Episode 51. “We went bankrupt, but I still have no boundaries with money”

Katie and Cal

Date: July 12, 2022

Katie and Cal are in their mid-twenties and, after moving around a bit, they live back home in Alaska with their young children. They bring in about $100k a year and have a good chunk of debt, about $25k of that they transferred to Katie’s mom for a better interest rate—a move which has hopelessly entangled her in their finances.

What do you do when a family member who means well (they all do) oversteps the line? Listen in to hear how Katie and Cal come to terms with the truth—that her mom’s influence has got to go—and how they might start to enact that very difficult change in their lives.

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Episode Transcript

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Katie:  [00:00:00] He felt like I didn’t trust him to do that, and that I wouldn’t even have to say anything. Seemed like it was a problem, and then it blew up into this huge thing. 

Ramit Sethi:  [00:00:11] So did you trust him?

Katie:  [00:0:15] Not really. But I wouldn’t trust myself either. 

Ramit Sethi:  [00:00:18] Cal, what do you hear when she says that?

Cal:  [00:00:20] I hear an attack. I feel judged. And this have been thrust upon me. When it comes to big financial decisions, I think now, we get cold feet really fast, really easily. And we’re very nervous and anxious when it comes to making large or big decisions. 

Katie:  [00:00:49] That leads us into the exact cycle that we’re in already. We’re not equipped to make the decision. So we refer back to my mom, and then she makes a decision for us. 

Ramit Sethi:  [00:00:57] Katie, have you ever told your mom no?

Katie:  [00:01:01] I’ve tried, and it doesn’t work out very well. I’m trying to have better boundaries.

Ramit Sethi:  [00:01:13] Today, I’m speaking with Cal and Katie. They’re in their mid-20s and they make over $100,000 a year. After a few years of moving around, they now live in Alaska. And their situation, as many started with a Target run. They wrote me because they’d had a big fight over a trip to Target. But as I speak to them, I learned that there’s a lack of trust, that Katie is the one who manages money on a day-to-day basis, and Cal ignores it. Until recently, he has traveled for several weeks a month and he comes back, hands over his paycheck, spends a little time with the family, and then goes back to work.

As you can imagine, this doesn’t produce a really healthy way of dealing with money. And then it gets even more complicated. Katie feels alone. She wishes she had some support. And so she turns to her mom. Her mom gives– shall we say not– very good financial advice, and in fact, has saddled them with tens of thousands of dollars of debt. Today’s conversation was very challenging. At times, I had to ask them to focus on my question. And other times, they seem to be spinning over the same stories, unsure of how to get out of it. But that’s what I’m here for.

Ramit Sethi:  [00:02:47] And so as you listen today, please stick with it. I think there are some really valuable insights that hopefully, you will hear with Cal and Katie. Cal and Katie don’t know how to talk to each other about money. If you are in that situation, if you have to struggle to know how to get on the same page with your partner about money, I put together some conversation starters for you, some word-for-word scripts that you can use to have a really positive conversation about money. You can get those by going to iwt.com/episode51. That’s iwt.com/episode51. So let’s get into Cal and Katie’s story. And remember to stay until the end to hear their follow-up from this conversation. I’m Ramit Sethi, and this is I Will Teach You To Be Rich. 

[Interview] 

Ramit Sethi [00:03:51] Katie, I understand that recently Cal came home from work and he wanted to go to Target. Can you tell me what happened? 

Katie:  [00:03:58] I was doing my hair in the bathroom, which is at the opposite end from where he was in the living room. And he was with the kids. And he had come home, and he had a list of things that he had kept track of when he was away that he wanted to pick up at Target. And I instantly got really anxious and asked if he could go and do the app where you can just shop from your phone, put everything in your car, and then just check out and drive there and pick it up because I feel like whenever one of us goes to the store, we end up picking up way more than what was on our list, especially if the kids are involved. 

And so he was going to bring the kids to me. I think I had plans that day. And so he was going to bring the kids and it sounded like a recipe for disaster. And I was like, can you do that? But then he got upset because he wanted to go in person and actually pick out his items. And he felt like I didn’t trust him to do that and be concise and that I would even have to say anything. Seemed like it was a problem, and then it blew up into this huge thing.

