"I’m 35, in debt, and spend everything I make"
Ramit Sethi works with Lena and Mike, a couple earning $199k annually but drowning in $755k in debt with 98% of their income locked into fixed costs. They bought a house without doing the math, and Ramit shows them how selling it and moving in with Lena's parents could free up $8,300 monthly to build a $60k emergency fund and start investing.
Chapters
You said we are spending more than we're making, but we're over $100,000 in debt.
I'm not very frugal. Comfort is not something that I'm going to cut back on.
Once I have my mind set on something that I want, I'm very stubborn.
Lena, you mentioned you're the one on top of these numbers. How can you be on top of them if your fixed costs are at 98%?
To me, it looks worse than what I feel. I kind of have like this sense of optimism that We're going to be okay.
You've taken on some of those attitudes, which are like, my family was wealthy, I'm going to be wealthy. I'm not cutting back on freaking grocery delivery. You don't have the finances to actually make that feasible.
If we're a plane, we're about to crash.
Yes.
I'd rather go out and make more money than have to be home cooking every day.
Hold on. I didn't want to do this, but I'm going to do this. Today I'm speaking with Lena, who's 35, and Mike, who is 28. They're a married couple living in South Florida with their 8-month-old son, and together they earn almost $200,000 a year. And yet they've been in debt their entire marriage. They'll make plans to pay it off. They'll tell themselves it's different this time, but somehow it never is. If you've ever wondered how successful people with high incomes stay stuck in debt for years, this conversation will show you exactly how it happens. And if you don't earn $200,000 yet, I especially want you to listen to this episode to understand that just making more money won't solve all your money problems. I'm about to open up Lena and Mike's conscious spending plan, which breaks down their net worth, income, and where they spend. It's the same tool I use in every episode. If you want help with your own CSP, Join my money coaching program at iwt.com/moneycoaching. Their assets: $845,000. Investments: $11,569. Savings: $16,037. Debt: $755,189, which gives them a total net worth of $117,417. Fixed costs: 98%. That is a massive problem. Investments, 6%. I'm not sure how that even makes sense. How do you get 98% plus 6%? Savings are at 0%. Guilt-free spending, -2%. We know that's not true. Now, before we dive in, I want to give a quick shout out to our new listeners. Welcome to the show. Drop a comment below and let us know where you are tuning in from. And here's my question for you. Have you ever been in a relationship where you talked about making changes with money, but nothing actually ever changed? If so, tell me in the comments on YouTube or Spotify. Let me know what happened. I read every comment. Now let's get started with Lena and Mike. If you are in a relationship where you or your partner cover up spending to avoid big fights, or you get stressed out spending $150 on dinner even though you can easily afford it, if you lay awake at night anxious about money, I want to talk to you. I'm currently casting couples for the next season of the Money for Couples podcast. We only do this a few times a year, and I want to hear from you. You can apply today at iwt.com/apply. Being on the podcast is basically a 3 or 4-hour coaching session with me. Tons of past couples who have appeared on the podcast have said it is a pivotal moment for them to get on the same page. So if you want my take on your unique financial situation, This is your chance. Apply right now at iwt.com/apply. Lena, in your application, you wrote something that caught my eye. You said, we are spending more than we're making. We're over $100,000 in debt. We talk about money, we make plans, and we never follow through.
Last year, We were on our way to paying down our debts. We just got hit with like a massive curveball, which, which was I got pregnant. And ever since that, all the debts that we were paying off and all these things that we were able to do kind of went down the drain and it became all about the baby to make sure that we were ready for when the baby got here. And now that the baby's here to make sure that the baby's comfortable.
And why don't you think you follow through?
I feel like we talk about like what we need to do, but then individually it just stays in the talk. So we don't hold each other accountable.
Why?
Most of the things that I buy, the things that I purchase, are things more so for comfort, like to make sure that our home is comfortable, that we're comfortable. Like, I don't— I'm not very frugal. Comfort is not something that I'm going to cut back on. So for example, our groceries, we don't go buy groceries. Like, I'd rather pay a premium and for them to bring the groceries here.
Okay, let me pause you. Mike, what do you think?
I don't want to fully blame the baby. I did notice that there was an inclination towards choosing, hey, what's the more efficient, what's the more comfortable way of getting this task done? Or the tendency that we have to choose comfort over, for lack of a better term, sacrifice. Having pre-made meals, whether it's Uber Eats, a prepaid service, instead of actually cooking.
Okay. What do you both— you've used the word comfort a lot. What does comfort mean to you?
To me, comfort is efficient use of time.
For me, comfort is delegating tasks that I don't necessarily want to do.
For example, cooking.
Mm-hmm.
Just don't want to do it. Cleaning. Um, honestly, just don't want to do it. Like, I prefer to spend that time working.
How do you know if you can afford to delegate or not?
When we're in the red, you can't.
Is, is that how you decide?
Kind of. Um, yeah, so I have like a set amount.
Mm-hmm.
And for me, that's my baseline. That's my zero. So anything below that, like, We need to do something emergency.
Does it work?
Most of the time.
Didn't you tell me you're in $100,000 of debt?
Yeah. What we've done is kind of push, like, we'll get there. Like, we will pay it off. We will get there. So we're kind of, I guess, future-focused, thinking that our solution is going to come.
How long have the two of you been in debt?
Oh, since we got married.
How long ago?
3 years.
3 years.
Were you in debt before you got married?
We were, I want to say maybe like not counting cars or anything like that. Just, just debt, probably like $20,000, $40,000, which is—
$20,000, $20,000, $40,000, which number? We already know it's not $20,000.
So I'm trying to think back. Um, it was probably, I would say split it, split the difference. It was probably $30,000, $30,000 that we were in debt.
Okay. So you had tens of thousands of dollars of debt before the baby. Is it possible that the inclination to get in debt is not due solely to the baby?
No, no, no, no, no. So I found you a few years ago, um, when we had already made like a whole bunch of the mistakes that you're like, don't make this mistake. Like we had already done that, right? Like, spending too much on a wedding, like buying a house without really like looking at all these costs, all these different things that I was like, crap, like I wish I would have known before, right? Because I was brought up in a home where you need to have a home, you need to buy a home, you need to have this big wedding. For me, like I would have eloped and that's not an issue, but we have— we're Hispanic, we have big families, like everybody needs to come and celebrate. So kind of being pressured into having this big wedding, and by the way, loved it, like it's not a bad thing, but because of those things we started accumulating like unnecessary debt. And then that's when I kind of found you on the Netflix show.
Okay. Let me, let me pause you.
Yeah.
How much?
Uh, $20,000.
$20,000 in credit card debt for the wedding.
Mm-hmm.
Was there a point where you were like, wait, we can't do this? Or was it just like, this is how it's done.
Yeah. Just, this is how it's done.
Okay. Now you mentioned that the two of you make a plan to get out of debt, but you don't follow through. Who is the one who makes the plan?
Me.
You initiate the conversations about money and debt?
Honestly, it's just me kind of telling Mike and then him just kind of agreeing.
Okay. What's the first thing you say when it comes to a money conversation?
Babe, we need to tighten up.
And then he goes, yeah, that sounds good. You're right. And then, and then what happens?
Nothing.
Nothing. The depth of the discussion that we have is very surface level. This idea that we might not be comfortable with what it actually entails to tighten up, because if, if it meant that we need to start cooking, we need to start cleaning, we need to start grocery shopping just for argument's sake, then that's something that I don't feel I would be comfortable with. And Lena would— Lena, please correct me if I'm wrong— would be comfortable with.
When you say you don't feel you would be comfortable with, do you mean I don't want to do that?
Yeah, I don't want to do it. It's just kind of like a choice. It's just kind of become, I want to say, like routine. One of these days it's going to hit, but we're just not there yet.
Did you catch what Lena said at the end there? One of these days it's going to hit, but we're just not there yet. It's kind of a very passive way of talking about life, isn't it? They've been in debt for 3 years. They've amassed over $100,000 in consumer debt, and their plan is to wait for some future version of themselves to magically have the discipline that they don't have today. What really struck me actually was how much they used the word comfort. Comfort to them means not cooking. Comfort means not cleaning. Comfort means paying a premium to have groceries delivered. Personally, I don't mind paying for convenience. I really love it. I pay for lots of things in my life that make my life easier. But if you're going to pay for convenience, you have to be able to afford it. Now, here's the interesting part. If you go deeper, They have positioned comfort as the opposite of sacrifice. And who wants to sacrifice? Nobody. It's an almost unassailable position. That means that once you position the opposite of what you're doing as sacrifice or failure or even hard work, nobody wants to do that. You have already decided it's painful before you even start. It's like when people see paying taxes as losing. They feel like they are losing, like taxation is theft. Personally, I see a huge tax bill as a sign that I was successful and that I get to live in a society where poor people and middle class people can benefit from roads and medicine. Think about how you position the things in life because it has a profound effect on how you experience that life. For Lena and Mike, there's a huge middle ground between comfort and sacrifice. I think it's about making intentional choices based on what you can actually afford. So reframing that view of the world is going to be critical for them. But first, let me show you a specific example of just how much they are relying on consumer comforts.
