Episode 214. “I’m 45 but my parents still control my money”

Kate and Keith have spent years afraid to spend—until now. In part 2 of this conversation, Ramit challenges them to rewrite the money scripts that have ruled their lives: Kate’s need for control, Keith’s fear of being dependent, and the invisible narratives passed down through generations.

They imagine a future with travel, community, and purpose, if they can confront this question: What’s the point of having money if you never use it?

But first, they need to uncover the mystery behind Kate’s underperforming trust fund, which is $5 million less than projected…

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Transcript 

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[00:00:00] Kate: My parents have always taught me that money is evil, so there's a lot of shame and a lot of emotion wrapped up in my parents and their expectations.

[00:00:08] Keith: I started just doing math. I couldn't understand why we weren't looking at $5 million.

[00:00:12] Ramit: Overall, looking at this trust, I am absolutely flabbergasted at the returns over the last 30 years. It's cost you millions.

[00:00:20] Kate: I still don't feel like I have control over it.

[00:00:23] Keith: This power dynamic has her acting as if she's a 12-year-old girl.

[00:00:28] Ramit: Kate, do you know why you don't have millions and millions of dollars more?

[00:00:31] Kate: I don't know.

[00:00:31] Ramit: You're an adult, fully fledged adult. You run a business. But the minute it comes to this, you revert back into childhood.

[Narration]

[00:00:39] Ramit: I discovered something shocking last week when we met Kate and Keith. They earned $30,000 a year, and Kate recently got access to a trust fund that was set up by her parents. It's worth roughly a million bucks. That trust fund was set up when she was a teenager. And if that money was invested in simple index funds, it would be worth around 6 million. But today, more than 30 years later, it's only worth 1 million. What happened to the 5 million?

[00:01:12] In order to help this investigation, I asked our partners at Facet to dig into the portfolio using all the information we could gather, and then to help create a personalized roadmap to help Kate and Keith create their Rich Life. But first, let's figure out why the trust has barely grown in 30 years.

[00:01:35] Facet is an SEC registered investment advisor. Investing involves serious risks, and past performance is not a guarantee of future performance or success. My opinions are included and should not be interpreted as a recommendation or research regarding any investment or investment strategy, legal or tax advice.

[00:01:51] The Facet-provided scenarios discussed are based on inputs provided by Kate and Keith and are based on industry standard assumptions. The information is for illustrative and educational purposes only. I am not a member of Facet and have an incentive to endorse Facet as I have an ongoing fee-based contract for cash compensation based on this endorsement. All opinions are my own and not a guarantee of a similar outcome.

[Interview]

[00:02:12] Ramit: What's the current value of the trust?

[00:02:14] Kate: This is what I think is really bizarre because the current value is a million.

[00:02:16] Ramit: What? 20-plus years later?

[00:02:18] Kate: Mm-hmm.

[00:02:19] Keith: It's almost 30 years.

[00:02:20] Ramit: Okay. Hold on. Do we have access to this? Can we open it up?

[00:02:24] Kate: We can.

[00:02:26] Ramit: All right. Show that on screen. I got to find out what is up in this-- where is this trust invested in? Holy [Bleep]. Can you just imagine, as you're pulling that up-- 30 years. So if it was 800k, let me just do the math. 800, 1.6, 3.2, 6.4. That's seven. Basically, it should be a [Bleep] ton of money. Where is it? Holy [Bleep]. What in God's name is this? Oh my God. Oh, how nice. Just a tiny bit in the Vanguard Fund and the rest is in a bunch of horse [Bleep].

[00:03:23] Kate: This is a financial advisor who specializes in sustainable investing.

[00:03:30] Ramit: Okay. So what do you see when you look at all this stuff just off the top?

[00:03:36] Kate: I see so many different numbers that don't make sense, that it makes me feel like, well, good thing I have a financial advisor, because I don't know what this means.

[00:03:45] Ramit: I'll tell you what I see. What I see are a crazy amount of funds and individual investments, most of which have fees, expense ratios. Probably some of them have front end or backend loads. I'd have to look. But basically they're like way too many. This is like walking into somebody's living room and there's 75 different toys. What the [Bleep] is happening in here? Can we just organize? Do we need this?

[00:04:14] It's just way too much [Bleep]. Most people can have one target date fund or three index funds to get general broad representation of the market. You have 30 investments. Let's go to activity. I'm willing to bet we see a bunch of trades which incur trading fees, taxes.

[00:04:30] Keith: $2,500 service fee.

[00:04:32] Ramit: Oh. Where's that?

[00:04:34] Keith: Down toward the bottom.

[00:04:36] Ramit: Oh my [Bleep] God. Click that. Hold on. I'm about to have a heart attack. Everybody, listen, if I die on this [Bleep] podcast, you know that I went out well. I did what I was meant to be doing, which is blasting these godforsaken wealth managers taking people's money through fees. Let's take a look. A advisory fee, $2,573. How interesting.

[00:05:03] Beginning value of your portfolio, 1.02 million. Total value, 1.02 million. Change in value-- let's just look at this. 2021, it dropped from 1.2 million, and in 2025, it's 1.0. Who the [Bleep] performs like this? I literally could take a armadillo and get better performance from this armadillo than this investment manager. What does this mean to you, Kate, when you look at this page?

[00:05:35] Kate: Frustration.

[00:05:36] Ramit: Okay, that's true. That's what you feel. But literally, what do you see on the page? What does it mean to you?

[00:05:44] Kate: I feel like there's something missing. I don't understand why things aren't moving in a better direction. And so it feels to me like, okay, what's missing that is the reason for why it's not performing well?

[00:06:00] Keith: I just don't understand because when Kate and I first got together and some numbers came up in conversations, the first thing I thought of was a book I'd read eons ago about the rule of 72. And I started just doing math just like you did. And I couldn't understand why we weren't looking at $5 million.