Ramit Sethi:  [00:05:10] So did you trust him?

Katie:  [00:05:14] Not really, but not because it’s only him. It’s like, I wouldn’t trust myself either. I primarily use the app because it’s a way of having self-control, which I feel like it’s something that we both have a really hard time with. And so I feel like if he told me that, I wouldn’t get upset because I’m like, yeah, you’re right. I would probably make an impulsive decision and buy something we don’t really need. But I felt like he wasn’t being understanding of my perspective in that situation. But I guess I also feel really guilty because he had just gotten home, and these are things that he wanted to get. So it’s just a hard scenario there.

Ramit Sethi:  [00:05:55] Okay. So, Cal, paint the picture from your perspective. You came home after being away for two weeks. And was this the next day that you wanted to go to Target?

Cal:  [00:06:07] I can’t recall if it was necessarily the– 

Katie:  [00:06:10] It was the same day. 

Cal:  [00:06:11] — immediately the next day or the same day, but regardless of circumstances of being just away for two weeks, I don’t necessarily want to be home or shop online ever. I haven’t been a proponent of order online, go pick up. Katie definitely is more so into that. Not that I don’t like it, definitely it can be convenient. But I was like, well, hey, it’s a nice day. I want to go with the kids, get out of the house, take them have fun. Maybe they’re excited to see me. I want to go in person. 

Ramit Sethi:  [00:06:45] What did she say to you? What do you remember when you brought it up, how did you bring it up?

Cal:  [00:06:52] I probably was a little brushed, [inaudible 00:06:57] I’d imagine. Most likely it’d something along the lines of, hey, we’re going to go to Target and make a Target run. We’re going to go get XYZ. And that devolved into, oh, you’re probably going to get ABC as well. I was like, well, no, I said, I’m going to get XYZ. 

Ramit Sethi:  [00:07:14] Wait. What items are we talking about here? What is XYZ that you had on your list?

Cal:  [00:07:20] It’s already been– 

Katie:  [00:07:22] I remember. 

Ramit Sethi:  [00:07:23] Tell me. 

Cal:  [00:07:23] I can’t remember. 

Katie:  [00:07:25]  He wanted, which is very reasonable, XYZ is reasonable, XYZ is new body wash, a t-shirt, and I think a belt, something very reasonable. 

Ramit Sethi:  [00:07:34] Okay. And, Katie, what were you afraid that he was also going to get?

Katie:  [00:07:41] ABC would be like stuff for the kids, toys that they saw. We just have a really hard time saying no. Snacks that we don’t need.

Ramit Sethi:  [00:07:50] What kind of snacks?

Katie:  [00:07:52] Junk food and stuff like that.

Ramit Sethi:  [00:07:55] Like what? 

Katie:  [00:07:56] I don’t even know. 

Ramit Sethi:  [00:07:57] Why are you guys doing so cagey with your food? Just tell me. I want to know the details. 

Katie:  [00:08:00] Well, I’m trying to think because our– 

Cal:  [00:08:03] Our son’s a very good negotiator. And he will convince us to get everything under the moon.

Katie:  [00:08:08]  

Literally anything he sees really, like candy. 

Ramit Sethi:  [00:08:10] Your son the four-year-old?

[Narration]

Ramit Sethi:  [00:08:12] Whoa. Big, big clue right there. The four-year-old seems to run things around the house, which causes them to fight about Target, and probably many other things. I meet a lot of couples like this. They would probably spend their entire lives fighting about Target. But that’s just a symptom. The root cause is so much deeper. And I’m already starting to guess that it is a lack of boundaries. Let’s see how else this manifests itself with Cal and Katie.

[Interview]

Ramit Sethi:  [00:08:50] So you have a problem saying no to your children. Do you think it’s a problem? Katie is saying yes with her head. Cal, do you think it’s a problem?

Cal:  [00:09:03] It can be. 

Ramit Sethi:  [00:09:05] Well, it’s a yes or no question. 