Two weeks ago, Mr. comes up to me and, hey, I want an iPhone. What is it? 17, 18, whatever the heck. And he's like, what do you think? Is your phone working? Yeah. Is it cracked? No. So what do you need it for? Absolutely not. We could use that money for a lot of other things.
Wow. Lena, the voice of reason. Okay. And Mike, how did you take that?
He has the iPhone.
Really? What is that, a 17 Pro Max?
The Pro Max.
How much did it cost? Why is everybody so quiet when I ask? It's just a number.
Because he didn't want to tell me. He hid it from me.
Oh, really?
No, I did not.
How much did it cost? The hell's going on?
$1,200.
Why are you so hesitant to share the number?
Because I can't believe that that's how much it costs. And I still grab it. It's crazy.
Is it crazy? Yeah. Why'd you do it?
Because if somebody asked me, hey, what phone is that? And I could tell them it's the 17.
Just hold up that phone again. I just want to take a look at that. Hold it right up tight to the camera. Wow, beautiful, beautiful phone. Love it. iPhone 17 Pro Max. What are you feeling right now?
There is a degree of like affirmation, right, that I like.
That's an honest answer. Yeah. Keep going.
If I'm being transparent here, once I have my mind set on something that I want, I'm very stubborn.
Lena, do you feel included in his $1,200 purchase?
Absolutely not. If anything, I feel even worse because I said no and you went and did it, tried to convince me. I still said no and you went and you did it anyways.
If we zoom out and we look at the roles that each of you play when it comes to money in your relationship, almost like your chess pieces on the board, Lena, what role do you play?
Kind of like the organizer or the attempted organizer, kind of. Motherly in an aspect. I'm the one that has the budgets. I'm the one that tries to be as aware as possible.
All right. Mike, what role are you?
It's almost like she tells me, kind of, and I digest information. So if I gave an analogy to a chess piece, it would probably be a pawn. There isn't a lot of back and forth, and that's because I know she's very well on top of our day-to-day.
She's on top of the family's numbers, is that what you're saying?
Our shared numbers.
How much debt did she just say that your family has?
$100,000.
Is that on top of it?
No.
This is kind of a recurring pattern, have you noticed? There's like a very good explanation for certain things, like very rational reasons, and then we get to the end, I'm like, does it work? You're like, no, it totally does not work. What do you make of that?
I think you're seeing like our relationship kind of in this little capsule where we always talk about the solutions and we're pretty smart people. We have good ideas, but then we always revert back to what's comfortable and how kind of we got together in our relationship. And I think that's what we're seeing, like just the cycle of like, oh no, this is how we fix it. But we go back to, oh no.
Mike?
I just know that there's definitely something here that we're overlooking, like, tremendously.
Okay, well, that's— I appreciate that. That's why we're here. There's a— we always have a blind spot in our own lives. Always. So that's why getting help, whether it's from a therapist, a trainer, a coach, whoever, can be super helpful. It's interesting when you can afford to buy lots of different things, what you actually choose to spend your money on. For example, I've tried these different shampoos At a certain point, I was just like, most of these are all the same. I'm just getting the one from the drugstore. I was talking to a friend about what type of meat we buy. He was shocked that we didn't buy the most expensive meat. And I think the lesson that I have taken as I have made more money is just because it's expensive doesn't mean it's right for me. That's why the mattress that I chose to sleep on every single night is from Leesa. Leesa offers many high-quality mattress models, whether you sleep on your side, your back, or somewhere in between. From the first night, you're going to be able to feel the difference. They use premium materials and it delivers full body support. Every Leesa mattress is assembled in the United States. It comes with free shipping, easy returns, and a 120-night sleep trial. Wirecutter actually named them the best hybrid mattress. Go to leesa.com for 20% off mattresses. Plus get an extra $50 off with promo code Ramit. That's exclusive for my listeners. That's leesa.com, promo code Ramit for 20% off mattresses plus an extra $50 off. Support our show. Let them know that we sent you after you check out. Again, that's leesa.com, promo code Ramit. A lot of people I know, including me, are drinking less alcohol these days. One friend stopped completely. He said it feels amazing, but he's got a little trick. Once in a while, he takes Element's new sparkling electrolyte drink to a party. He said it looks kind of like a can of hard seltzer, so I don't have to deal with questions about why I'm not drinking. Plus, it tastes good. It's something to look forward to. If you've cut back on drinking but you want something that tastes good, makes you feel more hydrated, check out Element. Element is a tasty, no-sugar electrolyte drink mix and sparkling electrolyte drink. My team has been using Element for a while and they can feel the difference. They have more energy physically, mentally. They're much better after a tough workout or a long flight when they need to rehydrate. Element is formulated based on real science. It's used by Navy SEALs and Olympic athletes. And now you can get their new 12-ounce canned sparkling drink in 4 refreshing flavors: Pineapple Salt, Lemonade Salt, Black Cherry Salt, and Orange Salt. These slim cans deliver the same electrolyte ratio as 16-ounce sparkling with half the formulation. Get a free LMNT sample pack with any purchase. Go to drinklmnt.com/ramit. That's drinklmnt.com/ramit. Try it totally risk-free. If you don't like it, they will give you your money back, no questions asked. What was it like creating the conscious spending plan together?
Since Selena had all the numbers, it was basically like a copy and paste scenario.
And Mike, what did you do during this process?
There was some back and forth.
Tell me.
There was some discussion over the number. There was definitely some pushback that she felt uncomfortable with. So at that point, I'm like, okay, whatever the number is, that's the number, right? Happy wife, happy life.
I feel like there's a lot unspoken happening right now. Let's just tease it out. You guys are here. Yeah, let's talk about it. Mike, you've heard that phrase from where?
My grandfather, my uncle, the male role figures in my life.
Okay, and what does it mean?
Like, give in to majority of arguments.
How long have you been doing this happy wife, happy life thing?
2, 3 years maybe.
Since I've been a wife.
Yeah, right. Lena, how do you feel about this phrase, happy wife, happy life?
There's a lot of little contradicting things when it comes to our relationship, and it's not every single facet. So happy wife, happy life kind of applies to like, oh, hey babe, I want to hang out with the family. And he's like, yes, let's go do what you want. Or can you bring me ice cream? Or he doesn't really like— he's very attentive. And in that sense, happy wife, happy life, totally agree with it. But when it comes to kind of like decision-making or like bigger things, for example, the iPhone or other examples that we've had in our relationship, sure, he doesn't push back, but then he goes behind my back. So it's not— he's not trying to please me. He's not trying to make me happy.
Happy wife, happy life, right? I really hate this phrase. It is such a sitcom phrase. You've got the beleaguered husband who just wants his old ball and chain wife to get off his case and leave him alone. So how does he do it? Just agree with the wife. After all, happy wife, happy life. 10 years later, when I ask him what he likes to do for himself, his eyes dart around frantically. Can't even remember what he likes to do. And then he whispers the only thing he can possibly imagine that might maybe make him happy. I would like a man cave with a bar. I hate this phrase. I don't simply want a happy wife. I want a happy relationship. I want a happy me and a happy wife and a happy family. You know, a lot of the phrases that we use around money are very intellectually lazy. Money doesn't grow on trees. You can't take it with you. And this wretched happy life one. These phrases are repeated over and over, passed down by people who don't even understand how money works. Personally, I am on a mission to get people to understand the holistic part of money. Yeah, the tactical parts like saving and investing, but also the meaningful, almost spiritual aspects of what money represents in our lives. In Lena and Mike's case, look at the situation. He's handed over all the financial responsibilities to her. And their debt has only grown. But as long as he believes this simplistic happy wife, happy life phrase, he has wiped his hands clean of any responsibility. The crazy thing is he even goes behind her back and buys what he wants anyway. He did it with the iPhone. The irony is that the very men who say happy wife, happy life almost never have happy wives. How could they? Nobody is happy if you just throw up your arms and say, do whatever you want. I am desperately wanting Americans, and especially American men, to grow a backbone around their finances. Now we're about to dig into their conscious spending plan. I want to see some numbers. And if you want to follow along with your own numbers, download the free template at iwt.com/csp. Let's take a look at what their numbers really look like. Let's take a look at the numbers. Lena, can you read off the word in bold and the number in full next to it for this entire box, please?
Assets, $845,000. Investments, $11,569. Savings, $16,037. Debt, $755,189. Total net worth, $117,417.
All right, let's continue on to the income.
