Episode 83. “I grew up on food stamps. At 24, I’m about to get paid $215,000 per year”
Megan and Nyles are in their twenties and on a great trajectory with their money. She graduates from law school this year—sending her income from $0 to $215,000 overnight. But they’re both haunted by childhoods spent in poverty, leading to toxic scripts and trust issues.
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Megan: [00:00:00] I feel like he’s a little stingy. He’s not stingy towards me if I ask, but his attitude generally makes me feel that I shouldn’t ask. I don’t feel like the money that I have for myself, even the money that I earn, I don’t feel like it’s mine. I feel like it’s Nyles’ to give to me. If Nyles just agrees to something that I propose, I don’t feel like he wanted it. I feel like he’s just giving in to me, which makes me feel like even more of an asker.
Ramit Sethi: [00:00:28] And after talking now, what do you recognize about that pattern? What are you doing when you go down that path?
Megan: [00:00:35] I’m avoiding the money, getting rid of it as fast as I can.
Ramit Sethi: [00:00:39] There you go.
Megan: [00:00:40] Not learning any valuable skills. I want to learn how to advocate for myself better and not resent Nyles, who I feel like is just losing with any choice that he makes.
Ramit Sethi: [00:00:55] Megan, you need to be able to ask for what you want when it comes to your money. He’s not going to read your mind. How does that strike you?
Megan: [00:01:05] That strikes me as true and uncomfortable to think about.
Ramit Sethi: [00:01:12] Megan is 24, Nyles is 28, and their lives are about to completely change. Until now, Megan has been a student earning almost no money. Anything she earn, she gave to Nyles, who would save it for her, in part because she admits she used to be irresponsible with money. And also in part because she doesn’t even trust her own financial judgment. But now she’s about to start earning more. A lot more. Even more than Nyles makes. She’s finding it hard to even believe it and it’s starting to cause issues in their relationship.
Now, this is an answer Nyles provided during their application process. I want to read it to you really quickly. He wrote, “The women in Megan’s family are either not financially healthy or do not work, and Megan is worried about becoming powerless despite earning a high income.”
I’d like to encourage you to listen to this and also to watch it on YouTube where you can see their body language and facial expressions. Just go to YouTube, search for Ramit Sethi and follow, my channel there to get all podcasts in full episodes on video. This is I Will Teach You to Be Rich, and I’m Ramit Sethi.
Nyles: [00:02:24] Early on in our relationship and early on in college, Megan had financial aid and I had financial aid as well, and I was working a minimum-wage job. So this was before I was supporting us. But Megan accrued a considerable amount of credit card debt and–
Ramit Sethi: [00:02:45] Considerable means what?
Nyles: [00:02:46] Well, it was like $10,000 or something. Megan, [Inaudible] the amount.
Megan: [00:02:49] Yeah. I think it was like $8,000.
Nyles: [00:02:50] Yeah. So with no way to pay it off. So it constantly was accruing in collections and all this stuff. And so I didn’t really trust her with her money. And as part of that, the rent, to me, it wasn’t going to be like one of those things like, “Oh, I’m going to pay it back.” That you’re going to– I’m saving this money so you can get it back in the future. But it did feel like it was more secure in my hands.
Typically, that wouldn’t go directly to the principal like I was mentioning, it would go into my savings. So if she needed the money, I always felt like she could take it out, though I don’t think we had a conversation about that at the time. And that was, like I said, I felt more secretive about the money, I suppose. This is earlier on in our relationship because I don’t feel like I trusted her.
Ramit Sethi: [00:03:39] Hold on. Let me make sure I understand. So Megan was an undergrad, taking out loans, ran up $10,000 or so of credit card debt, couldn’t pay it off. It started growing, going to collections, things like that. You two had met at that time, you were together. Nyles, you said, “Okay. I don’t really trust you with your money, therefore–” what was your conclusion?
Nyles: [00:04:09] Give it to me and I’ll keep it in savings.
Megan: [00:04:11] Oh, no. It was like give it to me under the pretext as rent. And like Nyles said, we didn’t have a conversation about that. And I think the first time that I heard that, that was why he decided to make me pay rent so that he could hold the money for me and it would be safer than if I had access to it was this past week.
Ramit Sethi: [00:04:31] Whoa. Why? Why was it getting ready for this call?
Megan: [00:04:35] Yeah. Yeah, it was.
Ramit Sethi: [00:04:36] Secrets coming out of the vault. And what was that like when you heard that?
Megan: [00:04:40] I was like, that’s fair, because I definitely have come a long way with my money and my approach. But I was still like, that makes so much sense because of the dynamic that we have now, which is like, I don’t feel like the money that I have for myself, even the money that I earn, I don’t feel like it’s mine.
Ramit Sethi: [00:04:59] Whose is it?
Megan: [00:05:00] I feel like it’s Nyles’ to give to me. And it creates–
Ramit Sethi: [00:05:03] So you make the money, he holds on to it, and you need to ask for it back.
Megan: [00:05:10] Exactly. And I hate asking for it. And so I end up–
Ramit Sethi: [00:05:12] What does it make you feel like?
Megan: [00:05:14] It makes me feel powerless. And it goes back to– I grew up with a single mom who was– we were really poor. She still makes $10 an hour. And she did throughout my childhood. And we had to ask for a lot of help. We had food stamps. We had the Salvation Army Christmas gifts. I had discounts at all of the after school activities. Everything was subsidized somehow.
And I feel like– it made me feel lesser than my peers for sure, because I didn’t see them having to ask for the help. It makes me feel like all of the work that I’ve put in to graduate and get this high-earning job, which I felt like was so honorable, is for nothing because I don’t think I’ll feel like the money is mine.
Ramit Sethi: [00:06:02] So if we stop talking right now and you both went back to the way you were doing it, you’re about to start making a lot more money, you would presumably hand that check over to him, and then would you have to ask for it back if you needed to spend money?
Megan: [00:06:20] The other day we were talking about this and I said, even if I get that money, I don’t know that I’ll be able to spend it truly guilt-free because I feel like I back owe him for the years, the six plus years that he’s been supporting us. So if anything comes up that we would pay for together, like buying a new couch, I feel like I would probably use my money for that. But I don’t know that Nyles would consider doing that too.
Ramit Sethi: [00:06:44] Have you asked him if he thinks you back owe him?
Megan: [00:06:49] No.
Ramit Sethi: [00:06:50] Okay. Want to ask him?
Megan: [00:06:53] Do you think I back owe you?
Nyles: [00:06:57] No. Definitely not.
Ramit Sethi: [00:07:00] Do you believe him?
Megan: [00:07:02] I don’t believe him because this all stems from me– the rent issue. I said, “I can’t pay you rent anymore because I don’t have enough money and I’m just going to have to borrow money from you after I pay you rent for a few months,” a few years ago when I was living off financial aid. And I feel like I still feel that his change hasn’t been genuine because I had to bring it up and I felt like he was oblivious to the whole issue the whole time. I think there’s some skepticism. Yeah. I want to know that he was thinking about it too.
Nyles: [00:07:45] It’s really challenging because then it feels like we can’t have a conversation about really anything without there being skepticism around, “Hey, I feel this way. How do you feel about it? What do we come into agreement with based on our two perspectives?” So it can definitely be challenging because it doesn’t really feel like there’s a path forward if we can’t have some trust around that.
Ramit Sethi: [00:08:06] You’re engaged, right? You live together?
Nyles: [00:08:09] Mm-hmm.
Megan: [00:08:09] Yeah.
Ramit Sethi: [00:08:10] There’s got to be some trust. But if you can’t trust what each other is saying, especially if you, Megan, can’t trust what he’s saying, that’s going to make it challenging. So what do you think that’s about, that lack of trust?
Megan: [00:08:24] Maybe it’s my pride that I don’t want to accept the change. That I just want to be upset about it enough to mention it. And then I’m too prideful.
Ramit Sethi: [00:08:33] What would that get you?
Megan: [00:08:35] Nothing.
Ramit Sethi: [00:08:36] No, it would get som–
Megan: [00:08:38] Maybe the upper hand.
Ramit Sethi: [00:08:39] Maybe. Do you find yourself ruminating on money conversations in your relationship?
Megan: [00:08:48] I definitely do. When we’re having them. I’ll dredge up some old stuff that I’m sure Nyles doesn’t want to listen to anymore and be like,
“Remember when you made me pay you rent and I had no money?” And all of our other history that’s since changed.
Ramit Sethi: [00:09:03] Yeah. Okay, So he “made you pay rent.” Made you means what? Did he say, “Pay me or you have to get evicted?”
Megan: [00:09:12] I don’t know if you would have evicted me, but you certainly asked me to pay you.
Nyles: [00:09:18] Yeah. Because went from us renting two separate apartments in the same town to us living together and me paying for the same apartment the same price. And so I felt like, “Hey, you have $600 extra. You might as well send it to me so I can save it for you or for us in the future.”
