Episode #88: "We own 7 properties. Why can't we pay for groceries?"
Natalie and Travis are in their 40s, living in SoCal with their four kids. Travis is a career military man, imprinting him with some pretty understandable tendencies toward conservatism with money. He’s saved and invested heavily for decades, but it’s left him without the muscle memory to enjoy what he’s built.
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Ramit Sethi: [00:00:00] Well, the news is out. I have a Netflix show coming out. It launches in April. You can go on to Netflix right now, search for my name and click “Add to List”. Make sure you do that so the algorithm knows that people like you want to watch my show. And second, I decided to have a little fun with this. So I’m putting together a special behind-the-scenes email list, just a pop-up one.
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Natalie: [00:00:46] Same 10 things I put in my cart a year ago are not the same price, and they’re so much higher. So we’re not going to go out to eat this week or we’re not going to get new shoes till next month.
Ramit Sethi: [00:00:57] Ah. So are you spending down your savings every month?
Natalie: [00:01:03] Yes.
Ramit Sethi: [00:01:04] Okay. And how does that feel to both of you?
Natalie: [00:01:06] Awful.
Ramit Sethi: [00:01:07] Natalie, I’d like for you to start with the net worth section. Just say, okay, assets and then read me the number next to it.
Natalie: [00:01:13] Assets, $890,000. Includes property, income property, investments that we have.
Ramit Sethi: [00:01:21] How many properties?
Natalie: [00:01:23] Seven.
Ramit Sethi: [00:01:23] Seven properties? And you guys are arguing about $20 on Amazon. What world am I in right now? Is that enough?
Natalie: [00:01:35] It could be enough.
Ramit Sethi: [00:01:37] But doesn’t it feel like enough?
Natalie: [00:01:40] No.
Travis: [00:01:41] There is no guilt-free. There’s always guilt to the spending every single time. Where does the grind stop? And where does the enjoyment begin?
Ramit Sethi: [00:01:50] I’d like to introduce you to Natalie, who’s 42 years old, and her husband, Travis. He’s 48. Travis is in the military. Natalie stays at home with their four children and runs the household. And they live in Southern California, which is very expensive. Now, they reached out to me initially because they disagree about the way to spend money.
And you’re going to hear about very specific examples like their son’s birthday party. But as we dig, not surprisingly, you’re going to discover that there’s something much deeper beneath the surface. As you listen today, I’d like to remind you of a couple of things. First, it helps me if you rate and review this podcast on Apple Podcasts.
Leave a little written comment. I read them all. I appreciate it. Second, watch this episode on YouTube. You can see the full episode and you can see Natalie and Travis and their body language, which is quite revealing. Just go to YouTube and search for Ramit Sethi and follow me there. Now, let’s get to the episode.
Travis: [00:02:54] Our son’s birthday party. That happened last month. He turned 11.
Ramit Sethi: [00:02:58] Okay. Congrats.
Travis: [00:02:59] And he’s our youngest of four. And we initially set out to have a budget of 250 bucks. And I’m sure that we doubled, tripled, quadrupled that and with no thought, no conversation or nothing afterwards about the amount spent.
Ramit Sethi: [00:03:19] Who came up with the number 250?
Natalie: [00:03:22] Usually for our children’s birthdays, it’s around 200, 250. Um, when we were good at our budget, we would put money away for that. But we have not looked at a budget in months. And so when it came time to plan his party, I wanted to plan it at the skate park. Found out that was $500, so canceled that. Postponed it to the next weekend where we could do it outside for free. So, um, Travis actually doesn’t know what we spent on the budget, but we were under 250 for that birthday party. But to him, he thinks that we went over.
Travis: [00:03:54] Wait, What? Wait. Travis said you may have quadrupled the budget, and you’re telling me it was under the budget?
Natalie: [00:04:00] Absolutely.
Ramit Sethi: [00:04:01] Okay. This is a good example. How much did you end up spending on this birthday exactly?
Natalie: [00:04:06] So far I’ve spent about $180 for his birthday. I just grabbed a couple of Costco pizzas and some of his favorite sparkling waters, and a couple of cookies and went to the skate park with 12 of his buddies. So it was a pretty cheap birthday.
Ramit Sethi: [00:04:21] Sounds like a great birthday.
Ramit Sethi: [00:04:23] This is already fascinating. So many of the stories we tell ourselves with money are just that– stories. We’ll say, I’m not good at money or I’m afraid of losing money. Or in this case, Travis literally tells himself that they quadrupled the budget for their son’s birthday party. Now, it’s tempting to think that presenting the facts will change people’s feelings, but it won’t.
Because these are feelings, and facts rarely change feelings. This is why so many people feel like investing is gambling, even though it’s not. I can show them a compound interest chart and point to 100 years of history and it will not change a thing. That’s the point of this podcast. Emotions matter. Psychology matters. Compound interest charts and spreadsheets matter a lot less than people think.
All right. Travis, what do you think about hearing that the birthday may have been under budget?
Travis: [00:05:17] I think it’s fantastic. Super stoked.
Ramit Sethi: [00:05:19] That’s a big smile. I see that. All right.
Travis: [00:05:21] Yeah, it’s great. Then I’m going to add the, uh, the 70 to $90 for the fishing trip, and then we’re back where we’re over. Not quadruple, but we’re over.
Ramit Sethi: [00:05:30] You’re over by 20, 30, 40 bucks or so. Okay. And does that trouble you, Travis?
Travis: [00:05:38] I know that you, Ramit, hate budgets. I have no problem spending every single piece of every penny every month. But as long as we know where each penny goes, I don’t care. And when we can’t have money for the frivolous, uh, what’s the term that you call it?
Ramit Sethi: [00:05:59] Guilt-free spending. It’s not frivolous. It’s guilt-free.
Travis: [00:06:03] Guilt-free. There is no guilt-free. There’s always guilt to the spending every single time because we didn’t allocate it’s work prior to it being spent.
Ramit Sethi: [00:06:13] Okay. Who feels the guilt?
Travis: [00:06:16] I do.
Ramit Sethi: [00:06:17] You do. Okay. Natalie, do you feel it?