Gross monthly income, $16,583.
$16,583. That means that combined, your household makes $199,000 per year. By show of hands, who knew that number? Lena's hand is up. Mike is— his hand is not. No. 50%. Okay. That's right along my statistics. Out of curiosity, Mike, what did you think that you made?
$149,000.
Does it change the way you feel about money?
No.
$50,000 more than you thought you make. We just— We just rummaged around in the couch cushions and found $50K a year. Doesn't change the way you feel.
With that number, we're in this situation.
So what does that make you think?
We would be in a much worse situation making less. Yeah, for sure. Mm-hmm.
I want to point out for everybody, this happens frequently. People constantly say, hey, if I just made $20,000 more, I would feel good about money. I wouldn't feel so scarce. But it happens over and over again right in front of our eyes. Mike, you were just a perfect example. You're making $50,000 more than you thought, and it did not change a single thing for you about how you feel. The way we feel about money, highly uncorrelated with the amount in our bank. Okay. What do you think of $199,000 as a household income? Lena, how would you describe that? Is it good, bad, high, low? What do you think?
Typically, I would say that that's a decent income. Um, we live in South Florida. Which is very, very ridiculously expensive. So it's one of those things where it looks good, but in the reality of where we live, it's not as much as you would think.
I agree.
How much would you need to make in order to have a good income?
My goal is to get $250,000 a year. And I think with that and just allocating and being smarter, Um, I think that would be manageable.
I personally want over $300,000.
I like asking this question because the answers I get are like all over the map, but they're always in the same direction. More. Looking at the incomes, one person makes $9,583. Who's that?
Mike.
Okay, Mike, what do you do for a living?
I'm an accountant.
What the f— is this serious?
Okay.
And then Lena, what do you do?
I'm a licensed mental health counselor.
Is this for real?
She likes Excel a lot. And I deal with numbers 12 hours out of the day.
He comes home and turns his brain off.
I turn my brain off, to be honest, Ramit, and I shouldn't.
Mike, do you understand this stuff? The personal finance? I know accounting is different than personal finance. Do you understand personal finance?
I don't want to say fully.
Okay, that's a fair answer. And then Lena, you're a licensed mental health counselor?
Yes.
Um, any of the stuff we're talking about today sound familiar to you?
Uh, yeah.
Okay.
The irony doesn't escape me.
Like, what would you tell a couple who is in a dire financial situation? They talk, but they never follow through.
They needed an action plan. They need to sit together. They need to create accountability with each other.
All right. Want to do that? Want to?
Yes.
Let's do it. All right. Let's keep moving along on the CSP. Lena, you mentioned you're the one on top of these numbers. You're managing them. Tell me your fixed cost number, please.
98%.
How can you be managing your numbers and on top of them if your fixed costs are at 98%? Serious question.
The debt that we're in is just not Manageable.
Yeah. But like you said, you have been managing it. You track it. You're the— I forget what you described it as, the sort of organizer, organizer. But what value is the organizer if 98% of your take-home income is going to fixed costs?
Last year, our fixed were still high, but it was at like a 70%. Which was more manageable. Now with me not working, um, as much because of having the baby and this past year, instead of organizer, I've been like, like a hole cover, right? Like I've been just covering all the holes and we've had to take out loans, which has brought us up to that number. And so like now it's become to a level that, okay, this is not sustainable and something needs to get done.
Mike, where are you on this?
I think not having income for 6 out of the last 10 months, it's not ideal at all. You personally asked me and I feel horrible about it.
What changes did you make once Lena went part-time?
We didn't really make many changes.
I think that's when we started leaning into, hey, are you comfortable? Yes or no? Can this situation be managed easier, faster? And we did not consider the cost implications of that.
So we did take out loans to cover, um, like the, I want to say 6 months of no work. And that's how we've been able to, to kind of manage.
Mm-hmm.
For this year. But then that's also why we're at 98%.
Mm-hmm. Can I point something out? When you have one manager, one money person in the relationship already, it's a big no-no. I talk about that in the new book. It's a big no-no for several reasons. You need both people to have skin in the game. One day somebody might get hit by a bus and on and on and on. But you can also see the effects of having one money person, when that money person, for example, becomes pregnant, which is all-encompassing, has to cut back on work for very rational reasons, makes perfect sense. But then that money person has a conflict of interest. As we can see here, Lena, you wanted to be comfortable, a word that you've both used. So what did you do? You actually started increasing your spending. If there were two people working on the money, then the other manager might say, hey, wait a second, wait a second. We need to really look at these numbers. But Mike, you were absent. You were the pawn. You were just doing what she told you. And now she's like, I want more comfort. I want to spend more. We'll deal with it later. And Mike's like, happy wife, happy life. I don't even know what these numbers are. Cool. Accurate or not?
Very.
This is the problem having one person being the money manager. Okay. At 98% of fixed costs, You are broke. Did you know that? Lena says yes. Mike is nodding as well. How long have you had 98% fixed costs?
This whole year.
All right, let's keep moving along on the CSP. We have $199,000 a year in income. We have 98% of fixed costs, which means you're spending more than you make every single month. Investments, how much are you contributing per month?
What is it, like 10%? Mike?
Uh, 6, 6%.
Your savings are at zero, but you do have $16,000 saved. And finally, guilt-free spending is at -2%, which we know is not true. What is that number actually? Do you have any idea?
So I would estimate $900 for food.
Okay.
We're big food people.
Oh, you are? Hold on.
What the fuck? We eat in a lot. We order more than we go out.
Uh, order means what, like Uber Eats? Yeah, guys, what the— that counts as eating out?
Eating out in Miami, we're talking like $300, $400 one night. That's what eating out is, because that's a restaurant in Miami, that's a few drinks, that's, that's appetizer, whatever, versus eating in or like ordering in where there's, there's not this whole experience. To me is different. There's a distinction there. And we're not spending $400, we'll, we'll spend like anywhere between $50 and $100.
Lena, did you really think that was gonna work on me?
I was just saying that that's where my brain was at.
Your brain is wrong.
Okay.
Are we gonna get real about these numbers? We haven't even looked at the total amounts yet. Are we gonna get real or not?
Absolutely.
All right. Food is $900 a month. That's eating in and eating out.
Yeah. Both ordering and, and going out.
Okay, what else?
I might get a little impulsive and buy something like on Amazon that's not necessary, or he will get impulsive and buy more shoes.
I had at one point shoes in that category, but I since have taken that out.
What else?
Gym supplements.
Supplements, okay, how much for those?
Anywhere from $150 to $200.
$200 a month.
Yeah, I didn't even know we spent that much on it.
Self-care, either of you? No self-care?
No. For me, my self-care is my gym and my—
the barber shop. Like, barber shop, that's $60 a month.
$60.
How often do people get haircuts?
Once— I do once a month. There's people that do weekly.
How much is your gym? You mentioned it a couple of times.
$200. $200. All right, fine.
And like small miscellaneous stuff, but like the, the, for example, formula, the dog food, wipes, diapers.
I don't, I don't count that. I count that as fixed costs. I'm struck by the lack of urgency that they have. We just went through some alarming numbers. 98% fixed costs, zero savings contributions. They are spending more than they make every single month. They say that things are bad, but their energy does not match the severity of the situation. When someone finally sees their actual financial reality and it's bad, but they have no emotional reaction, that tells me they probably don't fully understand what those numbers mean. And it also tells me it hasn't gotten bad enough for them to actually truly change. Neither of those is good. Watch what happens now when I push them to confront reality. If we take a look at your CSP, there's some very interesting numbers I want to draw your attention to. First off, your savings, $16,000. That represents 1.5 months of savings. Meaning if something went wrong, y'all can survive about a month and a half.
Correct.
You have a baby. How do you feel about that?
That is terrible.
That would be scary to me.
Very.
You know, people talk about being able to sleep, go to sleep fast, or like sleep, whatever that phrase is. I couldn't sleep if I had a little baby and 1.5 months of savings with high costs. Next, I couldn't sleep if I was spending more than I make every single month. Let's take a look at your housing costs. What is going into the 98%? Well, $5,300, which is 34% of gross or 55% of take-home pay. What do you make of that?
Pretty high.
You know, the overall guidance is you want to have your housing costs, total housing costs, below 28% of gross income. You have $199,000, so it could be feasible for you. But even still, you're at 34%. You could make it work.
You could.
The problem is each percentage you go up above that becomes increasingly risky. It's less money to put towards savings, towards investment, towards guilt-free spending. And then on top of that, we add in $3,000 per month for debt payments. Mm-hmm. Talk to me about the debt. You've got $755,000 of debt. Can you break it down?
Yes.
Okay. I see $555,000 for the mortgage. The next number is $100,000.
That one's the loans that we currently have.
What kind of loan?
So those are personal loans that we took out.