[00:06:21] Ramit: Exactly. Or much more. Do you know the answer to that?

[00:06:26] Keith: I understood that there was a percentage getting taken out for the management fees, but beyond that, I couldn't fathom why it wouldn't be so much more money.

[00:06:37] Ramit: There's one other important point. Kate, do you know why you don't have millions and millions of dollars more?

[00:06:42] Kate: Something that you just mentioned that I hadn't considered were fees through trading. But I wouldn't imagine that would be what you were looking for.

[00:06:52] Ramit: The other thing is your investments are probably dog [Bleep]. If you're talking about the rule of 72, we generally apply that to the S&P 500. If you have a bunch of funds that are underperforming the market, a lot of them, and they are just underperforming for years and years and years, it doesn't get better.

[00:07:16] It just gets worse and worse and worse. You're basically compounding down, not compounding up. Plus you're paying fees. Now, I'm not here to beat you up. I actually think that, looking at this, I have a lot of compassion because this [Bleep] is confusing. It's not clear what any of this means. And the way that it's set up makes people feel stupid and, oh, okay, at least they're like managing it. But it's obviously not serving you. Would you agree with that?

[00:07:43] Kate: Yeah, absolutely.

[00:07:44] Ramit: Okay. You mentioned something about this person is an expert in ESG. Can you explain that to me?

[00:07:50] Kate: He's supposedly taking what our values are and divesting from any investments that would be paying into things that we don't agree with. So we outlined a number of things that were important to us. We didn't want to be investing in fossil fuels or guns or private prisons. And so he went through a number of the investments and divested some of those into moving away from that stuff.

[Narration]

[00:08:20] Ramit: I just want to jump in here and explain that ESG stands for environmental, social and governance. It's basically a way for people who want to have a way to screen for investments so that they are environmentally sound. Now I want to tell you how ESG is perceived in the investing world. It's been critiqued a lot because companies will do something called greenwashing.

[00:08:44] They'll basically create a fake environmental department and they'll start reporting on their environmental success often just so they can be included in these ESG stocks. But a lot of it is just marketing. It's not often substantive change. It's also important to note that the performance on ESG has not been great. So in the investment world, ESG is unpopular. It's basically laughed at. And most sophisticated investors don't really take it seriously.

[00:09:11] But I deeply understand the desire to invest in ethical companies. Let me tell you another way. Another popular way that people do this is to simply invest in a diversified portfolio, like an S&P 500 index fund, then they simply take the gains they get and become extremely targeted with their philanthropy or their charity.

[00:09:31] You can create your own scholarship. You can donate to local charities in your area, libraries, schools. That's something that I might highly recommend. And this really comes down to the question of how much do your beliefs cost you? It's like, yeah, I want to invest in ethical companies. Okay, that might cost you $2.6 million over the course of your life. Or if you flip that, you could have 2.6 million more to be able to donate however you like.

[00:09:59] This is in part what's happening with Kate's portfolio, and it has left a lot of money on the table. So listen as I challenge Kate to think about the repercussions of this investment strategy.

[Interview]

[00:10:13] Ramit: Are you willing to invest in ESG if you get a lower return than the market?

[00:10:24] Kate: It is an interesting question, and I appreciate it because I guess there's two ways of thinking about it, and which is the right answer? There's one approach that we move away from ESGs because we can do better and then make a commitment to then taking our money that we make and putting it towards areas that we feel strongly about. And so that's one option. And the other option is, we might not make as good investments, but we'll commit to not investing in things that don't align with us.

[00:10:57] Ramit: Right. So what's the answer to my question?

[00:10:59] Kate: I guess I've been moving more towards investments that result in a higher yield and then having the flexibility with what we take out of that to then put towards the things that align with our values.

[00:11:13] Ramit: I respect that you want to be environmentally sound and you want to put your money where your mouth is. I always appreciate that. The question of how to do it, especially as the amounts get large, can turn out to be surprisingly complex.

[00:11:26] Overall, looking at this trust, I am absolutely flabbergasted at the returns over the last 30 years. It's cost you millions, and we can't do anything looking back, but we can understand what happened in this trust, which I think your parents set up when you were a teenager.

[00:11:44] Technically, they should have known better. They should have been better advised. They should have been more tenacious about their representation. But here we are today, and we can make sure that everybody listening and watching this never lets their money be managed this way. And let's not forget, you two are young enough to let this money compound a lot.

[Narration]

[00:12:03] Ramit: I have a confession to make. After we recorded this episode, I literally could not sleep at night thinking about how this trust performed over 30 years. The numbers were actually driving me crazy, so I wanted to find out what happened. So I asked Kate to send over every single statement, every single document she has, so I could do a deeper analysis around one question, what happened? Where is the missing $5 million?

[00:12:32] Now I want to be clear that this analysis involved piecing together scattered documents from three decades plus very foggy memories. For example, Kate told me that she withdrew $36,000 a year from the trust for a few years while she was in grad school, plus about $15,000 for medical expenses. She estimated it was about $200,000 in withdrawals. But in reality, looking at the documents, Kate actually withdrew a total of $461,945 across 14 years, from 2007 to 2020. That includes $174,000 house purchase in 2016 and $34,000 in medical expenses.

[00:13:17] But Kate doesn't remember this. And please understand, this is actually really normal. People don't remember what medications they took. They definitely don't remember where they spent their money. Remember, when I ask people how much they spent on eating out, the truth is almost 3x higher every single week. Imagine trying to remember what you ate 30 years ago or how much you spent. You can be off by literally hundreds of thousands of dollars.

[00:13:45] So now we start to understand a clearer picture. But before you say, "Ah, she just burned half a million dollars, that makes sense," consider this shocking truth. If she had simply invested in broad-based diversified index funds like the S&P 500, as opposed to paying an advisor to manage it, the trust would be worth $6.1 million, even with her withdrawals of over $460,000. So what happened?