Megan: [00:09:37] I didn’t have extra dollars, that was my only dollars. I literally have no income right now. I have negative income.
Ramit Sethi: [00:09:44] Okay. What’s the situation right now?
Megan: [00:09:47] Right now I’m in school and I’m graduating, and my job doesn’t start until October, but I’ve accepted a job. And Nyles pays for all of our stuff. And it’s been like this for four years. I’ve been in school for seven years.
Ramit Sethi: [00:10:01] This is law school?
Megan: [00:10:02] Mm-hmm.
Ramit Sethi: [00:10:03] Oh, congratulations. Just out of curiosity, if you had not moved in with him, Megan, how much would you be paying in rent?
Megan: [00:10:12] Yeah, I would be paying at least that much. And I would have certainly had to take out loans. More or less.
Ramit Sethi: [00:10:17] Yeah. Nyles, in a way, you were suggesting that out of the goodness of your heart, you really wanted to help Megan, it seems like. Am I reading that correctly?
Nyles: [00:10:27] Yeah. I mean, definitely that was my goal. I think at the time I didn’t feel like she was ready to take the feedback about her spending habits. I think so. Yeah, I definitely should have been more open about it.
Ramit Sethi: [00:10:47] How old were you at that time, Megan?
Megan: [00:10:50] I think I was 20.
Ramit Sethi: [00:10:51] I’m not sure what’s going on yet, but I am getting potential red flags. Let me start with the innocent explanation. Maybe Nyles saw that his girlfriend wasn’t great with money. He offered to have her live with him at a steeply reduced rent, and he took that rent money and put it into savings. Okay, if that’s the case, it’s pretty generous.
On the other hand, it’s not like she was a kid. 20 years old is enough to make binding decisions. Sure, maybe she wasn’t good with money. Megan even admits that. But if you start off a relationship with one person holding money for the other because they’re bad with money, it’s very easy to continue that pattern.
It’s almost a parent-child relationship, which you definitely do not want in a partnership. Now, don’t let anyone tell you that money is simply a tool. Money, like any technology, is never neutral. It has built-in bias. It influences and is influenced by society. Money represents power. It’s all of those things. Megan tells me more.
Megan: [00:11:59] I feel like Nyles has the power of money over me, even if it’s my money. Every time I get a windfall of money, like a tax return, I don’t know, I feel like I need to put it towards our wedding and down payment savings. And I just feel like Nyles doesn’t have that same consideration where his money’s already accounted for.
Ramit Sethi: [00:12:21] Have you asked him if he does?
Megan: [00:12:24] Oh, yeah. We’ve talked about what he’s going to do with his bonus coming up.
Ramit Sethi: [00:12:30] How much is the bonus?
Nyles: [00:12:32] Maybe $15,000, I think.
Ramit Sethi: [00:12:35] Okay. So what are you going to do with it?
Nyles: [00:12:38] My plan is whatever we’ve already accounted for with– we have a very tight budget. So if there’s things outside of our budget, typically when we’re close to a windfall like this, I’ll be like, “Okay, we’ll put this towards that.” And then whatever Megan needs for her surgery, $2,000, and then the rest straight into savings. Not really any specific plans for it. Probably for our down payment that we are saving for.
Ramit Sethi: [00:13:04] Okay. Megan, so there you go. He told you what he’s going to do with that $15,000 bonus. What’s your reaction?
Megan: [00:13:12] My reaction is that that came after I had the conversation of your money not being tied up in the same way mine was. And I gave the example when we had this discussion ourselves of his bonus last year. He bought an espresso machine, a camera. It was $10,000 for just fun things.
Ramit Sethi: [00:13:33] Well, wait, which was more expensive?
Megan: [00:13:36] The espresso machine.
Ramit Sethi: [00:13:37] How much?
Nyles: [00:13:39] It was $3,500.
Ramit Sethi: [00:13:41] Wow. You use it every day?
Nyles: [00:13:44] Mm-hmm. For both of us.
Ramit Sethi: [00:13:45] That’s cool. All right.
Megan: [00:13:46] Yeah. We love it.
Ramit Sethi: [00:13:47] Okay, so what’s the problem? Just so I understand. I mean, it’s his money, right? You guys are not married yet?
Megan: [00:13:52] Yeah.
Ramit Sethi: [00:13:53] So he made a bunch of money. He spent it on an espresso machine, which benefits you and some other stuff. What’s the problem?
Megan: [00:14:02] I guess the problem is now, if I need or want to buy something for myself, I don’t feel like that money is mine. It’s in his savings account now, I suppose–
Ramit Sethi: [00:14:11] Well, it’s yours, the two of you.
Megan: [00:14:15] But no. If Nyles just agrees to something that I propose, I don’t feel like he wanted it. I feel like he’s just giving in to me, which makes me feel like even more of an asker.
Ramit Sethi: [00:14:26] Wait. What’s the problem if you–
Megan: [00:14:29] I feel like he’s a little stingy. He’s not stingy towards me if I ask. But his attitude generally makes me feel that I shouldn’t ask. He’s not happy with it.
Ramit Sethi: [00:14:41] Ah. Okay. Nyles, would you agree with that?
Nyles: [00:14:45] I think historically, yes. I think historically, because of that, I guess, I’ll say lack of trust related to– because some of the dynamics that we had in the past in conversations, I felt like I had to manage her money for her in those conversations. The dynamic is obviously very different now. She’s much better at managing her money, but I think we still have some history around that.
Ramit Sethi: [00:15:10] I would say so. So you two have co-created this dynamic of, Nyles, you’re the responsible one with the money. And Megan, you’re the irresponsible one, running up the credit card bills and etc. Fair?
Nyles: [00:15:32] Yeah.
Megan: [00:15:32] And I’m the instigator. Nyles can ignore what we need or want, but I mention it.
Ramit Sethi: [00:15:39] So who calls you the instigator?
Megan: [00:15:44] Me. The problem is I feel like his money is his and my money is his. This summer, I earned the same salary that I’ll be paid when I start my job. So I made $30,000 after taxes in 10 weeks, which was great. And I sent Nyles $17,000 for our savings, without him asking. I just feel so guilty about our situation that that’s what I did.
Ramit Sethi: [00:16:17] Did you grow up Catholic?
Megan: [00:16:19] No.
Ramit Sethi: [00:16:20] Where does all this guilt come from?
Megan: [00:16:23] Maybe the fact that I was bad with money.
Ramit Sethi: [00:16:26] My dream is we would stop describing ourselves as bad with something. I’m bad with money. I’m bad with my fitness goals. I’m bad, bad, bad. We give ourselves these labels and then they often become self-fulfilling prophecies. I’m bad with money, then I overspend one month. See, I tell myself I am bad with money. No, let’s reframe it.
I haven’t yet learned the skills of money or investing, but I’m making a plan to do just that. And you have lots of options. You can DIY it, use my book and use my journal, or you can get help with my money coaching program directly from me at iwt.com/moneycoaching. But please do not settle for calling yourself bad at something. You haven’t built the skills yet. But if it’s a priority for you, you can.
I want to make sure I understand where you grew up with money, because some of the numbers I saw, obviously you’re very good at what you do. You’re about to make a lot of money and you’re about to enter a level of socioeconomic status that you have not been at. Fair?
Megan: [00:17:36] Definitely.
Ramit Sethi: [00:17:36] Okay. So I want to equip you to know how to think about money at that level, how to talk about money at that level, and how to behave with money at that level. All right. Megan, you mentioned you grew up poor. Salvation Army, food stamps, single mom. What do you remember about growing up as it relates to money?
Megan: [00:18:02] A lot of stress. Living essentially day to day or week to week. My mom making some of the poor choices that I made when I accrued the credit card debt.
Ramit Sethi: [00:18:13] Like what?
Megan: [00:18:16] I think she was going to file for bankruptcy when I was a young child, less than 10. And I remember she ran up her credit cards before that and was like, “Oh, I’m going to file for bankruptcy.”
Ramit Sethi: [00:18:32] Might as well just charge it up.
Megan: [00:18:34] Bad choices. Yeah.
Ramit Sethi: [00:18:35] Okay. And what else do you remember about money? When she talked about it, what do you remember her saying?
Megan: [00:18:42] A lot of scared emotions, I would say. Uncertainty. Not knowing if she could pay the mortgage. And I remember her asking for family members a lot. And she even tried to make me ask. She would try to make me ask my other family members to give us money. And I didn’t like that. No.
Ramit Sethi: [00:19:05] Why not?
Megan: [00:19:06] I was embarrassed and ashamed, probably.
Ramit Sethi: [00:19:09] How old were you?
Megan: [00:19:11] I was probably around 10.
