“We make $665k a year and still feel BROKE”
Ramit Sethi talks to Susan and Jeff, a couple making $665k a year who feel broke. They're trapped in whole life insurance policies and working with financial advisors who aren't helping. After 19 years of marriage and two kids, they're ready to fix how they actually spend money.
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It's a waste of money. We were fooled by it. Somebody sold it to us and we didn't know better then, but we know better now. We could make that money work for us someplace else.
So you don't like being ripped off, right?
I think that was the saddest part is seeing your salary and realizing we had so much debt and it didn't feel good and the money didn't fix the problem.
Did you do this conscious spending plan together?
We did. It was not the 20 minute version of the conscious spending plan.
How long did it take?
About two and a half to three weeks, I believe.
What, three weeks, let me tell you.
Doesn'T turn you on. I'll say that.
We don't have a simple financial situation. I will say that.
Can you just come here?
Ramit, I'm speaking with Susan and Jeff.
Susan is 48.
She's a stay at home mom. Jeff is 51 and he's a surgeon. They've been married for 19 years and they have two kids, ages 12 and 14. Now if you know my book or if you've watched my Netflix show, you know that I talk about financial advisors occasionally. You know that I never want you to work with a financial advisor who charges you a percentage of assets or aum. On the Netflix show, you saw me work with Natalie and she was going to end up paying millions of dollars right into her advisor's pocket, all, all in fees. So I get a lot of questions from people about this, including Jeff and Susan and I understand that this is a complex topic, right? Should I hire a financial advisor? How do I find the right one? This is an important one. So I wanted to dedicate an entire episode to this issue. I wanted to show you what really goes into how financial advisors charge you money and also some of the surprising psychology when it comes to hiring a financial advisor. Many of us feel good delegating our money to someone else. So for this episode I collaborated with a partner Facet, a service that offers affordable, accessible financial planning through a flat fee membership, not a percentage based AUM fee. Today you're going to see the look on Susan and Jeff's face when I show them how much they are paying in fees. You'll also hear me show them how to graciously get out of their advisor relationship, including a word for word email they can send. Notice what happens, by the way, when we go through their spending. Quick message before we dive in, I was reading this article about dating red flags. For example, being a MAGA Republican or listening to Joe Rogan these are real, statistically valid answers that they took on a survey that got me thinking. What would be the top financial red flags in a partner? Well, that's exactly what I'm going to share in my newsletter coming out this Saturday, October 28th. Make sure you're on the newsletter so you don't miss it. Iwt.com podcastnewsletter now let's get to Susan and Jeff.
Susan, what's the biggest recurring disagreement that you have about money with Jeff?
The whole life insurance policy.
Paint the picture for me. Where were you and what happened?
So this has been recurring for a long time. Even back when the policy opened 15 years ago, I remember hearing through Susie Orman that whole life insurance policies are not investments, that you shouldn't have them, that most of the money goes towards paying the financial advisor's pockets. Not really as an investment. And so before children, before we were even making any money, we started that policy. Yeah, I'm always bringing it up.
Okay, tell me where you were when you brought this up again.
At home, probably. Maybe even at the pool, trying to brunt it.
What does that mean?
Just, he gets agitated about the possibility of. As Jeff says, we're so far in because we've been paying for it for 15 years. Why stop now? It's only a couple hundred a month. Yada, yada, yada. I'm like, it doesn't matter if it's a couple hundred a month. It's still a ripoff. We could take that money and put it someplace else where it would actually make a bigger difference, but I don't know all the numbers. I can't say. Well, you know, we've already put in this, and this is what it's worth. You know, you would make X amount of money if you stick it someplace else. And plus, there's a loan against it. We took out money against that, and I have the numbers for that, for how much we owe back at an 8% interest rate. So that makes my head explode. Also that we owe money. And he go. And Jeff says, well, that doesn't matter. I don't care about that because that'll get paid off if the policy gets paid out. I don't know how true that is either.
Meaning somebody dies. Is that what we're talking about?
If he dies, I'm the somebody?
Yes, he's the somebody.
Oh, okay.
Yeah.
I mean, technically, that is true. One day when you die, there will be a payout. All right. Okay, got it. So, Susan, when you bring this up, how did Jeff respond?
