“We spend 154% of our income & refuse to change”

Sometimes I don't feel like it's a together thing. It's like she wants me to do certain things with both hands tapping behind my back and hopping on one leg.

I know you've been trying and you're doing the best that you can, but the way that we are doing things does not work. It does not work. We've been in the deficit for months. I feel really stupid because I did not know. I feel like I should have known.

I wanted to be financially free while I was 35. I'm 35 now. I've moved that goal to 40. The goals that I had when I was 25 to take care of my family, I haven't even accomplished that. And it's been 10 years. How much more time is it going to take for me to be able to do that?

Welcome to part two of my conversation with Trinh and Lucas. They're both 35 years old, married. Lucas has a history of risky investments. For example, he lost over 20 properties in the past. And Trinh was recently caught off guard when she learned that their family was running low on cash. When I left them in the last episode, I had just learned that they are spending 150% of their take home pay on fixed costs alone. That number is startling. Fixed cost percentage is supposed to be roughly 50 to 60%, which means that they are broke and they are running out of money fast. In today's episode, listen for how they individually approach money and especially listen for how they talk about money together. And as you think about creating a rich life together, you might have heard of the idea of having a monthly money date to help get on the same financial page as your partner. Well, what is a money date? What are you supposed to talk about? How do you make sure it's productive and not just two people spinning their wheels and getting mad at each other. This Saturday, I'm going to be sharing how to have a money date with your partner, including a sample agenda that you can use word for word. You can only get this@iwt.com podcastnewsletter this Saturday, November 11th and it is free. Now let's get to the episode.

I looked at some of transactions before too. Over the last six months. Six months we have been spending like at least over 20002500 on eating out. And I'm like man, we got to put in. We got to put. Something got to happen with this thing.

How often do you both eat out? Oh wow. Yeah, that uncomfortable look. Wow, she's covering her right eye with her hand. And he's now putting his hand on the face. When the hand goes to the face, you know, you got him. How much? What'd you eat out last? What is it? Doordash.

There you go.

I promote it, but not for you. All right, everybody. Everybody else who wants a home delivery? Doordash. Fantastic. They deliver all kinds of stuff. One hour. It's awesome. Not for you.

Ouch.

Right?

So only meant for me. Got it.

What'd you get on Doordash? Tell me.

Chick fil A. Huh?

What else?

Cheesecake Factory.

Like, normally, we. We usually buy from, like, longhorns or some. Some place like that.

How much does that cost?

Anywhere from 45 to 100 bucks.

How often would you say you. You get delivery or takeout per week?

About two. Two to three times per week.

Hold on. I just have to cut in here. Do you notice this little verbal tic that Lucas has? I asked him, how much does takeout cost? He said, 45 to 100 bucks. I said, how often? He says, two to three times per week. That means they could be spending anywhere from $360 to $1,200 per month. One thing that you'll notice is that people who are not savvy with money consistently use ranges. But how are you supposed to calculate anything based on 2 to 3 times per week versus 45 to $100? You can't do math on ranges. And what's really going on here is that deep down, people are uncomfortable with their spending. So they make up ranges right in the moment. Two to three times per week, it's probably 4. 45 to $100. Add in tax and tip, and it's probably more like $120 on average. To live a rich life, you've heard me say you have to be honest with yourself and the people around you. And that means not using ranges. In fact, be conservative. Look at your ranges, look at your numbers. Then add 15% to account for all the stuff you're forgetting. That is how you start to get more accurate with your spending. Okay, back to the conversation. You know we didn't even count that on the csp, right?

Yeah, we got into a little. A little discussion about that.

I thought. I thought we put it in there.

It said, let's focus on the big picture here. You're spending over $1,000 a month, eating out easily.

Yeah.

Every month. How are you going to change that?

