“We make $300k but spend like we make $1M”

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We can't afford it is a phrase that we need to add to our vocabulary.

My first instinct is like, let's not worry about it. It'll all work out.

Meet Forrest and Kathleen.

We're richer than 99 of the world's population. You know, we have such a good life.

Except they are drowning in credit card debt.

We think everything is rosy. If one card were to tip, that could smack us in the face.

We can't trust ourselves with credit cards.

They're losing $5,000 per month, so at the end of the year, they're down $62,000. This is brutal. They're effectively broke.

I make almost 300 dol thousand dollars a year. I should be able to go to $150 a month gym membership.

I'm feeling shitty that we have as much credit card debt.

Kathleen is an avoider and Forrest is an optimizer.

I like automating my spreadsheets and automating my finances. A lot of that I do pretty well.

I wasn't really allowing myself to worry he's going to get the right job at the right time.

It never occurs to the avoider that they're in trouble, and it never occurs to the person managing the money that they should somehow get help.

It makes me feel like I do have control over it.

What are we going to do if he loses his job?

You have $2,000 in savings. If you lose your job, you have enough to get by for about four or five days.

Meet Forrest and Kathleen. He's 40 and she's 43. Now, even though Forrest makes $300,000 per year, they are in $150,000 of credit card debt. Today we're going to explore the psychology of how people get into serious debt. And as we begin, I want you to listen to how their conversation about money starts. What do you notice? But before we get into their story, I was listening to a couple of past episodes, and I realized I want to start looking at people's numbers earlier. I already do this before I speak to couples. I look at their csp.

So I figured, why don't I just.

Let you in on what I do? What is my process? So here is me reviewing Kathleen and Forrest CSP before I meet them. Take a look, take a listen. What do you notice taking a look at the CSP from Forest and Kathleen?

Assets, $618,000. Investments, 168. Savings, 2000. Already you can tell there's a huge disparity between investments and savings. That's a red flag. And then debt at 506. And they broke out their debt. They actually went above and beyond and calculated what they. What we have been spending. Whoa. Dining out and drinks, 2,200amonth. Shopping, $1,859 per month. So they're losing $5,000 per month.

All right, well, I have my work.

Cut out for me, and if I can help this couple, it would feel.

Like a very good use of time.

Wow.

All right, let's meet Forrest and Kathleen. Listen to how their conversation about money begins.

We had had a couple of our finance dates, we call them, maybe like the week before, and they didn't maybe go as well as I had hoped they would. It was something that we were. We have been trying to put on our calendar on a regular basis. And it was probably, I think it was like a Saturday or Sunday morning. The kids were watching tv, playing games, and we set up the laptop in the. In the dining room and said, okay, let's. Let's really go through the numbers. Let's look at where we're at from a debt perspective, from a what our goals are perspective. And I wanted to put down. It was something that we hadn't done, like, how much do we need to save for the next vacation that we want to go on? And so we sat down and we put some numbers to those things. And at the end of that whole conversation, it actually felt like, it went really well.

I felt really good that we were talking about things that we both wanted to do. Kind of realistically, I want to go to Napa. He wants to go on a ski trip. So let's put that in and think about how much money do we have to save each month? Because that's always a sore spot, is I want to travel, and he's not really ready to because we don't have the cash up front sometimes or ever, really. And so I was like, great, we can plan for this. This looks really good. If we just follow this plan. I'm going to Napa. He's going skiing. You know, life is good.

Maybe, like, a couple of days later, after having, like, actually a good conversation around where we're at, I. Because this is what I do is I look at our spreadsheet too often, and I realized that there was probably some things that we missed from our costs perspective. And so I. I think I approached Kathleen, like, the next day or a couple of days later. I can't remember exactly what she said, but it was like, what the. You know, I thought we were good.

I felt defeated because I felt like I thought we finally got to a good point. And my reaction was I was upset that here I was feeling good, and now it's 48 hours later, and it's like, ugh. It's not. Things. You know, things aren't as good as I thought, and that sucks. At the end of the day, we really don't have the money to do all the things that we want. And I'm not sure exactly how to go about changing that. And without a specific plan in mind, it feels overwhelming. It feels unattainable sometimes. And so, like, why bother? No, but that's kind of. My attitude is I'm not working full time right now. I will be in the next couple of years as the kids get older, and we'll. We'll catch up. And it doesn't stress me out the way it stresses him out. So when I hear this kind of, like, I always tell Forrest, you're so doomsday about it. And I get it. It's very stressful to him. He's the one looking at the numbers every day, and I'm not. So I'm a little bit less connected, and I have the attitude of, we'll catch up. It'll all work out. And.

And does it work out?

We are in debt, and we don't want to be. So it hasn't worked out yet in that sense. But I look at it. Like, we are so grateful and lucky to have a house and two healthy kids and, you know, food and clothes and two cars. Like, life is good. We're o. You know, I kind of have this glass half full attitude.

Okay, back to my question. What did you notice about their money conversation? I think the good news is that they had a money conversation at all. They set a time and a place, the kids were occupied, and they did it together, which is really impressive. But I notice that Kathleen got upset when Forrest brought up some details about their finances a few days later.

Why?