Defensive. Of all the things to worry about, this is the least that we have a problem with in our financial picture. That's not the big picture. Look at the big picture. This is a small percentage of what we have.
Okay, got it. And do you agree? I mean, is the whole life insurance a small part of the big picture?
Yes, I think as far as our monthly investment, yes.
Okay, so what is it about the whole life insurance policy that seems to get you upset?
That it's a waste of money, that we were fooled by it, that somebody sold it to us and we didn't know better then, but we know better now, and that we could make that money work for us someplace else.
Okay, so you don't like being ripped off.
Right.
All right, got it. Jeff. Same scenario three weeks ago at the pool. Do you remember this conversation?
Not specifically, no. And I guess it's because it was sort of a rehash of other conversations that all had the same feel. So one doesn't feel necessarily significantly different than another. I know we've had this conversation, and I think my answer since at least, you know, of recent years, has been, if we really want to control our finances, we should focus on other things first, because this isn't really a huge part of what will make us successful or failure.
Okay, how long has this conversation been going on? 10.
12 years, I guess.
Okay. 10 years or so of having this conversation. And is it the same pattern where Susan brings it up and then you respond, and then like, nothing really changes?
More or less.
Okay. All right. I mean, is it really a problem? You two are fine. You think you have kids, right? How old are your kids?
Almost 14 and 12.
Yeah, 14. 12.
Great. So you got a beautiful family. Is this a real problem?
Yes, because it's. Why give them the money? Why can't we keep more of our own money to fund what we want to do? It's the same thing with moving the money out of the investment people that we have now that are charging us 1.24%.
Oh, your advisors.
Yeah.
Is this part of the conversation as well?
Oh, yeah, not this one, but it has happened.
Yes. Yeah, we pivot to that, too.
Hold on, hold on. Let's take it step by step. All right, so let me start by asking, what do each of you do for a living?
I'm a domestic goddess, so I stay home.
Great. Fantastic. And, Jeff?
I'm a surgeon.
Okay, great. How long have you two been married?
For 19 years in next month.
Oh, congratulations.
Thank you.
When you met, what was the situation when you Met. How did you meet and what was your financial situation back then?
Profoundly different. We met working together. We were both in science, basically technicians in a lab. At this point, I was already starting to consider the possibility of medical school. Working full time, going to school part time to make that happen.
What were you making when the two of you were working in the lab?
Gosh, I made maybe 28,000 a year. That was in 98, 99, 2000.
Okay, yeah, maybe I made a little more, but not much.
So maybe the two of you combined made like, let's say 100k or ballpark, a little bit less than that.
Way less, actually. Like maybe 15.
Yeah. In 2000. Yeah.
Wow. Okay. All right.
Yeah. And there were times in med school where, yes, he had student loans, but I made 30,000 a year and I carried both of us.
Yeah.
Wow. Okay. So that's quite a bit different than where you are, financially speaking, today. Did the two of you ever talk about how your financial life would dramatically change one day?
No, I didn't believe it. I had a. My psychiatrist who had an MD was like, you're gonna have a lot of money. And I go, I am. I go. I just didn't. Didn't occur to me. It wasn't. I had no idea. It just didn't seem real. It didn't seem like a possibility because I didn't have money. Didn't have. You know, being with Jeff was the first time I could even dream of going on a vacation. It didn't occur to me that you would go around the world and see things and do things and have all these experiences, because I was like, how would you do that that takes so much money?
Why would.
How. How does that happen, Jeff?
What about for you?
So, I don't know, it just didn't occur to me to have that next jump to the conversation about, you know, what's going to happen in five or 10 years after we really start working and start getting paid. What a physician will make, let alone a specialized physician.
Yeah. I'm so curious what happened the first time you got the full paycheck, Jeff? Do you remember that exact moment? Okay, tell me about it.
The prorated amount for the rest of the month, plus the sign on bonus and how much taxes came out of it kind of blew me away. I don't know if you remember that.
Do you remember what you said? I've never been so disappointed in $35,000.
