Episode 80. “If I add any more to our $50,000 credit card debt, he will ask for a divorce” (Part 1)

Sarah and Kevin are 38 and 42. They sold their home to pay off $130k in debt, only to dig themselves another $55k hole, six months later. Sarah is worried that if she doesn’t stop her credit card spending, Kevin will ask for a divorce. We need two episodes to untangle their complicated situation.

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Ramit Sethi: [00:00:03] I’m speechless. You paid off $130,000 of credit card debt six months ago, and now you have $50,000 of credit card debt just six months later?

Sarah: [00:00:17] Yeah.

Ramit Sethi: [00:00:19] Whoa.

Sarah: [00:00:23] We need something that works because nothing’s working, like working through how not to repeat past mistakes because we throw out a plan, but we always seem to get back to where we were. We both have a goal. We’re committed to wanting to build a house and want to travel and our rich life, but we don’t have a common plan to get there. This is a generational issue, I think, on both sides. And now as a mom and as a wife, I’m breaking that.


Ramit Sethi: [00:00:56] Meet Kevin and Sarah. He’s 42. She’s 38. They have accumulated $200,000 of debt. Then they sold their house to pay it off. And now they’re finding that those old habits are coming right back. I went back to their application when they initially wrote in to me, and I found a line that I’d like to share with you.

Sarah wrote, “Kevin recently told me that if I kept adding debt to my credit card, he would ask for a divorce.” My parents got divorced over money, so I’m desperate to figure this out. We’re going to talk to Kevin and Sarah today. But one of the biggest lessons of this podcast is that our money decisions are rarely only our own. A lot of us like to imagine that we’re rational, logical people. We’re pushing our shopping cart down the aisle, and we’re making a careful cost-benefit analysis before we buy those Ritz crackers. 

In reality, our parents bought those crackers and they subconsciously taught us that love means buying this exact brand. We learn how to talk about money from the people around us. We learn how to invest it, or if investing is even for people like us. And of course, we learn how to spend from the people around us. And it is very, very hard to shake those generational lessons away. 

I would encourage you to listen to this episode and I would invite you to watch it on YouTube. The body language and the facial expressions you’ll see at a whole layer of understanding. You can find this episode on YouTube by searching for Ramit Sethi and be sure to follow my channel there. Now, let’s begin. I’m Ramit Sethi and this is I Will Teach You to Be Rich.


Sarah: [00:02:45] We did Dave Ramsey’s thing. We tried those Spreadsheets, our own, made up, throwing spaghetti against the wall. I don’t know. What am I missing? We probably fell there. We probably tried it.

Ramit Sethi: [00:03:04] And so coming on this show to talk to me, for you, what does it represent?

Sarah: [00:03:13] I’m an emotional person, so there might be tears. Hope is what I hear in all of your podcasts. And so–

Ramit Sethi: [00:03:26] Hope to do what?

Sarah: [00:03:28] Figure it out. We have very different backgrounds when it comes to money and I want commonality and rules, and a way to speak to each other where we can actually hear each other when it comes to money. We tried to talk about money and I was like researching your site and listening to your podcast that kind of I’m an all-in person. And we started having a conversation about money just trying to communicate because you’ll find that that’s where we struggle deeply and we just lost it on each other.

Ramit Sethi: [00:04:12] So talk me through that conversation. Do you remember where you both were?

Sarah: [00:04:16] Oh, gosh, there have been so many. I think we were actually probably like I was sitting here and he was in the living room. I don’t remember exactly what it was, because like I said, there have been so many. But it was basically, screw this. Something’s got to change. Probably what it was was him getting mad at me about what was spent on credit cards.

Ramit Sethi: [00:04:46] What you spend on credit cards or what was spent?

Sarah: [00:04:49] What I spent because it’s my card.

Ramit Sethi: [00:04:52] I’d like to hear from you, Kevin. I’d like to hear about that same conversation that the two of you had where you both became really frustrated. What do you remember about that conversation?

Kevin: [00:05:06] I think I know what she is referring to. And this comes with accumulations of things that it’s built up throughout a marriage. I get short-fused. And so in that particular moment, the expectation in my head, “Hey, we should be at this ceiling.” And when we spoke, the ceiling was higher, and therefore I was like, “Oh, that means there’s more debt than we have to–

Ramit Sethi: [00:05:38] Sorry, what does ceiling mean? What are you referring to?

Kevin: [00:05:40] Just in the sense of I thought that the debt was at that level and it turns out to be at a higher level. Right now we’re probably at $50,000 in debt, like off-credit card debt.

Ramit Sethi: [00:05:53] Five zero?

Kevin: [00:05:55] Five zero.

Ramit Sethi: [00:05:55] Okay.

Sarah: [00:05:56] I want the clean slate every month. So like you’ve talked about in your book, utilizing credit cards as an account versus because you can use them for certain things that are very beneficial. And so I think you do it that way. But if you don’t have a plan and place of what you’re putting on the cards, then it can get out of control. And so–

Ramit Sethi: [00:06:18] Is it out of control for you now?

Sarah: [00:06:24] The amount, yes, it is.

Ramit Sethi: [00:06:27] Okay. Anything else that is or is not out of control?

Sarah: [00:06:33] What? Banks, I feel like right now. But–

Ramit Sethi: [00:06:35] Tell me.

Sarah: [00:06:36] Yes, we sold our house in May and moved into a rental house with the goal of building. It’s been a lifelong dream of mine, building our own house. We had to switch– Why is this? Sorry. We’ve had a really tough year, and so we had to switch our girls’ school because they went through a lot of stuff. They’re in private school and they went through a lot of stuff at their old private school, so we had to switch schools for them. 
So I think that out of control is just the level of stress and not being– we’re very outside of our comfort zones right now and my business is maintaining, but I lost a pretty big account in October and that dropped my income in half, almost in half. And my income from my business has steadily gone down. Not much, but a little bit. So there’s just been a lot of stress. And I really struggle when I can’t control things. 