Natalie: [00:06:20] I feel guilt from Travis because I guess we’re not on the same page, and we don’t communicate monthly as to, hey, this is what’s coming up this month. Do we have the money to pay for that, or do we need to borrow from our savings to pay for this? We’re really good at certain things like budgeting the car, registration, those things.
But it’s the random things that come up that we don’t communicate completely about where the money’s coming from. So I do feel a little bit of guilt when I do spend it because he’s not on board with me communicating and planning that part of it.
Ramit Sethi: [00:06:49] Hmm. Okay. All right. And when you say it’s the little things that you may be over on, you’re talking about birthday parties, groceries. What are we talking about?
Natalie: [00:07:01] So we are definitely over on our groceries. The other small things that I feel like nickel and dime as what I say to Travis is the kids have birthday parties that they’re invited to or the girls’ high school sports need an extra $100 for this or that. And we don’t talk about where that’s coming from. We don’t plan for that large of the nickel and diming to come out. And I think that’s what’s eating our budget.
Ramit Sethi: [00:07:25] So let’s talk about that. She comes to you and she says, what, I need 100 bucks for uniforms or something?
Natalie: [00:07:32] Right.
Ramit Sethi: [00:07:32] All right. What do you do?
Natalie: [00:07:33] I would. Take it out of the budget and then in my mind, try to spend less the next time I go to the grocery store.
Ramit Sethi: [00:07:40] Does that work?
Natalie: [00:07:41] No, it hasn’t. That’s why I’m here.
Ramit Sethi: [00:07:42] Travis, you’re shaking your head. What’s your take on this?
Travis: [00:07:47] It’s just after the fact. I have alerts on my phone for Amazon, Amazon, Amazon, Amazon, and I’m like, we don’t even have a budget for Amazon. And it keeps getting lumped into the food budget, and household things, and food, and household. We’re violating the very principle of money that we should be enforcing and employing ourselves.
Ramit Sethi: [00:08:13] Is it possible for the two of you to be financially compatible?
Travis: [00:08:17] Absolutely.
Natalie: [00:08:18] I think we can. I think we definitely have to mesh on some common goals.
Ramit Sethi: [00:08:22] Okay. Do you know anyone else, any other couples who see money differently, but they are meshed?
Natalie: [00:08:35] Yes. Tell me about them, Natalie. What comes to mind when you think about them?
Natalie: [00:08:38] So from the outside, one of our couples wants to save nickel and dime savings and not spend it on those things like, oh, well, let’s make him a card or let’s do something like that. And the other person in this couple is wanting to use their money to invest it for it to grow.
Ramit Sethi: [00:08:57] All right. By the way, you said nickel and dime in a really interesting way. When you say nickel and dime, is that a positive thing or a negative thing for you?
Natalie: [00:09:06] Um, for me, it’s negative.
Ramit Sethi: [00:09:08] Like we’re nickel and diming our way to debt. Is that how you use it?
Natalie: [00:09:13] To debt. Yes. Yeah.
Ramit Sethi: [00:09:15] I picked up that you also had a positive view of it like nickel and dime is interchangeable with saving.
Natalie: [00:09:23] I think that we can be. It can be a form. I’ve seen other people do it. And I feel like living in Southern California where things are so expensive and everybody has the best of everything, I feel like– in my mind, because I am the biggest spender in the family. I mean, Travis doesn’t go to the market. He doesn’t buy the kids socks or shoes.
So a lot of this, I feel is heavy on my shoulders because I want to get better at making him feel that I’m confident and competent in leading this family financially and not spending money that’s not needed to be done. So I would like to get better at not nickel and diming.
I feel like I do these things. But to Travis, all he sees is spending. Like the Amazon, this is a perfect example, the Amazon packages that come. To me, I would rather push a button and order those new socks on Amazon that are the same price at Walmart instead of driving my car 5 to 10 miles to go pick it up. So I’d rather do that. And that’s why a couple of Amazon packages come each week rather than driving to go do it.
Whereas Travis is the type if he needs a tool for the lawnmower or something, he’ll stake out three different stores, find the best price and bring it home. Well, I feel like he just wasted a ton of gas and time, which time is very valuable to me doing that.
Ramit Sethi: [00:10:40] Just to clarify, time is valuable to you. Why?
Natalie: [00:10:43] If I can save time going shopping, physically going out there to get it when I don’t need to even drive down that street or that area, I can use it more wisely as doing the household chores or preparing a meal for my family.
Ramit Sethi: [00:11:00] What about just enjoying the time?
Natalie: [00:11:03] That would be a fantastic way to do it. Yeah.
Ramit Sethi: [00:11:05] Okay. All right. What was the last time you just enjoyed the time?
Natalie: [00:11:09] Um, it’s been a while.
Ramit Sethi: [00:11:14] In college, I majored in something called STS, Science, Technology, and Society. And one of the things we studied was the emergence of technology in the home, like irons and dishwashers, and vacuum cleaners. The promise was always that suddenly, magically, once you buy this technology, you will be free to enjoy your leisure time.
In reality, expectations simply went up and now you spend approximately the same amount of time on housework. From the perspective of designing a rich life, if you let these things consume your time, they will. Just as if you let all your random expenses consume your money, they also will. But if you are in charge of your rich life, it’s your job to fight back by designing what your rich life is and then prioritizing those things first.
As an example, when you hear the phrase “pay yourself first”, this is exactly what they mean. You set a target savings goal, let’s say 10% of gross income, and you pay yourself first. That money goes into a savings account. Then you take the remainder of the money and use it to cover your spending.
In other words, you put the important things first or they will never get done. You can apply this to travel. You can apply this if you really want a nice car and it’s part of your rich life to be able to afford it. Fantastic. That’s how you do it. Now let’s explore how they both think about money.
When you think about money, what are the first 2 or 3 words that come to mind for you? Let’s start with Travis then Natalie.
Travis: [00:12:48] Money is a tool. Money is a method to pursue greater things selfishly and selflessly. For example, I’ve got about three or four years left in the military, and when I retire, I don’t want a W-2 job. And so I want to be able to spend my time supporting communities locally and abroad, doing whatever, teaching English in Indonesia to clearing a trail up in Tahoe for three or four months. That’s what I want to do selflessly.