I was expecting with what I knew, you know, a gross monthly salary would be for the 380 that I signed on for, plus a $50,000 bonus. I was expecting, you know, probably at least 50 total. We didn't make discrete plans, but, you know, in the process of trying to get moved and this and that, we had already accrued some debts. You know, we borrowed money from my parents and, you know, that didn't feel very good. You know, going as a doctor and a specialized doctor and a surgeon to have to borrow money from your parents to move, so to speak.
Yeah. What age were you at this point, Jeff?
40. Yeah. You were 40 when you were finally done.
Okay.
Took him until he was 40.
So 40 years. 40 years old, you essentially started this chapter of your career as a surgeon where you were being paid a considerable amount.
Yeah, okay. Absolutely. Yes.
There's a lot already going on here. Whole life insurance, financial advisors, the fact that Jeff's salary is very high, but that he only really started earning it at the age of 40. I don't yet know enough to figure out what's going on here, but I'm collecting the clues in my head now. If you were me, where would you take this conversation? What would you ask next? Think about it, because as you listen to this podcast, I want you to hone your own skills as an investigator. Let's listen.
I think that was the saddest part, is seeing your salary and realizing we had so much debt and it didn't feel good, and the money didn't fix the problem. We made 380,000 a year, and it was still, like, scrambling, still couldn't do everything. I wasn't, like, rolling around in money. I didn't feel any better. If anything, I was more scared because I was wasting it unintention. And I wasn't being intentional, and that was awful.
Were you always scared of money?
Yes. Yeah. Didn't grow up with a lot of money because I had a single mom and my dad wouldn't pay child support. So we always had the house and we had food and I, you know, things like that. But we didn't do anything extra. We never went on vacation, we never went out. I couldn't dream any idea for. Dreamed bigger. Even marrying Jeff, knowing that he was going to be a doctor, it didn't occur that it would ever be kind of even like my money. I was still, always, still scared that I was going to have to be able to take care of myself and still be able to live within my means, like things like that. Yeah. Couldn't dream big with it.
What messages about money? Do you remember your mom teaching you.
Have to Be very careful with it because there's no, like, pot of gold. There's no. You're not going to get. You're. You're not going to have a lot of money. It's. You're just not.
Wow.
That's why I went, because of our money situation growing up. That's why I went to college, because I didn't want to have to worry about money.
Were you the only one in your family to go to college?
Out of my entire family. I mean, huge people, yeah. Thank you. Because I didn't want to live like that.
Yeah.
I wanted to be able to have things. I kind of went. I thought my happiness would be in things and being able to buy things and realize obviously now that that's not it, but the security of having money. Because my mom struggled and she couldn't do things for us, and that hurt.
What else did your mom teach you, either explicitly or just through her own actions about money?
She never really spent it on herself because there wasn't a lot of extra. You know, if she wanted to dye her hair or do her nails, she did everything herself. Not. And it wasn't even so that she could give it to us because there wasn't a lot of extra to give. You know, she was kind of last on the list. If she wanted to do Christmas, she would put it on a credit card and then have to borrow the money to pay off the credit card from my grandparents. My grandparents were very stingy with money. Never did anything fun or good with it. Just kind of wanted to hoard it and hold on to it because what if you lose it? They were from the depression.
Where did you grow up? What area?
Philadelphia.
Oh, okay. Interesting. You mentioned that your dad did not pay child support. Did your mom ever reference that as you grew up?
Yes.
What did she say?
Well, what little that they would. I would ever see them talk on the phone. It turned into a screaming match over him not paying anything. I mean, it was so bad. He went to jail for not paying child support several times. And then for my college tuition. Apparently there was when they got divorced in 76, when I was a year old. Part of the contingency was that he would pay for my college, but he didn't pay for college. And so my freshman year of college, my mom had to take him to court to force him to pay, and he still didn't pay.
How did you pay for college?
Student loans.
Okay, so sort of a tortured relationship with money growing up is what I hear. Would that be fair to say?
Yes. And then not knowing how to handle money and going through our 20s and middle 30s, just making lots of money mistakes, overspending, not being conscious, having lots of debt. It was, you know, we've learned the hard way.
Okay, we meaning you and Jeff?
Yes, me beforehand. And then I, we. I feel like I dragged him into the mess. He was very conservative when we started dating.
So Jeff, what did you learn about money growing up?
