I Will Teach You To Be Rich - 162. “We panic over money—but spend $84K/year on travel and shopping”

Episode Date: June 25, 2024

Paul, 33, and Maddie, 29, joined us in New York City for a live-recorded episode. She is a high earner, but worries about lifestyle creep. He recently left his job, and they’re treading water on one income. This episode is brought to you by: Fabric by Gerber Life | Protect your family today with Fabric by Gerber Life. Apply today in just 10 minutes at https://meetfabric.com/ramit. Facet | Get affordable, accessible financial planning with a flat fee membership. For a limited time, the $250 enrollment fee will be waived when you sign up at https://facet.com/ramit. Masterclass | For unlimited access to every class and 15% off an annual membership, go to https://masterclass.com/ramit. Rocket Money | Stop throwing your money away. Cancel unwanted subscriptions – and manage your expenses the easy way – by going to https://rocketmoney.com/ramit. LMNT | Right now, LMNT is offering 8 single serving packets FREE with any LMNT order. This is a great way to try all 8 flavors. Get yours at https://drinklmnt.com/RAMIT. Connect with Ramit • Get the Podcast Newsletter and exclusive Q&A about the show • Get Money Coaching with Ramit  • Download the Conscious Spending Plan • Listen to my book—now on Audible • Get my New York Times best-selling book • Get my no-numbers journal • Other episodes • Instagram • Twitter • YouTube • Submit a question for the newsletter iwt.com/askramit  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.

I'm coming to San Diego on my next tour date. I'm going to be there July 1st and tickets are on sale right now at IWT.com slash San Diego. My previous events were in New York, Philly and Boston. I brought couples up on stage just like the podcast but live and you get to hear exactly what's going on in their financial lives. There is nothing like it and you're gonna find me in San Diego July 1st. Get your tickets now at IWT.com slash San Diego. That's IWT.com slash San Diego. I'll see you there. Hey, I want to get your help because it's my birthday this weekend and I want to do a challenge together. I don't need any gifts. I don't want an umbrella. I want to do a

generosity challenge. That means I want to do a generosity challenge. That means I want to challenge you to be incredibly generous over the next three days. Maybe it means you leave a 35% tip at a restaurant. Maybe it means you write a big check to your friend's charity fundraiser, or it doesn't even have to involve money. Maybe you offered a babysit for your sister so she and her partner can finally go out on a date night. Whatever it is though, I want to challenge you to use your time and money to live a rich life. And when you do that, take a picture of it, share it on social media with me,

tag me and use the hashtag Ramitgenerositychallenge. I'm going to be collecting and sharing some of the best examples and the single best example, you win a VIP ticket to one of my events coming up in the next few months. I'll be sharing all these examples on social media. Just remember it's from now today until Sunday, June 30th. Share your example of generosity and tag me and use hashtag Ramit generosity challenge. I have sort of a constant fear of getting laid off. It's like a recurring nightmare because I just feel so much pressure that I am the only one bringing in income.

I deal with it by putting a lot of pressure on Paul to figure out his side of the equation. And it comes out in probably not the best way. I have a very sort of like urgency, stress around it. I actually try to avoid having this conversation. That specific subject is just one that is very touchy. Maddie does understand all of these concepts. But there's something just like deep down innate inside that is scared that it will all disappear. Do you think it's possible to feel good about money? Not from my experience. We're also planning a wedding, so...

Meet Paul and Maddie. Paul's 33, Maddie's 29. They recently got engaged and they combined their finances. Unfortunately, he left his job and Maddie now panics about their finances. As you listen to today's conversation, you're going to hear a lot of expectations. What are our friends doing? What is our family thing? I want you to listen closely and remember that we are all affected by social expectations and peer pressure. Let's start at the engagement party that they were recently planning. So I love planning parties and I feel like I'd already planned everything. And I feel like you came to me and you're like, should we have a conversation about whether or not this is a good decision given that I'm just about to stop working and we're

going to be on one income? And then that made me panic. Everything was kind of already planned and I already told everyone about it and I didn't want to backtrack. Okay. But I think it ended with us both feeling not great and me thinking, okay, well, we're still going to do it because I really want to and it's important to me, but it's going to be kind of like stressful as we do it because

this is looming over us as it may be not be a good decision. Isn't that like the worst of all? Yeah. We're going to do this thing. We're not even sure if we should do it and we're going to feel bad the entire time. Exactly. Yeah. Okay.

Is that normal for your decisions? 100%. I feel like I constantly live between like two kind of feelings, which is like, I'm going to live a bougie, great life. I work hard. I've made great money. I can kind of do what I want and we can travel a ton and have a great wedding and all these things. And just feeling, then the other side constantly feeling like stressed and guilty about it. So I feel like in one sense, I feel like my spending is like out of control and I can't stop it. The other side is that we have a lot of money and we can do it, I guess.

But that side is, I don't know, it's yeah, it kind of constantly flip flops. OK, Paul, do you feel the same way? For the most part, yeah. You oscillate between, oh, my God, we're going to run out of money. We can't do this, we're overspending versus, they actually make a lot of money, we're good. I try to calm her down when she gets into panic spirals, but honestly, it makes me hesitate a bit.

It makes me think, maybe she's right, maybe we shouldn't be doing this, is this reckless? So I probably have a bit less of the instinct to panic about we're going to run out of money. But some changes in my job have caused me to start being a bit more concerned about things like this for sure. I think I have more of a scarcity mindset, which is it feels like anything can be taken away from us at any point. And we need to be like almost like hoarding money. And I think the best example of that is like, I believe that our money is our checking account. I don't feel comfortable tapping into anything outside of my checking account. I do understand it. And I know all about compound interest and investing over time.

OK. But for some reason, like, there's a mental gap between what I understand and how I emotionally feel. Yeah. You don't feel it here intellectually. Yeah. I look at the numbers. Yeah, I fully understand the numbers. I'm very analytical. I grasp all the concepts. Yeah. But emotionally, I'm like freaked out. Isn't that interesting?