Ramit Sethi: [00:19:14] Wow. That’s young. Young to be asking a little girl to do that. Amazingly mature of you to realize there’s something not right about this. Okay. What happened as you became an adolescent, as you went to high school, what happened?
Megan: [00:19:35] I think I started to take on my mom’s problems. I feel like my mom is– she’s great and she was a great single mom, but she’s not a sophisticated consumer of really anything. She didn’t finish high school, and I feel like I’m just at a very different level than her. And I’ve accomplished a lot of the things that I felt like she didn’t get the chance to do because of how she grew up.
So I feel like I own her problems and a lot of our conversations now, I’m trying to figure out like how she could get this work that her house needs done and how she can afford it and whether she should buy this car with this payment. And I feel like I’m in charge of all of that stress for her.
Ramit Sethi: [00:20:23] So on your conversations with her, how often would you say you’re trying to help her or, sorry, find solutions for her?
Megan: [00:20:33] A lot. Even if she doesn’t explicitly ask me, when she tells me anything about money, it’s always negative and it always makes me feel like she just put the burden on me.
Ramit Sethi: [00:20:46] It is interesting that she’s taken on the parent role with her mom, but in her financial relationship with Nyles, by saying that she’s bad with money and letting him manage her money, Megan has willingly taken on the role of a child.
How did you get into college?
Megan: [00:21:04] Myself. I applied. Yeah.
Ramit Sethi: [00:21:06] Did your mom support you?
Megan: [00:21:09] She was indifferent. I feel like she was proud that I did that but she didn’t really know what it meant. I found a lease for myself, and I figured out how much I could pay with my financial aid, and I moved myself. I just said, “Next Friday I’m moving.” And I left with all my stuff.
Ramit Sethi: [00:21:27] And this was like age 17, 18?
Megan: [00:21:30] Yeah.
Ramit Sethi: [00:21:30] Wow. Have you taken a second to reflect on that?
Megan: [00:21:38] No.
Ramit Sethi: [00:21:38] I mean, as you said it out loud, how does it strike you? A 17-year-old, 18-year-old packing themselves and deciding how much they can afford? How does that strike you?
Megan: [00:21:50] I feel like if it was anyone else, I would be like, “Wow, what an incredible achievement.” I guess it took some strength. But since it’s me, I don’t think about it like that.
Ramit Sethi: [00:22:03] How do you think about it?
Megan: [00:22:06] I guess I still feel ashamed that I had to do that.
Ramit Sethi: [00:22:10] Ashamed because of the family that you came from?
Megan: [00:22:13] Yeah.
Ramit Sethi: [00:22:15] Okay. How do you feel about money, personally?
Megan: [00:22:20] I’m scared. Not good. I feel good about it, hypothetically.
Ramit Sethi: [00:22:25] Why is that?
Megan: [00:22:25] I can look at houses for rent in a place that we’re moving and look at our conscious spending plan and say, “Yeah, we could afford that.” And then whenever it gets down to it, I’m like, “We should live outside of the city and pay a fourth of that price.” Because it’s scary to think about having to owe that much.
Ramit Sethi: [00:22:45] So you went on to college, you started– what’d you charge the credit card for? First of all, was it a Wells Fargo card or a Bank of America card?
Megan: [00:22:56] It was a lot of store cards.
Ramit Sethi: [00:22:58] Bach, Old Navy or Gap?
Megan: [00:23:00] No, neither. Well, there are multiple. One of them was furniture.
Ramit Sethi: [00:23:04] Yeah.
Ramit Sethi: [00:23:05] What?
Nyles: [00:23:05] That’s one I’m thinking of.
Ramit Sethi: [00:23:06] Like what? Just tell me that one.
Megan: [00:23:08] It was West Elm.
Ramit Sethi: [00:23:10] Jesus Christ.
Megan: [00:23:11] Yeah, I certainly had–
Ramit Sethi: [00:23:12] 10% off your first purchase. So cool. I just saved $12. Okay. What else?
Megan: [00:23:20] It should have been Walmart, not West Elm. My taste was a little higher than what I could afford.
Ramit Sethi: [00:23:26] Is that true? So in other words, you were shopping at West Elm when really you could not afford it.
Megan: [00:23:34] Yeah, when I couldn’t afford Walmart, for sure.
Ramit Sethi: [00:23:37] Oh, wow. Okay. All right. Okay. What else?
Megan: [00:23:40] Nordstrom.
Ramit Sethi: [00:23:41] Wow. Fine tastes.
Megan: [00:23:43] I know.
Ramit Sethi: [00:23:44] Fine taste for an 18-year-old with no money. Where’d you learn this stuff, by the way? West Elm, Nordstrom. I bet you did not grow up going to those stores.
Megan: [00:23:53] Well, I just told you that before my mom filed for bankruptcy, she decided to charge up the cards, and I think she had taste that was a little better than maybe she should have.
Ramit Sethi: [00:24:04] Champagne tastes on a beer budget, basically.
Megan: [00:24:07] Exactly. Yeah. And I think I needed to fit in with the people around me, or at least feel like I could and that buying stuff from places, even though I couldn’t afford it, gave me some worth that I think I was missing.
Ramit Sethi: [00:24:21] Did you understand how credit cards worked?
Megan: [00:24:23] No. And looking back, I’m shocked that I got one because I had no income.
Ramit Sethi: [00:24:28] Yeah. So you would charge it and then you’d get these things in the mail and it would say some number, the minimum. How would you even pay that you weren’t making that much from your loans?
Megan: [00:24:40] Yeah, I would pay the minimums for a while and then I wouldn’t pay it all from my financial–
Ramit Sethi: [00:24:47] Heads collections.
Megan: [00:24:48] Right.
Ramit Sethi: [00:24:49] Okay, Got it. Okay, so you ended up charging about $10,000. It went to collections. What’s the status of those now?
Megan: [00:24:57] They’re settled. Paid
Ramit Sethi: [00:24:58] They’re settled. Wow.
Megan: [00:24:59] By the way. Yeah.
Ramit Sethi: [00:25:00] Okay. So, Megan, you’re like a living example of the person who basically gets hooked on credit cards.
Megan: [00:25:07] Yeah, but I’m not anymore.
Ramit Sethi: [00:25:09] All right, fine. When did you start to realize that the way you handled money was not working?
Megan: [00:25:23] Probably when I had to settle the credit cards. So I think I went from an approach that was careless, and now I think I’m overly careful and extremely shameful about buying anything. I think it just shows– my mom felt the same way that I did, which is scared about her abilities. And our whole family, they’re in the same situation where there’s a lot of people asking for money. You might need to send it to somebody. So if you don’t have any, you could be the asker and not the payer.
Ramit Sethi: [00:26:00] Right. And is there a sense in your family that it’s totally normal at some point you’re going to run out of money and you’re going to need to ask other family members?
Megan: [00:26:11] For sure. Yeah.
Ramit Sethi: [00:26:13] Yeah. So we give when we can because one day we’re probably going to be the ones asking.
Megan: [00:26:19] Yeah. And I feel like it disincentivizes you from being the successful person who keeps any money because you’re just going to get asked.
Ramit Sethi: [00:26:26] Yeah. Well. Are you the most successful person in your family?
Megan: [00:26:32] I think I’m going to be the most high earning person.
Ramit Sethi: [00:26:34] Okay. And does everybody know that?
Megan: [00:26:39] I don’t exactly share how much I’ll be making.
Ramit Sethi: [00:26:41] Well, do they say, “Oh, Megan’s a lawyer?”
Megan: [00:26:44] Yeah. They’re very proud.
Ramit Sethi: [00:26:46] Yeah. That’s cool. And is the implication positive for you, or is it like, Megan’s a lawyer, she thinks she’s better than us. Which one is it?
Megan: [00:26:54] I feel like it separates me more than I would like, so the latter.
Ramit Sethi: [00:27:06] A lot of patterns repeating. I caught something you mentioned about your mom too the way she grew up. Do you think she grew up poor as well?
Megan: [00:27:14] I know she did.
Ramit Sethi: [00:27:15] Yeah. So her lessons from her family were probably quite similar to the ones she taught you.
Megan: [00:27:23] For sure. My grandma worked in a gas station and lived in a trailer and they’re all from the Deep South.
Ramit Sethi: [00:27:30] Really?
Megan: [00:27:32] This is just a common experience. Yeah. I feel like there’s a lot of poverty where we live. And she met my grandpa because he used to come into the gas station and buy lottery tickets and she told him that, “Oh, no, my trailer is flooding,” and she lives with him ever since. She moved in. They weren’t even dating. And then they spent the rest of their lives together.
Ramit Sethi: [00:27:54] I mean, I seriously feel like you need to write a book. This is insane. And you’re only 24. Your life is just beginning. This is unbelievable. Okay. Definitely keep notes. All right. Who knows if you’ve got a book in you. Wow. All right. So do you see the patterns repeating themselves through the generations?