Money in our family, you know, raised solidly middle class, but it was just a. It wasn't discussed. But it was never an obvious problem to the kids at least. And so I think that's just sort of how my mentality was, is that it just gets taken care of and even if we don't have a lot, we find a way again. I mean, you know, we were pretty solidly middle class. My mom was a stay at home mom. Uh, my dad worked.
What'd your dad do?
He worked for the city of Philadelphia. We grew up in Philadelphia as well. Um, sort of as a forensic accountant, looking up, you know, crooked accountants and lawyers and things like that. Um, didn't ever really bring his work home. I don't know the details of his work, but.
Is your dad still alive? Yeah. Has he done a forensic accounting of all the fees you're paying?
Yes.
Not okay.
He had a similar. Maybe not so similar, but he trusted some money to a person he shouldn't have as well.
What, wait, what happened?
The story is a little complicated, but he ended up getting a large settlement from his accidental death of his previous wife and left it with his brother in law who was a financial guy who totally messed it up. And they lost a large portion of that.
Oh my God.
Yeah, I don't, I don't know the details of what a large portion means, but it doesn't sound like it was just a couple thousand. It sounds like it was tens of thousands, if not even more. Perhaps.
How old were you when that happened?
Middle teens, 15, 14, something like that?
Pretty old. I mean, old enough to know to.
Sort of get an idea of what had happened. Yeah, he never, never really forgot about it. And his sister ended up dying somewhat suddenly as well from a sudden illness. And so almost lost contact with the brother in law as well for a time. And so there was some confusion around it and a little bit of chaos as well.
What was your conclusion from that as a 15 year old hearing the stories about your dad and his money?
Well, you know, the easy answer would be say that, you know, safeguard whom you trust with your money.
What do you make of Jeff's painful family lesson to be careful who you trust your money with.
I'll tell you what I take away.
From it that it's probably really hard for Jeff to admit he might have made a bad decision with their money. Specifically, I'm referring to the insurance and the financial advisor who's charging them 1.24%.
AUM is the primary disagreement about whole life insurance and your financial advisor, Is that what it is?
I think it is. I think so, yeah. It's. I have questions about the loan, about the loan against the whole life policy. I have questions about money for the kids. I have questions about some other things that are. Yeah, big like that too.
Well, I have questions about how you got into these products. That's what I want to know.
Well, you know, these people come to the hospital, oh, they love doctors and.
They look for the doctors, young doctors, and they love them.
Doctors in residency that are only making 60,000 a year.
Let's just talk about why every financial services company loves doctors. I have doctors in my family too. So first off, we should all acknowledge that doctors have a reputation as being the worst profession in the country with money. Let's talk about the dynamics here. So you have some 30 year old doctor who's like a resident. They've been in school forever, all their friends are making good money for the last 10 years. They're sitting here making like $40,000 a year and they live in a cramped little apartment and they work like 18 hours a day and they're told that someday they're going to make money, but they never even think about it. And suddenly somebody comes knocking on their door with a free lunch. Okay. And they go, oh, this is so cool. We'd love to help you organize so that you're the specialist at this. We, we specialize in that. And you do what you do best. And we do what we do best. Jeff, any of this sound familiar?
Absolutely.
All right, so they, they come specifically for doctors because doctors have effectively a guaranteed high salary and it's not that risky of a profession. Like if you're a doctor, you're probably going to be a doctor for many decades. Where. How old were you when you got into the whole life insurance thing? And the advisor.
I was an intern. It's like my second year, my formal intern. So. Yeah, yeah, 2007, 8.
Was it the same person, by the way, who got you into all these products?
Yeah, yeah, I mean, it was, yes. You know, a representative of one particular directional company.
Chad.
Yes.
What company was it all Our disability.
Life insurance, kids, life insurance, term insurance is all in.
How much insurance do you. Well, I know Jeff, you have like professional insurance, but you have term, whole life.
So I've got.
What else?
We've got $3 million of COVID I've got $3 million of coverage for me.
Okay.
