Episode #185: “My fiancé has no savings at 43. Should we get married?”

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[00:00:00] Dawn: We’re just not doing any saving or anything. We have no emergency fund. We have nothing.

[00:00:03] Richard: I know I’m behind. You need a 401k. You need finances in the bank.

[00:00:07] Ramit: In today’s episode, meet Dawn and Richard.

[00:00:10] Dawn: We’re not really sure how to get to the goals that we have with what we have. I also don’t know if my expectations are a little too high.

[00:00:19] Ramit: Dawn is 48. Richard is 43, and they live paycheck to paycheck.

[00:00:24] Dawn: When I get his money, the 200 or 250, I feel better. Like I can breathe.

[00:00:29] Ramit: They’re engaged, but they’re struggling to combine their finances.

[00:00:33] Dawn: We almost broke up. I have children and grandchildren, so my money goes many places where he’s doesn’t have the children.

[00:00:44] Ramit: Dawn wants financial stability, but she overspends on her family.

[00:00:49] Dawn: We went on vacation.

[00:00:50] Ramit: Oh.

[00:00:50] Dawn: I brought the whole family. I’d say probably 6,000.

[00:00:55] Ramit: Richard has deep scars from a financially devastating breakup.

[00:01:00] Richard: I’ve lost the home, lost the money, sold off a camera equipment, and I’m almost afraid to spend money.

[00:01:06] Ramit: And he isn’t sure how to contribute to their household and his retirement with his current income.

[00:01:12] Richard: I haven’t made this amount a year since I was in my early 20s.

[00:01:17] Ramit: Can they create a financial plan, move beyond their money past, and start getting aggressive about investing? You’re losing tons of money every single month by not investing.

[00:01:27] Dawn: I don’t want to be 70 years old and working a second job.

[00:01:30] Ramit: Now, let’s meet Dawn and Richard. Okay, let’s take a look here. Dawn is 48, Richard is 43. They live in upstate New York. They want to buy a house in the next one, two years. One of them has three kids. Live in a house. They’re renting to own. They struggle to put their finances together because of past financial trauma.

[00:01:52] “I have trouble saying no to my children, but I also want to save for vacations, and I want to buy the house. Rich does not have any retirement, and I claimed bankruptcy eight years ago after my divorce. We stress about money constantly, and it has caused us to almost break up. Rich has no children. I spend more than I should, and my son has no concept of money.

[00:02:18] “We’ve postponed our wedding because of money. I make three times what Rich does, so his go-to answer is he does not make enough money, except he hardly has any bills. This is my third marriage,” Dawn says. “We’d love to have a budget together and both feel we are contributing to our future.” All right. Well, let’s take a look.

[00:02:41] Assets of 28,500. Investments of 24,900. Okay. Savings of 58,000. Wow. And debt of 14,000. Total net worth of 97,000. Okay. So this is troubling. It’s not necessarily an issue to have a small amount of assets. I don’t mind that. But to only have about $25,000 of investments around the age of 43 and 48, that is a problem.

[00:03:13] To also have more savings than investments probably suggests to me that this couple has not been particularly educated about money. Because why would you have more in savings than in investments around the age of 50? That makes no sense. You’re leaving so much money on the table, and time is against you.

[00:03:34] The debt at least is nominal 15, 000 bucks. We can knock that out if necessary, but we need to take a look at the incomes to understand more. Okay. We have one partner making 6,000 bucks, another making 3,000 bucks, for a total of about $10,000. So they make six figures gross. I’m curious why one partner is making $3,000.

[00:03:59] That’s pretty low, $3,000 a month as a 43-year-old. So I want to find that out. Going down to the fixed costs. Fixed costs are at 74%. That’s too high, way too high. Housing costs are fine, 21, 22%. That’s not bad. Car payment is 766. Okay, it’s not horrible. Debt payment’s 557 per month. That’s a lot of money.

[00:04:29] Phone is 275. Also, why? Subscription is 299. Okay, so we see some sloppiness here. Just out of curiosity, if I drop that subscriptions down to 50, and I drop that phone down to, let’s just say 150, what would happen? Well, their fixed costs would drop down to 68%. Still high, but moving in the right direction.

[00:04:51] Let me tell you why I did that. What that tells me is there is sloppiness in their spending. If you’re at 74% and I just simulate using the CSP and get you down to 68% with a couple of clicks, you could do it. I bet you there’s some other various expenses that we’ll get to in guilt-free spending. Overall, that’s slightly reassuring.

[00:05:11] Let’s keep going. Investments are at zero. Huge problem. Savings are at zero. Huge problem. What the hell? Guilt-free spending is at 32%. I don’t even really believe this number. According to the CSP, it says their guilt-free spending is at 32% or 2,200 a month. I don’t believe this. I think they’re spending discretionary money on eating out, travel, etc.

[00:05:35] But I don’t think this properly reflects it. In any case, this tells me they have money to use. So we could redirect this money. We could invest it aggressively. We can save it. We could pay off that debt. There’s a lot we can do, which gets me excited. But I suspect that this goes a lot deeper. In Dawn’s application, she mentioned that she spends too much on her son who “has no concept of money.”

[00:06:03] She mentioned resentment about how Dawn and Rich spend money together. She mentioned that they’ve even put off getting married because of money. So we have a lot to unpack here. I’m excited to get a chance to speak to them.

[Interview]

[00:06:15] Dawn: I have a family. My money goes to supporting my children, my home, my house. Financial stability is number one on my list of what I need, and we’re engaged. And so I think part of me, we haven’t gone to the next level, one, for money, but for two, I need to feel secure. So we’re not on the same page many times. I’d say back in February was one of the times that we were really–

[00:06:41] Richard: Last year.

[00:06:42] Dawn: Struggling.

[00:06:42] Ramit: What happened in February?

[00:06:44] Dawn: He moved in. And that was when it really became more of a struggle that we’re not on the same page, where, how much money he should give to the household.

[00:06:57] Richard: She would give me just a relative number.

[00:07:00] Dawn: Give me 200 a week. That will at least help me. But then as you talked about, you didn’t want to be without money for yourself.

[00:07:09] Richard: We moved into a house that had a lot of love to be put into it. Just a fixer upper. It wasn’t move in ready. So inconsistently, I would give money. I’d give money here and here, but I took money that I would have and put it into the house as far as fixing it.

[00:07:26] Ramit: Okay. So you’re putting money in sporadically in different ways, not necessarily handing over 200 a week, but contributing in other ways.

[00:07:33] Richard: Yes.

[00:07:35] Dawn: So I’m struggling to pay the mortgage and things like that, and so I’m not seeing consistent money coming into me. The 200 I wasn’t seeing every week. It was like one week it’d be 100. The next week it’d be 200.

[00:07:49] Ramit: Were you struggling before he moved in?

[00:07:53] Dawn: I was struggling before he moved in, but things were different economy wise. My daughter, we redid the basement, so she had an apartment down there. So she lived down there and was giving me money towards that. She has since moved out. It was perfect timing. He moved in. So I was like, “Okay, that will help.” But then it was very inconsistent. So I never knew if I was getting money from him.

[00:08:18] So that’s been our fight, how to put our money together, because I feel like he’s paying me rent. He’s not really into putting our finances together because of some of his past stuff. So I didn’t know how to do it. I’ve never done that before. I’ve never had anyone move in with me, and I was married. So it was different.

[00:08:38] Ramit: How many times were you married before?

[00:08:39] Dawn: Twice.

[00:08:40] Ramit: Twice. Okay. So you’ve never had somebody move in, not married, and figure out how to deal with the money together.

[00:08:48] Dawn: Correct.

[00:08:48] Ramit: Okay. And when you said, it feels like he’s paying rent, is that a good or bad feeling?

[00:08:54] Dawn: That’s a bad feeling because it just feels like all the financial- I pay all the bills in the house. I pay the household bills. He pays his bills. But I pay all the household bills. So if I’m late on something or can’t make rent, that stress is all on me.

[00:09:10] Ramit: And out of curiosity, if Richard were not here, how would you be dealing financially?

[00:09:17] Dawn: I’d be struggling.

[00:09:18] Ramit: What would you do?

[00:09:19] Dawn: Get a second job.

[00:09:21] Ramit: So you began these conversations, and you said, I’m putting money here. I’m putting money there. How did you resolve it?

[00:09:31] Dawn: We almost broke up. It was talking about him leaving. But I said, I just need consistency at least. I need you at least to show me consistency. Let’s start with that.

[00:09:43] Richard: I’ve been more consistent as far as funding and money dispersed in the house.

[00:09:47] Ramit: How much?

[00:09:47] Richard: 250 a week. 225, 250.

[00:09:50] Dawn: Yeah, anywhere from 200 to 250 a week he’s been giving.

[00:09:52] Ramit: Okay, so does that work? Is the problem solved?

[00:09:55] Dawn: No.

[00:09:56] Richard: Yeah, no.

[00:09:57] Ramit: Oh, wait, what? This was the problem. You asked for the solution. It sounds like you got the solution you wanted.

[00:10:03] Dawn: Yes.

[00:10:05] Ramit: Why are we here?

[00:10:06] Dawn: Because I guess I thought we would have extra money that we could– because that was our plan. Like, oh, we’ll each put like 50 into a savings for this, and we’ll have an emergency fund. But then I realized when he gives me the 200, it still just pays the bills. There’s still not a lot of extra. We’re just not doing any saving or anything. We have no emergency fund. We have nothing.

[00:10:30] Ramit: Is this a problem for you, Richard?

[00:10:32] Richard: It is. At the end of the day, we just want structure. I have the ability to put money aside, but it’s, now where do I put it?

[00:10:42] Ramit: You said you wanted structure. Did you have structure in your finances before you met Dawn?

[00:10:49] Richard: I would say yes. There’s a lot there. So I met Dawn. I had an ex-girlfriend. Before that there was an ex-fiancé, a home, finances, and just the whole thing was a structure. Yes.

[00:11:05] Ramit: Who ran the finances in that relationship?

[00:11:08] Richard: We had joint finances, but we had a number of different, I would say, accounts that one paid the bills, one for the cars, one for fun money. It all just went in. We had money. It was good. We were good financially, but then after a while she lost her job.

[00:11:26] She wanted to take over the finances, and she did that, and then just ultimately in the long run, it didn’t end well. She wasn’t paying anything, and things went into her own accounts, and in the end almost like a fallout, a breakup, lost the home, lost the money, sold off a camera equipment and a lot of different things.

[00:11:47] Dawn: Shut down your business.

