“I work & watch my infant FT b/c we can’t afford childcare”

What is the plan once the baby gets here? Daycare is obviously very expensive, and I know we can't afford that. At this point in my life, I should be able to buy the expensive set of knives. Like, you know, I should be able to buy the expensive furniture. I should be able to go on the trip that I want to go on.

A lot of the decisions we make are like, oh, yeah, we can afford that. We. We're the type of people who should have that kind of thing.

Was that a problem?

Not until I started having a family.

All the stuff that's surrounding us is what we actually did choose, but that's not, like, what we really want.

Hold on. You went bankrupt?

Yes. Three years ago. I filed.

I see this cycle and this thing that we. That I've been doing, and I feel like we're heading that way again.

It's a lot to change. It's some radical changes, not only to our current situation, but our mindset that's hard to wrap my head around.

Today I'd like you to meet Nicole and James. Nicole's 44. James is 42. They recently had their second daughter, and they tell themselves a lot of stories about money. Today we're going to dive into those to try to understand why they can't change their habit of overspending. I've got a new tour date in Seattle, Thursday, July 18th. Tickets are on sale now@iwt.com Seattle. I love talking to you on the podcast. I love seeing you on YouTube. And now I am coming to the stage. I've already met people in New York, Boston, Philly, all over. And now I want to bring couples in front of you so you can.

Watch me ask them the toughest questions about money live.

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Into it and meet Nicole and James.

I was eight months pregnant in January. I was like, oh, my God. I don't know how we're going to pay for our older child's school for next year. I don't know how we're going to pay for the new baby's, like, childcare when I go back to work.

How would you describe where you were at that moment? In a word or two?

Frantic, I would say. Frantic and scared.

Scared of what?

Well, scared of basically what's going to happen, which is I'm going to go to work and I'm going to have to also take care of the baby, and I'm scared.

How's the baby doing?

She's great. She's 11 weeks and just growing perfectly and is a sweetheart. I'm just gonna have to, at least for the next few months, work and take care of her. Not ideal, but once our oldest goes back to school, I think my mom will have some free time and can watch her a few days a week until then. It's just gonna be a little sticky.

Yeah.

But still, like, I just know. I know how work is. I know how I am with work, and I know it's going to stress me out and I'm going to get resentful towards James because I have to work and I have to take care of the baby. And he works because I work from home and he gets to go to the office and have a kid free experience. So I can. I know how it's going to go.

Okay.

A few months prior, he had tried to have a discussion of money, and I was the one that was like, no, it'll be fine. We'll figure it out. Like, it'll all work out. I know it will.

What do you remember him saying, Nicole.

What is the plan once the baby gets here? Okay, meaning like childcare. My idea was we'll just hire someone privately. It can't be that expensive. I hadn't really looked into it. Then I started looking into it and I realized, oh, this is a lot more money than I thought. Daycare is obviously very expensive, and I know we can't afford that. And I started looking at our budget. I think I did your conscious spending plan, and I started looking at it and I was like, oh, yeah, we don't have any money for this. We don't have any extra money. And when I said I would take care of it, he probably let it just like, okay, she'll take care of it, and didn't really think about it. Again.

Okay. Honestly, money wasn't on my mind. Got it. Probably. Probably to our detriment. So I'm glad somebody had it on their mind.

Okay, good. All right.

I will say also, in March, I received a small bonus from work. And so some of that money is going to help pay for our oldest, her school up until 2025. So we had her school from August until December. Kind of covered.

What happens after December?

Oh, we have no plan.

How many parents run the numbers before they have kids? Truthfully, almost none. It's the same as a house, which is the biggest purchase of people's lives. Almost nobody runs even a basic calculation. The fact is, most of the time, it actually does work out. See, most people don't pay attention to their money closely at all. And they still have a place to live. They can still eat out at an occasional restaurant. They can still watch Netflix and have an iPhone. But I want more for you than being okay. I want you to live a rich life. And there's no way to trip and fall accidentally into a rich life. You have to be strategic. You have to get proactive. You have to go from playing defense to playing offense. And most of all, you have to make a plan.

We'll make more money by then. Like, I want to get a better job where I'm making more money. You should get a better job where you're making more money and it'll all work out. I think that was my plan. Neither of us have changed jobs. I don't think I, in my mind, realized how much time I would need for recovery and to actually raise a baby. And I didn't have as much time to do, like, other things like get a resume together and start putting out my resume and applying for jobs like I thought I would. So I've been kind of looking, but not really looking, and he's fine where he's at.

I allowed her to push it off and let me put it back to the back of my mind. Filled out the application for this. That really got my mind turning about money a lot more. Of course, knowing that this was coming.