2.8 of that is term policy. A 20 year, 30 year term, I forget which, but that's good. And then, and then 200,000 is the whole life portion. So like I was saying, it is a very small portion of the life insurance coverage portion, the most expensive part of the life insurance, but it's still a small part. And then I've got basically three different disability owned, occupation, disabilities. So if I can't operate, it kicks in. Long term disability, that will, you know, if enacted, pay $15,000 a month, basically. And then I think when the kids were born, they did sell us life insurance on the kids because of, you know, the health and you know, pre approval. And now they can never be denied life insurance thing. We, we were conned into that. I agree with that.
Oh, you realize that I, of course, they, they sold you life insurance for like an infant.
That's well, toddlers, basically. Yes.
Well, the idea with that is that if they would ever have some kind.
Of develop diabetes and become uninsurable, they.
Couldn'T, then they always have coverage.
And they showed you all these cute little pictures of a baby eating out of a spoon.
Yeah. And I don't know how true that is. I don't know if that's true.
That's just what they told me. I don't read the Bible anymore. Right. It's not true.
It's not true anymore for sure.
Right. I think maybe there was some component of that at some point, but that's long been not a thing. It probably wasn't even a thing at the time.
Honestly, as a general rule, anything coming out of an insurance salesman's mouth is a lie. That's just a general rule. All right. Generally speaking, yeah. They see a doctor, particularly a surgeon, and they go, that's. That's my kid's college fund. That's really the way that it's that doctors are looked at your prey and you know, you don't know. And I have to emphasize one thing which is really important to understand the psychology here, which is like if I go to a doctor, I basically go, look, my back hurts or my ankle's broken or something. Can you fix it? I don't know anything about the situation. Maybe I printed out a couple docs from Google. But really, I'm putting myself in the doctor's hands that that concept is drilled into every doctor in med school. Go to the spine expert, go to the, whatever type of doctor. The problem is that that's not the same analogy in the financial world. Because, Jeff, if I had surgery, I might come to you. And even though you're not really involved with the billing, you're not going to charge me 1.24% of my total portfolio, are you? Unlikely, you know, your billing office might charge me, I don't know, 20 grand or 50 grand, who knows, right?
I don't, I don't know much about, you know, I, I do my thing and eventually somebody get, pays them and I get paid by them and so on and so forth.
Exactly. It's very compartmentalized. And that's drilled into you since day one. If we actually dig into the nuances of how they're charging and what they're doing, which we will, we discover that a lot of it is either overcharged or just unnecessarily complex. I'm going to explain something right now.
That'S going to blow your mind. Consider that if you go to a doctor, you expect they're going to take care of you. They're going to put your needs first. They even take the Hippocratic oath. I will do no harm or injustice to them. If you go to a lawyer, you expect that they're going to represent you. But if you go to a mortgage broker or a whole life insurance salesperson or even most financial advisors, could you expect the same?
No.
Most financial advisors are not legally required to put your interest first. Do you understand how insane this is? And understanding why this is allowed is going to blow your mind even more. In finance, there's a term called the fiduciary standard. A fiduciary is someone who's required to put your interest first. Well, guess who opposes a fiduciary rule? Wall Street. In fact, they've actively tried to water it down and abolish it altogether. And along with their Republican cronies, the Trump administration kill, killed the fiduciary standard in 2018. Do you understand what this means? It means if your mom or your dad or your grandparents walk into a financial advisor's office, someone who is presumably supposed to help them, that advisor might sell them some larded up insurance policy or fat fee mutual fund masquerading as a good investment. And actually, that's exactly what happened after the Trump administration killed the fiduciary rule. Sales of fixed indexed annuities soared by 40%. These are piece of products. As Bloomberg wrote, quote, a client would have foregone on average an estimated $54,000 in profit per $100,000 invested. Do you understand what I just said? The client would have lost over half their money to these horrible investments. This is why I say money is political. And this is why I get so pissed off about what happens politically, especially when people go ramit. Why are you talking about politics?
Money is political.
Some of you are out here worrying about the price of pickles while you are secretly letting thousands and thousands and tens of thousands of dollars be taken out of your account for terrible investments. Oh, and yes, there are these arcane discussions that the financial literature, there's the fiduciary standard or the suitability standard. There's fee only advisors versus fee based. Can I be honest? Get real. Do you really expect the average person to understand all the nuances of these details? Of course not. Wall street wants to make as much money as possible from you. That is why it is so important to avoid commission based financial advisors just as a general rule.