[00:14:17] It's not as simple as she just paid a lot of money for financial advisors. Yes, she did that. But this was a gross systemic failure across the board. Her parents never taught her how money worked. The investments that the advisors chose are a complete mess. You know how I talk about a 7% return rate? Her trust returned only 2.9% over decades.

[00:14:40] There are also lots of investments in the portfolio that overlap, which means they are undiversified, and many of these investments have high fees, which also add up over time. Of course, not to mention the advisor fees, which were also quite high.

[00:14:55] Now most people wouldn't think much of these fees on a monthly basis. It's easy to justify a few thousand here or there when your portfolio is nearly seven digits. But it's like flying from LAX to Australia. If you're off by only a few degrees, after 10 hours, you will be thousands of miles off course.

[00:15:15] This is why with any major investment like your retirement or your kids' college fund, small changes compound in a way that is hard for the human mind to truly understand. We're not talking about a 10% difference. It can literally be a 5-million-dollar difference. And that's exactly what happened here, in part because of Kate's lack of ownership.

[00:15:39] Among all the other things that happened, this is Kate's money, and she herself did not take the responsibility of proper management. But we're here today. We can't change the past. So now that we understand how she got here, let's focus on the future and get right back to their CSP.

[Interview]

[00:16:00] Ramit: Okay. Now back to the CSP. You told me that your trust is not in the CSP. Is that right? Why is that?

[00:16:10] Kate: I guess technically because I still don't feel like I have control over it.

[00:16:15] Ramit: What do you mean? You just logged in.

[00:16:17] Kate: Right. I just logged in. It's in my name. However, having a trustee and not understanding the rules of what is a trust, what does this mean, and feeling as though I have an ability to make changes to that.

[00:16:31] Keith: She still has to go through the trustee to get money out of it or anything like that.

[00:16:34] Ramit: Which is your dad.

[00:16:35] Kate: Right.

[00:16:36] Ramit: You're an adult, fully fledged adult. You run a business, but the minute it comes to this, you revert back into childhood. Like, "Dad, what do you think?" Any of this connect with you?

[00:16:46] Kate: Absolutely. And there was question about making someone else the trustee, and we just couldn't come up with a better person because my dad felt like the right person for it.

[00:16:56] Ramit: Mm. All right. We can talk about that too. The trust money should be factored into your conscious spending plan. Okay?

[00:17:04] Kate: Mm-hmm.

[00:17:05] Ramit: What's the worth of it again?

[00:17:08] Keith: 1.01.

[00:17:09] Ramit: 1.0. Let's just say a million bucks. So look at the CSP. I'm going to add the assets here. Are you ready for this number change? Okay, watch. I changed the 1.2 million to 2.2 million. Whoa. What's the net worth now?

[00:17:28] Kate: Staggering.

[00:17:30] Ramit: Say the number out loud please.

[00:17:31] Kate: 2,891,793.

[00:17:35] Ramit: That's a lot of money.

[00:17:37] Kate: Yeah. We could buy our dog a new dog bed for sure.

[00:17:44] Ramit: What [Bleep] planet am I on right now? I don't know how much a dog bed costs, but I know it doesn't cost $1 million. All right, you have almost $3 million. What do you think about that? Is that a lot of money?

[00:18:00] Kate: Yeah. It feels like I must have made a miscalculation because I don't get it.

[00:18:05] Ramit: What do you mean you don't get it?

[00:18:06] Kate: I don't get where all that came from.

[00:18:09] Ramit: Well, it came from you investing since you were 10 years old. And then also one third of it came from your parents' trust, which was quite large, 30 years ago, and stagnated and still quite large. That's where it came from.

[00:18:25] Kate: Yes.

[00:18:27] Ramit: Sometimes I think that we create mysteries so that we can avoid the boring reality of what actually is. Where did all this come from? I must have made a mistake. Whatsoever shall I do to figure it out? Actually, no. I just saved and invested. My parents also put $800,000 when I was a teenager.

[00:18:48] All that money added up together now means we have almost $3 million. You can dance around it. You can ask questions to the cosmos, or you can just look at it and confront it head on. We are multimillionaires. What does it mean for us?

[00:19:08] Keith: It's noteworthy because it wasn't that long ago. We weren't having any discussion that the trust came in would result in tears.

[00:19:17] Ramit: Whose tears?

[00:19:18] Kate: Oh, mine.

[00:19:19] Ramit: Why?

[00:19:21] Kate: I think there's a lot of things wrapped up into it where my parents have always taught me that money is evil and you shouldn't have it, and you should do things for other people and always contribute to the world. So there's a lot of shame and a lot of emotion wrapped up in that trust and my parents and their expectations, and it's overwhelming.

[00:19:45] Ramit: That's very confusing.

[00:19:48] Kate: Yeah, wildly confusing.

[00:19:50] Ramit: Money is evil. Also, here's $800,000, which will turn into millions or should have turned into millions. It's very confusing. How did they reconcile that?

[00:20:02] Kate: They, on one end, showed me the trust, but then said, you can't have access to it until you're 25. But then 25 came around and nothing changed.

[00:20:12] Ramit: Huh? You didn't get access till 25?

[00:20:15] Kate: There was no discussion. It was just a verbal thing that was planted.

[00:20:19] Ramit: Did you bring it up?

[00:20:21] Kate: I didn't.

[00:20:22] Ramit: How come?

[00:20:23] Kate: Because I didn't have the courage to, and I didn't feel worthy of doing so, probably because of all these mixed messages.

[00:20:31] Ramit: Do you feel courageous around your parents now?

[00:20:34] Kate: I do.

[00:20:35] Ramit: You do. What changed?