Ramit Sethi: [00:07:59] How do you react when you have more and more stress like this? What do you do?

Sarah: [00:08:06] It depends on the level, but I tend to get depressed and I start withdrawing or I blow up. And it’s usually blowing up at Kevin.

Kevin: [00:08:17] And this has bluntly, but this has caused an issue in my marriage is where professionally, a husband so heads down that there are moments, more than moments, that in our marital life where I didn’t see her going through these times until she blew up, or until it was verbally told to me. 

In the meantime, I’m thinking, oh my gosh, if this is happening, then that means I need to double down and buckle into my work so that we can come out on the better end together. But she’s suffering because of that because she’s not getting the support emotionally. So this is full transparency here.

Ramit Sethi: [00:09:21] I really appreciate it. It really helps me understand the dynamic here.

A few things to note. There’s a lot of emotion in their description of money, and a lot of history, and I’m going to spend time trying to unravel it. Along the way, I suspect that Kevin and Sarah will get a better understanding of what’s really going on because when something like money is covered in emotion, it’s easy to lose sight of the real issues. It’s like a bad relationship. Everything feels existential. 

You’ll also notice that there are some clues, something about their girls, something about Sarah’s dream of building a house, something about Kevin having the best year of his career last year. We’re going to get into all that, and we’ll get into all the numbers. But I think it’s important for you to know that Kevin and Sarah are high earners. Keep that in mind as we continue on this conversation.


Sarah: [00:10:12] I think that money is a foundational struggle for us because we can’t sit down and have a non-emotional conversation or it’s very rarely that we can do that.

Ramit Sethi: [00:10:31] Is that the dream, to have a non-emotional conversation about money?

Sarah: [00:10:35] Yeah.

Ramit Sethi: [00:10:36] Okay. And if you were to have a non-emotional conversation about money, what would that look like?

Sarah: [00:10:42] Sitting down together over wine or dinner or out to eat or just in the living room, and talking about the spending and the things that we’ve done without criticism or feeling put down–

Ramit Sethi: [00:11:08] Who feels put down?

Sarah: [00:11:09] I do.

Ramit Sethi: [00:11:10] Okay. Okay. So you’d have conversations without you feeling put down. What else?

Sarah: [00:11:16] Feeling as an equal in conversation and having a common goal. And we do– maybe it’s more like a common plan. Maybe that’s a better way of putting it because we both have the goal. We’re committed to wanting to build a house and want to travel in our rich lives, but we don’t have a common plan to get there.

Ramit Sethi: [00:11:45] What has stopped you from making a common plan towards an already common goal?

Sarah: [00:11:56] We don’t speak the same language.

Ramit Sethi: [00:11:58] Ah! What language do you speak?

Sarah: [00:12:01] Well, we don’t actually, does completely speak a different language, but he speaks numbers and it’s just very, this is how it is. A perfect example is he goes like, “Can’t you just transfer the money over to the credit card?” And I don’t know why that is very hard for me to do it. He’s like, “It’s just a button, click a button.” And I’m like, “It’s not that easy. There’s a lot of emotion behind it.”

Ramit Sethi: [00:12:31] So he speaks the language of numbers, and what language do you speak?

Sarah: [00:12:38] Emotions. My childhood was very much all emotions when it came to finances. My parents divorced over finances. There’s a lot of baggage.

Ramit Sethi: [00:12:52] I want to talk about how you were raised. I find it very interesting that you speak the language of emotions. You were raised with emotions, but you told me that your number one goal is to have a non-emotional conversation about money.

Sarah: [00:13:08] Yeah, because I don’t want to cry for every conversation or avoid or yell at each other. I want a– maybe it’s not emotional, it’s a positive emotion.

Ramit Sethi: [00:13:21] Ah, that’s different. Right?

Sarah: [00:13:21] Yeah.

Ramit Sethi: [00:13:23] Because can I just say, I don’t think there’s anything wrong with having emotions about money? Everybody does. Even Kevin, who’s Mr. Numbers, I bet has emotions. Give me five minutes, I’ll find him. Everybody has them. And I think sometimes we’re raised with this idea that deep down, emotions are weakness. But they’re not. They’re just human. 

So can we reshape your goal? You said first that you want to have a non-emotional conversation about money. I think that would be really boring. What would you like to do instead?

Sarah: [00:13:57] I want to have a conversation that is positive and forward thinking and exciting to sit down and thought, “Look what our money’s doing and we’re going, and look what we’ll be able to do. It’s so exciting.”

Ramit Sethi: [00:14:12] All right. I can get behind that. Kevin, are you down for that?

Kevin: [00:14:17] I’m writing it down.

Ramit Sethi: [00:14:18] Oh, okay. Love it. Okay, good. Okay. And when you two got married, how long ago was that?

Kevin: [00:14:23] 14 years now.

Sarah: [00:14:25] Yeah, we just celebrated 14 years.

Ramit Sethi: [00:14:27] Oh, congratulations.

Ramit Sethi: [00:14:28] Thank you. I appreciate it. That’s awesome. 14 years. Amazing. Okay. 14 years, three kids. Fantastic. All right. 


A lot of you listening right now beat yourselves up for things that are deeply held parts of your personality. Sarah basically started crying in the first two minutes of our conversation, but four minutes later, she tells me she wants to have a non-emotional conversation about money. That’s not going to happen. That would be like me going to a French restaurant and saying, “Oh, I’d really love to spend $89 on some pulei that’s seasoned with three particles of salt.” It’s not going to happen. I want some fucking spice on my chicken. 

