Episode #154: “We’re drowning in debt, but I drive a BMW”

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[00:00:05] Ramit: When you discuss money, what actually happens?

[00:00:07] Michelle: It’s an argument pretty much. We’re just never on the same page about it, I guess. Even though I say I do trust him all the time with finances, I guess I really maybe don’t trust you as much as I thought.

[00:00:16] Kevin: I always tell myself I’m going to change and do certain things, but then it’s like, I’ll do it for a few weeks, and then I’ll take a couple of steps back. We’re just going to dig our hole deeper. We’re never going to be able to pay off our debt.

[00:00:28] Michelle: And God forbid something happens.

[00:00:29] Kevin: God forbid something happens, then we’re really going to be screwed. And then we’re going to–

[00:00:32] Ramit: What are you going to do then?

[00:00:33] Michelle: We’re going to have to sell the house. I don’t know. Move back home. It’s going to be horrible. We’ll both feel really terrible, like we really just failed.

[00:00:40] Kevin: I feel like it was always just easier to push the problems to the side. Just to highlight how that is, tomorrow we have a dinner with her brother and his girlfriend also here in New York City.

[00:00:51] Michelle: It’s hard to get the reservation.

[00:00:53] Ramit: Yeah. Good. The tough reservation. Which restaurant?

[00:00:56] Michelle: Torrisi.

[00:00:57] Kevin: Torrisi.

[Narration]

[00:00:59] Ramit: Kevin and Michelle are in their early 30s. They’ve been married for two years with a 3-year-old, and they have another on the way in six months, but they are drowning in debt, and when you hear why, I think you’re going to be shocked. I will tell you that my jaw drops several times during our conversation.

[00:01:16] Kevin and Michelle are textbook examples of the chaser-avoider dynamic. She’s a warrior, and she chases him. He’s an avoider, and he runs. That part is obvious, but I’m more interested in why they behave the way they do now. This is our first ever live recorded episode, which took place in New York City earlier this year. Head over to YouTube to watch and subscribe for even more exciting updates coming soon. And make sure to comment and let me know what you think of the new format.

[Interview]

[00:01:46] Kevin: She was out of the country with our son and her mom. She went on a cruise. She calls me and tells me, hey, you have to pay our mortgage this day. You have to deposit the money into the account. Being busy and stuff like that, I had never gotten a chance to just go to the bank and deposit the money.

[00:02:02] Ramit: Okay, how much are we talking about?

[00:02:04] Kevin: It was like $800 or a little bit more maybe. It was just sitting in my car, and she tells me to go deposit it. And she told me that before she left. Now, I didn’t deposit it. I think it was Friday, the 1st, and also one of the days I get paid. So I knew I was getting paid regardless. I didn’t put the money in, but I had just held the cash on hand.

[00:02:27] So she logs in on the cruise and sees that I haven’t deposited the money. She’s freaking out. I guess in her eyes or in her mind, I had spent that money on something. And I’m like, Michelle, I have the money. I just haven’t had the time to go deposit it. I was like, if you want, I’ll transfer you the money.

[00:02:45] But before we got even to that point, she was just so upset and disappointed because she felt like I had let her down. I understood where her frustration was. She was on vacation, she was trying to enjoy herself, and she just felt like she couldn’t even leave me one task and I could complete it. I feel like her approach in certain situations, it’s just like, not aggressive, but she’s just so quick to– her approach sometimes isn’t the greatest.

[00:03:12] Michelle: Like I’m accusatory to you?

[00:03:14] Kevin: Almost. And then I get, I guess, defensive, and then that’s when we have a disagreement.

[00:03:18] Ramit: Did you pay extra for that internet on the cruise?

[00:03:20] Michelle: I did. I wasn’t sure I was going to have anything in terms of internet. So I’m like, you need to make sure you pay this. I gave him all the login information for everything because he had not once, since he bought the house, ever paid the mortgage. Because he’ll just send me the money, and then I’ll pay it.

[00:03:34] Ramit: Why?

[00:03:34] Michelle: I guess it’s just how we did it.

[00:03:36] Ramit: Why? All the decisions you made, the hundreds of decisions you made well before this cruise.

[00:03:45] Michelle: I’m the financial person. I’m the one that’s going to handle everything. 

[00:03:49] Ramit: You are. 

[00:03:50] Michelle: Yeah. I forgot exactly what I said, but I did say something, so where’s the 2,000, or something like that? And then he probably already– okay. I understand. He felt accused, so that’s why he maybe felt upset about the whole situation.

[00:04:03] Kevin: No, I feel like if we were able to pull up those messages, it was more along the lines, I knew I couldn’t trust you with this.

[00:04:10] Ramit: Could she?

[00:04:10] Kevin: She could because–

[00:04:12] Ramit: It hadn’t been paid, and it was the date.

[00:04:14] Kevin: Yeah.

[00:04:14] Michelle: Right. And it’s really hard because I feel like I’m investing so much time into this. I want him to ask questions. I want him to get engaged into our finances. That’s what I really want.

[00:04:24] Ramit: And how would you describe Kevin’s relationship with family money right now?

[00:04:29] Michelle: Not scared of it, but just avoidant. If he’s like, oh, can you send me $100 for this or something? I’m like, yeah, just log into our account and just take it yourself. You don’t have to ask me for $100. Just go get it. And then he is like, well, no, I’ll just wait. You just log in and get it.

[00:04:47] Ramit: And then what happens?

[00:04:48] Michelle: Then I log in and send it to him.

[00:04:50] Ramit: So doesn’t he just pretty much get what he wants?

[00:04:51] Michelle: Yeah.

[00:04:52] Ramit: Hmm.

[00:04:53] Michelle: Yeah. I guess that’s true.

[00:04:56] Kevin: I’ve always felt like the finances, even though we are married, obviously it should be very open, but at one point, I thought it should be more private, and I didn’t want to feel like I was being nosy and looking at her stuff. I know what I should be doing, but I still overspend here and there, little things, stopping at a 7-Eleven and just buying water, juice, and stuff. Unnecessary spending. Personally, I don’t know how she feels about that, but I think I’ve been better.

[00:05:29] Michelle: I wanted to realize you can go to 7-Eleven and get whatever you want. You can go get a slushy. You can go do whatever, buy candy, whatever. Nothing’s off the table, but you have to stay within the 25% or whatever it was that your guilt-free spending is. You know what I mean?

[00:05:45] Kevin: I have so many things going on currently that my mind is all over the place. So I guess I appreciate having her handle our finances, and I feel like a lot of the stress comes off of my shoulders because I feel sometimes overworked with work and school, two jobs, and then trying to be there for the family at the same time.

[00:06:06] So it feels good to have that pressure off of my shoulders. But then I realized she wants to know that in the future I am going to be good with my money. She wants to make sure that once we are making more money, we’re not just spending it all.

[Narration]

[00:06:19] Ramit: I noticed that Kevin has given up all responsibility of the family finances to Michelle, and Michelle eagerly accepts it. She tries to give him a login, but when he doesn’t even open up the link, she just transfers money over to him.

[00:06:33] He also says, I guess I appreciate her having a handle on our finances. This is a classic phrase. People who don’t want to be involved in the money tend to lavish praise on their partner, saying things like, she’s just better with money, or he knows how to handle our family finances. I’m not a math person. But in reality, this is just an unconscious or sometimes conscious technique to avoid responsibility.

[00:06:59] We’ll be right back.

[00:07:00] Last thing, the comments about 7-Eleven. He mentions overspending at 7-Eleven a lot. Frankly, I’m skeptical. Nobody gets into tons of debt from 7-Eleven. Let me keep going and find out how they grew up with money.

[Interview]

[00:07:16] Ramit: Think back to being a kid. What phrases do you remember your parents saying about money?

[00:07:23] Michelle: Dad definitely like, save, save, save. That’s too expensive. We can’t eat out. We’ll go to this place we had down the block, and it was just a 12-dollar combo, where we live. It’s a Portuguese food place. And it was the whole family feed, everyone, with $12, and he was so happy about that.

[00:07:48] Ramit: Wow. How many people in the family?

[00:07:50] Michelle: Well, it’s four of us. Yeah. And my mom, not really much. I think my dad was more in control of the finances.

[00:07:56] Kevin: She grew up with both her parents. I grew up with a single mother. Now, my mother worked very hard to provide for myself growing up. But her way of thinking was she would try to provide and give me all these things, not materialistic things, but she would try to give me experiences that she felt would bring us closer together.

[00:08:17] So she would work her butt off just for us to have a very nice dinner on the weekend. And that would be our thing. We would have one very nice dinner on the weekend. She was almost living paycheck to paycheck, but she would spend that all on me in the sense that she wanted me to have “good things.”

[00:08:37] Ramit: Let me ask a couple of questions. When you say a very nice dinner, what are we talking about?

[00:08:43] Kevin: We would come into the city and have a dinner at an expensive restaurant or–

[00:08:47] Ramit: Like a sit-down restaurant.

[00:08:48] Kevin: Like a sit-down restaurant. It would be a restaurant that, I don’t know, maybe you’d run into a celebrity kind of thing. But she would want me to experience those things, and she’ll be like, hey, we’re going to go out to dinner at this place. And I’d be like, okay. I didn’t know anything about it, but then she would show me a newspaper article where she read about it and stuff. So she was like, yeah, I want to treat you to this.

[00:09:10] Ramit: Now knowing that, you also mentioned she lived paycheck to paycheck, when you look back on those experiences on the weekend going to these nice restaurants, what do you take away from those experiences?

