Money For Couples with Ramit Sethi - 84. “We spend 98% of what we make—but we refuse to change our lifestyle”

Episode Date: February 28, 2023

Kristine is 32 and Thomas is 35. They’re raising three children in the Midwest. They love their jobs, are happy with their incomes, and just upgraded to a third, much larger, home. Everything is good–except that they’re going broke. With astronomical fixed costs, something’s got to give. This episode is brought to you by: Rocket Money | Stop throwing your money away. Cancel unwanted subscriptions – and manage your expenses the easy way – by going to RocketMoney.com/ramit. DeleteMe | if you want to get your personal information removed from the web, go to joindeleteme.com/ramit and get 20% off a plan for you or your entire family. Links mentioned in this episode Get my New York Times best-selling book Get my no-numbers journal Get Money Coaching with Ramit  Connect with Ramit Download the Conscious Spending Plan Other episodes Instagram Twitter YouTube If you and your partner have a money issue and you want my help, I occasionally select a couple to work with, free of charge. Apply for my help here. Produced by Crate Media.

If you or your partner has fallen for a scam, I want to help, especially if you've recently fallen for an email or text scam, or you've gotten bad financial advice from someone who did not keep their promises, or maybe you just have not even told your partner because you are embarrassed. If this is you, I want to talk. Apply for free coaching with me by being on my podcast. Apply today at IWT.com slash apply. That's IWT.com slash apply. Let me share some of the coolest ways that my community has recently used money to live a rich life. One member did a month-long honeymoon in Europe after deciding she didn't want a big wedding. Another member bought a VW SUV that was their dream car that they've wanted for years.

And another member made a rule that any time she buys a ticket for an event, she always buys a second so that she can bring a friend. These are just a few examples of how my money coaching members have built systems to use their money. Notice that there's no more anxiety, that they have a smooth running system. They know when their debt's going to be paid off. They can feel comfortable spending on the things they love. They can actually spend less time on their finances while living an amazing life. In my money coaching program, members also get access to live events every month,

including topics like money with aging parents and how to create amazing vacations. That was one of my favorites where I shared how I spend my money on travel, plus Q&A directly from me. If you want to start building your rich life today, join us and get instant access to our back catalog of years of live calls. Check out IWT.com slash money coaching to join now. That's IWT.com slash money coaching to join the program right now. We love both, enjoy and like our jobs, our three kids, kids aren't going anywhere. We want them to have a nice childhood. We want to live the way we're still living without the burden of knowing every single dollar that we make is allocated

to someone. We don't want to move. I don't care about cars like we could drive less expensive cars and that's fine with me. This is our forever home. I mean, we don't, yeah. We don't ever want to move again. Our jobs are our jobs and our income is what our income is. But I think you two are living above your means. Yeah. Yeah. Have you ever acknowledged that to each other? No. I don't think so. I knew all these things were coming up and just got really scared. Scared of what? Going into debt and not having a way out. Meet Christine and Tom. Meet Christine and Thomas. Christine's 32, Thomas is 35, and they have three young children. They are based in the Midwest, and they have been in their latest house, which is their third for about two years.

Now, Christina Thomas are drowning with their money, but they don't know it. All they know is that they're stressed out. And they describe it as treading water, but when I look at their numbers, I am alarmed. They genuinely believe that they just need to make a few small changes to fix things, but that won't cut it. I'd like to invite you to watch this episode on YouTube where you can see the full thing. Just go to YouTube and search for my name, Ramit Seiti, and you'll be able to follow along. This is I Will Teach You to Be Rich. Let's begin. My relationship with money is stressful. It's a cause of stress for me pretty consistently. How consistently?

Daily. It feels stressful daily. When do you think about it first? In the morning, when I wake up in the morning. We use the YNAB app, and so in the morning I see like, oh, you have this many transactions to import. Or I look at our checking account, just like, you know, I have this like mental idea of, like, you know, the beginning of the month is when most of our bills come out. So I'm just like, okay, I just want to just for a little bit of peace of mind, check that like we have, I know, you know, I know approximately how much we need to have

in our checking account throughout the month and, you know, based on when our bills come out. So I just want to make sure that like something isn't a surprise to me and going to, you know, impact our checking account unexpectedly getting my kids ready. As you're getting your kids ready, you're checking into Wynab and the accounts? Yeah, so like I, we have a three-month-old daughter. So like when I'm feeding her in the morning, I will be, you know, scrolling through my phone. And it's kind of just like on the rotation. I check my social media. I check my, I check our checking account. I, you know, this is kind of the rotation of the apps that I check. We use Google Sheets. So we have everything shared on our budget. And so Christine, you know, like she said, is monitoring this stuff multiple times a day. And so then she'll message me or text me and be like, we have this coming up or gymnastics payments coming up. And so I'd say a lot of it is during the day instant messaging as well. And what does it feel like when you see the numbers in Wynab in your accounts?

In Wynab, it feels like I'm kind of like, I have to go through and check what all of these are. And then like how they impact the amount that we have budgeted for that for the month. And then when I look at my checking account, it's a little bit less stressful because I don't see the details and how they relate to what we have budget for the month. I'm just like, I'm just looking at the number there. I'm like, oh, okay. Like nothing happened overnight that I, that is a fire. Oh, that's interesting. So are you looking for fires when you log in?

Yeah. And if you find them, what do you do? I try to just like store that away for a while. until I have a chance to like go back in and handle it like, you know, speaking of details, like for example, this morning, I logged into a checking account and I saw like, oh, a check was cash that we had written. And we were both like, shoot, like, I didn't know what the check was for because I couldn't see like the image of the check. And I asked for Thomas and he didn't remember what the check was for either. And so

that was stressful for me this morning because it was a couple hundred dollars and I was like I don't remember this where this come from so that was something that was on my mind for a couple hours until I could find out what it was. It sounds stressful. Yeah. Like before 10 o'clock in the morning you're just inundated with all these numbers and worst of all missing data. There's nothing worse than missing data. It drives me insane. Okay. And then you're looking for fires.

It sounds like you're the firefighter, the financial firefighter in the relationship. Is that true? Yes. Okay. Is that what you want to be? No. All right.

So our mornings are very different. But putting the kids aside, if that's even possible, for just a second, the last thing I want to do in the morning is wake up and look at a bunch of rows of numbers. And I don't. So do you think that there's a possibility, a world that exists where you don't have to check your accounts every morning?

Yeah, I think that's possible. How come you haven't done it? I don't know. Habit. What else? Well, you're telling me it's stressful in a bad way. So why haven't you changed that? Um, because I don't feel like we're comfortable enough or we have enough of like a cushion in our finances or a savings, you know, in our finances that can like kind of like account for those ebbs and flows.

Yeah. It feels like you're living on the edge a little bit. All the time. Okay. All right. Thomas, tell me about your financial firefighting every morning. my financial firefighting every morning is listening to christine um and you know i am not a morning person and having three kids under five um it's a lot to do i'm out the door by seven a m bringing the kids to daycare um and so i'm not super chatty in the morning and i am not very talkative in the morning when do you talk about money um all the time time, basically whenever Christine brings it out. Oh, okay. This is a super common reaction when one partner is anxious about money and the other is avoidant. The avoidant person almost always believes that their

partner constantly talks about money. And to some extent, that may be true. If you are anxious about money, you will probably tend to bring up money a lot, especially at inopportune times. in the morning, when you're in bed, when the person comes home from work, all the time. As you can hear, Christine cannot imagine a world where she isn't constantly checking her accounts. But it's also true that the avoidant partner exaggerates how often money is brought up because they're sensitive to it. If money was brought up even once a month, they would probably still say she brings it up all the time. Just guess the average wait time to see a doctor in the United States. I'm not talking about a specialist, just a regular standard family doctor.