I’m not going to a French restaurant and Sarah is not going to have a non-emotional conversation. A better approach is what she finally said. She wants to have a conversation with positive emotions. Maybe she will later say that she wants to become comfortable talking about numbers. I can help with that, but I’m glad we caught this now because if you truly detest something about yourself, if you believe you need to fully extinguish it, it’s going to be very hard to actually change.


Sarah, will you tell me about how you were raised with money? What do you remember about growing up with your parents?

Sarah: [00:15:43] What I do remember is there was a lot of turmoil between my parents, especially in finances. My parents were raised very differently. And when it came to money and in general, one of the biggest things I was thinking about earlier today was my sitting at dinner point had gone out to eat, and my dad ordered a steak. And so there’s four of us, I’m one of four. And my siblings and I were like, “Oh, we want to take two, da, da.” And my mom would either order nothing or soup.

And we would find out as I got older, the reason we did that was we couldn’t afford it. And instead of arguing with my dad there in the restaurant, she would just let it happen. And there were lots of times my dad bought a car without consulting her. And there were six of us and it was a five-seater. And then he’d go and buy TVs and just different things. And it was always, “We can’t afford it. We can’t afford it.”

Ramit Sethi: [00:16:51] Who said that?

Sarah: [00:16:52] My mom.

Ramit Sethi: [00:16:53] Okay.

Sarah: [00:16:56] My dad worked hard, but we grew up on the poor side. He grew up very poor and my mom grew up wealthy. And so it was very two different sides of the track.

Ramit Sethi: [00:17:13] Can you think of any examples where that difference really manifested itself?

Sarah: [00:17:20] I know of some that my mom told me about and they would not be able to pay the light bills. And my dad would say, “Just go ask your parents for it.”

Ramit Sethi: [00:17:35] Oh, wow. And your mom told you that story, not your dad.

Sarah: [00:17:40] My mom told me that story, yes.

Ramit Sethi: [00:17:42] Did they separate, your parents?

Sarah: [00:17:44] When I was 16.

Ramit Sethi: [00:17:46] Why then?

Sarah: [00:17:46] Money and other things.

Ramit Sethi: [00:17:51] I see. And who was the one who initiated the separation?

Sarah: [00:17:56] I think my mom.

Ramit Sethi: [00:17:57] Okay. Okay. Looking back now, as an adult, as a mother, looking back on how you were raised as it relates to money, what are the things that you take away?

Sarah: [00:18:14] That my mom was just trying to survive, was a big one. I know my dad had a lot of struggles as a child as well, that he was never able to work through and it really was a problem. This is a generational issue, I think, on both sides. And now as a mom and as a wife, I’m breaking that. And I don’t want my children, and we have three girls, and so I don’t want them to grow up in their life and not know what I didn’t know. I don’t want them to be in these same positions to risk their marriages because they can’t budget well or whatever. I don’t want to end up like that and I don’t want us to end up like that.

Ramit Sethi: [00:19:24] Do you think you are destined to end up like that?

Sarah: [00:19:26] If we keep going the way we’re going, yes.

Ramit Sethi: [00:19:29] That helps me understand a lot. Thank you. Kevin, what about you? How were you raised with money?

Kevin: [00:19:39] My dad worked a lot. My last fan that I seen, he managed the money. My mom will stay at home. Once my dad’s career really took off, she didn’t need to be a teacher anymore and so she stayed at home. So that’s what I remember for most of my life.

Ramit Sethi: [00:20:03] What did you learn about money now that you look back as an adult? What are your takeaways?

Kevin: [00:20:08] Well, this is where it gets [inaudible]. Throughout my life, I’ve never been educated about money. I saw it. I was around it. I wasn’t educated about it. So I didn’t grow up in this country. I grew up abroad, and with that, there are some cultural differences. But I didn’t have an education about money. I just knew my dad took care of it.

Ramit Sethi: [00:20:42] Sarah, you reached out because of a series of conversations. Describe it for me. What is the situation? It sounds like you have together $50,000 worth of debt. What would you say in a sentence or two seems to be the problem that keeps coming up for both of you?

Sarah: [00:21:02] Lack of communication and connection. I think that we have to find even more commonality in what we want for our money. We’ve got to come together on that roadmap.

Ramit Sethi: [00:21:14] Let me ask you a question about yourself. You specifically, what behaviors do you think you need to change in order to break that generational curse?

Sarah: [00:21:30] Well, one of the big ones is impulse. I impulse purchase. And usually out of emotion or feeling like I deserve it. I think some of the things that I tell myself about money and I think probably, I would say a lot of it’s the impulses, and the way I speak about it, the way I talk about it, and in the way I think about it.


Ramit Sethi: [00:22:11] Be sure to watch her facial expressions on that last exchange. They are very revealing. 


This $50,000 of credit card debt, whose credit card is that on?

Sarah: [00:22:22] Mostly mine.

Ramit Sethi: [00:22:23] All right. So you have a joint investment. Is that joint?

Sarah: [00:22:29] It is. And he has a 401(k) and I have a Roth.

Ramit Sethi: [00:22:35] Great. All right. You have separate credit cards, so I’m just curious about the bills, the day-to-day bills getting paid, for example, your rent, eating out. How does that decision get made about who pays for what?

Sarah: [00:22:56] The rent, to live our lives under our roof, utilities, all that stuff, I set it up. I put it on my card, except for the rent. It has to come out of a checking account. So it’s on the joint checking account. But anything that could go in a card, I just put it on the credit card.

Ramit Sethi: [00:23:20] Your credit card?

Sarah: [00:23:23] Mm-hmm. 

Ramit Sethi: [00:23:24] Okay.

