Episode 58. If we want to retire, we’d have to live on $36k

This week’s conversation brings a slightly different perspective to the table. Michelle and Eric are in their fifties and are terrified that they’ve waited too long to invest for retirement. They’ve bickered about money for twenty-five years, narrowing their window of opportunity and adding a ton of personal baggage into the equation.

Usually, part of the solution for most people is long-term investing. But with Michelle and Eric, time is not on their side. To complicate things, Michelle is defensive and triggered by even talking about money. She prefers to keep things focused on the math… but it’s much deeper than that.

What would you do to overcome the very real hopelessness that many people of their age experience? Let’s see what happens.

Tools mentioned in this episode


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Michelle:  [00:00:00] I don’t feel safe and secure with my financial life.

Eric:  [00:00:04] We’re both 50 and 52 years old. I feel like we’ve fucked up over the years.

Michelle:  [00:00:09] Just the whole thing about money’s triggering. I was supposed to get married and have a husband who took care of me, who took care of my finances, who invested for us. I’m angry at him for not being responsible, for not taking care of me. My parents helping me didn’t really help me. I wanted this. Mommy gave me money. So it was a pattern and why not? Mommy gave me money. I needed it. I wanted it. So I took it. I don’t think it helped me grow up or be responsible with money. We live like we’re 25 years old.

Michelle:  [00:00:44] We sat down with the guy from Fidelity we set up our accounts.

Ramit Sethi:  [00:00:49] And what did you walk away remembering from that?

Eric:  [00:00:51] That we’re fucked. That we wouldn’t be able to retire probably till we’re in our 70s.


Ramit Sethi:  [00:01:06] Michelle grew up wealthy, and to this day, she expects her husband to provide for her. Eric makes $55,000 and feels like he can’t provide the lifestyle she wants. This dynamic has been causing conflict for the past 20 years. And now in their 50s, the stakes are even higher. They both feel that they’ve missed their time to invest and retire comfortably and that they might have to keep working until they die. You can get a free copy of the conscious spending plan at iwt.com/episode58. I’m Ramit Sethi, and this is I Will Teach You to Be Rich.


Ramit Sethi:  [00:01:49] So, Eric and Michelle, you made a comment that I should have seen you as you were filling out your conscious spending plan. What happened when you were filling out your conscious spending plan before you got on this call?

Michelle:  [00:02:01] What always happens, we always start bickering about stuff.

Eric:  [00:02:07] Yeah, it’s almost comical. If you ever thought of a Seinfeld that’s like George’s parents, like the Costanzas going back and forth, bickering like two little kids at each other, like, no, how much do you have in your Roth IRA? I don’t know. It might be 60. It might be 80. Well, how much exactly is it? I don’t know. I think– So it’s always like, I think, I feel, maybe, so we go back and forth. It was actually quite hilarious.

Ramit Sethi:  [00:03:36] It sounds like you guys enjoyed it.

Eric:  [00:02:39] It’s hard.

Michelle:  [00:02:39] I don’t enjoy it. It’s triggering.

Eric:  [00:02:43] Yeah, it is triggering for both of us actually.

Michelle:  [00:02:47] Just like 25 years, 27 years of– we try to do something with our finances. And then I’m the one that basically takes care of everything. And I know everything. And then when Eric starts to try to get involved, it’s like, no, I haven’t handled, but it might not be exactly the way he wants it handled, but he’s never been a part of it for 25 years. So then I’m like, “Leave me alone. I know what I’m doing. Don’t try to change my systems.”

Eric:  [00:03:21] We’re both 50 and 52 years old. I feel like we’ve fucked up over the years and we haven’t really been– I mean, at least I haven’t been adult-like about money when it comes to money.

Michelle:  [00:03:32] I don’t feel safe and secure with my financial life. Since COVID, we’ve actually started saving money. And we both put money in our IRA for two years in a row. But we live like we’re 25 years old. Just the whole thing about money is triggering. I was supposed to get married and have a husband who took care of me, who took care of my finances, who invested for us. I didn’t think I’d be 52 years old with very little savings, living like 25. When something happens it’s like, “Oh my God, how are we going to pay for that?”

Ramit Sethi:  [00:04:14] Where did that story come from that that was how it was supposed to be? Where did you start telling yourself that story?

Michelle:  [00:04:20] My parents helping me didn’t really help me.

Ramit Sethi:  [00:04:23] Tell me more about that.

Michelle:  [00:04:25] Yeah, so they always helped me even when I moved away for a little bit. I lived in North Carolina and I wanted to get a one-bedroom apartment. My mom’s like, “Nope, you need a two-bedroom apartment.” So she paid for the two-bedroom apartment. She’s just always like, I wanted to go on a trip, mommy gave me money. I wanted this, mommy gave me money. So it was a pattern and why not? Mommy gave me money. I needed it. I wanted it. So I took it.

Ramit Sethi:  [00:04:58] And looking back, what lessons do you think you took away from your parents always helping you?

Michelle:  [00:05:06] Maybe gratitude and generosity, how people are generous with money and grateful for their financial support.

Ramit Sethi:  [00:05:16] Anything else?

Michelle:  [00:05:18] I don’t think it helped me grow up or be responsible with money. I never had to budget my whole life. I never knew anything about money. We never talked about it at my house either. It was my upbringing. I’m Jewish. So you marry a doctor, the doctor takes care of you. My dad took care of my mom. It’s generational, I think for us.

Ramit Sethi:  [00:05:46] And when you were meeting Eric, did you have those conversations?

Michelle:  [00:05:53] No, I don’t think so. It was a lot of assumptions. I don’t think we ever talked about money. I assumed we both grew up in the same town, we both grew up upper middle class. No, we’d never discussed money before we got married ever.

