“We’re broke…but I spend $350/mo on clothes”

We don't plan ahead because the future is scary at this point because we don't know where our next, if we're going to make it past the next two weeks.

You are losing money every single month. You are broke and if anything happens to either of you, it's over. Why have you created a life where you have to do this?

Probably because we didn't value ourselves enough to create something good. We created something bad because that's what we thought we deserved.

You think you deserve a bad life?

Some days, not all days.

Welcome back to part two of my conversation with Elizabeth and John. Recall that they are in their mid-30s, they have an eight year old daughter and they can't seem to figure out why they struggle to save money. They have fallen into this pattern of paying some bills but letting others go late. And they are rotating things while Elizabeth desperately tries to manage the money using a notepad where she tracks random expenses. Last week we left at a pretty dark moment where they were just starting to realize how serious their situation is. Well, today we're going to get back into that conversation. We're going to go over their numbers and, and I think you're going to be surprised. I wanted to know what is it going to take in order for Jonathan and Elizabeth to get serious about making a change?

I'd like John to be more honest. I think he, he hides his true feelings a lot and he buries them deep down. When I ask you to be honest with me, I don't think you're being honest with me. That's why I ask you, are you being honest a lot? Because I know you're not. I can tell that you are holding back and I need you to actually be honest with me and tell me the truth. I need you to help me in a way that you don't currently help me. Everything else you do is great, but I need you to be in it with me. So I'm not doing this by myself because I feel like I've been doing it by myself for a long time.

I have held back for the fear of the fight. I know I'm willing to stand there with you if you're willing to hear me honestly and actually take my thoughts into consideration. When it comes to the finances, I don't feel like I'm always heard when, when we do talk about it.

Yeah, that's probably true. I'm very stubborn and set in my ways and I know I need to change that.

And that's a big part of why I've kind of Been passive all this time. Why say anything if what I'm going to say is just going to fall to the floor? I feel terrible that I've let it go for this long, but. And I still do.

Wishing I got the pony. And sometimes I do. I don't want to say ignore you, but maybe it is I ignore you. I ignore what you have to say because I have in my mind what we should do. And I should take your thoughts into consideration more. Sorry.

Sorry I haven't been here for you. I should have worked harder.

Thank you both. How did that feel? Good.

Good.

When was the last time you had a conversation like that?

It's been a hot minute, John.

I think you did a great job right there. You were proactive. You acknowledged where you have not done a great job. You also said what you want. I want to be heard. I want to be listened to. I think that was great. You gave an example. All that was fantastic. Elizabeth, how do you think you might have to radically reconceptualize how you show up with money?

I'm going to have to loosen the reins of the control that I have over everything and over the money.

Yes. Let's use a different phrase, shall we? Loosen the reins. That implies you are still totally in control.

That's true.

Do you want a passive person in your marriage? Okay, then.

No.

What's the real word you want to use?

I want to share the burden.

There you go. Oh, wait, wait. It was so good until you used the word burden. Why is money a burden? Try that again. You're so close. I want to share. Go ahead.

I want to share the financial responsibility with him.

Ah, so good, so good, so good. That's really good. Words matter. They are our destiny. If you are sharing now, suddenly you have a partner who can take some of the load on, who can also inspire you and help you. And both of you can hold each other accountable. All that you can dream together. And it's not a burden alone. It might be a burden in the short term. Okay. But it's a responsibility. That's what money is. It's a responsibility and it can also be a pleasure. So we share that, right?

Yeah.

Okay, good. So really, how else are you going to have to radically reconceptualize how you show up with money, Elizabeth?

Probably give up the. My notebook.

Yeah. Can we use a different word besides give up? Give up implies you lose. You surrender.

I'm not giving up. I want to change. Change the way I view money. Change the way that I spend money. Change the way that I save money, I need to change everything.

Manage money, monitor. I love it. Great. Yes, Great. And what about the spending? Talk to me about that.

I'm going to have to stop it.

Oh, stop. Just stop.

You just stop spending. No.

Just like that.

No.

That easy?

Just like that. I wish it were that easy, but no, it's not. I know it's not because I've been trying for a long time.

Here's the thing about trying and trying and trying and not getting results. It's extremely demoralizing. And after a while you start to think, I tried method one, I tried method two, I tried method ten. It's not the methods, it's me. I'm broken. Yeah, and you're not broken. You're not broken. Anyone can become good with money. You don't need to become world class to have a very nice life. Anyone can become good. But to tell you the candid truth, it will be challenging for you because you're going to have to radically rethink the way that you show up now. It can change. It can change with therapy. It can change with behavioral practices like setting up automation. It can change with the help of a partner. But it has to change. Yeah, I really like the direction they're taking. This all happened after I got frustrated with them at the end of the last episode and I basically said, you guys are not taking this seriously. And suddenly they are. But you can still see how challenging this is going to be, even in this serious discussion. They're cracking jokes, they're using restrictive language. But frankly, all of those are tiny details. What I notice is that they are making progress and I love that. We'll get into their CSP after this quick break. Let's get into their numbers. You can download your own free conscious spending plan template and follow along@iwt.com CSP. Their net worth reads as Assets, $170,000. Investments, 38,000 Savings, 0 Debt, $152,000 for a total net worth of $56,483 is.

A very sad little number.

Why?

I will be honest, I am surprised it is as big as it is. I thought it was going to be zero or negative, so I was happily surprised that we weren't negative completely. But as old as we are, I was really hoping investments would be, I don't know, three or four times bigger than than that number is. And debt was not even close to that giant of a number.

Talk to me about the debt. $152,000.

How does that break down student loans is about 50,000. Mortgage is about 45,000. R is 15,000. Credit card debt is 25,000.

Mm.

Medical debt is 8,000. I think that's everything.