Do you think it's a week, two weeks? Nope, it's over 30 days. So a lot of times whatever symptoms you have are going to be gone or maybe worse by the time you get to that appointment. I don't want you to have to wait weeks to see a doctor. I want you to get seen faster by an in-network doctor using Zoc Doc. Zocdoc is a free app and website that helps you find and book high quality in network doctors so you can find someone you love. They have over 150,000 doctors across all 50 states in 200 plus specialties, including mental health, dental, primary care, whatever you need. Just filter for

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and you do all the infrastructure stuff in life that most of us skip over. If you're going to set up an admin night, here's my suggestion for you. Use Zoc Doc to book your health appointments and you will be done fast. Zoc Dog is a free app and website that helps you find and book high quality in network doctors so you can find someone you love. They have over 150,000 doctors across all 50 states in 200 plus specialties, including mental health, dental, primary care, whatever you need. Just filter for doctors based on insurance, location, ratings, even virtual care options. And Zoc Doc appointments happen fast, usually within 24 to 72 hours. You can look through your options, book an appointment, and you are done.

If I needed to find a new doctor today, Zocdoc is what I would use. Stop putting off those doctors appointments and go to Zocdoc.com slash Rameet to find and instantly book a doctor you love today. That's ZOC, doc, dot com slash remit. Zokdoch.com slash remit. And I want to thank Zok doc for sponsoring this message. But yeah, I mean, like just the example she shared this morning with that couple hundred dollar charge, we were still in bed when she saw that.

I probably had been just woken up a few minutes ago. And so I didn't know where it was from. I didn't, you know, still in a daze a little bit. And what does that feel like to talk about money in that context? I'm getting to the point now where I'm more used to it and expect it, but it's not what I want to talk about when the first thing when I wake up. Okay. Okay. I can understand that. When would you want to talk about it if you could choose?

What's the smile that everyone's secretly having? Well, because we used to have Sunday budget needs. Okay. And that was maybe before kids or with one kid and just over time they have gone away. But we would sit down every Sunday night and we used a different budget platform before then and look at everything and plan for the week. And we don't do that anymore. Were you in a better place when you were doing that? Financially speaking? Probably. Yeah. Okay. We have a lot more expenses now than we did. I'm sure that's true. Three kids a lot. But is there any other potential correlations here? Let me try to lay out the facts as I've heard it. You used to talk about money every week. You were in a better financial position. Now you don't

talk about money every week. You're in a worst financial position. Is there any correlation? Maybe. All right. The magic wand would be no weekly meeting. And I think that's a little bit why it stopped was because I could tell Christine was getting frustrated. Sunday night, I kind of want to watch football or something, and we had to turn the TV off and sit down together for an hour and look at finances. Wait, what do you mean? That sounds fucking awesome. I get to turn off football and turn on finances. That's the dream. The American dream. That's the Sunday scary is right there.

Oh, all right. I guess we have different dreams. Okay, so that's kind of why it stops. So what is your dream? Like, what would it be if you could do anything? Have someone take care of it all for me. Okay. Okay. You don't want to talk about it. No, not really. Okay.

I know, for the most part, where we're at, what we have, what our expenses are. But yeah, I don't love talking about it. Okay. That helps me understand where we're dealing with here. So, Christine, you reached out to me. Why now? Because so in the fall when I had reached out, I knew that there were some things coming up in the next couple of months that we're going to greatly impact us. Like our mortgage went up.

We had another daughter. So daycare, she started daycare this month. So that's, you know, an extra kid in full-time daycare. and a hospital bill on top of that. I knew that was coming up. And then we about a year and a half or so ago had found ourselves in some credit card debt. And so we had transferred that debt to zero interest card

for a period of time. And I knew that time period is expiring soon. So we have to, you know, we've been paying on it every month and somewhat on track to pay it off in the next couple of months. So I knew all these things were coming up and just got really scared. Scared of what? Going into debt and not having a way out.

I shouldn't say not having a way out. I know there's a way out. I know there's always a way out. But just we've been working to get rid of this like one credit card debt. And then we're coming up on that at the same time. getting kind of flooded with all these other increased expenses. So just not sure that that's like how we're going to make it all work. I feel like we're always like treading water and just like bobbing at the surface.

It's like, you know, this month we are maybe a little bit ahead. So like, great. And then like the next month we're a little bit under. And it's just kind of like always up and down. and I feel lonely like that like you know because like I know what that Thomas doesn't want to talk about it and I don't want to be the person that's like nagging about it all the time either. So I've kind of like taken on the responsibility of that or taking on the responsibility of like managing things and it's just you know made me feel a lot of weight.

You know, it's just very stressful, and I feel, you know, alone in the stress. You know, yeah, it definitely makes me feel sad that she thinks she's alone because I don't want her to feel that, but then I also know that she knows, you know, that it's not my favorite subject to talk about as well. Some couples leave very, very obvious clues, and today's clues are enormous. They used to have money meetings when they were in a better position. Now they don't, and they're in a worse position. Thomas mentioned he's listened to the podcast before, but he also admits that his dream is to not think about money or talk about money or manage his money at all. Oh, and by the way, she checks

their accounts in bed every morning to put out fires. I want to talk about Thomas's dream of never having to think about money or talk about money. It's a really common one, but unfortunately it's delusional. Think about it. You would never say that about food. You would never never say that about parenting, but we say it about money. And the reason why is that we see money as a negative, as boring, as hard, as a source of pain and shame and debt and negativity. And until we can change that view, there will be avoidance. I think one thing that's maybe jaded me in the past was this is our third home. And I kind of did the whole home buying processes before, like working with realtor and

lenders and all those things. And it took a toll on me too, just the amount of communication and things like that. And I, once we finally got in this house, which we hoped to be in for a long time, I was kind of like, I'm done with this. You know, and, and then...

This means what? Money? Like, yeah, I guess, you know, big expenses, dealing with lenders, paperwork, credit card stuff. I was just over. Oh, okay.

I get it. That's a lot of paperwork to go through, but that's like me going into the forest, finding the most gnarly rotten mushroom I can ever find. It's got maggots crawling on it. And then I eat it. I eat it three times. And then I go, you know what? I'm fucking done with food. Food is disgusting. I'm done with that. Like you pick the worst of the worst of the worst thing to engage in three times. And now it's really colored your view of money. Yeah. Exactly. Notice the blending of buying a house with money. Thomas had a bad experience buying three houses, so now he goes, all money is bad.

And this is a classic clue for all or nothing thinking. They have kids. Let's say one of their kids throws up on their shirt. Are they going to say, I hate all kids? Of course not. But why? What's the difference between what Thomas does with money and what he likely does with his children? The difference is if you are a parent, you understand that a kid throwing up is one tiny part of parenting.