Rule.
Their incentives are not aligned with yours. And that is why you should be paying a flat fee, not a percentage. And when I myself have used a financial advisor who I once hired to check my asset allocation, I also paid a flat fee, not a percentage.
Susan, though, you said you don't like paying somebody else. You know, you could do it yourself. I mean, technically when I pay somebody to change my oil, I could do it myself, but I don't.
I follow your philosophy. I'm not going to do it myself. I want to pay somebody a flat fee. I generally feel as though most people are good and they're not trying to rip us off. So that's what makes me upset even about the current financial advisors that we switched to two years ago. When I did ask them about their percentage and they told me, oh, it's roughly around 1%. And I'll never forget he kind of made this face like, oh, it's not that much.
I know that face.
Thinking. And then I was thinking in my head like, you're saying 1%, but what is that really? You're saying 1%. Because I'm thinking 1% of isn't that much. Not 28% of the returns of what we're trying to grow.
I know this look that people give you. It happens in luxury purchases. It's kind of a little. You don't really talk about fees in certain rooms.
Yes.
And when you ask here's the reaction. I will be the advisor who says, oh, it's, you know, 1%, but what's really important is blank, blank, blank. It's sort of a. We don't really talk about money here. That's inconsequential to us in this room. And by the way, let's pivot to something much more comfortable to talk about. Sound familiar?
Yes, that's exactly what happened two years ago.
Okay, when did this financial advisor come around and what'd they say?
So when we moved here, we needed a bank, we needed a mortgage. And, you know, our situation was a little more complicated because our house back at the old location didn't sell, and so we didn't have the down payment that we were expecting, you know, so there was some complication to it, of course.
Okay.
And our real estate agent basically turned us on to this bank that we use, which overall we've been pretty satisfied with.
Okay, I'm already hearing two red flags, but go on. When you said the word realtor, that was a red flag already. All right? Anytime I'm within a city block of a realtor, my skin starts to tingle and my arm hair goes up. All right, so that's number one. And then number two, you said the word bank. I go, oh, oh.
We were referred by the banker we were using to the wealth management aspect of the bank.
Wealth management. Oh, God. So you sit down, and they got the nice suit, which appeared to be nice, but now in retrospect, you realize it's not that nice of a suit. They gave you the nice coffee, and they said, tell me about your goals. And then so you said, you know, I'm a physician. One day I'd like to retire, maybe 60, 65. Oh, we could take care of that for you.
We want you to focus on what you do. We focus on what we do.
And then they took all your money and they said they were going to invest it.
So we rolled over my retirement stuff from the old job into basically brokerage accounts run by them still. Retirement accounts for 401 and 457, basically. Or 403, I forget which it was. But. And so those are still functional. They're no longer with the original company, and now they're with.
Okay, cool. So there you go. The money's in there, and presumably you're contributing to it regularly.
Not to that, because I guess that was a rollover. That's basically. We haven't touched it more or less since it rolled over.
Okay.
We have a separate account with my new Employer. That's retirement account that I, you know, I contribute about 1200 or so a paycheck. We're paid biweekly now.
So who's managing that?
It's through the principal company. The company. The principal no one is specifically managing.
It's just like a computer. Like an index fund.
It's an index fund, yeah.
Okay, great.
Yeah, it's a target. I believe it's a targeted date target.
Date fund. Great. Yeah, fantastic. Okay. All right. So now that I understand, you have the whole life policy, which is an area of contention, you have this money in the rollover retirement account, which is managed by an advisor, correct?
Yeah, an advisor. And, you know, maybe his team of whatever, but yes.
Charging you approximately 1.2%, but you're not adding to that account, Is that correct?
Correct.
Okay. Is there anything else that's a contentious issue around the money?
You don't like the annuity.
Oh, God, you have an annuity too. They really got you 1, 2, 3.
Get out of an annuity.
This is the whole trinity. Oh, tell me.
I don't even remember what that was.
Only 30,000. He said we couldn't. You pulled it out of some account and you said you couldn't put it into another.
Is it the one from Vanderbilt's?
Probably, yes. And then you couldn't put it into something else because of taxes or something, so you put it into an annuity. So then my head exploded on that. And then there's also the long term savings account that we have the 60,000 in. That.