Because deep down, I suspect she dislikes money. So she wanted to get the money conversation over with as quickly as possible. Oh, most of us love having money. We love spending it, but we don't love managing it. We don't love talking about it. And to me, that's really what managing money is. It's talking about it, it's planning how to use it. And that is a core part of respecting money. Respecting money is not simply having it and spending it. Respecting money is talking about it and planning it. In other words, managing money. This love hate relationship with talking about money really describes how most people see money. They sigh, they avoid. They say things like, fine, let's have a conversation. As if one conversation about money and it's all going to be over forever. Money is not something you talk about once or twice or even 10 times. If that is how you see your finances as something to be over and done with as quickly as possible, of course you're going to be upset that it gets brought up again. The truth is, you're going to be talking about money for the rest of your lives together. So it's really important that you accept that and find a way to enjoy it. Let's dig in and hear more about how Forest and Kathleen talk about money.

When you two talk about money, is there one person who tends to bring it up?

Forest.

Kathleen, do you typically engage or do you avoid talking about money?

If it is something that we've planned, I will engage. But if I. If it's kind of sprung on me, I tend to avoid. And even if it is planned, I'll admit I am like, okay, I got it. Looks good.

So when I asked you, do you.

Do you engage or avoid?

You're like, well, if it's planned, I engage. But actually, even if it's planned, I avoid.

So you avoid?

I. Yeah, I think I do.

Why are you avoiding admitting you avoid right now? This is kind of weird, right?

Yeah. Not to be neurotic, but No, I, I, I want, I. Because I want to have these meetings, and I want to be on the same page, and I want us to reach all the goals that we have. And then I think I get uncomfortable in the moment with, like, all the bad news about it. Right. So Will, sit down. I'm like, okay, I see. I know.

I always say, in order to live a rich life, we have to be honest. Honest with ourselves and honest with the people around us. Forrest, I heard Kathleen say, she described herself as glass half full. And she admitted that she avoids generally speaking about money, but she said, overall, things are good. You have two children, two cars, a house, etc. She said, we're okay.

Things are good.

Do you agree with that assessment?

Yeah, yeah, I, I totally do agree. I think we do have a great life, and I love everything that we do. I wish there was a way that we could do it and not always be behind the eight ball. From a financial perspective.

Okay, I have to admit, I'm a little surprised by both of your answers, because on the very application that you yourself filled out, we ask, on a scale of 1 to 10, how serious is this issue? You wrote 10, not 9, not 8. 10. You wrote, Forrest, I am essentially the only income in our household, and I was laid off earlier this year. Luckily, they kept paying me for three months and I was able to get rehired. I'm afraid this could happen again, and everything that's in all caps would collapse on us.

That is how I feel. So from a personal and what we have perspective, our life is good, but I think we're living kind of on the edge, if you will. That situation with my job, I did get, I did get laid off, and it took like we were weeks away from, like, if my income stopped coming in, it would not be good. From a financial perspective, we would pretty quickly lose everything.

Lose the cars, lose the house, lose all the assets. All of it. Within a matter of weeks, probably.

Yeah, it would have to be all sold to just keep the lights on, you know.

So what you're saying is quite serious. It's also quite at odds with the way that the two of you are describing your situation. Like, oh, it's good. Glass half full.

Yeah, I think that's accurate. We keep living this life where we think everything is rosy, but if one card were to tip, it could. The. The reality of it could smack us in the face.

This is something I call the money minimization paradox. I'll speak to a couple who fills out an application saying things are incredibly Bad. We can't go on like this. And then the minute I talk to them, they suddenly start minimizing it. Oh, it's not so bad. It's actually better. In the last couple of weeks, I think we just need to get on the same page. It turns out that we would rather stick with a bad dynamic that we know rather than try to switch to something potentially better but unfamiliar. I cover this concept of the money minimization paradox in my new book, Money for Couples, along with exactly how to get on the same page with money in your relationship. You can pre order it@iwt.com Money for Couples. I'm so excited to be able to share this book that I've been working on for years with you.

He's right. If that happens again and he doesn't, you know, he loses his job. We would be a creek. So is it possible for both things to be true? Like our current reality, I don't feel terrible about, but it's a really scary reality because if he did lose his job, we don't have savings to fall back on. In fact, we have debt. And that is so stressful for him. And I feel bad that he takes on all that stress because he's the one that's checking the numbers every day.

Why is it stressful for him and not you? You. You two are both married. You have two daughters. Why is that?

That's a good question. I guess I just wasn't really allowing myself to imagine that reality and. Which is probably naive of me.

What are you hoping to get out of today's call?

I think it would be helpful for me to learn specific strategies, how I can behaviorally be better about the finances. So how can we get prepared? How do we get from where we are now to where we want to be with three months savings or whatever the goal is as painless as possible and continue to, you know, be able. And you know, to be able to live the life that we've been living. Not. But I'm okay with making some sacrifices. It doesn't have to be. I'm not saying it has to be. I want to be realistic about it.

What's that? I just heard a lot of circular talk. I want to have an emergency fund and I want to live a life.

That we've been living.

What? You can't do that.

No, I know. That's contradictory. I know we can't do that.

Now back to the show.

When was the first time you had a serious conversation about money?

Maybe not until we had kids.

I think that's accurate? I think probably not until. Not even just when we had kids, really. Not until, like, maybe just the last couple of years.

And what precipitated that first conversation?

I don't know. I think probably me just realizing that I haven't been as good about, like, controlling the ship as I should have been and asking for some help, maybe.

That true? I don't know if I buy that that's the first conversation you had about money. Was you asking Kathleen for help.

I can't remember if it was you that initiated or. I'm assum. It was me just maybe being stressed out about saying, hey, we don't have enough money to pay off the credit cards again and the balances are going up. I think we need to. We need to do something about this.

That sounds more realistic. The idea that you basically both coasted by for several years in your marriage with money and you only started to have more serious conversations about it. Serious meaning, hey, we really have to talk about this. This isn't like an offhand thing, like, we need to sit down and discuss this only when the situation became pretty dire.