Yeah, it sucks, but it goes with the territory. In other words, you can see the big picture, including the joys of parenting, and you can put that disgusting puk in perspective. With money, most people do not have that perspective. They do not understand the big picture. Thomas literally sees buying a house as equivalent to money. sees Christine's anxiety about money every morning as money. So it makes sense that he doesn't like money, that he avoids money, because from his perspective, money sucks. So you've had expenses going up. Before these expenses recently increased, how were you doing with your finances? So I think we've

always felt like we're not poor. But I think, We, with the baby, just with the medical bills, we've had so much more larger expenses happen, where in the past, it was so much smaller expenses that would pop up that we could manage and handle better. Now, I still think we're okay, but we need to be more careful and more smart about what we're spending our money on. I would say that before these larger expenses came up we were not in a wildly

different place. Their expenses were a little bit smaller so we had a little bit more of a cushion month to month. But we've just never had a good like or in my perspective a comfortable amount

in our savings that makes you know makes me feel like whatever comes our way, you know, we could field it, you know. What does that amount? Probably 20,000 would be a comfortable starting place for me. But we both wish we could make more money. And so that's kind of an ongoing battle, I think, where I had a job,

my previous job right before this, I was making more money, took this job for more happiness. And so not only did we have a large medical bill, another baby, two dogs, larger house, we had no car payments before. Now we have one. All these huge expenses that we have to pay monthly. And my job is making less money. We don't put anything into our Roth and things right now where we used to. What was the time period where all those changes happened? Within like six months.

What? Pretty close. Well, looking back, what do you think about that? I mean, we bought our house because the interest rates were so incredibly low that we could afford it. And I still think we can afford it. Can we look through the numbers? Because I think that's going to provide something to ground us around. Christine, walk me through these numbers.

Yes. So our assets are 597,500. All right. Fine. Investments. 106,800. Okay. Savings? Savings is a little over 5,000. And debt? Our debt, so this includes our mortgage, credit card, and vehicles, and that's 394,000. Okay, what's the total net worth? $315,000. All right, how do you feel about that number? I was pleasantly surprised when we came up with that because I was like, we're positive. That feels good to me. Okay, and how much credit card debt?

Our credit card debt is $2,200. All right, let's take a look at the income, Thomas. Yep, so... Just tell me, your... your gross household income. Our gross household income is 11,122. Yeah, that seems pretty good to me. And you said that you used to make more.

Now you're making 11,000 a month household income. So just to summarize so far, the two of you make $133,000 a year. You've got $106,000 in investments, $5,000 in savings, $394,000 in debt of which 360 is your house, 2,200 is your credit card, and 28,000 is your cars. And in terms of ages, Christine, you're 32, Thomas 35. All right. So far, okay. Let's take a look at the fixed cost, shall we? What's that number next to the fixed costs? The combined, how much are you both spending on your fixed costs as a percentage of your gross, excuse me, your net income? 98%.

Is that high or low or what does that number mean to you? Outrageously high to me. Yeah. Thomas? Yep, same. Okay. What should it be? That's no wiggle room at all. Yeah, none. What should it be?

75%. Where'd you get that? I think Christine told it to me one time in the past or maybe it was 60%. Yeah. Well, it can't remember exactly. It's less than 98. I'll tell you that. Gee, I wonder why Christine wakes up every morning feeling worried about money. And why when she tries to bring it up with Thomas, he avoids it.

When you lock yourself into high expenses like they've done, you cause all kinds of downstream effects. It would be like building a house with an absolutely tiny kitchen. You go, hey, let's save some space, but suddenly you only have one burner, which means cooking takes longer. You don't have a big enough fridge to store stuff so you have to run to the store three times a week. your kids can't come home from college because you can't cook enough food and on and on. These unintended consequences happen all the time with people's money, but we almost never trace it back to our fixed costs being too high. That is what's happening here.

Generally, I prefer to see 50 to 60%. Okay. There are rare exceptions, but they are extremely rare, and you two are not in that rare of a situation. So with 98, what is the implication if you have 90s, 58% of your take-home income is being spent on fixed costs. How do you think that that affects your life? We can't save an emergency fund,

and we also can't save to do things that we want to do. Yeah. What else? Can't go on vacation. Can't lose our jobs. Right. That's a good one. What else? Can't get sick or have any other major expenses. It suddenly makes us.

a lot of sense why, Christine, you're waking up, looking at your phone, you're asking about, like sending urgent messages about a $200 check, which I don't do that. Right? I don't. And I don't want you to have to be fixated on $200 when the two of you make $133,000. It's just, it, it, the way you have set your expenses up, it forces you to play small. And so you have, have taken this beautiful set of eyes that you both have. You can look at the entire world. You can see for miles and you have turned it into a little pinhole where all you can see is sell D32. What is that expense? And we need to light a fire in our relationship to identify this $13 expense that we don't know. Any of that sound familiar?

A hundred percent. Yep. It sounds awful. So it doesn't mean you're awful people. That's not what I'm saying at all. It just means the situation that you are in, it's not good. So let's see if we can find a way to make some changes. Okay, daycare slash school is $2,000 a month. So who's that for? Two kids, three kids?

Three kids in daycare and one is in a private preschool right now. Okay. Gosh, I hate how expensive child care is in this country. And we actually have our daycare is an in-home daycare. And it's probably about the cheapest you could ever ask for. In our area. Do you have any maintenance on that Jeep Grand Cherokee? Aren't those horrible vehicles?

Yes. And the gas is outrageous too. I have to drive, I drive 30 minutes to work one way. So I drive an hour a day. Why do you have a Jeep? Is it like your childhood thing? Exactly. Yeah, I used to have a,

a car. I had a Chevy Malibu with no car payment. Oh, I liked that. And then we added over $400 a month. How did you decide if you could afford it? Don't tell me you talk to the car dealer and he talked about monthly payment. Please don't say that. I will tell you that I very specifically remember being at the dealership and we looked at the, you know, we drove it and whatever and we sat down.

Oh, yeah. And I was like, you know, the car sales. salesman was, you know, gave us the price or the monthly payment. And I said no. And we walked away. We walked out. And I was so proud of myself. Like, like, no. And Thomas was like, I thought that was good. Like, why did you, why did we walk away? We had got, we had gone in there knowing that we didn't want to pay over 400 a month. Thomas, I'm going to kill you right now. What have I said on this podcast 10,000 times when the car dealer says to you, uh, how much you want pay. You look him straightly out. You say, TCO, motherfucker. I don't talk car payments. Nobody ever

talks payments. You talk about total cost of ownership. I want to know the full price. I think we said we didn't want to go over 400 a month. All right. He's like, I can make it work. And he gave you a fat loan for what, 60, 72 months? What was it? I think he was 60. I don't think we ever have felt good about it. And we even refinanced like a year ago. and lowered our payment. That's good. But we still don't feel good about it. Thomas, do you get why I don't want you to make decisions based on monthly payments?

No. This is why you never buy a car based on monthly payments. You need to understand that car dealers are there to make the maximum amount of money from you. Let me show you how it works. Assume you're buying a $75,000 truck at 5.5% interest. If you put zero down with a five-year loan, you'll pay about $1,432 a month, and the total amount you pay for that truck will be about $91,000. Let me say that again. You thought you bought a $75,000 truck, but it's actually costing you $91,000, plus the incremental gas, plus all the other assorted maintenance, which means your truck actually costs way over $100,000.