What's the interest rate?
15.5%.
15.5%. Okay. And then you have $50,000.
That would be my student loans.
And then what's the last $50,000?
My student loans.
What's your interest rate on your mortgage?
6.625%.
6.625%. You know, can I just tell you something? Like, if this were my CSP, there's only a few key numbers that I would care about.
Like the percentages.
Yeah. All the, all the debt, all the debt. I would know the percentages, meaning the interest rates. You know, they have those scary movies where somebody goes into the bathroom and it's all like, it's all steamed up and there's somebody who wrote something in lipstick. It's like, I'm going to kill you. That's not what my mirror would say. My mirror would say 555,000 at 6.625%. Every morning I would be like, ah, I would know those numbers. Next up, I'll show you the other numbers I would know. I would know this number. 98%. Because that is the number that I care about right now. It is drowning me.
Correct.
And Mike, you're silent, which is actually a good metaphor for your presence when it comes to money in your relationship, right?
I agree.
You all have a car loan?
Yes.
Where's that? I didn't see that in the debt.
Oh, we need to add that. Mine is $10,000.
Mine is, I think, 25, ballparking.
What kind of cars do you both drive?
I have a Chevy Equinox.
Okay.
2021.
Uh-huh. Then I have a Tesla Model 3, 2022.
Do you know your debt payoff date?
Like late 2027, I believe.
I don't think so. I think it's past that.
Probably past that. Okay, I'll check.
The cars themselves will take over 4 years. You're paying almost $5,000 in interest for the cars. Your personal loan will take 3.5 years. You're paying $30,000 in interest. Your student loans, I believe you're not paying at least one, maybe both.
I'm not paying it. I don't have to.
Someday you will, right?
Yeah, eventually. But I'm hoping that it's so far in the future that we're in a better position to pay it off.
How would you be in a better position specifically?
Paying down the debts and our CSP would look different.
The amount you're paying on the personal loan, are you paying the minimum?
Yeah.
I think you guys have put yourself in a very tough position. What do you both think about the numbers?
We need to fix it. I think that they reflect just like poor management.
Mm-hmm.
Who's poor management?
Ours.
Ours.
And what do you feel looking at the numbers, Lena?
Doesn't feel great. Um, I'll also say that it kind of surprises me in the sense that it looks worse than what I feel.
Tell me about that.
To me, it looks worse than what I feel. And, and it's always because I kind of have like the sense of optimism, I don't know, delusion that we're going to be okay. Like, no matter what, we're going to be okay. And I think sometimes that feeling or that mentality helps me in a lot of situations, and sometimes it can definitely hinder me in some.
Is it helping or hindering you now?
Right now, when it comes to our finances, I think it's hurting. Okay.
What's a different way to approach your money, if not unbounded optimism?
More sense of, um, like urgency.
Mm-hmm.
Is there currently any urgency around your money?
There should be.
Not what I asked.
Yes, but I don't feel it's as high as it should be.
What's the example of a sense of urgency?
Like, we need to make these changes and act on them now.
If that were true, which I believe you, then isn't it feasible that you could dramatically cut your costs?
Oh, absolutely.
Oh, so what are we doing here?
I can definitely cut costs. It's just very difficult if I don't have my teammate on the same page with me.
The happy wife, happy life guy?
Yes.
Okay, so tell him, tell him what you want.
I want a teammate. I want somebody to help. I want somebody that sees the numbers, worries about them just as much as I do, and puts, you know, an action plan together with me.
Mike?
I failed her in that aspect. I agree with her.
Keep going.
I can't excuse myself with the whole idea of like, oh, I work with numbers on an everyday basis and therefore I don't want— no, this is our life that we're talking about here. And not just ours, our son's life. So I hear you.
What do you think of these numbers when you see them?
I want to vomit.
Why?
Because it's, it's a presentation of the runway we have. And if we're a plane, we're about to crash.
Yes.
We don't have enough time to take off.
And what do you feel when you look at those numbers?
Right now, if you looked at my heart rate, beating pretty fast.
Yeah.
Tell me what's going on. What are you feeling?
Like something needs to, needs to change, like yesterday.
Are you feeling alarmed, worried, embarrassed?
Embarrassed. Disappointed in myself.
Go on. Why?
Because I let down my partner.
Okay. Do you feel disappointed in Lena?
No, quite the contrary, a sense of gratitude because she's had to take a lot. And I know that there is a level of control that she enjoys and she likes and she likes to have. But sitting back and digesting everything as we're talking, it's almost like I'm doing her a service in allowing her to do that.
She's been trying to tell you, right?
Yeah.
Why have you not listened.
I think my optimism is like, yeah, we'll, we'll figure it out. And that isn't right at all. That should have never been my mindset.
Let's try to keep digging. I feel there's more beneath the surface. Does anybody else feel that way? Mike's hand is up. Lena?
Sure.
Okay. Mike just said we're a plane about to crash. We don't have enough time to take off. I actually find this remarkable. It's the first time either of them has truly acknowledged how dire their situation is. Now, here's something I need to point out. In their application, Lena said they had over $100,000 in debt. The reality is they have over $750,000 of debt. She minimized the problem by a factor of 7. Mike didn't even know they made $199,000 this year. Lena said the numbers look worse than I feel. It's like they've been living in a fog of delusional optimism, telling themselves, we'll figure it out later. But they've been doing that for 3 years straight. What I noticed, though, is that something just shifted. Mike is finally feeling it. His heart rate is up. He's embarrassed. He said he's let down his partner. I'm glad. I'm not here for people to simply feel good. I'm here to help them live a rich life. And sometimes change requires you to face reality. Sometimes change is hard. Lena just told him exactly what she needs— a teammate, someone who sees the numbers and worries about them, or at least focuses on them as much as she does. If you feel that you and maybe your partner are not on the same page about money, if you want help to create a plan that you will actually follow through on together, That's exactly what my money coaching program is designed to do. Check it out at iwt.com/moneycoaching. Now, I can feel that there's something else beneath the surface here. I want to dive deeper. I need to go back to where they first learned about money. Let's do that now. All right. How many of you have a parent or a loved one that clicks on every link they get in their old email inbox? I have a friend that is constantly having to go over to her parents' house wipe out whatever random popup is appearing on her dad's browser because he basically just clicks whatever comes in his inbox. And the thing is, it's very easy, especially for older people, to get targeted and have their data compromised by clicking on the wrong link. Just a single button. That is why I personally use DeleteMe. DeleteMe is a subscription service that removes your personal data from the internet. We're talking about things like your full name, email, phone number, address, even your parents' names. All found and removed. They've been the leading expert in personal information removal for the last 15 years. They were recently named Wirecutter's number one data removal service. And I personally use and pay for DeleteMe, and I love it. And I know you will too. Start this year smarter and safer with DeleteMe. You'll get 20% off all consumer plans when you go to joindeleteme.com/ramitsethi. Ramit Sethi and use promo code Ramit at checkout. That's joindelete.me.com/Ramit, code Ramit for 20% off. What's the area of life that you want to spend more on this year? A lot of people will say health or relationships. Some people will say travel. Let's talk about food and health for just a second. For example, in my life, my wife and I both decided we're going to spend more on health. And that means having a personal trainer. It means having someone make meals tailored to our macros so that we don't have to think about it. But you don't have to pay for a private chef to do that. One great option is to make healthy eating convenient by getting meals from Factor. They take the work out of healthy, macro-dense meals so you can start eating better now. Factor is a chef-crafted, dietitian-approved meal delivery service that fits into your goals and schedule. Their meals arrive fresh, not frozen, and they are ready to eat in 2 minutes. No prep, no cleanup, just heat it and go. There are over 100 meals to choose from every week. High protein, calorie smart, Mediterranean, even GLP-1 support options. And unlike most meal prep, there's a lot of variety, so you're not locked into the same boring meals every single time. If you're looking to eat healthier starting right now, this is exactly what I would use. Head to factor meals.com/ramit50off and use code Ramit 50 off to get 50% off your first Factor box plus free breakfast for 1 year. Offers only valid for new Factor customers with code and qualifying auto renewal subscription purchase. Make healthier eating easy with Factor. I want to understand more about where this unbridled optimism comes from. Lena, what do you remember your family saying about money when you were younger?
There was never really no. I was very privileged, honestly. When I was born, my parents didn't have a lot, but they built a company together, and I was privileged enough to go to private schools. I was privileged enough to have a car when I was 16. I was privileged enough to travel the world with my parents. So very seldomly did we ever hear a no. To any of the things that— definitely not a no to any of the things that we needed, and very seldomly to the things that we wanted. My parents have always been extremely generous.
Have they given you money as an adult?
Yes. For example, my dad helped us buy this house.
How much?
Um, he gifted us $100,000. Yeah.
Okay, that's helpful to know. What else as an adult?
