“We bought a house we can’t afford, now what?”

If you would have asked us six months ago when we were going to buy a house, we would have told you six years maybe. This was just not in our five year plan. It wasn't even our one year plan.

Can you afford it?

She'll probably say no.

I worry. God forbid anything happens to him and his finances. Leaning back on me, we gonna fall.

So you basically doubled your expenses on housing.

I brought it up to her about buying a house when the political climate changed. I'm black, she's mixed and trans. I just thought it was really important for us to have at least property that was ours.

You make 147 a year and they told you you could pay 850 for a house. Okay. Attention all lenders in America. You mother.

I'm scared of doing something wrong and not being able to come back from it. I really do want to make change.

I'm about to talk to Sunny and Jasmine. They're newly married. They just bought a house in D.C. and they have never really talked about money. Their first real conversation about it happened recently over dinner and that conversation ended in silence. Taking a look at their numbers, I'm going through their conscious spending plan or CSP. You can download a free template@iwt.com CSP they make about $180,000 a year, but they've got $45,000 in credit card debt, zero invested and no savings. And here's the part that really stood out to me. They didn't buy the house because it was a smart financial move. They bought it out of fear. Fear of what could happen under another Trump presidency. So they're now here sitting and asking, what did we just do? Honestly, I'm wondering the same thing.

You recently got my new book Money for Couples, and as you started talking about money, you said it was not going well. What happened?

When we talk about money, it can go really good, can go really bad. There's no in between. So I told her about the book and how one of the things I wanted to incorporate was like monthly meetings. We like to eat out. And so we decided to use it as our monthly date. I got very frustrated the way I felt like Jasmine was answering some of the questions in the book and. And her response was, I don't know, I don't know, I don't know, I don't know. And I got frustrated in the restaurant and it got really hostile and then dinner just ended early and we left on a quiet note.

Money for Couples, the nightmare. Okay, Jasmine, would you agree with how Sunny describes it?

I will. I think one of the examples in the book was plan your perfect vacation. And in your book, it was telling us to be, like, very specific. So. So I'm thinking of, like, my favorite perfect vacation. So I guess mine wasn't as detailed as it was supposed to be. It was like, I want to be on a beach. He's like, okay, what beach? I did respond, I don't know, because I don't know that many beaches. And then he was like, so what are we doing at the beach? Relaxing on the boat. What kind of boat? A yacht. What kind of yacht? I don't know. Like, he wanted me to be very specific. And it wasn't. I don't know, because I don't want to do this exercise. It was. I don't know, because I legitimately had never thought about it. So he was getting a bit frustrated with me.

And, Sunny, when you were asking these questions, what kind of beach, what kind of boat, etc. What was going through your head?

We got to figure this out, because all through this process, we were going through the home buying process. And so for me, I was like, I want to get through these books because I really want to implement this stuff and get it set up for by the time that first mortgage comes.

Okay, should we look at the numbers?

Yes.

Yes.

All right. What was it like doing this conscious spending plan together?

It was actually really good. It feels good to say that too, because our past conversations with money, once we finished it, though, I think we both were in shock. For me, it was more seeing the difference on paper. And also, this was our first time really digging into, like, each other's real numbers.

I love the honesty. You know, a lot of people think that couples talk substantively about money when it comes to their wedding. They don't. They literally pick a number, and that's pretty much the extent of how they do it. They don't sit down and open up their income and debt. And what about this? And I put this money in a savings account. It doesn't happen. It doesn't even happen for a house sometimes, but often not. So you did the CSP had a positive time. I love that. Let's take a look. Sunny, can you read the words in bold and then the full number next to it for this entire net worth box assets, 566,000. Investments, zero. Okay.

Savings, 3,250. Debt, $578,775.

Okay.

Total net worth, negative 9,525.

What does it mean that you're negative $9,000 net worth.

I know negative is not good.

We owe more than we are.

Yeah, that's true worth, I guess. You know, a lot of people do. Did you know that?

Yeah.

No, I didn't know that.

A lot of people owe more than they have. Sometimes it's because when you first buy a house, it's kind of like driving a car off the lot. Your car is worth less than you paid for it instant you drive off the lot. Have we all heard that expression before?

Yes.

Same thing with a house. When you buy a house, a lot.

Of people have like 20, 30, 50.

Or thousand or more of closing costs.

And all kinds of escrows and stuff like that. If you were to try to turn around and sell it the next day, they would lose money. That's just a very simplified example of why people might have a negative net worth. Then people have student loans. Sometimes they have 25, 50, 100, 200k of student loans. That puts them at negative. But that doesn't mean you're a good or bad person. So you all have a negative net worth. But I notice a couple things. Number one, I notice you're young. So if you were 58 and this were the case, this would be alarming. You're both, what, 27. Correct.