Ramit Sethi:  [00:06:11] And how does money come up in your relationship?

Michelle:  [00:06:15] It comes up with a lot of feelings and anger.

Ramit Sethi:  [00:06:19] Oh, like what?

Michelle:  [00:06:23] Like anger. I’m angry at him for not being responsible, for not taking care of me, for not talking about it, for not being involved in the savings or any bills, all of that.

Ramit Sethi:  [00:06:37] Okay. Eric, when’s the last time you remember talking about money with Michelle?

Eric:  [00:06:43] It comes up occasionally, but it’s very surface. We don’t go deep. Every time I tried to do that with Michelle, she just pushes me away. She’s like, “I’ve got this. Stop messing everything up.”

Michelle:  [00:06:56] That is so not true. You’ve never verbally said to me, “Let’s sit down and do this.” Or else you do it for like 30 seconds, one month, and then it doesn’t come up for three more years. It’s not true. You never asked me to do that.

Eric:  [00:07:13] So you see what I’m dealing with now.

Ramit Sethi:  [00:07:15] So when we first started, you mentioned that you are like a bickering old couple, the Costanza’s parents. You’re laughing right now. Just immediately a smile comes to your face, I can tell it’s kind of funny, but it’s less funny when the two of you are pointing fingers and almost antagonizing each other.

Eric:  [00:07:38] I think we’re just comfortable bickering. For me, this is where I’m coming– it makes me feel not as bad about what happened in the past may be or it makes me feel right. I don’t know.

Ramit Sethi:  [00:07:51] Makes you feel right. Okay, tell me more about that.

Eric: [00:08:00] That’s a good one. So, for me, it’s more like, I want to do things differently because what we’re doing isn’t working. It’s gotten us by up until the last year. The last two years have been great, but it’s the same thing. I didn’t grow up upper middle class. I grew up very middle class. We didn’t go on extravagant vacations like Michelle’s parents took them on. We didn’t get expensive cars–

Michelle:  [00:08:28] We went to Florida. We didn’t go on extravagant vacations, Eric.

Eric:  [00:08:31] Ski trips out west.

Michelle:  [00:08:34] Oh, I forgot about that.

Ramit Sethi:  [00:08:36] What do you get out of the bickering with each other?

Eric:  [00:08:41] I don’t know.

Ramit Sethi:  [00:08:43] Two of you curious about your own patterns?

Eric:  [00:08:47] Yeah. I’ve never really delved this deep with the psychology–

Ramit Sethi:  [00:08:57] This is deep. We’re not even below the surface yet.

Michelle:  [00:09:00] We’re not?

Ramit Sethi:  [00:09:01] No.

Eric:  [00:09:03] Oh, man, how long–

Ramit Sethi:  [00:09:04] We’re in the Keddy pool right now. We haven’t even gotten ready to get into the deep end. 

Eric:  [00:09:10] Okay. I feel like I’m getting justification. I’m getting acknowledgment.

Ramit Sethi:  [00:09:15] You’re not getting acknowledgement, but you are getting justification, your own justification. When you poke and prod and you might be right, you might be wrong, I don’t know. It’s irrelevant because it doesn’t get you anywhere, does it? In fact, if anything, it causes Michelle to put up her defenses, which I would if I were in her position because I don’t want someone saying, “You knew.” And just poking at me. And then Michelle turns around and seems to say other words, but with the same goal, “You never do this. You always do this,” which, Michelle, allows you to affirm your story about what has happened with your money.

Michelle:  [00:09:58] I think he’s just legitimately asking to sit down and do it together, but he never follows through his stuff. He’ll start one thing and then change and then start another thing, it’s like a pattern.


Ramit Sethi:  [00:10:10] Notice that pivot. Michelle immediately jumps into her grievance without even letting the point settle, the point that they both feel right and justified when they bicker with each other.


Ramit Sethi:  [00:10:25] Just so I understand, your husband never follows through with anything, is that what you’re saying?

Michelle:  [00:10:32] Not never ever, but when you start something new, it’s very hard to create a new habit with that.

Ramit Sethi:  [00:10:39] Okay, I think that’s probably true for a lot of us. It’s hard for me to create a new habit. So sometimes when I ask, “Hey, will you do this with me? I would like your help.” Sometimes if I were to say that to my wife, what do you think that I would be hoping she would respond with?

Ramit Sethi:  [00:10:59] Sure, okay.

Ramit Sethi:  [00:11:00] Do you think that that might apply to your relationship?

Michelle:  [00:11:07] Probably.

Ramit Sethi:  [00:11:08] But it’s hard for you.

Michelle:  [00:11:11] Yeah, it’s hard.

Ramit Sethi:  [00:11:13] Why?

Michelle:  [00:11:15] Because it just never changes. Nothing ever changes. 25 years later, nothing ever changes. So it’s frustrating.

Ramit Sethi:  [00:11:24] So then why are you on the call today?

Michelle:  [00:11:27] Because he asked me to be on the call and there’s always hope.


Ramit Sethi:  [00:11:32] There’s something so sad and yet beautiful about what Michelle just said. Sad because it doesn’t actually sound like she believes anything can change. And beautiful because that’s what a loving spouse does. She’s saying, “I don’t really think this will work. But you asked me to be here. So I’ll come because I love you.” There’s a lifetime of work for a therapist to work through, but I’m not a therapist. I want to shift our conversation to talk about money. So I asked them if they’ve ever worked with anyone like me to talk about money before.


Eric:  [00:12:11] We sat down with the guy from Fidelity. And when we set up our accounts about– was it about three years ago, Michelle? Three, four. And he basically did all this.

Ramit Sethi:  [00:12:22] What did you walk away remembering from that?