Sarah: [00:23:24] And then when it’s eating out, a lot of us for eating out is convenience because we’re pretty busy. And so if we’re all together, typically it’s on his card. If it’s me with the kids, it’s mine. If I’m ordering, it’s mine. It’s through an app. It’s part of mine.

Ramit Sethi: [00:23:46] So it’s just like whoever is basically doing the thing is pulling out their credit card. Okay. Does this cause any problems for you?

Sarah: [00:23:54] Quite a bit.

Ramit Sethi: [00:23:55] Oh, I was like, this is a weird setup, but you both seem very calm about it. I’m like, “Is there any issue here?” And then I go, “Is this a problem?” And both of you are nodding furiously. Okay, so what’s the problem? Break it down. What happened the last time you all argued about this?

Kevin: [00:24:11] So if I think, one way to add to the context is when we sold our house, we were able to be debt free. We sold the house where like, credit card, no more. That’s it. Blah, blah, blah. And then we reintroduced it and there it goes again bad behaviors where there’s no plan set where we actually could get back to zero. And for a minute, we did it. But then there are some things that occur. Pull the trigger here. Pull the trigger there, and the next thing it’s the snowball. And here you are re accumulating debt.

Ramit Sethi: [00:25:03] Okay. Let me ask a few questions about the pattern that you seem to be in. How much did you sell your house for?

Sarah: [00:25:11] $1,000,050.

Ramit Sethi: [00:25:12] Okay. And how much did you take home after the sale?

Sarah: [00:25:18] It was like 369 or 396.

Kevin: [00:25:25] Yeah, it was somewhere around there.

Ramit Sethi: [00:25:26] All right.

Kevin: [00:25:26] At $375,000 in my head.

Ramit Sethi: [00:25:28] Let’s say 375. And did that include all fees that you had to pay, transaction fees, all that? What about taxes?

Sarah: [00:25:37] Yeah. That’s what we walked away with.

Ramit Sethi: [00:25:39] Okay. Walked away with including paying taxes, etc. on anything that you owed?

Sarah: [00:25:45] Yeah, minus 500 bucks that we had to pay for HOA.

Ramit Sethi: [00:25:49] Okay, great. So 375. And how much credit card debt did you have at that time?

Sarah: [00:25:56] $130,000.

Ramit Sethi: [00:25:59] Credit card debt?

Sarah: [00:26:00] Yeah, it was–

Ramit Sethi: [00:26:03] 130. And was there any other type of debt at that time?

Sarah: [00:26:06] Student loans, cars.

Ramit Sethi: [00:26:10] Cars multiple?

Sarah: [00:26:11] Yes.

Ramit Sethi: [00:26:12] Okay. And student loans. Whose student loans?

Sarah: [00:26:15] Mine.

Ramit Sethi: [00:26:16] Okay. All right. So you had, how much was it? 130?

Sarah: [00:26:20] Mm-hmm.

Ramit Sethi: [00:26:21] All right. So you were able to pay all that off and you still had a couple hundred thousand bucks?

Sarah: [00:26:26] Yes.

Ramit Sethi: [00:26:27] Awesome. All right, great. So was it a big thing in your household like, “All right, we’re paying off this debt?”

Kevin: [00:26:34] Huge.

Sarah: [00:26:35] Yeah. Mm-hmm.

Ramit Sethi: [00:26:36] Okay. What did that feel like?

Kevin: [00:26:38] Amazing.

Sarah: [00:26:39] Yeah, it did.

Ramit Sethi: [00:26:40] That’s cool. Was it the first time that you were debt free in your marriage?

Sarah: [00:26:46] Credit card debt. Mostly, yes. Yes. I think it was completely, but we haven’t been completely debt free.

Ramit Sethi: [00:26:56] Did you take the money from the house and pay off all the student loans as well?

Sarah: [00:27:03] No, because the goal was to take the additional– we sat down and decided, we’re going to pay off the credit card debt and then the additional amount that we had left over, we were going to invest some of it, save some of it to have cash available for whatever reason, and then utilize that for a down payment on the land. So we didn’t pay everything off? No.

Ramit Sethi: [00:27:29] Okay. That student loan that you had, which you did not pay off, how much was it at the time?

Sarah: [00:27:36] Right around $30,000.

Ramit Sethi: [00:27:38] Okay. What was the interest rate? Do you remember?

Sarah: [00:27:40] It’s nothing. 

Ramit Sethi: [00:27:42] It’s low?

Sarah: [00:27:43] It’s zero right now.

Ramit Sethi: [00:27:45] Okay. But back then?

Sarah: [00:27:47] This was six months ago.

Ramit Sethi: [00:27:48] Oh. What?

Sarah: [00:27:50] Yeah.

Ramit Sethi: [00:27:50] Hold on. Let me get this straight. What the hell? I didn’t know about these timelines.

Sarah: [00:27:54] Yeah.

Ramit Sethi: [00:27:55] Hold on. I’m speechless. You paid off $130,000 of credit card debt six months ago, and now you have $50,000 of credit card debt just six months later?

Sarah: [00:28:14] Yeah.

Ramit Sethi: [00:28:16] Whoa. So what happened?

Sarah: [00:28:25] Life.

Ramit Sethi: [00:28:26] Wait. Okay, this is like, if this was five years, I would be like, “All right, yeah, life happens,” but six months? We can figure this out in 25 seconds. Let’s just do it right now. Okay, life happens, all right. Not that much life happens in six months, so let’s break it down. What vacations did you take in the last six months?

Sarah: [00:28:45] Well, we paid for a cruise that we have coming up.

Ramit Sethi: [00:28:49] How much is that, ballpark?

Sarah: [00:28:51] $7,000, I think.

Ramit Sethi: [00:28:53] What do you think? What number do you think I would pick to write down here? How much is your cruise going to cost? You said $7,000. What do I think the real number is?