Natalie: [00:13:18] The first words that came to my mind when you ask that question were safety and save.
Ramit Sethi: [00:13:26] Tell me.
Natalie: [00:13:27] Yeah, I want to feel like I have enough money to do the things that we need to do for now and for our future.
Ramit Sethi: [00:13:33] Okay. This is very helpful for me to understand where you’re coming from. I am curious about Amazon. So you make a really good point, Natalie, that your time is valuable and you’ve got four kids and this household that you are in charge of. So makes sense to me you’d prefer to order something from Amazon and have it delivered rather than drive. Travis, I heard you say that, first of all, you get a notification when there’s an Amazon order. Is that true?
Natalie: [00:14:01] Yes.
Ramit Sethi: [00:14:01] Why do you have notifications turned on for Amazon purchases?
Travis: [00:14:06] Uh, I don’t know.
Ramit Sethi: [00:14:08] Can we just turn that off?
Travis: [00:14:10] I don’t have notifications for anything else on.
Ramit Sethi: [00:14:12] Are you serious?
Travis: [00:14:13] Serious.
Ramit Sethi: [00:14:14] So, Travis, can you turn off these Amazon notifications, please?
Travis: [00:14:18] I will note that.
Ramit Sethi: [00:14:20] Okay. All right. I feel like family harmony has already increased 15% just from turning off Amazon notifications. Okay. The job is done. Travis, I’m curious, though, knowing that you will turn off those notifications, when you see those things come across your phone, what’s that feeling you get?
Travis: [00:14:40] Just absolute gut punching dread, like we’re going over and we’re going over and we’re going over. That’s what I feel every time.
Ramit Sethi: [00:14:51] And do you even see the amount, or is it just the icon?
Travis: [00:14:55] I see the amount.
Ramit Sethi: [00:14:56] Okay. So what’s a typical amount that you might see?
Travis: [00:14:59] Um, 20 to 40 bucks. 50 bucks. 10 to 50 bucks on a given day.
Ramit Sethi: [00:15:04] You’re feeling existential dread from seeing 20 bucks on your phone. Okay, that’s a problem.
Travis: [00:15:09] Stupid. I know. I’m feeling dread because it wasn’t– it all goes back to allocating money so that money has a job. If we have a budget that’s set or a allocation of money that says, hey, this much money is going to go to Amazon, I don’t care.
Ramit Sethi: [00:15:27] Okay. Fantastic. All right. And Travis, you said something in your application. You said we’re loose. We’re not tight right now. We’re loose with our money. When you said that, it deeply resonated with me because there are parts of my life where I want things just completely tight. I want them dialed in, whether it’s workouts or my calendar or whatever. And then when it’s important to you and you can feel it’s getting a little sloppy, you go, oh God, I just feel out of control. Is that how you feel about it?
Travis: [00:16:00] 100% true.
Ramit Sethi: [00:16:01] Travis is a born optimizer. When things aren’t in their place, it drives him nuts. And he’s also in the military, which tracks perfectly. I’m an optimizer too, so I understand how he feels. But I also know that if I let my optimizer feelings take a front seat with my finances, my life can become extremely numbers-oriented and it can be really hard for a partner to deal with. So that’s what you’re hearing when he talks about gut-punching dread.
It might sound like hyperbole to you, but to him, he genuinely feels it. It doesn’t mean it’s right. It doesn’t mean I agree with it, even though I totally get it, Travis. Doesn’t mean it’s helping his relationship, but that is how he genuinely feels.
Okay, so tightening it up or dialing it in for you would be every dollar has a job. It’s assigned to something. We agree on that. And then I don’t care about the execution of it. Is that correct?
Travis: [00:17:00] That’s correct.
Natalie: [00:17:01] I don’t have a problem doing that because I know that he wants every dollar to have a place to go. I think the problem is that, a, we don’t plan it each month, and b, we haven’t changed our allowed budget in over a year. With inflation the way it’s gone and everything else. So I think that’s a big part of why he feels the way he does. I feel it as well, but I also I’m the one shopping and seeing that the same 10 things I put in my cart a year ago are not the same price and they’re so much higher.
So I make the try to make the adjustments with our shopping and I see that, and then I try to make up for it in other ways is not spending those, we’re not going to go out to eat this week or we’re not going to get your new shoes till next month or little things like that because I’m the one going out and actually spending it and seeing the difference.
Ramit Sethi: [00:17:57] I see. Okay. And can I go out on a limb and make a guess here? You haven’t updated it in a year. Is that because something changed and you started to feel worse about money and now it’s just this thing in the closet nobody wants to really tackle?
Natalie: [00:18:16] Yeah.
Travis: [00:18:17] We’re kicking the can down the road because we haven’t figured out the principles yet that we’re violating.
Ramit Sethi: [00:18:21] And you believe the principle is the day-to-day spending.
Travis: [00:18:26] Of just allocating our money.
Ramit Sethi: [00:18:28] Okay. But why haven’t you allocated it in a year?
Travis: [00:18:34] Um. I guess, tired.
Travis: [00:18:39] Okay. That’s an honest answer. The thing is, we’re not robots. I’m not surprised you haven’t done this in a year. But I’m also not surprised that now you want to talk to somebody like me, because sometimes we need a little nudge to get it tight again.
Ramit Sethi: [00:18:55] Travis and Natalie are stressed out by money enough that they’ve come on this show in front of millions of people to share their story and their actual numbers. But notice that they haven’t updated their numbers in over a year. I got to tell you, I got a lot of compassion for people who aren’t on top of their money every single day of their lives. We have family obligations. We get busy with work or we’re confused about a certain investment term, and we need to find somebody to ask for help.
But then life gets in the way.
One of my goals for this podcast is to introduce you to couples who really want to improve their relationships with money, but for whatever reason, they’re stuck. The reasons might seem silly or trivial to you, but they are nonetheless real to them. And the truth is that each of us has something in our life where we know we should be doing better, but we’re not. That is real life.