All right, so this is your gross annual income. $88,800. Who here knew that is how much you make jointly? Raise your hand if you knew. That's a no. All right, one out of two. Thank you very much for keeping my average consistent. 50% of people who come and talk to me do not know how much they make. How's that possible, by the way? Can you quickly explain that? John, How'd you not know?

I let her handle it. I was passive about it.

Okay, good.

I got a paycheck and that was all I cared about.

Elizabeth, are you the higher earner?

Yes, I am.

All right, so you make about 48,000 a year gross. And Jonathan, you make about 40,000 thousand, right? Yeah. Elizabeth, what's this number right here? Your joint combined fixed cost. What is that?

100%.

So you're spending every last dollar you make just on your fixed costs?

Correct. We are not making enough to get by already. Well, I know we are. Groceries, number one is ginormous.

Can we just zoom out? I don't care about grocery spend right now. I care about the fact that you are losing money every single month. You are broke and if anything happens to either of you, it's over. You have $0 in savings. So I don't really care for the jokes about groceries right now.

Yeah.

Are you all ready to take this seriously?

For sure. It's deflecting, I guess, you know? Yes, I know how bad we are. I know that we are one paycheck away from everything gone. Yeah.

You're spending 100% of your take home income on fixed costs.

Yeah.

It's too much. So let's take a look. First of all, Your mortgage is $500. Wow, that's good. I know you bought this a while ago.

We did.

What did it cost when you bought it?

$69,900.

$70,000. All right, great.

Yeah.

Well, all right. Your Debt payments are $1,265 a month. That's a lot. We're going to come back to that. All right, let's just put a pin in that. Groceries are 920amonth. Explain that to me.

We came to this number based off of the amount of trips we took to Walmart or Target. It was actually very eye opening for both of us how much that number was.

Especially because you mentioned that your in laws provide Meat for you. Yeah, things like that. That's a huge savings.

Yeah. We over buy because we, we both came from families, you know that you buy what you can, when you can, when you have the money. And that goes for food as well. You know, I like our cupboards to be completely stocked at all times. The moment I see, like, why? Because I've come from not having. So I. I want them to be fully stocked so that I. I know where my next meal is coming from.

I think that's pretty honest. And I can understand that. If you were raised food insecure, not knowing where things. I'm just sharing what I do. I don't really think about it. It's easy. And when you said you like to see your cupboard full, I thought to myself, I like to see my portfolio full.

Yeah.

I like to see my savings account full. Have you ever talked like that?

No.

No.

I would like that. Yes.

You can like it. I think that would be awesome. I'm sharing my perspective just because I want to give you a different perspective.

Yeah.

If you want that to happen, you can make it happen. Yeah. Closer. $350 a month. What?

So that was based off of this last month's. It's not every month that I spend $350.

Just want to reiterate. You have $25,000 in credit card debt and you spent $350 in a month on clothes.

I should not be buying more clothes. I have plenty.

I'm not here to beat you up or berate you. That's not my job. That's not what I do.

No, but it's honest.

What I'm trying to do is to show you that you are not in alignment.

Yeah.

If you say that you want to pay off your debt, we'll get to that. If you say that you would like to have more savings, if you say that you would like to stop worrying. This is not in alignment with that.

Correct. It's not.

So one of the things that I try to make sure of is I don't tell people, stop doing that. Because if I told you stop doing that, what's the first thing you would do? Especially you, Elizabeth.

I would go out and do it. Okay.

Your phone, $250 a month. What is that? That's more than I pay.

We have payments on our phones and we have an iPad that we pay for service.

What?

For our daughter. I thought it was going to be, well, a good deal. A way of getting her an iPad through, like a phone subscription service so that we were paying Payments.

Elizabeth, this is a whole. This is that radical reconceptualization. You may have found a great deal on something, but the truth is you probably shouldn't have been getting it in the first place.

It allows her to call us when she goes to, you know, grandma's house from her iPad, like FaceTime US.

Would you be willing to get rid of that service?

I want to say yes, that we should get rid of the service. But I like, yes, I like her having it. It's just like a safety feature for me. And she takes it with her pretty much everywhere she goes. So I know I can always reach her if I need to. For me, that's kind of how I justify it in my head.

Can I ask you a question?

Yeah.

Nothing against you wanting safety for your daughter. I totally respect that. And if you decide the two of you to keep it, that's your decision. It's your money, it's your daughter, it's your call. But I know I'm going to put this on screen right now. Speaking of safety, I noticed that the two of you with an 8 year old daughter have exactly $0 in savings. How safe is she really? Yeah, I noticed that you have $152,000 of debt and that combined, the two of you make $88,000. How safe is she really?

Well, not very.

And I noticed finally that the two of you spend 100%, probably a little bit more of your take home income on fixed costs, meaning you are spending more every month than you make. How safe is your daughter?

Only for the next two weeks, till the next paycheck.

Honestly, I was getting a little frustrated here. They're literally losing money every single month and they're here buying a $500 hoverboard for their daughter, hundreds of dollars of clothes and tons of random stuff at Target. It's one thing to do this if you're 24 years old and single, but this is a family with a young daughter and they have essentially no savings. Yes, I understand they grew up in tough circumstances. Yes, I understand they have a low sense of agency and their communication patterns are not that healthy. But if they want to change, they have to actually recognize how bad the situation is and then decide to make a change. As of right now, it still feels like they basically hoped I would show up, sprinkle a few magic words over our conversation and everything would be okay. We'll be right back. Now back to Elizabeth and John. Before we do work on some other reduction, I just want to look at the rest. Investments you're at 8%. All right? So you're putting 400 bucks a month away into retirement, which is why you have $38,000 invested. All right, fine.

Yeah, that's the only reason we have anything invested.

So what's the lesson?

If I can't see it go, like, then it's fine, you know, if you.