Do you see why I am so, so focused on fixed costs, specifically a house and a car? Because these are the places that you trap yourselves. Let me give you another example. Let's say you want a lower monthly payment. Sure, Chet, your friend and car dealer can help. He'll just stretch that loan out to seven years. Now, instead of your monthly payment being $1,432 a month, it'll be $1,225. So you'll save about $200 a month.

Now, most unsavvy people will go $200 a month. That's a good amount of savings. That sounds really good. Do not do that because the total cost of ownership will now be $94,000. That's more than the previous one. So you will save a little bit every month, but you will actually pay way more. This is how it works with all big purchases. Your house has massive phantom costs.

Your car has very large phantom costs. Investments have phantom costs. If you don't understand what they are, read my book. Never buy something expensive based on monthly payments alone. Always calculate TCO or total cost of ownership and then decide if you can afford it. That is how savvy people make big purchases. Just guess the average wait time to see a doctor in the United States. I'm not talking about a specialist, just a regular standard family doctor.

Do you think it's a week, two weeks? Nope, it's over 30 days. So a lot of times whatever symptoms you have are going to be gone or maybe worse by the time you get to that appointment. I don't want you to have to wait weeks to see a doctor. I want you to get seen faster by an in-network doctor using Zocdoc. Zoc-dog is a free app and website that helps you find and book high-quality in-network doctors so you can find someone you love.

They have over 150,000 doctors across all 50 states in two. 200 plus specialties, including mental health, dental, primary care, whatever you need. Just filter for doctors based on insurance, location, ratings, even virtual care options. And Zoc Doc appointments happen fast, usually within 24 to 72 hours. You can look through your options, book an appointment, and you are done. If I needed to find a new doctor today, Zocdoc is what I would use. Stop putting off those doctors appointments and go to Zocdoc.com slash Rameith to find an instantly book a doctor you love today. That's Z-O-C-D-O-C dot com slash remit.

Zok-D-C-com slash Rameh. And I want to thank Zok-D-D-K for sponsoring this message. What's the area of life that you want to spend more on this year? A lot of people will say health or relationships. Some people will say travel. Let's talk about food and health for just a second. For example, in my life, my wife and I both decided we're going to spend more on health. And that means having a personal trainer. It means having someone make meals tailored to our macros so that we don't have to think about it. But you don't have to pay for a private chef to do that. One great option is to make healthy eating convenient by getting meals from Factor. They take the work out of healthy, macro-dense meals so you can start eating better now. Factor is a chef-crafted,

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subscription purchase. Make healthier eating easy with factor. So your debt payment is $300 a month. What is that for? Our credit card. Okay. When's it going to be paid off? Well, it has to be paid off by, I think, for all. Are you on track? No. We're a little off track. What happens if you miss the full payment? Then we'll get, have an interest payment on or be charged interest for moving forward. Is it for the remaining amount or is it for all the amount that you had during that last 12 months?

Great question. Don't fuck with these 0% offers. Can I just tell you right now? Let me just put it this way. You're not smarter than the credit card companies. So I often find couples. They have some credit card debt. And you know what they do? They spend more time finding some cool 0% offer than they do actually fixing their spending. And so they go, okay, we got the 0%. It's 12 months. Why wouldn't I take it? I'm going to do it. What they don't realize is if they look in the fine print, sometimes if you do not hit the exact term specified, not only will you pay interest going forward, you'll pay interest on every thing retroactively. Also, your credit score, if you miss a payment, it can affect like all kinds of crazy stuff. You can't beat these credit card companies at their game. You can beat them at your game, which is to pay the debt off as quickly as possible and then never get into it again. All right? I would strongly encourage you. I haven't looked at the terms of your 0% thing.

Figure out a way to pay that off. I added up your mortgage and your utilities. And, And it's 25% of your gross income. What does that tell you? Is that good or bad? Well, you want us to be at 50% to 60%. That's half right there. Yeah, it seems like a lot. And it seems like it's expensive to keep our house.

And I also think that our house is our most important asset. and it's the most important part, not the most important part, but one of the biggest parts of our livelihood and family. All of our girls have their own room. We have a finished basement now, you know, in a three-car garage. So it's an important expense.

It's important because what? Because... It's of like high value to us. I think what Thomas is maybe trying to say is like that's something that we don't want to change like we don't want to move Okay well I get it Most people don't want to move

Especially out of financial necessity That's the greatest shame there is in America So all right I understand that You are where you are You have your house you've told me it's important to you But I think realistically you should Really write yourself a new story which is we spend a lot of money on our house.

We value it, but it's not like it's a cheap house. Did you grow up in the Midwest? I did. Your parents, what do you remember them in terms of their lessons that they taught you about money? My parents were extremely frugal. My mom was a Catholic school teacher. Never made over $40,000 in 38 years. My dad was an architect, but in small town, Iowa.

And so, you know, I don't know. maybe towards the end of their careers. They made $100,000 together, but it would only been a few years. So we probably went on maybe three vacations my entire 18 years living out growing up. Same house. And my parents never had a car payment.

They always paid cash for their cars. Oh, wow. They still even to this day, but growing up, they would walk, they walk all the time, and they bring a grocery sack and pick up. cans. Wow. And turning cans. And it's, you know, we, everyone around town, you know, everyone kind of knows everyone in small towns knew them, you know, knew that we're not homeless people or poor people, but they would pick up cans to get those couple bucks every week. What was the dynamic

between your parents when it came to money? From what I know, I think they had a really good relationship with money. They have a financial planner that would come to our house, maybe every six months where me and my sister would have to stay in the basement while they met with Rick upstairs. There was one time when me and my sister were both out of college where my parents finally, we had like a family meeting and they looked at like, this is how much we have in retirement. If we die, this is where these things are. This is how much we have. And we're like, whoa, wow, you guys have a lot of money. And they're like, that's because we didn't do anything. Okay. And what do you think about that?

that they didn't do anything? You know, at the time, I wish we could have got on more vacations and stuff like my friends were doing. But now, looking back, I'm like, wow, they're going to retire and they're going to have a lot of money for when it seemed like they didn't have jobs that made a lot of money. Yeah. Are they retired now? They both are retired. Yep. Okay. Do you grow up in the Midwest also? Yes. What are some of the money lessons you took away from your upbringing?

I think, I mean, there's a lesson. I feel like. I don't know, frugality is the right word. But I do remember, like, you know, we would use coupons when we'd get pizza. And I remember, like, going to, you know, like my mom likes to go to thrift stores and, like, things like that. Like, I remember that and I carry some of that with me today, too. Do you carry any of those lessons into your relationship with your children? I think a little bit in terms of, like, I want to. them to be able to do gymnastics and I want them to be able to do swimming lessons because I love

it and like those kinds of things I want to provide for them. So if there's other areas that we can save so that we can spend money in those areas or like put our five-year-old in private preschool, you know, that's those things are important to me. How many siblings did you have? I had two. Okay. So there was three of you just like you have. You have three. You have three. daughters. And what, if you can recall, what was the square footage of the house you grew up in? Ballpark. 1,500. Okay. What is the house? No. Oh, he's Thomas. It's always the partner who knows. The partner always is Thomas, how much? I'd say the house that she grew up in, because it's still the house we go back to for holidays and stuff. Um, 2,500 at least. 2500. Okay. And what is the square

footage of your current house? 3,200. Okay. Any takeaways from that? Christine? Not really. I mean, I do feel like we live in a, I felt like I lived in a nice house growing up. But of course, you know, like I had friends with nicer houses too. Like, I wasn't like, I didn't have the nicest house.