Eric:  [00:12:25] That we’re fucked. That we wouldn’t be able to retire probably till in our 70s.

Ramit Sethi:  [00:12:33] And, Michelle, you mentioned that you track the family’s finances. But you also mentioned that you’re frustrated with the family’s finances. I’m curious about that.

Michelle:  [00:12:48] I track them. I try to save money and then there’s always emergency that comes up. So the savings stuff that I have in savings never really goes to savings. It goes to the emergency.

Ramit Sethi:  [00:13:02] And how do you think that other families do that?

Michelle:  [00:13:06] I have no idea.

Ramit Sethi:  [00:13:09] So it’s been 25 years. I’m sure you’ve thought like, ah, it feels like one step forward, two steps back. For over 25 years, have you asked other people? Have you looked into how others manage their money?

Michelle:  [00:13:24] No.

Ramit Sethi:  [00:13:26] What do you think about that now that you’re talking about it?

Michelle:  [00:13:32] I think I grew up in a house where we didn’t talk about money. So I don’t feel comfortable going up to someone and asking them about how they talk about money. I do think it’s something between a husband and wife and I just never asked anybody.

Ramit Sethi:  [00:13:52] What might be the other ways to learn about how to manage money?

Michelle:  [00:13:58] Programs, online.

Ramit Sethi:  [00:14:02] What else?

Michelle:  [00:14:04] Reading articles. I don’t know.

Ramit Sethi:  [00:14:08] Books, events, financial advisor, there’s a million different things. I don’t mind that you haven’t done it. We all start from someplace. There are a lot of things I should have been doing 20 years ago. Fine. I wish I had. But all I can do is deal with where I am today. What I want to understand is your frustration around money because, Michelle, you are frustrated with money. You told me. But you’re also the one who has been managing the family finances for 25 years. So help me understand that.

Michelle:  [00:14:43] Well, I think it started because I was doing it alone. It’s just frustrating. I don’t want to have to do it. I didn’t grow up in a house where they budgeted. They just had magical amount of money and spent it on whatever. And it’s a lot of work and a lot of mindset shift to have to budget every month.

Ramit Sethi:  [00:15:06] Yeah, I can see that. I don’t like budgeting myself. Did you know that?

Michelle:  [00:15:12] No, I don’t know much about you. So I didn’t know that.

Ramit Sethi:  [00:15:15] Okay. What did you expect coming into this call? I’m curious. What did you expect me to tell you on today’s call?

Michelle:  [00:15:25] I don’t know. Eric asked me to be on this call with you. I agreed. And here I am. I have no expectations.

Ramit Sethi:  [00:15:32] Okay. Well, you’re playing along, which I appreciate. The way for this to go well, is both partners have to be engaged. And I’m happy to see that both of you are doing it. Even though, Michelle, some of the questions I’m asking you, it might seem a little tough, I appreciate that you are playing ball.


Ramit Sethi:  [00:15:51] My antennae are going up right now. You can hear that Michelle is getting defensive about some of my questions. So when I asked her what she expected, she tells me she doesn’t know much about me, and that she doesn’t really have any expectations. Now that can be okay. I don’t mind talking to someone with no expectations. But you can also understand why Michelle might be caught off guard by some of what I’m asking her. 

She shows up to have a conversation about money and suddenly she’s getting questions about why she’s been managing money that way for 25 years. I don’t mean to ambush her. I’m just trying to understand the situation here, the one Eric called me about and Michelle agreed to talk about. Again, I can understand their defensiveness. But with that said, it’s not giving me a lot to work with. When we start honing in on something, Michelle turns the attention right back to Eric.


Michelle:  [00:16:48] There has been a lot of baggage with money on Eric’s part. So you can ask him about that and why I’m so angry about it.

Eric:  [00:16:58] I had a lot of credit card debt that I racked up, which I knocked out over the last five years.

Ramit Sethi:  [00:17:04] How much debt?

Eric:  [00:17:05] Like 60.

Ramit Sethi:  [00:17:07] 60,000?

Eric:  [00:17:08] 50 to 60, yeah.

Ramit Sethi:  [00:17:09] What do you spend it on?

Eric:  [00:17:12] Just like off like business programs, business development things, equipment for the office, medical equipment, things like that.

Ramit Sethi:  [00:17:22] So you racked up 50, 60k of debt. You paid it off?

Eric:  [00:17:25] Yes.

Ramit Sethi:  [00:17:25] All right. Michelle, how did you feel when you saw him paying that debt off?

Michelle:  [00:17:32] Well, it’s his business. So I didn’t know how much–

Ramit Sethi:  [00:17:35] You didn’t know about it?

Michelle:  [00:17:37] Not really.

Eric:  [00:17:38] Michelle, you knew.

Michelle:  [00:17:39] I knew about the debt. I didn’t know how much it was, and I don’t know how he’s working on paying it off.

Ramit Sethi:  [00:17:46] Eric.

Eric:  [00:17:48] Yeah, I’ve made a lot of business mistakes over the years and it caused bankruptcy in 2008-2009 when the economy went down. There’s a lot of stuff in the past, but my philosophy right now is why go back there? Why still be angry about it? Get over it. Let’s move forward and be a team. Michelle has every right to be angry at what happened in the past, but that was a situation that happened 20 years ago and another one that happened about 12 years ago.

And it’s like, she still hasn’t gotten over that and it’s affecting where we’re going. That’s why she says always never. To me, that gets me so frustrated because I’m not, “I never do this. You always do that.” And so for me, that doesn’t work and it gets us– that’s why we go into that spiral and just get frustrated.