[00:11:48] Richard: Yeah, shut down my business, and there was a lot of things that happened. I was in a rebuilding process for a long time before I met Dawn. I’ve been through a lot, and yeah, if you want to join finances– because I know her good heart. You know what I mean? Good person, beautiful, amazing. You know what I mean? I know there’s no wrong to be had there in the end.

[00:12:09] Ramit: Are you saying you are open to joining finances?

[00:12:12] Richard: Absolutely, absolutely.

[00:12:13] Ramit: Okay, just out of curiosity, how long have two of you been together?

[00:12:17] Dawn: Three years.

[00:12:18] Ramit: Three years. And how come you haven’t joined it yet?

[00:12:21] Dawn: I think a lot of it is his last girlfriend that he lived with was asking him for a lot of money and he was always like,” I gave her everything.” He had no money for himself. So he’s worried that–

[00:12:34] Richard: Yeah. I didn’t make a lot because, from my previous experience, I had a lot of debt, a lot of wage garnishments and everything like this. Everything in my past I’ve already paid my dues.

[00:12:45] Ramit: Why were the wages garnished?

[00:12:46] Richard: Just ran up credit cards.

[00:12:49] Ramit: What?

[00:12:50] Dawn: For ex-fiancé.

[00:12:51] Interview: Yeah.

[00:12:53] Ramit: Like for what?

[00:12:55] Richard: Just random things. I don’t know to this day.

[00:12:58] Ramit: Would you say that you’re on top of your finances?

[00:13:01] Richard: I would say yes, it’s very minimal. It’s very, very minimal.

[00:13:05] Ramit: Listening to Richard talk about his past experience with finances, anything surprise you?

[00:13:12] Dawn: No.

[00:13:13] Ramit: Okay. What do you make of the journey that he’s been on?

[00:13:18] Dawn: I guess a couple of things come to mind. I do think he needs to be a little more aware, because one happened when we were together. His wages were being garnished, and I was like, “Well, do you know what it’s for?” He’s like, “No.” And I’m like, “Fight it.” I’m a little different. I will call and be like, “What’s this for?” And find out and fight it. And if there’s a late fee, I’ll call them and say, “This happened. Can I not get that?” I’m a little more aggressive in that sense.

[00:13:47] Ramit: Richard, how does your journey with money affect your relationship with it today?

[00:13:53] Richard: A lot of stress. There’s not one day that goes by where I’m just punching mathematics, doing problems in my head, moving things around, just bills and numbers. Yeah. Because I have the feeling that one day you could lose it. There’s been times I will go to the store and I’m almost afraid to spend money.

[00:14:16] Ramit: Have you always thought I could lose it all?

[00:14:20] Richard: Oh, absolutely. I’ve always had a pretty good income. Single, mostly. I’ve had my relationships, but yeah, it was a lot more simple.

[00:14:33] Ramit: When you were single, did you get ahead with money?

[00:14:38] Richard: There’s been some times in my life where, yes, I didn’t know was pretty ahead with money. Yeah.

[00:14:43] Ramit: What was money like for you then? What’d you do with it?

[00:14:46] Richard: Invested in my business as far as gear, camera equipment, and things like this upgrade, clothes.

[00:14:55] Ramit: Did you save?

[00:14:56] Richard: I did.

[00:14:57] Ramit: Where’d you put the money?

[00:14:58] Richard: I had a 401k. I had a savings. Paid the principal on my car and everything like this, but then what happened to me is I just lost it all. There was a lot that happened in a short period of the time where I just needed money.

[00:15:13] Ramit: And you cashed out the 401k?

[00:15:15] Richard: Yes.

[00:15:15] Ramit: What was that for?

[00:15:16] Richard: There was a house in foreclosure. My car got repossessed. A credit card debt. Yeah. Just a lot of different things.

[00:15:23] Dawn: She didn’t pay anything.

[00:15:24] Richard: Yeah.

[00:15:24] Dawn: She just took the money.

[00:15:25] Richard: Took the money.

[00:15:26] Ramit: That sucks.

[00:15:27] Richard: In the long run it was almost bittersweet because all of it’s paid. It’s in the past. Not really, as far as like trauma and things you carry, but as far as everyday life, it almost started me out on a blank slate. I know I’m behind. I’m 43. You need a 401k. You need finances in the bank. Yeah.

[00:15:48] Dawn: I have a pension with the New York State. So I was like, “What are you going to do in 20 years? I’m not paying for your retirement”.

[00:15:58] Ramit: Meaning if the two of you are married, you’re not going to pay for him.

[00:16:04] Dawn: My amount isn’t going to cover mine and his. I don’t have that big of a 401k. I don’t want him to have to work. I want to travel some, or enjoy our retirement. Not that I’m not going to pay for the home and stuff with my retirement, but he’s going to need money. I’m not going to have enough to give him.

[Narration]

[00:16:21] Ramit: I get a lot of requests to speak to couples with different income, especially lower incomes. Well, today we have Dawn and Richard, and as you listen, you’re going to hear how money lessons are passed from one generation to another. And at times today’s conversation’s going to be really frustrating. I know it was for me. But I want to encourage you to keep listening.

[00:16:41] Let’s recap. Dawn has been married twice. Richard moved in, and she asked him to pay. And he did. But now she feels like he’s paying rent, which, again, he is. Yet that didn’t even make her financial situation improve. When I asked what Dawn would be doing if Richard wasn’t paying, she admitted she would be struggling.

[00:17:01] She also acknowledges that Richard helps in non-financial ways around the house. Now, Richard has a complex financial background. As he tells it, his previous fiancé caused his wages to get garnished and destroyed his finances. Now, I don’t know the details. I can only take his word for it. What I can see is that he’s afraid to spend money today. And candidly, he’s not in a good financial place.

[00:17:27] What really stands out to me is the total lack of a shared vision between the two of them. In fact, you’ll notice that Dawn uses her finances almost as a weapon, saying, I have a pension. What are you going to do in 20 years? I’m going to probe on the kind of vision they have together, but first, let’s take a quick break to support our sponsors.

[00:17:47] Now, back to our conversation.

[Interview]

[00:17:48] Ramit: What’s the vision of the together thing that you want to build?

[00:17:52] Dawn: I’d like to do our finances together so I don’t pay all the bills myself and all the stress is on me. I would like once a week we sit down and say, “Okay, this is what we need to pay this week, and he’ll be like, “Okay. I’ll take this, and go pay that.”

[00:18:06] Ramit: So share the responsibilities of bill pay. Okay. Got it. What else?

[00:18:11] Dawn: I’d like to have some joint savings that we’re each putting some money into. I don’t want to just have me put money in. I make more than him, so that’s where we struggle a little bit. I want us both to put some money in so I feel like when we go on vacation or we have an emergency fund, it’s not just all me, because then I feel like in time I’m going to build resentments against that.

[00:18:32] Ramit: Okay. What else?

[00:18:33] Richard: Getting married. Yeah.

[00:18:34] Dawn: Get married, purchase the house.

[00:18:35] Richard: Purchase the house, have something you own. Number wise, the house, when you look at it on paper, it’s a really good deal. But it’s not hers yet.

[00:18:44] Ramit: It’s a house that you’re renting to own.

[00:18:46] Dawn: Yes.

[00:18:47] Ramit: You could own it or not. It’s up to you.

[00:18:51] Dawn: I could walk away. Yes.

[00:18:53] Ramit: How much have you put into it?

[00:18:55] Dawn: I’d say probably 10 to 12,000 because we redid the basement.

[00:19:01] Ramit: Ah. And if you were to buy it, how much would it cost?

[00:19:04] Dawn: It’s my ex-husband. He takes 1,000 a month off of the sale price, so he was selling it to me for 330,000, and now I think we’re at about 317, 315. So the longer I wait, the longer it goes down. So I’m assuming like $300,000.

[00:19:25] Ramit: How much would a house like that cost if you were to buy it?

[00:19:28] Dawn: Right now it’s about 495,000.

[00:19:31] Ramit: Wow.

[00:19:31] Dawn: Yeah.

[00:19:31] Ramit: So that’s a good deal.

[00:19:32] Dawn: It’s a huge deal. And it’s because he’s financially in a horrible position, and he wants me to have it because it’s for our children. I thought about getting out of it, and I looked around to see, because I want to stay in the same school district for my son, and I can’t find anything under 250,000 to 300,000.

[00:19:52] Richard: There’s nothing close to what we would buy that for.

[00:19:55] Ramit: If you were to buy that, how much would it cost you per month?

[00:20:01] Dawn: At least 2,000.

[00:20:02] Ramit: So a little bit more than you’re paying right now.

[00:20:04] Dawn: Yeah.

[00:20:04] Ramit: Okay. And if you were to rent?

[00:20:06] Dawn: Two bedrooms where we are are about 2,000, somewhere in there.

[00:20:09] Ramit: This makes sense. In certain low cost of living cities, it can be more expensive to rent or as expensive as it is to own.

[00:20:16] Dawn: Right. I’m in a better financial position monthly. I’m going to pay more when I get a mortgage.

[00:20:23] Ramit: How would you afford this house? How would you buy it?

[00:20:27] Dawn: I have a house savings.

[00:20:28] Ramit: Okay.

[00:20:29] Dawn: I have 68,000.

[00:20:32] Ramit: What? You have 68,000 in a house savings account?

[00:20:35] Dawn: Yeah, to buy the house. It was 100,000 when I started the process. But that’s slowly dwindling down. We used it for the basement for my daughter to have a place down there.

[00:20:47] Ramit: What do you think of that decision?

[00:20:49] Dawn: Yeah, financially, not the best. Both my daughters are in stable positions at this point. They both have children, so it’s a spot for them to come back.

[00:20:59] Richard: There’s a lot of things with that house because it’s very family-oriented, where it has a pool. It has the backyard, a patio. There’s 10 grandchildren.

[00:21:07] Dawn: I do have 10 grandchildren.

[00:21:08] Richard: There’s a lot of get togethers, a lot of parties.

[00:21:10] Dawn: It’s always at my house.

[00:21:10] Richard: The house totally fits the bill when it comes to that lifestyle.

[00:21:14] Ramit: I appreciate that. And I know that parents, grandparents, it feels amazing to be able to have the house that everybody comes back to.

[00:21:23] Dawn: Yes.

[00:21:23] Ramit: I am trying to understand the financial side. How much did it cost to renovate the basement?

[00:21:28] Dawn: I’d say 9,000.

[00:21:29] Ramit: Okay, so you renovated for 9,000 in a house that you’re renting, for which I don’t mind. I’ve put money into rentals I’ve had because I want to live in a nice place. But I could afford it. How did you decide if you could afford that or not?