Megan: [00:28:14] Yes. And it makes me feel that I haven’t really escaped that reality, where I came from.
Ramit Sethi: [00:28:21] That’s insightful. Even though geographically you live in a different place, even though you’re surrounded by all these academics and etc., you’re about to go to these fancy law firms, even still, you feel this inescapable pull back to how you grew up.
Megan: [00:28:38] Yeah. I feel like I might be discovered.
Ramit Sethi: [00:28:41] Isn’t it fascinating that someone can be so successful in certain areas of life, so driven, so confident, but they can totally shrink in other parts of life? I do it. You do it. Megan’s doing it right now. In fact, I think we all do it. I want to point this out because it’s so easy for you listening to this or watching this on YouTube to scream at Megan, “How could you do that?”
Well, it’s actually pretty easy to charge up tens of thousands of dollars on credit cards. Nobody stops you. In fact, they encourage you to. And one of my goals with this podcast is to give you a little more compassion for how people behave with their money.
You went to law school, which is impressive as well. So did you do that on your own? Took the LSAT, all that stuff on your own?
Megan: [00:29:27] Yeah, I did. Yeah. And I got a full ride. So the only–
Ramit Sethi: [00:29:34] Wait, wait, wait. Hold on. How did you do that? That’s awesome.
Megan: [00:29:38] I had good grades. I worked hard.
Ramit Sethi: [00:29:40] How good? What’s your GPA? Undergrad.
Megan: [00:29:42] I had a 3.9, but I have a science background.
Ramit Sethi: [00:29:45] Fuck, yeah. That’s awesome. High five. That’s amazing. You’re blazing past this. I’m like, “Yo, this is so cool.” And sometimes I think you minimize your own accomplishments. So you had a 3.9, amazing. Full ride to law school, holy shit. Did you enjoy law school?
Megan: [00:30:03] Somewhat. Yeah. I think it was– my undergrad was harder for me.
Ramit Sethi: [00:30:08] What?
Megan: [00:30:09] Yeah.
Ramit Sethi: [00:30:10] That’s weird. It’s even weird for you to say you enjoyed law school. I mean, look, you and I both know all these law students, they all hate their lives every minute they’re in there. Were you the gunner in your school?
Megan: [00:30:25] Maybe.
Nyles: [00:30:27] The gunner of gunners.
Ramit Sethi: [00:30:28] Holy shit. I’m talking to a real-life– okay, wow. This is a mo– suddenly this starts to make sense.
All right, that was fun. But I also just got a lot of information. Megan is a serious player with a lot of intellectual horsepower. 3.9 GPA, full ride to law school, she thought it was easy, and she was a gunner, which is the kid in law school class who always raises their hand and knows everything. All of this is incredibly impressive, but I think it’s even 10 times more impressive when you put some context around where she came from.
Her grandmother worked at a gas station. Her mom went bankrupt. Now Megan is about to graduate and become a lawyer. This is a big moment. Megan is literally changing her socioeconomic trajectory for the rest of her life and likely for future generations.
Nyles, what’s your take? I mean, sometimes the partner knows more than the person themselves. Have you heard all of this before about Megan’s upbringing?
Nyles: [00:31:29] Yeah. And I think– one thing that you just mentioned too, that’s really key to this is that Megan doesn’t really like sharing intimate details like that with other people.
Ramit Sethi: [00:31:40] That’s what confuses me, because you know all these influencers online, they’re always starting off with the same old story. I grew up in a shack. I was poor, and then you find out they grew up in fucking suburbia in a $500,000 house. I’m like, “I’m going to fucking kill you right now.” But you actually had an amazing transformational story in your life. And it’s the absolute opposites. Salvation Army, full ride. It’s mind-blowing.
Nyles: [00:32:12] Yeah. I think part of that honesty is what makes you not want to share it. Everyone likes to talk about themselves so much and what they’ve accomplished and their sense of pride. That there’s a sense of pride, I think, for both of us, of keeping that to ourselves and being, we know where we came from. We know how challenging it was for us, but we don’t share it because we don’t have to. We are the people that we are and that’s okay.
Ramit Sethi: [00:32:33] Do you grow up poor also?
Nyles: [00:32:35] Yes. Very similar to Megan, actually.
Ramit Sethi: [00:32:38] Mm-hmm. So what did you learn about money growing up?
Nyles: [00:32:46] That it can disappear really quickly.
Ramit Sethi: [00:32:49] Did that happen?
Nyles: [00:32:50] Oh, yeah. My dad was the sole earner in our family. And during the recession in ’08, ’09, he lost his job and had to liquidate his 401(k), and yeah.
Ramit Sethi: [00:33:00] I’m sorry to hear that. That must have been very disruptive to your family, right?
Nyles: [00:33:06] Yeah, extremely.
Ramit Sethi: [00:33:07] Yeah. Did it produce long-lasting effects in your family?
Nyles: [00:33:15] I would say yes, because my dad is now– I hate to use the word, but estranged from our family. And it all stemmed from that disruption, I would say. I mean, it was to the point where, again, same story as Meg. And we were living off of food stamps in a house that was foreclosed on but the bank lost the paperwork. So somehow we weren’t paying for it. And the AC would get turned off in a 95-degree weather and the water would shut off, and yeah. So definitely instability is there.
Ramit Sethi: [00:33:51] Just out of curiosity, how much is your salary going to be when you start getting paid in a few months?
Megan: [00:33:57] $215,000.
Ramit Sethi: [00:34:01] Can you say that in a full sentence, please? I want to make sure I heard that right.
Megan: [00:34:04] I will be making $215,000.
Ramit Sethi: [00:34:09] Round of applause. That is absolutely incredible. Does your mom know how much you’re going to make?
Megan: [00:34:15] No. I’m really embarrassed about it.
Ramit Sethi: [00:34:18] She’s about to know. All right. What do you think’s going to happen when she finds out how much you are making?
Megan: [00:34:24] She’s going to ask me for money.
Ramit Sethi: [00:34:26] Really?
Megan: [00:34:26] Yeah.
Ramit Sethi: [00:34:27] What are you going to do?
Megan: [00:34:29] I want to pay off her mortgage one day, but I’ll probably say– she’s already asked me for money. She asked me for money over the summer. I did give her some money. I’ll probably give her money.
Ramit Sethi: [00:34:48] Okay. If you need help with that, I can talk to you about that as well, some strategies for that. Wow. You’re about to make $215,000 after making essentially nothing your whole life.
Megan: [00:35:04] It feels insane. It doesn’t feel like I deserve it. I don’t think I ever will feel like that.
Ramit Sethi: [00:35:10] Yeah. I’m surprised. And do you know in what way I’m surprised?
Megan: [00:35:17] No.
Ramit Sethi: [00:35:17] What do you think? Why do you think I’m surprised?
Megan: [00:35:23] Maybe jumping class status.
Ramit Sethi: [00:35:27] Fuck yeah. It’s incredibly difficult. It’s incredibly inspirational. Everything you have mentioned from the fact that you grew up with a single mom, the fact that your mom taught you these money lessons, which were very maladaptive, the fact that you had to pack yourself and move. I didn’t do that. And then you got a full ride and a 3.9. Did that ever occur to you?
Megan: [00:35:52] Somewhat, in small parts. Yeah, I think I had a difficult childhood.
Ramit Sethi: [00:35:59] You’re right. You are inescapably tied to where you grew up. But to me, that’s also the good news. The good news is you know exactly where you came from. You don’t have to tell everybody if you don’t want. That’s okay. But that is your past. Personally, when I hear your story, I’m incredibly inspired. I go, “Holy shit.” I thought I accomplished something.
My parents, immigrants, all that stuff is nothing compared to what you’ve accomplished. Nothing. It’s amazing. It is the definition of the American Dream, in my opinion. You don’t have to escape your past. It’s never going anywhere. But you can learn how to turn the page and to embrace this new chapter of your life.
Megan: [00:36:57] Yeah. I’d like to do that for sure.
Ramit Sethi: [00:36:59] The past does follow us and it exerts peculiar influences on us. Think about it. I grew up in this place, now we’re making more, we’re living in a much nicer place. So why do I feel so guilty? Why do I feel so anxious when it comes to talking about money with someone I love? This is normal. You cannot take away the past. It exists. It will never leave. But what I hope to teach is that you can add on extra layers and extra skills so that you can retain that past and never forget it. But you can also create a new future for yourself.
All right. All this comes and it affects the way that you think about money, the way that you talk about money, and the way that you behave with money. In light of all the things we just talked about, about where you grew up, what do you think you have brought from your past into your current relationship with money?
Megan: [00:38:00] A lot of negative emotions, like we’ve discussed shame, guilt. Unconfidence makes me avoid it.
Ramit Sethi: [00:38:11] Definitely. What else?