Want your money to go somewhere, you need to make it automatic. Whatever's left, you're going to spend it. Might as well just be humble about it and admit it. Look, I have my own weaknesses, right? You put chips and salsa in front of me, I'm eating that whole freaking thing. I know that I'm only going to eat at a Mexican restaurant when I know it's going to be chips and salsa all night for Ramit. Yeah, I'm humble enough to know it. You got to be humble enough. It's not about trying. It's not about manually tracking in a notepad. None of that stuff matters. It's about automating your money to go where you want it to go. Simple as that. We need to get this number down to roughly 50, maybe 60%.

Like I said, we've tried to get out of debt many times, and we never get out of debt, ever. That's why it keeps accumulating. It just keeps getting worse.

Eating out. What else?

I would buy a lot of movies online.

What?

I mean, like, at $5 a pop, like digital movies.

What?

That was something else I like to buy. I know, it's weird.

You have $185 a month in subscriptions. I presume that' Disney Plus, Netflix, all that stuff. Right? So you're. You're buying on top of those?

Yes, I am. I stopped. John made me stop, so I did stop.

What'd you say, John, can we really afford that?

You need to stop. It all adds up.

No, he told me to stop. He said I wasn't allowed to buy any more movies.

Do you respond well to being treated like a child? I'm asking. Not insultingly, just this. A real question.

You know, I get that. I don't know. Maybe, yes, I like to be in control and to do what I want to do, but I also like somebody telling me what to do. So if he were to be more in it and say, hey, stop, and don't do that, then I think I would listen a little more.

I see. Okay. So you're saying if my partner were more directive with me about what is inbounds and out of bounds, I would respond to that?

Yes, I would.

That Is honest. I appreciate that. John, what are you hearing?

That I need to be firmer with her.

Yes. I. Let's be careful because it's very easy to go from, like, directive to, she's a child and I'm going to treat her like a child. I don't want that. That's not the intimate relationship you want. Trust me.

No.

What's a better way to balance this?

I would like him to set boundaries, period. With the way that we spend our money right now, there are no boundaries.

Okay, so he sets boundaries. So he says no more. Whatever, eating out, or we're only eating out twice a week or something like that.

I feel like I would stick to it more if I had somebody that would. Somebody that's making decisions not for me, but with me. Because right now I'm making all the decisions myself.

I agree with that.

Yeah.

John, you hearing that? Would you be willing to set some boundaries?

Yes.

Okay. Love that. He's like, yes, set me free. I'll do it. He pulls out a list. It's 350 pages long all day. How much tape you got? We're about to roll this thing for the next two days. Okay, fine. I can sense the excitement. Elizabeth, you asked him to set some boundaries. I respect that. He sounds like he's down for it. I would like you to set some boundaries for yourself.

Yeah.

Do you want to pick one right now?

No more clothes for. Well, I. See. I'm trying to quantify it.

No, you're trying to qualify it.

Qualify it.

You're trying to squirrel out of it, right?

I am.

Why are you trying to do that?

Because I want the clothes. I don't need them. I want to give in to that. That feeling, that endorphin rush of going shopping. I love doing that. I want to give in to that.

You have your email open right now?

Yes.

Read me the top 10 to 15 emails in your inbox.

Shoe, Carnival, Sizzle, Gamestop, Bloom Chick. Yeah. Their clothes and shoes. Yeah.

Look at me now. What have you done by signing up for all those emails that come into you every single day at all hours? What have you done?

Given myself permission to look at it and go after what I want.

You have basically told every company out there, I give you permission to flood me with highly engineered material to get me to buy stuff.

Yeah.

Do you see how you have set yourself up to fail?

Yeah, I do.

So what are you going to do about those emails?

Unsubscribe all of them.

If you have a spending problem, I can almost guarantee you are subscribed to a bunch of retailers like Bed, Bath and Beyond and Target right now in your email inbox. I can also guarantee you follow a bunch of brands and random influencers who encourage you to buy a bunch of bull on Instagram. Unsubscribe. Do it right now. You buying random items that some marketing manager fed you is not your rich life. Let's cut. And even if you actually love Bed, Bath and Beyond and even if it's incredibly meaningful to you and you sketched out your rich life and you put Bed, Bath and Beyond as one of your top three things, you can't afford it if you're spending more than 100% of your take home income on fixed costs. Just because something is part of your rich life does not mean you can afford it. You are playing small now. You can tell that there are some people who simply want clear black and white boundaries. Fine, I'll give it to them. But along with those boundaries, I'm going to try to show Elizabeth and John why I am giving them those specific recommendations. What are some other parts of life where you have set yourself up to fail?

Having shopping apps on my phone or where I see them.

Get that off immediately. Why have a shop. A shopping app? Like what?

Like for the stores that I like to shop from, I have their apps on my phone.

Bye. Bye. Okay, those are gone. That's like, again, you're actually just setting yourself up to fail. If you put a basket of chips and salsa in front of me again and I was like, I should try to be better. I'm so bad. Give me 15 minutes, I'm going to eat that thing.

Yeah.

Part of it is like, okay, like, could I have had stronger willpower? Sure, I could have. But like, let's not even play that game at all. Let's just not have the chips in the house.

Right.

Okay. Apps, you nailed it. Email, you nailed it. What else? Give me one more.

Yes. Not going to Target.

Yeah. Now you can tell that there are some people who simply want clear black and white boundaries. Fine, I'll give it to them. But along with those boundaries, I'm going to try to.

Period.

Yeah. Elizabeth, as you start to get some more wins under your belt, show Elizabeth and John why I am giving them those specific recommendations. What are some other parts of life where you have set yourself up to fail? I don't want you like a child to be told you can't go in there. I would like you to learn the discipline, like going into a restaurant and knowing how to order food. Or how much dessert to get. Like, you need to learn that stuff. You need to make some mistakes. It's okay. It's not going to kill you. After you get some wins under your belt, I would love it if three months, six months down the line, you go in with a small list.