Yeah. What do you make of that? Some sort of generational childhood trauma seeping into a fear of like losing everything. Yeah, it definitely hits home. I think that's a huge part of how we ended up on this podcast was Maddie does understand all of these concepts. But there's something just like deep down innate inside that is scared that it will all disappear.

And do you feel the same way scarcity wise? No, I don't. Okay, I don't. I'd say I actually feel pretty optimistic about the future. And when I when I think about money, I think of what it can do for us down the line. I also don't want to make it all about Maddie. I think my work situation over the last year or two has added a lot of stress to the situation. What's that work situation? So basically, I was working at a company and I was launching a business, a new business unit for them. And it went pretty well for the first year or so.

And then the market downturn happened and we basically just couldn't get the business to work out. And it was incredibly stressful. It took such a toll on me and I ended up leaving the company. And so now I've been off work for a month and a half now. So we've transitioned into one income. And I think that puts a definitely puts a bit of a burden on on Maddie emotionally and because of the money. I have sort of a constant fear of getting laid off, whether that's grounded in reality or not.

And right now, it's definitely not grounded in reality, but it's like a recurring nightmare because I just feel so much pressure that I am the only one bringing in income. And I think also kind of helpful context is so Paul used to be a corporate lawyer. So we used to be in this place of like immense stability and he really didn't like being a lawyer for obvious reasons. Wait, just tell everyone what those obvious reasons are. Let's go ahead and tell everyone about the legal field. Paul? Oh, it's about as exciting as accounting and you have to work 100 hours a week.

I like lawyers. Every time I talk to a corporate attorney, I'm always like, you're very interesting. You have a very, they're like Lego masters or they do something really cool on the side. But of course, that's all I see. I don't realize they're billing, you know, like 15 hours a day and doing reading briefs all day. So, all right, you left the legal world and go on, Maddie. And wanted to do something more entrepreneurial. It kind of coincided when we moved cities. So, we didn't have as much of a network. He ended up joining sort of a scale up. And at the time, we were really excited. We were sort of running the numbers around the equity and all of that stuff. And you usually take

a salary cut. So I was like, we felt good about that trade off at that time, but that was a long time ago. That was like 2019, 2020. The world looked very different. a long time ago, that was like 2019, 2020, the world looked very different. And I think the sort of realization that sort of that equity was worth nothing and Paul kind of feeling not fulfilled in that role after a couple of years and it being really stressful and him having to leave. I think it just kind of took us from a place of like immense stability to immense instability. I got you. Paul, you mentioned that you're not working right now is has caused a lot of stress for Maddie.

What about for you? If anything, the last year on the job was was even more stressful and that took a huge toll on me because I think I have my identity tied up a lot in being successful at work. And when I couldn't get that business to work, it took a huge toll on my mental health and definitely took a toll on our relationship as well. So if anything, there was, you know, when I did end up leaving the company, it was almost a relief and I started to feel better. I definitely struggled with it a lot. When things aren't going well for me somewhere, I'm like very inclined to sort of, okay, well, I'm just going to jump ship and do something different.

And I felt like Paul was really unhappy for a really long time and it frustrated me that he didn't take action to make a move. Like, it's not like he was the founder of this business. He wasn't that tied to it. So I think by the time this was all happening, I already felt a lot of frustration towards him because I felt as if it was a little too late. I was like, you weren't happy a year ago. Why didn't we look into making a move a year ago?

And now the market is really horrible and it's a different climate and now is when you want to leave and now we're going to be on one income because of it. Keep going finish the sentence for me we're going to be on one income therefore. Therefore I'm going to feel a ton of financial pressure and we won't necessarily be able to live within our means. We will have to dip into our savings. I actually try to avoid having this conversation.

Why? Because that specific subject is just one that is very touchy. The idea of at the end of the month, expenses exceeding income and dipping into a savings pot or investment portfolio. That really kills me. I think we should be making progress. We were making such good progress. And if I could have just made that job opportunity work, then we would be in this great position of just

growing our money for the future. Like you mentioned, you were really stressed when you were at work. How are you feeling now? It changes by the week is probably the honest answer. Yeah. From what? From a sense of everything is going to be okay. This is a temporary moment of being on one income. We can get by being on

one income. It's totally fine. Maddie makes great money. This will be resolved, you know, six months from now. This will all be in the rear view mirror. But then sometimes I get caught in the negative spiral too of thinking, what if this does go for six months and then longer or longer? What if it does? Then we we basically have to make like lifestyle changes. We should probably be reducing our expenses, making sure that we fit within Maddie's income. We're also planning a wedding.

So when is that September twenty twenty five? So you're planning a wedding. So when is that September 2025. So you're planning the wedding, but you have this financial instability. Yes. How do you deal with that? I deal with it by putting a lot of pressure on Paul to figure out his side of the equation and it comes out in probably not the best way. I sort of micromanage him and put a lot of pressure on him to sort of just get any job. Whereas his philosophy is, I should take the time and find a job that will be really fulfilling. And especially having sort of had two different

career paths that he didn't necessarily love for various different reasons. I think it's really important for him to find something that will put him on a path for a great career. He's so incredibly intelligent. Wait, are you making his case or are you making your case? So I'm making my rational case and then I'll... And then you'll tell me what you actually feel. Okay, go on. So this is my rational case is that...

It's important for him to find the thing he loves. He already went from one career to another. It didn't quite work. So intellectually, he needs to what? Find the best career option for him for the long term. Even if it takes time? Even if it takes time. Wow.

Okay. However, my actual day to day feelings are just get any job tomorrow. Any job? Not any job, but any like, like something will come up on LinkedIn and I'll be like apply for this. I'll be like, no, why would I apply for it? I'm like, who cares? Just apply.

Like whatever, just take the job. And if you don't like it, quit three months later. Like I have a very sort of like urgency stress around it. I see. You mentioned you micromanage him. What do you mean by that? Yeah, I mean she likes to be very involved in the job hunt process. She likes to make sure that you know I'm applying to companies every day, that I'm consistently scouring LinkedIn, that my list of contacts that I'm networking with is always being updated and meeting new people all the time.