[00:09:22] Kevin: I don’t think it was worth it. She could have done so much more with that. And it’s funny because she’s older, and I still sit down and have conversations with her, and I tell her these things. I told her we were coming here to the podcast, and I told her about how I don’t think that when I was younger she did the right things financially, and she understands that.

[00:09:41] Ramit: What did she say?

[00:09:43] Kevin: She agrees, but she blames it on the fact that she’s an immigrant and doesn’t really speak good English. She could have been more successful if she had understood the language better, and she would’ve been able to do more with her investments and stuff like that.

[00:09:58] As a single mother, she was able to buy a house, and we had that house for two to three years, but then she ended up having to sell it because it wasn’t set up for her to be successful or for us to be successful in the house. It was like one of those balloon payment kind of things where she ended up never paying towards the principal of the house, and that was when the market was terrible in 2008, around that time. And she fell victim to those terrible mortgage practices that were going on at the time.

[00:10:27] Ramit: Why do you think that she took you to those restaurants now with some perspective?

[00:10:32] Kevin: She just wanted to have a good experience together, memories that we would create and we could talk about and say that we did those things, whether it was that, whether it was some vacations and stuff.

[00:10:43] And it’s funny that I’m terrible with finances because when I was younger, I was the one in charge of handling all her bills. She would give me pretty much access to her paychecks or to her bank accounts, and I was the one, she would tell me, hey, you have to pay this, this, and that on a certain day, certain time, whatever.

[00:11:03] Ramit: Hold on. She would tell you that you have to pay this bill and that bill on this day. Does that happen in your life anywhere else right now?

[00:11:14] Kevin: Yeah, it does.

[00:11:15] Ramit: Who does that?

[00:11:15] Kevin: It all came full circle, and it’s the same situation now with my wife.

[00:11:20] Michelle: But you did pay the bills for your mom. Why don’t you pay the bills for me?

[00:11:23] Kevin: I’ll give you a perfect other example. Our taxes. We just did our taxes. Now, I ask all these questions, and when I ask the questions, she gets annoyed with me.

[00:11:36] Ramit: Put yourself in her shoes. Why do you think she might be upset?

[00:11:40] Kevin: Because she feels like I don’t ask the questions the other time. So why am I asking it now?

[00:11:46] Ramit: Yes. Feels like? Can you give me an analogy?

[00:11:49] Kevin: It feels like I’m trying to sit on the sidelines all the time, and now all of a sudden, I want to hop in the game and play.

[00:11:56] Ramit: Yeah.

[00:11:56] Michelle: Because you’re going to get your money. Because you’re going to get a big check.

[00:11:58] Kevin: Well, it wasn’t that we were going to go anywhere.

[00:12:01] Michelle: Yeah, no, I know. But that’s my interpretation. You’re expecting a lump sum of money, and then you want to know what to do with it when you didn’t contribute the whole year to the bills or whatever.

[00:12:12] Ramit: It feels a bit like backseat driving. Let me ask the question a different way. What is a better way for you to change throughout the whole year?

[00:12:22] Kevin: Be more involved.

[00:12:23] Ramit: How?

[00:12:24] Kevin: Ask the necessary questions. Take initiative. Be a part of paying the bills. Be aware. We need to be on the same page and ask each other the questions. That’s what our goal is here, is to feel comfortable and realize and break those barriers that there should be no, I wouldn’t say secrets, but there shouldn’t be any disconnect when it comes to knowing each other and our finances.

[00:12:51] Ramit: Okay. What would’ve happened if the mortgage had not gotten paid on the first?

[00:12:56] Michelle: I have no idea. Probably a late fee problem.

[00:13:02] Ramit: What do you think, Kevin?

[00:13:03] Kevin: Probably a late fee. Definitely a fight. The trust would’ve been completely gone at that point, I feel like.

[00:13:11] Ramit: Michelle, did you ever think about not checking in on the first?

[00:13:16] Michelle: No. I probably was always going to check my account. Because I wasn’t going to check in with him. If I looked at the account and everything looked right, then I would’ve just been happy. But when I looked at it and then there was the 2,000 missing, I’m like, oh, I have a problem. It’s already the first.

[00:13:31] Like I said, I didn’t have Wi-Fi that day. The crew stopped at the port, and we were leaving Mexico at 3:00 PM, so I’m already spiraling, like, okay, it’s already 1:00 PM. I need to make sure this gets paid before 3:00 so I can rest my head tonight.

[00:13:47] Ramit: Have some peace. Yeah.

[00:13:48] Michelle: Yeah.

[Narration]

[00:13:49] Ramit: There’s one area I want to comment on here, the dynamic of money between them. The way that they have set their money up, Michelle is the parent, and Kevin is the child. He has to ask for money to be transferred to him. He doesn’t do much because his parent, excuse me, his wife, Michelle, handles everything.

[00:14:07] This is insanely frustrating to her, and understandably so, but of course, she’s co-created this dynamic. At one point I said, what would’ve happened if the mortgage hadn’t gotten paid? And what I was really looking for was what kind of boundaries Michelle has ever set? What kind of consequences would he face?

[00:14:27] But the answer was none. Michelle would never let that happen, which is why she was logging on to check if her husband paid the mortgage as she asked him to from thousands of miles away on her vacation. But why would he change? There’s no reason for him to, I’m not saying this is right. I’m simply demonstrating that people will often rise or fall to the level of expectation around them.

[Interview]

[00:14:53] Ramit: When you discuss money, what actually happens?

[00:14:55] Michelle: It’s an argument pretty much. We’re just never on the same page about it, I guess, kind of thing.

[00:15:01] Ramit: Go deeper. Who’s the one who brings it up?

[00:15:04] Michelle: Me.

[00:15:05] Ramit: Uh-huh. Who’s the one who makes the decision?

[00:15:09] Michelle: Me.

[00:15:11] Ramit: When was the first time that you remember sitting down and having a serious conversation about money?

[00:15:17] Michelle: I think the first time I ever really even did that, honestly, from my records, was December of 2023. Literally, just recently.

[00:15:27] Ramit: Why?

[00:15:27] Michelle: Because I started listening to the podcast.

[00:15:30] Kevin: No one ever has thought of us as struggling or stuff with our money. I feel like everybody just assumes we’re good with money.

[00:15:40] Ramit: Do you need to struggle in order to plan?

[00:15:41] Kevin: Definitely.

[00:15:42] Ramit: You do?

[00:15:44] Kevin: Well, no, now that we’ve gotten to this place where we realize we need to discuss our finances, I don’t think we should struggle in order to plan. I think we should plan so that we don’t struggle. That is the goal for both of us. But again, it’s easy to say these things, but putting action down and actually doing the things that need to be done is where I lack the most.

[00:16:11] Ramit: What’s your reaction to all these “discussions”?

[00:16:16] Kevin: Defensive, almost like, let’s get this over with and move on.

[00:16:20] Ramit: Why?

[00:16:21] Kevin: Because I don’t like to hear the facts almost. 

[00:16:25] Ramit: Why?

[00:16:26] Kevin: Because I don’t feel like I am leading like I would like to.

[00:16:29] Ramit: Well, you’re not leading. You’re not even in the ball game.

[00:16:33] Kevin: Yeah.

[00:16:33] Ramit: What else? Why are you not participating in these conversations?

[00:16:37] Kevin: Because I don’t feel comfortable almost. I feel like she doesn’t trust me.

[00:16:44] Ramit: Yeah, I think there’s a– rightfully so.

[00:16:47] Kevin: Yeah.

[00:16:48] Ramit: What else? Is there any reason for you to participate in this?

[00:16:53] Kevin: Yeah, there should be.

[00:16:55] Ramit: I’m not saying is there should be. I’m saying is there? You ask her, can you transfer me $100? She says something, and then a week later transfers you $100. You get what you want. She says, let’s talk about X. You say, great. You sit back, wait for her to finish talking, and then it gets handled.

[00:17:13] Mortgage payment, she tells you to do it. You don’t do it, and then she calls, while you’re getting defensive, reminding you to do it. I’ll ask again. Is there any reason for you to participate in the finances?

[00:17:26] Kevin: No.

[00:17:29] Ramit: So it’s never been established. And anytime there’s a financial challenge or question, who’s the one taking on the burden? Look at me putting an additional five-pound weight on my back every single time there’s an issue. Who’s doing that?

[00:17:42] Kevin: Michelle.

[00:17:42] Ramit: Michelle. No consequence, no burden, really living a very great life, honestly. I see something, I get it. Not my problem.

[00:17:52] Kevin: Yeah.

[00:17:52] Ramit: Why would anyone change? Why would they? I would love to be in that position where I’m just like, oh, I get it, and someone else deals with the problems.

[00:17:59] Michelle: Right. That’s true.

[00:18:02] Ramit: Kevin, was the chance where you failed and faced the consequences with money?

[00:18:09] Kevin: I went to college right out of high school. I had no debt. I had gotten pretty much grants, and a scholarship, and stuff like that. So I went to college, and I ended up not doing exactly what I needed to do. I took college almost as a joke. My first year, I did terrible, and my mom decided to just retire. And she moved back to Columbia, and she told me, you need to grow up and figure it out kind of thing.

[00:18:39] So she left, and I kept my apartment that we had. I think I was paying 1,500 a month, which at the time was a lot. It was a two-bedroom, nice area. So I ended up having one of my friends move in with me. And for the first few months, it was great. Everything was working out.