Cal:  [00:09:06] Yes. 

Ramit Sethi:  [00:09:07] Okay. All right, fine. So you were concerned that he was going to buy a bunch of candy and toys and stuff for the kids? 

Cal:  [00:09:15] Well, I definitely felt unheard. I said, hey, I’m going to only get what I need. I didn’t say I was going to splurge and buy the kids whatever they wanted. So definitely it made me a little upset.

Katie:  [00:09:32] I think the problem with the exchange was that it got really heated really quickly, but I felt like it wasn’t me necessarily giving out the rules. It was more of like, hey, be mindful of this. I feel like I’m just trying to– because I know that I need that reminder sometimes, so I felt like I was trying to be reminding, but he took it as more of authoritative I guess.

Ramit Sethi:  [00:09:58]  And if you were pouring a glass of water, Katie, every morning and every morning Cal said, be careful, you might splash that water on the floor. How would you feel after the first day, the first month, the first year of hearing that?

Katie:  [00:10:13] Appreciated.

Ramit Sethi:  [00:10:16] But what’s the real issue here? I don’t really think it’s Target. I don’t think it’s the jelly beans that you’re going to buy for your son. So give me another example. 

Katie:  [00:10:26] A more recent example is like, I will be checking the bank accounts and checking the budgets and stuff, and I’ll make a comment, like, wow, we spent all of our month’s budget in two weeks. It’s not even been halfway through the month. And he’ll just get frustrated that I brought it up. He’s like, why do we do this? And it’s like, it’s not helpful. And he gets upset that I brought it up. And he feels like I’m blaming him by just mentioning it. It’s saying like, it’s his fault. 

Ramit Sethi:  [00:10:58] Cal, what do you hear when she says that?

Cal:  [00:11:04] I hear an attack. I feel judged and this burden thrust upon me, like, hey, here it is. Figure it out. Deal with it. Here’s all the weight of that problem. 

Ramit Sethi:  [00:11:20] I see. And what does that feel like to you? 

Cal:  [00:11:24] Immense pressure. It feels frustrating. I’m trying to find the words. It’s just hard, too much to handle all at once. I just got home, I want to decompress, I want to spend time with my wife, spend time with my kids without feeling the burdens of life, not necessarily to shelve it and to not think about it, but just have a moment of rest. I just got off of working every day, 12 hours a day, for two weeks. I wanted a moment of rest with my wife and with my kids.

[Narration] 

Ramit Sethi:  [00:12:08] This example actually sheds a lot of light on what is probably going on with Cal and Katie as it relates to their money. Cal totally disconnected from money. In fact, he physically leaves to go to work for several weeks a month, comes back, doesn’t want to talk about anything, just wants to spend time with his family. 

Katie is managing things on a day-to-day basis, highly involved, checking apps all the time, emotionally invested to the point of feeling anxious, feeling alone because Cal is not engaging with the money. And so she starts to try to control things. As soon as she sees him, she’s saying, what about this, what about that? Don’t go to Target. You’re going to spend too much. Our four-year-old is going to make you buy toys and I don’t trust you to say no.

Frustrating to listen to, but I feel a lot of compassion for the two of them. There are a lot of couples where one person is the one in charge of money. And oftentimes they find themselves chasing the other person, just wishing that they would actually care about money a little. And they don’t usually come out and say that. They don’t usually come out and say, I feel alone. I need a partner in this. They will usually say things like, why did you spend so much money on that? How could you do that? We’re running out of money.

And you can understand that. They’re frustrated, they’re anxious, they’re nervous. It’s hard to know how to have these types of conversations. So let’s give them a little bit of grace. This is why, by the way, I created that conversation guide, iwt.com/episode51. There are very specific word-for-word scripts you can use with your partner to change the way that the two of you talk about money. Instead of attacking or running away, you can have these constructive conversations and start to shift the way that you both feel and act around money. So check those scripts out, iwt.com/episode51.

[Interview] 

Ramit Sethi:  [00:14:23] So you got married at 20. And you mentioned that the two of you incurred a lot of debt. Walk me through that. 

