.

Whoa.

We need something that works because nothing's working like working through how not to repeat past mistakes because we throw out a plan. But we always seem to get back to where we were because we have. We both have the goal. Like we're, we're committed to wanting to build this house and wanting to travel and our rich life, but we don't have a common plan to get there. This is a generational issue, I think, on both sides. And now as a mom and as a wife, I'm breaking that.

Meet Kevin and Sarah. He's 42, she's 38. They have accumulated $200,000 of debt. Then they sold their house to pay it off, and now they're finding that those old habits are coming right back. I went back to their application when they initially wrote into me and I found a line that I'd like to share with you. Sarah wrote, kevin recently told me that if I kept adding debt to my credit card, he would ask for a divorce. My parents got divorced over money, so I'm desperate to figure this out. We're going to talk to Kevin and Sarah today. But one of the biggest lessons of this podcast is that our money decisions are rarely only our own. A lot of us like to imagine that we're rational, logical people. We're pushing our shopping cart down the aisle and we're making a careful cost benefit analysis before we buy those Ritz crackers. In reality, our parents bought those crackers and they subconsciously taught us that love means buying this exact brand. We learn how to talk about money from the people around us. We learn how to invest it, or if investing is even for people like us. And of course, we learn how to spend from the people around us. And it is very, very hard to shake those generational lessons away. I would encourage you to listen to this episode and I would invite you to watch it on YouTube. The body language and the facial expressions you'll see add a whole layer of understanding. You can find this episode on YouTube by searching for Ramit Sethi. And be sure to follow my channel there. Now let's begin. I'm Ramit Sethi and this is I Will Teach youh to Be Rich.

We did Dave Ramsey's thing. We tried that. So spreadsheets, our own made up, throwing spaghetti against the wall. I don't know, what am I missing? I mean we probably. It's out there. We've probably tried it.

And so coming on this show, Talk to me for you. What does it represent?

I'm an emotional person, so there might be tears. Hope is what I hear in all of your podcasts and so.

Hope to do what?

Figure it out. We have very different backgrounds when it comes to money and we want. I want commonality and tools and a way to speak to each other where we can actually hear each other. When it comes to money, we tried to talk about money and like, and I was like researching your site and you're listening to your podcast. I kind of, I'm an all in kind of person. And we started having conversation about money. Just trying to communicate because you'll find that that's where we struggle deeply and we just lost it on each other.

So talk me through that conversation. Do you remember where you both were?

Gosh, there have been so many. I think, I think we were actually probably like I was sitting here and he was in the living room and it was something. I. I don't remember exactly what it was because like I said, there have been so many. But it was. It was basically, screw this, like I'm. Something's gotta change. Probably what it was was him getting mad at me about what was spent on credit cards.

What you spent on credit cards or what was spent.

Well, what I spent because it's my card.

I'd like to hear from you, Kevin. I'd like to hear about that same conversation that the two of you had where you both became really frustrated. What do you remember about that conversation?

I think. I think I know what she's referring to. And this comes with accumulations of things that it's a built up of. You know, throughout our marriage, I get short fused. And so in that particular moment, there were the expectation in my head, hey, we should be at this ceiling. And when we spoke, the ceiling was higher. And therefore I was like, oh, that means that there's more debt that we have to.

Sorry, what does ceiling mean? What are you referring to?

Just in the sense of. I thought that the debt was at that level and it turns out to be at a higher level. Right now we're probably at $50,000 in debt of credit card debt. 5, 050. Okay.

I want the clean slate every month. So, like you've talked about in your book, like utilizing credit cards as an account versus because you can use them for certain things that are very beneficial. And so I think you do it that way. But if you don't have a plan in place of what you're putting on the cards, then it can get out of control. And so is it out of control for you now? Yeah, yeah. I mean, the amount. Yes, it is.

Okay. Anything else that is or is not out of control?

Lots of things I feel like right now.

But tell me.

Yes, I mean, just. We sold our house. Gosh. We sold our house. What? In May. And moved into a rental house with the goal of building. It's been. That's been a lifelong dream of mine of building our own house. We had to switch. Gosh, why is this? Sorry. We had to. We've had a really tough year and so we had to switch our girls school because they went through a lot of stuff there in private school and they went through a lot of stuff at their old private schools, so we had to switch schools for them. So I think that out of control is just level stress and not being. We're very outside of our comfort zones right now and my business is maintaining and so. But I lost a pretty big account in October and that dropped my income in half, almost in half. And. And then my My income for my business has kind of steadily gone down. Not much but a little bit. So it's just. There's just been a lot of stress and so. And I don't. I really struggle when I can't control things.