Yeah. I have nice sweaters, but there are people who have even nicer sweaters. So does that mean that I don't have nice sweaters? No. All right. Thomas, what was the square footage of your house growing up? 1200 maybe 1,100. How many siblings?

Me and an older sister. Okay. Can I just point out the elephant in the room? Your parents both had smaller houses than you two do. And you two have this house in your early 30s. Okay. Now, if you can afford it, fine. But Christine, one of the things you mentioned was that you took away from your parents that they would cut back on certain things so they could spend more on experiences.

And you also like experiences for your kids. But right now you have a lot of money in your house. You have a 3,200 square foot house. That's pretty big. I mean, not pretty. That is big. Huge. Now, if that is what both of you value, awesome.

We can find a way, hopefully, to make it work in the conscious spending plan. But if you value that and child care and car and saving, you can't do it all on your income. Yeah, I would say for me, the house is the number one. Christine? That we like to keep. Yeah, value the house more than any more than the other major expenses. Yeah. Because we do feel like this is our, this is our forever home.

I mean, we don't. We don't ever want to move again. All right. So your fixed costs are $8,000, $8,200 a month. Again, reminder, you take home $8,300. So what do you all want to do about that? this fixed cost category. Make more money.

Yeah, everybody says that. But if that were true, wouldn't you have already done it? Yes. Okay. So, you know, I noticed something interesting on your interview with my colleague.

You both said, we want to see if there are some changes we can make because we don't want to have to radically change things in our life. Do you remember saying that? We both enjoy and like our jobs. Our three kids aren't going anywhere.

We want them to have a nice, you know, a nice childhood. And we want to live the way we're still living without the burden of knowing every single dollar that we make is allocated to some line. Okay. Christine, what about you? My perspective from that statement was, like, we don't want to move. I don't care about cars, like, we could drive less expensive cars and that's fine with me. Daycare, you know, we have to pay for daycare. So the biggest thing for me was just like, we don't want to move.

Okay. So what do you want to do? Christine. Your guilt-free spending is negative 10%. So you're losing like hundreds of dollars every month as indicated by the sheet. Christine, you just took a big sigh.

I think that's where Christine mentions how we're kind of bobbing because like one month we, you know, we just did you know, we got money from Christmas. So like, oh, but we don't want to. count that. And it's like, oh, we had hail damage. So we got an insurance claim. So we have this

unexpected money. And that's these things, things keep popping up. But like we talk about it. We're like, we can't count on these things. And we don't want to count on these things. But that's the only way we've been like able to, to not feel like we are totally losing money every month. But you are. And we still are. Yeah. Okay. So what do you all think is a solution here? Please don't say earning more money. Well, I think, you know, we've talked about it multiple times. I think the car, the vehicle is a huge piece. Something that we explored recently was selling Thomas's vehicle and purchasing something that a friend was selling that would be a lot less expensive. but through that week or so of thinking about that

and kind of like running the numbers of like what could we get for Thomas's vehicle and what would we buy this? You know, all of this. So what did you decide, Thomas? So we still have the Jeep. Okay. The more I'm thinking about it, I'm like, do I, it's just a car. I don't know.

I guess I've never had the car growing up that I wanted. You know, I had my parents hand-me-downs all the way through high school college, you know, and then this is the first car that I actually bought that I liked and wanted. Yeah. And so now just to give it up, or not just to, but to give it up because it's too expensive, sucks. Sucks means what? Knowing that I'm going to drive something that I don't like. Yeah.

feels like what? It's a bigger picture, I guess, in the scheme of things, the car gets me from A to B, and if it means we have more money to live the life we want to live, then that's a sacrifice that I should make that really even should be considered a sacrifice, I guess. It's interesting hearing you talk about it like that, kind of contextualizing this car

from it first being a dream of yours and something that you achieved. It seems like you're proud to be able to achieve it, to now saying, well, in light of looking at some of these numbers, maybe it's just a car. It's kind of an interesting journey to hear you say that. Have you ever talked about anything else like that? I don't think so. Not really.

So if we were to truly mathematically calculate this, you would go search for a car and you would find out that this car, you know, you're going to get a used car and you're going to, you can do a chapter nine of my book. It has how to do this. Your Jeep payment is currently 407. Just for easy math, let's make it 400. Let's say you cut that payment in half. That's pretty extreme. Would you agree? Yes. All right. Plug that number in. So again, your Jeep payment is going to go down by half. Plug it in and let's see how it affects your overall money. So it would be, how much do we have for gas?

Because with the van is 300. The half would be 200, so that's 500 with... I think we usually have about 300 for gas. Can I suggest something, guys? Yeah. $15 here or there makes no difference. Keep it simple. I'm just trying to show you how the overall thrust of this works.

We'll just have it at 500. Whoa, hold on. Not that simple. Go back. So what he just did for everyone who's not watching, it was $9.53 a month. And Thomas was like, fuck it, let's make it 500.

I was like, whoa, hold on, hold on. You took my advice too literally. Take it back to 953. I want to show you. Let me go step by step here. Okay, so, 953, you got a Jeep payment of $400. I just want to cut that in half just to keep things simple. So if I cut that in half, how much would your payment be?

$200. $200. So why don't you take $200 off of your current car payment? So instead of $9.53, it would be what? $7.53. Exactly. All right, cool. And like, yeah, you'd probably save a little bit more with $1.503.

gas and all that stuff, but like, whatever, we're in the ballpark. Okay, can you tell me what just happened to the fixed cost number? What did it used to be? And what, what is it now? It was at 98% went to 96%. What does it tell you? It doesn't really make a huge difference. This is irrelevant. You sell your Jeep. It's irrelevant. Should you? Yeah, sell that thing. But this is not going to move the needle for you at all. And think about it. You were about to spend the next two months analyzing it. I don't know how to calculate all this shit. And it's Pointless. Yeah.

What does this tell you, both of you? That we're focusing. We're micromanaging. Yeah. I think it also says that, well, I don't know. I mean, I think that was a pretty big, drastic change, and our fixed costs barely

moved. Which tells you what? That more and more little things like this aren't going to move the needle. I could tell that was a challenge for you to put yourself in a different set shoes, but I appreciate you did that. I think the way I would articulate it would be, gosh, that really opened my eyes. I thought that selling this car would be like a huge thing.

And now I realize what I thought was huge is actually not even close. I need to make a lot bigger changes than I thought. The thing that felt enormous to you, like having to move heaven an earth to emotionally reconceptualize this car, it actually essentially makes no difference. And I don't know where to start, but I'm ready.

Yep, that's how I feel. Why do you think you've ended up here spending 98% of your income on fixed costs? What decisions have brought you here? I think the biggest decision would be to get a new house, and then I got a new job two months later, having two dogs that have not been cheap, which is an understatement.