Katie:  [00:14:31]  The first thing that happened was right before we got married, Cal and I decided to take the savings that his parents had saved for him his whole life and buy a car with it, instead of investing it, instead of saving it for our house. And then we got almost 8,000, $10,000 from our wedding a couple of months later and we spent all of that. We didn’t think to save it. We didn’t think to do anything with it. 

Ramit Sethi:  [00:14:58] What did you spend it on?

Katie:  [00:15:00] I don’t even remember. That’s the problem even till today. It just goes. It’s eating out. It’s buying things– 

Cal:  [00:15:07] Just living. 

Katie:  [00:15:09] Just living. 

Ramit Sethi:  [00:15:10] So you bought the car, you took the 8,000 to 10,000 from your wedding and just spent it. What else happened?

Katie:  [00:15:16] Then we moved to Minneapolis and we got a credit card and furnished our place with it. And then I still had my car that my parents had paid off and given to me from high school and got tucked into trading it in to get a lease on a newer car. 

Ramit Sethi:  [00:15:41] Your buddy Chet at the car lot told you, oh– 

Cal:  [00:15:44] He was a nice salesman. 

Katie:  [00:15:46] She was nice.  

Ramit Sethi:  [00:15:46] They’re all very nice in their ill-fitting suits. What did he tell you? Listen, folks, people, what do you want to pay? What kind of payments are you looking for? 299? Oh, 279? We could make that work for you. Don’t you worry about it, something like that? 

Katie:  [00:16:02] It was something $185 but that’s because we were leasing it and not actually financing it. And we didn’t really understand that. And so we were like, sure, yeah, 185, that’s really cheap. And so we trade in my car that was paid for. You’re going to find in our story that cars and trucks are literally our kryptonite. 

Ramit Sethi:  [00:16:25] Oh, really? Wow, that is shocking. 

Cal:  [00:16:27] What a surprise! 

Ramit Sethi:  [00:16:28] What a surprise! 

Katie:  [00:16:28] It starts here. It starts at the first one. 

Ramit Sethi:  [00:16:32] Let’s walk through the litany of these automobiles. 

Katie:  [00:16:33] No, you’re going to be shocked with how many different automobiles we’ve owned in our very short amount of time together. There was a 2007 Honda CRV. There was a 2016 Honda HR-V 

Cal:  [00:16:44] 2000 something Volkswagen Turkey. 

Katie:  [00:16:47] 2013 Dodge Durango, then we traded that one with 2017 Chevy Colorado, and we sold the HR-V 2010 Mazda.

Ramit Sethi:  [00:16:57] Guys, all right, enough, enough. I cannot spend the rest of my life talking about your cars. So now I’m going to create some rules for you. I don’t know what your love of cars is, but the two places that people in financial trouble like you get in is number one, they spend too much on housing, and number two, cars. And the two of you are really, really exemplifying it with the cars.

[Narration]

Ramit Sethi:  [00:17:23] There’s something very odd going on in this conversation. When I started asking them some basic questions, they spent 25 minutes talking about cars. Well, we had this car, but then we leased that car. And then we bought this car and then we moved here. That’s why you finally heard me say enough. I had to edit out all that car stuff because it would have made this podcast 10 hours.

I don’t yet understand what is going on here. But there’s something very unusual about this level of detail, about spinning over every minute detail. And when I told them, enough, they both almost looked visibly shocked. I don’t think they realized how deeply they were going into these irrelevant details. So I don’t know what’s going on here, but I know there’s something going on.

[Interview] 

Ramit Sethi:  [00:18:20] So you buy a bunch of cars, you move to Minneapolis and you move back in seven months, which must have been very expensive in terms of furniture, shipping, just getting rid of stuff. And you finally end up back in Alaska. At this point, how much debt do you have?

Katie:  [00:18:38] When we get back in Alaska I think we only have two grand in credit card debt at that point. 

Ramit Sethi:  [00:18:48] How did you get to $60,000 in debt? 

Katie:  [00:18:51] So when we get back to Alaska, we buy a condo.

Ramit Sethi:  [00:18:57] Why did you do that? Because you don’t want to throw money away on rent, right? 