Sarah: [00:29:06] Eight? $8,500?

Ramit Sethi: [00:29:08] No, higher. Kevin.

Kevin: [00:29:13] $11,050 [inaudible].

Ramit Sethi: [00:29:17] Okay, so let’s say $11,000. What else did you spend money on in the last six months?

Sarah: [00:29:22] Business stuff. That credit card debt is including business cards.

Ramit Sethi: [00:29:30] Okay. How much do you spend on the business?

Sarah: [00:29:34] I think it’s 15.

Ramit Sethi: [00:29:35] Okay. 15 on business. You spend that on a credit card?

Sarah: [00:29:40] Mm-hmm.

Ramit Sethi: [00:29:41] Okay. What else? Eating out, you mentioned?

Sarah: [00:29:45] Eating out. That’s a big one.

Ramit Sethi: [00:29:48] How much?

Sarah: [00:29:48] $3,000 to $4,000 a month.

Ramit Sethi: [00:29:50] Let’s say $4,000 a month. What else did you spend money on in the last six months?

Sarah: [00:29:53] Yeah, I had surgery in July.

Ramit Sethi: [00:29:55] Okay.

Sarah: [00:29:56] And so a big cost was post-care.

Ramit Sethi: [00:30:02] Okay. How much was that?

Sarah: [00:30:04] I was spending, I think, almost $1,000 a month.

Ramit Sethi: [00:30:10] For six months?

Sarah: [00:30:11] For five.

Ramit Sethi: [00:30:13] Wow. Okay. And are you doing all right?

Sarah: [00:30:13] Mm-hmm.

Ramit Sethi: [00:30:17] Okay. Good to hear. Okay. Anything else?

Sarah: [00:30:21] Christmas.

Ramit Sethi: [00:30:22] How much?

Sarah: [00:30:24] I don’t know.

Ramit Sethi: [00:30:27] Like $100, $10,000. What are we talking about?

Sarah: [00:30:31] Well, $1,000.

Ramit Sethi: [00:30:34] All right. Anything else? Clothes, you mentioned, Sarah?

Sarah: [00:30:38] Clothes. This is actually the first time we’ve had to buy a large amount of clothes because our girls were in uniforms before and the school had like a hand-me-down thing. So in August, we spent, I don’t know, maybe $2,000 on clothes for all three of the girls.

Ramit Sethi: [00:30:54] Okay.

Sarah: [00:30:57] I’m trying to think, what other. I’ve had some trips with my business.

Ramit Sethi: [00:31:02] Like what?

Sarah: [00:31:02] The one in September was about $2,000. Cuba, was my flight, which I spent quite a bit on my flight.

Ramit Sethi: [00:31:14] How much?

Sarah: [00:31:15] $3,500.

Ramit Sethi: [00:31:16] Okay. What else?

Sarah: [00:31:22] Then what else. August, September, October, just little–

Kevin: [00:31:28] Coaching.

Sarah: [00:31:30] Oh, yeah. Business coaching.

Ramit Sethi: [00:31:32] How much was that?

Sarah: [00:31:33] It was $1,700 a month for six months and then now it’s $900 a month for six months.

Ramit Sethi: [00:31:43] Let’s just say a thousand a month, just for easy math. So that would be $6,000. Would that be fair to say?

Sarah: [00:31:48] Yeah.

Ramit Sethi: [00:31:49] All right. All right. So if we add up all those numbers, what do you think we get?

Sarah: [00:31:57] A lot.

Ramit Sethi: [00:31:58] Any idea? Just take a guess.

Sarah: [00:32:02] 30, 35.

Ramit Sethi: [00:32:06] Okay. 30. Which one is it?

Sarah: [00:32:08] 30. 35, [inaudible] with larger numbers.

Ramit Sethi: [00:32:14] Let me finish calculating these. $72,500 in the last six months. What do you think about that number?

Sarah: [00:32:35] Wow, that’s unexpected.


Ramit Sethi: [00:32:43] All right. I need to lay down the fucking law here for a few different items. Can you see that affirmations board behind Sarah? They just spent $72,000 in six months putting them back into credit card debt. But she has these Etsy affirmations behind her, these posters. Here’s what they say, this year will be different. I have genius inside of me. I have something the world needs. 

It’s like affirmations are nice, but sometimes you need to look at the fucking numbers. Notice the details. Remember how I always say, the best predictor of your future behavior is your current behavior. And people get mad at me, “Over me. That’s not true. I can change. Everybody can change.” Well, maybe, but it’s hard. 

You’ll also notice that Sarah is using the innocent DOE technique to evade actually acknowledging what they’re spending on. You don’t know what the innocent DOE technique is. Let me explain. Imagine a wide-eyed Bambi. “Me? Little old me? I have no idea what’s going on with our money. I don’t know.” That’s the innocent DOE technique. And I can tell you because if it was five years of spending, we could figure it out. It would take a while. 

They ran up 50k of credit card debt in six months. It took us three minutes to figure this out. Some of you have been procrastinating on some money questions for 13 years that would take us 15 seconds to find the answer to. You could join my money coaching program. Let’s solve it right now. You’ll also notice another clue. She has a verbal tic of giving ranges, $3,000 to $4,000. That means $4,000 more likely seven.

You know why? Because she doesn’t want to count phantom costs in. A cruise isn’t just what you paid for the room. It’s the drinks, the extra food, the excursions, the flight, the hotels, all of it. Add 50% to the sticker price to be conservative. That’s exactly what I add whenever I stay at a hotel or whenever I look at buying a house. So, there are a lot of clues in that short exercise that really reveal a lifetime of attitudes and behaviors that Sarah has bought into. 


You mentioned that there are two issues that you have with money. One is impulsive spending, and two is the stories you tell yourself.