At one point, one of our dogs was taking eight pills a day, and so we were spending hundreds of dollars a month on these dogs. And then also the decision to have three children. I think we've articulated this with each other in the past that we have thought it's going to be a lot now, but we're always going to make more money as we get older. And so knowing that we think we can afford it now, but we should just keep making more money as we get older. But you took a job that pays you less. Yes. I would be scared. And I deeply understand why you wake up and why you look at these things,

why you send these instant messages. Like from a IWT philosophy perspective, you shouldn't be doing any of that. But realistically, day to day, I understand it. I would be feeling very scared living on the edge. Christine, what do you think was behind the decision that led you here? like our dreams and like what we always imagined for our life and our family um you know just kind of like i always imagined that i would have three kids and i you know always imagine that we'd live in this nice house and a nice neighborhood um and so it was kind of yeah just like what's wanting

everything that i wanted and wanting it right now that's honest Thomas, do you agree with that? Yeah, I would agree with that. And I think at the time when we were in our old house, we weren't even looking to move. But then looking at what the rates were when we were like, man, and talking to our financial advisor, we were like, we are just want to throw it out there that we are thinking about maybe moving. And he's like, if you're going to move in the next five years, now is the time to move because the rates will never be what they're. were. Okay, hold on. We have to do this. I didn't want to have to do this.

Christine, you want to just have this conversation with a true story. No, Thomas, you don't know what's about to happen, but Christine, does Christine, do you want to go ahead and just take control of the next two minutes of this conversation? Go ahead. About that whole situation and the financial advisor. Yes, just answer all the questions that you know I'm going to ask you. Go ahead. So we hired this financial advisor several years ago when we were starting our family. and at the time didn't know any, I wouldn't say,

we didn't know much about personal finances. We were just kind of like, you know, like. We had a checking and savings account and that was it. Yeah, like it was like a vulnerable feeling. Like we're having kids and we feel like, we feel like this is the right thing to do to like, you know, help get somebody to help manage our money. Did you hire a parenting advisor when you had kids?

No. That's weird. just jumped right in, huh? Yeah. Do you know the other questions I'm about to ask you? How much we're paying him? Yes. I want to say it's like, I don't know exactly.

I want to say it's like half a percent, what? It's not half a percent. As I say, I think it's half a percent like quarterly. That's more realistic. These motherfuckers, they change it out. Oh, let me set the term one eighth of a year, three-eighths. It's like, how's any human being supposed to calculate this shit? Quarterly?

Can you pull out the piece of paper that has the fees on it? I know you have it somewhere. I actually, I don't... I would have to dig for it. Of all the numbers you have at your fingertips, this is the one number you don't have? Honestly, I've been, like, putting my blinders on to it. Because? Because it...

So it's kind of like been my goal or like something. I'm like, I need to break up with him. Oh, I'll do it right now. I'm an expert at breaking up with financial advisors. It's just like the awkwardness, I guess. Do you feel awkward if somebody came in and robbed your house and you're like, dear sir, could you please stop robbing us of all of our life's assets? That would be awkward, right?

How about this guy charging you two fucking percent per year? 2% per year means over 50% of their returns will go into his greasy little pocket. If you want to learn the math, read my book. I'm not even going to get into it right now because I'm just going to get too mad. But I do want to highlight how they got to this place. Did you hear it? A lot of following the American dream. They wanted a big house, so they bought it.

That's about the level of rigor that most people put towards the biggest purchase of their life. I'm not judging Christine and Thomas. This is actually extremely common. What I am saying is it's no surprise that so many people feel trapped with money. So many people feel like they can't afford to do the things that they claim they want to do, like go out for a nice dinner without worrying or take a weekend vacation. Why? Because they've made a series of episodic one-time decisions like buying a car, then a house,

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as I have an ongoing fee-based contract for cash compensation based on this endorsement. All opinions are my own and not a guarantee of a similar outcome. You're over here like literally counting the dollars. using coupons, things like that, and you have this financial advisor, you don't even know how much you're paying him, and it doesn't add up. You're not actually concerned about costs.

I think what you are more both concerned about is playing the game the way you have seen it being played. And the way you both saw the game being played is you buy a house, you stay in it for a long time. You're frugal on a bunch of little stuff, whether it's the cans or the coupons or taking a road trip for vacation,

and then life kind of works out. Would that be fair? Yeah, very fair. It's not even about the financial advisor. We could fix that. You're young. You haven't paid that much in fees right now. The fees really hit you later on in life.

So it's a totally recoverable decision. No problem. What do you think is the real issue here? what we're focusing on. Yeah. What is that? Small everyday expenses and not things that will long term set us up for where we want to be. Yeah.

Yeah. Christine, would you agree? Yeah. I agree with that. Can I tell you that I really hate this idea, that managing money is making sure the bills are paid on time. It's playing small. Do you know, Christine, that a computer can make sure bills are paid on

time better than you ever can. So why are you spending your valuable time, quote, managing money, tracking down a $15 check? It makes no sense. I would rather have the two of you together manage your money by focusing on five really important big things. Start there. Look, our fixed costs are way too high. We need to talk about how to get that down below 60%. That is managing money. Our investments, we need to be investing at, least X percent every single month. And if we're not, we got a bigger problem. We got to talk about that. That is managing money. The real wealth is created in a couple of areas. One, designing your rich life. I would love that to be part of managing money for the two of you. And two, the nuts and bolts,

mechanics of personal finance involve these four critical numbers, your fixed costs, your savings rate, your investment rate and your guilt-free spending. Get those right, and you shouldn't have to worry about the $15 check here and there. What do you think, Christine? I love that. Yeah. Where do we start, though? I want somebody like you to come to our house and be like, and just tell us what to do.

Because I don't know where to even start it. You're not going to get that. I know. Can I tell you the real truth, Thomas, is you're going to have to engage with money. this is one of the most important things in your life. In fact, let's break it down. What are the three important things in your life? Family. Yep. Health. Okay. And livelihood. Okay. Livelyhood would be work, money, all those things. Right. Okay. Great answer. Christine, what about you? I would say, you know, our kids and

each other and experiences. Hmm. You know what's interesting? I love your answers, first of all. They're aligned. They're a little different too, which is cool. I like hearing all the similarities and differences. But some of the things you mentioned are your top three things

are not actually represented in your spending at all. So do you all see that the way that you've gotten here is you've gone bottom up? Whatever was put in front of you, you were like, we want that. Let's get that house. Let's get that car. Let's just do this. But you forgot about also going top down, which is let's start with our vision of a rich life. What is important to us?

And let's actually give ourselves permission to spend more there if we can afford it. But then we're going to have to cut on stuff that's not important to us. Yeah. So can we do that exercise right now? Sure, sure. All right. What is your rich life? If you were to describe it, let's go Christine first.

I would say my rich life is that we, I was thinking about this and kind of thinking of like, I want to be able to spend like $50 to $80, like no questions asked. Like that's my consensage money. Maybe. I have to cut in here. Listening to this after I spoke to them, I find that answer to be so sad. and I wish I had said something at the time. Christine's rich life is being able to spend $80, no questions asked.

Think about that. After all the work, all the worrying, all the decisions they've made, that is her promise land? Surely there's got to be more to life than not worrying about $80. That's like me saying my rich life is walking outside and not stepping on a nail. That's it? That's all we're working for. What you see here with Christine is a series of decisions that have forced her into thinking small. But she's been doing it for so long that she doesn't even realize it.

Let's continue. Some things like around our house that we, that I would like, when we bought this house, it was a new build. So like we don't have landscaping. We don't have a fence. we'd have a swing set, like things like that for our house would be something that I'd like to have. And then I'd like if we could go on, you know, one or two vacations a year. Like if we could go on a family vacation and then like a vacation with just Thomas and I,

at least once a year would be something that I would be my rich life. Fantastic. All right. Thomas, I would like to be a season ticket holder at my favorite with the Iowa hot guys. All right. That's cool. All those sound good. I like that they are...