[00:18:57] But then I started getting reckless with my spending habits, and I started spending it on partying and just going out all the time, and stuff like that. And then he ended up moving out, and I started falling behind on payments, and it got to a point where I almost got evicted and almost lost that apartment.

[00:19:12] So at the time, it was frustrating. I was stressed out, and I was disappointed in myself. It was terrible because the apartment was in my mom’s name. So I messed up her credit with that. It wasn’t mine that got messed up, but at that point, it was almost like she couldn’t trust me financially either.

[00:19:34] That was the start of, I guess, the same old habits. It was a situation where I wasn’t trusted to stay there. Things got tough for me, and that’s where I had to dig deep and really change a lot of my habits, and stuff like that.

[00:19:49] Ramit: Oh, that’s what it took for you to change your habits?

[00:19:51] Kevin: Yeah. And my mom told me that. She told me I would hit rock bottom.

[00:19:56] Ramit: Hmm. I wonder if there’s any relevance to this situation right now. Anybody?

[00:19:59] Kevin: Yeah. Absolutely.

[00:19:59] Ramit: What do you think?

[00:20:02] Michelle: Yeah, I guess I’ll try to convince him to care, but in the wrong way, like you said. Ask me that any questions you have, or here, just pay this mortgage payment. We don’t really talk about it. It’s just like, I give him a task to complete, and then I’m like, okay, here, do this. But it’s not like we’re talking about it. I’m just telling him what to do, so that’s not really fair either.

[00:20:26] Kevin: Yeah, because that’s where I feel just exactly how she said. It almost feels like she’s giving me tasks.

[00:20:33] Ramit: She is.

[00:20:34] Kevin: And then we talked about how it almost feels like– and I’ve told her this. It almost feels like you’re my mother, but I shouldn’t have to feel like that because you’re my partner. We’re a team. We should be doing this together.

[00:20:46] Michelle: Even though I say I do trust him all the time with finances, I guess I really maybe don’t trust you as much as I thought I did.

[00:20:53] Ramit: Mm-hmm. What does that feel like to you?

[00:20:56] Kevin: It feels exactly how I’ve always thought of that situation. I’ve always felt like she didn’t trust me with the finances. I know I’ve given her reasons in the past to not trust me, but I want her to know that everybody could change, everybody could evolve and grow and learn, and that’s what I want.

[00:21:12] That’s where I’m trying to get to because besides those tough financial conversations, everything else is great. So I want us to be great in every aspect. And yeah, we’re going to have tough times, and we’re going to struggle here and there, but I’ve always been confident that together we could do whatever.

[00:21:35] Ramit: Just so I’m clear, besides the way that you talk about money, everything else financially is good?

[00:21:42] Kevin: I would think so, yeah. In my opinion.

[00:21:45] Ramit: How much debt do you have?

[00:21:46] Kevin: Oof.

[Narration]

[00:22:02] Ramit: We are going to get back to the answer to that question, but trust me when I say everything is not good. Sometimes I read the comments on this podcast, and people really want me to just blast one or both of the guests who come on this show. And it would be easy for me to sit here and scream at Kevin for not taking on a leadership role or really any role at all in his family finances.

[00:22:25] I always ask myself, do I want to feel good about myself, or do I want to help this couple? If I simply wanted to shame people about their money, I would not be doing what I do. Anyone can bring a couple on, shriek at them for how much they spend on eating out, slap an ultra-offensive thumbnail up and call it a day. That’s not what I want to do.

[00:22:49] And in the past, I have lost my temper on this show. There were a few instances where I heard something so wrong or so offensive that I just let loose. It happened on Episode 1 and several other places, but it rarely helps. Yelling at someone is what some people in the audience want, but I find it intellectually lazy, and I find it unhelpful. And I know that because personally, if I needed help with something, the last thing I would want is to be yelled at.

[00:23:20] It’s much more interesting, in my opinion, to examine the money dynamic between Michelle and Kevin. Why has Kevin abdicated all responsibility for money? Because he faces no consequences, and because Michelle handles everything for him. Me saying that does not mean I’m blaming Michelle, but I am acknowledging the very real dynamic that exists between them.

[00:23:40] The only way for them to change is to truly, deeply understand the dynamic that they have co-created, and for both of them to decide they want to change it. But trust me, yelling at someone does not change their behavior.

[00:23:57] Let’s take a quick pause for a message from our sponsors.

[00:24:02] Now back to the show.

[Interview]

[00:24:03] Michelle: So he was working as a maintenance manager. We did not have a housing cost because he was doing that. And as part of his salary, we would get free rent. So also, at the time, it was during COVID.

[00:24:16] So it was like we were making a lot of money, and we weren’t paying rent. It was like we didn’t have to talk about money. Not that we didn’t have to, but it was whatever. It was like, oh, Michelle, I want to buy this PlayStation 5. Yeah. Here, go buy it. It was no questions asked. But then when he did make that career change, and we did move, we bought a house, so many things happened. It was like, okay, now what do we do?

[00:24:40] Ramit: What did you do with all that extra money you had during that time?

[00:24:44] Michelle: We had a wedding. We used a lot of it for the wedding. We went on a honeymoon to Barcelona. We paid for our son’s formula, diapers, and stuff.

[00:25:01] Ramit: How much did the wedding cost?

[00:25:03] Michelle: There’s not a real answer.

[00:25:07] Kevin: I would say about 90,000.

[00:25:09] Michelle: 90. That’s a good number. Yeah.

[00:25:10] Ramit: How come you don’t know the number?

[00:25:13] Michelle: Well, there was a number on a spreadsheet.

[00:25:16] Ramit: Which you quickly exceeded, right?

[00:25:18] Kevin: Yeah. The figures changed with unexpected costs about the wedding, whether it was invitations or–

[00:25:25] Ramit: I’ve heard that happens.

[00:25:27] Michelle: Yeah.

[00:25:28] Kevin: Yeah. There was just a lot of other expenses.

[00:25:31] Michelle: And it wasn’t even unexpected cost. We knew what the cost was going to be, but then out of nowhere, COVID came down, so I took a pay cut at my job. He obviously took a pay cut at his job, so it was less income and increased money that we had to spend. Yeah.

[00:25:48] Kevin: In my mind, I felt almost like school at this point in our life wasn’t even worth it. I almost felt like I should have stayed in property management and kept doing what I was doing.

[Narration]

[00:25:57] Kevin: This is another classic mistake. People decide to make a major purchase without factoring in phantom costs and assuming everything is going to be perfect, and then something happens, like a job loss, but they don’t adjust their spending. By the time they realize they’re in trouble, it’s too late. Let’s look at their conscious spending plan now. You can download your own CSP template to follow along at iwt.com/csp.

[Interview]

[00:26:23] Kevin: I got home, I would say, probably an hour before her, so I went ahead, and I wrote down all my spending and everything. So I had everything ready.

[00:26:31] Ramit: Nice.

[00:26:32] Michelle: But then I thought it was wrong, and I just went and checked it anyway.

[00:26:35] Ramit: So you didn’t trust him.

[00:26:36] Michelle: No.

[00:26:37] Ramit: Okay.

[00:26:37] Michelle: I just sat down. I was, okay, well, this is what I have on the–

[00:26:43] Ramit: Let me pause you right there. So you started off the meeting by you taking the initiative. Hmm. I wonder if that perpetuates any dynamics. What do you think?

[00:26:51] Michelle: Right. Yeah, I think it does. I started out excited, but then I just became homework real quick because it was getting late, and then I knew we had to have it submitted, and I just– we weren’t talking too much.

[00:27:07] Kevin: Yeah. At first, to be honest, I saw it, I guess, as homework, but after, I was excited about it because as much as it doesn’t seem like I want to discuss, have those tough conversations, it was nice to actually see the numbers.

[00:27:22] Michelle: Basically, I just asked him for his– because he had a couple of debts, I was like, oh, what are the amounts on those? What do you owe in your car payment? Okay, thanks. And then I just plugged the numbers in, and then I said, do you have any questions?

[00:27:36] Ramit: Did his fingers touch the keyboard?

[00:27:40] Michelle: No, I don’t think they did.

[00:27:41] Kevin: I want her to understand that I could be trusted. As much as I haven’t proved to be able to, I want her to understand that I’m very capable to lead and explain to her like, these are the numbers that I came up with. Let’s go over your numbers, and then if you think that we’re wrong, let’s talk about it and figure it out.

[00:28:00] Ramit: How does that sound?

[00:28:02] Michelle: Yeah, that’d be nice to hear you say something during the conversation.

[00:28:05] Ramit: I’ll tell you what, it’s really impressive that you prepared the numbers. I really like that. I think that going that last step is where you really get all the benefits of doing the work. And then you come, you say, you know what? I realized that I want to take more of a leadership role when it comes to money in our family, so I know I got to work on it. 

[00:28:28] Here’s what I did. I went through my numbers. I analyzed this. I might be off on a couple of them, but I’d love to talk to you about it. But here they are. I wonder if we can go through them together. How do you think that would’ve gone over?

[00:28:41] Kevin: Oh, that sounds great. I think that would’ve worked perfectly. And honestly, I feel like she would’ve appreciated that.

[00:28:45] Ramit: I think so too. What do you think, Michelle?

[00:28:47] Michelle: I’m giving you a big kiss.

[00:28:48] Ramit: Okay. Let’s see. Michelle, let’s do the net worth. Can you read the word in bold and then the number in full next to it.

[00:29:00] Michelle: Sure. Under assets there’s $251,000.

[00:29:02] Ramit: Okay. Next.