[00:21:45] Dawn: Well, at the time I’m just looking at, oh, I have 100,000. That’s not something I normally have in my bank account. So it was like, it’s not that big of a deal.

[00:21:53] Ramit: So 100,000. And how much is it now?

[00:21:56] Dawn: 68,000.

[00:21:57] Ramit: Ah, what happened to the rest?

[00:21:59] Dawn: We went on vacation.

[00:22:00] Ramit: Oh. Where’d you go?

[00:22:02] Dawn: Outer banks.

[00:22:02] Ramit: Okay.

[00:22:03] Dawn: So that wasn’t a huge, but I brought the whole family.

[00:22:06] Ramit: How much?

[00:22:08] Dawn: I’d say probably 6,000.

[00:22:11] Ramit: Okay. 6k. What else?

[00:22:12] Richard: This was really great that year.

[00:22:15] Dawn: Yeah. I just spent, not on anything for myself. House things. I paid off my car.

[00:22:22] Ramit: Ah, what car was that?

[00:22:23] Dawn: It’s 2015 Infiniti. I owed 12,000, so I paid that off to put me in a better financial place monthly. It was a high interest. It was 9%. I claimed bankruptcy eight years ago.

[00:22:41] Ramit: What?

[00:22:42] Dawn: When I got divorced the second time, I was in a home, and we had a ton of credit card debt because he had stopped working and wasn’t paying any bills, and I wasn’t making a lot of money. So we lived on credit cards. I did have a prenup, so when he left, he left with nothing, but then it’s all on me. I could not afford the bills. I couldn’t afford my car payment. So I claimed bankruptcy.

[00:23:07] Ramit: What did it feel like to make the decision to declare bankruptcy?

[00:23:10] Dawn: It was a hard decision for me. In the long run after it felt good just it was a clean slate. I had my car and my house, but all the credit card debt and all that was gone.

[00:23:23] Ramit: Do you notice the similarity in your journeys?

[00:23:27] Dawn: Yes, it is what brought us together.

[Narration]

[00:23:29] Ramit: A lot of this is hard for me to hear. When I ask about what they want to build together, I hear, I want us to split the bills, I want us to talk about money, and eventually I want us to own a home because you should own something of your own. It’s a simple set of goals, even simplistic.

[00:23:50] Then I hear Dawn had $100,000 but tapped into it for vacations, a car, and a basement renovation. This is after declaring bankruptcy. Which is just another reminder of how hard it is to actually change your financial behavior. Then Dawn says that she and Richard came together after their respective financial history.

[00:24:13] And that is a huge red flag because people who bond over trauma can often solidify and weave that trauma into their own relationship dynamic. Let’s hear from Dawn about how growing up with money impacted her money psychology today.

[Interview]

[00:24:28] Ramit: What do you remember hearing about money in your household?

[00:24:31] Dawn: Only the fighting. It was always, we don’t have enough. Money was fought about in my house all the time. My dad owned a business, and my mom worked two jobs, and he never could pay the bills. It was just constant fighting back and forth about not having enough, not having enough, which I understand as a mom how that would be if she’s working two jobs.

[00:24:54] Ramit: Yeah.

[00:24:54] Dawn: And he was like, “Well, I am paying the bills.”

[00:24:56] Ramit: Does that sound familiar to you?

[00:24:57] Dawn: Yeah.

[00:24:58] Ramit: In what way?

[00:24:59] Dawn: It sounds like me.

[00:25:00] Ramit: Yeah. And whatever happened with your parents and money?

[00:25:05] Dawn: They divorced.

[00:25:06] Ramit: What else do you remember your family discussing about money?

[00:25:10] Dawn: Just we’d never had enough. It was always we never had enough. We’d go grocery shopping and we’d always have to watch what we would buy per se. I never went without. But my mother did what I do. She never said no.

[00:25:25] Ramit: Wow.

[00:25:26] Dawn: Yeah. I was bratty. And if I wanted something, a new Barbie house or something like that, I would get it, even if they didn’t have money. Very similar situation to now.

[00:25:37] Ramit: What lessons do you take away from that looking back?

[00:25:40] Dawn: I wish my parents taught me more about money and how to be financially stable. I wish I did that to my children because they’re in different situations. They had children younger. But I wish there was more talk about it in a positive way.

[00:25:56] Ramit: What would that have looked like?

[00:25:58] Dawn: Instead of fighting about it and me hearing about the fighting, maybe sitting down and actually knowing what was going on.

[00:26:06] Ramit: Looking at where you are now and looking back at your journey from growing up to these two marriages, where would you have thought that you would be financially speaking?

[00:26:17] Dawn: I’m much better than I thought I would be because I didn’t have a degree. I went to college. I went and got my substance abuse counselor after that. And now I’m an investigator. So I make more money now than I ever thought I would ever make. And compared to some people, it’s not a lot, but for me, it’s a ton. When you look at me like as a single mom, I’ve never been without a home. I’ve never been without a job, a car. My kids don’t go without.

[00:26:45] Richard: Works very hard. Very, very ambitious.

[00:26:48] Ramit: I appreciate the gratitude. I really do. That’s really cool. Okay.

[00:26:52] Dawn: Yeah. I try to think of that sometimes, but it’s hard because I still struggle. And I’m like, I make this much money. Why am I still struggling? But it’s because I live above my means in some ways. I spend too much.

[00:27:05] Ramit: You do?

[00:27:06] Dawn: Yeah. On my kids. Yeah.

[00:27:07] Ramit: Okay. How old are your kids?

[00:27:09] Dawn: 25 and 22 are my girls. And they have children. So my one daughter, my 25-year-old has one daughter, and then her fiancé has five kids.

[00:27:20] Ramit: Two-year-old–

[00:27:21] Dawn: My 22-year-old is pregnant with her third child.

[00:27:25] Ramit: Okay.

[00:27:25] Dawn: And then her fiancé has one. So they have four.

[00:27:29] Ramit: And let’s talk about your son. How old is he?

[00:27:30] Dawn: My son is 12. He’s with my second husband. He’s tough. He’s tough. He wants a lot. Every day there’s something he wants. Just yesterday, he sent me three things he wants, and I’m like, “Well, maybe for Christmas.” They’re 125-dollar jackets that he wants.

[00:27:48] Ramit: Can we see? Well, he has very good taste. It says Nike Tech Men’s Full Zip Windrunner Hoodie. It looks pretty cool. I have to say it looks pretty cool.

[00:28:00] Dawn: Mm-hmm.

[00:28:00] Ramit: So he doesn’t even say like, “Can I have this, mom?”

[00:28:04] Dawn: No.

[00:28:04] Ramit: He just sends the picture and the link.

[00:28:06] Dawn: Yeah.

[00:28:07] Ramit: What’s your reaction when you get a text like this?

[00:28:10] Dawn: Typically, I get upset with him, which is that doesn’t help our relationship. I’ll be like, “[Bleep], I don’t have that kind of money. So if that’s something you want for Christmas, I’ll add that to your list.” Sometimes it’s okay, but most of the time it’s a meltdown. And sometimes I give in because I just don’t want to deal with the reaction.

[00:28:31] Ramit: What’s your ex-husband’s take on this as well?

[00:28:34] Dawn: My ex-husband doesn’t spend money on him like that. He knows if he reacts poorly, that I’m going to give in. When I had my girls, I was in my 20s. I had a lot more tolerance. Yeah, that’s the word, tolerance. Now I’m tired. And I also work, and I didn’t work with them. So I’m working hard. I have the house. I have the grandkids that I’m–

[00:28:56] Ramit: It’s a lot to juggle.

[00:28:56] Dawn: Yeah. So it’s just sometimes I just don’t want to deal with it. And he knows that.

[00:29:00] Ramit: That’s a good explanation. Can you go beyond the explanation and tell me what will happen as this continues?

[00:29:07] Dawn: Oh, I’m creating a monster because he wants what everyone else has. And in a way, I struggled with that for a very long time.

[00:29:14] Ramit: You did?

[00:29:15] Dawn: I really, really struggled with comparing myself. And I still do in some sorts. Facebook’s horrible because I see all these vacations and people are in Italy, Spain, and Caribbean. And I’m like, “I want to go.” I work really hard. I want to go. And that’s where I go back and forth with some days. I’m like, “I need to save and have a future.” And then other days I’m like, “I can’t bring it with you.” So I do struggle with that sometimes.

[00:29:41] Ramit: Let’s trace the pattern here.

[00:29:42] Dawn: Okay.

[00:29:43] Ramit: You were young. You wanted a Barbie house. Mom said fine, even though they were fighting about money and never had enough. You wanted X. You wanted Y. You got it. Your 12-year-old wants a Nike tracksuit. He’s probably going to get the tracksuit. So what happens? What do you see in this story?

[00:30:04] Dawn: Well, it’s going to be a repeat. I know that’s part of his issue with combining our incomes. And I don’t blame him because he’s going to give me all his money and then I’m going to spend it all on my kid. And I get that. I do get that. But I’m hoping if we’re doing it together, at that point, I want to change my son’s outlook on money.

[00:30:24] Ramit: So you believe that when you have more money at your disposal, you’re going to stop saying yes to your son.

[00:30:30] Dawn: Yeah.

[00:30:31] Ramit: Doesn’t strike me as true.

[Narration]

[00:30:32] Ramit: We are seeing how easily we can replicate past family patterns right on to the next generation. Dawn’s 25-year-old daughter has six kids with her fiancé. Her 22-year-old daughter has four kids with her fiancé. Her 12-year-old son is extremely spoiled, and Dawn admits that she is creating “a monster.”

[00:30:53] I was honestly shocked when I saw those text messages. He just sent links of things he wanted. He did not say please. He did not even ask. He just added links of what he wanted. And Dawn knows she’s a pushover. She tells me that her ex-husband doesn’t buy those things for her son, and he wouldn’t ask him. Go back to her childhood and her mom bought her everything she wanted. Now she’s replicating that for her son.

[00:31:18] Meanwhile, she directs her worries about money towards Richard. I want to get into their specific numbers, and we’re going to open up their conscious spending plan after this break for our sponsors. But before we get to that, I need a quick favor from you. Hit that Subscribe button because it helps my team and me grow this channel.

[00:31:36] Now let’s dig into Dawn and Richard’s CSP.

[Interview]

[00:31:40] Ramit: Go ahead and read off the word in bold and then the full number next to it.

[00:31:43] Dawn: Okay. Assets, 28,500; investments, 24,985; savings, 58,484; and debt 14,895. Total net worth 97,074.

[00:32:03] Ramit: Okay. What do y’all think of the numbers?

[00:32:06] Dawn: I wish assets was higher, but I don’t own a home, so that’s why that’s so low. Investment is not very big. I would like them all to be bigger.