And out of curiosity, have you had budgets before?
Natalie: [00:19:54] Mm-hmm. Yes.
Ramit Sethi: [00:19:56] And how long did those last?
Natalie: [00:19:58] Um, I feel like–
Ramit Sethi: [00:19:59] Look at Travis’s face right now. Sometimes that’s all that needs to be said. Go ahead, Natalie. How long did those last?
Natalie: [00:20:08] I don’t know if I could put a word on it, um, after that look. They didn’t last very long.
Ramit Sethi: [00:20:14] That’s shocking. I’m utterly shocked. All right. Let’s look at the numbers. The net worth– uh, okay, you know what, Natalie, I’d like for you to start with the net worth section. Just say, okay, assets, and then read me the number next to it.
Natalie: [00:20:29] Okay. Assets. 890,341.
Ramit Sethi: [00:20:34] Okay. Great. $890,000 in assets. And what do those assets include?
Natalie: [00:20:40] Includes property, income property, investments that we have.
Ramit Sethi: [00:20:44] How many properties?
Natalie: [00:20:46] Seven.
Ramit Sethi: [00:20:47] Seven properties? And you guys are arguing about $20 on Amazon. What world am I in right now? All right. We’re going to get to that. Seven properties. Are you actually cash flow positive on these?
Travis: [00:21:00] Every one.
Natalie: [00:21:00] Yes.
Ramit Sethi: [00:21:02] What am I doing here right now? Investments. What’s the next number?
Natalie: [00:21:13] 323.
Ramit Sethi: [00:21:14] Okay. All right. And of course, that does not include your properties. You count those as assets. Fine. Savings?
Natalie: [00:21:24] Uh, 119,000.
Ramit Sethi: [00:21:25] Okay. And debt?
Natalie: [00:21:26] Uh, 401.
Ramit Sethi: [00:21:28] Okay. What is that?
Natalie: [00:21:29] Mortgage. The mortgages on some of the properties.
Ramit Sethi: [00:21:31] Okay.
Travis: [00:21:32] That’s our only debt. We don’t have any debt on anything else.
Ramit Sethi: [00:21:36] All right. You guys are pretty financially conservative in that way. That’s good. So what’s that total net worth you see there?
Natalie: [00:21:43] Um, 931,000.
Ramit Sethi: [00:21:46] All right. What do you think about that number, Natalie?
Natalie: [00:21:49] I like it. I think that it’s a good number to have, but I feel like we’re crippling ourselves in our personal versus our investing or our business that we’re not as well disciplined.
Ramit Sethi: [00:22:06] I see. So your business, I can hear a lot of pride. You’ve got multiple properties. They’re all cash flow positive. I can hear that. It seems pretty dialed in. The personal side seems to be different. Is that a fair assessment?
Natalie: [00:22:21] Yes.
Travis: [00:22:21] Accurate.
Ramit Sethi: [00:22:22] All right. Fine. Great. At least we’re honest. That’s the step number one. Travis, talk to me about the income.
Travis: [00:22:29] So the income is what I make. We’re one income military family earner. That includes the housing allowance that we get because we live on base. And it also includes a, it’s called BAS, which is basic allowance for sustenance. So it’s like an extra 280 bucks that the government just throws you because I have dependents.
The 10,000, you subtract 3,400 for the housing that they put in and then take out. And so technically we have like 5,800 that they– and then we have the TSP that comes out of that, which is–
Ramit Sethi: [00:23:08] How much?
Travis: [00:23:09] 20%. So right around 1,350 a month.
Ramit Sethi: [00:23:11] Okay. So just to summarize, you make a gross amount every month of $10,523. That’s great. And do you have a pension?
Travis: [00:23:20] After 20 years, 50% of the base pay, which my base pay right now is 7,200.
Ramit Sethi: [00:23:26] 7,200 a month. And so 20 years will be when?
Travis: [00:23:33] Next year.
Natalie: [00:23:33] December.
Travis: [00:23:35] This December.
Ramit Sethi: [00:23:36] Oh, great. So you’re close to getting 50% of pay if you retire.
Travis: [00:23:41] Correct.
Ramit Sethi: [00:23:42] And when do you plan to retire, ballpark?
Travis: [00:23:44] If someone would ask me right now, probably I’ve got another three years-ish, so probably three or four years from now. I’ve already run those numbers, so it’ll just– at that point if I get 100% disability, which four tours that’ll definitely happen, but that’ll be basically $8,000 net just for waking up.
Ramit Sethi: [00:24:03] $8,000 net. That’s double what you make right now.
Travis: [00:24:07] Correct.
Ramit Sethi: [00:24:08] Okay. And that’s in three years?
Travis: [00:24:11] Yes.
Ramit Sethi: [00:24:11] You guys are making my job too easy for me.
They have seven cash flow properties and he makes good money and is likely to make even more soon. It seems like they should have plenty to be able to spend.
All right. Let’s work down the rest of it. Fixed costs. Uh, just out of curiosity, what’s that big old number in blue on fixed cost? Natalie, what do you see there?
Natalie: [00:24:34] 86%.
Ramit Sethi: [00:24:35] Now, out of curiosity, what is the recommended guideline for that?
Travis: [00:24:38] I believe it’s 50 to 60%.
Ramit Sethi: [00:24:41] 50 to 60%. You guys are at 86%. You’re actually way over that because you should add your mortgage or your rent in there. So it’s like, I don’t know, 100. Basically, you’re spending– it’s 100%.
Natalie: [00:24:54] Yeah.
Ramit Sethi: [00:24:55] What does that tell you, that your fixed costs are essentially 100% of your take home?
Travis: [00:25:04] It tells me that I have no guilt-free spending.
Ramit Sethi: [00:25:07] That is correct. And what was that, Natalie?
Natalie: [00:25:10] Just that we were spending too much money.
Ramit Sethi: [00:25:13] Hmm. Maybe. I’m not sure I would take that conclusion. You may be spending too much money, yes, but really, the problem is a structural problem which is your fixed costs are just too high. So let’s just take a breath on that. Hearing that, what is that feel like to you, Natalie?
Natalie: [00:25:36] It’s sad.