So how do you react when you have more and more stress like this? What do you do?

It depends on the level. But I tend to get depressed and I start withdrawing or I blow up. And it's usually blowing up a Kevin.

And this is bluntly, but this has caused an issue in our marriage is where professionally I has been so heads down that there are moments, more than moments that in our marital lives where I didn't see her going through these times until she blew up or until it was verbally told to me. And in the meantime I'm thinking oh my gosh, this is. If this is happening then that means I need to double down and buckle in into my work so that we can come out on the better end together. But she's suffering because of that, because she's not getting the support emotionally. So this is full transparency here.

I really appreciate it. Really helps me understand the dynamic here. A few things to note. There's a lot of emotion in their description of money. A lot of history. And I'm going to spend time trying to unravel it. Along the way, I suspect that Kevin and Sarah will get a better understanding of what's really going on. Because when something like money is covered in emotion, it's easy to lose sight of the real issues. It's like a bad relationship. Everything feels existential. You'll also notice that there are some clues. Something about their girls. Something about Sarah's dream of building a house. Something about Kevin having the best year of his career last year. We're going to get into all that and we'll get into all the numbers. But I think it's important for you to know that Kevin and Sarah are high earners. Keep that in mind as we continue on this conversation.

I think that money is a foundational struggle for us because we can't sit down and have a non emotional conversation or it's very rarely that we can do that.

Is that the dream? To have a non emotional conversation about money?

Yeah.

Okay. And if you were to have a non emotional conversation about money, what would that look like?

Just sitting. Just sitting down together over wine or dinner or out to eat or just in the living room and talk. Talking about the spending and the things that we've done without criticism or feeling put down.

Who feels put down?

I do.

Okay.

Okay. So you'd have conversations without you feeling put down. What else?

Feeling as an equal in the conversation. And, and having a common goal. And, and we do. Maybe it's more like a common plan. Maybe that's a better way of putting it because we have, we both have a. The goal. Like we're, we're committed to wanting to build this house and want to travel in our rich life, but we don't have a common plan to get there.

What has stopped you from making a common plan towards an already common goal?

We don't speak the same language.

Ah. What language do you speak?

Well, we did. We don't. He actually does completely speak a different language, but we. I. He speaks numbers. And like, it's just very. This is how it is. I mean, a perfect example is he was like, can't you just transfer the money over to the credit card? And it. I don't know why that is very hard for me to do. He's like, it's just a button. Click a button. And I'm like, it's not that easy. There's a lot of emotion behind it.

So he speaks the language of numbers. And what language do you speak?

Emotions. My childhood was very much all emotions when it came to finances. My parents divorced over finances. Like, there's a lot of baggage.

Want to talk about how you were raised? I find it very interesting that you speak the language of emotions.

Yeah.

You were raised with emotions. But you told me that your number one goal is to have a non emotional conversation about money because.

Yeah, because I don't want to cry through every conversation or avoid or yell at each other. I want a maybe it's not emotional, it's positive emotion.

Ah, it's different, right?

Yeah.

Because can I just say, I don't think there's anything wrong with having emotions about money. Everybody does. Even Kevin, who's Mr. Numbers. I bet you he has emotions. Give me five minutes, I'll find him. Everybody has him. And I think sometimes we're raised with this idea that deep down emotions are weakness, but they're not. They're just human. So can we reshape your goal? You said first that you want to have a non emotional conversation about money. I think that would be really boring. What would you like to do instead?

I want to have a conversation that is positive and is forward thinking and is exciting. To sit down and talk. Look what our money's doing and we're going. And look what we'll be able to do. It's so exciting.

All right, I can get behind that. Kevin, are you. Are you down for that?

I'm writing it down.

Okay.

Okay.

Love it.

Okay, good.

Okay. And when you two got married, how long ago was that?

Yeah, we just celebrated 14 years.

Oh, congratulations.

Thank you.