[00:32:14] Richard: I’m pretty much the same, but that definitely could be worse. It’s manageable. I’d like the assets higher as well as the investments.

[00:32:23] Ramit: What does this number mean to you, $97,000?

[00:32:26] Dawn: It’s so low. But I guess I never thought of a net worth.

[00:32:30] Ramit: What’d you think about?

[00:32:32] Dawn: Just what I owed.

[00:32:33] Ramit: Meaning, how much do I owe every month for my car? How much do I need to pay my bills every month? And that’s why you talk about weekly Richard, pay me 200 a week. I don’t talk to anybody about week, ever. That’s like saying, let’s go for a walk. Let’s walk 2,520 inches. Why would I talk in that term of measure?

[00:32:56] Dawn: Right. It’s very small.

[00:32:57] Ramit: Yeah. But often, people who were not taught about money, they shrink their world down to the month or, in your case, even the week. And what is the effect of that when you talk about things on a weekly basis?

[00:33:12] Dawn: I don’t think it allows us to look towards a future at all. It’s just paying what you pay. It’s almost like going into a car salesman and saying, “I don’t want my payment to be over 500.” Instead of actually looking at the numbers.

[00:33:26] Richard: It shrinks your bubble. It shrinks your world. It’s almost like it distorts your vision to look out into the future, the big picture.

[00:33:34] Ramit: Right. So out of curiosity, how come you haven’t looked at the big picture of money both of you?

[00:33:42] Dawn: I’ve been single in a sense of living alone for almost 12 years. So I’ve never had to talk about it with anybody.

[00:33:49] Richard: I would say my case was just adapting to it. I’m big on adapting and fitting in.

[00:33:55] Ramit: When you say that you adapt, when Dawn comes to you and says, “I want 200 or 250 a week,” your method of adapting is to do the fence, etc., but then eventually say like, “Okay, here’s 225 a week.” Did you say to her, this is how much I can afford?

[00:34:20] Richard: Not really. Just that I don’t really make a lot of money. So my money only stretches so far. Do you know how much you can afford?

[00:34:27] Dawn: We did it together. I sat down and said, “Let’s sit down and figure out.” So I wanted to make sure he still had money for himself because that was a big thing. I’m like, “So if we do your bills and what you get paid and you give me 200 a week, that leaves you enough for what you need.”

[00:34:43] Ramit: How much do you have left over every week?

[00:34:47] Richard: 150.

[00:34:48] Ramit: Okay. And what do you do with that 150?

[00:34:50] Richard: Gas. I’m a smoker.

[00:34:52] Ramit: Do you notice that the way that both of you talk, there is no discussion about savings rate? None of that. It’s, I have 150. It’s enough to pay my gas and to smoke.

[00:35:03] Dawn: Right. It’s very, very weekly. It’s just getting by.

[00:35:07] Ramit: Is that okay with you?

[00:35:08] Dawn: No.

[00:35:09] Richard: No. We have the dreams.

[00:35:11] Dawn: I’ve tried to do budgets. I’ve tried to do apps. I don’t know if I just don’t follow through.

[00:35:15] Ramit: Do you think it’s a budget that’s the problem, that you don’t have the right spreadsheet set up? I don’t think it is.

[00:35:20] Dawn: Probably not.

[00:35:20] Ramit: What is it?

[00:35:22] Dawn: I guess I don’t really know. Saying no and actually taking control, like you said, of my finances and being like, “No, this is going to go in here,” and being disciplined.

[00:35:34] Ramit: Okay. What about for you, Richard? Why haven’t you gone beyond the weekly basis? It’s been 40-plus years.

[00:35:42] Richard: In my case, it’s what I make. I haven’t made this amount a year since I was in my early 20s. With what I make a year, my ability to put money in, save money, how far can I actually stretch?

[00:35:56] Ramit: You’re right. Maybe your income isn’t high enough. We’re going to get to that in a second. But if I were in your situation and I were talking to a partner who said, “Hey, I want you to contribute something to the household,” I would definitely have that conversation. But if I can’t afford to save any money every month and I can’t afford to contribute, I need to be paying myself first. Meaning I need to be saving 20 bucks a week, 50 bucks a week, 50 bucks a month, whatever the number is. That’s how I would think about it.

[00:36:29] Richard: Okay.

[00:36:30] Ramit: Anybody teach you that ever?

[00:36:33] Richard: Not really. No.

[Narration]

[00:36:34] Ramit: I’m really glad that I get the chance to talk to Dawn and Richard because I want you to understand how most people in America grow up with money. Most people have never heard the word investment in their household ever. Their parents don’t talk about it because they don’t even know what investments are. What’s the savings rate? How does retirement work? Parents don’t know, so kids don’t know, so their kids don’t know. And the cycle simply continues.

[00:37:02] The truth is, most people grow up with simple money messages, very simple. Save money, make your own coffee at home, buy a house. And then they enter into a complex world with words like mortgages, deductibles, and expense ratios. It’s almost unfair, almost. You’ll notice that Dawn and Richard have not made a serious effort to learn about money.

[00:37:29] This is why I say that we can simultaneously call for systemic reform while encouraging personal responsibility. Pick up a book. Listen to podcasts. Start to focus time at least an hour a week at the beginning on your personal finances. It’s one of the most important uses of your time in your entire life. Dawn and Richard are focused on paying weekly bills while the real problems are much, much bigger. But they don’t even realize it.

[Interview]

[00:38:03] Ramit: Dawn, that urge you have to combine finances so that you can pay the bills, what do you notice about that?

[00:38:10] Dawn: It’s me. Probably because I’ve had to do things on my own, so I take control. I do it in the house too. Everything needs to be planned. If there’s anything going on, I just–

[00:38:22] Ramit: Why didn’t you plan more investments?

[00:38:24] Dawn: I never really thought about it. Growing up, it was just the bills. It was always the bills. It was never investments. It was never, like I said, go to college to get a better job. I try to instill that in my children.

[00:38:35] Ramit: You instill the saving, investing part in them.

[00:38:38] Dawn: I think I try to but not with [Bleep]. I don’t.

[00:38:42] Ramit: What’s going to end up with his financial situation when he becomes an adult?

[00:38:46] Dawn: He’s going to struggle because if he wants $100, $100 every day, he better make a lot of money.

[00:38:54] Richard: You come accustomed to getting what you want.

[00:38:56] Dawn: Which I was.

[00:38:58] Ramit: And now he will and probably his kids will.

[00:39:02] Dawn: Probably. Which I’d like to stop that.

[00:39:04] Ramit: Really?

[00:39:05] Dawn: I would like to make a plan and do it. I have been putting my foot down more with that. I was like, “You’re not getting it. I don’t have the money.”

[00:39:13] Ramit: You said that?

[00:39:14] Dawn: Yes.

[00:39:15] Ramit: How did that go?

[00:39:15] Dawn: A couple of weeks ago, I had a surprise bill taken out, so my bank account was nothing. And I’m like, “[Bleep], I literally have $8 in my bank account. I don’t have it.” And then he’s like, “Oh. Well, you should have told me.”

[00:39:31] Ramit: What has happened with the fact that he asks you for things all the time and he doesn’t ask your ex?

[00:39:37] Dawn: I think because his father wasn’t around, and I overcompensated.

[00:39:42] Ramit: First, I wish it wasn’t guilt. I wish it was caring. And I wish you had that same care for yourself. The reason I wish you had that care for yourself is that by prioritizing yourself, you actually create a model for everyone in your family.

[00:39:55] Dawn: Right.

[00:39:56] Ramit: To see what it’s like to have healthy boundaries, to see what it’s like to prioritize things that are important for you. Still be generous, but to prioritize a healthy Rich Life. Let’s look at the income. Richard, can you read off the combined current monthly income?

[00:40:14] Narration: 10,251.

[00:40:17] Ramit: I know you two have not combined your income, but just for simplicity, if you did, your household income would be $123,000. Did you know that?

[00:40:26] Dawn: Not really.

[00:40:27] Ramit: Richard?

[00:40:27] Richard: No.

[00:40:27] Dawn: It took a long time for him to even tell me what he made.

[00:40:30] Ramit: Why?

[00:40:32] Richard: I’m not comfortable with what I make.

[00:40:34] Ramit: So the income split here, 6,700 is for you, Dawn.

[00:40:39] Dawn: Yes.

[00:40:39] Ramit: 35 is for you, Richard.

[00:40:40] Dawn: Mm-hmm.

[00:40:41] Ramit: All right. And you net about 7,000 a month. Again, combined. But if you look at that, we make $123,000. What do you say?

[00:40:53] Dawn: I don’t think it’s terrible. Of course, I’d want to make more.

[00:40:55] Richard: I’d say it’s almost average.

[00:40:57] Ramit: I don’t know too many small towns that make 123k average. That’s a lot of money. You want me to look it up right now?

[00:41:03] Dawn: Sure.

[00:41:04] Ramit: The median income in your city is 57, 000. What does that tell you?

[00:41:09] Dawn: That we’re not doing poorly for where we live. So we might live above our means.

[00:41:17] Ramit: What do you make of it, Richard, the fact that the two of you combined make double the median income in your town?

[00:41:23] Richard: Very eye-opening. It’s good. It’s good news.

[00:41:28] Ramit: For me, if I had just sat down and discovered that I make twice the median household income as what I thought, I would feel a lot of gratitude. We should give ourselves a pat on the back. We should appreciate how far we’ve come, how hard we’ve worked. And sometimes people become addicted to the feeling of struggle. It is all they know. And when I ask them, “What if you didn’t worry about money? What would you do?” They go, “I have no idea.”

[00:41:57] The second thing I would feel is anger. Anger at why do we feel so behind if we make more than a lot of people in our area? What are we doing? And I would start to get mad. If I make that much, where’s it going? Yeah. What are we doing wrong? Because it shouldn’t be like this if we’re making double what other people are making.

[00:42:23] Dawn: Yeah, absolutely.

[00:42:24] Ramit: Shall we take a look at the fixed costs? All right. What was that laugh?

[00:42:29] Dawn: Because mine are a 100%.

[00:42:31] Ramit: Wow, your fixed costs are 100%.

[00:42:32] Dawn: Mm-hmm.

[00:42:34] Ramit: Okay. What does that tell you right there.

[00:42:36] Dawn: That I have too much for what I make?

[00:42:39] Ramit: Yeah, it tells me you’re broke. You are literally spending more than you make every month.

[00:42:43] Dawn: Absolutely.

[00:42:43] Ramit: That’s where the money from your $100,000 is going. It will go away, and you will be left in extreme peril.