Like, I can see your eyes light up when we talk about it. Is there anything about, like, do you care about kids college? Do you care about retirement? Does that fit in anywhere here? Yes. I guess, yeah, that's true. Yeah, I mean, I think kids college and having three girls knowing that weddings are a thing in the future as well,

especially knowing like our wedding how much Christine's parents helped us out with that but yeah college weddings and then

not having to work until we're 68 years old as well I mean we both want to retire can I just tell you just so you know I'm the opposite like if there's

a hundred bucks missing I'm like whatever who really gives a shit but I know every last decimal place on my investments What's the difference? The investments are much larger.

Yeah. And long term. That's where we spend the time and attention. That is way more important than $15, $20 here or there. Do you see why I'm emphasizing focusing on certain things versus other things? Yes. Okay. Makes all the difference.

Yep. So let me show you some. Here's your investments right now. You have $106,000. Agreed? Yep. And how much do you invest every single year? We haven't been for like the past year outside of our 401Ks. 401Ks are investments. Yeah.

So whatever that. So if we do, 600 a month? 600 a month? Yeah. So let's just say 7,000 bucks. Fair? Just want to clarify something. 401Ks are retirement accounts where you invest money. One odd peculiarity that I've learned with people is they literally do not consider. consider 401ks to be part of their investments. We have this mental bucket where a lot of people, they go, no, we don't invest, but oh yeah, we also have this 401K thing that we contribute to.

I'm like, that's an investment. There is this widespread lack of basic knowledge about money. And it's no surprise that we feel worried when it comes to money, because most of us do not understand the basics. Let's just make it 8,000 because I don't want to get a bunch of math people complained. years to grow. How many years until you want to retire, Christine? 22. 22, great. And what should we assume for your return rate on your investments? If you've read chapter 6 and 7 in my book, you know this.

I haven't gotten that far, but I think it's 10%. Okay, yeah. 10% is a good nominal number minus inflation. We can assume roughly 7 to 8%. I like to say seven just to be conservative. All right, how much is it going to be worth your portfolio by the time you are 55? Yes. A million dollars. You see?

I was going to say $1.5 million. $892,000. What? Ouch. Are you both disappointed? Yeah. Very. All right.

What does that number mean to you? We can't live. We can't retire at that age. Why? How do you know? I guess. I'm going to sound so stupid. But everyone, I mean, it just seems like you have to have over a million dollars

to be able to retire comfortably. Okay. This is a really important number. And it's one of those things that I want you to get savvier about because you can't just go the rest of your life, like mindlessly saving without knowing how much you need, what type of lifestyle. This is worth understanding deeply. You spent more time looking up your Jeep than you.

you did thinking about the number that is actually going to determine the second half of your life. So it's really important to engage on this. That means you're going to have $35,000 a year to live on. What do you all think about that? I mean, you would think like we wouldn't have, you know, our household please paid off and other things like that, but also paying for college. And all those other things that are going to take those spots. So there'd be no way we could live off that. Yeah, there's no way that we could both live off of that.

We really need to focus on our future and investing for our future. The thing that matters the most is what are we investing in and what can we do to make sure we have the most amount of money when we needed? My concern is that it's very easy in America to just get on the conveyor belt and go. You wake up, you go, oh, that's what success looks like. I want that. I want that. And you wake up one day and you blink your eyes and you say, how did we get here?

Yeah. And I think that's kind of what led us to where we're at with this conversation right today. All this is fixable. But you have some stories you tell yourself. you know, this is, we wanted this. We're not willing to give up this. Okay, I'm not here to tell you what you believe is right or wrong. I'm here to probe and interrogate your beliefs and say, is that true?

Do you really need three bedrooms, four bedrooms, whatever? Maybe. Five. Five bedrooms on a $130,000 income. I know you live in a low cost of living area, but that doesn't, add up. You have 98% of your income is going to fix costs. What are you hearing so far in this conversation that is different than what you have previously talked about when it comes to money? For me, I think what I'm hearing is that we need to kind of prioritize our investments

and start there. I agree. I think our focus of where it has been needs to change. We've gone through Dave Ramsey. We did every dollar. We retract. Every thing we spent on, we do YNAB now. And I think we can keep those things, but our focus has to be, I think, number one, is a big mind change set for me to be involved. let's figure out what we need to do together, where we can prioritize and shift our focus to not the little expenses,

but what can we do together where we can break up with our financial advisor, do it ourselves intelligently, and make sure that we have, that we're putting our money in the right spots for us for the future, without having to drastically change our lifestyle, which we've kind of gone through. We can't really do. That would make huge amount of difference.

Hold on. I'm concerned that you're taking away the wrong message. Okay. Yes, you need to prioritize investments, yes. But it's very interesting to me that you've suddenly both gotten super motivated about investments, seeing that $892,000 number. That is a problem, but that's not your near-term problem.

That's like you're driving and you see a wreck five miles down the road. But guess what? There's a truck swinging around the freeway right in front of you. What is that truck? Our fixed cost. You still have this belief that we don't want to have to dramatically change our lifestyle. You guys spend 98% of your take-home income on fixed costs. Yeah.

I really have to be very candid with you. There is no extra money to invest because, Every month you're currently losing money. Would you guys, it's up to you how you want to proceed. I'd love to walk through your fixed costs and actually talk about some options. Yeah. Sometimes it just helps to have a fresh set of eyes on this stuff. Sure.

Okay. This is probably going to be a little difficult to talk about. And I don't generally, I don't come into conversations ever planning to be like, no, no, no, no. That's not my style and I'm not, I don't want to do that. What I do want is your participation in helping to create the kind of life that you want. It's got to be your rich life together. Okay.

All right. Let's look at the numbers. So we're in the conscious spending plan. A good guideline is to get this number below 60%. And I will say one thing. You have young children, sometimes, especially at these early, a few years, it's okay to break the rules a little bit. Your savings rate might not be what it needs to be later.

That's okay. We can give yourself a little bit of grace. And once the kids are in school, you can increase that number. But 65%, okay, 98%. It just can't happen. So how do you, I'd like to see the two of you have a discussion about this, and I will observe. Where to start?

I mean, we just really don't want to move. I mean, that story about downsizing and everything. Like, I just don't think for either of us, that's something we want to do. Don't talk to me. Talk to each other. Right? I mean, Christine, right? Yeah, no.

Yeah, I don't want. We love our house and we want to be here forever. Right? So taking the house out of it, I think that's where we need to start. Since the house is off the table for some reason, let me painfully illustrate what they are about to do. Over the course of 30 minutes, they attempt to adjust their truck payment, pay off the van, a loan repayment with Christmas gift money, dog expenses to stay at 100, lowering their insurance costs, which is managed by an advisor. By this point, by the way, we're at 84% on fixed costs.

They then continue on to cut $100 eating out, cheaper phones, drop Amazon Prime, cut swimming lessons, cut gymnastics. And now we are at 83%. All right. So what did we start the fixed cost number at when we started this analysis? 98. Okay. What is it now? 83%.