My first apartment, my dad helped me out with, with that. But we have it kind of like in a trust. It's a family thing. Those have been like the biggest things.
Do you know how much you're going to get in your trust and when?
Yeah.
And is it a lot?
Yeah.
Are you comfortable sharing the amount?
It'd probably be over a billion.
Over a million. Okay. And is that when your parents pass or before?
No, no, no. In any event of them passing, of him passing.
What effect do you think that growing up privileged and rarely being told no has had on your relationship with money?
Well, I think that's where a lot of like this optimism kind of comes from because I haven't failed. I haven't had the opportunity to fail. Like I've always had my parents' backing. And like right now, worst case scenario, we would move in back with— back in with my parents. So like, they've always had my back. Like, I never hit the floor, they're always there to catch me.
And is your mom, uh, are they still together and is she still alive?
Yes and yes.
Okay, cool. What's her relationship with money?
Same. So they built the company together. Uh, my mom— both my parents are incredibly, incredibly hardworking. We do value comfort. So—
oh, is that a word that you use in your family?
Well, we just say that we don't want to do stuff.
Tell me more.
Yeah, like, my mom hates cooking, so no quiero, I don't want to.
Yeah, so she doesn't.
So she doesn't know. We had a live-in person with us that would cook and clean and stuff.
I'm a little surprised. Are you sure it's not more than a million? Just the way you're describing how you grew up, it sounds like it would actually be a lot more than that. Probably. Like, how much more? Because I don't think it's a million.
But I have my brothers and stuff. Like, everything's going to be split.
What do you have, like, 40 brothers? Because there's no way.
3.
3 brothers. It's more than a million. Just the way you're talking, I can tell. It's important because if it's 1 million versus 5 million versus 20 million, that actually dramatically affects why you are making some of the decisions. That's why I'm asking.
Yeah.
Do you have a sense of what is the range you might realistically inherit?
Maybe closer to the 2 million, because it'd be kind of like I'm dividing like the 10 between the 4 of us, roughly like 2, 2.5, something like that.
I assume the money is invested. And it's growing. So over the next 7 or so years, it would double. And then again, well, yeah, I'd have to see what type of—
because he has, um, majority is real estate investments. Um, and then like some annuities. So it's more of like a fixed, fixed growth rate versus like an S&P or anything like that.
Who is his, uh, wealth advisor?
We're very Hispanic. So he just has a guy.
Even worse, he has a guy who sold him annuities. $10 million of net worth and he has a guy. Holy shit. Did your parents immigrate here?
Not my mom. She's Puerto Rican, so she's American. But my dad came from Colombia.
Yeah. Ah, and where did they meet?
They met in Texas and got together. That was a whole drama. Went to New York, had me, and then came to Miami where there was more opportunity of building the company that they wanted.
This is quite an amazing story. So your dad immigrates here, your mom moves from Puerto Rico, they meet in Texas, they build a fantastic amount of wealth, they have children, and they decide, like, hey, we don't want to cook. We're not going to cook. We earn enough to not have to cook. I'm all for it. I have no problems. I love hearing this story. They created something amazing. I love it. And then they share that privilege with their kids. Also totally cool. What's the point of money? It's not to simply hoard it. It's to create a rich life. You grew up, as you put it, privileged. Do you want to continue that level of lifestyle? Do you want to increase it, or do you want to decrease it?
No. At the very minimum, same The same. Mm-hmm. Um, but ideally I want to increase it.
As you got older, what did your parents teach you about their journey to building wealth?
So my dad tried to teach me, not so much teach me, but just do it for me and give it to me. So for example, he's the one that went in and opened up a Roth IRA and like, here, this is how much you're going to put in a month. But he never explained like, why. I don't, I don't really even think that he understood. He just knew that this is something that you do. So it's always been like, okay, we buy a home because that's something that you do, right? You buy a car, not lease it, because it's something that you do. You have a Roth IRA or a 401k because it's something that, like, it's, it's not questioned or it's not explained.
What I'm noticing is your dad accumulated wealth your mom and dad. They don't really understand how it works, but they did observe some healthy behaviors. They passed those on to you. You also may not have learned why. So you're basically copying what your dad did for you, didn't even explain it. No. And it's like a game of telephone. No one is really understanding what's happening. Now imagine you do the same thing for your son. Paint the picture for me.
Like, if it continues to be a copy-paste, he grows up and he learns the very limited amount that we know. He wouldn't question it, just kind of do it, and he'd be stuck. Honestly, he'd get stuck.
He would be operating from a playbook that his grandfather, who immigrated from Colombia, did, obviously not taking into account The theory behind money, how it actually works, just literally copy-pasting, I think is a beautiful way you put it.
Yeah.
There's got to be more. You know, some wealthy families, they simply decide we're wealthy, our kids are going to be wealthy, that's never going to change. And they behave accordingly. This happens a lot, like in India, for example, in many other countries. If you're wealthy, you're often institutionally wealthy, like you own the oil company in your country. And in many ways, some of these families are like, why the fuck are we going to teach our kid how to, like, choose the cheaper item at McDonald's? They are never going to have to do that. And in some ways, Lena, I suspect that is how your family raised you. I see you nodding your head. Would you agree?
Yeah, 100%.
There are cultures all around the world with immense generational wealth where it actually makes very little financial sense for them to learn how to cook or clean. Like, if you live in one of these cultures and you are generationally wealthy, you are never going to clean a toilet in your entire life. You have 3 maids who live with you. That's going to be your life, your kids' life. Your grandkids' life. And I think it's important to acknowledge this because the way we look at wealth in different cultural contexts informs the way that we feel about money and certainly the way we treat it. Like, think about America. We love these pithy little sayings. Shirt sleeves to shirt sleeves in 3 generations. This is a very common phrase in wealth management in America. It means the first generation works hard, makes the money, the second generation spends it, and the third generation loses it all and ends back right where they started, in shirtsleeves, working with their hands. These are cultural invisible scripts in America. We're terrified that if you make a lot of money, the next generation is going to waste it. So what do we do in our litigious, legal-based society? We create trusts, we send our kids to wealth camp, and we encourage them to get a summer job, but at an art gallery, not working at Burger King. It's a very Western approach. In other countries, the approach is going to be completely different. You're going to be rich. Your kids are going to be rich. Their kids are going to be rich. We're going to leave you a house. We have this vacation house. There's a bunch of money and we're not going to talk about it. Why pretend? You don't need to work as a delivery driver because you're never going to go without money. Now, each of these approaches has pluses and minuses to it. But if you are not aware of the cultural context or the story that you're operating under, you might be playing a different game than you thought. I can tell Lena's parents are probably operating under South American customs, but Lena and Mike live in America. All the stuff they're dealing with here is US-based, but the parents didn't teach why they were doing any of it. I don't really blame the parents. I mean, what does it matter if I do? It's irrelevant. Young kids never ask to learn. Why would they? The money keeps coming in, and so the whole invisible dynamic works. Until it doesn't. Right now, it is obviously not working for Lena and Mike. So let's keep going. Just guess the average wait time to see a doctor in the United States. I'm not talking about a specialist, just a regular standard family doctor. Do you think it's a week, 2 weeks? Nope, it's over 30 days. So a lot of times, whatever symptoms you have are going to be gone, or maybe worse, by the time you get to that appointment. I don't want you to have to wait weeks to see a doctor. I want you to get seen faster by an in-network doctor using Zocdoc. Zocdoc is a free app and website that helps you find and book high-quality in-network doctors so you can find someone you love. They have over 150,000 doctors across all 50 states in 200+ specialties, including mental health, dental, primary care, whatever you need. Just filter for doctors based on insurance, location, ratings, even virtual care options. And Zocdoc appointments happen fast, usually within 24 to 72 hours. You can look through your options, book an appointment, and you are done. If I needed to find a new doctor today, Zocdoc is what I would use. Stop putting off those doctor's appointments and go to zocdoc.com/Ramit to find and instantly book a doctor you love today. That's Z-O-C-D-O-C. Zocdoc.com/Ramit. Zocdoc.com/Ramit. And I want to thank Zocdoc for sponsoring this message. You talk to your parents about money today?
Yeah. Me and my parents have a very, very open, candid conversation. They're amazing.
Do they know that you are losing money every month?
Yeah.
You tell them?
Yeah.
What do they say?
My mom advises me as best she can and my dad encourages me. Um, like I said, I got my license very recently, so they share my optimism and my growth plan for the future.
Do they offer to write you a check?
If I needed it.
How would that come up?
I just let them know, mommy, papi, I'm stuck this month. I need this much.
Oh, okay. And that's interesting. I'm stuck this month. When was the last time you've had this conversation?
Um, I haven't, I haven't really asked for money like that.
Uh-huh.
But I can.
You can. And they would, what would they say?