[00:42:51] Dawn: It scares me, and I think that’s where my stress comes up. And maybe that’s where I portray it on to him, like, I need more money.

[00:42:58] Ramit: Yeah. That is. You’ll also see that stress manifesting in other ways in your financial life. How many times a week do you log into your accounts, look at the numbers, run calculations?

[00:43:10] Dawn: I have it on my phone, right on the screen.

[00:43:14] Ramit: Does it get you anything?

[00:43:16] Dawn: No. Stress, that’s what it gets me.

[00:43:19] Ramit: Why do you do it then?

[00:43:20] Dawn: Maybe habit.

[00:43:22] Ramit: Remember when your kids were young. They have a blankie?

[00:43:24] Interview: Mm-hmm.

[00:43:25] Ramit: That’s your blankie. You log in, you feel this intensity, you click the button, you see the same familiar numbers, but there’s this. There’s that. It’s a bit of stress. And then what do you feel at the end?

[00:43:41] Dawn: Still stressed.

[00:43:41] Ramit: Still stressed. But?

[00:43:43] Dawn: Well, a little relief that I’ve done it.

[00:43:45] Ramit: I can make it this week.

[00:43:47] Dawn: Correct. I have a little calendar that I have everything that comes out, and I look at it almost daily of, okay, this comes out today.

[00:43:55] Ramit: Making $123,000, but talking about making calendars, like a child would make them to make sure they did their homework.

[00:44:03] Dawn: Correct.

[00:44:04] Ramit: I think there’s a different way. One of the reasons I wanted to get a chance to speak to you was that sometimes we’re just not taught this, and we are passed down conscious and unconscious messages from our family. We’ve talked about them. Mom did this. I do this. Now my kids do this. In your case, Richard, things happen to you in your relationships. You were not in control of your money.

[00:44:33] It almost was like you were a passenger for some of this. Oddly enough, the journey you went through brought you two together, but you haven’t rewritten the chapter of your life that you’re in now, and you’re just continuing the same trends, being passive with money, mistaking, observing your finances for being in control of your finances. And so I see this and I get alarmed. I look at your fixed cost, Dawn, I see 100%. I look at yours, Richard. Is this right? Dawn, are you paying less than Richard pays?

[00:45:07] Dawn: Well, I pay all the other bills, so I guess when it comes to just rent.

[00:45:11] Richard: The money I give her, I don’t know where it goes. I’ll just say bills.

[00:45:16] Ramit: No. That’s not acceptable to just say, “She wants 250, so I gave her 250. As long as she’s okay, that’s okay with me.” No, you’re in your 40s. You have to prioritize yourself first. You’re not married. And similarly, Dawn, it’s not acceptable to just say, I need 250 to cover my weekly bills because you’ll be covering your weekly bills until one day you can’t work anymore and now you’re screwed.

[00:45:38] So this isn’t acceptable. $723 a month for rent is what Dawn is paying. Richard is paying 1,000 a month. That doesn’t make sense to me, but let’s keep going down the list. Utilities, Dawn is paying all of them, $486 a month. So you’re picking up more of the housing proportionally. I get it.

[00:46:00] Insurance, you’re paying 238, Dawn. Car payments, 260 is what Dawn is paying per month. So I assume you have a paid off car. This is just your gas. And then, Richard, you got 506. You have a car payment still?

[00:46:12] Richard: Yes.

[00:46:13] Ramit: What kind of car?

[00:46:14] Richard: It’s a 2015 Jeep Cherokee.

[00:46:16] Ramit: Does the thing break down a lot?

[00:46:18] Richard: Doing pretty good.

[00:46:19] Dawn: It’s starting to break down, and we want a truck.

[00:46:22] Ramit: Wait. Hold on. Just explain the logic. We need a truck because we own a connection.

[00:46:25] Dawn: I want a camper.

[00:46:27] Ramit: Explain these words to me. What’s a camper?

[00:46:30] Dawn: An RV that you pull behind a truck.

[00:46:32] Ramit: Oh my God, is this a joke? How many couples do I talk to that tell me they own a truck? I go, “Why do you own a truck?” They go, “I got to pull the boat.” So you currently tow it behind what?

[00:46:44] Dawn: I have to pay somebody to tow it. I have a membership to a campground, so we camp for free. We go camping for a couple of weeks in the summer. And that’s our vacation.

[00:46:55] Ramit: And how much does this camper cost in maintenance fees?

[00:46:59] Dawn: I pay 500 a season to have it towed.

[00:47:02] Ramit: And then you want to get a truck because you want to stop paying someone to tow it for you.

[00:47:06] Dawn: Some of it. Yes. And then just household. When we’re doing household things, like we have no way to get stuff to our– like lumber and things like that.

[00:47:13] Ramit: Okay. Can I just say without even looking at the rest of the numbers, don’t buy a truck. Do not buy a freaking truck right now.

[00:47:20] Dawn: Okay.

[00:47:20] Ramit: All right. 517 a month in debt payments for Dawn. What is that for?

[00:47:25] Dawn: Credit cards.

[00:47:27] Ramit: What? How many? How much in debt?

[00:47:29] Dawn: I have a loan on my 401k because I needed the money back before my bankruptcy. I tried to do it that way first, pay things, and then I took out the rest for the camper.

[00:47:43] Ramit: Why’d you do that?

[00:47:45] Dawn: Because I wanted a camper.

[00:47:47] Ramit: What she grew up with.

[00:47:48] Dawn: I had this membership–

[00:47:49] Ramit: I grew up eating Indian food five times a week. It doesn’t mean I do it now.

[00:47:52] Dawn: Well, that’s my spoiledness of that part.

[00:47:55] Ramit: Okay, I wanted the Barbie house. I got the Barbie house. I wanted a camper. I got the camper.

[00:47:59] Dawn: Right.

[00:47:59] Ramit: Okay. Well, I will say that was a horrible decision, but a lot of people who take loans out don’t even pay themselves back. So the fact that you’re paying yourself back is better than most, and you have 40 bucks a month, Richard, in debt. What’s that?

[00:48:15] Richard: I have a personal loan. Yeah.

[00:48:16] Ramit: How much is it for?

[00:48:18] Richard: Right now the total is about 800, 850, around there.

[00:48:24] Ramit: Groceries are 800 a month. That’s for the three of you?

[00:48:29] Dawn: Mm-hmm. I would love to get that down.

[00:48:32] Ramit: Groceries are not the problem. That’s fine. I have no comments. 800 bucks a month, fine. I’ll take it all day.

[00:48:37] Dawn: Okay. Yeah, that’s the three of us. And if the kids come over, I’ll make dinner.

[00:48:41] Ramit: Phone is 150 for you and 125 for you, Richard. That’s 275 total. Why is it so much?

[00:48:47] Dawn: I pay for my children and then they pay me. We’re on one together.

[00:48:51] Ramit: And do they actually pay you?

[00:48:52] Dawn: Well, they didn’t used to, but I just took on my other daughter, so they said, let me know when you get it, and I’ll pay it. So it’s more me having to ask for it.

[00:49:02] Ramit: How many text messages are you sending, time to pay me? How many meetings are you having with Richard, time to pay me?

[00:49:09] Dawn: It’s a lot. I would love to not do that ever because that makes me feel like I’m a debt collector.

[00:49:16] Ramit: You are a debt collector. That’s the role you’ve given yourself. Remember when I told you that the way you feel about money, that stress, will manifest itself in certain ways? What is this?

[00:49:27] Dawn: More stress.

[00:49:28] Ramit: Yeah. But what are you getting out of it? You go around to everyone. You knock on the town’s doors, including your fiancé. Hey, it’s time to pay me again. I feel horrible doing this. But in the end, what happens?

[00:49:41] Dawn: I feel better once I get it.

[00:49:42] Ramit: Yeah. Ah, let that temporary sense of money wash over me and give me control.

[00:49:49] Dawn: That’s absolutely right. When I get his money, the 200 or 250, I feel better.

[00:49:58] Ramit: Yeah.

[00:49:59] Dawn: Like I can breathe.

[00:50:00] Ramit: Richard, I can see you are very observant about what’s going on in the studio.

[00:50:05] Richard: Love it.

[00:50:06] Ramit: How long has it been since you’ve been in the photography business?

[00:50:11] Richard: Four or five years.

[00:50:13] Ramit: What if you just never start the business?

[00:50:14] Richard: If I never start the business, then I’d have to dive into something that made a little more money.

[00:50:21] Ramit: What do you do?

[00:50:22] Richard: I do assets protection and logistics, and they’re 12-hour days, Saturday, Sunday, Monday. Tuesday through Friday, all that’s open to start a business.

[00:50:33] Ramit: What do you currently do during that time?

[00:50:35] Richard: Just the housework, organization, renovations. That’s kind of nothing. I always say that’s nothing for me.

[00:50:43] Ramit: Well, it’s something for me. I don’t know how to do any of that stuff. If somebody was doing that, that’s worth a lot of money. You know what I mean?

[00:50:50] Richard: Yeah.

[00:50:50] Dawn: He works very hard at the house.

[00:50:52] Richard: Yeah. I don’t stop.

[00:50:53] Ramit: Is there value in that?

[00:50:54] Dawn: Oh, absolutely.

[00:50:55] Richard: I save money. Yeah. There’s money saved.

[00:50:57] Ramit: Is there financial value besides just the money saved?

[00:51:01] Dawn: I’ve told him when we first talked about him starting his business, I’m like, “Why don’t you get something part time?” And he’s like, “Well, I couldn’t pay the bills.” I’m like, “All you need to do is pay your bills and just help out a little.” But what you do in the house is so much more to me than financially, but at the same time, I don’t want to struggle.

[00:51:19] Ramit: What’s the balance that you’ve decided on?

[00:51:22] Richard: I work now, and the struggle is there, even though I’m giving the money. I’m told to work part time, grind my business, but we all know when you’re starting out, it’s up and down.

[00:51:32] Ramit: What if Richard told you that looking at his finances, he can’t contribute 250 a week? He can contribute 100 a week because he needs to prioritize his own retirement.

[00:51:43] Dawn: I would be okay with that if I could get my finances under control more.

[Narration]

[00:51:49] Ramit: You can see that a lot of Dawn’s financial struggles are due to her own decisions. She took out a loan on her 401k for a camper. When I asked her why, she said, “Because I wanted a camper.” Now, of course, I’m getting frustrated listening. And I know a lot of you want me to scream at Dawn and Richard, but this isn’t a zoo. I’m not here to create a spectacle with my guests.