Appreciate it. That's awesome. 14 years. Amazing. Okay, 14 years, three kids. Fantastic. All right, a lot of you listening right now. Beat yourselves up for things that are deep, deeply held parts of your personality. Sarah basically started crying in the first two minutes of our conversation, but four minutes later she tells me she wants to have a non emotional conversation about money. That's not going to happen. That would be like me going to a French restaurant and saying, ooh, I'd really love to spend $89 on some poulet that's seasoned with three particles of salt. It's not going to happen. I want some fucking spice on my chicken. I'm not going to a French restaurant. And Sarah is not going to have a non emotional conversation. A better approach is what she finally said. She wants to have a conversation with positive emotions. Maybe she will later say that she wants to become comfortable talking about numbers. I can help with that. But I'm glad we caught this now because if you truly detest something about yourself, if you believe you need to focus on fully extinguish it, it's going to be very hard to actually change. 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.comRamit to find and instantly book a top rated doctor today. That's Z O C Doc.comRamit Zocdoc.comRamit 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 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 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 slash Ramit W I S P R FL Flow AI Ramit or click the link in the description below. Sarah, will you tell me about how you were raised with money? What do you remember about growing up with your parents?

What I do remember is there was a lot of turmoil between my parents and my and especially finances. My parents were raised very differently and when it came to money and in general and I one of the biggest things I was thinking about it earlier today was my sitting at dinner, had gone out to eat, my dad ordered a steak and so there's four of us, I'm one of four. And my siblings and I are like oh, we want steaks too. And my mom would either order nothing or soup and we would find out as I got older the reason we did that was we couldn't afford it. And instead of arguing with my dad there in the restaurant, she would just let it happen. And there were lots of times my dad bought a car without consulting her. And there were six of us and it was a five seater and it was like and then he'd go and buy TVs and just different things and it was always we can't afford it, we can't afford it. And who Said that my mom.

Okay.

And my dad. My dad worked hard, but we grew up on the poor side. He grew up very poor, and my mom grew up wealthy. And so it was very. Two different sides of the track.

Can you think of any examples where that difference really manifested itself?

I can. I know of that. Some that my mom told me about and that it like, we would be. They would not be able to pay the light bill, and my dad would say, just go ask your parents for it.

Oh, wow. And. And your mom told you that story, not your dad?

My mom told me that story, yes.

And did they separate your parents?

When I was 16.

Why then?

Money and other things.

I see.

And who was the one who initiated the separation?

I think my mom.

Okay.

Okay. Looking back now as an adult, as a mother, looking back on how you were raised as it relates to money, what are the things that you take away?

That my mom was just trying to survive was a big one that. There that I know my dad had a lot of struggles as a child as well that he was never able to work through. And it really was a problem. This is a generational issue, I think, on both sides. And now as a mom and as a wife, and I'm done. I'm not. I'm breaking that. And I don't want my children, and we have three girls, and so I don't want them to. To grow up in their life and not know what I didn't know. I don't want them to be in these same positions, to risk their marriages because they can't budget well or whatever. I. I don't want to end up like that, and I don't want us to end up like that.

Do you think you are destined to end up like that?

If we keep going the way we're going, yes.

That helps me understand a lot. Thank you. Kevin, what about you? How were you raised with money?

My dad worked a lot. My last band that I seen, he managed the money. My. My mom stayed at home. Once my dad's career really took off, she didn't need to be a teacher anymore, and so she stayed at home. So that's what I remember for most of my life.

What did you learn about money? When. Now that you look back as an adult, what are your takeaways?

Well, this is where it gets a little through. Throughout my life, I've never been educated about money. I saw it, I was around it, but wasn't educated about it. So I didn't grow up in this country. I grew up abroad. And with that there's some culture differences. Differences. Right. But I didn't have an indication about money. I just knew my dad took care of it.

Sarah, you reached out because of a series of conversations. Describe it for me. What is the situation? It sounds like you have together $50,000 worth of debt. What would you say in a sentence or two seems to be the problem that keeps coming up for both of you.

Lack of communication and connection. I think that we have to find even more commonality than what we want for our money. We've got to come together on that roadmap.

And let me ask you a question about yourself. You specifically, what behaviors do you think you need to change in order to break that generational?

I think. Well, one of big ones is impulse. I. Impulse purchase. And usually out of emotion or feeling like I deserve it. I think some of the things that I tell myself about money. And I think probably just. Yeah, I would say a lot of it's the impulses, the. And the. The way I speak about it, the way I talk about it and the way I think about it.

Be sure to watch her facial expressions on that last exchange. They are very revealing. This $50,000 of credit card debt, whose credit card is that on?

Mostly mine.

All right, so you have a joint checking. Joint investment. Is that joint?

It is.

Okay.

And then we each have. He has a 401k and I have a Roth.

Great. All right.

You have separate credit cards.

Yeah.

So I'm just curious about like the bills, the day to day bills, getting paid. For example, your rent, eating out. Like how does that decision get made about who pays for what?