Ramit Sethi: [00:25:37] Why?
Natalie: [00:25:38] It’s sad because how can we succeed if our plan is a failure? So no wonder that we mumble under our breaths or the sigh happens when he gets a text from Amazon or it’s like, why would we not be surprised? Because it’s exactly what we planned for.
Ramit Sethi: [00:25:57] Now that is very accurate. Travis, what about you?
Travis: [00:26:03] Um, it’s frustrating.
Ramit Sethi: [00:26:06] The final section of the conscious spending plan is your guilt-free spending at -29%. I don’t know if I’ve ever seen a number like that on a conscious spending plan.
Travis: [00:26:16] You’re welcome.
Ramit Sethi: [00:26:16] You’re in the Hall of Fame. So what does that mean? -29%, what does that mean to you?
Travis: [00:26:23] That means our kids are getting shoes, and jerseys, and birthday parties, and everything else out of our savings.
Ramit Sethi: [00:26:30] Ah. So are you spending down your savings every month?
Natalie: [00:26:36] Yes.
Ramit Sethi: [00:26:37] Okay. And how does that feel to both of you?
Natalie: [00:26:40] Awful.
Travis: [00:26:40] And I’m now having income of, my paycheck is 55, $6,000 a month. Well, then I should be employing the extra money either through securities, paying down debt, find another investment property. Something. Making that money make more money.
Ramit Sethi: [00:27:00] Okay. What about spending some of it?
Travis: [00:27:03] Um, sure. Yeah.
Ramit Sethi: [00:27:08] I don’t know if you really believe that.
Travis: [00:27:11] Spending some of that money would be like celebrating a win. As a marine, I’m driven. That’s a mission accomplished. It is crushed. It’s devastated. On to the next mission. The joy that I get is not celebrated because I’m focusing on the next target, the next mission, and the next property or the next– moving my TSP percentages around between the different funds to make sure that we’re maximizing.
And it’s just like always moving forward. So I don’t celebrate that. I just got promoted to Chief Officer 4 and we got our paycheck and it was backdated a month. And I’m like, all right, that’s an extra $5,000. Put it over here instead of, let’s go and get ice cream for the day. I need to be better about that.
Ramit Sethi: [00:27:59] Okay. Natalie, you want to chime in here?
Natalie: [00:28:03] I 100% agree.
Ramit Sethi: [00:28:05] Yeah, I agree. But I also agree that celebrating is a really important skill. And it’s not just a skill with money. It’s a skill with family. When you really look back on your family, you don’t remember the type of salt your mom or dad used. You remember the rituals. You remember the random celebrations, eating dinner together or going out for ice cream.
There’s an art and a science to living a rich life. The science is what most people focus on. They think money is strictly about the numbers. And it’s true. The basic nuts and bolts of money are a key part of a rich life. But that’s where most people stop. And you can hear Travis admitting that. He even says he wants to use money to what? To buy more investments?
There’s a lack of understanding the psychology of money, which is the second key skill in a rich life. That means understanding how you behave with money, how you talk about money, and how you feel about money. Travis won’t celebrate their financial wins. That’s his story. And now that you understand this lens that he uses, you can understand why he thought that Natalie overspent on their son’s birthday party.
You can even understand why when he learned that she didn’t, he quickly pivoted to another worry about money. I dig into their CSP and I notice that they invest 29% of their take home pay, and they only spend $50 a month for vacation. That’s for a family of six.
It’s a little unusual that you only put $50 a month aside considering you have seven cash flow positive properties. Anyone else here think that’s a little weird?
Travis: [00:30:00] Well, there’s history behind why we– we lost six properties in the recession 20 years ago. And I was deployed. Natalie was a young mother doing all the property management stuff on her own. And we ended up having to short sell them. And regardless of how much money we had saved, it didn’t matter. And so we were doing the classic Dave Ramsey beans and rice because we had nothing else.
And you know what, we short sold the last house in 2011 after my fourth deployment. And it was like that was that was a big wound for us. There’s still that lingering thing of like, we don’t have enough money saved. We got to save more money because we don’t know what the future’s going to hold. And even though we have all of our stuff for CapEx, we’re a year plus, that money just comes into the account and sits there because–
Natalie: [00:31:00] Something might happen. We need to have it.
Travis: [00:31:03] Yeah.
Natalie: [00:31:04] I don’t feel scared about it. Travis was deployed every other year, and I was the one having kids and dealing with what happened in ’08. So I’m not scared. I just want to have a plan for it. And I think that’s why Travis is a lot more aggressive in his investing to where I want to make sure that we do have six months reserved for each of the properties that the renters move out or if something were to happen or we need a new roof, there’s that number that I’d like to see in the bank to feel comfortable about what we have.
Because that’s why things crumbled in ’08. But it taught me a lot about, I always want to make sure that there’s enough in case something happens.
Ramit Sethi: [00:31:39] And how much is enough for you now?
Natalie: [00:31:44] We have to have at least 40 to 50,000 in the bank just for our family.
Ramit Sethi: [00:31:49] Okay. You have triple that.
Natalie: [00:31:51] Minimum.
Ramit Sethi: [00:31:52] Okay. You have that. Is it enough?
Natalie: [00:31:56] It is unless I start taking from it every month.
Ramit Sethi: [00:32:03] Well, you said you need 40 to 50,000 minimum. You have 119,000 in savings. Assuming you take $1,000 a month, you could go many, many years basically the rest of your life before you got down to 50,000. Is that enough? Why did it get so quiet in here?
Natalie: [00:32:26] Yeah.
Travis: [00:32:26] Yeah.
Ramit Sethi: [00:32:28] That’s weird.
Natalie: [00:32:29] Yeah.
Ramit Sethi: [00:32:31] What do you think?
Natalie: [00:32:32] I think it could be enough.
Ramit Sethi: [00:32:35] But does it feel like enough?
Natalie: [00:32:38] No. I’d like to take 30,000 and put it under my mattress. So then that takes us down to about 60,000 or 70,000. And I’d like to go and buy another 30,000 in gold coins and have that in case the economy blows up. I’ve got all these things in my head to really make me feel completely safe and to travel.