Ramit Sethi:  [00:18:50] Eric, if you declare bankruptcy, which you never mentioned in any of the documents you sent over, I can understand why she would be upset. That’s a serious thing. And that doesn’t just heal over time. That doesn’t even heal over 12 years later. It takes talking and it takes changing the way you deal with money.


Ramit Sethi:  [00:19:09] The more I try to understand Michelle and Eric, the more I get lost in their history of resentments. Each of them has valid reasons to be angry and defensive, but nobody can solve this on a single call. That’s not what I’m here for either. I’m going to try to zoom up and recalibrate.


Ramit Sethi:  [00:19:28] What do you think is the real problem here?

Michelle:  [00:19:31] Us.

Eric:  [00:19:32] Communication.

Ramit Sethi:  [00:19:33] Yeah.

Eric:  [00:19:34] Lack of having a plan.

Ramit Sethi:  [00:19:36] Correct.

Michelle:  [00:19:37] Trust.

Ramit Sethi:  [00:19:38] You don’t trust each other, yes. Keep going. You’re nailing all these. What else?

Michelle:  [00:19:42] Expectations.

Ramit Sethi:  [00:19:44] Yes. Anything else?

Michelle:  [00:19:47] Strategy, know-how.

Ramit Sethi:  [00:19:51] What am I doing here? So you’re actually quite savvy at knowing the problems here, but putting them all together eludes you.

Michelle:  [00:20:00 Well, fixing them eludes us.

Ramit Sethi:  [00:20:02] Yeah, and part because I’m not sure you actually want to fix them. I think you actually enjoy the bickering. I think it gets you to feel a temporary sugar high where you go, “I’m right. You’re wrong.” “No, I’m right. You’re wrong. And what about that thing that happened two years ago, two months ago, 10 years ago?” And then you get back into this comfortable relationship and then you both get mad and come back the next day and pretend it didn’t happen until the next time.

Michelle:  [00:20:31] That’s true. I feel like we have the daily funding under control. I think we need more money, so to generate more income so that we can invest more and know investment strategies because neither of us know how to do anything like that.

Ramit Sethi:  [00:20:47] Okay. now we’re talking. So you need a higher income, you want to invest more. I’m with you so far. And what else?

Michelle:  [00:20:57] Yeah, those two things– strategy, know-how, what to do, how to invest.

Ramit Sethi:  [00:21:01] So let’s say that we accomplish that and you start investing $25,000 a year. Okay, great. What then?

Michelle:  [00:21:11] Just growing, I guess, I don’t know.

Ramit Sethi:  [00:21:13] And then what?

Michelle:  [00:21:14] Growing so that we can buy our house up north, so we can travel, I don’t know.

Ramit Sethi:  [00:21:20] It seems a little vague.

Michelle:  [00:21:21] I don’t have a big rich life. We want to buy a house up north Michigan and move up north to Northern Michigan. I personally want to have real health insurance and long-term care insurance because we had a tragedy in our family. And it scares the bejesus out of me that if I had to go to a group home, how would that get paid for? I don’t want to burden my family or my kids. So I need that security to know that I’ll be safe. Really, for me, it’s all about security, and not burdening my kids. I really don’t have these crazy dreams of things I want. I’ll travel. I love to travel and I want a house up north. But besides that, I’m pretty simple.

Ramit Sethi:  [00:22:15] Michelle, one of the reasons that people don’t enjoy managing their money and they don’t aggressively save and invest is that they never take the time to create a vision of what their rich life is. So, of course, you want insurance. Okay, great. You should definitely get insurance. But I’m not excited by hearing you talk about long-term care insurance. Are you?

Michelle:  [00:22:39] Either was Eric.

Ramit Sethi:  [00:22:40] Are you really?

Michelle:  [00:22:41] Yes, I really I’m.

Ramit Sethi:  [00:22:43] You wake up in the morning and you go, yes, long-term care insurance?

Michelle:  [00:22:48] No, to me, it’s like, okay, you’re being a responsible adult.


Ramit Sethi:  [00:22:53] The problem is that the idea of being a responsible adult is not inspiring. Nobody wakes up and says, “Yes, I want to change my entire way of thinking about money and managing money because I want to be a responsible adult.” It never happens. And if it would have worked, they would have been doing it for the last 25 years. So my opinion is if it hasn’t worked your way, why don’t we try it my way?

My way involves starting with a vision of a rich life. It involves being honest about what excites you with money. And if you can’t find that excitement, that’s okay. Some people have lost it over the decades. Let’s go through my process. And I want to watch both Michelle and Eric build this vision together. Unfortunately, many of us have lost the ability to dream. So we go back to the seemingly logical things we want.

Ramit Sethi:  [00:23:45] When I talk to people and ask them what’s your rich life, and there’s a very small minority of people who say, “I want health insurance. I want to make sure that I can take care of myself.” I know two things. Number one, there’s probably something that happened in their family that makes them prioritize that above everything else. And number two, they have no real vision of a rich life because wanting health insurance is not a rich life. It’s something you should have, but it’s not going to inspire you to change the way you treat money. And that, among other reasons, is why Michelle has not made a change in the last 25 years.


Eric:  [00:24:23] What I want for my rich life is to have a cottage up north, a three-bedroom cottage on a lake or near the lake, I want to have the ability to travel and go away for let’s say two weeks, twice a year, or a one week four times a year to really cool places and be able to see amazing things and eat in great restaurants and to be able to take our kids with us if they want to come with us. 

I want to leave them a legacy and teach them strategies so they can live their rich life and not fight with their spouses so that they can have great times with their families too, to be able to afford– me, no, cars aren’t that important, I want to be able to drive a car that I feel proud of. My car’s fine. It gets me from A to D, but it’s a 12-year-old SUV. I’d like to have like a newer car that’s reliable like a new 2017 Ford Explorer, I’d be happy with that. But it doesn’t have to be fancy, but a good, reliable, newer car. So those are just some of the things off the top of my head.