The rent, the. Like to live our life under our roof. Rent, utilities, all that kind of stuff. I set it up, I put it on my card. Except for the rent. It went. It has to come out of the checking account. So it's on the joint checking account.

Okay.

But anything that was going on could go on a card. I just put it on the credit card.

Your credit card. Okay.

And then when it's eating out, it is. I mean a lot of us for eating out is convenience because we're pretty busy. And so it's. If we're all together, typically it's on his card. If it's me with the kids, it's fine. If I'm ordering, it's fine. If it's through an app, it's probably mine.

So it's just like whoever is basically doing the thing is pulling out their credit card. Okay. Does this cause any problems for you?

Quite a bit.

Oh, it's I was like, this is kind of a weird setup. But you both seem very calm about it. I'm like, is there any issue here? And then I go, is this a problem? And both of you are nodding furiously. Okay, so what's the problem? Break it down. What happened the last time y' all argued about this?

So if. If I think one way to. To. To add to the context is when we sold our house, we were able to be debt free. This. We sold the house. We're like, x debt, credit card, no more. That's it. Blah, blah, blah. And then we reintroduced it, and there it goes again. Bad behaviors where there's no plan set, where we actually could get back to zero. And for a minute, we did it. But then there are some things that occur. Pull the trigger here, pull the trigger there, and next thing you know, it's the snowball, and here you are reaccumulating debt.

Okay, let me ask a few questions about the pattern that you seem to be in. How much did you sell your house for?

A million fifty.

Okay. And how much did you take home after the sale?

Was like three. Was it 369 or 396?

Yeah. So somewhere around there. All right, I have 375 in my.

Head, but let's say 375. And did that include all fees that you had to pay? Transaction fees, all that. What about taxes?

Yeah, that's what we walked away with.

Okay, Walked away, including paying taxes, etc. On anything that you owed?

Yeah. Minus 500 bucks that we had to pay for HOA.

Okay, great. So 375. And how much credit card debt did you have at that time?

130,000. Credit card debt? Yeah. Okay. Was it. It was. Yep.

130. And was there any other type of debt at that time?

Student loans, cars, Cars?

Multiple.

Yes.

Okay. And student loans. Whose student loans?

Mine.

Okay. All right. So you had. How much was it? 130. All right, so you were able to pay all that off, and you still had a couple hundred thousand bucks? Yes. Awesome. All right, great. So did you. Was it kind of like a big thing in your household? Like, all right, we're paying off this debt?

Huge.

Yeah.

Okay. What'd that feel like?

Amazing.

Yeah, it did.

That's cool. Was it the first time that you were debt free in your marriage?

Credit card debt, mostly. Yes. Yes. I think it was completely. I don't know if we've ever been completely. We haven't been completely debt free.

Did you take the money from the house and pay off all the student loans as well?

No, because we were. The. The goal was to take the additional. We. We sat down and we decided we were going to pay off the credit card debt, and then the additional amount that we had left over, we were gonna invest some of it, save some of it to have cash available for whatever reason, and then utilize that for a down payment on land. Okay, so we didn't pay everything off? No.

Okay. That student loan that you had, which you did not pay off, how much was it at the time?

Right. Around 30,000.

Okay.

What was the interest rate? Do you remember?

It's nothing, right?

I mean, it's low.

It's.0.0 right now. I mean. Okay, but back then, this was six months ago.

Oh.

What?

Yeah.

Hold on. Let me get this straight. What the hell? I didn't know about these timelines. Yeah. Hold on. Oh, I'm speechless.

Yeah.

You paid off $130,000 of credit card debt six months ago, and now you have $50,000 of credit card debt just six months later?

Yeah.

Whoa.

So what happened?

Life.

Wait. Okay. This isn't. This is like. If this was five years, I would be like, all right, yeah, life happens. But six months, we could figure this out in, like, 25 seconds. Let's just do it right now. Okay. Life happens. All right. Life, not that much life happens in six months. So let's break it down. What vacations did you take in the last six months?

Well, we paid for a cruise that we have coming up.

How much is that ballpark?

7,000, I think.

What do you think? What number do you think I would pick to write down here? How much is your cruise going to cost? Yours? You said 7000. What do I think the real number is?

8.

No.

8500.

Higher. Kevin?

11. 1150.

Okay, so let's say 11,000. What else you spend money on the last six months?

Business stuff. This is. That credit card debt is including the business cards.

Okay. How much did you spend on the business?

I think it's 15.

Okay, 15 on business. You spent that on a credit card?

Mm.

Okay.

What else? Eating out. You mentioned eating out.