Having shopping apps on my phone where I see them, five items.

You go into Target, and you tell yourself before you go in, you go, how am I going to show up on this Target trip? Oh, I'm gonna do exactly what's on this list. No less, no more. Get that off immediately. Why have a shop. A shopping app? Like what?

Like for the stores that I like to shop from. I have their apps on my phone.

I trust you. You need to trust yourself more. Yeah, let's just go back and work through some of the numbers right now, because right now we gotta fix something. Bye.

Bye.

Okay, those are gone. That's like, again, you're actually just setting yourself up to.

Yeah.

So your fixed costs need to come down from 99% to 60%. And let me tell you what doesn't work. Sitting here for the next three hours and talking about, oh, can we shave off $10 on gas? No, it's never going to work. Right. A better approach is simply to say, if we had a blank page, what would we be doing with our money?

Saving.

Okay.

Invest. Investing.

Okay. You want to. You would start with saving, Investing. What else?

Go on a vacation, a honeymoon.

Okay. Yeah. Huh. Anything else?

I mean, save for Rosie's College.

If you put a basket of chips and salsa in front of me again.

And I was like, if she wants to.

Not on the list is credit card debt.

Oh, okay. Nice. Agreed. I should try to be better. I'm so bad. Give me 15 minutes. I'm gonna eat that thing.

Yeah.

Part of it is like, okay, like, could I have had stronger willpower? Sure, I could have. But, like, let's not even play that game at all. Not on the list is a $500 pony.

Yeah, yeah.

What else? You want to save money? Fine. How much do you want to save per month? Give me a number.

Well, I'd like to at least be able to save $1,000. That's my.

Let's just not have the chips in the house.

Right. The first goal.

All right, but you could save a thousand dollars. It doesn't happen to have. Have to happen in one month.

No, I want to save at least $100.

All right, $100 is 2%. I like that. Let's go a little bit higher.

200?

Yeah. 200.

200.

I say three.

300. Okay, fine. All right, that's at 6%. That's nice. I always say like 5 to 10%. Of course, I'd love to see that number higher, but this is a good place to get started. Investments. Ah, you're at 8%. I don't mind that. Well, we got a problem here because right now your guilt free spending is negative 13%, which means you cannot afford to do any eating out, et cetera. And of course, you just ignore that. You just eat out anyway.

Okay.

Apps, you nailed it. Email, you nailed it. What else? Give me one more.

Yes. Not going to target.

Yeah.

Period.

Yeah. Elizabeth, as you start to get some more wins under your belt, I don't want you, like a child, to be told you can't go in there. I would like you to learn the discipline, like going into a restaurant and knowing how to order food or how much dessert to get, which just adds to your credit card debt. That's not effective. That's a structural. You've set yourself up to fail, so that is not going to work. That means we need to go up here to fix costs. That is where the crux of the problem is. If you need to make big changes, this is how you do it. You simply start a new page and you say, if we had to start all over again, what would we do? When you do that, most people immediately prioritize saving and investing. That's literally what we mean when we say paying yourself first. Most people also conveniently leave off a bunch of the random, mis, meaningless purchases that they are wasting their money on. They do, on the other hand, add meaningful things like vacations. Okay, you can see that when you give people the chance to design on a blank slate, whether it's with food, whether it's with their rich life, whether it's with their time, they are quite intentional. The problem is that we typically cobble together our life based on what's in front of us. Oh, I got an email with a sale for this thing for 15% off, click, buy. And suddenly you wake up one day, you look around your house, it's full of stuff you don't care about. You look at where you're spending your money, it's full of stuff you don't care about. And then you go, why can't I live a rich life? Well, you've done everything but. And one of my goals is to be able to disentangle all that stuff, cut through the cobwebs. Like, you need to learn that Stuff you need to make some mistakes. It's okay, it's not going to kill you. Say, what is your rich life? So they did exactly what most people do. They took a blank slate. They made very intentional decisions. I like it. Now we have to see if they can actually. After you get some wins under your belt, I would love it if three months, six months down the line, you go in with a small list, five items. You go into target and you tell yourself before you go in, you go, how am I going to show up on this target trip? Oh, I'm going to do exactly what's on this list. No less, no more. Change their existing spending to get aligned with the life that they want. Let's get back to the show. I started working through their CSP with them. Remember, we're aiming for 50 to 60% in fixed costs. They're currently at 99%. That's down from 100% after we cut cell service on their eight year old daughter's iPad. So here's what we did. We removed $520 a month from groceries. We cut way back on clothing. We traded in and canceled service on their apple watches. Cut $90. Gym membership, they can work out at home. Went down to one streaming subscription. All those decisions got them down to 77%. Fixed costs, good, moving in the right direction. But it's also clear that numbers are. I trust you. You need to trust yourself more. Yeah, let's just go back and work through some of the numbers right now because right now we got to fix something.

Yeah.

So your fixed costs need to come down from 99% to 60% are not the most important part of this conversation. It's amazing how much you realize you did not need all this stuff. Apple watches, iPad connectivity. I don't even have this stuff. I have a mission though. And you don't need it either. You don't need it. Nobody needs it. You want it. And I want you to get to the place where you can easily afford it. There is a vision to get there, but it's not today. Okay. John, anything from your perspective?

I think we could get groceries down to 400.

How are you going to get from 962 to 400?

We can meal plan better.

We have. We just get out of it.

Let me tell you what doesn't work. Sitting here for the next three hours.

And like we don't keep the habit.

How long does it last for?

Usually a couple weeks. And then we get. I don't want to say. Yeah, we get bored with it. You know, bored with whatever we had picked. I guess we don't plan ahead.