[00:52:10] It might feel good to you, but I’m not here to scream at them. I’m here to try to help them live a Rich Life. This is why I’m asking them lots of questions, and I’m going slowly. I’m letting them hear their own responses. When we get back from this short break, I’m going to talk to Richard about what he wants. Let’s keep going.

[Interview]

[00:52:30] Richard: If we didn’t work out, I have the ability to bank half of my income.

[00:52:36] Ramit: How?

[00:52:37] Richard: My family owns a duplex apartment, and I can move in there rent free.

[00:52:41] Ramit: How long can you do that for?

[00:52:43] Richard: Forever. But that’s not what I want.

[00:52:46] Ramit: Okay. Very interesting. You want to live together, and you’re willing to contribute in some way, financial, logistical, all the above so that you two can do that.

[00:52:56] Richard: Yes.

[00:52:57] Ramit: Okay. Hear you loud and clear. Let’s keep going down the numbers here. So we are currently at 74% fixed costs, which is a lot. Well, it’s 77% for Dawn, which is high, but fixable, and 69% for Richard, which is also high, but we can work with that. Okay. 74% joint fixed costs. Although again, you’re not joint expenses. Your subscriptions by the way are 161 and 138 per month. Let’s go down to the investments. Investments are zero, $0 being invested.

[00:53:36] Dawn: I have a 401k, but it’s pre-tax.

[00:53:39] Ramit: All right. So how much are you putting in that 401k?

[00:53:41] Dawn: It’s about 120 a check.

[00:53:45] Ramit: So 3,000 a year ballpark. Okay, fine. And what about you, Richard? Investments?

[00:53:52] Richard: Nothing.

[00:53:55] Ramit: How come?

[00:53:56] Richard: Just trying to rebuild after things.

[00:54:00] Ramit: Okay. Savings are at zero for everybody.

[00:54:05] Dawn: Besides my house savings, which needs to go to buy the house, that’s all. There’s no savings.

[00:54:10] Ramit: Down from 100 to 58. And going down every month, probably. Okay, let’s look at guilt-free spending. Whoa! First of all, I don’t believe these numbers. I know you’re spending more than 993 a month on eating out, travel, etc., stuff for the kids. What happens at Christmas?

[00:54:31] Dawn: Last Christmas, I probably took out of my savings.

[00:54:35] Richard: Was either that or a lot of credit cards.

[00:54:37] Dawn: Yeah, one or the other. It’s very stressful.

[00:54:39] Richard: A lot of kids, a lot of family members.

[00:54:42] Ramit: What I took away from that was, life happens to me. Not I decide what happens at Christmas. Another couple I could speak to could be making half of what you make, even a third of what you make, and they could say something like this. “You know what? We talked about it, and we saved up for the whole year. And each child gets one gift and we really spend Christmas together. We all watch a movie.”

[00:55:10] Fraction of what I’m sure you pay. But they decided. The world didn’t decide. I also noticed that you said, “I don’t know what’s going to happen this Christmas.” What’s that saying to me? So by saying, I don’t know what happens, life is out of control for me. I don’t know.

[00:55:25] Dawn: Other people are going to tell me what happened.

[00:55:28] Ramit: Exactly. And why is it that you’re so afraid to decide what happens with your own money?

[00:55:35] Dawn: I don’t want to disappoint my children, maybe, and other people.

[00:55:40] Ramit: What would be disappointing to them?

[00:55:42] Dawn: I don’t know with my girls, if they would be disappointed, really, because they’re older and they’re like, don’t buy for me this year. Buy for the kids instead. I think they’d be okay if I really said I don’t have money. My son, it depends with him. He might be disappointed. It’s the guilt. It’s that overcompensating.

[00:56:00] Ramit: If guilt is the primary driver for your financial behavior, you’re going to guilt yourself right into running out of money.

[00:56:06] Dawn: Which I’ve done.

[00:56:07] Ramit: Yeah. Look at this number. You’re down from 100k to 58k. It’s going down.

[00:56:11] Dawn: Yeah.

[00:56:12] Ramit: I don’t know about you. I would not want to live my life based on reactive guilt. It just seems like you’re always one step behind. No matter what you do, it’s never enough.

[00:56:23] Dawn: That’s exactly how I feel.

[00:56:25] Ramit: If we were to speak about money in a combined sense, you have $123,000. It’s a good salary, particularly relative to the median salary in your area. You have an enviable housing situation, unbelievable. And in your case, Richard, if you need to, you could always go and live back for free. So you both have an enviable situation housing wise.

[00:56:51] Dawn: Correct.

[00:56:52] Ramit: But you have only $24,000 in investments, and you’re investing very little. And if we run a calculation on how much you will have, I can show you, but it’s going to be very little. You have a pension?

[00:57:09] Dawn: Yes.

[00:57:09] Ramit: How much is a pension going to pay you?

[00:57:11] Dawn: Maybe 1,100 a month, 1,200 a month, something like that.

[00:57:14] Ramit: Just so everybody knows, you’re currently making 6,700 a month gross. So to go from that to 1,100, what would you do?

[00:57:21] Dawn: I wouldn’t be able to afford to live or get a job.

[00:57:25] Ramit: So right now you don’t have enough money to retire. You’re not on track to have enough money. So I guess from the reactions you’re both giving me, I feel more alarmed for your situation than you are. Why is that?

[00:57:38] Dawn: I’ve never had to really think about the future much. It’s more, like you said, living the day.

[00:57:44] Ramit: So here we are. What do you want to do? This is your chance.

[00:57:47] Dawn: I want help.

[00:57:49] Ramit: Okay. Tell me what you want to do.

[00:57:50] Dawn: I don’t want to be 70 years old and working a second job.

[00:57:53] Ramit: Right now you’re on track to do that.

[00:57:54] Dawn: Yes. So I need to start putting more money into my 401k and investments.

[00:58:01] Ramit: Mm-hmm. How are you going to do that?

[00:58:03] Dawn: I need to get some of my fixed costs down so I have the money to put in there. If I didn’t have the debt payments, but I do, so I don’t know how to get those down besides just paying them off.

[00:58:14] Ramit: Well, you could pay that off today if you wanted.

[00:58:16] Dawn: With my 58,000. Yes. Which is what I did with my car. I don’t think I can be in a better spot rent wise, mortgage wise, financially.

[00:58:25] Ramit: I agree. Even if you were to downsize to a two or three bedroom, you’d pretty much be paying the same.

[00:58:30] Dawn: Right.

[00:58:30] Ramit: But what about the basement that you spent $9,000 on? Is there an opportunity there?

[00:58:36] Dawn: There is an opportunity there. It’s just finding some way to utilize that with somebody.

[00:58:43] Ramit: Yeah. Somebody you trust. I totally hear you on that. But getting aggressive, putting the word out. But if somebody were to come in, how much rent would they pay you?

[00:58:52] Dawn: 800.

[00:58:54] Ramit: 800? Let’s even say 700.

[00:58:56] Dawn: Okay.

[00:58:57] Ramit: That changes the whole game. Absolutely, it does. Okay, so that’s a huge lever you have to pull as long as it is safe for your family.

[00:59:05] Dawn: Right. Yeah. I have no problem with that.

[00:59:08] Ramit: Okay, what else?

[00:59:08] Dawn: Not pay for my kids’ phone.

[00:59:11] Ramit: Agreed. Every bit helps. Just to show you, instead of 150, if we take it down to 80, that drops you from 77% fixed cost to 75%. So it actually is meaningful. But what’s more important about that? Can you imagine sending a text message to your kids and letting them know they’re going to be responsible for covering their own phone?

[00:59:33] Dawn: I try to help them out because to be on mine it’s cheaper than if they went on their own.

[00:59:36] Ramit: Look, it’s your money. You can do what you choose. It’s your family. But the way you are currently managing your money, you will run out of money. This is the easiest decision you will make out of the things that we’re going to talk about.

[00:59:52] Dawn: Right.

[00:59:53] Ramit: So would you be willing to do it?

[00:59:54] Dawn: Yes, I would be willing to do it.

[00:59:56] Ramit: Are you ready to turn the page on that chapter of them being little kids and you helping them with everything?

[01:00:01] Dawn: Yes, I think it would be good for them.

[01:00:03] Ramit: Can we do it right now? Can you send the text?

[01:00:06] Dawn: Oh boy. I will.

[01:00:13] Ramit: Tell me what you’re going to say in this text message.

[01:00:16] Dawn: Looking at my finances, it would be financially in my favor if everyone had their own phone plan.

[01:00:26] Ramit: Was that difficult?

[01:00:30] Dawn: It’s very difficult. Now I’m going to cry.

[01:00:34] Ramit: It’s okay to cry.

[01:00:38] Dawn: I just want to help my kids. And I don’t have a lot of money to help them, and that’s really small amount. And I do ask them for the money and they pay, but I just at least feel like I’m being a little–

[01:00:53] Ramit: I think everyone wants to take care of her kids. And that changes over time. It seems like you are providing a place for the whole family to come.

[01:01:03] Richard: That’s what the house is. That’s what that plays. Everybody gathers, grandkids, everybody, pool, yard, anything like that. That’s the hub.

[01:01:12] Ramit: So you are living that dream?

[01:01:16] Dawn: My house right now I would say is my dream.

[01:01:19] Ramit: In order to keep that dream, would you be willing to make other changes?

[01:01:25] Dawn: Yes.

[01:01:26] Ramit: Which ones?

[01:01:29] Dawn: Sell the camper, things like that. I can sell the camper.

[01:01:33] Ramit: How much would you get?

[01:01:35] Dawn: Somewhere between 10 and 12,000.

[01:01:37] Ramit: Let’s say 10,000. 10,000, what do you do with the money?

[01:01:40] Dawn: That’s where I’m not sure if I would put it into the house fund to make my mortgage go lower when I do buy it or put it into a 401k.

[01:01:49] Ramit: Is anyone looking at the credit card debt here?

[01:01:51] Dawn: Oh, definitely get rid of the credit cards and pay back my 401k, I’m assuming.

[01:01:56] Ramit: Yeah, that would be good.

[01:01:58] Dawn: And then the rest put into my savings.

[01:02:01] Ramit: I think that you should probably be investing more, a lot more. And I think that you probably don’t understand how investments work. And I’m going to be willing to bet both of you haven’t read my book or anyone’s book on personal finance, stuff like that, right?

[01:02:18] Dawn: I’ve read the book.

[01:02:19] Ramit: Yeah?

[01:02:19] Dawn: Yeah.

[01:02:20] Ramit: Oh. What’d it tell you?

[01:02:22] Dawn: Well, it told me a lot of things, but I have to put it into play.