Michelle:  [00:25:52] I know all that. I’m very worked up right now. I know those things. He’s told me those things before.

Ramit Sethi:  [00:26:02] Wow. So how do you think he feels when he just opened up about the things he wants and your answer’s, “Yeah, I already know those things”?

Michelle:  [00:26:10] I’m sure, not good.

Ramit Sethi:  [00:26:12] So do you want to change it or do you want to just repeat the same pattern for the last 25 years?

Michelle:  [00:26:17] I do want to change it.


Ramit Sethi:  [00:26:20] When you talk to your partner about money, it is inevitable that you’re going to have disagreements. Remember, most of us are not even confident about money with ourselves, much less having a conversation with our partner. There’s baggage, there’s history, there’s invisible scripts in the way that we grew up with money. So here are a few suggestions. Start with curiosity. You can even create simple rules for yourself, like each person has to ask at least one probing question, “Oh, you want to travel more? Wow, that sounds interesting. Where would you want to go if we could travel anywhere?”

Another rule, you don’t have to solve the how today. What is the goal of your first conversation with money? It’s literally just to get excited about money. That’s it. And finally, another rule, there’s something new to learn always. Here, we have a couple that’s been together over 20 years. And I think they still have more to learn about each other. I find that exciting.


Ramit Sethi:  [00:27:24] How savvy would you say you are with money scale of 1 to 10?

Michelle:  [00:27:29] 3 to 5.

Ramit Sethi:  [00:27:33] Not especially savvy, I’m guessing. Is that fair?

Michelle:  [00:27:38] Yeah.

Ramit Sethi:  [00:27:39] Okay. So I can understand why it must be stressful to talk about this. Not only is it the money part of it, it’s the fact that you’re in your 50s, it’s the fact that he asked you to be here, and you’ve got a history with bankruptcies and debt and earning and expectation and parents. Are all those fair?

Michelle:  [00:28:02] True. Yes.

Ramit Sethi:  [00:28:05] So all of those can be true. I’m not going to change all of that today on one call. You know that and I know that. You can do a lot more with your money. But yeah, I’ll show you some investment stuff you can do, and yeah, I’ll show you how to allocate your money. I’ll talk about that. But if the two of you can’t have a conversation where one of you is sharing his rich life and your answer is, “Okay, yeah, I already know that,” then none of the numbers are going to matter at all. I heard a lot of pride from both of you over what you have accomplished financially in the last two years.

Eric:  [00:28:44] We had someone in the house staying who gave us 600 bucks a month, and we just put that right into savings. And he was with us for about a year. So there’s that. We’re not extravagant. I love Michelle because she doesn’t want jewelry, she doesn’t want a fancy car. She just wants security. One of her things was like, “I want long-term care insurance because I want to make sure that, God forbid, something happens that our kids aren’t burdened by us.” So like the last two years, we didn’t go out for quite a long period of time. We saved a lot of that money and we just kept it really lean and mean.

Ramit Sethi:  [00:29:23] Michelle, what’s your perspective on the last two years?

Michelle:  [00:29:27] Well, I got excited when I saw that money kept building up and then I set goals like “All right, by the end of this year, I want to have this much money.”

Ramit Sethi:  [00:29:39] Tell me the numbers. I want to hear them.

Michelle:  [00:29:41] How much we’ve saved?

Ramit Sethi:  [00:29:42] Yeah, how much have you saved?

Michelle:  [00:29:43] We went from zero to 42,000 in two years.

Ramit Sethi:  [00:29:47] Great. And what was the goal by the end of the year?

Michelle:  [00:29:51] Well, the goal by the end of this year is 50.

Ramit Sethi:  [00:29:55] And what does that mean to you? If you were to have $50,000 in savings, what does that mean to you?

Michelle:  [00:29:59] I don’t know, it’s just a little like, “Okay, I can do this. I can do it.”

Ramit Sethi:  [00:30:04] And if you were to get to 50, what would you do next?

Ramit Sethi:  [00:30:06] Make a higher goal for the next year.

Ramit Sethi:  [00:30:12] Like what?

Michelle:  [00:30:16] Maybe 70.

Ramit Sethi:  [00:30:18] Okay, so I could see you incrementally move that number up, 70 soon, 100, maybe 120. Okay. All great. And when would you get to feel good about money, Michelle?

Michelle:  [00:30:37] When would I get to feel good? Well, I’m starting to feel good about it now. I want to feel good now about it. I don’t want to wait.

Ramit Sethi:  [00:30:47] Okay, I like that. So can we just flip a switch and you start feeling good about money today?

Michelle:  [00:30:52] Sure.

Ramit Sethi:  [00:30:53] Really?

Michelle:  [00:30:54] Yeah.

Ramit Sethi:  [00:30:55] I don’t know if I believe that. This is the first time I’ve seen you smile on our entire call. I love it. What is that? It seems like you felt bad about money for a very long time.

Michelle:  [00:31:08] I have. I have. So it feels good to be responsible about it. It didn’t feel good for 30-something years to be given everything, even though I took it. And then it feels good to create your own money.

Ramit Sethi:  [00:31:30] Yes, it does. Thank you for saying that. I think that’s very powerful. You said, “It doesn’t feel good to have been given everything, even though I took it.” “Being given everything,” you’re referring to your parents?

Michelle:  [00:31:47] Yes.

Ramit Sethi:  [00:31:49] When did they stop giving you money?

Michelle:  [00:31:59] They still buy things for my kids, but they don’t give me money monthly anymore, a birthday present.

Ramit Sethi:  [00:32:07] When did it stop?

Michelle:  [00:32:10] Maybe five years ago.