You just turned 28.

28 on Saturday.

Okay, great. So that's good. 20s. We got time to do a lot of things. You have more debt than your mortgage. You mentioned student loans and credit card debt. And then you have no investments and low savings, which to me is a big problem. We're going to tackle that as well. So what I'm telling you is I'm not immediately alarmed by this number, but I'm curious. Okay, let's keep working our way down this time. Jasmine, I'm going to ask you, what is the combined gross monthly income number?

$14,948.

All right, great. So that's per month. So you're gross, combined annual income is $179,000 a year. Who knew that number? Put your hand up if you knew that number. Both knew that number. Whoa. Hey, good job. That's very impressive. So you're basically making $180,000 a year. What do you guys think about that?

Rena's pretty good.

Outstanding. 180 in your 20s.

In our 20s, yes. That's good.

Yeah.

This is a big deal. $180,000 combined income, and you're not even 30. You just married. That is really impressive.

Fantastic work.

I want to hear about this purchase. How did this happen? Where you said, this wasn't even on your 10 year, one year plan. Walk me through it.

Well, I brought it up to her about buying a house kind of when the political climate changed, because I started to do some research and just things that were happening in the world, and I knew how important it would be for a family like ours to really own some property moving forward in the future.

What do you mean, a family like yours?

One being multiracial, black. She's mixed also with me being trans. I just thought it was really important for us to have something, at least property, that was ours. I mean, I guess I was predicting of what the future could hold the depending on at the time who was gonna win presidency. And kind of what I predicted kind of happened in the sense of like, all the EO orders and things like that changing. I just figured if life or the future goes one way, I at least need to have something like this, where if I need cash on hand, equity, anything, I have it. If something happens to me, she's gonna be okay.

I just wanna jump in quickly to make it very clear that when Sunny said, I just thought it was important for us to own something, he wasn't being dramatic. For people of color and the LGBTQ community, fear of losing rights or even personal safety is very real. Many people don't know, but in recent American history, there was something called redlining, which meant many, many communities across the country explicitly would not allow people of color to. To buy houses there. And they used the power of law to keep people of color out of neighborhoods. There was even a recent New York Times article on racial covenants in contracts that still exist, saying, you are not allowed to sell this to a black person. This is recent American history. You can imagine what happens to communities. For example, people in the black community who have been told and seen their own parents and grandparents having housing stripped away from them while other people built massive wealth on single family homes. This is why money is political. This is why we have to understand that your experience with money and housing is probably quite different than other people's experience with it. So, yes, there is a reason that people feel drawn to own something, especially when your identity has been politicized. But I have to say, just because you are scared or just because you had a message passed down generation after generation doesn't mean the math works, because once you've signed the papers, the bills come and they don't stop coming.

Okay, so you brought this up with Jasmine and then Jasmine, what was your reaction?

I said, okay, let's Go look at some houses. I did not think in the beginning that we would be here. I did think that we was just looking at open houses for fun.

That's like a classic American pastime is to go to open houses on a Saturday. And then you're like, who lives in here? And like, ugh, they have the worst taste, all that stuff. All right, how much was the house?

It was 526.

526. All right, cool. Did you run your numbers before you bought the house? Did you know how much you could afford?

Yes.

Okay, first of all, so rare. Okay, now I got to know. What did you run? Tell me how you ran those numbers.

Well, I ran it with the lender.

Off. Hold on, hold on, hold on. I just need to just. I want to rewind and enjoy the three seconds of pleasure I had in my life for once before it got abruptly erased from me. Ran it with the lender. Would the lender tell you, oh, you could spend 60%, no problem. What'd they say?

Oh, wait, I misunderstood what you asked from numbers. Did you mean the pre approval numbers or.

How much could you afford?

Oh, oh, oh. I ran that by myself.

You did?

Using your book. How I did that?

I'm gonna have a heart attack right now. Listen, if I die on this podcast to my team, who's monitoring it, just tell everybody I went. Well, okay? It was a great time. If and when I prematurely die, I want to die discussing mortgage rates with a couple. That's how I want to go. Okay? I don't know why I'm looking upwards. I'm definitely going to hell one day. All right, Whatever. Okay, so you ran the numbers yourself using my book. I'm very proud of you. And what did those numbers tell you? How much could you afford?

4,000Amonth. What I could afford for a home was like 850.

$850,000.

And that was the same.