I will be doing it. So I will be, you know, being more strategic with. Strategic, excuse me, with the groceries that I am going to purchase. And then also planning out our meals ahead of time actually started this two weeks ago. A lot has come out of it. I realized how much refined foods we were eating, how we need to incorporate more whole foods for ourselves. And that even goes back down to our culture of eating better. Right. Because culturally, neither one of us were raised to eat like that. And so at first, I saw it as a daunting task, but now I see it as a privilege to be able to provide that for my family.

Oh, cool. Oh, my God. Okay, so, Trinh, that is amazing. What you just said is, like, to me, the culmination of how you change all this conscious spending plan. It can be seen as daunting.

It is.

It's hard to start thinking and talking about money differently and behaving differently, but once you start to get a few wins under your belt and you realize, just like you realize, oh, my gosh, we need to eat more whole foods, and we start to feel better, it becomes a privilege.

Right.

And that's the same thing with money. Your car payments, does that include gas?

Yes. All right.

What kind of cars you have?

Just have one car that we're paying a loan on.

What kind of car?

Mazda CXVAC.

Mazda. Okay. What's the other car?

2013 Hyundai Elantra. 2014 Nissan Versa.

You have three cars?

Yeah.

Why. Why is everybody smiling all of a sudden?

Because Trendy said that he was going to ask us about this. The Mazda is a new addition to our family.

As of when?

April.

April.

Why did you get that? How come it's so quiet in here?

I'll share that. That part. In 2019, before we got married, I went to him and told him that I wanted to purchase an suv. We. We wanted to grow our family. I had two dogs. Already had a conversation with him and my dad. They suggested my car was only a year and a half away from being fully paid off. That I waited. I decided to wait. The urgency of me purchasing the vehicle was. I felt that Lucas would not allow me to purchase that vehicle after we got married. I was correct. And so over the years, we have grown our family, and we have two. Those two cars that he named are small compact cars. So in traveling, even locally, it is a challenge for our family to all get into the vehicle with car seats and everything. So I had been expressing, and not in a nagging way, but I had, you know, dropped a gem here or there as, like, you know, I wish we could purchase a vehicle. He got approved for a loan back in 2021, presented it to Me at Christmas. And I was like, hey, this is not a smart move right now. I appreciate the gesture, but it's not wise for us to purchase a vehicle right now where we are. We got. We ended up getting it because we were like. We were at a point, he was like, I really want to go ahead and purchase the suv. In his eyes, it's more of a gift for me, which I appreciate.

With what money?

At that time, we were bringing in $12,000 a month. I still, at the time, didn't 100% agree, but I went along with it because we did need a larger vehicle.

So wait, you dropped multiple gems and then suddenly you were like, oh, no, no, no, no, not me. Is that true? That.

Yeah, sure. Yeah, it was.

Lucas, you agree with.

So you actually, you know, you asked with. With what? Multiple gems. So I had always felt bad about saying, hey, I don't think it's the right time to get a car right now. I felt bad about it because it was like I was preventing her from. From having a car and doing what she. She wants to do with. With the money. But for me at the time, I'm like, we don't make that much money. You know, it's going to be an extra 300 or $400 out of our pocket, blah, blah. We argued about that. I think we put down either 5 or 10,000 on it.

And how much does the car cost?

Like 31.

How did you decide if you could afford it?

Can we afford the monthly payment? Not can we afford this?

Yeah. And what have I said on this show before about monthly payments?

Pop quiz.

Oh, I don't remember. But you did say it.

I said, never make major purchase decisions based on monthly payment.

The other thing I went into it, too, with our conversation was, can we pay this off in a year or two?

Can you?

I mean, at the time, I thought we could.

All right, how about a savings account? How many months of savings did you.

Have at that time? How much do we have? Like, maybe. Oh, how many months of savings? I don't know. Like, we had like. Like maybe. Was it 15,000, 17,000 in the account?

That's like one month.

Yeah, probably like one month.

Yeah.