[00:20:37] Kate: I changed an awful lot. My parents were financial safety to me.

[00:20:43] Ramit: Mm.

[00:20:44] Kate: Whenever I was around them, yeah, I would fall into old habits, like let them pick up the bill. Let them take care of me. And for some reason, that just equated to, well, I need them in order to be financially safe. So that's been a huge part of my journey in the last couple of years, is to separate myself from that.

[00:21:04] Ramit: But isn't your family spending $30,000 a year helping with your medical expenses?

[00:21:11] Kate: Yeah, and I thought of that when I was saying it, and I'm allowing that.

[00:21:19] Ramit: Mm-hmm. Why do you think you are?

[00:21:25] Kate: Because it's easy and because I don't really know how to do it myself.

[00:21:31] Ramit: You don't know how to pay $30,000 from $2.8 million?

[00:21:36] Kate: Not in a sustainable way.

[00:21:40] Ramit: Mm-hmm.

[00:21:41] Kate: Because in my mind it's like when you don't have money invested, it's not growing. So anything that I take out of it is a subtraction and there is no addition to that. And so in my head, it doesn't make sense to me and doesn't feel comfortable.

[Narration]

[00:22:01] Ramit: It's interesting hearing Kate describe this idea of your money decreasing instead of increasing. That is exactly how people feel when they retire and they have to start drawing from their investments. And this phenomenon is incredibly difficult for a lot of people to watch. You've seen this number grow and grow over your lifetime, and then suddenly, say 65 years old, you watch that number go down and you know it's only going down.

[00:22:31] I was even talking to my dad recently. He's retired. He has to take his RMDs or required minimum distributions, and he came to me and he basically said, "I don't know what to do with this money. I think I'm going to reinvest it." I said, "Dad, the whole point of that money is to spend it."

[00:22:48] The fact of the matter is for everybody, including my dad, who's pretty good with money, it's really hard to get out of the mindset of preparing for the future. It's even harder to get into the mindset of actually spending that money. This is where an advisor, one who does not charge you AUM, like Facet, can be really helpful. If someone in your life is newly retired or getting ready to retire, send them this episode.

[Interview]

[00:23:17] Keith: I'm going to challenge that. I think that you have a mindset around money the same way you have a mindset around really good chocolate. You don't want to spend it. You want to sit there and look at it on the counter and know that it's there for you and ready for you when you need it, but you're never going to need it because you're never going to take it because you don't want that chocolate to be gone.

[00:23:38] Ramit: Is that true?

[00:23:42] Kate: I'd say it's 100% true for who I used to be. I'd say it's maybe 50% true now.

[00:23:53] Ramit: Hmm. It's interesting. This has happened several times today where I'll ask you a question and what you'll do is you'll say, "Well, it's gotten a lot better." I'm sure it has gotten better. Going on a journey is amazing and involves a lot of work and mindset changes.

[00:24:14] But ultimately, when I'm talking to somebody, I'm asking them a question about where they are today. And so if Keith says you have trouble spending money, just like you have trouble eating chocolate, and I go, "Is that true"? And you go, "It's gotten a lot better." That's actually a way of letting yourself escape from the real answer.

[Narration]

[00:24:34] Ramit: We've all heard stories about lottery winners who go broke five years later. Spending money meaningfully is a skill, especially when you take a windfall, whether it's an inheritance or a trust, or any kind of amount of money, even retirement, where you have not prepared what to do with it.

[00:24:57] That's why there are three important skills when it comes to money. One, learning how to earn it. Two, learning how to manage it. Three, learning how to spend it meaningfully. Kate is a living example of how difficult step three is, especially because she grew up in a family that taught her money is evil.

[00:25:15] Despite her parents having a huge amount of wealth themselves, they actually don't have the skill of spending money meaningfully. Honestly, the most beneficial thing would be for Kate to start spending time with people who actually use money to build happiness, to have great experiences, to build and deepen relationships. We're going to get into that, plus Keith's money psychology after this.

[Interview]

[00:25:36] Ramit: Keith?

[00:25:37] Keith: Yes, sir.

[00:25:38] Ramit: You said earlier that my first goal in this relationship was to make sure nobody in the family thought I was here for the money. Tell me about that.

[00:25:52] Keith: I don't know where it comes from or why I get to that point, but in the beginning I was not in a great financial place, and so I took on a bit of credit card debt and spend it outside of my means to take care of dinners and to take care of things like that, because that was the messaging that I was putting into my head, was like, I don't want her to think that I'm here for her money or anything.

[00:26:13] Ramit: Did she ever say anything that would make you think that?

[00:26:16] Keith: No, not really. She said things that I interpreted, and it's probably because of the way I was taking it rather than the way she was saying it.

[00:26:28] Ramit: That's actually quite telling, isn't it? The fact that Kate's the one in charge. Kate's the one managing the money. Kate's the one worrying about money. And Keith, you're the passenger. And in any relationship, there's a dynamic that's been established. And as we can see here, we have Kate, who's the driver. Pretty competent with some aspects of money.

[00:26:50] However, had the two of you been partners, it probably would've resulted in millions and millions of dollars since the beginning of your relationship. Just because of that offhand comment you made Keith, rule of 72, Keith, you would've had the courage to bring it up. "Hey, what is this rule of 72?"

[00:27:08] She would've said, "I don't know." You two would've talked about it. Let's go do some research. Hey, why are we paying this person? Should we change? Millions of dollars in your bank account. More importantly, connection. So that's where we're going to be going.

[Narration]

[00:27:25] Ramit: In preparation for our conversation today, I gave Kate and Keith some homework from my journal. Their answers were incredibly revealing. As you listen in, you can get my journal from any bookstore, the I Will Teach You to Be Rich Journal, and follow along.