The lender said, how much is your income?

So it's 147. But I have my business stuff, too.

You make 147 a year and they told you you could pay 850 for a house? Okay, Attention all lenders in America, you mother.

First of all, I have a couple.

Of things to say. You. I'm talking to all the mortgage professionals in America, burdening young people, telling them they can spend.

What is that?

Six times their income?

House.

And what happens? You get your stupid goddamn commission and then you leave these young couples house poor. Hold on, I'm sweating already. We're like, literally, we're less than 10 minutes into this conversation and I'm sweating. Okay, so they told you 850 and did you agree with them?

No.

Did you have a house price that you could afford before you went out looking at houses?

Yeah, I didn't want to go over 35amonth.

Oh, okay, you did it by monthly payment. Did you have a house price, like nothing over 400k or.

Oh, no. I gotta call Bull here. Sunny claims to have run the numbers using my method, but no, he didn't. First off, don't ask your realtor or your mortgage lender to run your calculations for you. What do you think they're going to tell you? Oh, it's amazing. I ran these calculations and magically you can afford to buy a house. In fact, let me give you triple the amount you thought so that you are now indebted with years and years and decades of interest. What a shock. I didn't know my mortgage lender would.

Say I could buy a house. So crazy.

What's your commission? Listen, you don't ask the person at Supercuts to do spinal surgery, and you never ask your realtor for financial advice. As a prospective homeowner, you want to look at tco the total cost of ownership. A lot of you have no idea that the house you're buying for $300,000 is actually going to cost you over $600,000. When you add in all the costs, you have no idea because you never ran a single calculation. Oh, and also, what about accounting for repairs, furniture, maintenance, transaction costs, and on.

And on and on.

When these costs hit, and they will, it's going to feel like you're hemorrhaging money. I don't like surprises with my money. The only kind of surprise I like is opening up a birthday card and getting a $20 bill. Okay, that's it. If I'm getting a surprise, it's going to be on the upside, not the downside. This is how people trap themselves in a cycle of debt. Especially when they are young, they buy too much house. They never ran a single calculation. And if anything, they asked their realtor or mortgage lender, hey, what do you think? You need to be smarter than this for the biggest purchase of your life. You should be fluent in how the numbers work. This is why I'm always talking about homeownership in the U.S. it's not just so that I get some freaks on Twitter liking my posts and retweeting it. The reason I talk about housing is that housing is the single biggest purchase you will ever make. And sometimes it's not the best financial decision. All I'm asking is for you to really run the numbers to make sure that you can afford the housing that you might buy. I noticed this interesting phenomenon in the gym where people start coming to the gym in January for New Year, new you, and in June, right when summer's around the corner. And I love people taking any excuse to get more fit or to start managing their money. But I also notice that the people who are most successful are doing things way before they need to. That's one of the key differentiators of living a rich life. Planning for something before you need to now that's true with your fitness, that's true with your money. That's certainly true for your taxes. Now that tax season is behind us, this is actually the best time to get ahead. If you run a business or you filed for an extension, one small move right now could save you thousands later. That's why I've partnered with Gelt, the sponsor of this episode, and the team I trust to help you take a more proactive approach to your taxes. Gelt isn't just another CPA firm. They actually helped a colleague of mine completely rethink his personal and business tax plan, not just file it. Now he's saving way more than he spends on tax prep and they helped him leverage powerful credits and unlock smarter deductions. With Gelt, you get a proactive year round strategy, not just a one time filing. And their team helps with everything from credits and deductions to structuring your business the right way. They have a tech platform where you can upload your documents, tag them by year, and see exactly when your tax team has reviewed each file. Plus you get access to their full tax library with expert guides on things like optimizing retirement plans, navigating qualified business income, and more. So if you've got a business or you filed for an extension, this is the window to take control of your tax plan. Head to joingelt.com ramit to book a consultation. As a member of my community, you get to skip the waitlist again. Let me give you that URL. It's join gelt.com ramit G E L T Taxes don't have to be a task With Gilt, they can be a tool to build wealth. Why are you guys posting some of the stuff I see you posting? Taking photos out of your front window so everyone knows exactly where you live. Posting what school your kids go to, telling us when you're on vacation.

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I T. All right, so you went out shopping, you got the house all right, fine. How's the house?

It's amazing.

Nice.

All right. That's cool. How does it feel now that you own a house?

I feel good, but I am nervous.

What else do you feel?

Excited, Real curious and anxious.

Anxious, okay. Anxious about what?

Messing something up.

How about you, Jasmine? How do you feel now that you are a homeowner?