You have to play a long game to find the right opportunity and these things take time. And you should be taking steps along the way consistently, but I'll get there eventually. Matty just likes to see a bit more day-to-day progress of... How do you monitor his LinkedIn and his contacts and stuff like that? We work from home together a lot. So I'll kind of come over and I'll be like, did you respond to this person? Have you emailed this person yet?

Did this person reply to you? I just like, I feel like I feel more on top of it than he does. And I feel like I need to be constantly following up If someone emails him like he might respond a day or two later and like that just does not fly with me in this Recruiting why says because I'm worried he's gonna miss out on an opportunity and it's gonna take us longer. Okay something Okay, got it. So you're kind of checking in with him daily. maybe more than daily, multiple times a day. Is that fair? Oh yes.

Oh yes. Did you do this? What about that? Et cetera. How do you even know what LinkedIn people he's talking to? I ask him and he'll tell me. Sometimes I'll see it like pop up on his phone. Once he tells me something, it like goes in my like mental filing cabinet.

So then I'm like, okay, I have like little mental reminders. Be like, check in on this, make sure Paul did that, make sure Paul responded to this. And just out of curiosity, what do you get out of this? I guess it feels like I have some sense of control over something that feels very out of my control. Yeah. How do you feel when you get the questions from her about your LinkedIn check-ins and things like that? I immediately feel my chest tighten up.

The feeling of stress and my heart rate skips a beat of, I need a good update for Maddie right now. Like I need to be able to show her I made progress. What does that feel like? I mean, it's a very tough thing to kind of like accomplish. Does it remind you at all of any other career situation where you felt like you had to give a positive update regularly? My last job, for sure.

How did that end up? That ended up with me in the worst mental state I've ever been in. All right. And what if this just went on for, let's say, six months, nine months, over a year? Yeah. So I think, to answer your question, at some point, a deadline would have to come in. Personally, I'm kind of avoiding the step of running the numbers fully on how many months

we can take before I have to take a more drastic step. Okay. Have you run those numbers? Absolutely not. But you feel... I feel like the deadline is tomorrow. Okay. We've done a lot of couples therapy and we're super aligned and we're very open and we're

great communicators. I feel like this is like the main blocker in us like being super happy. This is the main blocker. This being what? Our financial security. I won't even say stability because I know that it's not necessarily that, but it's feeling financially secure and feeling excited for our future together financially and also our career trajectories and just feeling confidence that everything's going to work out.

Do you think that if he had a job tomorrow that you would feel financially secure? I wanna say yes, but I know the answer is probably not yes. I mean, when he had a job and he was making good money, did you feel financially secure? No. No.

It's a short answer. You've heard me talk about gender dynamics on this program. Studies show that women do more household labor even if they work the same number of hours as men. But notice what's happening here. Maddie is taking on the labor of checking on Paul's job search. She's micromanaging his process. Now this is an example of Maddie unnecessarily taking on labor when she doesn't need to.

Her partner is not asking her to do that. And I'm highlighting this because it's happening early on, meaning you can see easily where this leads. Just as in other couples, we have somebody who may be a little bit more conversant with numbers. She takes on the family finances. She does the day-to-day finances. It would be very, very predictable for her to take on more and more of Paul's responsibilities. He tries, but it's not quite her way, or she's a little better.

He feels disempowered. He basically gives up on the finances. And fast forward 5, 10, 15 years, he goes, oh, she's better at it and she feels incredibly overwhelmed and resentful. Do you see how this pattern is starting right here? I don't want that. Now, I'm not blaming Paul. I'm not blaming Maddie.

What I am saying is you have to be very, very careful about taking on labor from your partner. Very careful because it sets a precedent and it has bigger ramifications Very, very careful about taking on labor from your partner. Very careful because it sets a precedent and it has bigger ramifications than most of us think about. Hold that thought, we'll be right back. A lot of parents have a hard time doing things for themselves, spending money on themselves, prioritizing themselves. We hear it all the time on this show.

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I'm paying $1.25 a month to buy a new house. I'm paying $1.25 a month to buy a new house. I'm paying $1.25 a month to buy a new house. I'm paying $1.25 a month to buy a new house. hilarious slash sad thing that happens to me almost every single week in my Instagram DMs somebody will write me they go Hey, I'm paying one point two five percent AUM to my financial advisor I know you've talked about not paying a percentage to a financial advisor I just want to know if it's worth it or not. Where can I ask you a question? I go just join my money coaching program. It's like 69 bucks a month

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out facet.com slash Ramit. Sponsored by FACET, FACET Wealth Inc. FACET is an SEC registered investment advisor headquartered in Baltimore, Maryland. This is not an offer to sell securities or investment, financial, legal, or tax advice. Past performance is not a guarantee of future performance. Terms and conditions apply. Let's get back to the conversation. Part of being an effective partner with money is having a clear joint vision. And if something unexpected happens, like leaving a job that's not working out, talking about it and recalibrating that vision, Maddie is nervous about money. Fine.

But we need to run some numbers. We need to get clear what Paul needs to do. Paul left his job. It's his responsibility, not Maddie's. You like being stressed? Maybe. yeah. Maybe it's my natural state. I think I feel comfortable being stressed.

What does that mean? It's a way for me to sort of like process things and sort of like channel my emotions in a way. And it feels more comfortable than like being calm. Oh really? Let me just repeat that back to you. Being stressed out feels more comfortable than being calm. What do you make of that? It's true right? For you? Yeah.

Do you think that there are any examples where you've spent a good amount of money and you felt good about it? No. Okay. How about you, Paul? No, I honestly don't think so. Is there any part of your life where you'll do something and you'll be stressed about it?

Most of my spending. Engagement, travel. Yeah. All that. Clothing for sure. Like I love shopping, but every time I purchase something, I go through an internal battle with pressing this submit button, online shopping. Yeah.