I know we talked about goals and aspirations and dreams and the kind of life that we wanted to live, but we didn't sit and plan for how that was going to be. Right. I feel like my attitude is just going with the flow, trusting the process. Everything will be okay.

Faith.

Faith that it'll all work out. Yeah.

You remember that phrase from your upbringing, it'll all work out, things work out, that kind of thing?

Yeah. Yeah, I think so.

Here's what I propose. I propose we look at your numbers first. What was it like to go through the process of doing the conscious spending plan together?

It's something that we had tried to do previously, and I think doing it again together in the context of, hey, we're gonna have to show somebody else this. Like, let's make it accurate.

I could hear myself in the conversation wanting things to be better than they are.

That's very insightful. Okay, let's take a look at the csp, shall we? Okay, let's see. Kathleen, can you read off the word in bold and then the full number next to it?

Sure. Assets, 618,000. Investments, 168,113. Savings, 2,000. Debt, $506,098. Total net worth, $282,015.

What do you think about that number? All those numbers?

I wish we had less debt, more savings. Not great. I feel a little embarrassed or ashamed. Like, I wish that we had done a better job. I wish they were better, you know.

Forest, can you read off this number here?

Combined GROSS Monthly income, $23,884.

So the two of you make $286,604 a year. Did you know that?

I did, yeah.

Forrest, you make 23,217 per month of the 23,884. And then, Kathleen, you make $667 a month gross, Correct?

Correct.

Let's look at your fixed costs. Kathleen, what's this number here?

91%.

All right. What do you think of that number?

Doesn't leave much room for much else.

At 91%, what does it tell me?

That we have no money.

Yeah, that's correct. You have no money left. You're effectively broke. If 91% is going towards fixed costs alone, I don't even have to look down the rest of the CSP to know that you're not saving, you're not investing. You're probably still overspending on guilt free spending, but you don't really have that much. And this right here, that one number is the source of enormous stress to American households right there. So you did something that I really love. You created a little category at the bottom, what we have been spending. And I appreciate this. You actually broke it out for me. This is really helpful. So dining out and drinks $2,200 a month, shopping at Amazon, et cetera, $1,859 a month. So those total costs are $4,000 a month. What we actually have left is negative $5,200 a month or negative $62,000 over the course of a year. Guys, you're broke.

Yeah.

So how do you reconcile seeing these numbers, Kathleen, with saying we're doing okay?

Can't help but just feel like in my head when I see that it's this immediate defense mechanism of. But if I start making 80, $90,000 a year working full time in the next couple of years, we're going to be able to come out of this and we are going to be okay.

True, true. Yep.

What do you think the real problem is here?

Before we hear his answer, I need a quick favor from you. If you are enjoying this show, please hit the subscribe button because it really helps my team and me.

Yeah, I think spending money with thought that we'll eventually have have the money and not having it up front, but not actually doing what's necessary to be able to afford those things, living a lifestyle that we can't afford.

To me, I think that we are both very similar in that I say we're both the take the trip kind of people. You know, you only live once. Let's live our lives the fullest and enjoy it. And again, like, this naivete of everything will work out. Horace likes to ski and cycle and I like to, you know, go to yoga and travel. And I know those are bougie things, but I don't care that my house isn't as nice as my neighbor's house. But I know I do care about the adventure and the fun and that kind of lifestyle.

Kathleen, that's what makes this so difficult. Because the story you just told me, paraphrased, is, it's not like I'm living some crazy millionaire life. My car has dents in it. Sure, I like to ski, but I'm a simple person. But you're not. The number that we did not talk about is one of the most important numbers on this csp. It's this number right here. Under debt. You helpfully broke out the debt. Mortgage, 320k. Fine. Home equity line of credit, 97,000. That raises some red flags. And finally, credit card debt. Read that number to me, Kathleen.

65K.

$65,000 of credit card debt.

How are we. How have we had this whole conversation so far? Like, oh, we're simple people. What's the $65,000 of credit card debt?

Trip to Montana, yoga classes, eating out, skiing for the family.

What do you think? Like, are you worried about 65k of credit card debt?

It's scary to worry about this stuff. So maybe I don't let myself worry about it as much as I should.

I don't believe what you just said. I don't believe that it's so scary that you simply don't allow yourself to think about it. I think that's a nice story, but I don't believe it for a second. I think there's no reason for you to worry about it. Your husband doesn't really involve you in the money. Every time he tries, you avoid it, still go to yoga, still have theoretically putting money aside for this trip to Napa. Why bother? Why worry? Life's going to be fine. It's been fine so far. Even when he lost his job, he figured it out and family's good and we still eat out and we have a nice time. Forrest, what, what is behind this $65,000 of credit card debt?

I've been in the trap of doing balance transfers. This is also the not the first time we've had that much or more credit card debt like that. We at least twice bailed ourselves out by cashing out money from 401k to pay off credit card debt because I couldn't transfer it around to be zero percent interest anymore, which is also very embarrassing to say, but that's the reality.

Why did you get into credit card debt multiple times?

Spending money that we didn't have on things that we wanted to do and just saying, we'll worry about it later. Right.

Why?

Because we wanted to do the things more than we wanted to deal with the consequences.

Do either of you ever say no to spending?

I think the simple answer is, no, we don't.

If we want to fix these numbers, we can, but it will require you changing your entire worldview on money, on your relationship with it, and candidly, on your relationship with each other. You want to do that? It's a lot of work.