How much? Here you go.
Okay. Got it.
Wire, check, Zelle.
Just out of curiosity, why haven't you asked?
Like I said, the, the visual of the numbers don't represent how I felt, um, month to month because I like, we haven't been in the negative.
So what do you mean you haven't been in the negative?
Like we haven't had to overdraft or anything like that. Right. So, so I haven't like seen like those big urgent signs. Remember how I said I have a baseline and if I get under that, that's when I kind of concern myself. So that's when I would probably reach out and ask for help.
Baseline is what, how much you have in your checking account? Hold on. I need to— okay, let me do this. I'm going to— I didn't want to do this, but I'm going to do this. We cannot use the amount in our checking account for any meaningful information. We need to take back control. Mike, what's your reaction here? You've been quiet for about 45 minutes. Get in on this.
Just upsetting. Very upsetting. As someone who understands the importance and delicacy of finances, I can't help to think, but the backseat I've taken as a huge failure from my part.
I want to understand your background, Mike. What do you remember your family saying about money when you were a kid?
Not a lot, honestly. Total opposite to my wife's upbringing. I grew up up until the age of 11 in Colombia. Then my mom and I migrated here to the US, and seeing her work 2, 3 jobs at a time took a toll on me. Where did she work in Colombia? She was the treasury head for a bank, and come here to the United States, obviously she could really use her education. Currently works in credit collections for a shipping, an importing and exporting company.
And your dad?
My dad, funny enough, he was an accountant in Colombia. And I mean, he wasn't part of the equation from ever in my life.
So, so your mom raised you She's been a father and a mother. Yeah, got it. And she was working 2, 3 jobs. Was there a point where she did not work 3 jobs, she only worked 1 job, got more stable? No. Mike's shaking his head no. Is that true even today?
No, not today.
When did it change? Take a second if you need to. We're in no rush.
When I started working. Mm-hmm.
Sorry, what's happening right now? I noticed that this is getting a little tough for you to talk about. Why is that?
Just looking at this scenario, it upsets me because it's almost like that sacrifice.
Your mom's sacrifice.
It's not, it's not, you know, paying its dividends. Mm-hmm.
Meaning what? Meaning she came here, she worked 3 jobs, And now?
And now I put my family in, in a situation that's not ideal, and that's not the idea my mom had.
What was her idea?
That I'll be in a position to assist my partner and not have this be the scenario we contemplate.
That's a difficult realization to have, you know, that your mom came here, gave you the gift of being able to accomplish what you've accomplished, what both of you have, and that you and maybe both of you together have not put yourself in the position that you thought you would. The good news is this is not at the end of this story. Mike has not been the most particularly talkative person that I have had on this show, but one thing he said earlier rings in my ears now. His line about prioritizing comfort over sacrifice. At this moment, he's realizing the impact his mom's sacrifices have had on his life. And I think he's having a hard time squaring that fact with their current circumstances and lifestyle choices. Earlier on, it was almost like I had to pull emotions out of him. But in this moment, you can see it on his face. You can see the pain. You can hear it. Hearing about their backgrounds, another thing is obviously clear. They both have very different inherited money mindsets. Lena grew up with generational wealth. She never hit the floor because her parents are always there to catch her. She can call them right now, say, mommy, poppy, I'm stuck this month. They'll send money, no questions asked. Mike grew up watching his mom work 2, 3 jobs at a time. She came here from Colombia, couldn't use her education, and worked herself to the bone so he could have a better life. Two completely different stories, and both of them led to a similar place: a lack of urgency around money. For Lena, there's always a safety net. For Mike, he spent his whole life watching someone else carry the weight, so he learned to check out. Did Mike even know about the millions Lena stands to inherit when they got married? Let's find out. Did you know she came from serious family wealth?
To the degree that I'm finding out now, I did not.
What? You only found that out just now?
I knew that they would take their trips, their family trips. I always knew that the family business was around, but the blanket check idea or that sort of— that is news to me.
I'm like, I'm more shocked than the two of you.
You're always like, what the fuck?
I didn't know that their family had this much money. How could you not?
They're not crazy wealthy.
Lena, how big is your parents' house? Is it big?
Yeah.
Look at that smile. It's huge. How big?
No, it's not huge. It's not huge. Remember where we live? So it's not huge.
Mike, how big or nice is her parents' house?
Very nice. Very nice.
He goes, everybody, if you can't see this right now, he goes, very nice. Okay. They're obviously very wealthy. You can tell from the house. This didn't cause conversations between the two of you? Like, you're literally totally different financially speaking. You didn't talk about this?
No, not to the degree that I think we should have, probably.
Just a modest amount of over $10 million.
But that's like in the future.
Not really. In fact, it's going to be a lot more. And because the two of you have never talked about it, each of you are playing by different rules. I think we need to recalibrate a lot. In your case, it is immediately obvious that there are two socioeconomic realities here. The fact that you have not talked about this, what do you think it has cost you as a couple?
We miss these discussions that could help us better prioritize our spending in the sense if we want our son to go to a private school because both Lena and her brother went to private schools, then we need to assess where we are present and what action items can we do, right? What are immediate things that need to change that are hindering us from that.
Agreed. What else?
A lot of missed opportunities.
Yeah.
A lot of missed opportunities of being able to work as a team and grow a wealth earlier on instead of growing debt.
The problem, Lena, is that you've taken on some of those attitudes, which are like, my family was wealthy. I'm going to be wealthy. My kid's going to be wealthy. Everyone's going to be wealthy forever. So like, I'm not cutting back on freaking grocery delivery and food delivery. Not gonna happen, but you don't have the finances to actually make that feasible. Now, if your parents wrote you a check for $200,000 a year, you could do it, but you can't right now. You're losing money every single month. How does that strike you?
I would say mostly accurate.
And then Mike, what is your playbook? What is your invisible script for how you are operating? With money.
I don't understand why. Ramit Sethi, hopefully you could help me see the light here. But because growing up it was very much a, hey, let's make sure if we're gonna eat out, then maybe we don't do it again in a month from now. That when I started making my own money and got access to capital, It's almost like, you know, like I went crazy. I was like, oh, I could buy this and I could buy that. And those practices stuck with me to my detriment, of course.
Let me tell you what I've seen speaking to people who grew up poor. They often go one of two ways, and they are radically different directions. The first way is they say to themselves, I've been poor before. I can do it again. That's one direction. The other direction is, I've been poor before, I am never going back there again. And they will do any number of things. Sometimes they will spend a lot to distance themselves from where they were. Here's the key. If you were spending $60,000 a year, you could do that. You could grind it out using the same principles that your mom did. Just work harder. You can't do that when you are spending over $200,000 a year. You cannot simply grind it out. Because your fixed costs are so high. And that is the old playbook that you are operating on that is not congruent with today's reality. So here's the question to you, Lena. Do you want to continue your relationship with money benefiting from your parents' generosity, or do you want to do it yourself, you and Mike together, independently?
Us?
Mike, how do you feel about that?
Oh, hardly agree.
If you discovered that you have to reduce your lifestyle compared to how you grew up, if you discovered that you could not buy the same things that you got as a child or even in the last 5 years, what would that feel like to you?
I don't mind that because to me it's not so much the material things.
What about the comfort issues that you described?
That's where I would be very difficult in, in sacrificing. Not that I wouldn't, I can definitely find a happy medium, but I wouldn't be able to kind of just all of a sudden do everything myself. I'd rather go out and make more money than have to be home cooking every day.
That's what everybody says. And you're, you're not, she's like, yeah, that's what I say too. Okay. All right. So you're okay. So I'm hearing you loud and clear. You're saying, look, I will not cut back on the convenience items. Those are minimum requirements. I'm not going to stop with the, for example, food delivery, grocery delivery, that kind of thing.
I wouldn't 100%, but if we're a team, like it's not all going to fall on me.
Fair enough.
Like I can get rid of the material things. I don't mind it. I don't need a big house. I don't need a nice car. I don't need those things.
Well, your mortgage is $5,300 a month. Could you get rid of that?
Yes, I could.
You think Mike would be the one to be resistant?
I think it would be a very long conversation. I think he's always had my back, and I feel like if that was a choice that we both came to a conclusion that needed to be done, I think he'd be okay with it.
All right, with the two of you operating as a team, I'm gonna put these numbers up again, and I would like you to tell me what you would like to do. Again, to summarize, debt is at $755,000, including a personal loan of $100K at 15.5%, fixed costs at 98%, including $3,000 a month in debt payments. Investments are like 3, maybe 6%, and savings are at zero, and you are spending more than you make. Every single month. What would your approach be? Mike, then Lena.
Tackle that fixed cost. How do we lower that 98%?
Okay, how would you do it conceptually?
15% on a $100K loan is a lot. Yep. Realistically speaking, that timeline is much longer.