And then I'll go through periods where I'll like completely ban myself from online shopping and then periods of like buying way too much. Have you realized that relationship with money is probably not a healthy one? Yeah, definitely. When we first started dating, I actually didn't worry about money at all, but I was also quite young and I had a very sort of like laissez faire feeling towards money and was like pretty frivolous and kind of thought money was sort of like always going to be there and I had a good job out of university and I was like, I'm just going to keep doing well and things are going to be great.

And he sort of was the first one to kind of like open my eyes to like being like financially responsible and maybe some of the decisions I was making wasn't the most financially responsible. And I almost like went on like a full pendulum swing to the other way. And this kind of like resonates for me because one of my parents is really stressed about money and the other one is very frivolous with money. So I was more in line with one parent and then it kind of completely swing. And now I like see myself turning into the other parent and like being stressed to order like an extra appetizer because it's going to be another like $12 or something.

Is that true? You are stressed? Yeah. Whenever we order, I'm like, oh, we shouldn't get that. It's an extra $20. Let's rewind back to you being young. Are you the only child or do you have siblings? I have an older sister.

Older sister. Okay, great. So you're young, you're five, six, seven, eight years old. What do you remember about money in your household? So one of my parents was extremely stressed about money 24 seven. Who's that? My dad. Okay.

And my other parent was very lax about money, but it was always a secret. So it was like, we're going to go shopping. But when we come back to the house, take your shopping bags and run up and hide them in your bedroom. That was mom. That was mom. Yeah. Wow. Yeah. Okay. What do you make of that now as an adult? Mixed messages for sure. One is that we don't have any money and we're need to be really frugal and money is a scarce

resource. And one is we actually do have money, but we're not going to talk about it. We're not going to talk about it. Or we're not going to. We can talk about it. You, me and your sister. But who are we not going to talk about it or we're not going to. We can talk about it. You, me and your sister. But who are we not going to tell about it? Dad.

Why not tell dad? He would get unhappy. Oh really? Upset if we spent a lot of money. He is a comes from a Holocaust family. His mom was part of the Holocaust and so he grew up I think is a lot of that like trauma still very real. How do you think that that affected his relationship with money?

Definitely a scarcity mindset of feeling that anything could be taken away at any point. Makes sense. Yeah. And keep going. So as a result, what did he do? Tried to keep all of his resources very, very close. How did he do? By restricting spending and obsessing over money.

How do you obsess? His mood fluctuates with the stock market. Oh really? Yeah. Like you can tell. Yeah. What do you obsess? His mood fluctuates with the stock market. Oh really? Yeah. Like you can tell. Yeah. What would he say? You can just tell when the man's grumpy. And he had a successful career in finance. We went to private school. We had a really great life. We had all of the things that we needed. We lived in a really big house. And then as you got older, I'm assuming he paid for college. Yeah. Yeah.

Even beyond college, like cars and stuff like that. Beyond college, I've been relatively financially independent, but up until college, paid for everything. Okay, got it. Definitely didn't feel poor or like even middle class by any means. Like it was we felt upper middle class, but the messaging we got was not that was that we were not comfortable financially. When we were eating out, like he wouldn't order a meal and he would like pick off our

plates to like save money. Or I feel like we were always kind of like stressed about money because we didn't want to make him stressed out about money. Okay. Your mom and dad still married? Yeah. Okay. And your mom's still shopping and not telling dad? Yeah. Yeah, we're going to have to edit this out of the podcast. Dad goes into the closet, finds out there's a secret Batman closet and there's all these

beautiful bags. Okay. Maddie didn't catch it, but I bet you did. She feels stressed at the concept of ordering another appetizer just like her dad did. I have a lot of empathy for couples who come on this podcast. Whenever people behave in peculiar ways with money, there's almost always a reason for it. And here we can see how much of her dad's financial anxiety has influenced her.

Not to mention the mixed messages that she got from her mom buying and hiding purchases. I think you mentioned that my dad is very cheap even though he lives in a million dollar house. Yeah. Is that true? Multi-million. Multi-million. Okay. Thank you for being honest.

I love it. Okay, great. So he's cheap. And how could I, an outside observer, tell that he's cheap if I spent two days with him? The clothing for sure. He wears crocs and sort of a ripped shirt. Say no more. Once you said crocs, I understand the whole...

I don't need any more details beyond a cheap person wearing crocs. That's tough. How does it feel to have a dad that wears crocs? Yeah. I mean, apparently they're stylish again, which is... That's f***ked up. Yeah. Alright, so does he eat out? Rarely.

And if you went to eat out with him, what would he get? He'd pick off your plate? Yeah. No. No, not quite, but he would get nothing extravagant. Okay. What does he do to enjoy his money? Nothing.

And when you ask him about that, you're like, Dad, like, what are you going to do? You have all this money. What would he say? We don't have all this money. Really? Yeah. Does he deny it? Yeah.

That's the thing. There's like a black hole. We don't understand what the reality is. Yeah. Or if it's all in his head. What do you think will happen with your parents financially speaking as they get older? You know, five, 10, 20 years from now, are they going to spend their money? No, I mean, they should.

Like me and my sister would love for them to enjoy their money in retirement, but I think there's too much of a mental block for them to do that. Yeah. You ever tell them, hey, you should take a trip block for them to do that. Yeah. You ever tell them, hey, you should take a trip? Oh, yeah. Come visit us in London. All the time. Yeah.

What do they say? They will do it, but there will be stress. I see. On one side. My mom is fine, and she's stressed about the fact that my dad is stressed. So your dad is stressed, and then she inherits that stress. Yeah. She absorbs the stress. She enjoy it

Being stressed maybe Well, you know your mom best does she enjoy? Absorbing the stress from your dad. No. Do you think Paul enjoys absorbing this stress from you? No Hmm, and and you're like dad. Why don't you just stop? You tell him that. And then what does he say? He's like, stop what? Yeah. This is me. Yeah.

Yeah. There's nothing to stop. This is who I am. Yeah. Okay. Can I ask you a question? Do you understand if you have enough money? No.

You don't know? No idea. You don't know if your dad has enough money? You don't know if you have enough money. Yeah, absolutely no idea. In a way, it feels quite comfortable, right? It's the same way you grew up. Yeah.