[Interview]

[00:27:42] Ramit: Let's talk about money worries. Kate, your answers were quite haunting. You wrote, "Not having enough. What others will think about my having money. Worrying I'm making poor decisions. Not feeling worthy of spending."

[00:28:06] Kate: As you've been reading it back to me, I am hearing exact phrases from my parents that say every one of those things.

[00:28:14] Ramit: Tell me.

[00:28:17] Kate: My dad has repeatedly said, my mom too, how when people know that you have money, it becomes a pain in the [Bleep]. That people will just start asking them for money. And so it's a burden, and they have repeatedly put the fear of God into me when saying, you need to have an emergency fund.

[00:28:40] What happens if you get chronically ill, all sorts of different scenarios. This is from childhood. So making me feel as though there's some unforeseeable, massive event that's going to happen in the future, which is going to obliterate me financially. That's how it's always come across. And not being able to support myself. The comments like, well, you better marry rich. So every one of those things that you just read has a source.

[00:29:10] Ramit: Hmm.

[00:29:10] Keith: I was just struck by your answer and my concern about you or your family thinking that I'm here for the money.

[00:29:19] Ramit: What are you struck by?

[00:29:21] Keith: Just making the connection that I have this fear or this concern to make sure that people don't think I'm here for any other reason than because I love her and want to be with her. And she has this fear of other people knowing that she has money because they'll want to have money from her. So I just made the connection.

[00:29:40] Ramit: Do you see how those two interact with each other and influence each other?

[00:29:45] Keith: Yes. I see that now.

[00:29:47] Ramit: It's almost like you two are magnets, but in a way, your beliefs are repelling each other rather than bringing each other closer. You see that?

[00:29:58] Keith: Yeah.

[00:29:59] Ramit: Kate, what will people think about you having money?

[00:30:11] Kate: I guess at the very core, unsafe. It's someone taking my agency away.

[00:30:17] Ramit: Yeah, that's powerful. And yet I'm struck because is it unsafe to have lost millions of dollars over the course of 30 years in fees or management? Is it unsafe as a 40-something-year-old woman to have to ask your dad for permission to take $30,000 out because of an illness? That feels unsafe to me, especially as somebody who's used to having autonomy.

[00:30:52] Kate: Yeah, I think the medical expenses feel a little nuanced to me. The whole reason that they didn't want me to pay for it was because they're very concerned about passing their wealth onto me in a way that doesn't incur taxes. And so they saw this as an opportunity to do that. But ultimately, I think you're right. It's disempowering, and I've recognized that and tried to do my own work to realize I don't need to explain anything.

[00:31:21] Ramit: But you do. You literally have to explain all this medical stuff to your dad so that he cuts you a check for $30,000 from your own trust as a grown woman.

[00:31:36] Kate: The question hasn't been asked, so fortunately I haven't felt like I'm needing to explain. But yeah, there's that dynamic.

[00:31:48] Ramit: Sometimes I think there are values higher than tax efficiency. I'm just going to be really blunt about it. If I were in your situation and there was some tax optimization thing, which saves me or my parents, whatever amount of money-- it could be tens of thousands, it could be a million-- but it was preventing me from being my autonomous self, it was keeping me small, keeping me reverting to childhood, to be very blunt, I would not give a [Bleep] how much I had to pay in taxes. They're higher values than tax efficiency. 

[00:32:30] Kate: I appreciate that, and I know exactly what Keith is thinking right now.

[00:32:34] Ramit: Keith, speak up.

[00:32:36] Keith: I just 100% agree with you. Kate's parents are amazing, but Kate is a grown woman, and this power dynamic has her acting as if she's a 12-year-old girl and not taking on the role of decider of her own life.

[00:32:53] Ramit: Call your parents up and say, "I want to trust in my name, and I don't want to have to go through a trustee anymore."

[00:32:58] Kate: I've already had that talk with my dad.

[00:33:00] Ramit: What happened?

[00:33:04] Kate: At the end of the day, he's supportive of that. However, he just has no idea if it's doable because of how the trust is set up.

[00:33:13] Ramit: That's an unacceptable answer, Kate, in my opinion. You asked your dad. He was like, I don't know how. Then Kate, find out. Don't put yourself in the position of being a 16-year-old girl who's dependent on her dad. This is a lot of money. A million bucks. Find out.

[00:33:32] When you're in the Northeast, I understand that you are planning to live a unit or an apartment on your family's land. Is that correct?

[00:33:45] Kate: Yeah.

[00:33:45] Ramit: Okay. Tell me about that.

[00:33:47] Kate: My parents built a house that's a summer home for them.

[00:33:51] Ramit: Mm-hmm.

[00:33:52] Kate: We figured that at least for the time being, we can live there to reduce our expenses and to spend time with them, still have a little bit of autonomy by being in a separate apartment in the space. And that enables us to have the freedom to go to Hawaii without having a property that we have to maintain and worry about.

[00:34:14] Ramit: Got you. In light of our conversation today, any new thoughts on that? Can I just tell you, I think from a financial perspective, it's [Bleep] amazing. Like, ah, here's free housing, and you know it. It's great. From the perspective of radically reexamining your relationship with money and with others, certainly expectations, which Kate, you told me one of the top ones was, what do people around me think about money, and how do I feel more empowered?

[00:34:59] To me, this is the polar opposite of what you might consider. Let me go back as a young teenage girl into my parents' property, which they are paying for, and then every time I have a question, I have to ask them, "Please, mommy. Please, daddy, can I do X, Y, Z?" A multimillionaire woman. To save, what, 5,000 bucks a year, 10,000 bucks a year, whatever? Does it make sense?

[00:35:31] Kate: We looked at a bunch of different options and haven't been able to find a rental for ourselves there. Seasonal rentals like that don't really exist. And we don't want to have to buy another place to then be worried about it when we're not there and have that burden.