[01:02:26] Ramit: This isn’t a hypothetical life. This is your life. Either I want that and I’m going to do it, or I’m not. You can also say I’m not. I like the way it is. I don’t want to make any changes. I want to pay the cell phone and keep the camper. I’ll respect that.

[01:02:42] Dawn: No, I want to do it, and I will do it. I want savings. I want to get married.

[01:02:46] Ramit: You guys talk a lot about what you want, but you don’t talk about what you’re willing to do.

[01:02:50] Dawn: True.

[01:02:50] Ramit: And I have a lot of compassion for both of the things that you’ve gone through in your journeys. I feel for that because not everyone grows up learning about this stuff when you’re a kid. But at a certain point, you have made decisions that have kept you here. And even when we have this time together, which I want to help you, you’re reliving the past, and you are telling me what you want. But kids want unicorns. That doesn’t mean they’re going to get them. And kids want everything. That’s not a plan. So I’m begging you to tell me what changes specifically are you willing to make? Let’s start with Richard.

[01:03:32] Richard: Sell the camper. 10.5, 11 at most, pay your 401k. But you look at the money you’re already putting into the camper as far as towing it, the expenses. The money that you would spend doing that, put it where you want.

[01:03:48] Ramit: Oh, wow. Normally during summer, let’s just say you would spend, I’m going to make it up, 300 bucks a month on XYZ assorted expenses. So three months, that’s 900 bucks you would have normally spent. You take that 300 bucks a month, and you– what?

[01:04:03] Richard: Put it in your 401k, put it towards your wedding. Put it in an emergency fund.

[01:04:08] Ramit: It’s either one of two things, save it or invest it. In your case, because you are starting later than most, but you still have time, 48 years old and 43. So you have time. You have. 15 to 20 years to let money compound and grow. That’s a long time before potentially you retire. For me, I’m investing aggressively. I’m finding an extra 5,000, 6,000, or more per year to be investing. And that’s right there. I love what you said. 900. Pull it. Put it in there. Okay. What’s next? Let’s go back and forth.

[01:04:45] Dawn: I need to stop buying stuff for my family.

[01:04:49] Ramit: How?

[01:04:50] Dawn: Well, the phones, like you said.

[01:04:51] Ramit: Is that a done deal or no? If you are serious about making these changes, you’re probably going to make a series of changes to recalibrate the financial relationship between you and your loved ones.

[01:05:06] Dawn: Correct.

[01:05:06] Ramit: It’s not just about the cell phone. Correct. So this is a great opportunity to let them know that you’re going to recalibrate it. It’s not just about the cell phone because if it’s just about the cell phone, then it’s going to be just about this and this, and they’re just going to feel like she’s constantly just stabbing me.

[01:05:23] So let’s set the tone. Hey, I’m in New York. I’m meeting with this guy. I’ve realized I need to make some big changes with my finances. The first thing that I’m going to do is I’d like for each of you to be responsible for your own phone plan, and I’d like for you to switch over to your own plans by the end of the month.

[01:05:51] Dawn: I’m in New York. I’m meeting with Ramit, and I need to make some big financial changes. I would like you both to switch to your own phone plans.

[01:06:03] Ramit: Before you send it, at the very end, put this. “This is important to me. I love you.”

[01:06:09] Dawn: Look, I’m crying. Am I sending it?

[01:06:13] Ramit: Yeah. Good work.

[01:06:15] Dawn: You think I’m taking away their dog or something?

[01:06:20] Ramit: It goes a lot deeper than just a cell phone bill, doesn’t it? What is it to you?

[01:06:25] Dawn: Just being there for them. It was just me and them for a long time, 11 years. I went through a lot with the divorce emotionally. If it wasn’t for them, I don’t know how I would have gotten through it.

[01:06:40] Ramit: You know you’re still there for them. You’re there physically. You’re there emotionally.

[01:06:46] Dawn: Yeah, I have a great relationship with them.

[01:06:48] Ramit: Mom is mom. You’re going to be there. But you’re going to change the dynamics. It’s the same way every parent has done when they were little kids. You used to feed them. You don’t feed them anymore. Same way that you used to pay for them to go back to school shopping. You don’t do that anymore. And this is just another evolution of that.

[01:07:12] So what feels big to you, I get it. It feels big because it’s just closing the door on one more chapter of parenting. But you are actually giving them the keys to start their own chapter. They’re going to figure things out now with their spouses and fiancés. They’ve got to figure it out, just as you’re doing it right now. Not everybody has a chance to come to New York and talk to me and others. You had that chance. Now you’re passing that gift along to them. Yes, it’s going to be tough for them. It is. There’s no doubt. Especially with the incomes they make, the number of kids, it’s going to be tough.

[01:07:47] Dawn: Yeah.

[01:07:48] Ramit: Well, let’s remember. They have a house that they can go to where grandma’s there. They’re loved. And a cell phone bill, they will figure out a way to make it work. Okay?

[01:08:03] Dawn: Yeah.

[01:08:03] Ramit: All right. Richard, what do you say? I noticed you were holding her hand during that process.

[01:08:05] Richard: It’s a really big deal. I know what family is to her. That’s everything.

[01:08:13] Ramit: Yeah. I love watching the two of you. I love that you reached over and comforted her. And Dawn, I love that I think when we were talking about the numbers you were quite stoic. I was becoming alarmed. But this really tells me so much about you. It is family. And just the fact that it is so challenging for you to send this text message.

[01:08:31] Dawn: Yeah I’ve never realized that that would be so hard.

[01:08:35] Richard: Yeah. It’s like standing up. It’s like me first.

[01:08:39] Ramit: Yeah, that’s right.

[01:08:41] Dawn: I don’t do that.

[Narration]

[01:08:41] Ramit: That conversation was really hard for me, but it was 10 times harder for Dawn. Truthfully, looking back on the recording, I don’t know if it was the right call. Think about it. Her daughters are engaged. They seem to be responsible. They have big families. They don’t make a lot of money. Why are they being penalized?

[01:09:00] Let me tell you why I decided for Dawn to start with her daughters. They’re grown up, they have their own families, and Dawn is my guest– Dawn. She’s my focus today, along with Richard. Without making a change, it is a certainty that Dawn will run out of money. She doesn’t have enough saved. She doesn’t own a house. She is at extreme risk of living in poverty when she gets older.

[01:09:25] And I know that her saving $50 a month on cell phone bills will not materially change her financial situation, but I need her to take an action, a hard one, to show herself that she can put herself first. Also, I intentionally did not tackle her relationship with her son. The fact that she spoils him, that a 12-year-old essentially orders her around, that she has allowed him to control the financial dynamic at home, that goes much deeper than the scope of this show, and that needs the help of a therapist. Back to Dawn standing up for herself.

[Interview]

[01:10:00] Ramit: What could be a new definition for you of who Dawn is going to be?

[01:10:06] Dawn: Somebody that takes control of my own life but is still there for my children and still a good mom.

[01:10:14] Ramit: It’s not a but. You’re taking control of your life, and you’re going to continue to be there but in a different way. You’ll be there to hug them. You’ll be there to talk to them. You’re not going to be there to pay their bills, and you’re not probably going to be there with your son when it comes to what?

[01:10:34] Dawn: Things that he wants every day.

[01:10:35] Ramit: Yeah. That’s going to be really challenging, right?

[01:10:38] Dawn: It’s going to be challenging, but I think it’s going to be easier than sending that text. The bond with my girls, and they are in college and trying so hard, and I do feel like I financially failed them. I wasn’t able to pay for their colleges. I look at like my brother’s situation, and he’s done so well. His house is paid off. He paid for his kids to go to college. He’s got a ton of money, savings, all in one income. I just wasn’t able to give them any of that, and I could have if I did things differently.

[01:11:13] Ramit: Don’t you think that’s what we’re doing right now? You can give them cellphone payment, and you can do that for the rest of your life and put yourself into complete debt. Or you can actually give them something even more valuable than 50 bucks a month. You can give them what I think is the opposite of a doormat, is being a role model with money.

[01:11:32] Can you imagine they look and say, “Wow, mom took total control of her money. Mom went through so much, and look at now. Her retirement account is growing. She feels confident. And believe it or not, I guarantee your family will respect you when you start to have very clear boundaries of what you will and will not do.

[01:11:53] With your son, I think that that’s probably outside of the scope of what we could talk about today, but I’ve noticed that there is no therapy on this as well. Is that something that the two of you have done before?

[01:12:02] Dawn: Oh yes.

[01:12:03] Richard: We’re very big into mental health.

[01:12:04] Ramit: Love it. I’m so happy. If you haven’t already, although I assume you have, talking about the financial relationship with your son, is that something you could bring up comfortably in therapy?

[01:12:15] Dawn: Yes.

[01:12:15] Ramit: Highly encourage you to do that because you’ll get some great tools to have conversations with him. And I think that will be fantastic.

[01:12:22] Dawn: Yes.

[01:12:22] Ramit: What about you, Richard? If you want to live together, then that makes it difficult for you to start a business or have the financial security in order to– you’re investing zero. You’re saving zero. So what’s the plan?

[01:12:39] Richard: God, I can almost say not even pursue the business.

[01:12:43] Ramit: Really?

[01:12:45] Richard: It’s time. That’s the balance issue with me. Where do you fit it all in as far as like house care, renovations, and grinding a business?

[01:12:54] Ramit: Well, maybe, what’s the point of the renovations? What if you stopped doing that, what would you do instead?

[01:12:59] Richard: Probably that.

[01:13:00] Ramit: What?

[01:13:01] Richard: The business. Taking pictures, creating content, doing things for myself.

[01:13:06] Ramit: All right. And if you do that, how long will you give it? And how much do you need to make to know if it’s the right financial decision or not?

[01:13:16] Richard: That I don’t know. Enough to pay bills, obviously. I’d have to pay my bills first and foremost.

[01:13:23] Ramit: If I were going to start a business, let’s forget video, audio, it doesn’t matter. It’s just a business at a certain level. You currently make $3,500 a month.

[01:13:31] Richard: Yes.

[01:13:33] Ramit: So that’s roughly 40K a year. The thing is we can start to make some choices about finances by just looking at the high level. We go, making roughly 40k a year, you can make 20 bucks an hour. And I don’t know what places around you pay for minimum wage and things like that. Probably what?

[01:13:52] Dawn: 18.

[01:13:53] Ramit: So that’s close to it. That’s right there. You can make minimum wage and make similar to what you’re making. No grinding, no nothing. Just go to work. And after work is done, you’re over, but you’re working full-time.

[01:14:06] The real reason that I think there’s so much confusion in your mind about what to choose is that there’s no clear end goal. The two of you haven’t talked about what is the actual lifestyle we want. Do we actually want to buy this house? If so, how much is it actually going to cost us, and when are we going to do it?