Megan: [00:38:14] Guilty whenever I buy something that I can’t afford. I think I’m scared of money. And so maybe I commit to sending more to Nyles than I have to or he expects.
Ramit Sethi: [00:38:27] Yeah. And then you tell him–
Megan: [00:38:30] I have no money.
Ramit Sethi: [00:38:31] I have no money, and I don’t actually believe you telling me that I can take some of that money back. Fast forward this. Do that, but do that for the next 25 years. How do you think that affects your relationship?
Megan: [00:38:45] I think it makes me feel like I have to take care of both of us. And maybe stay in a job that I wouldn’t want to. That’s mainly what I’m scared of.
Ramit Sethi: [00:38:59] You are a corporate lawyer. That’s how you already feel.
Megan: [00:39:03] Yeah, I’m worried.
Ramit Sethi: [00:39:06] All right, so let’s put that aside. I don’t think it feels good to have your partner not believe you. That lack of trust, it’s one thing when the two of you are engaged and living together, okay, and then you get married, and then maybe you grow a family, and then, and then, and then. I mean, how does it feel after 20 years of your partner just saying, “I don’t believe you,” doing the same fucking fights over and over again?
So let’s not do that, especially because the two of you are going to have a great amount of money. This is not a numbers problem. Would you agree? Wait, What was that look on your face? You don’t agree? That’s okay if you don’t agree. Tell me.
Megan: [00:39:50] I’m worried still.
Ramit Sethi: [00:39:52] Okay. You’re worried you’re not going to have enough money?
Megan: [00:39:54] Yeah. Because I don’t know if I’ll ever feel like I have money that I can spend how I want. I feel like maybe we’ll have enough money.
Ramit Sethi: [00:40:04] What do you want to feel?
Megan: [00:40:07] Empowered. I want to feel like I have a plan that will actually work for my money. And that I can trust myself to make one. I also want to feel like I can purchase the things that I want to, go on vacations, and contribute my part of it and not feel the need to pay for all of it.
Ramit Sethi: [00:40:43] Nyles, any objections from you on any of that?
Nyles: [00:40:46] I’d love all that.
Ramit Sethi: [00:40:48] Okay. Do you believe him?
Megan: [00:40:50] Yeah.
Ramit Sethi: [00:40:51] Good answer. Okay. All right. Let’s look at the numbers, shall we?
They have $290,000 in assets. That’s a house and two cars. By the way, on their cars, they spend just $75 a month on gas, total. Fantastic. And Megan is being added to the title on the house. Great. Megan has zero in investments. Nyles has $165,000 invested. Their savings is just under $40,000. Their debt is $229,000, 95% of which is their mortgage, meaning Megan only has $10,000 in student loans.
Just to be clear, you have only $10,000 of loans graduating from law school?
Megan: [00:41:36] Yes. And I think they’re going to be canceled if things go my way.
Ramit Sethi: [00:41:43] Do you realize how ridiculous and amazing that is?
Megan: [00:41:45] Yeah, it’s incredible.
Ramit Sethi: [00:41:47] You could graduate with $100,000 of loans, it would not make a difference because you’re going to be making a really high income.
Megan: [00:41:53] I wouldn’t have gone.
Ramit Sethi: [00:41:56] Okay, just as a hypothetical, because this is important. You would not have gone to law school if you had to take out a 100k of loans?
Megan: [00:42:04] Probably not.
Ramit Sethi: [00:42:05] Okay. And let’s say that I was interested in law, do you think I would go to law school if I had to take out 100k of loans?
Megan: [00:42:16] Yeah. Maybe depending on your comfort level with the debt.
Ramit Sethi: [00:42:19] Yeah. I don’t give a fuck. A 100k, whatever. I know how much I’m going to make as a corporate attorney. 200, then 300, and blah, blah, blah. And you know, you’re going to be a partner, whatever. That’s a lot of money. That number is inconsequential. What’s the difference between us?
Megan: [00:42:38] You see the return and I see now.
Ramit Sethi: [00:42:45] Close. I see the ROI. You see the cost only. Cost is important, absolutely. If you were going to some 50th-tier law school and you’re only going to make 60k out of– then no. But you’re obviously going to a good school, you’re going to be working at a great firm, why not? Different way of thinking about it.
The most common money lens in America is cost. How much did that cost? Oh, my God. You could get that so much cheaper. Ugh, why would you need to spend that much? One of my students recently sent me this Instagram post of a two-star Michelin restaurant in San Francisco. She told me that she’s eaten there twice. And the comments on one of the reels was a bunch of people saying, “Ew, who would spend $275 on this? I’d just be hungry. I’d rather go to McDonald’s.”
This is what I mean by the money lens of cost. Most people only see the world as if they are wearing a set of eyeglasses that can only see cost. Yes, cost matters, absolutely. But it’s also limiting. I think a much more savvy way is to look at value as well. Now, there are some areas of life where value is very intangible, like an expensive piece of clothing.
This is where a lot of us lie to ourselves. We go, “It’s an investment.” No, it’s not. It’s a luxury. That’s the same with personal training. I used to say it was an investment, but now I’ve realized it’s a luxury. An investment has the potential to pay back a specific material reward. Otherwise, people start to call everything an investment, which is exactly what people are doing now.
My lipstick is an investment. My sweater is investment. My office chair is an investment. Get real. But in other cases, there is a very clear, measurable ROI. Going to law school would make Megan money. Once you’re comfortable with money and you understand that there are different money lenses besides cost, like ROI, even delight, these decisions become much more nuanced. And to learn more about this concept of money lenses, just google Ramit Money Lenses.
You were not raised thinking about ROI, making those trade-offs and calculations, but at the level that you are now playing, that’s a skill you’re going to have to learn. Okay. All right. So 229,000, only 10,000 being student loans. Wow. All right. What’s your total net worth?
Megan: [00:45:22] $264,300.
Ramit Sethi: [00:45:25] Let’s talk about income. What is your current gross household income, Nyles?
Nyles: [00:45:32] $8,600 a month.
Ramit Sethi: [00:45:33] And how is that split between you and Megan?
Nyles: [00:45:36] I make all of that.
Ramit Sethi: [00:45:39] And she makes zero. Okay. You’re a student. Fine. No big deal. Megan, how do you feel about making zero in this relationship right now?
Megan: [00:45:49] Feel like it’s normal. My feelings won’t change when I start making money is what I’m worried about.
Ramit Sethi: [00:45:55] No. You could earn 10,000, 20,000, 50,000 a month, and that wouldn’t necessarily change your feelings, right?
Megan: [00:46:01] Yeah.
Ramit Sethi: [00:46:02] Right on. I agree with you. All right, So we got to find something else that we’re going to do, because it’s not just the money. Take home pay is 6,600 a month. Fine. Your fixed costs are 54%. That’s really good. That’s really good. All right, fine. 20% on investments, which is good, especially at the current income you’re making. That’s fantastic. If you were to keep that up for just a few more years, you’d be in absolutely phenomenal position. That’s really good. Savings goal is at 23%. You’ve got a wedding coming up, is that right?
Megan: [00:46:35] Yes.
Nyles: [00:46:36] True.
Ramit Sethi: [00:46:36] All right. When’s that?
Nyles: [00:46:38] September 13th.
Ramit Sethi: [00:46:39] Oh, wow, it’s coming up soon. Okay, great. Congratulations.
Nyles: [00:46:43] Thank you.
Ramit Sethi: [00:46:43] So you’re saving aggressively towards that. And then once that wedding is over and honeymoon or whatever, you’ll probably take that money and redirect it somewhere else.
Nyles: [00:46:55] Yeah, that’s the plan.
Ramit Sethi: [00:46:56] Good. And your guilt-free spending is at 3%. Is that true?
Megan: [00:47:02] Yeah. Sometimes we–
Nyles: [00:47:03] Pretty much.
Megan: [00:47:03] Go and get a pastry.
Ramit Sethi: [00:47:05] Split it?
Nyles: [00:47:07] You know it?
Ramit Sethi: [00:47:09] Sadly, I actually believe you. All right. I mean, I like you guys. I like the discipline, I will say that. I like it. Are you doing it for a reason?
Megan: [00:47:21] So all these other numbers can be what they are.
Ramit Sethi: [00:47:27] I mean, what if you were to take your investments to 19% and take 1% and redirect it so you guys could buy two croissants a month? Do you want to do that?
Because they’ve been living a life of scarcity for so long, Megan and Nyles literally lack the ability to know how to adjust their spending. It would be like me going to ask a random person on the street, “How would you handle $20 million from the lottery?” Where do you even start?
I think the two of you have the lowest amount I’ve ever seen of a couple for guilt-free spending, you know that?
Megan: [00:48:03] That’s sad, but I feel like it’s expected.
Ramit Sethi: [00:48:09] When do you get to feel good about money?