[00:35:50] Ramit: Keith, what do you think? Is this the right move?

[00:35:53] Keith: At this moment, I think it is the right move. We ran the gamut with building our own place on the property, apartment or condo, and then building our own house, and then going and buying a house, and then renting someplace. And we just felt like, for this summer, let's just not stress about that particular decision, and maybe something will come to us.

[00:36:14] Ramit: Okay. Well, honestly, that seems pretty reasonable sometimes. Not every decision can be absolutely perfect. Life is complicated. I think your core value of one thing at a time is really smart. And if I were in your situation, I might do exactly the same thing.

[00:36:34] Personally, from a distance, I don't think it's ideal for you to live on your parents' property, not when the two of you are trying to carve out a life where you don't feel judged. But could you figure that out a year from now? Of course. Did that surprise you that I suggested maybe not living there?

[00:36:57] Keith: Oh, no, we chatted about that. The dynamic that you're imagining as far as Kate living with her parents and setting a particular tone, that exists. That happens. And so wanting separation is definitely part of that decision. It is tough to balance too, because we really enjoy spending time with them. And so it's tough to find that balance.

[00:37:22] Ramit: I think a lot of people feel that if they end up with millions of dollars, they're just going to feel joy. Ah, I finally achieved it. But the truth is, I think a lot of people are quite surprised to realize that whether they're in debt or whether they have millions of dollars, they are still afraid of money. The question is, do you know how to make the right decisions?

[00:37:48] So I asked our partners at Facet to take a look at your portfolio and to share a few scenarios based on what the two of you told me that you might want to do in this next chapter of life. Shall we take a look?

[00:38:01] Kate: Yeah.

[00:38:02] Ramit: All right. So I have three scenarios from our friends at Facet. Scenario one is you earn the same income and you travel. You could spend double what you spend now. Essentially you could spend an extra $4,000 per month, and you could use that for whatever you want.

[00:38:27] You would also be able to retire at the age of 62, and you would increase your net worth as you got older. So by the time Keith is 90, and by the time Kate would be 82, you would have an estimated net worth of approximately $4 million. Let me get your immediate reactions. Kate.

[00:38:55] Kate: Sign me up.

[00:38:57] Ramit: Wow. What do you like about that?

[00:39:02] Kate: I like that there's parameters, there's flexibility, and there's predictability.

[00:39:11] Ramit: Yeah, this is very telling. I like when people know themselves. You like parameters. Tell me the parameters, and I can play inside that, and I can win. I can see you nodding right here.

[00:39:22] Kate: Mm-hmm.

[00:39:23] Ramit: Perfect. That's awesome. Keith, what do you think about that scenario?

[00:39:28] Keith: It sounds great. I guess I feel the same way too, this once you have the game plan set down, just put your head down and reap the rewards from it, I guess.

[00:39:38] Ramit: Yeah, I think that's true. You got to know the game, but it also requires you making some decisions. Now, most decisions are reversible, but you have to decide, what do we actually want to spend money on? You both seem pretty excited about it. And this is where the  Rich Life work begins. What is our vision? What are we doing? What is all this for? How can I use money to make my life easier? Okay. Shall we go to the next scenario?

[00:40:10] Kate: Yeah.

[00:40:12] Ramit: Scenario two, Facet created this using your information. Work more, and you can buy a house. You discussed buying a house at some point. You don't want to do it right now, but let's just take a look here. Let's say that you increase your monthly spending by only $2,000, not 4,000, but you can increase your spending by 2,000 a month, which is a lot of money. You could purchase a house in five years for $750,000. But you would need to increase your annual income to $50,000 and you could retire at 62. How does that strike you?

[00:41:00] Kate: The opportunity to own our own home without having any involvement from my parents means that we can truly have our own space and do what we like with it, which is supremely appealing to both of us, and makes me really excited. Even if it means that we have to work a little bit more. What do you think about that?

[00:41:33] Keith: I like option one better.

[00:41:37] Kate: Okay. That actually surprises me.

[00:41:39] Keith: Obviously, I want our own place too, so that is very appealing. And the roadmap seems very accomplishable by us.

[00:41:49] Ramit: Wait, first of all, this is [Bleep] great. I love it. But what just happened? Are you guys going with two or one? What's happening right now?

[00:41:56] Keith: I don't know.

[00:41:57] Ramit: Too much spinning. You're indecisive, but you don't have to pick it like it's going to be the final decision. But can somebody make at least a preliminary decision?

[00:42:07] Kate: Yeah. I'll make a decision.

[00:42:08] Keith: Okay, great.

[00:42:11] Ramit: Wait, wait, wait, wait. Hold on. Keith, for the first time, make a financial decision.

[00:42:16] Keith: One.

[00:42:17] Ramit: Option one. He goes, "Whatever the [Bleep] it was." One, one.

[00:42:22] Keith: Option one. It was less work.

[00:42:26] Ramit: Yeah. Okay. So make the same amount of money you've been making, 30k a year, and you can double your spending. That's an extra $4,000 a month. You retire at 62. You're probably not going to buy a house.

[00:42:42] Keith: Kate, I would love to hear your answer.

[00:42:45] Kate: The concept of option one feels more comfortable to me right now because it means that there's less pressure. I can focus on my health. I can be able to focus on some joy as well and not feel a sense of pressure to perform or meet a certain quota or work towards something that maybe doesn't fit with my health or my energy levels or whatever.

[00:43:11] So for right now, that honestly feels more appealing to me. Option two feels more appealing to me, like 10 years down the road or we're where we retired to having our own space, but not right now.

[00:43:29] Ramit: Great job. What'd you notice about that dynamic? A lot more conversational. I felt like you're both learning something about each other.

[00:43:37] Kate: Yeah.