Why? Talking about, oh, can we shave off $10 on gas? No, it's never going to work. Right. A better approach is simply to say, if we had a blank page, what would we be doing with our money?

Saving.

Okay.

Invest. Investing.

Okay. You want to. You would start with saving because the.

Future is scary at this point because we don't know where our next. If we're going to make it past the next two weeks.

A horrible way to live.

Yeah, it is. It's not been great. That's the honest truth.

That resistance, that reactance again.

Yeah, yeah.

See how it shows up in so many different parts of your life? Investing. What else?

Go on a vacation, a honeymoon.

Okay. If somebody tells me this is the plan, I'm going to resist it. Even if the plan would have helped me and my resistance harms me.

Yeah.

Until you fix that, none of this is going to work. That takes work. That takes working with a therapist. Huh? Anything else?

I mean, save for Rosie's college if she wants to.

Not on the list is credit card debt.

Oh, okay, nice. Agreed. Not on the list is a $500 pony.

Yeah, yeah.

What else? You want to save money? Fine. How much you want to save per month? Give me a number.

I'd like to at least be able to save $1,000. That's my. Yeah.

Because this is a plan we're creating right now. If we walk away, even though it's your plan, the minute I leave, if you go, oh, this, this. I don't. This plan this guy made me do, it's over.

Yeah. I definitely need to work on it.

I need to be there for you.

Thank you.

Let's talk about your debt. You pay $1,265 a month now. What is this debt consolidation thing you do?

The first goal.

All right, but you could save a thousand dollars. It doesn't happen to have to happen in one month.

No, I want to save at least. They basically contact the credit card companies for us to consolidate or to negotiate deals on our behalf. And we stopped paying all credit cards while they're doing the negotiations. And we just pay at least a hundred dollars.

All right, $100 is 2%. I like that. Let's go a little bit higher.

200.

Yeah.

300.

200.

I want to say three.

300. Okay, fine. All right, that's at 6%. That's nice.

I always say the money towards to them.

How'd you find them?

I. This is embarrassing. I'VE gone through them before or one like it before. When I got out of college I was in a lot of debt, probably 5 to 10,000 in credit card debt when I got out of college, before I got married and I went through.

Like 5 to 10%. Of course I'd love to see that number higher, but this is a good place to get started. Investments. Ah, you're at 8%. I don't mind that. Well, we got a problem here because right now your guilt free spending is negative.

13% to get that down. So I knew it was out there, I knew it was an option and when we got to this point it was. I was overwhelmed and I knew that was an option, so I went for it.

I don't love these services, I don't know the exact one you're using, but I'll tell you, usually what they do is some of them they. Which means you cannot afford to do any eating out, et cetera. And of course you just ignore that. You just eat out anyway, which just adds to your credit card debt. That's not effective. That's a structural. You've set yourself up to fail. So that is not going to work. That means we need to go up here to fix costs. That is where the crux of the problem is. If you need to make big changes, this is how you do it. You simply start a new page and you say, if we had to start all over again, what would we do? When you do that, most people immediately prioritize saving and investing. Have you stopped paying on all of your debts? Is that what they had you do?

Yes, they did, yeah.

Okay, so they have you stop paying. Meanwhile you're just putting money aside somewhere and then when it looks like you're basically going to default, they will swoop in and try to negotiate and they'll get a settlement. Sometimes not every company will settle, but they'll charge you these really hefty fees. That's literally what we mean when we say paying yourself first. Most people also conveniently leave off a bunch of the random meaningless purchases that they are wasting their money on and your credit will be ruined. And like all kinds of other effects will happen. This is it, right? This is what they're doing.

Yes, this is exactly what they're doing. Yeah, yeah. I knew going into it that our credit was going to be ruined, but I didn't really see any other options. It was already getting ruined because we were late, couldn't make the minimum.

So they do on the other hand, add meaningful things like vacations. Okay. You can see that when you give people the chance to design on a boat.

For me, it was kind of a wash.

It was our blank slate. Whether it's with food, whether it's with their rich life, whether it's with their.

Going to be bad. So why not let somebody else, you know, solve the problem for us? We got in the cycle of I would make a payment to the credit card so we would have like a $200 time.

They are quite intentional. The problem is that we typically cobble.

Together credit on the card and then we would use the card for that $200 and then we would pay it and then we would use it and pay it and use it. So we were constantly maxed out on all of our credit cards.

Why have you created a life where you have to do this?

I don't know.

They're our life based on what's in front of us. Oh, I got an email with a sale for this thing for 15%. Tell me you know only. The only two people who can know are the two you two right here.

Yeah.

Why have you created a life where you have to do all this. Percent off? Click buy. And suddenly you wake up one day, you look around your house, it's full of stuff you don't care about. You look at where you're spending your money, it's full of stuff you don't care about. And then you go, why can't I live a rich life?

It's all we knew growing up.

That's true. You guys are almost 40 years old.

That is also true.

Is there an answer?

Not a good answer.

Well, I don't care if it's good or bad. I just like the truth. Why have you created a life where you have to do this? Well, you've done everything but. And one of my goals is to be able to disentangle all that stuff, cut through the cobwebs and.

Probably because we didn't value ourselves enough to create something good, we created something bad because that's what we thought we deserved.

Wow. You think you deserve a bad life?

Some days. Not all days.