Sarah: [00:35:03] Yeah.

Ramit Sethi: [00:35:04] What are the stories you tell yourself about this spending?

Sarah: [00:35:08] That it’s all my fault.

Ramit Sethi: [00:35:11] Yeah. What is that story?

Sarah: [00:35:14] “Oh, if I hadn’t done this– I put a lot of, I guess guilt and stuff on myself for seeing the credit card bills and saying, “Oh, we shouldn’t have done X or we shouldn’t go on trips or we shouldn’t do these things.”

And then I think about the way I grew up and I was like, “Oh, screw that because I want my kids to have a different life. We didn’t do trips. We didn’t do fun things. I don’t want my kids to feel like we can’t go buy clothes because we don’t have any money.” So I just ignore it. And because I just want something different.

Ramit Sethi: [00:36:30] Something different about what?

Sarah: [00:36:32] Than what I had growing up.

Ramit Sethi: [00:36:34] How long ago was it that you felt that way when you talk about growing up? What year was this?

Sarah: [00:36:40] Really between like, what I can remember, it was pretty much my whole life.

Ramit Sethi: [00:36:57] And that feeling is what? That we don’t have enough. I can’t have X. What are the feelings that you’re trying to escape from?

Sarah: [00:37:12] I think they are embarrassment, confusion, frustration, and sadness. There’s a lot of sadness about money.

Ramit Sethi: [00:37:44] And have you also spoken to a therapist?

Sarah: [00:37:48] So I’m actually starting therapy back again.

Ramit Sethi: [00:37:54] Good. How do you believe that you stack up to other people in terms of your income and your expenses?

Sarah: [00:38:06] I think income-wise, we’re pretty comparative.

Ramit Sethi: [00:38:13] Yeah. What would you call yourselves?

Kevin: [00:38:19] I don’t understand the question.

Ramit Sethi: [00:38:20] Are you wealthy?

Sarah: [00:38:21] Middle class.

Ramit Sethi: [00:38:23] You’re middle class?

Sarah: [00:38:25] In terms of income.

Kevin: [00:38:26] No, we’re upper-middle class in terms of revenue. Just strictly revenue, not the way we manage.

Sarah: [00:38:38] There’s another piece to this we haven’t talked about is that Kevin has an inheritance coming in this year.

Ramit Sethi: [00:38:47] What? How much?

Sarah: [00:38:50] It depends on the exchange rate, but–

Kevin: [00:38:53] Yeah, it will depend on the exchange rate.

Ramit Sethi: [00:38:55] But not that much.

Sarah: [00:38:57] $300,000 to $400,000.

Kevin: [00:39:02] Yeah, we’ll keep it like that.

Ramit Sethi: [00:39:04] All right, good. Something like that. So it’s a sizable amount.

Sarah: [00:39:07] Mm-hmm.

Ramit Sethi: [00:39:08] Okay. That’s interesting. I did not know that. And what’s the plan with that money?

Kevin: [00:39:13] Well, that’s what we want to talk to you about it. No, we’re not asking you to solve our life problems in a two-hour span of conversation or however long we’ll discuss, but at least it’s addressing these behaviors that we have so that we don’t swallow– to your point, using the word resolve velocity with beautiful is we don’t continue this velocity which is going to eat away what would come in?

Ramit Sethi: [00:39:45] Yeah, it’s a great concern because you actually know exactly what will happen right now because just six months ago you had the exact same amount and it’s essentially gone.

Sarah: [00:39:45] Mm-hmm.

Ramit Sethi: [00:39:57] So we don’t want to make that mistake again. All right. Let’s go through the full conscious spending plan and evaluate it. Who put this conscious spending plan together?

Sarah: [00:40:06] We did it together.

Ramit Sethi: [00:40:07] Good. How was that process?

Sarah: [00:40:12] I think because we both sat down and like, we’re looking at the numbers, it was overwhelming. But it was a simple conversation.

Ramit Sethi: [00:40:27] That’s good.


Let me recap their numbers here for you because something is missing. Their total net worth is $150,000. They have 100K in assets. They’ve got two cars, a Ford Expedition and a Tesla. They’ve got $137,000 in investments, $93,000 in savings, $179,000 of debt, 30K of which is student loans, over 50K of which is credit cards, and about 100K left on the car loans.


All right. Let’s talk about the income. I found this one very interesting. All right. So, Sarah, what’s your gross annual income?

Sarah: [00:41:10] Annual income? Last year I will bring in just under $100,000.

Ramit Sethi: [00:41:19] Just under means what? Just tell me a number.

Sarah: [00:41:21] All right. I don’t think that’s right. I’ll say 95.

Ramit Sethi: [00:41:30] $95,000. Okay. And Kevin, what about you?

Kevin: [00:41:35] This past year, 214.

Ramit Sethi: [00:41:40] What?

Sarah: [00:41:41] Well, I’m contracted. I’m a contractor, too. So it’s like where my income is coming in. So that monthly number is current, three months ago, it was at, I don’t know, $11,000.

Ramit Sethi: [00:42:04] What?

Sarah: [00:42:06] For large contracts.

Ramit Sethi: [00:42:08] Okay. But collectively, the two of you are making about $309,000 a year. Is fair to say.

Sarah: [00:42:17] Yeah. This last year.

Ramit Sethi: [00:42:18] And this year, what will you make?

Sarah: [00:42:22] I don’t really know.

Ramit Sethi: [00:42:24] Ballpark.

Sarah: [00:42:26] If I had all my goals?

Ramit Sethi: [00:42:27] No, because you’re probably not going to. Most people don’t.

Sarah: [00:42:36] Probably the same. I’d like for it to be higher, but probably the same.

Ramit Sethi: [00:42:43] That would be $95,000?

Sarah: [00:42:45] Mm-hmm.