[00:43:37] Ramit: It's quite educational. You would be shocked how much new stuff there is to learn from our partner of five years, 10 years, 25 years, if we just ask them. So I want you to keep that up.

[00:43:52] Let's go to the scenario three from Facet. Scenario three, you earn $0. You retire. You would increase your monthly expenses to 8,500. So you would spend 4,500 more. No change to your living situation. Your net worth will decrease over time because you're not bringing in any income. So you're basically drawing from what you have.

[00:44:24] But you could do it. A lot of other people have. Your ESG investments, I would strongly recommend you take a second look at them. And I want to show you an example. Here we have what your life could look like. You can see that money starts to decrease as you get older.

[00:44:43] But we can see that if the market returns less, then you get into a danger zone when you're very old. We certainly don't want that. You don't want to be 92 years old and running out of money. That's catastrophe. So we build models to make sure that never happens or close to never. What's your take on scenario three?

[00:45:05] Kate: It doesn't appeal to me. First of all, spending that much extra from what we're already spending doesn't seem to make sense to me. I can't think of a scenario where it would bring me joy. So that right there wouldn't make sense to me. And then part of what we'd like to do is be able to leave something to Keith's kids. So that would not make that possible. So it doesn't really appeal. What about you, Keith?

[00:45:37] Keith: Option three would not be the one that I would go for mostly because I'm not ready to just stop working.

[00:45:45] Kate: Okay. How does it feel to know that you don't have to work? It feels like a burden is taken off, a sense of release, a sense of loss of pressure to hold up to some kind of standard and live my life essentially for someone else.

[00:46:15] Ramit: Mm-hmm.

[00:46:16] Kate: And it feels like a sense of freedom to let Kate be the driver.

[00:46:26] Ramit: The driver and maybe the partner as well.

[00:46:30] Kate: Right. Keith and I dream a lot. And we've been lucky to turn some of those dreams into careers, and it's been incredibly rewarding. And I want to find that in something that isn't so physically demanding, but that we can keep doing together.

[00:46:49] Ramit: Yeah. I love that. What I want for the two of you is to get crisp about what your  Rich Life is, even for the next year, the next five years, and so on. The next year in general should be pretty dialed in. You should know it. Five years can be a little bit more vague. 10 years can be even more vague, but it's not like you're two or 22 years old. This is the time.

[00:47:17] What I really wish for you is to be conscious, intentional about your Rich Life because I think you have the possibility of doing so many things. And money is not really a limiting factor for the two of you. It's not. You're in a very rarefied position. Most people, money is the number one thing, stopping them. But you actually achieved the money that you need and more. It's not a reason holding you back. If anything, it's an accelerant for the kind of stuff you actually want to do.

[00:47:52] In our conversation today, I'm curious, was there anything that surprised you?

[00:47:58] Keith: I guess I came to some realizations at how much I am responsible for my passenger nature, and I'm a little disappointed that I haven't gotten to a place where I've been able to initiate conversations better and to become a part of a conversation better than I have up to this point.

[00:48:18] Kate: I feel like maybe surprise isn't the right word. Reevaluating my relationship with self-confidence and ownership and empowerment. I know I've done a lot of work, but seeing that I have a lot more that I can do.

[00:48:35] Ramit: It's great realization, both of you. Really deep foundational realizations is exactly why I do what I do. So much deeper than some number on a page. It's who you are, what your relationship is with money, with each other, with the people you love. That's why I do what I do. How are you feeling now compared to when we started this call?

[00:48:58] Kate: I'm feeling pretty excited. I feel like the pieces of the puzzle are coming together, and I'm feeling a lot more ability to get there as a couple, as opposed to feeling as though it's my responsibility to figure it out. And so I'm feeling pretty energized around that.

[00:49:16] Ramit: Love that. Keith?

[00:49:19] Keith: Confident and looking forward to having conversations and trying to help steer decisions better than taking a backseat.

[00:49:28] Ramit: Great. Love that. I don't do this often, but sometimes I just give very direct advice on what I would do if I were in your situation. Would you be okay if I share what I would do? You don't have to take it, but I just want to tell you point blank what I would do.

[00:49:45] Keith: Yeah.

[00:49:45] Kate: Yeah, sure.

[00:49:46] Ramit: Okay. This is what I would do if I were you. How often are you seeing your therapist?

[00:49:53] Keith: Once.

[00:49:53] Kate: Probably every other week.

[00:49:55] Ramit: So I would make that once a week, and I would consider individual therapy as well. There's some really foundational, powerful stuff to work on in terms of confidence, being active participant, having these conversations. I would start that immediately. I would do it every week, and keep the joint stuff up.

[00:50:12] I would reread I Will Teach and Money for Couples together. In fact, if anything, I would have Keith lead the reading of that, and I would re-look at the accounts and just make sure our accounts are flowing the way they should be. Right now I suspect they're not. The fact that sometimes Keith rather spend his own money than joint money, that shouldn't even be a question.

[00:50:37] So there should be money set aside for each of you every single month, regardless of whether you're earning or not, so that you can spend on things you love without having to ask questions. Fix your accounts. Next I would get rid of that investment advisor, and you can either switch over to a financial advisor if you choose to have one. We like Facet.

[00:51:00] There are plenty of others, just not paying AUM percentage. I suspect that any good advisor is going to take a look at the funds you're in and want to dramatically simplify them because you're just paying fees on top of fees. And for the next 30, 40 years of your life, you don't want to be doing that.

[00:51:19] It will cost you millions. So I would get out of that. I would start to create a vision of what your life looks like without being enmeshed with your parents. And that is everything from getting your dad out as a trustee. Either get the money yourself or find a professional trustee, like a law firm, etc. But he's got to be out. It just can't happen anymore.