Yeah, I do.

When we first started this conversation, I was like, hey, I feel like we have to make some sort of major life change for this to start working.

I would love for us to get to a point where one day we can take the trips that we want and we can do the activities that we love to do and help our kids with their down payments on their house or whatever it is. I would love for that to happen one day. But I do know that something or many things have to give in order to get there.

I believe you. I'll take you at your word. And I appreciate that. Because if you. If you're both open to making big changes now, I can work with that. We're gonna talk about specifics in terms of making changes. That's when the rubber meets the road, and we will see.

Now, back to Forrest and Kathleen.

Let's start at the beginning. I need to understand how you got into this situation, because right now you've made a lot of poor financial decisions. And I'm grateful, actually, that we get a chance to talk about it. I'm grateful. That takes a lot of courage. Okay? So I appreciate that, and I'm glad, at 40 and 42 years old with two kids, that we get to have this conversation now, because it's way better to have it now than 20 years from now. I can't help you at 20 years from now. Kathleen, I want to understand your relationship with money. When you were a kid, what do you remember your parents saying about money around the house?

I think my parents didn't talk about it much, and I wasn't taught much about money at all, but it felt like we always had enough. But I think my parents did a really good job of living below their means because they grew up very poor.

What was the. Who managed the money in the house? Mom, dad?

My mom did mom.

Okay.

Yeah.

And what was dad's relationship with money?

He was obsessed with money. I would say he had a gambling problem. I don't want to make my dad sound bad. My dad made most of the income, but my mom worked full time and I didn't know when I was a kid, I didn't know until I was a teenager that he had a gambling problem and that he was accruing debt. Right. And I don't think my mom knew about it either for a while. And then once that kind of came to light, I think that might have been when my mom took over with the finances and he didn't bet on horses after that. I think my dad was obsessed with money and I didn't, you know, I didn't want that to ever be my focus.

That actually makes a lot of sense. When you earlier said, I don't want to stress about money, it's almost like calling to the echoes of your dad because his relationship with money was tortured, was stressful, was in many ways indulgent, which I think we see some similarities there. Right. Forest, what do you remember about money as a kid?

So I, I grew up in pretty rural Northern California. My parents were a little bit kind of hippies. They lived very frugally. I don't think I've done a really great job of like saving a ton of money for retirement. They are retired, but they live a comfortable, happy life and they're not worried about money, I don't think, but they do. I think they are very good about living within their means, which I'm not sure why I'm not. It's something I struggle with. Like I, it goes back to like, I don't know how to say no to anybody really. When I was like 18, 19, got my first credit card. I dabbled with a gambling problem myself back then. And I ran up credit cards and my parents bailed me out of that. They made me sign a contract with them saying, hey, we'll pay off this $10,000 worth of credit card debt, but you're going to move back in with us. And I, for maybe a year, I had my paycheck deposited in my parents bank account. I've always had some solution to move all of the chess pieces around. That worked for me in the past.

Yeah, it worked. It's worked since you were 19 years old.

Yeah.

Your parents came in, swooped in, saved the day. Then your 401 came in, swooped in, saved the day. Balance transfer came in, saved the day. I mean, you guys can keep going.

On like this until we can't, right? Yeah.

And then. And then, like, it'll be like driving a semi into a brick wall. It will hit you all at once, and that's the end. Behaviors leave clues. And when I hear about avoidance on your part, you're an avoider. You employ conscious and unconscious techniques to just avoid money. Even your attitude about money is, it'll all work out. A lot of that's shaped by your dad and also what you saw him doing with money and his relationship with money. Forest, the clues start at age 18 or 19 for you, and they continue on just because you paid off that credit card debt, which was laudable. And I love that your parents did that.

And.

And they had a solution. That's great. But the lesson didn't get internalized. You took away a lesson that is perhaps different than what others would do. Others might say, holy, I hated being in debt, having my own wages garnished by my mom and dad. I am never going back there. Your solution was, oh, it all kind of worked out. So let me just keep spending, and then I'll find a way to make it work out again in the future. So as your income has increased to a very high income, $300,000, you still haven't gotten ahead.

I definitely have some regret about, like, the last 10 years. Had we taken a different path, like, the income that we've been making could. We could basically be, like, 180 degrees in the other direction had we.

Yeah.

Played the game correctly.

Kathleen is an avoider, and Forrest is an optimizer. Now, we each have a money type, but what's even more important is the dynamic that exists in your relationship. For example, does one partner chase and the other avoid? That's the chaser, avoider dynamic. To put it another way, what is the culture of money in your household? When I ask this question, most people have to really think they've never really thought about the culture of money in their household. But you have a culture for a lot of things. Of parenting, of food, of sex, of leisure, and, yes, a culture of money. You create your culture of money, and if you want, you can change it. Let's find out now where they've been spending their money, which will tell me a lot about Forest and Kathleen's money culture. Some of these items include travel Tickets to professional sports games, entertainment, trendy. First of all, who the hell calls it a sports game? Probably a guy who doesn't go to any tickets to professional, whatever. Trendy outdoor cooking equipment, yoga classes, subscriptions and bikes. Listen in.

One was $5,000, and the other one was $6,000 that I didn't have the money for.

What the. What's a $6,000? Bike. Bike. Motorbike bike. What is it? What the. That just looks like a huffy. Let me make sure my logic is correct. I'm just looking at the numbers. I just want to make sure I understand this. You have $65,000 in credit card debt, and you have a $6,000 bike on camera right behind you. Did I get that right?

Yes.

Do you realize how ridiculous that sounds?

Yes.