Yeah, that's true.
That goes up and down. And I'm like, savings account.
If it's losing money, it's a brokerage account as well. We. We don't have a simple financial situation. I will say.
Can you just come here, Ramit.
Well, you know that basically the dream of everyone who contacts me, I get like a thousand of these messages a day. What they really want is for me to come to their house, like, fix their log into all their accounts. Fix it. Rake the leaves in the front yard, vacuum and iron their clothes and then leave.
I go, if you just stopped at the first part, I'll cook for you and you can hang out at the pool after you're done.
Yeah, we pay people to do all the other stuff.
Thank you. All right, now you can see how.
Hardworking, even very smart people can be sold into these type of financial products. Okay, let's now take a look at their CSP for some more context. Their assets, $1.1 million. Their investments, 835,000. Their savings, 20,000. Their debt, 914,000. Total net worth, just over $1 million.
Did you do this conscious spending plan together?
We did. It was not the 20 minute version of the conscious spending plan.
Oh, how long did it take?
About two and a half to three weeks, I believe.
What, three weeks?
Let me tell you. Doesn't turn you on, I'll say that.
What happened?
So fighting.
We haven't lived on a budget in a while. We just sort of lived our lives and hadn't really accounted for.
After 150k, people stop tracking money. That's pretty much what happens. All right, so wait, so how did that start a fight?
We were just arguing about the numbers. There's no way we could.
There's no way free spending is $13,000 a month.
Right.
And I'm like, I don't know what to tell you. We have a teenage daughter, and she won't stop going to Sephora and Lululemon.
You can start to understand how, gosh, like, it's actually totally realistic that we might be spending a hundred thousand dollars a year and not even realize.
Right. That's awful. That created a little friction, I think.
That's awful.
That's just reality to me. When I hear that. I've had times where I look at my own spending and I go, oh, my God, I can't believe that I.
Spent that much in the last six.
Months on this one thing. And again, assuming you have the cash flow to be able to make this a lesson, what's the best thing you can do? You can be like, oh, wow, it really got away from me. I need to put some controls in place. Maybe I need to sell a couple of these things or stop doing it. But let this be a lesson to me. Your groceries are 2,800. All right. So you like to eat. Well.
That surprised us as well.
Do your kids participate in the grocery shopping? Not much.
Rarely.
Okay, all right. 2,800 is a lot.
Dining out was outrageous. I think it was over 3,000amonth, wasn't it, Jay? It was crazy.
It was outrageous.
So you're spending 2,800 at the grocery store and then 3,000 eating out. What? In the last two weeks, where'd you eat out?
Sam, Laverna Dan and Peter Luger Steakhouse. But that was not.
That's just a one off. How about the prior two weeks also Peter Luger, but that's just a one off also.
And we were having. We would have date night. And if we have date night, it's not Unheard of to spend $350 because of a bottle of wine and stuff like that.
And Your subscriptions are $649 a month. What are these subscriptions?
Everything.
I have a list like, I mean.
The world wants to know.
Patreon. I filed backup. Apple Music, Spotify, Roblox. We have several charities, but not enough. We should be giving more, which comes up very small amount. Hulu, ASPCA, Feeding America, Netflix, Crunchyroll, YMCA, SiriusXM, a second Spotify account. Audible, 10% yearly subscription. Masterclass subscription, IFIT subscription, Peacock Car Wash and then a yoga subscription and a spa monthly subscription.
All right, what do you think about that? As you say it out loud, I've.
Already marked a few things to that. If I don't use them to get rid of them.
Pets. How many pets do you have? Oh, God.
Five cats and a dog.
I knew it. I. Hold on.
The dog itself is 550amonth.
What the hell kind of dog is this? It's like a mortgage payment for some people.
She is a very sweet rescue. And she had an ACL repair that.
Did Jeff do the repair?
No. And she needs antibiotics which cost $450 a month.
Okay, look, listen, I understand. I'm not trying to ruin my own career. Fine. You love your dog. Great. The kids activities. Kids are expensive. Fine. Again, you can afford it. The problem? There's a few problems here, but just so you know, I'm not coming in here saying you can't ever have wine. If you want to have a very nice bottle, be my guest. It's just that it's bloated. Right? You're doing that. You're not thinking about it. There's sort of no vision and no strategy behind it.