[00:29:03] Michelle: I keep going. Okay. So investments is $43,700. Savings is $500, and debt, $628,500

[00:29:14] Ramit: Okay. Total net worth?

[00:29:16] Michelle: Negative $333,300.

[00:29:19] Ramit: All right. What do you think about that number?

[00:29:22] Michelle: Not where I want it to be.

[00:29:22] Kevin: Nowhere near where it should be.

[00:29:25] Ramit: Okay. So the 251,000 is your house.

[00:29:30] Michelle: Yes.

[00:29:30] Kevin: Yes.

[00:29:30] Ramit: Okay. And your investments, fine. Savings, okay. And your debt, break that down for me. $628,000 of debt. What is that?

[00:29:39] Michelle: So 414,000 is the mortgage. 30,000 is my car. 69,000 is Kevin’s car. My student loan’s 18,000.

[00:29:54] Ramit: Mm-hmm.

[00:29:55] Kevin: Mine are about 12,000.

[00:30:02] Michelle: Credit card debt, about 73,000.

[00:30:07] Ramit: 73,000 in credit card debt.

[00:30:09] Michelle: Right. So one of them is a loan for 55,000, and the credit card debt’s 18,000.

[00:30:15] Ramit: What’s the loan?

[00:30:17] Michelle: It’s a consolidation of all the other credit card debt, so that’s why I put it all under the same.

[00:30:24] Ramit: Okay. What’s the interest rate on that consolidation? Do you know?

[00:30:28] Michelle: 17%.

[00:30:29] Ramit: All right. It’s effectively credit card.

[00:30:31] Michelle: Right.

[00:30:32] Ramit: How come we spent so much time talking about 7-Eleven snacks but we’re over here with over $70,000 of credit card, a 69,000-dollar car loan?

[00:30:45] Michelle: I know. Yeah, I knew that was coming. I don’t even know why we got that car, to be honest. Because we did the math on it, and we couldn’t afford it. And then I don’t know what happened, and we– not that I don’t know what happened. I know what happened. 

[00:31:00] Ramit: What happened?

[00:31:01] Michelle: We still went for it because I was just being an enabler, and I said, yeah, it’s okay. We’ll figure out how to make it work.

[00:31:08] Ramit: And when you figure it out, who do you become in the relationship?

[00:31:13] Michelle: The hero.

[00:31:14] Ramit: Yeah. And by the way, what kind of car was it, Kevin?

[00:31:18] Kevin: I have a BMW. A lot of this was before I took that pay cut, but now that I have taken that pay cut, it’s so ridiculous, and I know I have to get out of it.

[00:31:32] Ramit: So how come you haven’t?

[00:31:33] Michelle: Because then we’ll take a loss. I mean, regardless.

[00:31:37] Kevin: Yeah. So the reason–

[00:31:39] Michelle: What was the worth of the car or whatever? You did the Kelly Blue.

[00:31:43] Kevin: Yeah. So the car’s valued at about 48,000, and 69 is what I owe on it. So I definitely would take a loss, but we haven’t taken the time to go in and figure out what our best option is, to be honest. The reason I stayed with them– so I had a BMW previously. Hers is a Mercedes. So we both have luxury vehicles that we both have no reason to be in.

[00:32:08] Ramit: You have a BMW and a Mercedes.

[00:32:11] Kevin: Yeah. That’s literally half of our income.

[00:32:14] Ramit: Mm-hmm. And those cars also take some pretty expensive gas, huh?

[00:32:18] Kevin: That is why I say I spend a lot of money on gas.

[00:32:23] Ramit: How come you got the cars? That’s what I’m curious about.

[00:32:26] Michelle: I don’t know. I’ve always had a luxury car since I was younger.

[00:32:29] Ramit: Oh, that’s a good reason to–

[00:32:31] Michelle: Well, because my dad always had a luxury car too. I don’t know, it just seemed like an asset that you had that. It made you feel good because you work so hard. You want to have a nice car.

[00:32:42] So I’ve always liked to have a nice car. This is getting into specifics, but I had a Lexus RX 500. It was paid off. It was great. It was fine. And one day, I don’t know what happened. We walked into a dealership, and we were looking at cars, and there was a really nice M series BMW.

[00:33:03] So I traded in my Lexus for the BMW that was on a lease. So then after that, we were having a baby. It was too small for the baby and everything, so that’s why I decided on the Mercedes. It was bigger.

[00:33:17] Ramit: Hold on, hold on. This is classic Americana in the worst ways. First of all, a luxury. How much were you making at the time where you had that Lexus?

[00:33:28] Michelle: Maybe 60,000, $70,000 a year.

[00:33:31] Ramit: Okay. Thank you. This is making my story even better. Making $70,000 a year, buying a Lexus. Basically, spending 100% of your salary on a car. Then you go, hey, this car’s paid off. I know what I’m going to do. I’m going to incur more payments.

[00:33:44] Michelle: It was the worst thing I ever did.

[00:33:46] Ramit: So you go in there. And then the minute you have a baby, what does every single parent in America do? We need a house and an SUV. Why? Because our little infant that can’t even move needs to around.

[00:34:00] Michelle: Right. Yeah, I know.

[00:34:01] Ramit: And so you go, you buy 1, 2, 3 things. Income goes down. One of you goes to school, one of you takes time back from work, etc. So you have these skyrocketing costs, lower income. Heavier costs with the baby. And now what happens? You’re trapped.

[00:34:18] Michelle: Stuck. Yeah.

[00:34:19] Ramit: You have car payments and transportation of $2,495 a month. That’s one of the highest I’ve ever seen.

[00:34:28] Michelle: Really?

[00:34:28] Ramit: Mm-hmm.

[00:34:29] Michelle: Yeah. That’s the car payment plus gas.

[00:34:31] Ramit: Mm-hmm.

[00:34:32] Kevin: So I had a BMW before, and it was a lease. That’s when I really started taking coaching seriously and almost took it as a second full-time job. And I didn’t account for how much I’d be traveling. So at first, I had, I think it was a 10,000-mile lease, and I was way over my miles.

[00:34:55] Then I had someone sideswipe me on the car, and there was like a hit and run kind of situation. I started realizing that I was going to be way over my miles, and I decided I had to go get a new car. So I went in–

[00:35:06] Ramit: What the hell? What?

[00:35:08] Kevin: Yeah.

[00:35:08] Ramit: Why did you make that decision?

[00:35:10] Kevin: Because I knew I was going to get screwed in the end. So now that I think about it, we’ve been acknowledging this. I got screwed even worse. So what happened was–

[00:35:21] Ramit: But you screwed yourself.

[00:35:22] Kevin: Yeah, definitely. So I started going to many car dealerships. I was not trying to go luxury, but what the issue I kept running into was the only dealership that would give me the highest cost of my car was BMW if I stayed with them. Every other car company wasn’t giving me anywhere near what the car was worth. So I ended up rolling all that negative equity into this new car payment and financed it.

[00:35:50] Ramit: Well, the good news is that the car dealers of America love both of you because you’re exactly what they want. They will run you into the ground if they can.

[00:35:58] Michelle: Yeah.

[00:35:59] Ramit: And all the reasons they gave you– let me tell you all the ways that you pursued this that I would not have. First of all, I got a BMW when you couldn’t afford it. Two, a lease. Why a lease?

[00:36:11] Kevin: Well, the first one was a lease. This one’s not.

[00:36:12] Ramit: Why? There’s no reason. There’s only two people who should get a lease. One, if you’re incredibly wealthy. Two, if you have some type of business where this could be considered a business expense. There’s zero reason to have a lease, especially for A BMW or a luxury car when you don’t have the money for it.

[00:36:28] Kevin: Yeah.

[00:36:28] Ramit: You are exactly who they love. And then third, you take it and cash it in early and roll it over, like 1, 2, 3. Perfect for the car dealers.

[00:36:39] Kevin: Terrible for myself.

[00:36:40] Michelle: Yeah.

[00:36:41] Ramit: And again, we’re spending hours talking about 7-Eleven, when the house is burning down on here.

[00:36:51] Michelle: Right.

[00:36:53] Kevin: Another thing that we tend to do that I was telling her we need to stop doing is taking vacations. We take a lot of–

[00:36:59] Ramit: Hold on, we’ll get to that in a second. How about the mortgage?

[00:37:02] Michelle: We owe $414,000.

[00:37:05] Ramit: What’s the interest rate?

[00:37:07] Michelle: 6.25.

[00:37:08] Kevin: Yeah.

[00:37:08] Ramit: Why’d you buy a house?

[00:37:09] Michelle: Because we needed to establish roots somewhere.

[00:37:15] Ramit: Huh? What’s that?

[00:37:16] Kevin: Well, one, I was getting out of the whole property management thing, so I had gotten out of that. So I would’ve lost the 50% discount that I was getting. The apartment where I was working and living, I think that apartment was 3,200 if we had to pay it. So instead of paying 3,200 towards rent, we figured 3,700 on a mortgage would be way better.

[00:37:41] Ramit: The 3,700 plus. What are all the phantom costs when it comes to housing? Y’all had any repairs recently?

[00:37:47] Michelle: Yeah. We did a lot.

[00:37:48] Kevin: We renovated the whole house.

[00:37:49] Ramit: How much?

[00:37:51] Kevin: About 80,000.

[00:37:54] Michelle: Yeah.

[00:37:54] Ramit: I’m just counting all the different industries that love you. Car Dealers of America, home renovators of America, Home Depot of America.