You ever think of that? No. Do you think it's possible to feel good about money? Not from my experience. The most important part of that entire deep dive on Maddie's relationship with her dad and his money psychology was her admitting that her dad wears crocs. I'm sorry, Maddie. But also, you can see how easily our money identity gets transmitted to the people around us.

Not just children, which is obvious, but from Maddie's dad to her mom and now from Maddie to her fiance. Now listen, you can play whack-a-mole your entire life fighting about your KFC order and Starbucks and Target, or you can get to the root cause and build a healthy relationship with money. That starts with yourself and then with your partner. That's what I get to do on this podcast. We'll open up the conscious spending plan right after this. I recently took a masterclass with Amy Poehler called Prepare to Be Unprepared, where she shares her nine principles of improv.

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Now let's get to their numbers. Keep in mind that Maddie just said it's not possible to feel good about money. Okay, so assets, zero. Investments, $627,000. Savings $27,000. Debt, $5,000. And total net worth, $649,000. All right. What do you think about that? I feel like it's incredible.

I feel like it's way more money than I would have ever thought I would have at this point in my life. Okay. How old are you? I'm 33. 33 and? 29. 29. All right. What do you think about the numbers? It's okay.

It's okay. All right. Is there a number that would be great? Maybe like double. Okay. And when you look at this net worth number $649,000, what does it mean to you? It means that we still have to be quite thoughtful and conscious about money. Okay. Just if we like fast forward and let's say this was one million, two million, five million, would you still need to be conscious and thoughtful about money? It depends. I think I will fall victim to lifestyle creep.

And if we had that money, I would probably want to buy a house and nicer things. And then I would think I would always feel a little bit stressed and a little bit like there's something else to reach for. Lifestyle creep. You use that phrase. What is that? So when we first moved abroad, we were making much less money. And I believe I felt the exact same level of stress about money as I did today when

we're making a lot more, but I spend a lot more. And the lifestyle creep part of that is what? I shop more now and we live in a nicer flat and do a bit more trips. And when we go away, we stay in a four star hotel instead of a three star hotel and all of the things. Why is it called creep? Why not conscious spending? We earn more.

So we spend more thoughtfully. Yeah, could be like I spend a lot more than I used to spend. Yeah. Am I guilty of lifestyle creep? No. What's the difference? I don't know. Maybe there isn't one.

But it always raised the question for me. Okay, so if I add 50% to my income or double my income or triple my income, am I still supposed to be eating the exact same dishes I used to eat, traveling the exact same places, wearing the exact same shirts? When do I get to actually use my money? So my philosophy is if you earn more, you should spend more, but you should do it thoughtfully and carefully. Yeah, I think the difference is significant for sure. I think if we, to be conscious spending, if we got aligned on doing exercises like this and committing to like I think committing to that guilt free spending number that we feel comfortable with

would be super helpful for us because then we could just go forward each month and know that X thousand dollars is allocated to that. Okay, cool. Let's look at your income. Maddie, what is your combined gross monthly income? Around 20k. All right. You make $19,583 a month. That's from your income alone, right? Right now, you're looking for a job. So your salary alone brings in close to a quarter million dollars,

$235,000 or so into your household per year. How do you feel about that? Pretty good. Oh, I agree. It's great. Right now, Paul, you're making zero. You're on the job search. When you find your next job, how much do you expect to make? Ballpark. Ballpark, $150,000 to $200,000. So maybe $350,000 to $400,000. Yeah, $350,000 to $400,000 a year. How do you both feel about that? That would be great. I would feel incredible if we had that.

Let's take a look at your fixed costs. Your fixed costs are at 63%. Alright, you live in London. It's a very high cost of living city. Your rent is 18 or 19% of gross income. Again, this one income. Okay. Looking at your spending, honestly, I don't have much to say about this at all. You have a car payment.

You have no debt, your groceries are $850 a month, you have $300 a month of subscriptions. Okay, maybe you could cut that if you needed to a bit. And your therapy, you have this listed here, that's great. And you added the miscellaneous 15% for things you don't even account for, which is smart. And you are at 63%. Fine. Investments are at 9%. That's a thousand dollars a month. What is this, Maddie?

Part of it's a pension. And then I also put some into the market, although I've stopped that while we're on one income. So usually that would be closer to 2000. Ah, okay. You stopped it while you're on one income. And what do would be closer to 2000. Ah, okay. You stopped it while you're on one income and what do you do with the money that you redirected? Oh yeah, well, you'll get to the bottom

and then you'll see where that money's going. Okay, let's keep going. Let's keep going. Savings are at zero. Let's just scroll up. You have $27,000 in savings. So like three to four months of savings, like basically four months of savings, right? How do you feel about that?

I feel pretty good about that. But also because a lot of our money is invested in tax free accounts. So I feel like that is kind of savings as well. Okay. All right. And then let's go down to guilt free spending. Whoa. What is this? Can somebody explain this? It's 62% which is $7,000 a month. What's going on here? The last three months have been incredibly expensive for us. We got engaged in January. So we've had a bunch of kind of one-off expensive costs like ring and a trip to celebrate or engagement party.

And then we also just have a lot of friends weddings this year. So travel wise, it's been a very, very expensive start to the year. So I don't think that's fully representative of what it would normally be. But we do spend quite a lot of money on on travel living abroad. We travel quite a lot. And that adds up for sure. What the hell? This was all sounding great. Like, why are you so worried?

And then I get to the bottom. Oh, now I understand they're spending 62 percent $7,000 a month on guilt free spending. I need to dig into this. If this is true, this is $84,000 a year in guilt free spending. If that pace continued. Yeah. Yeah. Okay.

The numbers are the numbers. Like I'm not here to judge where your money's going. I just want to get an inventory of what's going on. Would you say that this is accurate? Yeah. Okay. So if that's the case, you are spending more than you make every month. Yeah. Is that a cause of stress to you? Oh yeah.