Yep.
Than revising the rent— the mortgage.
What does that mean?
That would probably be able to lower the mortgage by downsizing before we pay off the debt.
Agreed. Mortgage can be done immediately. You could sell. Lena, what would your conceptual approach be to your CSP?
Ideally, obviously just make more money, but something that's more immediate and more effective would definitely be Probably the housing.
How much would you make if you sold your house?
Like $300K.
$300K? That's after all fees, realtor, staging, moving, all that?
Yeah, we don't really have to stage.
Okay, okay, that's cool. That's what a rich person says. Stage? Our fucking house is immaculate. I love it.
Well, not so much that, but more so where we live. Yeah, like it could be spider webs and everything, and people are going to buy it.
Okay. Why did you buy such a big house? Such an expensive house?
A little gentle pressure from, from my parents. It's in the same community. We're really close by.
They said, we want you to buy here. We'll give you $100,000 to make it easier for you. And you were like, yep, sounds good. Pretty much. Yeah. Did you— why am I even asking? I was going to say, did you run the numbers? Of course you didn't. Nobody does.
Nope. Because like the American dream is to have a house. Like that's the concept that we kind of grow up with.
Copy and paste it.
Exactly.
No understanding of why. No understanding, whereas in South Florida it may or may not make financial sense. Just copy and paste it.
Correct.
Where, where would you move?
Honestly, my parents' house.
Okay, Mike, are you cool with that?
We lived there. We lived there before, until right when we got married.
All right, so you're going to live with your parents for how many years?
I'd say at least a year.
And what would you do with the extra money that you're currently spending on your mortgage?
Build up the savings. First of all, have at least 6 months of savings just in case anything were to happen. And also save up, um, to move out of my parents' house too.
What about the debt?
Oh no, that— I mean, considering that we already paid that, I thought that was given. Sorry.
Oh, oh, oh, with the house. You're right, you're right. I stand corrected. Yeah, you're getting a $300K, you're paying off a bunch of the debt. Amazing.
A bunch? No, like the $100K, everything that we can pay off.
Uh-huh.
And then all the extra builds up the savings and, and What we're saving a month, put that, max out what we can.
Are your student loans accumulating a balance as time goes on?
No.
No. Okay.
No.
Mike?
Mine are.
And we're going to pay that off. $50K at 7%. We're not going to let that sit around. That's getting paid off too.
Mine, because of mental health, um, it's not.
Oh, great. Will it get, um, forgiven?
Well, that's what I'm pending. That's why I don't have to make any payments yet.
All right. That's pretty convenient. Are both of you willing to sell the house? It's like kind of a big deal.
Yeah. The position that we are right now, yes.
Okay. Mike, what is it? I don't mind.
Lack of better terms, like a two-step back. I don't know. It's perhaps maybe it doesn't need to be that we go back to living with the in-laws, and, and maybe we rent a place.
What's the hesitation with moving in with the in-laws, out of curiosity?
This is— it's tough.
It's an ego hit, but who cares, dude?
Ego— not a— that's not an ego hit. It's more of a personal thing, to be honest, Ramit.
Okay, you have your own house right now. It's your own family unit. Not only would you sell that house, you would move back in with your in-laws, which I can see to some that would be considered two steps back. How would you deal with that?
Ultimately, putting myself in, in the idea that this is a short-term plan, this is going to set us up for a better future.
You believe that?
I do. And then it would have to be that, because it can't be that nothing changes if we make such a drastic change. I cannot accept that at that point, Lena. We're gonna fight, we're gonna go back and forth, and I don't care.
Whoa, what's— I like this. What is this energy?
If, you know, being back with your in-laws— I mean, with my in-laws, it's gonna be sort of like, oh, comfort. Okay, we're back with the in-laws, like comfort could stay the same. No.
Should we talk about that right now? I've been waiting. Okay, I just want to cut in here because for this entire conversation, I thought they were being real. But watching what happened next showed me what real actually looks like for the two of them. This is the only show where you will see real people sharing real numbers from behind closed doors. Because even hours into this conversation, it was only right now that they finally showed me how they really talk about money. Just watch. What's the comfort right now? The comfort that you currently spend? Let me just reflect what you told me here. Food, this is delivery, et cetera, is $900 a month. Yeah. What would you do if you moved in with your parents?
We'll have to start cooking. We'll have to start, like, instead of eating out so much, like, own in on what we're spending for food? What's the better alternative?
I mean, I don't, I don't necessarily agree with that.
If we're making such a drastic change, but that's the thing that it can't just be, we make change here and we don't make the change here because if we continue this sort of habit, what do you think is going to happen once we have accumulated, if we do Right. Once we end the year time where we've, we could have used this transition period to really hone in on our habits. And what, and like, once we see the house that we're going to make the jump to, now's when we start assessing whether or not to change.
No, like, I don't agree in the sense that, okay, we sell the house. We take down the $100K debt. We're not paying $5,300 a month. Right. Our costs, our expenses have gone significantly, like ridiculously significantly down. We can spend on food. Yeah, maybe not spend as much, but we don't have to sacrifice.
I feel like to me it's, we're cooking at our house. We're not sacrificing anything.
To me, cooking is a sacrifice. I don't like doing it.
I'm just afraid that If we don't look at the habits that got us in this scenario in the first place and we make an effort to at least put them out on the table and see what's wrong and what's right, that we might find ourselves in the same scenario in the future.
I agree, but I don't think food is the habit that we should be looking at. I think the habits that we should be looking at is buying a really expensive phone for no reason and not talking about it. I think communication is the habit that needs to change, not necessarily the spending of the food. That's trivial in my opinion. I don't know.
Do you know how much I pay monthly for the phone?
Babe, it doesn't matter. Interest— you're paying a ridiculous amount for a phone that you don't need because the other one you had worked.
It didn't work perfectly fine.
It did. But when, uh, when the iPhone 17 came out, all of a sudden, oh, you know what? I can't hear.
Like, it's not even— Ramit, apologize to cut you off.
Not at all. I mean, I'm learning from this conversation. What did you both notice happen in that conversation?
We disagreed.
And did you come to a conclusion?
No, not yet.
Would you like to?
Yes.
Okay, go ahead.
I agree with you. That's, that's the whole point of me wanting to throw into the table what the habits are that need to change, right? So I appreciate you calling me out on this particular habit. Right. But also like to think that sometimes the comfort, monetarily speaking, also puts a dent, right? I feel like identifying those non-negotiables, identifying which items are negotiable in this whole concept or umbrella, what we consider comfort.
Mike, be specific. Just name it if you think there's a negotiable.
I was gonna say Uber Eats, but I feel like that's, that's another— what is it? Is it non-negotiable?
It's not a non-negotiable one. And see, this is where like you're getting hyperfixated on it has to be zero because that's what you've been saying, like we have to eradicate it. No, we can sit down and we can compromise, but it's about the communication.
Should we do it right now since we're here?
Yeah.
Okay, right now what I'm hearing is a lot of people getting increasingly heated just sharing their opinions. Everyone is cementing their opinions in their corner of the ring. Do you notice that? First of all, you probably don't have these conversations very often. I can tell you avoid them, or Mike goes, happy wife, et cetera. So the first time you're doing this, it's a bit clunky, but I appreciate it, Mike. I especially appreciate you finding that voice of yours, and you're doing it. You're not giving up both of you. So that's awesome. What I notice is there's no— it's all in the ether. It's in the clouds. Is anyone going to use some real numbers? Yeah. Yeah. This exchange just revealed a power dynamic that has been there dormant or invisible to me the whole time. There's a 7-year age gap between them. Different levels of sophistication in the way they communicate. They've got contrasting financial family backgrounds. When Mike speaks up about maybe renting a place or cutting down on comforts, did you see what happened? Lena pounces. She puts him back in his place. I suspect Mike probably doesn't have the skills to communicate how that makes him feel. And I relate to this. It took me years of working on myself and getting the help of therapist to be able to articulate my own feelings. And I would consider myself like a beginner, maybe intermediate. This is where the help of a couple's therapist would be profoundly useful. And I truly hope they see one, because a power dynamic like this is going to make alignment really, really hard. Now, I want to shift the focus back to the numbers. So let's see if we can paint a picture, something shared that they can both get excited about. What changes should I make in this CSP to reflect the current plan that you're thinking of?
Okay, so, so what we're discussing currently is selling the house. So we wouldn't have that $5,300.
This would go to zero. Great. I'm dropping $5,300 to zero. Let's just see what happens to your fixed costs.
Whoa.
What just happened to that number?
It went from $98 to $47, which is amazing.
That's huge. Great.
And if we were to do that, we would eradicate the debt, the $3,000 that we're paying a month.
Let's take that down to zero.
Which, that's what I'm saying. Like, where are, what's our percentage right now? 18%. We could spend on food. It's the communication aspect of it.