When we're talking about risk. You're now seeing what happens when you don't manage risk. You're not like, taking away the key lessons to learn. You're not changing your behavior. I'm confused by it. Let's zoom out so I can tell you what I'm seeing here. It is really easy to make a series of transactional decisions and miss the big picture, which is what has happened here. They bought a car based on the monthly payment. That's mistake number one. At the time, they had a high income, which is great, but only one month in savings. That's mistake number two. And of course, there's all the considerable risk they're taking that we discussed in last week's episode, which, when combined with this decision for a car, made their finances much more risky. That's mistake number three. In money, you can seem fine for a long time and then suddenly one day, everything blows up. You want to avoid that? It's better to live slightly more modestly or take slightly less risk in order to avoid ever getting into a super risky situation. It's like driving 70 miles an hour instead of 80. Yeah. It seems slower than some cars in the fast lane. It seems like they're going to get there faster. But by increasing your speed, even 10 miles an hour, your risk goes way, way up. And most of the time, it actually doesn't save you any meaningful time at all.

We had a trip. We ended up taking a nice little vacation for our family.

Where'd you go?

Went to new Orleans. She was having a bachelorette party, so we went there to support her. Nice move. Stayed at a very nice hotel. Never stayed at, like, a five star hotel before.

Which hotel?

Four seasons.

All right.

So I'm excited, you know, I'm like, you know, four seasons, we've never been there. We've been saving all this money. Let's. Let's treat ourselves. Let's have this vacation boom. Go to the four seasons, come back. I look at the bill, I'm like, oh, man. It was like 50% more than what I had budgeted on.

Is there. Is there anyone that we've heard in the industry? The only person who tells people a magic number to add to your expense budget when you're traveling. And isn't there somebody who says, take the room rate and add 50% and then everybody goes 50%? Ramit, that's crazy. Why are you talking about that 38% room rate tax? Da da da da da. And then nobody listens. And then. What's that magic number that you said again, Lucas? What was that?

Well, if you want to. If you want to do it that way, then I guess it's 100% because we did 30% more and we spent more than that, you know, so you.

Had a good time on that trip.

That sounds amazing. It was. It was. It was great. It was great. I was able to Bring, you know, we were able to bring my mom on the trip as well. So we went back after the trip. Two months later, we end up moving, you know, again back, like, long distance. And, you know, my wife is like, hey, we haven't had a vacation in a while.

Like, wait, this is after New Orleans?

Two months after, yes. And I'm like, what do you mean we haven't had a vacation? She said, well, you know, that was a bachelorette party. I didn't really get to have, like, fun with the fan. We haven't had a family vacation.

Just so everybody knows. Trinis, like. Like laughing hysterically in the corner over here. Trent, I'm coming back to you. Don't worry. I want to hear your side of the street. You're really laughing. All right, I'm coming to you in a second. Carry on, Lucas.

It made sense because at the time, we were having, like, a Nigerian convention in the area. So we said, okay, since we're moving, let's just go stay at the Marriott Hotel. We stayed there for about a week and a half or two weeks. Then my mom was there, too. So we had a family vacation this time. I don't know what the other vacation was or the other trip was, but again, and we moved the move. So many things went wrong on the move, like, so many things. So I thought the move was going to cost, let's say, 8 or 10,000. It ended up costing, like, 15, as well as that other extra vacation. We get to this place, and there's. There's a whole bunch of stuff wrong with this place. So we can't even stay in this house. So we have to go stay in another hotel. We stayed there for about three to five days or something, so that's more money out the pocket. Again, I'm trying to handle all the stuff. I think it was, like, two weeks after that point. I'm looking at the expenses. Before all this stuff happened on that vacation, I did something that I never, ever do. I turned my brain off in terms of finances, because normally on trips, I'm in the numbers. Like, hey, we budgeted for food. We did this, we did that. On this trip, I just turned it off. And it stayed off for, like, another three to four weeks after we got back. So when we get back, I'm like, all right, you know, it's time to look at the numbers. And I'm like, wait, wait, wait. What is going on here? I see about, I think, 800 or a thousand dollars in the account. I start feeling, like, anxious or nervous.