Say, what is your rich life? So they did exactly what most people do. They took a blank. Thank you for being so candid. One of the reasons that I feel very fortunate to speak to both of you is like, I just got to know you. I didn't know you before today. Right. Just hearing the way that you both grew up in your childhood. So many differences. Slate. They made very intentional decisions. I like it. Now we have to see if they can actually change their existing spending to get aligned with the life that they want. Let's get back to the show. In the way that the two of you grew up and the way that I grew up, sometimes I think that's a beautiful thing. I didn't grow up on a farm and I get to hear how you grew up. And I didn't grow up with a highly religious, restrictive background like you did. And I'm learning from you. I started working through their CSP with them. Remember, we're aiming for 50 to 60% in fixed costs. They're currently at 99%. That's down from a hundred percent after we cut cell service on their eight year. But I can also see the effects of all these different types of upbringings and what they have. And you know, Elizabeth, it is very heartbreaking for me to hear that, you know, sometimes you think you deserve bad things. I don't think you deserve it, John. I would bet you don't think.

No.

That she deserves it.

No.

So, Elizabeth, I think that is incredibly. Your old daughter's iPad. So here's what we did. We removed $520 a month from groceries. We cut way back on clothing. We traded in and canceled service on their apple watches. Cut $90 gym membership they can work out at home. Went down to one savvy of you to admit that incredibly courageous. Put all these numbers aside until you're able to heal that part and to acknowledge where you came from and what happened and chart a path forward. And that can only happen between the two of you and your therapist. These numbers are just irrelevant. These numbers are simply physical manifestations of how you feel, John, how you feel and how the two of you are connected or disconnected about money. That's why the iPad spending. That's why the Apple watch. That's why the $962 on streaming subscription. All those decisions got them down. Groceries and eating out and getting bored of preplanned meals, it's all traced back to that.

Yeah.

So while I can't tell you what to do, it's not my place. From my perspective as somebody you invited here to give some feedback to 77% fixed costs. Good moving in the right direction. But it's also clear that numbers are not the most important part of this conversation. It's amazing how much you realize you did not need all this stuff. Apple watches, iPad connectivity. I would say if I were in your position, Elizabeth, this would be my number one priority. Number one. Like I would clear heaven and earth to be able to say I Need to work on this because everything else in this family depends on that.

Yeah, it does. It does.

I don't even have this stuff. I have a mission, though.

I've always put myself last ever, you know, as far as I want, you know, things for my daughter, for my husband. So I've taken. Started the journey this last year to put myself first and start to get help, you know, speaking with my doctor, medications, things like that, to help start the journey in the right direction. Therapy is, is the next, next step that needs to happen.

And you don't need it either. You don't need it. Need it. Nobody needs it. You want it. And I want you to get to the place where you can easily afford it. There is a vision to get there, but it's not today. Okay, John, Anything from your perspective?

We've always been so strapped for catch, and therapy is expensive, so that's not always something that I would prioritize because, you know, we were always behind.

What are the things that you could deprioritize so that you could prioritize therapy? We've already talked about groceries and all that stuff. Go beyond that.

I think we could get groceries down to 400.

All of the trinkets and all of the silly things that we spend our money on. Eating out all the time, entertaining ourselves, distracting ourselves from what our life really is.

Which is what?

The reality that, that we're 100 and whatever it was. Thousand dollars in debt. We're just distracting ourself with the entertainment, you know, going places, spending money, distracting our.

Are you going to get from 962 to 400?

We can meal plan better.

We have. We just get out of it. Like, we don't keep the habit.

How long does it last for?

Usually a couple weeks. And then we get ourselves from the reality of. Of our life.

You can tell that all of the spending, the toys, the clothes, the exorbitant grocery bill and the random purchases, those are all symptoms of a lot of pain. And in the past, they have tried to treat the symptoms. They even went through a debt.

I don't want to say, yeah, we get bored with it, you know, bored.

With whatever we had picked, I guess, consolidation, service. And guess what? They're right back in the same situation. This is exactly why I suggested that Elizabeth prioritize therapy. Because without working on the root cause, the symptoms will just persist and they will morph. And the fact is, even if they magically change their relationship with money, with.

We don't plan ahead.

Why?

Because the future is scary at this point because we don't know where our next. If we're going to make it past the next two weeks.

Horrible way to live.

Yeah, it is.

With each other. It still won't fix their finances. That's why I wanted to talk to them about their income. Let's talk a little bit more about what you can do.

Yes, please.

There's just not enough money.

No, there's not.

Can we talk about the income?

Yeah. So it's not been great. That's the honest truth.

It's going to be very tough for you to get ahead with the incomes you're on.

Yes. That's. Yeah.

What's the possibility of increasing your income?

Mine's a very good possibility. I'm up for. Up for a promotion. So I do know that hopefully will be happening soon, within the next two months.

John, what about you? That resistance, that reactance again.

Yeah. Yeah.

See how it shows up in so many different parts of your life?

It does. The.

I mean, I've gotten a steady 3 to 4% raise each year. That's. That's usually what they stick to.

That's. Yeah.

If somebody tells me this is the plan, I'm going to resist it. Even if the plan would have helped me and my resistance harms me. Yeah.

I don't. I don't foresee his going up very much anytime soon. Yeah.

Until you fix that. Why are y' all making yourself passive in this journey of your income? Watch this. John, how long you been at your job? How many years?

12.

12 years. And you've got 3% raises the whole time. Yeah.

Yeah.

John.

Yeah.

This passivity is costing you literally tens of thousands of dollars. The economy is booming. Are you aware of that?

It's familiar.

None of this is going to work. That takes work. That takes working with a therapist.

Yeah.

Because this is a plan we're creating right now. If we walk away, even though it's your plan, the minute I leave, if you go. So it's familiar to you, so you stick with it even though you're probably being drastically odd. This. I don't. This plan this guy made me do, it's over. Underpaid Elizabeth. Overspending on random trinkets is familiar to you, so you keep doing it even though it's taking you further and further away from where you really want to go. Right. What did I tell you at the beginning of this call? I can't make you both change.

Right.

John, what do you think about the income part? You could probably be making a lot more money getting a Different job.

Yeah. I should look into it.