Ramit Sethi:  [00:32:11] So in your mid-40s?

Michelle:  [00:32:14] Maybe 40s. 10 years ago, maybe.

Ramit Sethi:  [00:32:17] 40 years old, okay. Do you see how you ended up frustrated with money in part because it was being given to you and you weren’t taking your own responsibility?

Michelle:  [00:32:33] Yes.

Ramit Sethi:  [00:32:34] And the minute you started really taking responsibility with Eric during COVID what happened?

Michelle:  [00:32:43] It grew. We have money in our account.

Ramit Sethi:  [00:32:50] And how do you both feel about money from those last two years?

Eric:  [00:32:53] We feel like an adult now. We’re actually acting our age, not like we’re 25 years old or 20 years old again.

Ramit Sethi:  [00:33:06] Yeah. So what does it tell you about the next 10 years? You two did it for two years. What does it tell you for the next 10 years?

Michelle:  [00:33:15] Yeah, that we just got to stay on the plan.

Ramit Sethi:  [00:33:19] Well, also, you don’t even really have a plan. You accumulated $42,000 without even knowing what you’re doing.

Eric:  [00:33:25] Just thinking if we actually had some strategy from you, Ramit. Holy shit.

Ramit Sethi:  [00:33:29] Yeah, it’s like you got into a car, and you just started driving, and you finally put on cruise control. And you’re like, “Oh, my God, we drove 1,500 miles. And now we’re actually going to look at a map, and we’re going to go the right direction. Imagine where we could be in another two years, much less 10 years?” I don’t know. Either of you excited about where you could be in 10 years?

Michelle:  [00:33:56] Yeah.

Ramit Sethi:  [00:33:57] Okay. That’s what I’m talking about. This money has all been sitting in savings. It wasn’t even invested. So imagine if you could start to really grow your money, if you could start to do it together, and if you could be on the same page and not fight about money. This is a win. But I think it’s just a start. That money right now is just sitting there.


Ramit Sethi:  [00:34:19] And this is where I invited them to open up their conscious spending plan and lay the groundwork for their numbers. Unfortunately, it just turned into more bickering. But if you want to do this for yourself, you can get the CSP at iwt.com/episode58.


Ramit Sethi:  [00:34:37] Now I’m looking at the conscious spending plan, which is very helpful to get a bird’s eye view on how your spending stacks up. I recommend fixed costs be 50 to 60% of take-home. Yours are 62%, right in that parameter. So that part I would say generally really well done. Your investments should be roughly 10% of take home. Roughly, how much do you each invest per month?

Eric:  [00:35:11] 500.

Ramit Sethi:  [00:35:12] Okay. It says that you’re spending $1,000 a month on guilt-free spending. Is that true?

Michelle:  [00:35:24] I don’t think so.

Eric:  [00:35:26] That includes dining out, clothes, hats, that stuff–

Ramit Sethi:  [00:35:34] Travel.

Eric:  [00:35:35] Traveling.

Ramit Sethi:  [00:35:37] Right now Michelle is shaking her head vigorously saying no. Michelle, do you think that number is too low or too high?

Michelle:  [00:35:46] I honestly don’t know the answer to that. It’s like, I do all the bills and I know when they come out, but I don’t know the answer to that other question without looking at it. I never added it up.

Eric:  [00:35:57] It was really enlightening for me to pull up the last three months of the credit cards and actually look at what we actually spent.

Ramit Sethi:  [00:36:04] What did it tell you?

Eric:  [00:36:06] A lot. I didn’t realize we spend more than I anticipated on traveling and going out. We don’t go out for extravagant dinners, but we do go out and buy clothes for the kids. We give our sons 600 bucks a month for college, spending money for him to buy food and stuff. So I mean, it adds up quickly.

Ramit Sethi:  [00:36:33] That’s good. That’s what most people find out when they actually track their spending for one month. They discover that they were dramatically overspending compared to what they thought. And they also forget to include all those things they do only once or twice a year. Oh, we went to Disneyland, oh, we went for this holiday trip, we did this quick vacation. They forget. You actually have to spread that expense out over the entire year. Michelle, what do you think?

Michelle:  [00:37:01] So I don’t understand how a conscious spending plan is not the same as a budget. In my mind, it’s exactly the same thing.

Ramit Sethi:  [00:37:08] This is a common question I get from people on the Internet. Let me explain. With a budget, you track every last line item, how much should we spend eating out, how much should we spend on Airbnb, how much do we spend on Netflix and Kiwis at the grocery store, everything. And then at the end of the month, you go, okay, I have all this information. What am I supposed to do with it? 

A conscious spending plan is different. It looks forward. It says, of the money we make next month, how do we want to allocate it? Some of it should go to our fixed costs, some of it should go to our savings automatically. Some of it should automatically go to our investments, and the rest should be left for us to spend guilt free.

Eric:  [00:37:58] You know what this reminds me of? We did a Mago relationship therapy, which is really about what you’re saying. It’s like, let’s move forward. We’re not going to talk about all the shit from the past. We’re going to talk about moving forward and develop a new strategy of communication. It’s like having a new language.

Ramit Sethi:  [00:38:18] But CSP is definitely a new language, a conscious spending plan. I do think that the way that the two of you communicate, I’m glad you took some therapy sessions, and I would encourage you to do more. I think it’s amazing. I’m not making a joke. It’s not–

Eric:  [00:38:31] I know. I completely agree.

Ramit Sethi:  [00:38:33] I try to destigmatize therapy for everybody. And there’s only so much that I can do on one call and a therapist has other tools and skills that they can bring. I don’t need to tell you that. I think it would be very helpful. But few therapists can talk about money like we are talking about right now. I think you both tell yourself a story. I’ve heard both of you say that you’re not fancy, you don’t need fancy things, you’re not spending on a lot of stuff, but actually, you are spending on a lot of stuff. And you’re not saving or investing nearly as aggressively as you need to. How does that strike you?