Nyles: [00:48:12] I think when I know that my retirement is secure and that I have enough money in savings that we could do whatever we wanted to. And I don’t mean me, I mean we, both of us, because that’s how I view our money.
Ramit Sethi: [00:48:27] Is there a number?
Nyles: [00:48:29] No, I wouldn’t say there’s a number.
Ramit Sethi: [00:48:31] So it’s a feeling.
Nyles: [00:48:32] Yeah, it’s definitely more of a feeling.
Ramit Sethi: [00:48:34] And where do I find the definition of that feeling on this conscious spending plan? I don’t see it here somehow.
Nyles: [00:48:41] Oh, yeah. Yeah. I mean, this is Megan’s favorite little anecdote about that is I use this little gas app that’ll save you $0.10 a gallon–
Ramit Sethi: [00:48:51] Come on.
Nyles: [00:48:51] On the gas. And I’ll do it for $0.01, though.
Megan: [00:48:54] This makes us drive all over.
Nyles: [00:48:56] It’ll save us $0.12 and I’m like, we’re–
Ramit Sethi: [00:49:00] I mean, you didn’t have to tell me any of the rest of your history. I already knew how you grew up once you told me that fucking gas story. And, it’s not about the money, is it?
Nyles: [00:49:08] No.
Ramit Sethi: [00:49:08] What is the feeling you get when you roll up to that gas station? You go, “Mother, fuck these oil companies. I found $0.03 a gallon cheaper.” What does it feel like?
Nyles: [00:49:18] It feels like a win.
Ramit Sethi: [00:49:19] I’m all for finding the win, but this is just an example of playing small. Shopping for gas, playing the Frequent Flyer Mile game, posting funny memes about how you went to Target to only spend $20, but you actually walked out with 200, ha ha. And what is dear husband going to think? Ha ha ha. I fucking hate those. It’s playing small.
What a tragedy to get wins from something as small as shopping at a store full of commodities or in Nyles’ case to drive around, actually losing money, to save $10 on gas. Excuse me, not $10. $0.10. The people I speak to who do this kind of stuff, they actually don’t need to. They choose to, not realizing that their decisions to drive an extra two miles to save $0.10 are actually keeping them obsessed with three-dollar questions. That, in my opinion, is a tragedy.
I don’t like playing those games. But I think what stands out to me most is that with the current rules of your game of life, you’re doing pretty well. Your fixed costs are low. Your investment is solid. Your savings goals are great. Your guilt-free spending is fucking horrible, but you’ve turned it into a virtue. We only buy one croissant per month. We’re so cool. Fine. I am not going to argue it, but fine. The problem is, the rules are about to change in a big way. Do you know how you’re going to change with them?
Nyles: [00:50:58] No, honestly. I mean, we’ve talked about the amount of money after putting it into the new conscious spending plan, and we’re like, this is honestly ridiculous and insane to think that we’re going to have $1,000 a month that we could spend on something. I’m like, “I don’t buy a $1,000 of things a year.”
Ramit Sethi: [00:51:12] So your current strategies work for the rules of your current game, but they stop working when the rules change.
Nyles: [00:51:22] I would agree, yeah.
Ramit Sethi: [00:51:22] Should we look at the new rules?
Nyles: [00:51:25] Yeah.
Megan: [00:51:25] I guess.
Ramit Sethi: [00:51:25] All right. So Megan, you’re about to get paid, right? First time in a long time, basically, ever. So how much are you going to make per month, gross?
Megan: [00:51:35] Well, let’s see. I’ll make $17,916 a month.
Ramit Sethi: [00:51:49] You’re going to make 18k a month. How does that feel to say?
Megan: [00:51:54] I think that’s the amount of money I’ve made in the past, like seven years. Crazy.
Ramit Sethi: [00:52:02] That’s amazing. It’s ridiculous. It’s bewildering. It’s all of those things. But it’s going to happen.
Megan: [00:52:11] Yeah, it’s scary.
Ramit Sethi: [00:52:12] If we didn’t talk beyond right now, what would you end up doing with it?
Megan: [00:52:18] I’d probably be a lot less involved with how it’s spent than I’d like to. And I’d probably have to ask Nyles for it.
Ramit Sethi: [00:52:27] Okay. So you would just get the paycheck, send it to his account. And then probably feel like, I can’t do anything. I have no money, all that stuff, right?
Megan: [00:52:40] Yeah, because I don’t want to ask him.
Ramit Sethi: [00:52:41] Yeah. Even though you yourself sent it to him.
Megan: [00:52:45] Yeah.
Ramit Sethi: [00:52:45] And after talking now, what do you recognize about that pattern? What are you doing when you go down that path?
Megan: [00:52:52] I’m avoiding the money. Getting rid of it as fast as I can.
Ramit Sethi: [00:52:57] There you go.
Megan: [00:52:57] Not learning any valuable skills.
Ramit Sethi: [00:52:59] There you go. It’s the money came to you, and instead of you touching it and engaging with it, you literally just go, hot potato, onto the next person. Out of my hands. In fact, I’m still poor. Not a healthy relationship with money.
Megan: [00:53:15] No. I want to learn how to advocate for myself better. And not resent Nyles, who I feel is just losing with any choice that he makes.
Ramit Sethi: [00:53:30] Megan, you need to be able to ask for what you want when it comes to your money. He’s not going to read your mind. How does that strike you?
Megan: [00:53:42] That strikes me as true and uncomfortable to think about.
Ramit Sethi: [00:53:49] Yeah. Good. It should be. That’s the level. You’re jumping from here to here. It is an uncomfortable jump. But the fact is, one way or another, you’re going to be in this situation, the situation where you’re making 18k a month.
One way or another, you’re going to have to figure out how to deal with it. Either you’re going to continue on the path that you’ve continued on, which is to hand over the money to him, let it go, hot potato, in one hand and out the other, and then feel resentful and like you don’t have anything which doesn’t do him any favors. Nyles, are you on board with that?
Nyles: [00:54:30] Yeah. 100%.
Megan: [00:54:31] I think I’m a money chameleon. And with my mom, I inherited her reckless approach. And with Nyles, maybe he’s slightly too conservative in his approach. And it leaves me feeling like I can’t spend the money that I get when I occasionally get some, and I need to give it to him.
Ramit Sethi: [00:54:52] Yeah, I can sense this desire and need for both of you to have some joint account where it’s structurally set up, that it’s working for both of you. I also can sense the need for some individual money for each of you to do whatever you want with, no questions asked. So we’ll set that up too. I like this chameleon comment you made. It’s very perceptive of you to recognize that.
In psychology, there’s this concept of high social monitors and low social monitors. High social monitors, they’re always observing what’s going on. And if they’re in a certain situation, they will act that way. So you had your mom as one model. You have Nyles as another. Who’s the model that you want to choose to model after now?
Megan: [00:55:51] Honestly, neither of them is what I see for myself.
Ramit Sethi: [00:55:55] Is there somebody in your life that you can think of that you admire the way they treat money?
Megan: [00:56:05] Honestly, no. I really haven’t– I’m not informed about any financial situation that I want to emulate.
Ramit Sethi: [00:56:14] Can you think of a TV character or movie character?
Megan: [00:56:18] Honestly, the way you talk about your money sounds pretty nice. You seem like you’re not feeling a lot of the negative emotions.
Ramit Sethi: [00:56:24] No. When you said– you’re like, I feel– you said I feel aaah. I was like, “What word is that?” I feel aaah. And then I was like, “Oh, she’s saying guilt.” I don’t even know what that word means. What the fuck is guilt? What does that mean? So you can use me. And I can be your metaphor.
I used Captain Picard. Sometimes when I’m like, “Shit. What would Captain Picard do?” You can use me, and you just go, “What would Ramit do?” And then adapt it for your own situation. So sometimes we know that our history misleads us. So we need to create a new model for ourselves. If it’s me, fantastic.
All right. What would Ramit do? Here’s what I would do. I would start by assessing the state of money in this relationship, including the numbers and how we talk about money. That’s what they’re doing right now. Then I would decide on my rich life, starting with something vivid and specific. I would have my rich life, your rich life, our rich life. Perfect. And then I would set up the systems to make it happen. That is exactly what I would do in that order.
Shall we look at the conscious spending plan with the new income? Because I’m really curious what you’re going to do differently.
Megan: [00:57:33] Sure.
Ramit Sethi: [00:57:34] Cool. Can you guys just tell me what your gross household income will be after this income change?
Megan: [00:57:44] $27,516.
Ramit Sethi: [00:57:48] Every month. Are you guys still going to be driving around for cheaper gas?
Megan: [00:57:55] Nyles?
Nyles: [00:57:57] It’ll be hard not to, I’ll be honest.
Ramit Sethi: [00:57:59] Nyles, I’m going to kill you. Groceries. Looks like you’re going to spend a little bit more. Wow. You guys are splurging. What are you going to get?