Yeah. Both of you. Yeah. So not well, different cause of stress to you? Oh yeah. Yeah. Both of you? Yeah, yeah. So not, well, different degrees of stress. I think it causes Maddie more stress. In fact, we've kind of been, or I've been running the numbers on this to hopefully get a bit more comfort and to bring the pressure gauge down about the situation. And even with our aggressive spending to start the year and being on only one income, our savings and investments have still grown each month, despite month to month being slightly in the red.

So to be honest, when we talk about this concept, I think we both still feel really icky about being in the red and it doesn't give us, especially probably Maddie, as much... It doesn't make us feel as relaxed as I probably should. For example, we're planning a wedding so I anticipate for the next year or so we're gonna be in the red. Even if we did get a second income, there will be many months that we're in the red plant like on wedding costs. I think we feel very uncomfortable and unsure around how much we should be allowed to happily spend on a wedding. Well, I agree. Well, I agree. I think you earn the right to feel okay about being in the red occasionally if you have a very large net worth. I think at your age, your net worth is really impressive.

But I think when we factor in the fact that you're losing money every single month, that you're planning to continue that for the foreseeable future and you've got extensive travel and a wedding, that starts to be trickier. Yeah. Well, so this goes back to my urgency around changing the other side of the equation. Which is? Paul getting a job. I'm getting a job.

So you're saying, Paul, if you get a job, suddenly this whole CSP looks a lot better. It gives us a lot more flexibility. We don't have to change as much as aggressively and we have money for the wedding. Everything you said is right. I also think that the second I land a job, our situation goes, it is great. And we really don't have to worry and we can go back to investing aggressively each month, putting money away. And we don't have to stress about trying to cut back on on places we don't want to come back on. I agree with that. It ratchets up the pressure. Yeah. So emotionally, it's difficult. I feel really guilty asking Maddie to pull back on spending

when I Am the the problem and I could solve the problem by by getting a job. Hmm I think that that you know on one hand I want us to be a team and I would love for Madty to support me emotionally while I'm looking for a job and say, it's okay, we can handle this for three months. If it's six months, that's totally fine, we'll be okay. You should find the right job.

Rationally, when we look at the numbers, it makes me think, yeah, I need to fix the side of the income equation as soon as possible. And I should also be cutting back my own spending significantly and not asking Maddie to cut back as much because. Is there a difference in what you spend versus what Maddie spends on the CSP? Well, we've aggregated it all for the purposes of this, but yeah, there would be a difference. We spend in different areas and.

We have different weak spots. I spend way more on shopping. OK, it's all rolled up into that five to seven thousand a month. OK. And where do you spend money? We do a lot of travel together, but I'll also I'll go on a golfing weekend with my guy friends and I also spend a lot of money. I love to cook and I spend a lot of money on food and groceries. And my gym is very expensive.

OK, what about the wedding? How much do you want to spend on your wedding? We're struggling with this because we look at this number and we're saying, okay, it's going to be the best day of our lives. Also, we're like super social and like I like love to party and like, I really want to have a wedding. Like it's like, It makes me really excited. But there's also this looming stress and guilt about the fact that we are on one income and should we actually

be dipping into this? Is this reckless? We budgeted $80,000. I basically just decided that based on comparing it to friends' weddings and the number didn't seem like it would destroy our finances. Where will the 80,000 come from? It would come from our investments. And when you just one question because I've planned a wedding. This 80k number that you picked, did you actually go through it and map out everything? The dress, the bachelor party? Oh, no, that's just for the wedding. Part of my work with couples is really

allowing them to share what's on their mind. And I try as hard as possible not to interject midway through. Mostly I want them to be able to tell the full story. But now that I have finished speaking with Paul and Maddie, and as I'm re-listening to this part of our conversation, I just have to be really directive. This is a really bad idea. They have arbitrarily picked a number based on what friends spent. They haven't run a real analysis. The wedding and the bachelor-bachelorette parties and the honeymoon and all the assorted expenses will probably triple the

cost. And all of this on one income when they're already in the red each month. Do not do this. Do not. I don't mind taking calculated risk, but you have to know what the risks are and you have to build a healthy buffer for the risks you didn't plan on. What they've done here is multiplied risk times risk times risk. And if one thing doesn't work out, everything else comes crashing down.

I've built a life so I could avoid that at all costs. And I hope you do too. But it takes some tough decisions. We'll get back to this story after these brief messages. I just got this message from a listener who enjoys this episode's sponsor, Element, which is a tasty electrolyte drink mix. Annie wrote, I just tried the grapefruit flavor

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and try the new Element Sparkling, a bold 16-ounce can of sparkling electrolyte water. Try it totally risk-free. If you don't like it, they will give you your money back, no questions asked. The deal is only available through my link at www l m n t dot com slash Ramit. R-A-M-I-T. Again, drink element dot com slash Ramit. Thanks for sticking around. Let's get right back to it. I've mentally prepared myself for it to be 100 to 120. Uh, yeah. What do you think?

Yeah, that sounds right. Okay, so $120. Okay. Weddings have some of the highest phantom costs ever. I wouldn't be surprised if it ended up being like $150. That would be almost double what we planned. Wow, did the oxygen just get sucked out of this room? What just happened?

What are you all thinking right now? I would not want to spend $150 on a wedding. Sucked out of this room? What just happened? Hmm. What are you all thinking right now? Oh, that's a lot of money. I would not want to spend $150 on a wedding. Do you agree? Yes. What if your wedding cost a total of $50,000? But...

Gives us a lot more breathing room. A lot more. But you know what kind of wedding you'd get for $50,000. It's not the wedding you have in your mind. What do you think, man? Betty's going no f*****g way. I don't want it. I'd rather not have a wedding. We really struggle with this because we've lived in three, four different cities each. We have friend groups in each of those places. We want our family to be there and we've gone through the numbers and tried to cut down the list and we find we always get to the point of saying, you know, could we

turn this into a 50 person, 60 person wedding instead of a 120 person wedding and we don't think we can. Okay. Let's go back to the numbers. Technically, you could do it. Sell $150,000 from your investments. You'd still have $475,000 or so. You could do it. What's the problem? It's a huge chunk to take out of the investments. Yeah.