Ramit Sethi: [00:32:55] Hold on. Take me out of your head because putting money under your mattress and buying $30,000 of gold, I can tell you right now is not going to change the way you feel. Do you believe me?
Natalie: [00:33:11] I can see that. I feel like– yes, I guess so. I guess because– I feel like to me it’s more diversified. And then I feel like, okay, if one area falls–
Ramit Sethi: [00:33:22] That’s up here. Diversify. You are diversified. You have cash. You have investments. You have real estate. You’re diversified. Take me out of here and take me to here. What would safe feel like?
Natalie: [00:33:42] If we had money left in the account before the next paycheck came.
Ramit Sethi: [00:33:48] Oh. And why would that feel safe?
Natalie: [00:33:51] Because. If that was the case, then I’d feel like we were telling our money where to go instead of our money telling us.
Ramit Sethi: [00:34:03] It’s up here. But when we get to here, it’s actually quite simple. It’s, I want my husband to trust me, and maybe I want to have the freedom to be able to breathe, to go for a walk, to get my nails done, to not deplete our savings account and take from it every month. Anything else?
Natalie: [00:34:25] I think that’s right on.
Ramit Sethi: [00:34:27] Isn’t this interesting? Natalie could have gone the rest of her life believing that she needed another $50,000 to feel safe. But the way you feel about money is highly uncorrelated with the amount you have in the bank. You heard it yourself. First, she said she needed $50,000 to feel safe. I said, “You have that.” Then she said, “Minimum.” I said, “You have three times that.” Then she pivoted to, “Well, I don’t want to draw from it.” I said,” You can actually draw from it for decades.”
Then she said, “I’d like to buy gold and stick cash under a mattress.” And then she wanted to talk about diversification. I’m going to say something respectful here. Natalie didn’t even really know what she was saying. This is nothing against Natalie personally, but we as humans are natural storytellers. We really think we know what is going to make us feel a certain way.
Of course, in our culture, especially in the West, we are individualistic. We believe we are in control of ourselves, but we are also storytellers. Our minds are what’s called adaptive. If something doesn’t make sense, we will naturally create a story to make it make sense. That’s what children do when you hear them talking to their toys, trying to make sense of the world.
But guess what, adults do it, too. Natalie genuinely believes that she needs all kinds of financial instruments in order to feel safe. She was sitting there talking about diversification, but none of that is actually true. It’s like me saying, excuse me, my car is on fire. I think I need to create a spreadsheet comparing alternative options for a new car that I might buy. But I definitely want to factor in depreciation.
No, I need a fire extinguisher. And sometimes you need somebody to help you understand what you really need. What Natalie needs is to know that her husband trusts her. And she needs to be able to go and buy something nice every once in a while without worrying.
Travis: [00:36:21] The point of life is to enjoy. I want to create a legacy of something for my posterity, something that allows my kids and their kids and their kids the opportunity to enjoy life. And money allows the life to be achievable because it’s a tool. I don’t need, my goal is to make $10 million. That’s not my goal. My goal is to live a selfless and selfish life by impacting communities locally and abroad. That’s my burning why.
That’s what I want to do. I want to go with my kids on summer break when they’re out of college and go somewhere and build a house in Mexico. These are events and episodes. We’ve backed off of Christmas gifts under the tree because we want to go and have an experience. We took the kids to Maui. Was that last year or 2020?
Natalie: [00:37:16] 2020.
Travis: [00:37:17] We went to Maui. A part of our vacation there, we went and did service for an hour, two hours at this woman’s house at the local church. I’m like, “Hey, who in your congregation needs help”? And so we went to some random woman’s house, mowed her grasp, picked her yard, she ordered pizza. We hung out. Never met the woman in our life, but we laughed and it was a great experience. That’s what we want to teach our kids. We want them to have it.
And we learned that lesson because we went to Thailand and we saw a family of 12 living in a 10 by 10 corrugated metal building. There’s so many things that our kids have been exposed to. Money’s not the end all. And we live in Orange County where it’s very easy for high school kids to drive their parents’ Tesla or their dad’s Raptor to high school. We get it. But that’s not what we’re trying to do.
Ramit Sethi: [00:38:10] So many things I love about what you just said. You have a personal vision. You’ve clearly thought about it. That’s powerful. That’s leadership. I mean, what you did on vacation is amazing. Just that alone, I hope, inspires every single person who’s listening and watching this to realize that their vacations can have even more of layers to it than just eating and seeing things. I think that’s incredible.
I also recognize when you said that we’ve backed off of Christmas gifts because we want to spend more on other things. Totally aligns with my philosophy. Spend extravagantly on the things you love and cut costs mercilessly on the things you don’t. If I were to talk to your kids right now and I were to ask them, what lessons have you learned about money from your parents, what would they say?
Natalie: [00:39:03] You invest it.
Travis: [00:39:06] You invest it.
Ramit Sethi: [00:39:07] Okay. What else?
Travis: [00:39:10] It’s a really good question. I hope not to fear it.
Natalie: [00:39:18] I know that the kids, they’ve heard Travis and I talk about different ways of spending or investing, and they know that we have difference of opinions on some of it.
Ramit Sethi: [00:39:28] How do they know that?
Natalie: [00:39:30] We involve them in some of it.
Ramit Sethi: [00:39:31] Okay, good.
Natalie: [00:39:32] I ask them how they feel about it or what they’d do.
Ramit Sethi: [00:39:34] Wow. Very advanced. That’s very impressive. Most people don’t even talk about money. And to involve their kids, wow, that’s great.
Travis: [00:39:43] I know that they’ve said on occasion, like, hey, are we poor? Why can’t we go do that? Why don’t we have– and that might be reinforced by me because we are surrounded by seven and eight-digit earners. And when they find out that their friends are going here, they’re like, “Hey, can we go do that?” I’m like, “No, we can’t afford to do that.”
And as a father, as a provider of the family, that’s far worse than ever getting an Amazon text message. It touches me to the very core of a man, and provider, and a patriarch of like, you should never have to say that. And so that is one of my daily drivers so that you don’t have to say that to your kids.