Why? Hold on, hold on. Oh, when she filled out the application, did she tell you that she did, yes. And what was your reaction to that?

I was with it. I wasn't sure what it could do for us because we don't know exactly what our 100% problems are. So without knowing that, it's hard for me to know what can be done if that makes sense. I like to pretend I'm a great planner. I'm not. I think about the plans, but then I don't always have it completely locked in stone.

James, you said when you were speaking.

To my colleague about your situation, you said, I think we need to learn how to budget. Yeah, tell me about that.

Well, I feel we have done a good job of being very open about our spending. There's not always discussion before the money's spent. But I think we do a good job of setting things up. But then we failed to really have a good grasp of our costs when it comes to food and entertainment and the little things that weren't planned but are spur of the moment decisions throughout the month. You know, let's do this. Oh, this came up because so and so called Us, that kind of thing. Those things add up. And once you have that emotion of going out and doing something, I think we're too quick to throw some money around because now we're in this nice, fun situation that we didn't expect, you know, and we get a little carried away with that, thinking that we're doing a little better than we are.

Okay, would a budget solve those problems you just described?

I don't know. Perhaps it's too psychological. And I ignore the budget, too. And we still do the same thing.

Like, if you had a budget right now, what would you do with it?

I'd try to follow it. I'd like to put it in my phone and stare at it and do my best and probably get angry when I still went over it, but I. I'd try to follow it.

Wait a minute. Even in this hypothetical, you already went over your budget? It took two seconds. What kind of budget is this?

Not a great one, I suppose.

Okay.

What do you think about this, Nicole? The idea that James said, I think we need to learn how to budget and stick to a budget.

I would have thought the same thing.

Another story they tell themselves, we need to budget. What's funny is how many couples come on here thinking that some magical budget will solve their problems.

Let's get real.

If a budget was going to solve your problem, you would have been using one already. The truth is, budgets rarely work. And more importantly, a spreadsheet is not going to solve an emotional problem, a psychological challenge, or an income deficit. We'll be right back after this short break. Table. Now back to James and Nicole.

Things will work out financially somehow. I don't know how. I've had a few times where like, you know, I was in debt and then something happened and then I got a little bit of money and I was able to take care of that debt.

Did you grow up religious or poor?

Religious and poor.

Okay.

So my mom was a single parent. We were very poor. She finally became a teacher. She graduated from school. She put herself through college with two young kids and graduated and I think in 1988 became a teacher. But we were still, you know, teachers don't get paid a lot. My dad never paid child support. He kind of didn't really have any money either, so just didn't grew up with money. I grew up, though, with very rich friends, very wealthy friends, and I was very aware of it.

So what do you remember about that?

Just like we had to shop at Pick and Save and my friends got to shop at Gap. One thing that I remember my mom always telling my sister and I was that you have to be able to take care of yourself because you can't depend on men on a man. And I remember I wanted to go into dance. I wanted to be a ballerina or, you know, continue that study. But, no, that's not dependable. You need something that you can make a career out of. And so I went with that in mind. And I actually do see it in our situation, like, I've just kind of taken control because can't depend on a man, which I don't know if I ever would have thought that's why I'm doing it, but I think that's why I'm doing it.

Never made that connection until just now.

Yeah. Yeah.

What does it mean to you?

Well, kind of annoying that I do that. I really didn't want to be like my mom and, oh, there I am, or there she is, you know? And it's something like this because I do feel like I can depend on James. I feel I trust him completely. And I know that if he had to, he would handle things. He just doesn't have to because I don't let him.

So you're saying you trust him with your family finances?

Yeah. Okay.

What about before you two met? He was managing his own finances.

Well, he didn't do a very good job at that, did he?

Yeah, it wasn't going particularly well.

Have you ever told him what your expectations are around money?

No.

Do you have any expectations?

I don't think I have any. When I was able to get a credit card, I got a credit card, and I got into a lot of debt in my 20s, and I was able to get out of it because I cashed in a 401k plan in my 20s thinking, oh, you know, I'll have plenty of time to save later. Like, let's just use this to get on debt. And then I get back into debt. And then I was able. I got a chunk of money from my mom that. That was supposed to be used to put a down payment on health, but I used it to pay off debt. And then this latest time, my grandmother passed away and left my sister and I her house and an account that she had, and I was able to get out debt with that. And the investments that we have, which you'll see when we talk about the CSP plan, that's because of my grandmother. It has nothing to do with me. So I see this cycle and this thing that we. That I've been doing, and I feel like we're heading that way again.

And why do you do it?