That's a big one.

How much?

Three to four thousand a month.

Let's say four thousand a month. What else did you spend money on the last six months?

Yeah, I had surgery in July.

Okay.

And so a big cost was post care.

Okay. How much was that?

I was spending. Spending. I think almost $1,000 a month for six months till. For five per five.

Okay. And are you doing all right? Okay, good to hear. Okay. Anything else?

Christmas.

How much?

I don't know.

Like 110,000. What are we talking about?

4,000.

All right, anything else? Clothes you mentioned, Sarah.

Clothes. This is actually the first time we've had to buy like a large amount of clothes because our girls were in uniforms before and the school had like a hand me down thing. So in August we spent, I don't know, maybe 2,000 on clothes for all three of the girls.

Okay.

I'm trying to think what other. I've had some trips with my business. The one in September was about 2000. Cabo was my flight, which I spent quite a bit on my flight.

How much?

3,500.

Okay, what else?

And what else? August, September, October. Just little coaching. Oh yeah, Business coaching.

How much was that?

It was 1700amonth for six months. And then now it's 900amonth for six months.

Let's just say a thousand a month just for easy math. So that would be 6,000. Would that be fair to say? Yeah. All right. All right, so if we add up all those numbers, what do you think we get?

A lot.

Any idea? Just take a guess.

30. Okay, 35.

30.

Well, which one is it?

30. Okay, 35. Since we're going with the larger numbers.

Let me Finish calculating these $72,500 in the last six months. What do you think about that number?

Wow, that's unexpected.

All right, I need to lay down the fucking law here for a few different items. Can you see that affirmations board behind Sarah? They just spent $72,000 in six months putting them back into credit card debt. But she has these Etsy affirmations behind her, these posters. Here's what they say. This year will be different. I have genius inside of me. I have something the world needs. It's like affirmations are nice, but sometimes you need to look at the fucking numbers. Notice the details. Remember how I always say the best predictor of your future behavior is your current behavior? And people get mad at me. Oh, Ramit, that's not true. I can change. Everybody can change. Well, maybe, but it's hard. You'll also notice that Sarah is using the island innocent dough technique to evade actually acknowledging what they're spending on. You don't know what the innocent doe technique is? Let me explain. Imagine a wide eyed Bambi me, little old me. I have no idea what's going on with our money. I don't know. That's the innocent dough technique. And I can tell you because if it was five years of spending, okay, we could figure it out. It would take a while. They ran up 50k of credit card debt in 6 months. It took us 3 minutes to figure this out. Some of you have been procrastinating on some money question for 13 years that would take us 15 seconds to find the answer to. You could join my money coaching program. Let's solve it right now. You'll also notice another clue. She has a verbal tick of giving ranges 3 to $4,000. That means 4,000. More likely 7. You know why? Because she doesn't want to count. Phantom costs in a cruise isn't just what you paid for the room. It's the drinks, the extra food, the excursions, the flight, the hotels, all of it. Add 50% to the sticker price. To be conservative, that's exactly what I add whenever I stay at a hotel or whenever I look at buying a house. So there are a lot of clues in that short exercise that really reveal a lifetime of attitudes and behaviors that Sarah has bought into. 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 Gaelt, you get a proactive, yes, 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 join gelt.com ramit join g l t.com ramit taxes don't have to be a task. With Gilt, they can Be a tool to build wealth. 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. You mentioned that there are two issues that you have with money. One is impulsive spending and two is the stories you tell yourself. Yeah, what are the stories you tell yourself about this spending that it's all my fault. Yeah. What is that story?

Well, it's just, oh, if I hadn't done this. We do. It is put a lot of, I guess, guilt and stuff on myself for seeing the credit card bills and saying like, oh, we shouldn't have done X or we shouldn't go on trips or we shouldn't do these things. And then I think about the way I grew up and I was like, well, screw that because I want my kids to have a different life. We didn't do trips, we didn't do fun things. I want, I don't want my kids to feel like that they, we can't go buy clothes because we don't have any money and so I just ignore it.

And.

Because I just want something different.

Something different about what?

Than what I had growing up.

How long ago was it that you felt that way when you talk about growing up? What year was this?

I mean, really between, like, gosh, What I can remember like it was pretty much my whole life.

And that feeling is what? That we don't have enough. I can't have X. What are the feelings that you're trying to escape from?

I think they are. Embarrassment, Confusion, frustration and sadness. There's a lot of sadness about money.

And have you also spoken to therapists?

Some I actually have. Am starting therapy. Back again.