I'm excited. I'm very eager to learn more about everything that comes with being a homeowner. And I'm interested to see how this is going to reflect our relationship. I feel like me and Sunny, we have been very live in the moment for our first few years together when we just hit our one year of marriage. I think life just kind of came very quickly in this one year of marriage. Right now. It's all cool. I think it might change once our bills start coming in and we see those numbers and we'll see how each one of us react.

I understand where she's coming from. I don't get scared in that sense because it's not like it's our first time living together. Like we've had the same bills. The only bill that changes, it went from rent to mortgage.

You guys paying the same amount for your total cost of ownership versus what you were paying to rent?

No, we're paying more than what we was to rent.

Okay. Can you afford it?

I'll say yes. She'll probably say no.

Can we afford it together? Yes.

Y' all are Married. Is there any other way?

No, there is not. I think my thing is I worry God forbid anything happens to him and his finances leaning back on me, we gonna fall.

And what does that feel like to you?

Scary.

I'm going to go over the four key numbers in your CSP.

Okay.

Fixed costs are at 71%, investments are at zero. Savings are at 11% and guilt free spending is at 18%. Let's talk about fixed costs. What do you think about that number? 71%.

It's high.

Yeah. What should it be?

Under 60?

Under 50 to 60 is typically where I like to see it. With an income like that, I like to see it at the lower end because that's a high income for a young couple that typically does not have all the fixed expenses that an older couple might have. Investments are at zero. Why?

I really never knew about investments. Like I knew people would say, like, get into your 401k, especially if your company matches.

Never really had anyone explain it to me.

You know, we are the products of who we were raised by and around. And like, if you don't have people around you who are talking about 401ks, probably not going to get a 401k for a long time. Of course there's YouTube and there's my book at the library. And yes, there's a lot of information out there. I agree it can be done. But I think we should also acknowledge that if you just didn't grow up around anyone talking about it, it's probably not a factor of your reality. If you didn't grow up learning how to negotiate your salary, probably not negotiating your salary. My dad had me opening up investment accounts at age 14.

I was probably going to invest.

That's because that's how I grew up. And so I think we need to acknowledge the advantages that we're given or not given. They make a lasting impact. With that said, you two are a little too smart to not be investing. What do you think about that? I can agree the old nobody told me while true kind of wears a little thin when you're making $180,000, you own a house in your 20s and you're sophisticated enough to be listening to my podcast and reading all my stuff kind of doesn't really ring true. What do you say?

I don't know where to. How to get started.

Hold on a second. No, let me pick from the multiple editions of my book. Chapter three.

What does this say on screen right here? What does that say? What does it.

Read that out loud.

Get ready to invest.

That's I will teach you to be rich. The 10 year updated edition.

All right. I guess I'm scared of doing something wrong and not being able to come back from it.

What might go wrong that you can't come back from?

I can, like, lose my money in investing.

What else?

I get so deep into it, I don't kind of, like, know when to, like, maybe stop and that I'm in a bigger hole than I need to be.

Meaning? You put too much money in there. It almost feels like gambling.

Yeah.

What else? If you lost your money, what would it mean to you?

Like, I'm letting Jasmine down.

Why is that? Because what is your role in this relationship?

I'm the breadwinner.

What do you think, Jasmine?

Yes, you are the breadwinner. You're also the provider.

What does that mean?

He take care of the major finances, as in the mortgage, our car insurances, our phone bills. He buys a lot of stuff for the both of us. He pushes us to have a better future.

Okay, and Jasmine, if Sunny is the provider, what is your role?

I am the natural caretaker. I take care of the house, I take care of us and, like, our self care.

Okay. All right, let's keep working down this csp. I want to point out a couple of things I see. I see a big disparity in incomes. So on a monthly basis, Sunny is earning 11,200 bucks. Jasmine is earning 3,600 bucks, three and a half times more. Has that caused any conversations in your relationship?

Yes.

Yes.

When we first started dating, I pushed her to kind of figure out what she wanted to do. When we talk about income, I always say, like, I know that you could get a job making the same amount as me, if not more.

How does that conversation go?

At first it was hard because she was shutting me out. I felt like she might have been feeling that I was trying to tell her what to do. But now it's really good because she's, like, looking at going back to school and, like, looking at different jobs and careers she will want to pursue.

Okay, Jasmine, how about you? What kind of conversations have you had about the disparity in income?

Sunny pushes me to be a better version of myself. I have moments where I do get comfortable. He pushed me into doing what I always thought I wanted to do, which was working with animals. So it was very exciting in the beginning. After being in it for years, a few.