Because I can't say no to myself. I remember in my 30s, like, I was working really hard, 80 hour week. Like, I deserve this. And also at that point, I'm like, at this point in my life, I should be able to buy the expensive set of knives. Like, you know, I should be able to buy the expensive furniture. I should be able to go on the trip that I want to go on.

This is a phrase I hear, especially.

From people who have an unhealthy relationship with money. The phrase is I deserve that. See, I almost never hear it from people who are high earners investing 18% of gross income, but I hear it all the time from. From people who are in credit card debt, people who cashed out their 401k to pay off debt, and people who save and invest almost nothing. I think the phrase itself is fascinating because almost nobody ever says it out loud. It's simply a private thought that people have, and they say it to themselves when they want to buy something they like, like a dinner out or a new car or a beautiful bag. I wish I could ban this phrase.

As it relates to money, but really.

It'S just a symptom of, of an unhealthy relationship with your finances. Because if you truly know your numbers, you realize that you don't deserve anything. You can spend on the things you love, and you don't have to justify those to anyone, but you do need to be able to afford it.

I'm curious, James, how you grew up with money. When you think back to childhood, do you grew up with both parents?

Yes.

Okay.

What are some phrases you remember your.

Parents saying when you were young about money?

I don't remember them discussing it.

How come?

We never really wanted for anything that I can remember. We knew we were middle class, but we were upper middle class. And we got what we asked. We didn't ask for a ton, but we got what we needed as a family. There was five kids, so we were a big family. So we knew we couldn't be wealthy. Wealthy. But my dad made a lot of money.

How much?

I don't know exactly. I know he made more than a hundred thousand dollars in 1986 or something like that. That's a lot of money making good money. So I wouldn't say like wealthy, because As I learned 20 years later, he never saved anything. He wasn't even paying the IRS much. Um, so wealthy would, would involve actual planning. But he had money coming in and he spent it on the kids and he spent it on his family. Um, where did you grow up? I grew up in. Outside of New York City and then upstate New York and then Pennsylvania.

What did your dad do? What was his occupation generally?

He was a salesman. He sold tractor trailers. The. The big back end. Okay, great.

What about your mom?

She was a stay at home mom up until her late 40s.

Your dad bad with money as well?

Yeah, to the exact. Almost to the exact degree that I am, including the cost. I think he didn't pay his taxes, and I think by not paying his taxes, he had a lot of money. And I think at a certain point in my childhood, I want to say probably my early teens, it finally caught up with him. He needed to start paying the tax bill. We moved out of a bigger house into a smaller house. That was the big sounding bell to the family. Like, okay, times aren't as good as they were.

Did you go to college?

For two years. Didn't graduate.

Okay, who paid for that?

Nobody. I did eventually. Oh, that's a fun story. Tell me like it. So I went to University of Pittsburgh because actually that's a good, good thing to talk about because that was the first time I was told there was not enough money. I was accepted to University of Colorado in college. But when I presented the acceptance letter to my parents, that's when I was finally told, oh, you know what? Out of state school, we can't afford to send you to an out of state school. My dad just said, I will get you a loan. I said, okay, get me a loan. Great. The second year came up and they were looking for money for me to continue going to school because I had two years of unpaid bills. Essentially, University of Pittsburgh was saying, you know, you owe us for this dormitory bill. You owe us for this tuition. My dad had not actually gotten the loans, had somehow. Somehow I don't know the exact ins and outs because I don't really want to get in a fight with him over it now or these years later. Basically I owed these loans or owed money to the school and paid it for a good seven or eight years afterwards, just paying for those two years of school that I then ended up because I was 20 and mad about it. I dropped out. I gave up on college, kind of walked away from it all. I did not learn I needed to pay for them until about two years later when my wages began being garnished. When I was a bank teller in Colorado. That was when it really came out that my dad had used my social on the forms for the loans and stuff, but hadn't told me and then had not started paying or anything like that after I had left school.

What about your dad as it relates to his finances during this time period, 2001 or so?

Honestly, for my dad, this was the time in his life when he was forced to figure it out. He ended up getting a. Getting a reckoning with the irs. Huh. He had to live with his brother for a while after he left the family. He had to go through some lean times during these years, making up for overspending, I think, on the family the 15 years before.

What lessons do you take away from that story as it relates to your personal finances?

I think I do a lot of the same things my dad does. I think I spend at a level I think I should be at as opposed to what I truly am. And I think a lot of the decisions we make are like, oh, yeah, we can afford that. We. We're the type of people who should have that kind of thing. Not really thinking about whether we actually have the money for that kind of thing. And I. I know that's the way he operated, and I know that's the way me. Me and Nicole operate. And I think it's. It's tough for me to break that mindset because it's just so ingrained.