Good. How do you believe that you stack up to other people in terms of your income and your expenses?

I think income wise, we're pretty comparatively comparative.

Yeah.

What would you call yourselves?

I don't understand the question.

Are you wealthy?

You're middle class in terms of income.

Okay. Now we're upper, upper, upper middle class in terms of revenue. Just strictly revenue. Not the way we manage.

There's another piece to this we haven't talked about. Is that Kevin has an inheritance coming in next.

Really?

This year.

What? How much?

It depends on the exchange rate, but.

Yeah, it depends on the exchange rate.

But not that much.

Three to 400,000.

Yeah, we'll keep it like that.

All right, good. Something like that. So it's a sizable amount. Okay, that's interesting. I did not know that. And what's the plan with that money?

Well, that's what we want to talk to you about. No, we're not asking you to solve our life's problems in a two hour span of conversation or what or however long we'll discuss. But. But at least is. Is addressing these behaviors that we have so that we don't swallow.

Yeah.

To your point, using the word velocity with beautiful is. We don't continue this velocity in which is going to eat away while we come in.

Yeah, that's a great. It's a great concern because you actually know exactly what will happen right now because just six months ago you had the exact same amount and it's essentially gone. So we don't want to make that mistake again. All right, let's go through the full conscious spending plan and evaluate it. Who put this conscious spending plan together?

We did it together.

Good. How was that process?

I think because we both were like, we sat down and like we're looking at the numbers. It was overwhelming, but it was a civil conversation.

That's good. Let me recap their numbers here for you. Okay. Because something is missing. Their total net worth is $150,000. They have 100k in assets. They've got two cars, a Ford Expedition and a Tesla. They've got $137,000 in investments, $93,000 in savings, $179,000 of debt. 30k of which is student loans, over 50k of which is credit cards. And about 100k left on the car loans. All right, let's talk about the income. I found this one very interesting. All right, so, Sarah, what's your gross income? Annual income?

Annual income? I think last year I will bring in just under a hundred thousand.

Just under means what? Just tell me a number.

Sorry, I don't think that's great.

70.

I'll say 95.

95,000. Okay. And Kevin, what about you this past year?

214. What?

Well, mine was. I'm contracted.

Okay.

A contractor, too. So it's like where my income is coming in. So that monthly number is current. Three months ago it was at, I don't know, 11,000. What? Because I lost a large contract.

Okay, so you. But collectively, the two of you are making about $309,000 a year. Is that fair to say?

Yeah, this last year.

Okay. And this year, what will you make?

I don't really know.

Ballpark.

If I hit all my goals?

No, because you're probably not going to. Most people don't.

Probably the same. I'd like to be. I'd like for it to be higher, but probably the same.

That would be 95,000. There must be something else going on here. There's just so much squirming in Sarah's answers. I ask how much she spent on the cruise. She gives me a range. I ask how much Kevin's going to inherit. She gives me a range. By the way, 300 to $400,000 is her range. I ask how much she's going to make this year. She gives me a hypothetical. This is a great example of what I mean when I say to live a rich life, you have to be honest with yourself and honest with the people around you. You have to learn how to pick numbers that make planning easy. You can get them wrong, that's okay. You can correct them later. But you have to have a logic for picking some numbers instead of letting them simply hang out in the air and never making a decision at all. 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 okay, let's try to guess what you got your mom for Mother's Day. Was it a gift card to Starbucks? Was it random chocolates from See's Candy or a pair of slippers? And you said, here mom, keep your feet warm. They cost $3 at Target. Guys, don't you think generosity is a core value to have, especially for Mother's Day wealth? If it is for you? If giving great gifts is a part of your rich life, especially to your mom, I recommend checking out Aura Frames, this episode's sponsor. Aura is a WI fi connected digital picture frame that beautifully showcases your photos. You can add unlimited photos and videos straight from your smartphone using their app. Aura Frame was named the best digital photo frame by Wirecutter and featured in 495 gift guides. And because they only take two minutes to set up, it's easy. You can even send her photos straight from your phone no matter where you are in the world. My coworker gave an Aura Frame to her in laws and this is what she had to say. They absolutely love it. Now that they spend the winter in Florida, they don't get to see their grandkids as often, so we fill it with photos of the kids so they can see what they've been up to. As the year goes on, the photos look like framed photos. Highly recommended. Aura has a great deal for Mother's Day. For a limited time, listeners can save on the perfect gift by visiting auraframes.com to get $35 off plus free shipping on their best selling Carver Mat frame. That's a U R A frames.com promo code RAMIT Support the show by mentioning Promo code Ramit at checkout. Terms and conditions apply. So this year. Last year you made 309. This year you're both going to make 309. Fair. Does it make it difficult to plan when you don't know what the numbers are going to be?