Ok. We're going to make some changes if you guys are ready. But I want you to understand what just happened. Now. If you guys were making a million dollars a year, okay, you could live this lifestyle, but you're not. More importantly, it's not simply one decision or two. Because if we simply try to do it by decisions, it's like playing whack a mole. It's not about whack a mole. It's about going deeper. It's about understanding the principle, not the tactic. Okay. What is the principle that guided your financial decisions for the last decade?

I think there wasn't one.

I think Kathleen had one.

Mine was that it was all going to work out eventually.

Yep.

And what else, Kathleen?

And let's not worry about it.

Bingo. Well, that's quite a powerful.

Two principles.

Incredibly powerful. Because given virtually any financial decision that comes your way, what do you individually, Kathleen. And what do you, as a unit, Kathleen and Forest decide to do if presented with a choice, should we buy this thing or should we not? What do you almost always do?

We buy it.

Gotta change that principle. So can we start by coming up with a new principle or a new vision for how money works in your relationship? What do you think? I'll start. In our relationship, when it comes to money. Dot, dot, dot. Give me your vision.

Okay. In our relationship, we only spend what we have.

Okay. What else?

And we get. And we get comfortable with saying no.

Oh, we say no to what?

Spending money. To each other? To ourselves.

But, like, give me some examples because.

Okay, we say no to trips.

Trips.

What else?

We say no to eating out.

Oh, okay, good.

We say no to buying things we don't need.

All right, so that's good. So that's in our relationship when it comes to money. We only spend what we have. If we don't have the money, we say no to trips, eating out, alcohol, etc. What else? Boris, what about you? What's your vision for money in your relationship?

The vision is out of the credit card debt, and we're saving money. And when we want to go on a trip, we were able to actually save the money to do it so that in two years, when we have a trip that we know we're going on, we can go on that trip and feel great about it.

Who's doing the money in the relationship right now for us? You have all these spreadsheets and stuff, right?

Yeah.

What's the point of all that stuff?

I don't know.

Organized torture?

You know why you do it? It's just a meaningless way of boosting your perceived control without actually increasing your control.

Yeah, that makes. Makes sense.

Yeah. It's like doing the dishes in the sink when your house is on fire. Well, I gotta clean the dishes. It's like, no. What the.

No.

You don't smash that dish and get the out. Your house is on fire. That's the level of urgency we need to approach this situation with.

Yeah.

So the spreadsheets are not doing anything for you. If anything, they are distracting you from the fire that is burning. And if I were you, Forrest, I would say as part of the vision in our relationship, when it comes to money, we are both equal partners. So are you interested in that?

When we were talking about doing this with. With you, I said, I really want us to be able to do this together as opposed to. Yeah, what you said, like, I have been kind of running the car into the ground, if you will.

Okay. To just say, I need a partner in this. I can't do it alone anymore.

Yeah, I think that's. That's true.

Want to say it to Kathleen?

Kathleen, I need a financial partner because doing it by myself has not worked. And I feel like there's no.

We're.

I'm as much at fault for all of our overspending as. As anything, but I think I need help following the rules that we talked about, and I need. I can't be the only one that follows the rules. I don't have somebody that is, like, binding the contract and saying, these are our rules and we agree upon those rules. Both doing the same thing together.

I. I hear you. And that makes a lot of sense. And it's not fair that I'm avoiding. It's not fair that I'm putting it all on you to Find the gimmicks to get us out of it and. And let you kind of carry that emotional, you know, stress, and it's not working.

Yeah, this is awesome. I'm feeling good about this. Sounds like you're both feeling good about this. Any objections or reservations so far?

I think just maybe one quick thing.

I think he goes, one quick thing. We don't want to say no to trips eating out, alcohol, gyms, extracurriculars.

We have to be able to find a balance between having some sort of existence other than just work and pay off debt. And I want to make sure that plan that we come up with that we're both bought into, and Kathleen is bought into it as well. What do you think, Kathleen, about making a large commitment to changing our lifestyle and sticking to it?

I think we can do it. I really feel like we've had this kind of reckoning, facing. I'm getting my head out of the sand these last four months and seeing the reality that we're in. And I know we're capable of having the life that we want in the future. I know we are. And I envision it for ourselves. And I can commit to anything and especially with you by my side. I'm. I'm in, baby. It's fine. We will, you know, I will make the sacrifices needed to have the life that we want in the future. How are you going to be able to say no to the things that are really valuable in your life that you surely deserve, but we can't afford?

This is why I wanted to. To do this and have this conversation is to kind of make us both feel like we're connected to a goal that we can achieve.

Mm.

First of all, great job. Take the win. That was a very healthy conversation. I like that a lot.

Okay, I want you to notice my process so far. I let them explain how they see their situation. We took a glance at their numbers, and I checked in with them again. Then I helped them understand the severity of their situation. And we still have not made a single change yet. That is by design. I'm doing this on purpose. It's very tempting to have something like this, a podcast. People come in with their problems. I go, okay, I took a look. Now you need to fix this. Is this cut your cable? That's outrageous. I can't believe you go to the farmer's market. That feels good to everyone watching. It feels good to the person giving the advice, throwing stuff around and shrieking in a high pitched voice. But that doesn't actually change people's behavior. It certainly doesn't change the way they feel about money. I'm not here to entertain a bunch of people in their basement who leave comments on my YouTube saying, oh, my God, this is so slow. The remit needs to be hard love, tough love. No, that might make you feel good.

But I'm not here for that.