That number would turn into well over a million dollars over the course of your life. But weddings are a big deal. I spent a lot of money on my wedding. I get it. If you can afford it. Are there any other problems with it? The stress of doing it.

I think I think what will happen is we will do it, but we won't. And we will be stressed about it the whole time. Correct. Same way you've treated every large purchase. Yeah. Yes. For sure.

So mathematically, you could do it. You have the money. You've invested. How'd you get all this money, by the way? A portion of it is inheritance. From your parents? From grandparents. Grandparents, okay. So we got sort of of like how much of that

Maybe a quarter to a third of it. Okay, and then the rest comes from we've just been working I've been working for almost a decade Matt. He's been working for For seven years and we've invested and saved good for you. All right Good to hear the inheritance part. Good know. The other part is what particularly interests me, which is it shows demonstrated ability to invest consistently. It tells me that you're going to continue having probably high income jobs and you're going to be able to invest aggressively over time. I agree. I think that's great. I think you've proven that.

On the other hand, from the way that you describe your lifestyle, it seems like you like nice things. I don't mind it. You like nice things? Great. I would say you do not want to get in this situation where you have these high incomes and you are essentially living paycheck to paycheck. It's a really miserable way to live. Yeah. To be making three, four, five hundred thousand dollars a year, wanting to stay at these hotels, go with your friends and you are sitting there like, I don't know if we can order the salad. It's really like going to be expensive.

What do you think about that? I think. You feel like you keep up with the Joneses? Yeah. How so? We hang out with people who money feels to be less of a concern due to their backgrounds. I don't think we keep up with the Joneses to a ridiculous extent. Seeing Maddie doesn't seem to agree.

What do you say Maddie? I definitely disagree with that. I think we have a lot of trips. We do a lot of group trips. We do a lot of nice things. We buy a lot of nice things and there's definitely a sense like we need to keep up or not. We need to, we want to keep up. Like obviously if we get invited on a girls trip to Ibiza, like I want to go.

And if he gets invited to a boys golf trip in Spain, like we want to attend these things and we do, but then we feel stressed about spending afterwards. Do you ever say, no, I can't go because we can't afford it? No. Sometimes, yes. But I also struggle to say no to friends. I'm terrible at saying that. It would be easy to scoff and say, oh, my God, Paul and Maddie, so ridiculous, so entitled. The first thing you need to do is stop caring what other people think.

I love that people say that with a straight face while holding an iPhone, wearing the same five brands as your five friends, using a probiotic that eight of your friends do, living in a house you bought because everyone told you that you need to own, while driving an SUV you bought because you have a two-month-old kid and society tells us, we need an SUV for our young child who can't walk. We're all social animals. We're all part of a larger community that influences our spending.

The minute you start accepting that is the minute you can decide which societal influences you want to accept and which don't align with your rich life the problem is they don't have a crystal-clear vision of their own rich life and They don't have the money to be able to afford this type of lifestyle So unless something changes they will simply spend on whatever their friends spend on whatever they get invited to leaving them wondering Where's all the money going? Let's be honest, you have $627,000 invested at a young age. Very impressive.

You have a high-income job. When you land your next job, it's gonna be high income. Together, fast forward for me 10 years. Where are you? Spending has gone up a lot. Like what would you be spending on differently? We would be living in a much more expensive apartment or like a small house. Our vacations and travel spend would continue to get more expensive. In 10 years we probably have a child or two. Yeah, I think you can probably just add a multiplier to everything on the list and everything gets more expensive.

I agree. And some of it becomes exponentially more expensive. If you're taking two kids to a very nice hotel and you're like, we want to sleep, you're getting two rooms, maybe you have childcare coming with you. Now you're talking about something that's not just two times more expensive, but three times more expensive. So it starts to really ram up. What happens in terms of your careers? So we both plan to keep working. Yeah, you're

prioritizing our careers. You'll be working more, you'll be earning more. I think that's fair to see. Yeah, be very busy. I can imagine it turning into a stressful situation of we're so dependent on having a high income that we can't like if anything goes wrong, one of us could have a health issue that could be a family thing. Totally. If we drop to one income with our expenses up like crazy then. Like right now you can do it. You can do it with one income.

You can actually do it quite handily if you were to cut a bunch of discretionary expenses. But at a point where you have one kid two kids childcare You can't a lot of pressure a lot of stress around it you feel that way now Yeah, so at a certain point the tail starts wagging the dog and you're like, yeah We're so grateful that we had these high-income jobs, but now we need these jobs That's just The path forward that you painted for me. Yeah.

But at the same time, I do have a lot of faith in our ability to keep providing and earning good incomes and work is really important to us. I don't see a scenario where one of us wants to stop working, but I don't want to walk a tight rope. You could do it. You'll be like so many other people living in major cities that have to work and are petrified of losing their job because if they lose it for one month, everything falls apart.

You know people like that, right? We are those people. Now you mentioned you're both in couples therapy, right? Okay. Were you seeing this therapist while you were going through this stressful work time? Yeah, definitely. Plus another individual therapist. Wow, great.

Okay. Was that helpful? It was incredibly helpful. Yeah. What did you take away from speaking to your therapist? What surprised you? The biggest benefit that my therapist brought was just getting my head out of the muck

and taking me out of the day to day fear to see the bigger picture. Like to zoom out and look at the whole situation. Yeah, give myself a bit more perspective from a 30,000 foot view instead of the day to day. Quick reminder, I'm not a therapist, but I frequently encourage my guests to see one. Paul is mentioning that his therapist encouraged him to zoom out to see the big picture. This is very similar to zooming out of the day to day expenses to ask yourself, what's

my rich life? What's our rich life? What's our rich life? What is your meaningful rich life for the next three years going to our closest friends weddings? For this year. I thought the number was closer to eight or nine. Well, I think four are meaningful Okay. Yeah, so I'm say maybe four or five combined. And then being able to afford the wedding that we want for us.