You know, I appreciate the honesty when Lucas says he turned off his brain. I think a lot of us do that with our money. What's really hard is that we tend to turn our brains off and stop using our systems when the stakes are really high. In their case, traveling with family for a long time because their house wasn't ready, that's stressful. I remember I used to do these huge launches every January, and I and my body would be a wreck afterwards. The first time I did it, it took me about six months to physically get back to 100%. Physically and mentally. I'd be up late. I'd drink way too much caffeine. I would skip my workouts. And I learned later that in times of high stress, those are exactly the times to lean on your system. And I think that's why it's so important to build your financial system right now. While you're listening to this, you have peace and calm. You can think ahead. Because at one point or another, we're all going to get in a stressful situation. It might be something with your home, it might be something with your family. Somebody might get laid off. If you don't have a system to lean on, it is easy to become overwhelmed with stress, close your eyes and start spending money on whatever's in front of you. Now, if you want help setting up that type of system, you can join my money coaching program@iwt.com moneycoaching I do live Q and A every month. I love to answer your questions right there on the spot. And there's a community of other people just like you. Iwt.com moneycoaching what about the credit card debt? How much are you paying on that every month?

That varies. Because, like, I thought that was minimum payments to cards we pay. Yeah, like every month. We're probably paying like maybe 5,000 on the card.

5,000Amonth? No way.

Well, okay, so this is another the complicated thing. Whatever. If we start the month out with, let's say, $6,000 in a credit card. Right. I want to end the month with less than that, probably zero.

So, like, how much are you paying per month on the credit card debt?

I don't know how to answer that question. I'll give you an example. Let's say we paid. Let's say we paid rent with the credit card. If I paid rent with the credit card and I took the cash and paid the credit card off, how do I answer your question?

Why are you paying your rent with a credit card? To get some points.

Well, One part was for the points. Two was because we didn't have the cash at the time.

Do you now?

Yeah.

All right, Can I just say something? Your overcomplicated system is actually doing you no favors. You can't get your head around it. And if, Lucas, even if you don't know the answers to this, then how can your wife know the answers? And you told me, coming on this call, I want to have better communication, right? I want to have a team, work together. No teammate can understand a system that only works in your head. That surprise you to hear a little bit?

For me, there's no. There's no, like, system behind it. The right answer is manage it better.

Correct.

Okay. My thing is how. How do you manage this? Like, this is what I'm trying to figure out.

What is the number you have at the top for fixed costs?

154%.

You're broke. You know, sometimes in my conversations, I have to spend a lot of time getting these facts out on the page so that the couple I'm speaking to realizes the severity of their situation. I don't blame Lucas and Trinh for not knowing how bad things are, because our minds are very creative in finding ways to rationalize and. And obfuscate painful truths. We want to believe that we are conscientious and smart and we care about our money, but we never want to admit that actually we've been ignoring it and possibly even just mismanaging it. And sometimes we have to confront the uncomfortable truths that we are broke. That's what I am doing here, spending a lot of time to get those facts on the table so that we can all start working with reality.

What are you feeling, Lucas?

Well, one. You know, seeing you cry and hearing your perspective on this is. It's kind of hard because, like, it's not what, you know, I wanted for our family. You know, that's one. But also, I'm feeling overwhelmed and a little bit frustrated as well, because I deal with these numbers on a daily basis, on a weekly basis, on a monthly basis, looking into the future as well, of what needs to get set up for our family, looking at the things that we also need as well, and the conversations that we have is.

Let me. Let me pause you right there. First of all, you're both in counseling, right? Okay, I can tell. And I mean that in a positive way. So, like, very good work. I also noticed that each of you feels this resentment about how the other is treating money. Each of you has this need right now to make sure the other person knows that you're right. But what I didn't hear was the two of you talking about this problem that the two of you are facing together.