Katie:  [00:18:59] Pretty much that’s what our mindset was. 

Ramit Sethi:  [00:19:02] Who told you that?

Katie:  [00:19:05] All the people in church did and friends. And in our area, it’s like everything here is really ugly. And I feel like Cal thinks I’m shallow, but I’m like, I want to live somewhere nice and I want to fix it up and make it pretty. And all the places for rent at the time were horrible. And it was the middle of winter and so when we got home and so we decided let’s just buy a condo. So we find a condo that is fairly reasonable. 

Ramit Sethi:  [00:19:36] How did you know it’s reasonable? How did you make the calculation?

Katie:  [00:19:42] Based on what we could pay for rent I think it was about half. It was like rent would have been 1,400 a month for a two bedroom in a decent area and the condo was 750 before dues. 

Ramit Sethi:  [00:19:57] Wow. And what about once you factor in all the dues and interest and taxes? 

Katie:  [00:20:03] It starts to eat it up. It literally gets to the same point where it’s about $1,400 a month after all the utilities and stuff. So the condo was a bad choice because the HOA was defunct. And so we were ended up being one of the only two units paying the dues. And the dues kept going up, up, up, up, and they only took care of water, and they were supposed to take care of ground maintenance and insurance and they weren’t taking care of that. 

Ramit Sethi:  [00:20:06] Okay, when did you realize that you were in financial trouble?

Katie:  [00:20:36] We didn’t really realize until we had bought the truck, and then realized it’s a $40,000 truck and a $600 a month car payment. We started to realize that it was becoming really unmanageable. And that’s when my mom got involved and basically was like, add up all your debt. What is it? And it was like $60,000 with the truck and all the credit card debt. 

Ramit Sethi:  [00:21:04] What was that moment like when you sat down and added up all your debt together?

Katie:  [00:21:10] It was really embarrassing mostly because my mom was involved, I think. 

Cal:  [00:21:14] It was disappointing.

Ramit Sethi:  [00:21:16] Did you two look at each other to say anything?

Katie:  [00:21:23] I really don’t remember him being involved in that at all. It was more like my mom and then she just took over.

Ramit Sethi:  [00:21:30] Count the red flags. I count two. Number one, why is mum taking over? And why is Cal not involved at all? Two big red flags that I suspect are going to play a very large role in the rest of our conversation. Where were you, Cal? 

Cal:  [00:21:51]  It was something that I decided it would just be easier to do it if Katie’s mom was going to offer to assist us, that’s a nice easy way out of our situation instead of having to worry about paying a bank, we just pay our mom.

Ramit Sethi:  [00:22:10] Katie, tell me about the offer that your mom made.

Katie:  [00:22:13] So she asked us to add it all up. I had started I never had talked to her about our finances once we got married until we bought the condo and I started to get really stressed out. And after the whole truck fiasco, I was really, really stressed out. And so I finally reached out to her to ask for her advice. And she told us to add it all up. And we realized it was $60,000 between all of the different negative equity and all that crap. And she said, I’ll take half of it. I’ll take 25 grand of it. And you guys can deal with the rest and all you could pay me back. But I’ll get a better interest rate, and it’ll be cheaper for me to take it on for you.

Ramit Sethi:  [00:23:04] So what did you do?

Cal:  [00:23:06] We sold the truck. We sold the condo, got out from some of the debt. Used all equity we had acquired from the condo to help pay down the portion of our debt that her mom was not paying.

Ramit Sethi:  [00:23:23] And at this point, did you decide to declare bankruptcy?

Cal:  [00:23:27] Nope. 

Katie:  [00:23:28] It wasn’t until the pandemic and then Cal lost his job and we were totally screwed.

[Narration] 

Ramit Sethi:  [00:23:36]  This is a pattern that I frequently hear from people who are not particularly savvy with money, and that is they make a lot of changes all at once. Look at Cal and Katie, house, car, job, all of these things at once. Now, sometimes you can’t help it. If you get laid off, it’s not like you could plan for that. But in many cases, when I talk to people who are in financial trouble, they do not sit down and make a plan for even one year. 