I mean, what other lessons did you take away from the family history? Oh, to me, the primary lesson is that nothing changed until your dad was forced to change.

Yes.

And I think that's exactly the situation with you.

Oh.

Like, obvious one would be like, pay your taxes.

Yeah, you know, like, yeah, pay your taxes. Great. We owe the IRS about. What is it? Do we finally get them paid off, or do we still own, like, 1500 bucks?

We are, like, 2000, I believe.

It was discharged in bankruptcy, but despite that, it's still appearing on some kind of.

Hold on. You went bankrupt?

Yes, three years ago. I filed. Was that.

No, I don't think I saw that. Okay, well, hey, let's roll.

Sorry to toss that on you.

I love having conversations with the couples on this show. And the way that I can keep doing these conversations is if you click that subscribe button right now, that'll help our channel grow, and that'll help my team keep producing these videos.

Tell me what happened with the bankruptcy.

I had been living on my own in Denver for 17 years and just overextended myself through all the same kind of things we do today. Entertainment and food. And I. I lived alone and lived like I had more money than I.

Did like what specifically, what did you spend money on?

Cars. Not many at once, but I liked to upgrade my car more often than I should.

And tell me what specifically, when you say more often, how often?

About every year.

Okay.

You.

You bought a new car and then traded it in, that kind of thing.

Every year? Yeah.

What kind of cars?

Hondas. What nice Hondas. Nothing fancy.

Hold on, you're talking to Mr. Honda over here. What's. What nice Honda are we talking about?

Well, I. My first Honda. I've owned four different Honda Civics. An Accord, an S2000, and a CR.

V. He had a Porsche.

I did buy a 911.

How come you didn't mention that?

Well, I don't know.

I didn't get to that one yet. That was after all the Hondas.

Wow, that's so interesting.

The last one, that was the straw that broke the camel's back. And after the 911, I've been.

Yeah, all right, what else?

I don't know. Electronics, you know, the new iPhones, iPads, stuff like that. Computers. Once in a while, like there was never any one giant, oh, I spent 20 grand on this. It was just a lot of small items living beyond my means.

What do you mean? There was no 20 grand? You bought a Porsche 911.

Well, I never bought it and paid cash. It was a loan I had that I suddenly was paying more on and got myself way too monthly overextended.

Okay. How much were you making at the time?

Anywhere between 40 and 60, depending on the job. At one point I had two jobs, so I was making a little more.

But why do you think you got into that situation? Overspending?

I think I spend. Emotionally. I think when I feel bad, I spend money. And I probably felt bad because I was single for a while and had been lonely. I don't know.

When did you know that you were in financial trouble?

It was when I didn't do my bankruptcy. That was obviously trouble. Post that.

Wait, wait, wait, wait. Did you know you were in trouble before you went bankrupt?

Yeah.

I mean, I always knew I was in a bit of trouble, but to be honest, if you want to ask, when I knew I was in trouble, like I've always known I've been not great with money. You know, it's been my whole life. Why I've never had. I've never been able to accumulate it. I've always just kind of spent what I had.

And was that a problem?

Not until I started having a family.

What did you think when you had to declare Bankruptcy.

That I would try to do better next time.

Did you really believe it deep down?

No, because I know how I am. Yeah.

Did that concern you when you were early on in the relationship?

Not really. I also am not that great with money.

Notice how these money messages are transmitted from generation to generation. Dad was bad with money, and now.

James is bad with money.

Then you see it in intimate relationships. As Nicole admits, she isn't good with money either. And one clue I want you to notice here is how James constantly minimizes his financial behavior. He literally says, it's not like I spent 20 grand on any one thing while describing how he bought a Porsche 911 while making around $50,000 a year. And he does this a lot. In fact, you'll hear him keep doing it over the next few minutes. We'll open up the conscious spending plan after this. Let's get back to the show. Assets, $547,000. Savings, $12,870. Debt, $269,300. Net worth, $444,758. Fixed costs, 90%.

Nicole, what's that look on your face?

Terrible.

What's it supposed to. Let's not pass a value judgment. Let's try to be. Let's just analyze the numbers. What should this number be?

It should be 50 to 60%.

Yeah. Yeah. So it's 90%. So it's way above recommended parameters.

Our fixed costs are really, really high, and I think that is why we're feeling the stress of just not being able to have enough.

We've talked about fixed costs quite a bit, and I guess we keep bumping up against them. Short of, you know, selling the house and downsizing in the mortgage, I don't. I don't really feel like we found a way to. To change the situation, though. Right?

No.

Okay.

And that's. That's the problem. Other than me.