And I would say like taking advantage of us having some time off together and doing something we maybe wouldn't be able to do in another period of our life like for example when we have kids. I think we could cut down to four weddings, be happy to do that. Taking a long trip. I agree that it's kind of an opportunity that we probably won't have, we might never have again. And I don't want to have to go to like the community gym, for example.

Like I want to keep going to like Barry's boot camp. I want to keep traveling around Europe while we're there. We don't know how long we'll live there for anything else. It's really important to me that we keep investing our money. How much while we're just on one income, I think we should still be trying to invest a thousand dollars a month. Once we're on two incomes, then I think we should be investing. We have an opportunity to invest. We could 30% of our take home.

35%. Huh? How would you do that? 35% plus traveling plus big wedding plus no, doesn't work. Well, I mean, travel and weddings is the biggest one. Yeah. And what's more important, traveling to other people's wedding or your wedding? Our wedding. Our wedding. Yeah. Aside from like small circle core friends.

I want to make sure that we're at that. So four friends, you'll be at their weddings guaranteed, right? Okay. It's a great vision. It's probably, just to ballpark it, it's probably a couple with no kids making six to $800,000 a year. It's a lot of money. You probably don't realize that because the people around you have normalized the type of travel that you're doing.

Definitely. It's not actually normal for people making $230,000, which is a very good income to be traveling like eight times a year internationally, plus your own personal travel, plus Barry's boot camp, plus shopping and golf trips. So you're living a great life, no doubt, and I love your vision for an even greater life. It's beautiful, but your income is not commensurate with the vision, nor will it be. And so you're actually setting yourself up to constantly feel poor relative to everyone else around you. Now that we've seen how these numbers could play out and the situation that we

could be in ten years from now if we keep going being so dependent on a high income do you feel like it's important enough to us to make some sacrifices on saying no to things so that we can build a bit more margin of safety into our plan. I do feel that way. But I think we will have a bit of a misalignment over where that line is. Are you willing to flex a bit more to my side to prioritize this? A bit.

Yes. Sounds like a no. This is a great discussion. Keep going. A bit. Yes. Sounds like a no. This is a great discussion. Keep going. Part of this is really being honest. I guess, where do you think that we could say no to? Kind of other trips in between. Like you can golf less.'t that kind of expensive and expensive hobby. Yeah. I could shop way less. We could maybe make sacrifices when we're at the weddings and

stay at if everyone's staying at a really nice hotel. Maybe we stay at like a super cheap hotel and just kind of do things a bit differently. Would you be willing to say no to those? Just kind of do things a bit differently. Would you be willing to say no to those? Yes. Yes. Let me propose a different way. Please.

You could make a change so that the series of coordinated decisions, you would build a portfolio that was so large that it would be a moat against anything happening. It would be a moat against one of you ending up in a job or under a manager that you didn't like you could quit knowing that you have financial security. It would be a moat so that if and when you decide to have children, you can have childcare and never have to stress about a nanny or a babysitter or whatever type of childcare you need. You could build a life with a series of coordinated decisions where you were still traveling,

still enjoying eating out, all that. But you'd have to be conscious about which ones were the most important because they would not all be equal to you. I think it's a necessary step. I think we've had so many conversations where we try to align on what's actually important to us. Where do we want to spend? But it's like this compulsion to be at everything and live such a social life just drains us. Yeah. Do You want that?

It would be easy to say no, I don't want that. But I do want to be at all of my friends' weddings. I missed a friend's bachelor party just two weekends ago and it killed me to miss it. Yeah. I don't want to say no to our good friends' weddings. I think we need to commit to realizing that we need to make sacrifices along the way to get there. But I also have a lot of like, I don't want to say no to things. The conversation began with Maddie agonizing over Paul's recent decision to leave his company, which was affecting his mental health. She looked over his shoulder. She constantly nudges him to find another job.

But it turns out that the real problem is a joint dynamic where they both want to have it all. They live like they make at least $750,000 a year, but they're not making anywhere close to that. They've taken multiple international trips. They're planning an expensive wedding, but nobody is willing to say no. You hear lots of detailed reasoning. We love our friends. We love our family. We want to be there for them. But in the end, their spending is no different than someone in $38,000 of credit card debt who can't stop buying random junk.

If they don't create a vision for themselves, they will forever be chasing what other people think no matter how much money they earn. Yet that's what happened to her dad and now that's what's happening to Paul and Maddie. And unless they make a change, they will probably pass that along to their children. Let's take a listen to Paul's follow-up. Hey Rameet, thanks so much for having us on your podcast. I think we both really enjoyed the conversation and had some important takeaways from it.

I think the two things that really stuck with me from our conversation, first one was how we have this great opportunity to really get ahead with our finances over the next decade or so. I think the phrase you used was to build a moat that will basically protect our financial future, but to do that we have to be more intentional and purposeful with our spending decisions, especially by getting more comfortable saying no both to ourselves and to outside commitments. And we've definitely made some big changes since our conversation. We sat down and built out targets for spending in each category in our plan, and we do a

quick catch-up call on Sunday nights to check if we're on track and make any changes if we have to. And as a result of this, our spending has actually dropped quite dramatically. We've also done the exercise that you mentioned of deciding which areas we want to prioritize in our long-term vision and we realized that we need to be intentional about protecting that vision. So you'll be happy to know that we've changed our travel schedule quite a bit for the year and we were able to politely decline several destination weddings that probably would have placed quite a bit of a strain on us financially. I have to say

I'm cautiously optimistic. I love that they made these changes. Extremely impressive. And what is really impressive is that they systematized it. They talk on Sundays. They built out targets. All of these things go far beyond trying to do better. These are now part of their rich life operating system.

The reason that I say I am cautious, I didn't get a follow-up from Maddie. So Paul and Maddie, I am wishing you the best. You have a chance to build a financial moat around your entire lives that will allow you to live an amazing life together. But you have to make these tough decisions now and you most importantly have to have a clear joint vision of your rich life. Thanks for listening to I Will Teach You To Be Rich. I'm Ramit Sethi. 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.