[00:38:04] Michelle: We don’t have a Home Depot card, though.

[00:38:05] Ramit: Okay. That’s good.

[00:38:08] Michelle: The mortgage lenders love us.

[00:38:09] Ramit: What’s the thing about vacations you mentioned Kevin?

[00:38:12] Kevin: I feel like Michelle loves taking vacations. It’ll be a weekend thing. It’ll be a one-week thing. And I get it. I love to travel. We both love to travel, so yes, we want to explore the world and do all these things. And she’s like, well, we can afford to do it, so why not? We should do it.

[00:38:36] Ramit: Where was the last place you went?

[00:38:38] Kevin: Austin. Was it Austin?

[00:38:42] Michelle: Bahamas.

[00:38:42] Kevin: No, Bahamas.

[00:38:44] Ramit: That’s nice.

[00:38:45] Kevin: But after that, she was just on the cruise that she just went on with her mom and Enzo.

[00:38:50] Ramit: When she suggests these vacation spots, how does it make you feel, Kevin?

[00:38:53] Kevin: My first reactions is like, I don’t think it’s necessary. Then obviously, I enjoy it. I have a great time. Who wouldn’t? But I’m hesitant. I’m really actually hesitant because I don’t feel like it’s necessary in that moment, or I don’t feel like it’s the right time because there’s been situations where we took these vacations and I had to take off from work, so now I’m missing out on money that I could be making. And a lot of the times I’ve expressed that to her. I got to cancel coaching. I got to do this and stuff and move things around.

[00:39:22] Ramit: How did she respond?

[00:39:24] Kevin: We’ll figure it out.

[00:39:25] Michelle: Yeah. I feel like where he may overspend with the little things, it is my biggest problem, feeling the need to go on vacation because I see a cheap flight, and I’m like, oh, well look, I’m going to buy this cheap flight. But then of course comes other costs, like the hotel might not be as cheap, and then of course the food and whatever else comes with it. So I think I get lured in by that, small, like, oh my gosh, the flight’s $80. We have to go. But it’s not $80.

[00:39:57] Ramit: In total, how many vacations do you take a year?

[00:40:02] Michelle: Maybe three.

[00:40:06] Ramit: Okay. Round up.

[00:40:07] Kevin: Last year we took about 10.

[00:40:09] Ramit: Wait, it’s my math exactly. I say take whatever it is and triple it. However much you say you eat, triple it. However much you say you take vacation, triple it. It never fails.

[00:40:22] Michelle: Yes, last year.

[00:40:23] Ramit: Everybody make a note. Ramit’s rule number 318, vacations. Whatever you say you spend triple it.

[00:40:30] Michelle: Right.

[00:40:31] Ramit: How do you pay for all this stuff when you go to the Bahamas?

[00:40:34] Michelle: Well, the flight, I usually use Miles. And then the hotel, I’ll get through my job. They have discounts, so I’ll get a discount through my job, but I’ll pay that on the debit card. But when we get there, it’s a free for all. I’ll just use a credit card. And we have a lot of credit card debt.

[00:40:51] Ramit: Yeah. Banks and credit cards love you too.

[00:40:53] Michelle: Yeah. They all love us.

[00:40:54] Ramit: Whoa.

[00:40:55] Michelle: I know. I don’t know. Truly, we’re in a really bad financial position, and I think we need to come up– well, I hope that our plan to get out of it works well and that we can keep our house and keep everything running smoothly and that nothing happens to either one of us in the next two years, because if it does, we’re screwed.

[00:41:19] Ramit: The next two years where you have a new baby coming and your little one’s going to be getting older?

[00:41:23] Michelle: Yeah.

[00:41:23] Ramit: Let me just ask to refresh your memory. How much do you have in savings right now?

[00:41:27] Michelle: $500.

[00:41:28] Ramit: How long would that last you if one of you lost your job?

[00:41:31] Kevin: Not even a week.

[00:41:33] Michelle: A day.

[00:41:33] Kevin: Yeah, I think it’s scary. I think reality is really setting in now.

[Narration]

[00:41:38] Ramit: Honestly, I’m at a loss. We spent almost an hour talking about 7-Eleven snacks and Kevin not paying the mortgage, and then we look at the numbers and find two luxury cars, $80,000 of credit card debt, tens of thousands of dollars on a home renovation, and literally 10 vacations last year. It’s almost hard to believe, but it’s real.

[00:42:02] There are a lot of people like this in America. They make a nice income, but they spend every last cent. And rather than looking at the real problem, which would invariably require a total lifestyle shift, they pick out one random area and fixate on it. At this point in my conversation, I’m still not sure how serious they are about changing. We’ll see.

[00:42:27] Here, by the way, are the income numbers for Kevin and Michelle. Kevin makes $4,000 a month gross. Remember that he’s in school. Plans to make more soon. Michelle makes $14,000 a month gross. She’s a nurse practitioner and adjunct professor. They, combined, have a household income of $216,000, which is a very good income, meaning they probably have some options. Let’s take a look.

[Interview]

[00:42:52] Ramit: $216,000 is a lot of money, right?

[00:42:55] Kevin: Yeah.

[00:42:55] Ramit: You would think so.

[00:42:55] Kevin: Yeah, exactly.

[00:42:59] Ramit: Regardless of where you live, that’s a lot of money. So what do you think’s going on here where it feels so tight? Michelle, I’m going to ask you because you manage the money.

[00:43:09] Michelle: Okay. So when I go through the fixed costs, I don’t think it’s the housing because it’s under whatever it is, the 28%, I believe. But I know the car payment, transportation, the gas, the car insurance, that’s a big one. And we’re aggressively trying to pay off the credit card debt, so that’s another huge one for fixed costs. So that’s why I think it’s so tight right now.

[00:43:36] Kevin: It feels like we’re fine, I guess because she does always take on that role to make sure that we’re fine. The reason I feel like we’re fine is because we don’t miss our payments. So in my eyes, we’re fine.

[00:43:48] Ramit: That’s a pretty low bar. How do you think she receives it when you tell her that?

[00:43:53] Kevin: Probably doesn’t believe it. How do you feel about it?

[00:43:58] Michelle: Yeah. I feel almost like, okay. Not like, who are you to say that? But like, yeah. Again, you’ve not been involved in it, and I thought that you seeing it on paper would make you feel like, whoa, we do need to change. But it didn’t, so then I’m more concerned.

[00:44:22] Ramit: That’s honest. I thought this would finally be the moment that he gets it. Not only does he not get it now, he’s sitting over here reassuring me, telling me it’s going to be okay. Is he ever going to get it? He’s not engaged. He’s not working on this. I give him one assignment, and he doesn’t do it, and so I have to call. Now he’s trying to smooth things over, telling me it’s going to be okay? It would make me wonder if we’re ever going to be on the same page. Those are my words. Can we look line by line at your fixed costs? Okay. So Michelle, what’s this number here next to your combined fixed costs?

[00:45:04] Michelle: 73%.

[00:45:05] Ramit: And what do you think about that number?

[00:45:07] Michelle: I think it’s high.

[00:45:08] Ramit: Yeah, it’s high. Let’s just do the rest of these categories, and then we’ll break down into your fixed costs. Investments, what numbers here?

[00:45:15] Michelle: 3%. I think that’s low.

[00:45:19] Ramit: Yeah. Savings goals?

[00:45:21] Michelle: 4% combined.

[00:45:23] Ramit: Okay. And your guilt-free spending?

[00:45:27] Michelle: 19%.

[00:45:28] Ramit: Which I don’t really believe. You think this number’s higher?

[00:45:32] Michelle: No, I think it’s lower.

[00:45:34] Ramit: Mm. Can’t be lower because where would the rest of the money be going? Where is it?

[00:45:41] Michelle: At 7-Eleven.

[00:45:41] Kevin: At 7-Eleven.

[00:45:42] Michelle: Just kidding. I don’t know.

[00:45:44] Ramit: How would you characterize my reaction to these numbers.

[00:45:50] Kevin: Exactly how I expected it to be because it’s not okay, and you’re realistic.

[00:45:55] Ramit: And what are you?

[00:45:56] Kevin: I’m living a fantasy over here.

[00:45:58] Ramit: Oh.

[00:45:59] Kevin: Because I just haven’t sat down and really thought about reality. I haven’t sat down and realized that we’re struggling.

[00:46:07] Ramit: Why?

[00:46:08] Kevin: Because I’ve always had Michelle who protected us and took care of the bigger issues and stuff.

[00:46:17] Ramit: Michelle, do you see what has happened here?

[00:46:19] Michelle: Yeah. He’s saying what he’s saying, and then I’m supposed to be the protector, but in fact, I actually mess things up even more by saying, yeah, we should get those cars. We should do that. I’m to blame as well.

[00:46:30] Ramit: Uh-huh. So both of you are enabling each other.

[00:46:33] Michelle: Absolutely.

[00:46:34] Kevin: We’re both guilty of it. Yeah.

[00:46:35] Ramit: Hurdling towards disaster.

[00:46:38] Kevin: Mm-hmm.

[00:46:38] Ramit: Do you hear the alarm in my voice?

[00:46:41] Kevin: Absolutely.

[00:46:42] Ramit: Okay.

[00:46:43] Kevin: I feel like it was always just easier to push the problems to the side.

[00:46:47] Ramit: How do you get that to change?

[00:46:50] Kevin: Besides ask the questions, become more involved. Take the initiative to–

[00:46:59] Ramit: You would’ve already done that. If that’s all it took, you would’ve done that. You’ve been together for a long time.