Yes.

Yes.

Has that been an issue for the two of you?

Yes. Yes.

All right. You want me to give you a little solution for that?

Yes, please. Okay.

Because I hear couples, they agonize over this shit, and it drives me insane listening to, like, right now, just listening to the two of you. My fists are curling up. I go, look, I don't need the exact number. I just need some number that you both feel confident about. And that's not your fault. I'm not blaming you. It's actually psychologically very difficult when you're a contractor or you have different clients. I get it. Okay. What we want to do is we want to pick a number that we are absolutely certain that we can get. Okay? That's the number we're going to work off. That's our baseline. So if you get a bonus at the end of the year, don't include it. Just the number that you know you're going to get. If you have 10 clients and you think three might churn, hell, give yourself a little room to. You have five clients now instead of 10. That's your number. But it's a number that you know for a fact. You're 99% confident. You can get 95% confident, and then you work off that number and anything that comes on top, any annual bonus, etcetera, that's icing on the cake. And we will create a separate thing on what to do with that money.

Okay.

All right. Because otherwise you're just going to drive yourself insane.

Yeah, that's what we're doing.

Yeah. And honestly, it's like we just got to pick a number that we know we can get, and let's work with that. The rest of it's icing. So what's the number right now? You told me 309,000 this year. That seems a bit optimistic.

I think 95 is right for mine.

Okay, Kevin.

I'll be conservative and say 190.

190.

Okay.

I just want to point something out. This is really funny. So how long have you. Has this been driving you crazy? This, like, we're not sure about how much we're going to make.

Probably the last three years for me.

Yeah. What the. Do you know that the difference between the two numbers we picked is literally $24,000? That's nothing in the grand scheme of how much you make. $24,000. That number, that's the difference between 309. 285. That is the number that has been stopping you from just saying, this is our certain number. The lesson here is to stop letting tiny barriers get in the way of your rich life. It's like two parents saying, gosh, we really should get a car seat for our baby. But first we need to make sure we have the right baby food. And also, what if we get the wrong fabric on the baby seat? And also, we need to talk to grandpa about babysitting. But first, we really need to baby proof the bathroom. It's like, just go buy the baby seat. Go get the best one. Go get the fifth best one. Get all of them. It does not matter. So many people waste their lives letting these $3 questions get in the way of the actual point of money. And even if you get it wrong, so what, you can fix it next year, you can fix it tomorrow, but at least make a decision. One of the worst things that I hear when I speak to couples is. Is indecisiveness. And it's indecisive from everything, like a $5 purchase, you know, or all the way up to what should we do with $5 million that's sitting in our checking account? Building the skill and the habit of being decisive is one of the single best things that you can possibly do for your rich life. Okay, so can I just say, you two make a lot of money. You guys make $300,000 a year. So what's really going on here? It's not an income problem. You ever see those people on Tick Tock? They're always, like, wearing these horrible ties. I'm like, first of all, get a new tie. Second of all, who taught you how to tie that tie? And I'm not even the best tie tire, but I'm like, that looks like. And these guys are always saying the same thing. There's a hedonic treadmill in the United States, and if you make more money, people always spend more money. I go, shut the upper. But the problem is you're actually doing that.

You.

You're the example they're talking about on Tick Tock. You made more money, and then you started spending more money. Yeah, you're violating my own rules. Okay, so look, can we fix this, please? Because it makes me look bad. If somebody goes out in the public. They go, ramit Sethi's readers. They are on the hedonic treadmill. I go, ah, so tell me this. What do you need to do?

I think pay off the debt. Okay, babe.

Yeah. I mean, the. The double Digits, credit cards is gonna kill us. So there's no, there's no, no ways around it. And so the, the first thought is.

To.

Eliminate the, the credit card debt.

Okay.

What's the savings?

Okay, that's a possibility.

Let's.

Let's just stay at the high level. So one thing you both know that you want to do is pay off the credit card debt. Fantastic. Okay, let's not even get into the how. But yes, I totally agree. That's a really important thing to do. Are there any other things that are really important for the two of you.

To start doing saving for the girls school next year?

What? How many? What? Where'd that come from? We haven't talked about that at all.

No. So they. They're in private school, and so we have to switch their school. It's for all three. It's about. Without financial aid, it's about 55,000 a year.