All right. How do you feel about that? Part of this exercise is, you know, as we keep making smaller changes like this, you know, we started two hours ago at 98. That's a pretty big job. I mean, there's a lot of work to get to that that we have to do, but... Yeah. Isn't that the right track?

It's good. Like, what do you say when your oldest brings home like a C-minus or something? Do they even grade kids that young? I don't know. No. What if you were my parents and I brought home a C-plus? Just look at the skin color. Unacceptable.

We came to this country with $10 in our pocket and you can't even get a fucking A-plus. Yeah. Okay. So I'm not going to say that to you, but I am going to say, look, I think you could do better. Okay. Utilities is also higher, one of our higher ones. Time to get a blanket.

And we also have DirecTV, which is over $100 a month. See, I don't feel that bad about Drive. I know it's an expense, but I'm pretty proud of the way that I've every year called them and said, I'm going to cancel. And I don't think $100 is that bad when like you think about if we're going to supplement that with all these different subscriptions that are going to equal $100.

I think if you were making $500,000 a year, I wouldn't even be having this conversation. Yeah. But you two are living above your means. Yeah. Yeah. Have you ever acknowledged that to each other? No. I don't think so.

Not in terms at least of like these assets. Yeah. Well, every month you're losing money. Yeah. You tell me when you want me to give feedback, because I'm not here to just puncture holes in what you're doing. That's not my role. You know, the DirecTV, we've talked about that before, too.

I mean, that's just going back down, getting into the little things again, like we just talked about. So I don't know where we should go, because I think all the rest of the conversations when we go down the list are all these smaller things. Somebody, please ask me for my opinion.

I'm fucking going to. You want your opinion. Okay. Thank God. I feel like I'm going to explode. Okay, listen. Yes, you need to be focusing on the big things, but when you encounter something that is small,

this is how you do it. You need to be a lot more decisive. I feel like we're so slow. Everything's moseying along. I'm like, fuck, we have a lot of urgency here. You have three young kids. You're in your 30s. You either correct this,

or you spend the rest of your life treading water. That sucks. So $100 for direct TV, I go, question number one, is this part of my rich life? No, gone. Done. What's next? That's the tenor I want to get,

this cadence. We've got to pick up the pace here. All right, that's just my opinion. Now you decide what you want to do with it. Will you just do that for every line for us? I did something better. I just taught you how to do it. How are we going to get it down to 60, though?

A great question. Can we play with something for a second? The beauty of having this on the Conscious Spending Plan is we can just delete something and see what happens and then put it right back. So what is a very, very expensive thing on your fixed costs? The mortgage. Okay. Let's just zero that thing out. Pretend that you have no payment.

I don't know. Who cares? It's just a model. Zero it out and see what happens. Okay, what just happened? Artifix costs went down to 55%. From what to what? 83.

From 83 to 55% is what just happened. In other words, all those changes you just spent the last half an hour agonizing over were exceeded by one decision. What does that tell you? I've focused on the big things. And the fact is you're losing money every single month. Somebody like me, a third-party observer with a clipboard, needs to see something dramatic changing in your life.

Otherwise, you will be stuck here for the rest of your lives. So you can put the number back on your mortgage. It's up to you. But what would you like to do to make a bigger change? I don't know the answer to that. These ones make everybody uncomfortable, don't they, to talk about this? Yes. And yet it is really the only thing that actually matters.

The point of this discussion is not to just arbitrarily get to 60%. Trust me, a day from now, neither of you are going to be motivated by some arbitrary number called 60%. The point of this is for you to define your rich life, which you told me was family, was experiences, was health, et cetera, and to match up your spending into that vision. Even though you have made progress, you are still approaching it with like a tiny 0.3 millimeter pencil, and you need to have a gigantic,

gigantic pen, broad stroke to make big changes. One of the first things you said to me when you spoke to my colleague was, we don't want to change our lifestyle too much. And we're still there. You don't have to. It's your lifestyle. You will keep paying your mortgage. You will send your kids to school, all that stuff.

It's fine. But invisibly, you will be slowly getting pulled underwater. and you will increasingly fight, you will increasingly be stressed out with little issues that come up, and you will continue to make arbitrary episodic decisions about buying a chair or a bed frame or taking a trip, and what will become bigger and bigger in your relationship will be money. Let me jump right into the follow-ups because they are fascinating. Christine said, I have been reflecting a lot on my mindset towards money and our budget since our call. One thing that is really sticking out to me is that for years I have been focusing on small details,

which put me in a vicious cycle of frequently checking account balances and strictly tracking our spending, which has caused worry, stress, and lost sleep. I learned that the real impact for our money happens at the 10,000 foot level. Thomas and I now have a plan to improve our greater areas of spend. Our call also helped Thomas and I to start handling our finances as a team. We have a short-term and longer-term action plan that we both agreed to. I feel much less alone and am motivated to succeed as a team with Thomas. And Thomas said, we understand that we are focusing too much on the small details and not the larger picture. We also took to heart each other's feelings and thoughts toward how we approach money. We've set goals. I am going to give up the Jeep, sad face, but we both understand

we are living above our means and willing to make sacrifices. They also updated their plan together. And here are some of the decisions they made to reduce their fixed costs. In the next 30 days, separate from current financial advisor and shop out insurance, cancel direct TV, cancel gymnastics, look for cheap car options, begin process to sell Jeep, cut 100 bucks from monthly groceries. And they continue on, get a raise, get a side job, and not look at accounts each day. Their goal is within a year,

here 60 to 65% on fixed costs. Now here's an even more recent update. I actually heard from Christine and Thomas a few weeks later, and this is what they said. Since our last update, we have sold the Jeep and purchased a less expensive vehicle for Thomas, which reduced our car payment by $200 per month. We canceled our daughter gymnastics class, have reduced our grocery spending, and got the PMI removed from our mortgage. Ryan got his annual 4% raise, and I adjusted my tax deductions which increase my take-home pay. These changes have reduced our fixed cost from 97% to 80% of our income. We still have a ways to go, and we are very proud of the progress we have made so far.

We have weekly budget meetings, and I've gotten out of the habit of checking our accounts first thing in the morning or even daily. I feel like we are partners and more equally share the responsibility of managing and being aware of our finances. We've both been listening to recent IWT podcast episodes too, and it has been fun to have those as a topic of discussion. you have made a big impact on us and we really appreciate it. Well, I'm thankful to both of them for coming on this episode, for having this conversation

with me and for you for listening. I'd like to encourage you with a couple of things that you can do now. If you listen to this episode and you heard something that struck you, that you feel the same way you're thinking too small, you can take control to your money. First, you can do it on your own. Get my book, get it from the library or any bookstore. I will teach you to be rich. Pair it with the journal,

and you solo or you and your partner can sit down and design your rich life and use your money to live it. Second, if you want help to actually do this faster and adapt it to your life, get in my money coaching program. Iwt.com slash money coaching. I'd love to see you. We have hundreds of other people who are sharing their wins and can help guide you.

And then I'm there as well every single month doing live Q&A. Thank you for listening. and I'll see you next week. Thanks for listening to I Will Teach You to Be Rich. I'm Rameet Seity. Please follow the show on Apple, Spotify, or wherever you listen to podcasts.

If you haven't read I Will Teach You to Be Rich, my book, pick up a copy. You can get it at any bookstore or any library, and it will show you the specific tactics for how to build the I Will Teach You to Be Rich system into your personal finances.