[00:47:03] Kevin: Yeah.

[00:47:05] Ramit: What needs to change in order for you to change?

[00:47:07] Kevin: My mentality?

[00:47:08] Ramit: How?

[00:47:09] Kevin: Digging deep and realizing where my issues are and understanding and reflecting. Just saying is not going to do anything. And then thinking of the worst-case scenario, if I continue these habits, how it could affect my son and our soon-to-be-here child also.

[00:47:28] Ramit: You coach soccer?

[00:47:30] Kevin: Yes.

[00:47:31] Ramit: How old are the kids?

[00:47:32] Kevin: All ages. So I coach a high school girls’ varsity team that I just got that job actually, so I haven’t started with them till the fall.

[00:47:39] Ramit: Okay.

[00:47:40] Kevin: I also work at a lead academy that is top in this area and in the US, and there I coach kids. Youngest I’ve worked with there right now currently is probably eight-year-olds, and then it goes up to high school.

[00:47:57] Ramit: Let’s talk about that. Okay. I used to be a soccer referee. So when you get into the older kids, especially at an elite place, they’re serious.

[00:48:05] Kevin: Yeah, they are.

[00:48:05] Ramit: They’re not messing around.

[00:48:06] Kevin: They’re not.

[00:48:06] Ramit: All right. Let’s say you take one of your under 15 kids.

[00:48:10] Kevin: Okay.

[00:48:11] Ramit: They’re acting up at practice. They’re not doing what they need to do. They’re talking back to you. What do you do when game time comes around?

[00:48:21] Kevin: They get limited playing time. And then where I am, parents will ask you, and I’m very quick to let them know.

[00:48:28] Ramit: Oh, what do you say?

[00:48:29] Kevin: I actually just had this happen recently. So I told them, I’m like, listen, they play 9v9 right now. I have 19 kids on my team. 12 get rostered. So seven kids weren’t rostered. And I had the one parent reach out to me and ask me, hey, what happened? They said that their child was working hard at practice. And I explained to them, your child was working hard at practice, but they’ve been distracting all the other kids on the team.

[00:48:51] They are fooling around a lot of the time. And unfortunately, their mentality wasn’t there. And I bring it up to them, the kids themselves, and I try to– it’s funny that I’m about to say this because now I’m like, this is– it is just so funny. But I tell them that I want to teach them to hold themselves accountable.

[00:49:14] Ramit: Oh, wow.

[00:49:14] Kevin: For their actions. And even at a young age, I try to teach them that because not only am I teaching them soccer, but I’m trying to teach them life lessons that they could take with them forever. And I want them to be able to grow as young men and young women. And I want them to be successful in every aspect of their life. So I treat them like adults. I ask them the tough questions that they probably don’t want to hear.

[00:49:36] Ramit: You’re a good coach, would you say that?

[00:49:39] Kevin: Excellent.

[00:49:39] Ramit: I like that answer. I love the confidence. Great. Okay, so I’m talking to a good soccer coach here. You know what it takes to create a player who cares, who wants to be better, etc.

[00:49:51] Kevin: Who works hard.

[00:49:52] Ramit: Yeah. You also know that you have to set some boundaries, right?

[00:49:55] Kevin: Absolutely.

[00:49:56] Ramit: Okay. Now apply that to your own relationship with your family money.

[00:49:59] Kevin: Mm-hmm.

[00:50:01] Ramit: You’ve tried to dig deep. Michelle said, hey, I want you to care. You don’t. What’s the solution?

[00:50:10] Kevin: The solution is just changing, just literally becoming disciplined.

[00:50:15] Ramit: Isn’t that what you try to tell your students and some of them listen and some don’t? How long has she told you, be better, get involved?

[00:50:25] Kevin: Yeah. For about a year or two now.

[00:50:28] Ramit: What’s the next step?

[00:50:30] Michelle: He needs to prioritize–

[00:50:35] Ramit: Maybe it’s not about him. You’re the coach right now.

[00:50:44] Michelle: Mm-hmm.

[00:50:45] Ramit: What do you need to do?

[00:50:47] Michelle: Go in a different direction.

[00:50:51] Ramit: Yes.

[00:50:51] Michelle: I don’t want to cut him from the team.

[00:50:53] Ramit: You can’t cut him from the team. We’re not talking about that. But there’s something else, right?

[00:50:58] Michelle: Yeah.

[00:50:58] Ramit: What is it?

[00:50:59] Kevin: Change.

[00:51:01] Ramit: The next step is boundaries. Because we can’t just sit here and berate each other and berate ourselves and say like, I got to be better. You need to be better. That doesn’t work.

[00:51:09] Michelle: Right. It’s true.

[00:51:10] Ramit: Right now, you have no reason to be motivated. Why would you? You get playing time every single week no matter what. You’re very responsive to crystal clear boundaries. Michelle?

[00:51:25] Michelle: Yeah. I think maybe set some boundaries. I don’t even know how to do that, to be honest.

[00:51:38] Ramit: That’s okay. That’s what we’re here for.

[00:51:40] Kevin: How about you send me the money and I pay the bills instead of me sending you the money? You saw her face, though? You saw her face?

[00:51:46] Ramit: Okay. I like that. That’s a good–

[00:51:47] Michelle: It’s a big change for me right now.

[00:51:49] Ramit: Maybe you’re not comfortable with that, but I like that. That suggestion’s pretty bold.

[00:51:52] Michelle: Yeah.

[00:51:53] Ramit: Cool.

[00:51:53] Kevin: Split the finances.

[00:51:54] Michelle: Is that a good idea?

[00:51:56] Kevin: Hey, I’ll handle these five bills. You handle these five bills.

[00:52:00] Ramit: Wow. I like it. Okay. That’s definitely one option. Great. Put it on the table. What else? Let’s get a few of here?

[00:52:06] Kevin: We eat out a lot.

[00:52:07] Ramit: Like how much?

[00:52:08] Michelle: At least twice a week or once a week.

[00:52:10] Ramit: No couple ever says to me, we eat out a lot, and then the other one goes once a week. No way.

[00:52:14] Michelle: At least on the weekends. We’ve been way better.

[00:52:16] Kevin: We’ve been way better since we did this, to be honest. But besides that, no. And it’s not like we’re having cheap meals. And just to highlight how that is, tomorrow we have a dinner with her brother and his girlfriend also here in New York City.

[00:52:32] Michelle: It’s hard to get the reservation.

[00:52:34] Ramit: Yeah. Good. The tough reservation. Which restaurant?

[00:52:37] Michelle: Torrisi

[00:52:38] Kevin: Torrisi.

[00:52:38] Ramit: Okay. For everyone who doesn’t know, just look to the camera and tell them what kind of restaurant is Torrisi.

[00:52:45] Michelle: Fancy Italian restaurant.

[00:52:46] Kevin: I’ll put it this way. David Beckham’s all over Instagram or social media for being there.

[00:52:50] Ramit: Yeah. Would you say that it’s a hot restaurant?

[00:52:53] Kevin: Yes.

[00:52:53] Michelle: Yes.

[00:52:53] Ramit: So you’re like, but it’s a super hard res.

[00:52:57] Michelle: Right. We got one. We have to go.

[00:53:01] Ramit: How much do you think it’ll be?

[00:53:02] Kevin: Well, she can’t drink now, but I already know that we have a 250 minimum, I think, that we have to spend.

[00:53:08] Michelle: No, we were going to spend that. I think it’s $500 maybe.

[00:53:11] Kevin: I would say at least 500.

[00:53:12] Ramit: For the two of you.

[00:53:13] Michelle: No, for everyone.

[00:53:13] Kevin: For all four.

[00:53:14] Ramit: And then you’re driving into the city parking. So we’re looking at 350, something like that, minimum.

[00:53:24] Michelle: Yeah, that makes sense.

[00:53:25] Kevin: Fair. All for an experience.

[00:53:29] Ramit: I got a question. Yeah. In a way, it reminds me of your mom taking you into the city, going to the hard-to-get-res that’s in the paper. Is this not exactly the thing?

[00:53:39] Kevin: It is.

[00:53:40] Ramit: And then what did you tell your mom? Later in life, you’re like, mom, looking back, I think– what’d you say?

[00:53:45] Kevin: We shouldn’t have done that.

[00:53:47] Michelle: I look at it the wrong way because, like Ramit mentioned, okay, the toll. We’re going to pay the toll. We’re going to pay the parking. We’re going to pay all this stuff that I wouldn’t even take into account because I’m just thinking, oh, well, we already each paid $50 for the reservation. We’re going to lose the $50. I don’t want to do something and feel bad about doing it. I want to go knowing that, wow, we were able to go because we could afford it this month.

[00:54:09] Ramit: Can I tell you something?

[00:54:10] Michelle: Mm-hmm.

[00:54:10] Ramit: Couples who make $216,000 should not be thinking about being able to afford something this month. If you made $50,000 a year, okay. We’d be talking on a monthly basis. Making over $200,000 a year and being concerned if you can afford a meal, that’s a problem. You’re playing smaller than your income suggests you should be. And the reason you’re playing smaller, you have to play smaller is why?

[00:54:38] Michelle: Because our fixed costs are really high.

[00:54:39] Ramit: Exactly. Your fixed costs are super high. So therefore, your obsessing over haircuts and snacks is not the point. That’s a total distraction from what’s really going on here, which is the house is burning down.

[00:54:55] Michelle: Yeah.

[00:54:55] Ramit: Okay. Your phone is $330 a month. Why?