Sometimes we don't feel like it's a together thing. You know, sometimes I tell trend this. Like, it's like she wants me to do certain things with both hands tapping behind my back and hopping on one leg, right? Like the.

The.

The thing, though, how she wants me to do things, it's like. Like that. And I'm like, the way that you're telling what you want me to do is fine, but the how I can't do it that way. We are going to go down, you know, a different path. And she takes that as me saying, I'm better at you than you in finances, my way is the best and this and that. So I'm not going to lie. I do have control aspects of things because, like, you can see the numbers, right? Like, even if we made $5,000 more, we are still in a position where we are broke. And that scares me to the point where I'm like, okay, in order for me to accomplish the goals for our family, I need to make $35,000 a month. But that scares me even more because if I made more, guess what? We're probably going to spend more if we continue down this path. And it's.

So, Lucas.

Yeah.

Lucas, do you think that maybe for the first time ever, Trin, seeing these numbers actually understands the severity of the situation?

Yeah, I think so.

Haven't you been wishing that she would actually get it for. For a long time?

Yeah.

Well, do you think she gets it?

Hey, Trinh, do you get where we are right now, our financial position?

I definitely do. And I. I also empathize with you that you've been carrying that for a long time.

Thank you. So, like, through this conversation, was there anything that, like, I said or anything that, you know, that I talked about that I could have talked about in a different way or we can communicate in a different way so that we can be on the same page.

I really appreciate, you know, you opening up and sharing, like, your true feelings, your point of view. And I know that you have tried, and maybe my ears just weren't open. Listening is a skill, right? And sometimes I hear you and it goes in one ear and out the other, but I'm listening. I'm your partner, and I'm here to help. And, you know, I may be a little emotional now, but in the morning, I'll wake up, strap on my boots, and we'll. We'll figure this out, so.

And like, I do want to share something with you, though. I think it was like last week or the week before, you had said, hey, you know, we don't have a college or a savings plan. And I think I hit you with like a one liner, like, oh, okay, you know, something like that. But that actually made me, actually made me cry because, like, that's, that's on my big board of things to accomplish. And that is not the first step for me. Like, the first step for me is to have savings and an emergency fund and then, you know, to have us set up with life insurance. Like, so I have like a step system or a plan, but I'm like, you know, like, I can't even came and put away money for something that we both think is important for our daughter. Right. You know mama's sick, right? I don't even have enough money to take care of mama. So, like, the, the goals that I had when I was 25 to take care of my family, I haven't even accomplished that. And it's been 10 years. How long. How much more time is it going to take for me to be able to do that and for us to be able to, like, accomplish the things that we want to accomplish?

It's beautiful hearing the two of you talk like a team. It's really the first time when it comes to money that I'm hearing that today. It seems to me that if the two of you were totally aligned, you could actually make some big changes.

Oh, yeah.

Are you two aligned as parents?

Yeah. I'll say. Yeah.

All right, that's cool. And what's another part of life where the two of you are aligned?

Our faith.

Great. You just kind of. You can read each other, you know what they're thinking, you can close your eyes, you know where they are, you know they have your back. You know, if something you're struggling with, they're going to be there. And, you know, sometimes they're going to be down and you're going to be there. That's a partner, but not with money. What do you think it would feel like if the two of you were trying to true partners with money?

I don't know.

First time you ever really thought about it, right? Give it a shot. Lean on your faith, Lean on your parenting. Think about what it feels like to know that you have a partner.

I mean, I don't want to just talk about crisis, because in crisis, we already got each other's backs, like money, faith, parenting. Like, when that stuff happens it's outside of crisis. But you said. How would it look like, when things are going well, it gets even better.

We wouldn't have to bring in the Four Horsemen. And so my.