Ramit Sethi: [00:40:39] Well, you’re your youngest is 11 years old. I mean, they’re leaving soon enough. And would you say that you’ve taught them good values?
Travis: [00:40:53] Yes.
Ramit Sethi: [00:40:55] Would you say that you’ve taught them how to make their way in the world?
Travis: [00:41:00] Yes.
Ramit Sethi: [00:41:01] Okay. So I don’t think they need seven figures because they will become financially independent. I have no doubt about that. You’re going to start them off young, you’re already teaching them about cash flow. Great. I just think it would be a tragedy if they end up pursuing the very thing that you both do not want to teach them, which is the blind pursuit of money without realizing that your rich life is actually lived along the journey not at the destination itself.
Natalie: [00:41:36] There’s so much truth to that. We teach them about enjoying the journey in so many other things, but we’re really not living it right now.
Travis: [00:41:48] I think that my struggle with that is where does the grind stop and where does the enjoyment begin? And I’m not talking about enjoying the little things, the ice cream or the dinner after or something. I’m not talking about that. But I’m saying, we know like we have our cash flow amount we want to have each month, preferably from real estate. Because it’s now so we don’t have to wait till I’m 59 to withdraw.
While that has a monetary amount, once we get to the monetary amount, we’re good. In my opinion, I don’t need to keep– it’s not a number of doors. It’s not a seven-digit number that I need to get to. It’s just like, hey, my finances are this much, if I can make that much with the real estate cash flow, then the paper assets, the pension, the retirement, all that stuff is just all gravy. All gravy. And then the gravy becomes the rich life.
Ramit Sethi: [00:43:00] Let me ask it a different way. You asked a really great question. When does the grind stop? What a fantastic question. If you have been grinding your whole life and it has gotten you to this where you’re very successful, it’s not just a intellectual question, it is part of you. So let me ask you. If I were in the military and I were to say to you, when does the training stop and the competence start, what would your answer be?
Travis: [00:43:33] Training never stops. Ever. Never, ever.
Ramit Sethi: [00:43:37] Exactly. So nobody’s going to stop the grind from you. I can’t take it out of you. I cannot extract it. What I can do is to help you add on another layer to your identity. And that would be enjoyment. The rich life. Using it now while continuing to grind. And it may turn out over time that one layer becomes a little bit larger than the other. I actually hope that you can add that layer on at this point in your life.
But the fact is you’re never going to turn that grind off. It’s you. And that’s okay. You’re picking up clues. Your financial friend, these numbers, your pension. And it’s starting to dawn on you that, oh, my God, I did it, but what now? One does not come after the other. They are beautifully intertwined.
If I can share one message with you, it’s that I want you to live your rich life today and tomorrow. You and I already intuitively understand that some things must be done at the same time. if you’re cooking, you have to add in peppers and onions and– ah God, I don’t even know what this analogy, where it’s going. Let’s take kids. Let’s take kids as spoken by a non-parent.
Listen, you don’t first teach your kids how to read and then later teach them how to be a good person. You do it all at the same time. Yes, it’s hard. That’s how it’s supposed to be. We intuitively understand this. But when it comes to money, we stop listening to our intuition and we develop magical thinking, the kind that says, first, I’ll invest, later, I’ll enjoy it. Wrong. You might get sick. Your partner or your family might get sick.
You’ll definitely never develop the muscle of living a rich life until you’re in your 60s or 70s. And by then, for most people, it’s too late. I’m not telling you anything revolutionary here. What I am asking you to do is to connect your money habits with the other parts of life where you intuitively understand that you have to do them today. Live your rich life today and live an even richer life tomorrow. This is important.
Let’s talk about the next few years, because you’ve got this big income jump that will be coming from the pension. You’ve got these cash flow properties. Kids going out of the household. Whether or not you help them with college, the kids are going to be leaving the household at some point. Three years from now, that income jumps up. You could wait.
It would be very typical to grind and then wait and you go, ah, okay, we really made it now. We got the properties. Maybe we acquired another one. We got the pension, and this and that. And I think if I left you alone and we stopped this call right now, you would do that and you would do it very successfully. Fair?
Travis: [00:46:35] Fair.
Ramit Sethi: [00:46:35] Okay. Here’s my question for you. Can we change that trajectory? You’re going to get that pension three years from now one way or another. It’s going to happen. What would it look like if you were to actually love the journey from here until then? I’m talking about both of you. Natalie, let’s start with you. What would it look like, financially speaking, if you were to love the next three years instead of merely be okay?
Natalie: [00:47:07] Yeah. I think it would look like making money available to create the memories before the people we want to make the memories with are gone.
Ramit Sethi: [00:47:19] Those are your kids?
Natalie: [00:47:20] Yeah.
Ramit Sethi: [00:47:20] Okay. I love that.
Natalie: [00:47:23] I think learning to communicate better with Travis about our common goal as to what are we doing, what are we spending, what do we want to– I just think that there’s a lack of detailed communication that we’re missing.
Ramit Sethi: [00:47:45] Okay. Those two would be good. What about for you personally? Just you.
Natalie: [00:47:49] I’ll probably have my nails done.
Ramit Sethi: [00:47:51] Thank you.
Natalie: [00:47:52] I would schedule time to do the things that I love and fill the rest in with all the things that I need to do.
Ramit Sethi: [00:48:03] How much time per week?
Natalie: [00:48:05] For myself, I think I should have at least a couple of hours a day.
Ramit Sethi: [00:48:09] A couple of hours a day. Okay. All right.Ten hours a week. Okay. And a couple of hours a day. Let’s say a Monday. On Monday, what would those couple hours be?
Natalie: [00:48:18] I would love to make time for myself to do something enjoyable, whether it is a beach walk, or discovering a new hike, or sitting in silence in the backyard. I love silence. I love just listening to the world. And I don’t do that.
Ramit Sethi: [00:48:36] It’s a beautiful vision. You two are clearly very aligned in so many parts of life. Just this money thing that’s gotten a little loose. I totally get it. But it is so clear that you’re actually both generally pointing the same direction. Love having this conversation because we can tweak a few things, change the way you look at the world and money, and it just brings you, like a magnet, two magnets coming together as they should.