Ramit Sethi: [00:42:46] There must be something else going on here. There’s just so much squirming in Sarah’s answers. I ask how much she spent on the cruise, she gives me a range. I ask how much Kevin’s going to inherit, she gives me a range. By the way, $300,000 to $400,000 is her range. I ask how much she’s going to make this year, she gives me a hypothetical. 

This is a great example of what I mean when I say, to live a rich life, you have to be honest with yourself and honest with the people around you. You have to learn how to pick numbers that make planning easy. You can get them wrong. That’s okay. You can correct them later, but you have to have a logic for picking some numbers instead of letting them simply hang out in the air and never making a decision at all. 

So last year you made 309, this year you’re both going to make 309. Fair?

Kevin: [00:43:38] Fair.

Ramit Sethi: [00:43:39] Does it make it difficult to plan when you don’t know what the numbers are going to be?

Kevin: [00:43:43] Yes.

Sarah: [00:43:44] Yes.

Ramit Sethi: [00:43:44] Has that been an issue for the two of you?

Sarah: [00:43:46] Yes.

Kevin: [00:43:47] Yes.

Ramit Sethi: [00:43:47] All right. Do you want me to give you a little solution for that?

Sarah: [00:43:50] Yes, please.

Kevin: [00:43:51] Yes.

Ramit Sethi: [00:43:51] Okay. I hear couples, they agonize over this shit, and it drives me insane listening to you. Right now, just listening to the two of you, my fists are curling up. I go, “Look, I don’t need the exact number. I just need some fucking number that you both feel confident about.” And it’s not your fault. I’m not blaming you. It’s actually psychologically very difficult when you’re a contractor or you have different clients. I get it. 

What we want to do is we want to pick a number that we are absolutely certain that we can get. That’s the number we’re going to work off. That’s our baseline. So if you get a bonus at the end of the year, don’t include it. Just the number that you know you’re going to get. If you have 10 clients and you think three might churn, hell, give yourself a little room too. You have five clients now instead of 10. That’s your number. But it’s a number that you know for a fact you’re 95% confident you can get it, and then you work off that number.

And anything that comes on top, any annual bonus, etc., that’s icing on the cake. And we will create a separate thing on what to do with that money. All right, because otherwise, you’re just going to drive yourself insane.

Sarah: [00:45:00] Yeah, that’s okay.

Ramit Sethi: [00:45:01] And honestly, it’s like we’ve just got to pick a number that we know we can get, and let’s work with that. The rest of its icing. So what’s the number? Right now, you told me $309,000 this year. That seems a bit optimistic.

Sarah: [00:45:13] I think 95 is right for mine.

Speaker3: [00:45:15] Okay, Kevin.

Kevin: [00:45:18] I’ll be conservative and say 190.

Ramit Sethi: [00:45:22] 190. Okay. I just want to point something out. This is really funny. So how long has this been driving you crazy? This like, we’re not sure about how much we’re going to make.

Sarah: [00:45:34] Probably the last three years for me.

Kevin: [00:45:36] A year.

Ramit Sethi: [00:45:37] What the fuck? Do you know that the difference between the two numbers we picked is literally $24,000? That’s nothing in the grand scheme of how much you make. $24,000, that number, that’s the difference between 309 to 285. That is the number that has been stopping you from just saying this is our certain number. 


The lesson here is to stop letting tiny barriers get in the way of your rich life. It’s like two parents saying, “Gosh, we really should get a car seat for our baby. But first, we need to make sure we have the right baby food. And also, what if we get the wrong fabric on the baby seat? And also, we need to talk to grandpa about babysitting. But first, we really need a baby-proofed bathroom.” It’s like, just go buy the baby seat. Go get the best one, go get the fifth best one, get all of them. It does not matter.

So many people waste their lives letting these $3 questions get in the way of the actual point of money. And even if you get it wrong, so what? You can fix it next year. You can fix it tomorrow, but at least make a decision. 

One of the worst things that I hear when I speak to couples is indecisiveness, and it’s indecisive from everything like a $5 purchase or all the way up to what should we do with $5 million that’s sitting in our checking account. Building the skill and the habit of being decisive is one of the single best things that you can possibly do for your rich life.


Ramit Sethi: [00:47:04] Okay, so can I just say you two make a lot of money? You guys make $300,000 a year. So what’s really going on here? It’s not an income problem. You ever see those people on TikTok? They’re always wearing these horrible ties. I’m like, first of all, get a new fucking tie. Second of all, who taught you how to tie that tie? And I’m not even the best tie tire, but I’m like, “That looks like shit.”

And these guys are always saying the same things. “There’s a hedonic treadmill in the United States, and if you make more money, people only spend more money.” I go, “Shut the fuck up.” But the problem is you’re actually doing that. You’re the example they’re talking about on TikTok. You made more money and then you started spending more money.

Sarah: [00:47:45] Yeah.

Ramit Sethi: [00:47:46] You’re violating my own rules. Okay, so can we fix this, please? Because it makes me look bad. If somebody goes out in the public, they go Ramit Sethi’s readers are on the hedonic treadmill, I go, “Aha!” So tell me this. What do you need to do?

Sarah: [00:48:05] Pay off the debt.

Ramit Sethi: [00:48:09] Okay.

Sarah: [00:48:11] But–

Kevin: [00:48:12] Yeah. The double digits credit cards is going to kill us. So there’s no way around it, so the first thing is to eliminate the credit card debt.

Ramit Sethi: [00:48:31] Okay.

Kevin: [00:48:33] What’s the savings?

Sarah: [00:48:35] Yeah.

Ramit Sethi: [00:48:37] Okay, that’s a possibility. Let’s just stay at the high level. So one thing you both know that you want to do is pay off the credit card debt. Fantastic. Let’s not even get into the how. But yes, I totally agree. That’s a really important thing to do. Are there any other things that are really important for the two of you to start doing?