Okay. We're not done yet.
Yes.
When you approach the conversation already having committed that you are not willing to budge on something, It does not set up teamwork. It sets up Mike to be adversarial. And that's not what you want right now.
Yeah.
To put it another way, I would rather that the two of you be united, even if each of you has to compromise, than for each of you to be adamant about an iPhone and food and not be connected, which is exactly what is happening today.
Yeah.
Let's continue. So you now have $8,000 per month. To allocate. And didn't the two of you tell me you want to be wealthy?
Mm-hmm.
What are you going to do with the money?
First of all, I would build up the savings. I wouldn't invest everything all right away. I would put some in investment, but not all of it.
Hold on. I'm sorry. Are we fighting about having $8,000 extra per month? What in the hell is happening right now? Can we recalibrate the tone happening right now for all of us?
Yes.
We are grateful to be able to have $8,000 $1,000 per month. What do we get the gift of allocating this money towards? Who would like to go first?
Go, Alina. Savings first.
Savings. How much would you put in savings?
Honestly, 50% of it until we're able to build it up to something that we're comfortable with.
Great. 50%. So we're going to save $4,000 a month. And how long would you go?
I want to build up, uh, 6 months.
Hold on. You're about to be surprised right now because you already have like 10 months, but that's because you cut your fixed costs down to $1,800 a month. So it's artificially low. It also artificially reduces your fixed costs because one day you're going to rent or buy a place. You actually need to be preparing for that future, not the fake future. I call it fake. It's a temporary future where you have no housing costs whatsoever.
Correct.
I think that's what Mike is getting at when he says, yes, of course we can afford the food costs, but if we were to add on housing and spend $1,500, $2,000 a month on food, we would be right back in the same position we are now. Do you see?
Yeah.
You would only get to that if you look at the numbers. So, Lena, go ahead and tell me what you would like to do.
So taking that into account, I would say we, we would need at least $10,000 a month. That's $60,000. So we have 6 months.
Okay.
Um, so keep the $4,000 into the savings until we're able to build that $60,000 up.
What else?
And then I would definitely invest. Uh-huh. Not all of it, but I would say at the very least $2,000.
$2,000. All right. Let's do that. Okay. That's at 23% of take-home. That's a nice number. I mean, great. That leaves you with $2,134 a month or 21% guilt-free spending. Thoughts?
I think that would be very comfortable, especially for the year where we're able to build up and get to a position where we're okay.
All right. And just to do the final thing on that, when— let's say you stay there for a year, paint the picture for me. So you would have $50,000 plus $16,000 in savings. So about $65,000 in savings.
Beautiful.
Okay. Your rent or mortgage at the time, how much, if you were to get a place, how much would it cost?
So let's put $4,000. I think that's a safe number.
All right. $4,000. Watch what happens. $4,000, you're back at 56%. And you know, you would need to reduce your emergency fund.
By that time we would have already the $60K target. So I would say at least like maybe $500 a month in savings.
Okay. Yeah, that will work.
That's kind of maintenance.
Mm-hmm. $500 would work. That would leave you with 16%. That would mean less guilt-free spending if the two of you moved into this new place compared to when you live with your parents. Would you be willing to go down in guilt-free spending?
Yes.
Really?
Yeah.
That would mean probably less eating out.
That's okay. I don't— I can compromise. I just don't want to sacrifice it completely.
Okay. Fair enough. What I like about it is you didn't factor in any income increases, which is great. So anything you made would be icing on the cake. And that could be— you could create a rule for that. You know, we take 50 or 70% of it, put it towards investments. That's what I would do. Take 20% savings and 10%. Have fun. That's nice. I like that your investments in this scenario, even when you move into a new place, still at 23% of take-home plus an extra $6,000 a year for your 401(k). That's a nice healthy number. Like, wow, wow, wow, wow. You do that for a few more years at that number, you will be setting yourself up for a very, very nice life. In the long term. And honestly, if you do this for like 7, 8 years at 23 or like 25%, you could even start reducing that number by 1% every year. Most people increase the number. You could actually decrease the number and then take that money and freaking go on trips or buy whatever you want. You could really relish it. Okay, great. How do you feel about that, Lena, if that were the plan?
Uh, I love that.
Okay, great. That's how we talk about a plan. It doesn't mean that's what you have to do, but do you notice the difference in what just happened?
Mm-hmm.
Way more constructive, way more focused on the numbers. You can paint a vision and you, we even can discover some surprising things like, yeah, I'm actually okay cutting back on food if XYZ, ABC. Beautiful. Take it outta the clouds, bring it down to the street. That's what we're trying to do. Mike, it's your turn. What would you wanna do?
Sorry, I just have a bunch of ideas. The gist of it is that, yeah, we'll probably need to sell the house, most likely, to be able to plan for the long term.
Is this hitting you right now?
Yeah, it was hitting me when I started realizing the gravity of what that mortgage payment was doing to our fixed costs.
Yes. You might be able to afford it if you had no debt. And if you were both extremely meticulous about your guilt-free spending, you are neither of those things. So finish the program with me. What do you want to do, Mike?
It'd be a sacrifice, but what puts us in the best scenario? Honestly, it's not what I want or like, I'll get over it. It's just like, okay, we're back with the in-laws, like this is just a temporary thing. That's why I keep saying that to myself. But it's not to appease her. I mean, at the end of the day, this is going to help our future. And that's the important thing.
Finish the sentence for me here, if you would, and use the full phrase. I feel what?
I feel like there has been some weight lifted.
Cool.
Lina?
I feel grateful.
What will happen? Honestly, I would be surprised if they sell the house. Selling your house is one of the hardest financial decisions that you can make. It's not just about the numbers. It's deeply emotional. In this case, it's admitting that what you've been doing is not working. And then there's the practical questions like, where do we go? Do we move in with family? Do we rent? What do we tell people? I will say I was very impressed that they got real with each other today. For the first time, they actually disagreed. They argued about food spending. Mike found his voice and he pushed back. Lena didn't just steamroll him. They realized there's a massive gap in how they communicate about money, and that's progress. So the question is, can they actually build towards being aligned? Because what they were doing was easy. They were essentially living separate financial lives. Happy wife, happy life is a good metaphor for washing your hands of a rich life together. But as you can see, they cannot fix this separately. It has to be done together. So now let's check in on their follow-up videos to see how they're doing.
So it's been about a week since our session with Ramit Sethi, um, and I can say that one of the big surprises that I took out of it is my lack of understanding in a lot of areas and just needing to, to get more educated. Educated in order to be able to organize things better for myself and my family. Key takeaways was definitely the copy-paste model of how my parents were able to acquire their wealth and how I just kind of copy-pasted without really understanding everything behind that and how it's just not working out. Definitely there's a lot of differences. There's been a lot of changes, you know, from the time that they grew their wealth to now. Overall, it's been, been great. And Mike and I were able to sit down and have a conversation with my parents and how they acquired their wealth and everything like that. And I think we both have a, a better understanding. And I think that conversation is definitely a blueprint as to how we want to have conversations with our son later on to make sure that he has a healthier relationship with, with money. Hey, so it's been about 3 weeks. Since we met with Ramit Sethi and we've made decisions after a lot of talking, we finally put our house for sale and we moved back in with my parents, which has been amazing. We can kind of reset and just start making better decisions moving forward for, for us, for our family, for, for our child. Communication when it comes to finances and like the budgeting and all these things still hasn't really changed. Still the same dynamic. Although with the sale, I think that might change. And we're also looking for a couples counselor to see to start couples therapy. Other than that, we're kind of moving forward with, with what we discussed with Ramit Sethi. So thank you so much, and I'll keep you updated.
Wow. I did not expect that. I stand corrected. They put the house on the market. That is incredible. I am very impressed, and I'm happy to hear back from Lena. One thing I wanna point out is despite repeated requests, we never heard back from Mike. And this is very concerning for me, especially with Lena and Mike, because there's a power dynamic here and it's critical that both of them work on this together. So it concerns me that I only heard back from Lena, not from Mike. Mike, we want to hear back from you. Please write back, send us a video update. We would love to hear how things are going. For you as well. Lena and Mike, I wanna thank both of you for coming on the show and of course everyone for listening to Money for Couples. One thing I wanna suggest to you, if you enjoy this show, get the book Money for Couples. You can get it at Amazon, you can get bookshop.org or any public library. Start using it. It will blow your mind. Listen up. If you want my help with your specific money questions, there are only two ways to get it. First, you can apply to be on this podcast at iwt.com/apply. Or second, you can join my money coaching program instantly at iwt.com/moneycoaching. In that program, you get access to live virtual events, monthly group coaching calls, live Q&As, and an amazing huge community of other people like you. Check it out at iwt.com/moneycoaching.