I'm here for the couples. That's why I go slow on purpose, to go fast, go slow. And so much of developing a healthy relationship with money involves not jumping right into cutting back on hbo, but rather zooming out and talking about how you see money and understanding how serious this situation really is. It's not just the numbers on the page. It's how we got here, we, the two of us. Now, I do want to point out this common pattern that I see where one person manages the money, but they're not even really good at it. And I see this over and over. Usually in these situations, the other partner is an avoider. So it never occurs to the avoider that they're in trouble. That's because they avoid money. And it never occurs to the person managing the money that they should somehow get help. They've just become used to struggling with Forest and Kathleen. I don't think they've ever really had a positive conversation about money. So I'm going to walk them through an exercise from my new book called your first positive money conversation. Watch how it sets the stage for them to make real changes to their spending.

Let's start off with why this meeting is going to be awesome.

This meeting that we're going to have today about our money is going to be awesome because I'm excited to sit down with you and look at where we're going and how we're getting there. And I can visualize us in our retired years having the life that we want. And I'm excited to get there with you.

Next one is how I feel about money.

All right. I feel anxious when we talk about money because I know it's not good news, and I don't like hearing the bad news and I avoid it. And I don't want to feel that way about money. I want to feel like we're doing the right thing and we're proud of the decisions we're making and the headway we're making and where we're going. And how do you feel about where we're going and about our money conversations?

I also feel that I have a lot of anxiety around our money, and I feel like often I can't say no, When I know I probably should. I have this envision of our future where I don't have that anxiety and that money is fun and awesome. How do you want to feel about money in the future?

Yeah, I want to feel proud of it, of our decisions around it. I don't want it to be a source of anxiety. I want it to be a source of, like, empowerment.

I want to feel proud about what we've done also.

That's so cool. I love that that is at the foundational level of what's going to make this successful. We've all referred to a plan. You all want to go through the CSP and actually make the plan right now?

Yes.

Now back to the show.

All right, now, before. Before we do this, you have three choices of what changes you want to make. You can make no changes, a few changes, or big changes. What do you want to make?

Big changes?

Yeah, big changes.

Great. Let's do it. You have basically created a lifestyle where, by default, you spend a tremendous amount of money. Literally by default, we want to flip that as you described it. Do a 180. The way I think about it is I want to, by default, be saving and investing a lot of money. You make $300,000 a year. What the. You actually can save and invest. But first, you need to pay this debt off. It's choking you. Well, if we look at your CSP right now, your fixed costs are at 91%. We need to bring this number down to 60%. How do you want to do it, Kathleen?

Do you think we can spend less on groceries?

Yes, I do. I definitely think we can bring that number down. I feel like I could bring it down at least to 1200. And with the goal of a thousand, you know, we don't need to eat as bougie as we do. We can't.

1200 bucks. All right, let's take a look. Watch the number at the top here. Certainly 91%. As I change your groceries from 1700 to 1200, what did that number change to?

87%.

We're going in the right direction. What else?

We could have that Amazon number go down. I feel like that could save $100 a month.

I'll take subscriptions down from 401 to 301. Tell me what the number at fixed cost changes to.

Didn't change at all.

Didn't change at all. What did that tell you guys?

We need to think bigger.

Yes.

The car payments and what we're spending on gas and maintenance, in four months, you can take $587. Out of that, the car will be.

Paid off, so it's going to go down to 1540. What did that number do right here on fixed costs?

81%.

We got to make bigger changes.

I could sell. We could sell one vehicle. Yeah.

Now we're talking. Can you survive on one vehicle?

Yeah, we did for a long time.

But why'd you buy the second then?

Because we wanted a truck, and we.

All need a truck. How much can you get selling this truck?

The blue book value, I believe, was 30,000.

That's a lot of money.

Whoa.

That's big time.

We owe 20 ish thousand on it or so, so.

Oh, never mind.

Yeah.

All right, fine. Sell the truck. You'll make a few thousand bucks off it. 75% on fixed cost. Guys, we're actually, like, really moving in a nice direction here.

Awesome.

This is very good. Wow. Okay, I'm impressed. Subscriptions at 301. What else is in this subscription?

Half of it's my gym membership. I would probably just get rid of the gym and spend, like, 500 on home gym equipment.

Yeah, you can't afford it. See? See how pervasive this idea of, like, I'll just go buy this thing. You look a little uncomfortable for us.

I make almost $300,000 a year. I should be able to go to $150 a month gym membership, but obviously we can't. That doesn't make sense.

We can't right now.

I totally agree. At $300,000 a year, it feels crazy to not be able to. And it's gotten you to where you have, if you count the home equity line of credit. I mean, you all have, like, $150,000 plus of debt, not to mention the 401k that was cashed out and all kinds of stuff. So even though you make 300,000, you've.

Incurred a ton of debt.

Yeah.

We have to change that.

Yeah. And we can do it. It's, you know, it's not forever. And I think if we, you know, make all these changes and then we see, let's say we have $500 after all of this every month. That's it. And we want to go to a comedy show. Well, maybe we can, because we haven't eaten out all month, and we can do that or whatever, and we can. And then that debt's going to come down and we're going to feel empowered and we're going to feel good, and not to make an excuse, but I am going to be working full time. You know, eventually and bringing in more income, and then we can add back in the gym and add back in the things. But we just have to do it now. And both of us, you know, Kathleen.

You'Re, like, totally bought in here. Like, I love it. I'm. I'm pleasantly surprised. I think it's amazing. And what's interesting to me is that, Forrest, you have been taking on the financial load, the mental and emotional load of money for a long time. But now I'm finding this dynamic is so interesting because Kathleen is totally bought in. She's now encouraging you, and you are resisting. Why do you think that is?