Sarah: [00:48:57] Saving for the girls’ school next year.

Ramit Sethi: [00:49:00] What? Where did that come from? We haven’t talked about that at all.

Sarah: [00:49:05] So they’re in private school, and so we have to switch their school.

Ramit Sethi: [00:49:08] How much?

Sarah: [00:49:09] For all three, without financial aid, it’s about $55,000 a year.

Ramit Sethi: [00:49:14] What the fuck? How are these secret expenses coming up right now? $55,000. What else?

Sarah: [00:49:25] This next year, I think that’s it. The school–

Ramit Sethi: [00:49:29] Don’t you have to make a donation to these private schools too? No. Okay. She’s shrugging. All right. Okay, where does that money come from, by the way?

Sarah: [00:49:40] So this was our first year, and we used some of the money when we sold the house, we used it to pay it for the first year.

Ramit Sethi: [00:49:49] And where’s it going to come from next year and the year after and after that?

Sarah: [00:49:53] Good question. We’re asking ourselves that same question.


Ramit Sethi: [00:50:00] This is absolutely blowing my mind right now. They signed up for a $ 55,000-a-year private school without being able to pay for it. I don’t even buy lunch without knowing how to pay for it. They committed to 10-plus years of $55,000 a year, and they can only afford one year of it. There’s this idea floating around the financial world that people who make a lot of money always spend it. Like there are so many Americans making multiple six figures and just living paycheck to paycheck. 

I don’t really love that concept because I know a lot of people making 100K, 250K, 500K who are extremely disciplined about money. But Kevin and Sarah are doing exactly what all those people talk about. They have a high income and they are spending every last cent and more. And worst of all, their attitudes towards money will likely keep them broke for the rest of their lives.

Kevin: [00:50:52] The private school is difficult because this is something that both Sarah and I agreed on very early on. The school system that we’re in currently isn’t bad, but we have recognized that our children do better in smaller settings than in larger settings. So before this prior year, we were able to manage it through our budget and it was manageable. We only had two children go in there. It was doable. This was an increase, significant increase plus an additional child, and hence the big jump.

Ramit Sethi: [00:51:51] So how do you think you can handle it?

Sarah: [00:52:02] Makes more money.

Kevin: [00:52:03] Yeah, make more money is the only answer.

Ramit Sethi: [00:52:07] What do you think of that answer?

Sarah: [00:52:16] I wanted it to not be the only answer, but it’s the only one that I can come up with.

Ramit Sethi: [00:52:27] Okay. Do you believe yourself when you say that?

Sarah: [00:52:36] Yes, but I think it’s because we’ve been so in the weeds like you were saying, that we can’t be thoughtful and creative about options if it really was that important to us and making changes, making significant changes if that is what is important to us.  But now we’re switching our mindsets about some of this stuff.

Ramit Sethi: [00:53:10] I don’t like this line of thinking for several reasons. First of all, how much do you need to make to pay for the kid’s school?

Sarah: [00:53:23] $55,000.

Ramit Sethi: [00:53:24] No. What about taxes?

Sarah: [00:53:27] Oh, yeah.

Ramit Sethi: [00:53:28] Oh, yeah. So 75, 80, 85,000, whatever the number is. You’re already making a lot, so you’re at a high marginal tax rate. And we don’t need to calculate that right now, but it’s more than $55,000, a considerable amount more than $55,000. That’s number one. Lack of thought into this. 

Number two, I don’t like buying something and then saying we’ll figure out how to pay for it later. That is a terrible decision to make. Haven’t we all heard people say like, don’t go into debt for a wedding? We’ve all heard people say that. Did you guys go into debt for a wedding?

Sarah: [00:54:14] Not really. No.

Ramit Sethi: [00:54:16] Okay. Isn’t this basically the same thing? We’re going to commit to $55,000 a year, but we don’t actually know how we’re going to pay for it. And it’s not just for one year, is it?

Sarah: [00:54:29] No.

Ramit Sethi: [00:54:30] How many more years is it for?

Sarah: [00:54:32] Well, 12 at least.

Ramit Sethi: [00:54:34] Yeah. It’s over half a million dollars. If it is truly critical to you, then maybe we can find a way to make it work. It’s possible. If you tell me that, we can look through your numbers, and maybe we can find a way to make it work. But I can tell you that it would involve you radically changing the way you live. Have you both entertained the idea of potentially not doing this private school?

Sarah: [00:55:02] The only other option that I would entertain is homeschooling.

Ramit Sethi: [00:55:09] That’s it?

Sarah: [00:55:10] Yep. I’m not putting my kids in public school. That’s a conversation that we really have to get into and make the decision and make it together. But I think we need to live in both scenarios, like in the scenario of what that feels like, of cutting back the things. I think we need to do that anyways, regardless of the school piece. But if we take that out, what does that look like? And if we keep that in, how does that feel? 

And I think we need to live in that and have that because we’ve never really done that. We’ve never really had the conversations and sat down together and said, “Okay. Are we going out to eat this week?” We haven’t ever really felt that pain, and I think we need to feel it, to decide if it’s worth it.


Ramit Sethi: [00:56:22] Let me summarize. Kevin and Sarah make over $300,000 per year. They sold their house. They paid off $130,000 of credit card debt, yet six months later, they were back in $50,000 of credit card debt. They recently committed to 12 years of a private school at $55,000 a year but they have no idea how they’re going to pay for it. 

I truly hope you’re getting a chance to watch their facial expressions on the YouTube version of this podcast because the rest of our conversation is surprising and eye-opening. And you can hear the rest of it next week on the I Will Teach You to Be Rich Podcast. I will see you there.