[00:54:58] Michelle: Because everyone’s on the phone payment plan.

[00:55:03] Ramit: Why?

[00:55:04] Michelle: For just us two, it was 200 something. So I put his mom, my mom, my dad, my dad’s wife, my brother, me, and Kevin on it.

[00:55:14] Ramit: Why did you do that?

[00:55:15] Michelle: They were all also paying a lot of money, so if we all combined, it made sense that everyone just gives me for their phone.

[00:55:23] Ramit: Did they do that?

[00:55:25] Michelle: My dad does.

[00:55:26] Ramit: How about the other 19 people on the plan?

[00:55:28] Michelle: Well, I feel bad asking my mom because she takes care of our son. We pay no childcare fee or anything. My brother, he could probably pay me, but it’s $30. So I’m like, all right.

[00:55:41] Kevin: No, she’s just too nice because I’ve told her, I’m like, listen, let me know exactly how much I owe you for my mom and myself. You just got to let me know, and I’ll send it to you. She said, don’t worry, just focus on your other bills.

[00:55:53] Ramit: Because when you are nice you are?

[00:55:56] Michelle: Saving people.

[00:55:57] Ramit: You’re the hero. Do you see how that comes out in so many different places in your life, financially and probably otherwise?

[00:56:05] Michelle: Right. Yeah, that’s a problem I have. I will agree.

[00:56:08] Ramit: People pleaser?

[00:56:09] Michelle: Yeah. 

[00:56:10] Ramit: And the thing is, you’re actually just playing small.

[00:56:11] Michelle: Yeah.

[00:56:12] Ramit: Shows up in other parts of life too, right?

[00:56:14] Michelle: Oh yeah.

[00:56:15] Kevin: I think we’re both people pleasers. That’s a lot of our biggest issue.

[00:56:22] Ramit: What? If you were a people pleaser, you would have been pleasing Michelle by taking on 50% of the finances. You’re not a people pleaser, not when it comes to finance. You’re deeply avoidant.

[00:56:33] Michelle: Yeah.

[00:56:33] Kevin: Very true.

[00:56:34] Ramit: So what’s up? Do you all see that this isn’t just one person here?

[00:56:37] Michelle: Right.

[00:56:39] Ramit: Kevin, you’re avoidant. It’s like a water off a duck’s back. Any financial thing that comes in, you’re just like, great. Goes right off my back. Michelle, you pick it up so much. You internalize this idea of yourself as? What is your identity when it comes to money in your relationship?

[00:56:56] Michelle: The person that will handle it.

[00:56:59] Ramit: Yeah. The person that handles it. Good. What else? Keep going.

[00:57:02] Michelle: Yeah, the money expert in our relationship.

[00:57:06] Ramit: Good. The expert. And when you solve it and you save the day, you ever save the day when it comes to money? Where are we supposed to find the money for this or that? What do we call the person who saves the day?

[00:57:15] Kevin: The hero.

[00:57:17] Michelle: Hero, right. Yeah.

[00:57:18] Ramit: You don’t feel good about that? You sure?

[00:57:19] Michelle: Right. I guess I subconsciously do, but in reality, I’m just looking at myself like, well, I had to sacrifice on this, that, and the other.

[00:57:30] Ramit: So what do you do It? You must be getting something out of it.

[00:57:33] Michelle: I’m just the good person. Yeah.

[00:57:36] Ramit: Yeah. And if you were to say no to your husband, what does that make you?

[00:57:42] Michelle: The villain.

[00:57:44] Ramit: Oh.

[00:57:44] Michelle: Yeah.

[00:57:45] Ramit: What do you think about that? That’s powerful. The villain. That’s not just a bad person, the villain.

[00:57:53] Kevin: I don’t think she should feel that way, but that doesn’t make me feel good that she does feel like that.

[00:57:57] Ramit: Hmm. And yet you ask her two days ahead of getting paid for $100, and you don’t even transfer it yourself. You wait for her to do it.

[00:58:05] Michelle: Yeah.

[00:58:06] Ramit: So in a way, the dynamic here turns her into the villain, the one that you are participating in. But Michelle, you also actively participate. You two have co-created this dynamic.

[00:58:19] Michelle: Right, right.

[00:58:19] Ramit: Hmm. It’s like a knot. And when one pulls on it, what happens to the knot?

[00:58:25] Michelle: It’s tighter and tighter.

[00:58:27] Ramit: Yeah.

[00:58:28] Kevin: Absolutely.

[00:58:30] Ramit: And the more he avoids it, the more you say, I really want you to dig deep and participate. But that’s just words.

[00:58:37] Michelle: Right.

[00:58:38] Ramit: The only thing that causes change in a scenario like this is actually boundaries. And you know that because it happened to you in your life. That’s the only thing that got you to change. Took years.

[00:58:48] Michelle: Yeah.

[00:58:50] Ramit: It feels uncomfortable because it’s like you’re almost taking X-ray glasses to your own relationship. You two are the same people you were walking in here, but you’re just seeing your relationship with a new lens, and sometimes it’s uncomfortable because you’re like, oh, what we thought was quite simple, we just need this one little budgeting tip, and then you realize there’s a knot here that’s incredibly complex. And if we try to get out of it the way we’ve tried, it just gets tighter.

[00:59:20] Michelle: It’s not going to work. And that’s the thing too, because I feel like we keep coming back to, oh, well this is just temporary. In two years, I’ll have my degree, but it’s not because the way we’re thinking about it. Our mindset isn’t there.

[00:59:29] Ramit: That’s right. That’s right. That’s a great insight. You keep having these temporary things that come up. We just had our son. It’s going to be tough for a while. I just went back to school. It’s going to be tough for a while. It’s going to be tough for a while forever unless you change the dynamic.

[00:59:46] Michelle: Right. Yeah.

[00:59:48] Ramit: What do you want to do? Again, it’s up to you. It’s your money. It’s your res. It’s up to you. What do you want to do?

[00:59:55] Kevin: I don’t think we should go.

[00:59:56] Ramit: How come?

[00:59:58] Kevin: We just can’t afford it right now. We have to worry about other things.

[01:00:04] Michelle: Yeah. I don’t think we should go either.

[01:00:06] Ramit: Wow.

[01:00:07] Michelle: Because we truly can’t afford it. We would just be digging ourselves in a deeper hole that we’re trying to get out of. And it goes back to everything you were saying, like we’re just going in a circle here. So it takes a boundary to like say, hey, we need to stop.

[01:00:23] Ramit: Love that. This is a boundary. I love that the two of you’re doing it together. This is a real discussion. I don’t think we should do it. Here’s why. The next step is to say, what do you think? But in this case, you two are totally aligned, so where’s your phone?

[01:00:38] Michelle: Over here.

[01:00:40] Ramit: We’ll grab it for you. And let’s just send that text. Let him know. Boy, I’m interested to see. Yeah, there we go. Okay.

[01:00:50] Michelle: You’re making me be the bad guy. That’s interesting.

[01:00:52] Ramit: You’re are not a bad guy for setting a boundary. You’re not a bad– hold on. That’s actually really interesting. Person who sets a boundary is what?

[01:01:00] Michelle: Smart

[01:01:01] Ramit: Yeah.

[01:01:02] Michelle: And responsible. 

[01:01:05] Ramit: Yeah. In fact, to me, that’s somebody who’s a hero. That is the kind of hero that I want. Someone who says, look, we have a goal. This is what we’re doing. We’re going to say yes to this, but we’re going to say no to anything that’s not in our primary goal. I’m not the bad guy. I’m the hero. And in this case, both of you’re the hero because you’re deciding. Now, who sends the text, that’s up to you. But approach it as if you’re doing the right thing, not you’re being the bad guy. Go ahead.

[01:01:34] Michelle: Right. I said, hey, guys, I don’t think we can make it to Torrisi tomorrow. I’m sorry.

[01:01:40] Ramit: Okay. So the fact that you’re both saying, no, we’re going to put ourselves first, not this dinner, I think it’s amazing. I think it’s especially meaningful because you’ve gone to the city, there’s something very meaningful about this type of restaurant for you, and for you to say, no, we’re coming first. I think that’s really awesome. So great work. First of many boundaries.

[01:02:06] Michelle: It’s true.

[01:02:07] Kevin: I feel good about the decision.

[01:02:09] Ramit: Yeah. What do you want to do to fix cost? We need to get this number down.

[01:02:13] Michelle: The glaring numbers, obviously the car.

[01:02:16] Kevin: I guess I’m really going to have to go and figure out what options I have to getting out of that car payment.

[01:02:25] Michelle: Because we can’t do anything else.

[01:02:29] Kevin: I definitely would love to get into a new car payment. I just don’t know how to go about it. I guess I would’ve to go to a dealership, look at some cars, and then see what options I have.

[01:02:36] Ramit: No, fuck that. You’re not going anywhere near a dealership. Every time the two of you go into a dealership, you end up buying another luxury car.

[01:02:43] Michelle: Yeah. I’ve never felt good leaving a dealership ever.

[01:02:45] Ramit: Oh, shocking. That’s really shocking. Wow.

[01:02:47] Michelle: Yeah.

[01:02:48] Ramit: So, no, what do you want to do?

[01:02:53] Kevin: I don’t know.

[01:02:54] Michelle: Sell the car.

[01:02:56] Kevin: Sell the car.