Okay.

I'm going to.

Okay. I like that.

I think he. I've been saying it for a while that he needs a different job. He loves where he works, but he doesn't make enough. And I think he has the. He has more of a potential. Yeah. I definitely need to work on it.

I need to be there for you.

To make more I feel than I do. If I were to. Thank you.

Let's talk about your debt. You pay $1,265 a month now. What is this debt consolidation thing?

You changed my job.

Isn't this something like a team would talk about together?

It's hard.

All of this is hard. That's the position you've put yourself in. It is by not working together and by not setting boundaries. You have now put yourself in a position where you have to make all hard decisions. That's reality.

Yeah.

Yeah. I don't know. I think your daughter actually could benefit as an educational experience.

They basically contact the credit card companies for us to consolidate or to negotiate deals.

We have a roof over our head. Everybody's going to be okay. But we're going to be making some changes. First of all, mommy and daddy are going to be getting rid of our watches and we're going to be making some changes around the house. Here's what it on our behalf.

And we stopped paying all credit cards while they're doing the negotiations.

And we just pay means I'm going to need your help on this. This. This making her a part of it. She doesn't have to know every last detail.

Right.

Paint the picture for me. What would she say in the best case scenario? I'll start it off. When I was around the age of 10, my parents were in a ton of debt. I didn't really know how much but I knew they were always worried about money. And then they changed everything.

They changed our lifestyle, they changed our spending habits, they changed the money towards to them.

How'd you find them?

I. This is embarrassing. I've gone through them before or one like it before. When I got out of college, I was in a lot of debt. Probably 5 to 10,000 in credit card debt. When I got out of college, before I got married and I went through changed their meal habits. We changed.

They changed themselves.

Yeah, they changed themselves.

Why were they doing it? Tell me what she will say.

Hopefully she'll say the. To make a better future for her.

Yeah. They did it for me.

Yeah.

We actually went on for hours on our conversation. John and Elizabeth have put themselves in a very difficult situation. They do have a path out, but it will take radically. Reconceptualizing their relationship with money, with their daughter, with each other, and even with themselves in the best case, that is really hard. But it's much, much harder if you've never done it before. The good news is I don't need them to be perfect. I just need them to start moving in the right direction, ideally together.

To get that down. So I knew it was out there. I knew it was an option. And when we got to this point, it was. I was overwhelmed and I knew that was an option. So I.

One other thing, they signed up for this debt consolidation service, which I suspect is pretty scammy. I asked them to. I don't love these services. I don't know the exact one you're using, but I'll tell you usually hand over all their documents and I sent those over to our partners at Facet. I asked the financial advisors at Facet who work on a flat fee model, not a percentage of income, to take a look and help Elizabeth and John figure out what would be the right steps to get out of this debt consolidation trap that they find themselves in. Our partners at Facet actually looked over everything for Elizabeth and Jonathan and within a couple of days they sent me a summary of what they found. They said, yes, this is legit. The company does help you negotiate and settle your debts. If they do settle an amount, they will charge them 25% of the amount that is forgiven. But there are two issues. Number one, most debt that is forgiven can result in the amount being reported as taxable income. That means you may owe income taxes on this amount as well. And number two, settlements can really damage your credit for the next seven years. You're essentially locking in a lower credit score for about seven years before this activity can be removed from your credit report. I sent Facet's full report and findings over to Elizabeth and Jonathan as a courtesy to help them make an educated decision. But the big point here is they can get out of this if they choose to. If you want help with your financial plan, check out our partners at Facet where you can get your own CFP for a flat fee membership. Remember, it's never a percentage based fee. Check them out and the special deal they have for IWT listeners@fat facet.com ramit that's f a c t facet.com ramit now I'm really looking forward to hearing the follow ups from Elizabeth and John. Let's Start with John.

The biggest surprises from our conversation for me was where all of our money was actually going and how far in debt we really were. I had no idea that it was that bad. So thank you again for taking the time to sit with us. The big takeaways that I got from it was that I need to be more supportive of Elizabeth in our finances and I need to be more vocal about our financial decisions.

I learned that what they do is some of them, they have you stopped paying on all of your debts? That what they had you do?

Yes, they did. Yeah.

Okay, so they have you stop paying. Meanwhile, you're just putting money aside somewhere, and then when it looks like you're basically going to default, they will swoop in and try to negotiate and they'll get a settlement. Sometimes not every company will settle, but they'll charge you these really hefty fees and your credit will be ruined and like, all kinds of other effects will happen. This is it, right? This is what they're doing?

Yes, this is exactly what they're doing. Yeah. Yeah. I knew going into it that our credit was going to be ruined, but I didn't really see any other options. It was already getting ruined because we were late, couldn't make the minimum.

So that there are places in our finances that we can make big changes to really help us meet our vision of the future.

For.

For me, it was kind of a wash.

It was our trips and retirement. And I just want to say thanks again.

Are you going to be bad? So why not let somebody else, you know, solve the problem for us? We got in the cycle of I would make a payment to the credit card, so we would have like a $200 credit on the card, and then we would use the card for that.

$200 for sitting down with us and going over all of has been very enlightening.

And now Elizabeth's follow up.

I am so thankful that we were able to really dig into the bigger issue of why we're having so much financial struggles. I was pleasantly surprised.

And we would pay it and then we'd use it and pay it and use it. So we were constantly maxed out on all of our credit cards.

To learn a lot more about myself and that I definitely am not worrying mentally and how much, much that is really, really affecting our financial situation. I knew it did, but not to the extent that we really dove into. And I'm so thankful that.

Why have you created a life where you have to do this?

I don't know.

We were able to talk about with John, the struggles that I've been having and for him to see how greatly it affects both of us and that he is now wanting to take a more active role in our finances. So thank you very much for that. We are actively looking into getting rid of.