Michelle:  [00:39:17] Well, I don’t think we’re spending stuff on a lot of stuff. I mean, I buy the dogs’ diet. I don’t think we’re spending on a lot of stuff, but I do think we need to be more aggressive.

Ramit Sethi:  [00:39:33] You two in your 50s with not as much investments as you could have had are spending $1,300 a month on your son’s college expenses and other services for your children, not to mention car repairs, etc, for them.

Eric:  [00:39:56] Intention for me and I’ve not really expressed it, but I really feel that our kids need to have more skin in the game. Again, it’s like that pattern of buying them everything, paying for everything, and Michelle goes to me like, “Why are you so selfish? Don’t you want to support your kids?” I’m like, “Absolutely, I want to support them, but I want them to learn. I want them to have skin in the game. I don’t want them ending up like this.”

Ramit Sethi:  [00:40:26] Do you see any connection between how your parents treated you with money and how you treat your children?

Michelle:  [00:40:30] A little, but when I was growing up, if I wanted to go on an extravagant trip, I was always given a check. I want to be generous, but I’m not overly generous because we don’t have the money to be overly generous.

Ramit Sethi:  [00:40:30] I’m not here to tell you how to raise your kids or what to spend on them. That’s up to the two of you. It’s your rich life, it’s your money. I will say right now you don’t have enough to invest and save at the rate you need to. For 25 years, you’ve been managing the money making sure the bills get paid, and that’s amazing. That needs to happen. That’s table stakes. But we also now need to add on a way to grow your money. That’s investments. That’s automatic saving. That’s where real wealth is created. You’ve got $200,000 invested. How much are you contributing total per year to your investments?

Michelle:  [00:41:35] 13.5.

Ramit Sethi:  [00:41:37] Great. And what age do we want to do this until? Do you want to see what happens in 10 in years?

Michelle:  [00:41:46] 65.

Ramit Sethi:  [00:41:48] 65? Okay, great. 15 years. And what interest rate should we assume that you’re going to get on your investments?

Michelle:  [00:41:58] I don’t know. You tell us.

Eric:  [00:42:00] I don’t know. 8.

Ramit Sethi:  [00:42:01] Michelle, what do you guess?

Michelle:  [00:42:04] 8.

Ramit Sethi:  [00:42:06] At least you’re in the ballpark. Some people say 8,000. I go, ah, shit. I use 7% because I like to be conservative. There’s a whole section in my book talking about where this number come from and how do you derive it and all that stuff. But let’s just say 7 to be conservative. Maybe you get 8, great. So by the age of 65, you’ve turned that into $914,000. Here’s my question for you. Does this number mean anything to you?

Michelle:  [00:42:38] I don’t think it seems like enough money.

Ramit Sethi:  [00:42:41] It’s just a number and it doesn’t feel like enough. That’s most people. Eric, what does this number mean to you?

Eric: Speaker] 42:49]

To me, I always thought like, okay, I want to be like, I don’t know why that number is so significant, but like a million dollars just seems like significant to me.

Ramit Sethi:  [00:42:59] First of all, if you have $914,000, you are millionaires because you have like $75,000 in savings. Big whoop dee doo. It’s just a number. It doesn’t mean anything. I’m going to show you an example of how to figure out what to do with it. There’s a simple rule called the 4% rule. Some people can debate it, whether it’s 3%, or whatever. We’re going to use 4% for this calculation. And what this means is you can safely withdraw 4% of that amount every year for 30 years. There’s more complexity to the 4% rule, which you can research online.

But it’s a really beautiful back-of-the-napkin calculation you can make that tells you how much income you can eventually get from your investments. So if you live from 65 to 95, you could safely take 4% of that. So why don’t we figure out what that is? 4% means you could withdraw $36,000 per year. What do you think of that?

Eric:  [00:44:03] That sucks.

Ramit Sethi:  [00:44:05] Correct. That’s a number that you can more easily grasp because you can compare it to your current income, which is what?

Michelle:  [00:44:13] 100.


Ramit Sethi:  [00:44:15] This is a very stark moment for people, especially people in their 40s and especially 50s and 60s. For many people in this situation, they suddenly realize that the money they’ve saved is not enough. And now the dreams they have of their future life, their retired life, might not be possible. Now, Eric and Michelle still have a chance to make a change. But I want them to understand how serious this is. I asked if they wanted to go from $100,000 in income to $36,000 in income. In our culture, it is excruciating to imagine taking a forced downward socio economic step.


Ramit Sethi:  [00:45:01] So you want to go from 100k to 36,000?

Michelle:  [00:45:07] No.

Eric:  [00:45:08] How do we triple that?

Ramit Sethi:  [00:45:10] Okay, so what do you want to do? Now we have some decisions to make. What are your levers here?

Eric:  [00:45:19] Well, the annual addition.

Ramit Sethi:  [00:45:20] What number would you like to change it to?

Ramit Sethi:  [00:45:22] 25.

Ramit Sethi:  [00:45:25] 25. So from $13,500 to 25,000. And just give me a sense, where would that money come from?

Michelle:  [00:45:35] More earnings.

Ramit Sethi:  [00:45:36] More earnings is one way. What else?

Eric:  [00:45:40] I mean, like you said, with 1,300 a month for kid stuff, I think we just cut the kids off.


Ramit Sethi:  [00:45:50] Cutting kids off always is going to be one of my favorite levers to pull. Don’t come for me, parents. I don’t need to hear from you right now. Just save it. Send your emails to ramitwillneverreadthis@Iwillteachyoutoberich.com. But in all actuality, they do need to take a very conscious look at their expenses. And this is a lot of money that they’re spending on their children.