[00:51:41] Housing, you know what I was going to say, but I actually love your answer. Like, look, we can't do it all at once, so we're going to go there for the next year. Cool. Totally respect that. But I would have a vision that in X years, we're out. We're going to find something else in some way, somehow.

[00:52:00] I would consider also postnup if you don't already have it, because this trust comes from your family, Kate. And that also will eliminate Keith's worry. So all of that would be written down, and both of you would be super comfortable knowing. It's a done deal. It's not like whispers in shadows. It's just written down and transparent.

[00:52:24] And I would certainly plan a little meal for the loved ones. People are going to think it's weird. Why are they paying for our dinner? Are they show offs? And you both practice your line. What are you going to say to them? You say it with a big smile, and that's it. So that's what I would wish for you. Those are some things I would consider. It's of course, totally up to you.

[00:52:46] And final thing, just remember you have millions of dollars. There is no virtue in playing smaller than you have to. So you, above almost anybody else, have the ability to live a very Rich Life. I really, really want you to take advantage of it.

[00:53:07] Keith: Awesome. Thank you.

[00:53:08] Kate:  Awesome. Thank you.

[00:53:08] Ramit: Right. It's been a total pleasure. Very nice to meet you both.

[00:53:10] Kate: Me too.

[Narration]

[00:53:11] Ramit: A huge thank you to Kate and Keith for speaking with me and sharing so openly. Most of us think that if we had $3 million in the bank, the only thing we would feel is joy. But as we just saw, a lot of complicated feelings come up, especially with inheriting money, guilt, shame, unworthiness.

[00:53:32] I find this particularly interesting because as a culture, we in the US are obsessed with creating generational wealth. I know you've seen those freaking videos on TikTok. It's all about generational wealth. That's why I am buying real estate. We save. We invest. We stockpile all these things for the kids.

[00:53:50] But one thing we don't do is actually talk to the people who are going to receive the money. How are you going to feel? Do you feel prepared? Do you know what to do with this money? Have we taught you the lessons of how to handle this type of money?

[00:54:06] Without learning the skill of managing and spending money meaningfully, generational wealth isn't just a dream. It can turn into a nightmare. So if you have the feeling of, am I going to be okay? Especially heading into retirement, then I recommend you check out facet.com/ramit.

[00:54:24] Facet is waiving their $250 enrollment fee for new annual members. And for my audience, Facet is offering $300 into your brokerage account if you invest and maintain $5,000 within your first 90 days. I am not a member of Facet and have an incentive to endorse Facet as I have an ongoing fee-based contract for cash compensation based on this endorsement. All opinions are my own and not a guarantee of a similar outcome.

[00:54:48] Kate and Keith made a ton of progress today, but the real work starts when our conversation ends and their normal life resumes. My wish is for them to take this gift of a trust and really use it meaningfully in their Rich Lives. Now let's check out their follow-ups.

[00:55:08] Keith: I found it very interesting that after that call, we were both incredibly exhausted. We had dug into so many emotional things and financial things that we were excited to have him give us the permission to not have to talk about finances after the call with him.

[00:55:22] Kate: I felt like I just wanted to curl up with Keith on the couch with a blanket and just do all the comforting things. That alone told me that there's stuff that hasn't been discussed or resolved or processed that needs to be.

[00:55:39] Keith: After giving us the permission to spend money on some of the things that we considered part of our Rich Life, Ramit had suggested holding off on purchasing a vehicle, which I had found to be important as far as our plans moving forward. But after discussing it, we decided that it was a good idea to table it for now while we work on some of the things that are a little bit more pressing for us.

[00:56:03] Kate: Some of the biggest takeaways that I had were realizing how, even though I've named my invisible scripts, how much they're still playing a role in my view and how I'm showing up in financial matters. And so that's something that I definitely am working more towards dismantling. Had a great therapy session about it.

[00:56:25] Keith: We have already had one good call with one of our existing financial advisors, and we have also had a fantastic talk between ourselves about the things that we went over with Ramit on the call. And one of the action items that we are excited to move forward with is to connect with Facet and use their services to help us get a concrete plan for how we can put everything into action moving forward.

[00:56:54] Kate: We've also committed to my taking over my trust and firing the manager and taking more responsibility in that, realizing that its performance is completely unacceptable. And that was something I already knew. But having a knowledgeable third party affirm that was very helpful. So making a plan to bite off chunks as we go and not feel as though I need to get it perfect and do it all right now. We have time, and we're going to work towards it.

[00:57:28] Ramit: I received this message from Kate since they sent in their initial follow-ups. "We chose Facet scenario number one because we enjoy the work we do, and we don't want to step away from it. We had a meeting with the advisor for the trust and told him not to make any further changes. We want to have another plan in place before revealing to him that he is fired.

[00:57:50] "So far we've had three calls with flat fee advisors and have one more before making the choice. From there, we will work on creating an investment plan and then executing it. They don't manage assets, so we'll gain some confidence there with the safety net of some handhold.

[00:58:06] "We did sell our house and moved the $572,000 from it into a high-yield savings account until we can implement our financial plan. We also sold Keith's car and put a deposit on a truck after realizing we can't continue doing our handyman job efficiently or safely without one. We agreed to purchase something that can serve multiple purposes and be with us for a long time. It being the most affordable truck on the market is a cherry on top.

[00:58:34] "Overall, we've made some great changes that are thoughtful, intentional, and in line with our long-term plan. We're also continuing to separate ourselves from the family dynamic. We treated dad and a friend to lunch. Dad has almost always paid in the past, and we are looking to remove dad as my trustee."

[00:58:55] I'm really happy to hear Kate and Keith's follow-up. There are two things that, in my opinion, really matter from their follow-ups. The first is starting to take ownership of their money, including getting a new advisor. And the second thing is separating themselves from this family dynamic. Both of those things will make huge changes over the next several decades. Kate and Keith, great work. Please keep me updated.