[01:02:58] Ramit: It’s going to suck. You’re going to lose money. But over the course of 12 months, 18 months, 36 months, that’s when you’re really going to start to see those savings. And it’s not like you’re going to get a big fat check that says, here, you did the right thing. It simply means that the amount you’re paying towards your car payment is slowly going to go down. You’re going to have a little bit more cash every month. And that is money that can be used for what?

[01:03:23] Kevin: Credit card payments.

[01:03:25] Ramit: Yes. Savings, all those things. But it’s going to feel horrible. That’s the situation you’re in. Let’s be conservative. Remember how I always say like, I want to be conservative with my assumptions? Let’s drop this down $1,000. So 1,295, and therefore your car payments per month become $1,495.

[01:03:45] Michelle: That’s only Kevin’s car right now.

[01:03:48] Kevin: Yeah, pretty much.

[01:03:49] Ramit: Yeah, which is insane. Well, first of all, what just happened to your fixed cost number?

[01:03:54] Michelle: Yeah, it went down.

[01:03:55] Kevin: Wow.

[01:03:56] Ramit: It went to 67%.

[01:03:57] Michelle: Yeah, that’s really good.

[01:03:58] Ramit: We’re getting close. We’re in the right direction.

[01:03:59] Michelle: Yeah.

[01:04:00] Ramit: So what are we noticing with all these examples?

[01:04:07] Kevin: That we have options.

[01:04:08] Ramit: Yes.

[01:04:08] Kevin: That there’s definitely ways to work on things and get it done.

[01:04:13] Ramit: Yes. What else?

[01:04:14] Michelle: That I shouldn’t be so hesitant to come up with an idea? If I think of something, maybe I should just say it instead of like, oh, I don’t know if that’ll work. I don’t know.

[01:04:23] Ramit: Yeah, I noticed a lot of self-censoring, a lot of digressions about, I’m not trying to say this, and I’m not trying to do that, and not, not, not, not, not, a lot of ego protection instead of like, let me be straightforward. I’m not sure if this is the correct solution, but here’s what I think. What do think?

[01:04:41] Michelle: Right.

[01:04:42] Ramit: That’s a discussion.

[01:04:43] Michelle: Yeah.

[01:04:44] Kevin: Yeah.

[01:04:44] Ramit: Can’t dance around everybody’s feelings the entire time. In fact, you’re actually hurting both of you by not being direct.

[01:04:51] Kevin: Right.

[01:04:53] Ramit: Honestly, you could go out and eat at some nice restaurants and take some vacations, and it’ll be okay. What do you think would happen if you keep doing that?

[01:05:04] Kevin: We’re just going to dig our hole deeper. We’re never going to be able to pay off our debt, and something–

[01:05:13] Michelle: And God forbid something happens.

[01:05:14] Kevin: God forbid something happens, then we’re really going to be screwed. And then we’re going to–

[01:05:17] Ramit: What are you going to do then?

[01:05:19] Michelle: We’re going to have to sell the house, I don’t know. Move back home.

[01:05:22] Ramit: Mm-hmm. Two kids, move back home.

[01:05:25] Michelle: Right.

[01:05:25] Ramit: What else?

[01:05:26] Michelle: Credit’s going to be super bad. We’re going to have a hard time coming up from that.

[01:05:33] Ramit: Mm-hmm. How’s it going to affect your relationship?

[01:05:35] Michelle: It’s going to be horrible. We’ll both feel really terrible, like we really just failed.

[01:05:41] Ramit: Yeah. Kevin, you agree?

[01:05:42] Kevin: Yeah, I agree.

[01:05:43] Ramit: If you were engaged with the money, Kevin, you would be able to open up the CSP, point out the fact that there is no specific vacation thing here. There’s $0 saved for vacations. And you would be adept at saying, look, right now it’s not in our CSP. If we want to make a plan for it, we can make a plan for it. Let’s talk about it. Where can we draw the money from?

[01:06:05] But because you don’t live in this world, you live in just a world of like, ah, I don’t know. What do you think? Okay, well, I trust you. You’re the leader. You leave it up to her, and she wants to go on the vacation, so she’s going to go on the vacation. Do you see how that dynamic works?

[01:06:20] Kevin: Yeah.

[01:06:22] Ramit: You down with it. You look a little hesitant.

[01:06:24] Kevin: No, it sounds great to me. And that’s where I want to get to. I want her to not have to check anything. Just trust in me that I could get it done. And I feel like if she gives me that opportunity, I could show her that I could excel and do just that.

[01:06:42] Ramit: If you create that opportunity for yourself. She doesn’t have to give it to you.

[01:06:50] Kevin: Yeah.

[01:06:50] Michelle: Takes discipline, holding each other accountable.

[01:06:52] Ramit: Uh-huh.

[01:06:53] Kevin: I’m excited about what we have to look at and move forward. I think that if we work together, we’ll be way better off, to be honest.

[01:07:08] Michelle: Yeah.

[01:07:09] Kevin: And I think we’re very capable. You’re definitely capable of it, but I think–

[01:07:13] Michelle: So are you.

[01:07:15] Kevin: Communicating.

[01:07:16] Ramit: What’s the dynamic today? Before we started talking, what was the dynamic?

[01:07:21] Michelle: Separate.

[01:07:22] Ramit: Separate. Yeah. And who did what? What was the roles?

[01:07:25] Kevin: The hero.

[01:07:27] Ramit: And?

[01:07:27] Kevin: I guess the villain.

[01:07:28] Michelle: No, it was the avoider.

[01:07:31] Ramit: Yeah.

[01:07:32] Kevin: The avoider. Yeah.

[01:07:33] Ramit: Yeah, the avoider. And the worrier.

[01:07:36] Michelle: Yeah, the worrier.

[01:07:38] Ramit: Worrying, yeah. Living in the spreadsheet as well.

[01:07:42] Kevin: Mm-hmm.

[01:07:43] Ramit: You can now be saving thousands of dollars per month.

[01:07:45] Michelle: Yeah. That sounds really good

[01:07:49] Kevin: That sounds amazing.

[01:07:50] Ramit: And actually, it’s a perfect time because you have a new baby. You’re not going to be going out to restaurants. In many ways, this is the time to hunker down, focus on the family.

[01:08:00] Michelle: Exactly. Right.

[01:08:01] Ramit: Turn off the outside noise, and build up a war chest, a moat, where your family is protected, and more importantly, the two of you are connected.

[01:08:13] Michelle: Right.

[01:08:13] Ramit: What do you think?

[01:08:14] Kevin: I love it.

[01:08:15] Michelle: Yeah. Sounds really good. 

[01:08:17] Kevin: That sounds perfect.

[01:08:18] Ramit: There’s a path forward. That’s what I see.

[01:08:20] Michelle: Yeah.

[01:08:21] Ramit: So now what is the new dynamic? How would you describe it?

[01:08:24] Michelle: United.

[01:08:24] Kevin: Super team. Yeah. United, for sure.

[01:08:28] Ramit: Love that. United. Super team.

[01:08:31] Michelle: Yeah. Strong.

[01:08:32] Kevin: Yeah. I love that for us. I think it’ll be great, and I know we could do it.

[01:08:40] Ramit: I like that.

[01:08:41] Michelle: Yeah.

[01:08:42] Kevin: At least as long as you know that we’re going to work together and get to where we need to be. That’s all that matters.

[01:08:49] Michelle: Hot in here.

[01:08:50] Kevin: Yeah. It’s okay. We said it would get hotter when the questions got hotter.

[01:08:54] Michelle: Yeah.

[Narration]

[01:08:55] Ramit: I thought Kevin and Michelle were extremely interesting. They have a very good income, but they have co-created a dynamic that is not serving them anymore. Now, while Michelle and Kevin did not send follow-up videos, I did receive this letter from them. Let me read it to you.

[01:09:17] “We left the meeting feeling hopeful and optimistic about our financial future. The past couple of days, we’ve been discussing options regarding selling our vehicles and paying off the loans associated with them. A family member is purchasing a new vehicle in the near future, and he’s willing to sell his old car directly to us instead of trading it in.

[01:09:35] “Don’t worry, it costs less than $15,000. Our plan is to buy this car and sell my Mercedes within the next two months. We are also looking at websites like Carvana and KBB to sell Kevin’s car and then hopefully find another vehicle in the $10,000 range to purchase.

[01:09:52] “Although we still have a lot more to work on, just having this discussion together regarding our car situation has been extremely refreshing. We’ve been collaborating as a team on which car makes the most sense, what timeline we need to stick to, and most importantly, how we will manage our finances for the purchase of the new cars and the sale of the old ones.

[01:10:11] “Coming up with a plan together is a big leap in the right direction for us. We realize we have a lot of work to do. We have cut our guilt-free spending to only 10% and plan to keep that for at least a year. We’ve put together a debt payoff schedule. If we commit to spending only 10% of our income for guilt-free things, putting an extra $1,000 monthly towards our debt, we can pay off our $55,000 loan in only one year and eight months versus the currently projected two years and nine months. 

[01:10:40] “This will free up over $3,000 a month for us in as little as two years, not to mention the $5,000 in interest we will save. We are committed to working on these financial changes together and setting boundaries when it comes to our friends and family and our finances.

[01:10:54] “Next on our list of things to tackle, we’ll be cutting everyone off our Verizon phone bill, setting up automatic payments, which we plan to do together this weekend. We finally see a light at the end of the tunnel. We are excited that we are slowly untangling the tight knot we have created for ourselves, eager to move forward with our growing family. Thank you for all of your help. It was a pleasure meeting and speaking with you and your team.”

[01:11:15] Thank you, Kevin. Thank you, Michelle.