On a side note, I get comments from people saying, I was with you until you told me they made $250,000.
Then I checked out. I'm like, what?
Do you seriously lack the ability to adapt someone's story to your own life? Guys, one of the points of this show is that people can feel guilty or anxious or fearful about money, whether they make 60k or $600,000. People can have bad money habits at 50k or $500,000. In fact, if you feel bad about money at 50k, you're probably going to feel that way when you 10x your income. This is why I feature people who make 50k, people who make a million dollars a year. I want you exposed to everyone. And for some reason on the Internet, there's this undercurrent of People who expect everything to be tailored to their exact situation. Your income, your location, your number of kids, your spending, your tax rate.
That's not going to happen.
If you want that, hire an advisor. What I'm asking you to do is to turn off that voice in your head that says, they're nothing like me. If someone makes 10 times what you make, you could probably still learn something from them. I learn from people who make more than me, and I learn from people who make less than me. And that is what I'm asking you to do.
So let's talk about income. Susan, go ahead and read me off the gross combined income here. What do you see?
$55,434.
665,000. That's Jeff's salary, right, Jeff?
Yeah.
And your take home is 426,000 a year. Okay. Very, very healthy salary.
Yeah. Great big shovel.
All right, so 426,000. Let's acknowledge that at 426,000, the game is a little bit different. My wife is a personal stylist, and she often goes into people's homes and she sees. She. She does a closet clean out. And she shows me before and after pictures, and it's just. It's quite revealing. Right. People's closets actually tell you a lot about who they are and how they live. What I'm seeing instead is a full closet in your fixed costs is just a lot of stuff. Subscriptions, pets, groceries, the car. But not even the car. But it's the tolls and the this and the. Yeah, right. Okay. I'm seeing a lot of nods. It's just a lifetime of having a high income and being like, we make enough, let's get it. But not really saying, hold on a second. We need to do a closet cleanse.
Right?
Yeah. And after a while, it just kind of gets overwhelming. You're just like, I don't even know. What is this stuff? And how do we start over?
I like your philosophy of spend extravagantly on the things that are important to you and cut mercilessly the things that aren't. We tend to spend extravagantly on the things like travel. I mean, we were just in New York City and ate at a fancy restaurant, a great steakhouse, and did a couple of great things, but we just don't really do the cutting mercilessly part. We just keep slowly adding on. Now, it's not extravagant add on, but it's adding on nonetheless.
You're spending.
A lot.
13,500 on.
On just, like, stuff that we don't really know, honestly.
Okay, fine.
Yeah, that's the single biggest expense.
But see, but I rather cut from May. And I think that's part of the mental activity, is that. Or the mental process is that, yeah, we make all this money, and yet I'm not going to get my nails done for the next couple months because I don't want to spend the $200 a month on May. I rather spend it on something else.
Do you know where that comes from?
Yeah, childhood. I'm not worth it. I will sacrifice so that everybody else can have something, you know, and plus picking and choosing. I can't. Jeff likes to say, you know, you can't do it all. And so I'm like, well, you know what I think, you know, I had pretty nails all summer. Now it's fall. I'm, you know, I'm okay. I can't rationalize doing everything because when I added up the expense expenses to do everything, it's $1,800 a month just for me to spend on me. You know, I hold back.
All right. I think it's savvy of you, Susan, to recognize that that nail issue is not simply a financial issue, because truly, if you wanted to find 200 bucks or however much it costs, you could find it. It comes from childhood. It comes from watching your mom and maybe even your mom watching her mom sacrifice and even turn that into a virtue. And you don't have to do that with your household income.
Right?
All right.
One of the things I want you to do when it comes to your spending is think about it in terms of percentages, not just how much a hamburger costs. Let me explain why. You know, we can get a hamburger for a couple bucks, all right, at a fast food place, but you can also get a hamburger for $24 in New York sometimes. Now, is it outrageous to spend $24 on a hamburger?
I don't know.
Is it a special occasion? Is it your anniversary? Is it a once in a lifetime thing? Do you make $10 million a year? We need to know these things. And that is why you'll hear people.