Ramit Sethi:  [00:46:13] I do recognize that making big decisions about expenses, especially family expenses, takes time. Nobody decides on a call like this, “We’re not going to spend any more money on our kids.” But my job here is to simply raise the question for them so that they can start thinking about all their options. I also want to pull on another lever here– time. Let’s just even see if this is exciting.


Ramit Sethi:  [00:46:40] So we’re raising it from $13,500 a year investments to $25,000 a year. And suddenly, instead of $914,000, you have 1.2 million. If we take 4% of that, 48,000 a year. How do you feel about that?

Eric:  [00:47:03] It’s better, but it still doesn’t seem like a lot.

Ramit Sethi:  [00:47:08] What else?

Michelle:  [00:47:11] Many more years to grow.

Ramit Sethi:  [00:47:13] Okay, so instead of 65, what number would you like to put?

Eric:  [00:47:17] 70.

Michelle:  [00:47:18] So 20 years.

Ramit Sethi:  [00:47:20] Okay, now we’re talking. Instead of 1.2 million, we have 1.87 million. Whoa, that’s a big jump. What does that tell you?

Eric:  [00:47:32] My first thought was like we should have started doing this 10 years ago, but that extra five years it grows significantly.

Ramit Sethi:  [00:47:44] Yes. And now you have 74,000, almost $75,000 a year. That’s impressive.

Michelle:  [00:47:54] I think we could do that.


Ramit Sethi:  [00:47:56] I am loving this. Suddenly, I’m showing them different scenarios with their money and they’re starting to connect what they do today with what they will have tomorrow. Honestly, this is pretty advanced for most people. Most of us cannot make the connection between what we spend on our rent or mortgage today and what our income is going to be at retirement. But there is a direct connection. 

This is how tools like my conscious spending plan can help you. That is why I mention it so often on the podcast. Buying a truck can directly affect how much you have later. How much you spend on maintenance for your house can directly affect how much you have later, and on, and on, and on. Now, I want to direct them to the money sitting in their savings account.


Ramit Sethi:  [00:48:45] You got the 42,000 that’s sitting in savings. You’re in a great position having that, but we might be able to put 20,000 of that to work. Let’s just take a look. Instead of 200,000, 220,000 would turn that into 1.9 million. So that money would grow, grow, grow. But you know what your biggest lever is? It’s really this number. It’s the annual addition and it’s your time. The earlier you start investing the better. You’re 50 years old. You don’t have time to wait. Even one year costs you dearly. And the second thing is the amount that you contribute every single month. What do you take away from those examples that I just gave you, Michelle?

Michelle:  [00:49:37] Let’s do it. So tell me how. Where do I put the money?

Ramit Sethi:  [00:49:43] You seem very motivated right now. Tell me about that.

Michelle:  [00:49:48] Well, I think I can see the numbers and I can see what we have to do. So having math, it took the emotion out of it and it’s just math.

Ramit Sethi:  [00:49:59] Wow. But are emotions bad?

Michelle:  [00:50:04] Of course, they’re not bad. But if you just have the numbers, then Eric and I follow the numbers and don’t get involved with the emotions and the bickery.


Ramit Sethi:  [00:50:15] I’m very confused by Michelle right now. She’s been defensive for most of the call, but suddenly, she’s lit up. And she’s saying, “Okay, I’m in. Tell me what to do.” I don’t know if I buy it. I honestly think this call would go a lot better if I just shared some basic investing tips and gave them some handy rules to follow and sent them on their way. But that’s not really what I do. And if that’s what they really wanted, why haven’t they just read my book or anyone’s book? I think money, psychology and emotions are the thing in this relationship. Their investing situation is not that complicated. But why they haven’t talked about money and invested money and been aligned for 25 years, that is incredibly complicated.


Ramit Sethi:  [00:51:07] I guess my perspective would be that I’m going to show you how to do this. I will show you. You will walk away with a plan. I will also suggest to you that emotions, expectations, communication are part of the reason you didn’t do this 25 years ago.

Eric:  [00:51:27] To see that number from 1.2 up to 1.9 mil just by increasing the amount that we’re putting away and adding five years to it, to me, that’s amazing and I wish we would have done this 25 years ago.

Ramit Sethi:  [00:51:40] Everybody wishes they would have done it 25 years ago. The only thing they can do is do it today and do it aggressively. The two of you rowing in the same direction will get you there. You cannot achieve this with how short your timeframe is if one of you is not on board. That is the bottom line. The only way the two of you get to have enough for retirement is by investing aggressively. That’s the truth. And I mean aggressively. Now how aggressive you want to be is up to you. But that’s just the math.


Ramit Sethi:  [00:52:18] There’s a lot left unsaid in today’s call. First, Eric and Michelle realized it is possible for them to change the way they treat their money. Once we focus specifically on their conscious spending plan and on their investments, they really took to it. They seem on board making these changes, but what I think is missing is a deeper analysis of why they haven’t been able to connect about money for 25 years. 

I don’t expect to be able to get to everyone in one phone call, but when it doesn’t happen, I am frustrated. And I know this is just one call. It can’t change everything overnight, but I wish we had been able to go a little deeper. I hope Eric and Michelle continue to focus on aggressive investments. They’re 50 and 52 years old, they do not have time. And I also hope that they find other tools and resources, whether it be a therapist, a coach, or whoever, so that they can connect more deeply and talk about money regularly.

Ramit Sethi:  [00:53:26] To understand what your numbers really mean, you can plug them into my free-conscious spending plan template. You can download that at iwt.com/episode58. 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.