I think. And Kathleen, I think I'm being a little resistant because I'm worried that you're saying that we're going to do these things but then fall back into old habits, and that's giving me anxiety.

I think I hear you. And of course, that's, you know, something we have to be really careful of and hold ourselves accountable and hold each other accountable. If we can't make these decisions now, we're definitely not going to be able to hold ourselves to them.

Thank you for, for saying that. I'm sorry. I'm having anxiety around it. I love that you're saying what you're saying.

Thanks.

Me too. All right, so let's get excited about just a slightly different plan.

Yeah.

The vacations. Using your new vision.

What do you think about these vacations in 2025? Kathleen has been planning a trip to go to Napa for one of her best friends.

40Th birthday.

Kathleen, how do you. Can you say no to going on the trip?

Yeah, that's going to be hard for me. But I mean, if I. If I have to, I have to, because I feel like, you know, we said we're not going to spend money we. We don't have. And that is hard for me because to me, it's not about me going and having a great time. It's me disappointing a friend.

If we're looking at the numbers, what is the answer? No, it's me. From now on, I have one religion, and that religion is my rich life vision. And that religion guides me on my decisions. Okay. At least this version of the rich life vision, that will change over time. Once you're debt free, you're going to change it. Of course. Of course. But for now, I need to live it, and I need to show my partner that I'm living it. And sometimes that involves some sacrifice. So $810 a month for vacations. Can I just summarily just tell you guys, like, can we just shortcut this and cut it to zero?

Yeah, yeah, let's do it.

No more trips. Okay. Gifts at 300 bucks. Give yourself the gift of being debt free. Okay, no more gifts. Long term emergency fund. Yeah, we're going to increase that because right now it terrifies me that you have one income, virtually no savings, and you have two kids. That is a very risky place to be. It's like way, way, way too risky. So what I did was I put your emergency fund at $3,000 a month. Okay. In six months, you're going to have 20,000 bucks in your savings account. Really good. Okay. Now, looking at your guilt free spending, you have 15%, which of a large number is $2,144.

I don't want to give up my rowing machine, but I could also join Anytime Fitness for $20 a month, you know, so that could be a thousand dollars right there.

I could sell both of my bicycles. Let's say conservatively, I could get $6,000 total for selling both of them. I would want to probably buy another like twelve to fifteen hundred dollar bike to replace them.

Sorry, not when you have $150,000 of high interest debt. No way. Guys, come on.

This is extremely fascinating to me. Notice how hard it is to change your lifestyle. Forrest is here trying to do little micro negotiations with me, like telling me he really needs a free $1,500 bike. What's even more interesting is that Forrest is the one who's been taking on a lot of the mental load of the family's finances. That's while Kathleen avoids it. But now that we're making changes, he's the one resisting and he says he's worried Kathleen won't actually follow through. It's like he's preemptively trying to make this plan fail. This is what we call self sabotage in psychology. To me, the real reveal here is that just because one person handles the finances in a relationship, that doesn't make them skilled at it. If we're being candid, Forrest, spreadsheet and tracking have not stopped them from getting into six figures of high interest debt. And we have to acknowledge that Kathleen has played her part by avoiding money for a long time.

We're making this commitment to each other where we're not going to spend money that we don't have. And right now we have negative money. And you have the trainer downstairs that for indoor cycling. And you, we can, you can go to Anytime Fitness and use their bikes like can't you ride a, like, a $300 bike.

Yeah, you're right. Okay, let's get rid of them all.

Do it. That was awesome, Kathleen. Amazing work. I really appreciated you stepping up there and kind of communicating in a way that reached Forest Forrest. I appreciate you taking a step back and going, you're right. I am creating this thing in my head. Let's actually look at a debt payoff calculator.

Yeah.

So I have your home equity line of credit, which is, I believe, $97,000, and you're currently paying approximately a thousand dollars a month towards that.

Yep.

Your credit card is at 65,000. How much are you paying towards that?

$728 a month. Right now.

Nine years is your base case for paying this off. So the good news is you have a lot of fat that we found from eating out and Amazon and all that stuff, so there's easily an extra thousand. There's actually more than that that you can use to pay off every month. That's the good news. The tough news is that it's going to feel really difficult. You can do it, but you got to be committed to it, and you have to have clear rules, and one of those rules has got to be like, no gimmicks.

I know why you're saying, remove all of the gimmicks.

Oh, God. What are we going to do now?

Just seems like leaving a lot also on the table by not doing a much smaller degree of. Of the credit card shuffle.

I want you two to live your life the way you want to live it. Okay. Right now you have a struggle because you have debt. And we've spent a lot of time today talking about how you got there, which I think is very important. But I want you to start understanding the mindset of somebody who has a high income like you do and has managed to save and invest a lot, which you have not done. I am allergic to gimmicks. I don't want them. I leave money on the table because I prioritize simplicity over everything else. Most of the suggestions, we're spending how much time looking two steps backwards about gimmicks rather than moving forward on a plan? This call is going to end at some point. You two are going to be on your own. I'm trying to equip you with the tools to stop leaning on the crutch of a gimmick and instead start looking at deep foundational strategy.

Yeah, okay.

Yeah.

No, you're. You're right.

I know it's hard. You can do it.

Let's let's do it.

I spent a lot of time with Forrest and Kathleen working through these issues. They were able to reallocate money towards their emergency fund and they found $13,000 worth of stuff to get rid of. Now, if we used this money to pay down some of their credit card debt to, it would actually make a big difference. Listen in.