Megan: [00:58:10] Well, I like to shop at the farmers market. That also includes eating out.
Ramit Sethi: [00:58:16] This is hilarious. Your groceries at the farmers market and eating out is a total of $2,000 a month.
Megan: [00:58:22] I feel like that’s an insane amount of money. We have 900 right now.
Ramit Sethi: [00:58:27] What are you guys going to get at the farmers market? Some almonds? What are you going to get?
Nyles: [00:58:30] Mushrooms.
Megan: [00:58:31] Peaches.
Ramit Sethi: [00:58:32] Wow. This is a big day. She goes, “I went to law school for 30 years so I could afford some farmers market peaches.” God bless you. Great. I have nothing to add. You’re under the recommended 60%. You’re at 49%. Even with a $5,000 a month rent and your peaches. Awesome.
Megan: [00:58:57] Sounds great.
Ramit Sethi: [00:59:00] Some of these numbers do really sound high. Just saying them out loud. And this is one of the things that those people on Instagram were reacting to. $275 for dinner? Outrageous. This is why I always want you to calculate your conscious spending plan in percentages. Because it’s true. Dinner for $275 is outrageous if you are making $25,000 a year. But if you make $300,000 a year, it’s not.
And if you have a 20% savings rate, whether at a high-income or middle-class income, you can save for things that might seem unimaginably ridiculous. Context matters. It’s like asking someone how much they bench. Oh, 225. Wow. All right. Let’s add some nuance, though. Is that your first set or your last? Are you training for the first time or are you 10 years in? Do you weigh 250 pounds or 150? Fuck. As I say this example, I’m just getting mad because I actually can’t bench to 225. Maybe I’m just bitter.
All right. Nyles is about to talk about throwing money away on rent, which is perfect, because I can just channel my existing rage right now into this next part of our conversation. Let’s do it. Nyles, you feel good?
Nyles: [01:00:15] Yeah. I mean, I think the only thing– it does feel like an insane amount of money, even $2,000 a month for groceries and eating out. I’m like, “That’s a lot.” But I think the challenge that I have with renting and I know, Megan said that you talk about this is, it feels hard for me to be okay with spending $5,000 a month on rent. It feels like I’m throwing it in the drain.
Ramit Sethi: [01:00:42] Okay. Let’s just do this.
Megan: [01:00:44] I told him not to say it.
Nyles: [01:00:46] Yeah, I said it.
Ramit Sethi: [01:00:47] He fucking said it. Now we can’t– look, you pulled the plug. The water’s rushing down the drain. We’ve got to address it. All right. If you were to spend 5,000, you feel like you’d be throwing money away on rent, right? I’ll give you a couple of examples where the math is surprising. Living in high-cost-of-living areas, Nyles, like New York, San Francisco, LA, every time you run the numbers, the vast majority of the time you find that it’s actually cheaper to rent than to own.
And I’ll give you a personal example. When I lived in Manhattan, my apartment, let’s just pretend it was $3,000 a month. The place next door, same view, same square footage, all that, would have cost over $6,000 per month when you factor in taxes, interest, maintenance, all kinds of stuff. It would actually have been over 6,600 a month. So what I did was I took that $3,600 a month, and instead of buying, I rented, which was a great place, and I took that 3,600, I just invested it. Which actually ended up making me more in the long term.
But there are also some other reasons. I didn’t know how long I was going to be in New York, so I wanted optionality. I didn’t want to buy because it would have been incurring huge costs. And if I leave, ah, fuck, do I really want to be a landlord? No. Do I want this to be that big of a part of my portfolio? Maybe, maybe not.
So there are a lot of different concerns I had, but ultimately mine was a lifestyle choice first. Financial, second. Okay. So for you, I can’t tell you what the financial part’s going to roll up to be. But just so you know, I’ll tell you my back of the napkin little calculation I do. Whatever the mortgage is, I add 50% on that to account for all phantom costs.
That’s how I think about it. So the math is in my book, Chapter 9, and I have a bunch of stuff online about this. But please don’t feel you’re throwing money away because just the same way you go to a restaurant, you happily spend money there, you are paying for value. It’s the same thing whether you rent or buy.
Nyles: [01:02:56] Okay. That makes sense.
Ramit Sethi: [01:02:58] If you want to learn more about everything I just said regarding renting versus buying and how to actually calculate your own numbers, go to iwt.com/houseguide. There’s a free guide I put together where it shows you how to think about buying versus renting, including the actual calculations you need to make. That link again, iwt.com/houseguide.
All right. Your investments would be 25%. Fantastic. So in this case, you took a bunch of money and you redirected it to investments, basically $5,000 a month. That’s outstanding. I’m sure your work is going to have some 401(k) match. You’re doing over 60k a year of investments. That’s great. At this young age, oh, my God. Ten years of this, you guys will be in an absolutely phenomenal unstoppable financial position. You guys want do the math right now?
Nyles: [01:03:53] Sure.
Megan: [01:03:53] Sure.
Ramit Sethi: [01:03:54] All right. So what’s your current amount invested?
Nyles: [01:03:59] 165.
Ramit Sethi: [01:04:01] 165,000. How much are you going to put in per year?
Nyles: [01:04:07] To this calculator, 60,000.
Ramit Sethi: [01:04:09] Okay. That’s this year, when you’re 28 and she’s 24. But we’re talking about the average over the course of your life. I know it’s hard, but is it more or less than 60,000 a year?
Nyles: [01:04:23] I would say more. I don’t know, but yeah.
Ramit Sethi: [01:04:24] Way more.
Megan: [01:04:25] Probably.
Ramit Sethi: [01:04:25] How much more?
Megan: [01:04:28] 80,000, maybe.
Ramit Sethi: [01:04:29] Okay, 80,000.
Nyles: [01:04:32] I’d say 3% more a year or something like that, depending on how much inflation and raises are.
Ramit Sethi: [01:04:39] I don’t think corporate attorneys get 3% raises. How much do you make after like two years, Megan?
Megan: [01:04:46] Over 300.
Ramit Sethi: [01:04:50] Mm-hmm. And then what– just give me the key numbers on that curve. 300. Then what happens is the next year and the next year?
Megan: [01:04:57] 350. Probably 400. And then there’s some bonuses in there.
Ramit Sethi: [01:05:05] Anybody hearing a 3% rate in this? No fucking way. They don’t pay those lawyers that much. They pay him to sit there and build 2,000,000 hours a year. All right. So what’s the answer? The answer is it’s definitely more than 60. It’s definitely more than 80. What’s the number?
Nyles: [01:05:27] I’d say higher. I mean, I want to say 100 just because it sounds nice.
Ramit Sethi: [01:05:30] Megan, how do you feel about that?
Megan: [01:05:32] Yeah. That’s crazy.
Ramit Sethi: [01:05:34] Yeah. $100,000 a year invested. You never even made that in your entire life combined. That’s the curve you’re about to enter on. So again, you don’t have to master every nuance of this right now. But I just want to show you what these numbers look like.
All right. I want to point out a couple of fascinating wrinkles there. What they just did is really funny and really common. I have found that people find it impossible to estimate what their lifetime average earnings will be like. I constantly talk to someone in their early 30s making $80,000 and I ask them, how much do you think you’re going to make over the course of your lifetime? They go, $80,000.
I’m like, “You fucking earn that at 31 years old. You think your salary is going to freeze in time like a Stegosaurus? Have you ever looked at the median salaries of people like you?” What it really comes down to is people are afraid to make an assumption because they believe if they get it wrong, they will have failed. I like, “what?”
If we have a chance to dream big or small? Why not just choose big? The funniest part of this whole conversation, by the way, is how Megan was just sitting there quietly letting Nyles talk about his 3% raises. And then when I ask her, “Hey, Megan, what do lawyers make?” She’s like, “Oh, yeah, 350, then 400, then 500.” It’s like, Megan, speak up.
Okay. Anyway, you guys constantly minimize your dreams. It drives me insane. But in the grand scheme, it’s fine. You’ll just end up with millions of dollars more than you ever imagined, and no real idea or skills of what to do with it at age 65. Whatever. Let’s get back to the numbers.
So I put 37 years for this to compound because that’s how long until you’re 65. What do you guys want to do here? How many years do you want to calculate this for? Do I just do 20 and see?
Nyles: [01:07:19] Yeah, 20, 25.
Ramit Sethi: [01:07:21] Twenty years. And your interest rate, what should we put there? You don’t know. Have you read my book?
Nyles: [01:07:27] 5%.
Megan: [01:07:28] 7%.
Ramit Sethi: [01:07:29] Who’s read my book out of the two of you? Oh, of course, the gunner did. All right. 7%. You are correct. And now again, why, it’s all in there. You can choose seven, you can choose eight, historical, blah, blah, blah. But I always use seven for my calculations. All right. So what do you think the number is going to be here in 20 years, investing 100,000 a year, starting with 165? What do you think it’s going to be?