It’s a really a beautiful illustration of what money can do. Part of the inability for the two of you to talk about money and, Natalie, for you to not feel like you’re failing every single week and to have to preemptively call your husband and say, “Hey, I just bought something for Amazon. Don’t freak out.” That’s a structural issue. It doesn’t mean you’re bad people. It just means that the structure you’ve set up is not serving you.
It’s actually reducing you down to a series of tactical maneuvers. One person orders something. Natalie, you order something with the best intentions in mind, but then you have to call him. He’s already got this existential dread in his chest. And both of you are just like, ah. And by the way, the funniest part is this is all over $20. I’m like, huh? That’s what the system is accomplishing. It’s actually making you dream smaller. So let’s change that. What do you think the problem is here?
Travis: [00:50:01] I think it’s what Natalie brought up is that we need to reduce the amount we invest.
Ramit Sethi: [00:50:09] Maybe.
Travis: [00:50:11] That is a course of action. It may not be the only one, but it is worth mentioning.
Ramit Sethi: [00:50:16] Very good. I love that, Travis. Let’s put them all out on the table, no matter how crazy. And then we can decide. Yes, you can reduce your investments, which are currently 29% of take home. Very impressive. Absolutely. Okay. That’s one thing you could do. Your savings are 14% of take home. Again, let’s–
Everybody listening, they’re going, how is this guy telling them to consider reducing their investments? Let’s not forget, you have a pension in three years that’s going to pay you 50% of your income. And you’ve got seven income producing properties. So your financial situation is a little different than other people’s. We got to take that into account.
Sometimes it blows people’s minds to hear that you can over-save or you can over-invest. And it’s true. It’s relatively rare in our culture, but it’s a real problem for some people. And the truth is there is virtually nothing that caters to people in this scenario. What I’m really trying to teach you through this podcast is that most of society teaches you a one-dimensional view of money. Save, save, save. Invest, invest, invest.
But once you understand money, it has nuance. There’s an art and a science to it. There’s a rhythm to it. There are rules. And sometimes you can even break those rules. Let me give you a few examples. There are times where you should invest aggressively, but there are other times where you can ease off the gas, like the first year of having kids.
Or in Travis and Natalie’s case, when you have more than enough and $20 purchases are causing relationship problems. The advanced level of personal finance is not investing in private equity and venture capital. It’s knowing how and when to vary the basic fundamentals of money to suit your needs today.
All right. What are the other potential strategies? Reduce the investments. Reduce the savings goals. What else?
Travis: [00:52:17] We could take some of the net income from our income properties and offset our income. We could increase our income from the rental properties.
Ramit Sethi: [00:52:25] Hold on. Let me get this straight. You can take this very profitable business you’ve created, buying seven properties, being very disciplined, and you can actually use the money to make your household run more smoothly? What do you think?
Travis: [00:52:40] Say it ain’t so.
Ramit Sethi: [00:52:42] Sounds like a pretty good idea to me.
Ramit Sethi: [00:52:44] I actually think that those three things right there, those levers are your key levers. When I looked at your conscious spending plan, the first thing that jumped out to me was that your gross monthly income was 10k, and your net monthly income was 4,700. I now understand that you really should probably deduct your real estate costs and move them to fixed costs and all that stuff. But the point is, when I look at– having a family of six, it’s tough on $7,000. It’s tough.
It’s just very tough. Especially then I find out you live in Southern California. All that stuff is tough. So if you didn’t have the pension, the real estate, we’d be having a very different type of conversation. We’d be seriously looking at the grocery bill. But the fact that you’ve got basically the secret treasure over here, to me, the obvious answer is to start using it.
Travis: [00:53:43] There is a method to why we are investing the way, or at least why we have been. It doesn’t say that we’re too rigid and not expanding those options.
Ramit Sethi: [00:53:53] We want to actually make today magical and enjoyable. That’s the purpose of money.
Travis: [00:53:59] Yeah.
Natalie: [00:54:01] I think it sounds wonderful.
Travis: [00:54:03] It would feel good to just leave the house every day to go to work and knowing that not only is our bank account growing, but we’re growing closer together with–
Natalie: [00:54:19] I would love to plan our future in a positive way together, and I’m more excited about it now than I ever have been.
Travis: [00:54:28] Ditto.
Ramit Sethi: [00:54:29] Here’s what Natalie and Travis sent me in a follow-up. “Our biggest takeaway from the call was that Ramit actually asked us to invest less, build the skill of spending money meaningfully together, give trust by not asking about spending. What surprised us most was that we did not recognize there was a structure problem. We can grind and enjoy symbiotically. We also updated our CSP.
“The biggest changes we made were, number one, did not add any new income to investing. Number two, we moved our insurance to only renters insurance. The business pays all our other insurance payments. Number three, added 15% to miscellaneous on our fixed costs. Number four, added savings goals for vacation and gifts.”
Natalie went and got her nails done the day after the call. Here’s the calendar block she created for herself. Every night, meditate and gratitude journal before bed. Monday, 8:30 to 10:00, workout, lunch with friends at noon, family trip to Tidepools. Tuesday, 8:30 to 10:00, workout, date night with Travis. Wednesday, beach walk 8:30 to 10:00. Thursday, 8:30 to 10:00, workout. Friday, 8:30 to 10:00. workout, nail appointment at 11:00.
Well, Travis and Natalie, fantastic work. Thank you so much for appearing on this podcast and sharing your story with us. For everybody listening, I have three ways that you can help me and also get help for yourself. The first one, this is strictly for me, go on Apple Podcasts and rate and review this podcast. It helps a lot and I appreciate every time you leave a review.
Second, you can watch this episode in full on YouTube. Just go there, search for my name and you will see the body language and the facial expressions of Natalie and Travis, and all of our guests. And number three, you can design your rich life on your own. You can get help with my book or you can get the most help directly from me in my money coaching program. Go to iwt.com/moneycoaching. Join a community of hundreds of other people as well as me. I do a live call every single month where I will answer your questions. That’s iwt.com/moneycoaching.