So instead of 65,000, we will make it 52. Did you all see the change? It shows that instead of like basically 10 years, it's seven years and five months. That's a massive change. What that shows me is every single thing you have that you can sell that is not mission critical to your rich life vision and your family, sell it. Because even $1,000 more towards debt is a huge difference when it comes to big amounts of high interest debt. Like an extra thousand dollars is actually a massive deal. Which is also why going to Napa for three grand is financially devastating at this point. You see that?

Yeah, I do. Because it's not just three grand. It's. It's the interest that would save by using that three grand to pay off it.

Exactly. Now I want to talk about what to do with your additional income. Let's see here. You had told me, Kathleen, that you're going to make 1299 per month additional. Correct?

Correct.

All right. Awesome. Amazing. Hey, what are you going to do.

With that money and for credit cards?

So let's put an extra thousand.99 per month towards your debt. Watch what happens. Are you ready? Four years and three months.

Wow. That's amazing.

That's actually incredible. Right, Forrest? You see that? Yeah.

I mean, that, that now it feels doable.

These are the things that actually move the needle. They don't require any kinds of complicated. None of that. It's just like get the big things right and then be patient and let the process work. All right. Was there something else about, uh, is there any additional income that might come in?

I mean, possibly for me, but I'm hesitant because I don't know how it's going to work out. I'm going to be teaching a few classes and I think if things go the way I hope they go, that would be about 10k before taxes. But it's hard for me to put that down because it's very new.

Okay, can we, can we just simulate it so you can see the effect of it?

Sure.

Let's be conservative here. Let's say 4,000 per year.

Okay.

Okay. That would take out your taxes, plus maybe you save, I don't know, 10% of it for family stuff. I'm being very conservative here. 4,000 per year. Remember right now you're at to pay off your debt four years and three months. Watch what happens when we add in your $4,000 per year.

This is a $4,000, like one time extra payment, right?

Yep. Watch what happens. Three years, nine months.

Yeah, that's great.

This is why when you're facing a decision like, oh my God, I love.

My bike, should I sell it?

It's like, sell that thing right away and put it towards the debt as quickly as possible. It pays off so fast. Next, it is about additional income, meaning additional money put to it consistently. You nailed that as well.

You put over $1,000 a month towards that.

Fantastic. And then the third thing is automating the process and leaving it alone. Don't mess with it. It's like a Thanksgiving turkey. You put it in the oven, leave it alone, and you will know the exact month and year you, your debt will be paid off. How good will that feel?

Amazing. And yeah, that's how, like, I look at it. I mean, I know it's not my bike and truck that I've given up, but for three years, let's call it four years, we're going to suck it up and we can do this and, like, also feel really empowered because have a great family and we have fun watching Netflix and eating ramen, like, it's okay. We're still going to have all of those great, valuable experiences together with our kids. We're going to be less, less bougie. And in a few years, you know, we can be smart and I'll be working more and we can start adding things back in. And hopefully in that time we'll also, like, have figured out how to not make the same mistakes again. So I just feel like we can do it. Babe.

I love hearing you say that. You have this vision.

Beautiful. I'm really pleased to see where this conversation has gone. I really am. I want to offer a couple of pieces of just pretty direct feedback. Take it as you will again. I always tell my guests, it's your money, it's your rich life. It's your decision. I can't tell you what to do. I can simply tell you what I would do. I have a couple things that I would do in your situation when I would do every single thing we talked about here, which is I would not only would I put the 13k together immediately, I would go looking around the house with freaking binoculars and I would say, what else can we find? Let's Just get it up to 15. That's our challenge. Can we get it up to 15? We got to find a way. I bet you could. I bet you could. And I would immediately put that towards whatever it is you decided. Credit card. Great. Next up, I would set up a an appointment, a regular appointment with a therapist. I think that's going to be the glue that binds you together and keeps you focused on this vision. And just remember, it's natural. I taught you some principles and I taught you a rich life vision. But you will literally face thousands of financial decisions, and I don't expect you to get every single one right. There will be times you go backwards, you make a mistake. That's okay. More important is that you create a healthy culture of money so that whenever these things happen, you can recognize it and you can correct it and you remember that you don't have to beat yourself up about it. I make mistakes with my money today, but I also trust myself to know that I will identify it and fix it. Each time getting a little bit better.

Let's hear their follow ups.

What I learned from this experience was just how far up creek we actually are. I think I had trouble really seeing that and accepting that previously. And more importantly, what I learned is what we can do about it. And now I feel empowered to tackle that debt and start actually saving some money and reaching our future financial goals together.

And now Forrest's follow up.

Hi, Ramit.

Thank you again so much for your time. What did I learn from this experience? Well, I learned that actually the challenge of making large changes in our life to fix some of our financial problems was more of a challenge than I thought it was going to be. I was more resistant to it than I thought I was going to be. I think it scared me. But we are going to make some large changes. We've already put some plans together. We started looking at what we could.

Sell the truck for.

I started figuring out what my bikes are worth and how we could sell those. Kathleen is really motivating me and she's that partner that I need. It's sort of the fire that we needed lit under our to build a financial future that we're proud of and build our rich life together. I'm more excited than ever for the future and I think we can do it.

Thank you very much.

Honestly, these updates are disappointing. I was looking for specific details from Forest and Kathleen, especially after I spent a ton of time working with them line by line. The fact is, time is their enemy right now and what they really need to do is attack their debt with overwhelming force. So my team and I went back to them and we asked them for another update weeks later so we can hear what, if anything, they have actually done.