What the fuck? Where did. How are these secret expenses coming up right now? 55,000. What else?

This next year. I think that's it.

That's all.

I mean, the school.

Don't you have to make a donation to these private schools too? No. Okay. She's like shrugging.

All right.

Okay. So 55. Where's that money coming from, by the way?

So this was our first year and we used some of the house. The money that we. When we sold the house, we used it to pay it for the first year. Mm.

And where's it going to come from next year, in the year after and after that?

Great question. That's. We're asking ourselves that same question.

This is absolutely blowing my mind right now. They signed up for a $55,000 a year private school without being able to pay for it. I don't even buy lunch without knowing how to pay for it. They committed to 10 plus years of. Of $55,000 a year, and they can only afford one year of it. You know, there's this idea floating around the financial world that people who make a lot of money always spend it. Like there's so many Americans making multiple six figures and just living paycheck to paycheck. I don't really love that concept because I know a lot of people making 100k, 250k, 500k, who are extremely disciplined about money. But Kevin and Sarah are doing exactly what all those people talk about. They have a high income and they are spending every last cent and more. And worst of all, their attitudes towards money will likely keep them broke for the rest of their lives.

The private School is difficult because this is something that both Sarah and I agreed on very early on. The school system that we're in currently isn't bad, but we have recognized that our children. Do better in smaller settings than larger settings. So before this prior year, we're able to manage it throughout our budget. And it was manageable. We only had two children going there. It was duple.

Yeah.

This, this year we, it was, it was an increase, significant increase plus an additional child. And so hence the, the big jump.

So how do you think you can handle it?

Yeah.

Make more money.

Make more money is the only answer.

What do you think of that answer?

I want it to not be the only answer.

Okay.

But it's the only one that I can come up with.

Okay. Do you believe yourself when you say that?

I. Think yes, but I think it's because we've been so in the weeds, like you were saying, that we can't be thoughtful and creative about options if it really was that important to us. And, and making changes, making significant changes, if that is what is important to us.

Yeah.

And. But now we're switching our mindsets about some of this stuff.

Well, that's. So I, I don't like this line of thinking for several reasons. Okay, first of all, how much do you need to make to pay for the kids school?

55,000.

Nope. What about taxes?

Oh, yeah.

Oh yeah. So 75, 80, 85,000. Whatever the number is, you're already making a lot. So you're at a high marginal tax rate. And we, you know, we don't need to calculate that right now. But it's more than 55,000, like a considerable amount. More than 55,000. That's number one, lack of thought into this. Number two, I don't like buying something and then saying we'll figure out how to pay for it later. That is a terrible decision to make. You know, haven't we all heard people say like, don't go into debt for, for a wedding? We've all heard people say that. Right. Did you guys go into debt for a wedding?

Not really.

Okay. Isn't this basically the same thing? We're going to commit to $55,000 a year, but we don't actually know how we're going to pay for it. And it's not just for one year, is it?

No.

How many more years is it for?

Well, 12 at least.

Yeah, it's over half a million dollars. If it is truly critical to you, then maybe we can find a way to make it work. It's possible. If you tell me that we can look through your numbers and maybe we can find a way to make it work, but I can tell you that it would involve you radically changing the way you live. Have you both entertained the idea of potentially not doing this private school?

The only other option that I would entertain is homeschooling.

That's it.

Yep. I'm not putting my kids in public school. That's a conversation that we really have to get into and. And make that decision. I mean, and make the decision and make it together. And. And, I mean. And I. But I think we need to kind of live in both scenario. Like, in the scenario of what that feels like of. Of like cutting back the things. I mean, I think we need to do that anyways, regardless of the school piece. But if we. If we take that out, what does that look like? And if we keep that in, how does that feel? And I think we need to live in that and have that, because we've never really done that. We've never really had the conversations and sat down together and said, okay, are we going out to eat this week? We haven't ever really felt that pain. And I think we need to decide if it's. I think we need to feel it to decide if it's worth it.

Let me summarize. Kevin and Sarah make over $300,000 per year. They sold their house, they paid off $130,000 of credit card debt, yet six months later, they were back in $50,000 of credit card debt. They recently committed to 12 years of private school at $55,000 a year, but they have no idea how they're going to pay for it. I truly hope you're getting a chance to watch their facial expressions on the YouTube version of this podcast because the rest of our conversation is surprising and eye opening. And you can hear the rest of it next week on the I Will Teach you to be Rich podcast. I will see you then. Thanks for listening to I Will Teach youh 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 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 youo personal finances.