Megan: [01:07:55] 4,000,000.
Ramit Sethi: [01:07:57] All right. 5,000,000. Want to do something fun?
Megan: [01:08:04] Yeah.
Ramit Sethi: [01:08:04] Want to just let it sit there and do 25 years? Just five more years. It took 20 years to get to 5,000,000. What do you think is going to happen in five years?
Nyles: [01:08:18] Should almost double, right?
Ramit Sethi: [01:08:20] My man knows the rule of 72 $7.6 million. And if we left it in there for 30 years instead of 20 and 25, we’re at $11,000,000. Now, if I ever fucking find out that you drove 10 miles to get gas when you have $11.3 million, I’m going to find you and I’m going to hurt you. What do you think?
Nyles: [01:08:45] Yeah, it feels fake. It doesn’t feel like, “Oh, that’s what’s going to happen.” Something is going to happen between now and then that’s going to make that all messed up. I don’t know. That’s what it feels like to me because that’s what happened to my family.
Ramit Sethi: [01:08:57] Exactly. You made the connection beautifully. It doesn’t have to happen that way. You never have to spend so much that you put yourself at risk. We can manage your risks. But there is no virtue in living a smaller life than you have to. Conservatively, you have five to $12,000,000. it’s going to happen. Seems to me that it’s time to start building those skills right now.
Megan: [01:09:37] I mean, I think that maybe raised a fair point when he said that, your investments are generous right now and looking at the calculation that we just saw and knowing that our income will increase and we have 30 years to do it, I think that maybe we could divert a little bit of that money and pay for a vacation or for us to have more experiences together because staying at home is getting old, and just cooking when I have been working for 10 hours, I think is not going to work for us.
Nyles: [01:10:20] Yeah. No, I 100% agree with you. Especially right now we’re saving $600 a month as a down payment. If we’re not going to buy a house, we don’t need to do that. So I think that makes a lot of sense to improve our quality of life now rather than, “Oh yeah, it’s going to be good in October.”
Ramit Sethi: [01:10:37] Megan, I see you nodding a lot. Is that connecting with you?
Megan: [01:10:41] Yeah. I love to think about what I could buy someday. We visited Maine this year and I really liked a certain town and I thought, “Wow, maybe we could spend summers here and buy a house or rent a house for the summer.” So I look at the houses for sale there, even though this is a far off goal, and the same thing with all these things I want to buy for our wedding. I have a list, including the prices of everything. But then when it comes down to it. I just can’t buy it.
Ramit Sethi: [01:11:18] Because?
Megan: [01:11:20] Because I feel like I’d have to ask for it. I feel like there might be some judgment about it from Nyles, the same way I feel about telling other people something personal about me. Maybe this is a personal desire that I just want to keep to myself.
Ramit Sethi: [01:11:40] Nothing you’ve mentioned seems outrageous to me. Can I just tell you that? Wanting to one day get a house, okay. Some something nice for your wedding, why not? It seems to me Nyles is fairly reasonable. But it also seems to me that you expect him to magically be able to read your mind.
Megan: [01:12:03] Yeah, I do. And I also assume that he doesn’t find these things as valuable as I will and that there will be some judgment about them.
Ramit Sethi: [01:12:19] And worst case, maybe there will. What I’m not going to do is pretend that both of you are going to agree on everything for the rest of your life. It’s not going to happen. Instead, what I will do is teach you how to handle these natural disagreements. First, we have to be able to just articulate what we want. I know you articulate what you want at school because you couldn’t achieve what you did without going for it. That was not an accident. Would you agree? The levels you achieved?
Megan: [01:12:54] Yeah. I planned for it.
Ramit Sethi: [01:12:56] Exactly. Getting that job you got, not an accident. You went for it, didn’t you?
Megan: [01:13:01] I did.
Ramit Sethi: [01:13:01] You guys are awesome. Now, get specific. You have the intention. Talk numbers, because I know you’re both numerically driven.
Nyles: [01:13:12] So we have 620, I think, per month that we’re saving for the down payment. It would make sense to me to take $500 out of that per month.
Megan: [01:13:21] For what?
Nyles: [01:13:22] So to put it into guilt-free spending. So we’d each have 250.
Megan: [01:13:27] I think that for guilt-free spending, we should each have 150 a month. Just three times more than we both have now. And we could go to the tennis tournament that we want to go to in March and not just look at the tickets and never buy it like we’ve been doing. It’s only $90. We could go there.
Nyles: [01:13:55] Yeah, let’s do it. That makes a lot of sense to me.
Ramit Sethi: [01:13:58] That’s awesome. How do you feel about that conversation?
Nyles: [01:14:03] Much better. Yeah, I think if we didn’t have $30,000 in savings already, I might feel different. But we do. We don’t need to keep saving that money and having literally no money to spend on anything fun.
Megan: [01:14:19] It would be nice.
Ramit Sethi: [01:14:21] Yeah, I love that. I really enjoyed watching you both joke around and even make fun of yourselves, the tennis tournament, it’s only 90 bucks. You’re right. It is only 90 bucks. And your quality of life to give you something to remember and create these memories, absolutely amazing. It’s not like you’re asking for a $90,000 vacation. 90 bucks, it’s meaningful. You both love tennis. You could do it. You could do it today. You don’t even have to wait for this new income to come in.
So to me, this is such an awesome example of training wheels. 90 bucks, we redirected it from here. “Ah, feels good.” You’re building the skills and you’re probably going to encounter some stuff. You’re going to go, “Oh my God, I didn’t realize we should– the coffee, I didn’t budget for it. This is $8. It’s so expensive.” Okay, You’ll deal with that.
And each time you go through one of these uncomfortable situations, what you’re really doing is building the skills so that when you are making $18,000 a month, $20,000 a month, you’ve started already building those skills with smaller amounts.
Megan: [01:15:30] Sounds great.
Nyles: [01:15:31] Yeah, it makes a lot of sense to me. Yeah, I think, especially in the future, dynamic we’ll feel– I mean, I don’t want to, “Oh, I’ll pawn this off,” like, “Oh, yeah, we’ll do it in the future.” But I feel like our future budget does feel more flexible in that way versus our current one would be taking from retirement or taking from savings, which now that we’ve had this conversation feels a little bit better. But I think before it was a hard dynamic to change.
Ramit Sethi: [01:15:55] Well, you do buy some flexibility when you add an extra $215,000 a year.
Before I share the follow-ups from Nyles and Megan, I want to remind you to go to YouTube, search for Ramit Sethi, and follow my account there. You can watch this podcast with Megan and Nyles and see the fascinating body language in this episode.
Now, I did something a little unusual to wrap this episode up with them. I was more directive than I usually am. I suggested that Nyles say, “Megan, I really appreciate you contributing so much for our wedding, but I want to send you back $1,000 of your own money for you to use.” And she resisted. She said, “I don’t know why, but it wouldn’t feel meaningful to me.”
And this is what I said. I said something that I rarely do. I said, “You know what, Nyles? I would just ignore her and send it anyway.” And here’s why. Megan, you made $30,000 in your internship, and you have no money in your account. That’s not okay with me. I want you to have money in case there’s an emergency. And I want you to have money so you can begin trusting yourself.
It’s rare that I am that directive. But in this case, sometimes you need to just brute force it in order to begin building the foundation and in order for Megan to begin trusting herself with money. One way or another, they’re going to start having a lot more money. You might as well build the skills when the stakes are low.
Here’s the follow-ups. Megan said, “I learned that I caused myself internal anguish for no reason when I don’t communicate my needs clearly to Nyles. When I do communicate them, Nyles is more receptive than I assumed he would be. I realize that I am avoidant with money and that part of me not communicating my needs is avoidance. After speaking with Ramit, we discussed our current CSP together. I was pleasantly surprised to hear that Nyles had considered my expenses when we talked about the CSP more.” Great.
Now let’s hear from Nyles. Nyles said, “I learned how to trust Megan more with some of the financial decisions that I had been making on my own. I also learned how to take a more relaxed approach, especially as it relates to our savings. I was surprised by how much of our current habits and feelings towards money are influenced by events in our childhood and familial experiences.”
And they both said, “We rebalanced our CSP together to move money from saving for a down payment into fun money. Now we each have $200 of fun money per month. We calculated the money we still need for our wedding and honeymoon, and we decided where it’s coming from. We are also going to put some money into savings and keep some for our own purchases too. Finally, we also booked the tennis tournament!!!!”
Megan and Nyles, it was such a pleasure to talk to you. Thank you for coming on the podcast and being so candid. And for everyone listening, as always, find me on YouTube, find me on Twitter, Instagram, Tik Tok, and my newsletter. And I will see you next week.