Tell me you know only. The only two people who can know are the two you two right here. Why have you created a life where.

You have to do all this, a lot of unnecessary things and really trim down our finances so that we can get a a great start on this new year and getting our finances back up to scratch. So thank you so much.

I want to thank Elizabeth and Jonathan for having the courage to ask for help and for coming here and sharing a lot with me. In hearing these follow ups for the first time, here's what I noticed. I love that they are energized. They feel connected, more so than when we first started our conversation. And that's exactly what I wanted them to feel. Connection and a small sense of control. That is why I took the conversation in the direction that I did. But I also notice that I've heard very few specific specifics about the changes they want to make. And when you're in a situation like this where you need to make huge changes, success is all about the specifics. So Elizabeth and Jonathan, thank you again for coming on, being so courageous and asking for help. Please keep me updated.

Well, we knew growing up.

No.

Well, that's true. You guys are almost 40 years old.

That is also true.

Is there an answer?

Not a good answer.

Well, I don't care if it's good or bad. I just like the truth. Why have you created a life where you have to do this?

Probably because we didn't value ourselves enough to create something good. We created something bad because that's what we thought we deserved.

Wow. You think you deserve a bad life.

Some days, not all days.

Thank you for being so candid. One of the reasons that I feel very fortunate to speak to both of you is like, I just got to know you. I didn't know you before today.

Right.

Just hearing the way that you both grew up in your childhood. So many differences in the way that the two of you grew up and the way that I grew up. Sometimes I think that's a beautiful thing. I didn't grow up on a farm and I get to hear how you grew up and I didn't grow up with a highly religious, restrictive background like you did. And I'm learning from you. But I can also see the effect, effects of all These different types of upbringings and what they have. And you know, Elizabeth, it is very heartbreaking for me to hear that, you know, sometimes you think you deserve bad things. I don't think you deserve it, John. I would bet you don't think.

No.

That she deserves it.

No.

So, Elizabeth, I think that is incredibly savvy of you to admit that. Incredibly courageous. Put all these numbers aside until you're able to heal that part and to acknowledge where you came from and what happened and chart a path forward. And that can only happen between the two of you and your therapist. These numbers are just irrelevant. These numbers are simply physical manifestations of how you feel, John. How you feel and how the two of you are connected or disconnected. About money? No, that's why the iPad spending, that's why the Apple watch, That's why the $962 on groceries and eating out and getting bored of pre planned meals, it's all traced back to that.

Yeah.

So while I can't tell you what to do, it's not my place. From my perspective, as somebody you invited here to give some feedback, I would say if I were in your position, Elizabeth, this would be my number one priority. Number one. Like I would clear heaven and earth to be able to say I need to work on this. Because everything else in this family depends on that.

Yeah, it does. It does. I've always put myself last ever, you know, as far as I want, you know, things for my daughter, for my husband. So I've taken, started the journey this last year to put myself first and start to get help, you know, speaking with my doctor, medications, things like that, to help start the journey in the right direction. Therapy is the next, next step that needs to happen. But we've always been so strapped for catch and therapy is expensive, so that's not always something that I would prioritize because, you know, we were always behind.

What are the things that you could deprioritize so that you could prioritize? Therapy. We've already talked about groceries and all that stuff. Go beyond that.

All of the trinkets and all of the silly things that we spend our money on. Eating out all the time, entertaining ourselves, distracting ourselves from what our life really is.

Which is what?

The reality that, that we're 100 and whatever it was, thousand dollars in debt. We're just distracting ourselves with the entertainment, you know, going places, spending money, distracting ourselves from the reality of, of our life.

You can tell that all of the spending, the toys, the clothes, the exorbitant grocery bill and the random purchases, those are all symptoms of a lot of pain. And in the past, they have tried to treat the symptoms. They even went through a debt consolidation service. And guess what? They're right back in the same situation. This is exactly why I suggested that Elizabeth prioritize therapy. Because without working on the root cause, the symptoms will just persist and they will morph. And the fact is, even if they magically change their relationship with money, with each other, it still won't fix their finances. That's why I wanted to talk to them about their income. Let's talk a little bit more about what you can do.

Yes, please.

There's just not enough money.

No, there's not.

Can we talk about the income?

Yeah.

So it's going to be very tough for you to get ahead with the incomes you're on.

Yes, That's. That's. Yeah.

What's the possibility of increasing your income?

Mine's a very good possibility. I'm up for. Up for a promotion. So I do know that hopefully will be happening soon, within the next two months.

John, what about you? The.

I mean, I've gotten a steady 3 to 4% raise each year. That's. That's usually what they stick to.

I don't foresee his going up very much anytime soon.

Why are you all making yourself passive in this journey of your income? Watch this. John, how long you been at your job? How many years?

12.

12 years. And you've got 3% raises the whole time? Yeah. Yeah, John.

Yeah.

This passivity is costing you literally tens of thousands of dollars. The economy is booming. Are you aware of that?

It's familiar.

Exactly. So it's familiar to you. So you stick with it even though you're probably being drastically underpaid. Elizabeth, overspending on random trinkets is familiar to you. So you keep doing it even though it's taking you further and further away from where you really want to go.

Right.

What I tell you at the beginning of this call, I can't make you both change.

Right.

John, what do you think about the income part? You could probably be making a lot more money getting a different job.

Yeah, I should look into it.

Okay.

I'm going to.

Okay. I like that.

I think I've been saying it for a while, that he needs a different job. He loves where he works, but he doesn't make enough. And I think he has more of a potential to make more, I feel, than I do if I were to change my job.

Isn't this something like a team would talk about together?

It's hard.

All of this is hard. That's the position you've put yourself in. It is by not working together and by not setting boundaries. You have now put yourself in a position where you have to make all hard decisions.