[01:14:23] That means you need to make this much, and I need to make this much. That means we need to be contributing this much every month. Right now it’s a lot of, I’d like to do this and travel. You guys are in your 40s. So either you decide now or you just coast into the rest of your life and close off lots of doors.

[01:14:44] Dawn: Right. Which I don’t want.

[01:14:46] Ramit: Richard, for you, if I were in your situation, I would say, I have six months to be making more than I currently make at my job. Right now I make 3,500 bucks a month. I need to be making 3,500 bucks a month within six months. Otherwise, close the business down. It’s not working. And if you can make 3,500, you could probably make 5,000 and on and on and on.

[01:15:09] I set a time limit and an income goal because that forces me to be really specific about what I’m doing in my business. Otherwise, I’m just doing random stuff and hoping one day it will take off. I don’t have time for that. I’m getting aggressive with my business. I’m getting aggressive with my finances. What do y’all notice about the way I’m talking?

[01:15:29] Richard: Confident.

[01:15:30] Ramit: Mm-hmm.

[01:15:31] Richard: Aggressive.

[01:15:32] Ramit: I’m going to do this. And, hey, it won’t always work, but if it doesn’t work, here’s my plan. Close it down or change approach, etc. Timeline, specific, numbers. If you look back over the last 10 years, financially speaking, what’s changed? It sounds like you’ve gone through all. You’ve gone through a lot of relationship changes and things like that. Yes.

[01:15:55] But the next 10 years, I want you to be able to live this amazing life. Now, amazing might be different than what you envisioned when you were 20, but it might be, look, being able to be in your dream house and have your family over X, Y, Z times per year. Maybe it’s not fighting about money. Maybe it’s taking a camping trip. Fine.

[01:16:15] But you got to be intentional about it. If it were me with the numbers, I would not combine my finances until I got married. I would not get married financially speaking until I had a shared vision about what we’re going to do. And the fact that you can’t afford a wedding right now, this is where I think you need to start talking about compromises.

[01:16:41] I would never let the cost of a wedding get in the way of getting married. A wedding is a wedding. If I didn’t have money, when I got married, I still would have gotten married. I should have done it in the courthouse. If having a wedding in your fashion is important to you, fine. What choices are you willing to make to do it?

[01:16:58] So I would make the changes to cut this number down to roughly 60%. That would be difficult. That would involve raising incomes. In your case, Dawn, you mentioned that if you didn’t have Richard, you would get a second job. I would hate to see a 48-year-old mom have to get a second job simply because of her inability to say no. It’s like, let me just take on more and more and more so that I can just give, give, give to others. And then what happens to you?

[01:17:30] Dawn: I get lost in it.

[01:17:33] Ramit: You are lost in it. But nobody can get you out except you. Not even me. I would increase my savings and my investments. I would take this house payment and I would say, “Look, I don’t know if we’re going to get a house or not, but right now what’s more important is we have an emergency fund. That emergency fund is going to be roughly 30k because that is six months of expenses. Again, I’m speaking jointly. I know you’d have to divide it for the two of you.

[01:18:01] Dawn: Right.

[01:18:02] Ramit: Richard, since you don’t have any savings, that would be first priority for you is to build up those savings. And that is why you cannot afford to be paying $1,000 a month. There are a lot of things here that need to change if you two want to be financially secure, a lot. And it’s difficult. We saw the text message, difficult. It’s difficult. Going to be for your son. It’s going to be really difficult for you. This is where the two of you can actually show that you are partners.

[01:18:31] And it’s like, hey, I know this is so tough for you to say this. Let me help role play with you what you’re going to say to your kids before they come over. Hey, I know it’s tough for you to quit smoking. How can I help? How can I support? This is where partners can step up. And you can do it together. But what’s important is you’ve got to have a vision together. If we’re going to get married, this is what it’s going to take. If I were in your position, I would be putting a lot more money towards investments than savings.

[01:19:01] Dawn: Okay.

[01:19:01] Ramit: Why? Because savings make you very little. You need time for these investments to compound. Typically, historically, these numbers have returned roughly 7% per year after inflation and all that stuff. That doesn’t sound like a lot, but it adds up to a lot. And in your case, you’re 48. Presuming you retire at 65, 68, that number could turn out to be quite a bit. Would you like to see?

[01:19:29] Dawn: Sure. Love to see that.

[01:19:30] Ramit: I’m going to show you the math really quickly here. You have 25,000. You are putting in, let’s say, 6,000.

[01:19:36] Dawn: Okay.

[01:19:37] Ramit: You want to retire at 65?

[01:19:38] Dawn: That would be my goal, but I don’t know if that’s doable.

[01:19:43] Ramit: All right. So you’ll currently have $276,000. That means you will have. $11,000 a year in income, plus your extra 12,000, we’re talking about $22,000 a year in income.

[01:19:58] Dawn: It’d be hard to live on that.

[01:19:59] Ramit: You can’t live on that. You can’t. What’s going through your mind right now?

[01:20:03] Dawn: I’m in a really bad place.

[01:20:05] Ramit: Do you see why I’ve been in such a hurry? You can’t live on this. It’s not a good life. Can we make some changes?

[01:20:12] Dawn: Yes.

[01:20:14] Ramit: Instead of 6,000 a year, you put 12,000 a year. That’s $1,000 a month. Okay. That’s pre-tax. It’s extra money. You have all of it to your 401k. Let’s just say, to keep it simple, 17 years You’re now at 474,000. It’s growing. Still not enough. What else could we do? Let’s assume for the moment that you are not going to buy a house.

[01:20:35] Dawn: Okay.

[01:20:35] Ramit: So we take 30k out of here and put it into the investments. Watch what happens. You’re now at 569. All right. What else?

[01:20:49] Dawn: Put more money in?

[01:20:50] Ramit: Yes. 18,000 a year. We’re now at 767,000, which means you could have 30,000 of income plus your pension plus social security.

[01:21:02] Dawn: It’s doable. I can live.

[01:21:04] Ramit: You can live. You know what else you can do? You can stay working for a couple of more years. Why don’t we do that? Watch what happens. Instead of 767,000, a million bucks. You see what just happened? It grew a lot in three years. You’re up to 40,000 a year in income plus all that other stuff. Now why? Because we’re in a hurry. Compounding needs time. It’s like cooking a turkey. You can’t just do it in five minutes.

[01:21:27] That’s why I’m getting so passionate about like, oh, are we talking about sending a text message? Send the text. We got bigger things to worry about. We need to be putting well over $1,000 a month into investments. We need to be decisive, and making big moves with our money needs to become a regular thing.

[01:21:46] And these conversations that feel so existential right now, they’re actually the tiniest conversations in the grand scheme of what’s important. Wat’ are you all taking away from this? Dawn?

[01:21:57] Dawn: I just need to be more aggressive with what I do with my money and take control of it. I have to not make impulse decisions when it comes to my family and buying, even buying for myself in the house. I love to buy things for the house. But I just have to look at my future more.

[01:22:14] Ramit: Richard?

[01:22:16] Richard: Know about your money, be more aware where you want it to go. Be more aggressive.

[01:22:21] Ramit: I like that you said, be aware of where you want to go because it’s not enough to just be aware of what’s going on today. We have to be aware of where we want to go. And in your case, because you have 20-plus years to do it, you have a chance to actually build a pretty healthy financial life.

[01:22:43] Dawn: Right.

[01:22:44] Ramit: In this calculation, I didn’t even combine the two of you. If you were to combine, makes things even better.

[01:22:51] Dawn: Oh, absolutely.

[01:22:52] Ramit: But you can’t combine it until you each get control of your money right now.

[Narration]

[01:22:57] Ramit: The real issue with Dawn and Richard is that they don’t believe they have agency or control over their lives. This is very common with people who grow up low income, who often see the world as happening to them, not as something they can influence. And this explains so much of some people’s passive behavior with money.

[01:23:19] You’ll hear them talking about their decisions, and you’ll say, “Why don’t you just do X or Y?” And they’ll have an answer for everything. You’re basically playing financial whack-a-mole. And after a while, you realize there’s a deep lack of agency. And it goes something like this. Nothing I ever did made any difference, so why bother?

[01:23:42] It’s haunting, really, when you think about it. And these messages are passed down generationally. So even when you get someone trying to make a change, they often lack the basic fundamentals. Sometimes they try to make a change, but they end up fixating on how much money they’re spending on groceries that week.

[01:24:01] This is where we really have to have compassion for the different ways that we grew up. I grew up knowing that I could make an impact on the world. It was an expectation. My parents told us, of course, you’re going to college. Of course, you’re going to get a good job. Of course, you’re going to get A’s.

[01:24:17] That’s an expectation. I knew that I could work and that I could get results. But that was taught to me from my parents, whose parents taught them, and on and on and on. And we have to remember that not everybody grew up the same way. In this conversation, I also wish I’d gotten to the retirement numbers earlier.

[01:24:37] It was only at the last minute that I showed Dawn these numbers, and did you see her reaction? She looked alarmed. All that talk about their situation, but it was only when she realized she’d have to live on a fraction of what she makes now that she sat up and realized she was in trouble.

[01:24:54] I want to thank Dawn and Richard for asking for help. I truly hope they’re able to make the changes they need to. Time is not on their side, and if they want to live comfortably as they get older, they will need to make aggressive, sweeping changes very quickly. Let’s hear what they have to say, starting with Dawn’s follow-up.

[01:25:14] Dawn: I guess Rich and I came into it thinking that it would be more of a plan of what we’re due to move forward, more of an idea or blueprint of what we are to put our finances together so it doesn’t feel like I’m paying all the house bills and he’s just giving me money. We did come up with a solution. He is going to actually pay certain bills because the money he gives me doesn’t go solely to rent.

[01:25:39] It does have to go to food and electricity, things like that. So he is going to actually take on some of those bills and be responsible for those. So that takes a little weight off me. I don’t have to ask him for the money. So that did make us open up a conversation about that, and we were happy with the outcome of that.

[01:25:57] When it comes to my retirement, I did look into that, and I actually have a New York state pension, which is so much better than I thought. I am going to be putting into a 401k. But I get a pretty high percent of my top three years that I work for New York State. So looking at that now, I know how to actually navigate that. Richard started putting money into his 401k, and so we are well on our way. So thank you. Bye.

[01:26:26] Ramit: Unfortunately, we never got a follow-up from Richard, even after my team reached out several times. And I have to tell you, I am very, very disappointed to hear that. Dawn and Richard, I’m wishing you the best. I would love to stay in touch, and I would love for you to keep me updated. Thank you, again, for coming on the show.