They often will simply focus on the next month and they will buy whatever is in front of them. Oh, we need a place to live. We should buy a house. That would be a not very savvy way to do it. A much savvier way would be to sit down and say, okay, we’re probably going to need to get a new house when our lease expires in three months. What are our options? Do we think that this housing is going to be less than 28% of gross? Do we think that we’re going to fit the 28/36 rule? Do we have enough for an emergency fund? What about moving expenses? What if one of us loses our job? How will we handle it? 

This is the whole point of living a rich life. One characteristic that distinguishes the very rich from almost everybody else is that they plan ahead before they need to. Again, some things cannot be played for. I understand that. But often, if you’re talking about a house and a car in the same year, that is a massive increase in expenses. It’s also a massive increase in complexity. I want to be very careful about doing all of that at once. 

[Interview] 

Ramit Sethi:  [00:25:22] So you declared bankruptcy, you discharged how much of that debt? 

Katie:  [00:25:27] Technically, it’s all discharged, but I would not have a relationship with my mom if we never paid her back. 

Ramit Sethi:  [00:25:35] How much do you owe her? 

Katie:  [00:25:36] We still owe her 24,000, so pretty much all of it because of interest and stuff. We weren’t paying it for a while. It was just sitting because of the forgiveness during the pandemic.

Ramit Sethi:  [00:25:46] What is the interest rate that your mom is charging you?

Katie:  [00:25:49] I think it’s really low, 3%. 

Ramit Sethi:  [00:25:55] Is that a question?  

Katie:  [00:25:55] I’m not sure. I’m honestly not sure. I’ve asked, but I think it’s a variable interest rate, not a fixed interest rate. And I don’t feel like– 

Ramit Sethi:  [00:26:04] What do you mean, you’ve asked? You’ve asked your mom? 

Katie:  [00:26:08] Mm-hmm.

Ramit Sethi:  [00:26:08] What does she tell you?

Katie:  [00:26:11] Sometimes she answers sometimes she doesn’t.

Cal:  [00:26:13] She’s very hard to communicate with.

Ramit Sethi:  [00:26:15] Wait a minute. What? Explain that to me, please.

Katie:  [00:26:19] I asked this afternoon in preparation for this and didn’t get a response yet.

Ramit Sethi:  [00:26:26] What are we about to discover when it comes to Katie’s mom and their finances? So your mom, Katie, your mom currently holds around $25,000 of your debt. That was very nice of her to offer, to take that on and give you a lower interest rate. What is your mom’s involvement in your finances?

Katie:  [00:26:51] Super involved. So it started with that first loan. And then when we had to do bankruptcy, she didn’t ask us and just bought a car for us, but with the intention of us paying her back. 

Ramit Sethi:  [00:27:05] What? 

Katie:  [00:27:07] Yeah, that’s another–

Cal:  [00:27:08] It was a gift. It was a surprise gift. 

Ramit Sethi:  [00:27:10] That’s not a gift back. That’s not a gift. So she just bought this car and said, here you go. And then was it free? No, they’re shaking their heads. You had to pay for a $14,000 gift?

Cal:  [00:27:23] Yeah, we’re still paying her for it. 

Katie:  [00:27:25] I mean, we’ve paid it down too. So it’s like it started out at 20–

Ramit Sethi:  [00:27:29] I’m not what you paid down. Hold on. How comes it’s always the details with you, Katie? I’m curious. Because I’m finding it very difficult to get to the heart of the matter here. And just do you find yourself constantly spinning over details? 

[Narration] 

Ramit Sethi:  [00:27:47] This is really frustrating. Did you catch what just happened? We learned that Katie’s mom gifted them a car and then told them that they were expected to pay for it. And I said to them, wait a second, you had to pay for a $14,000 gift? And Katie’s response was, I mean, we’ve paid it down in part too. This is why I’m getting frustrated. Katie can’t seem to give me a straight answer. And if she can’t give me a straight answer, I bet she’s not honest with herself about her financial choices either. 

This has been happening for our entire conversation. Remember, we spent over 25 minutes just going into the extreme details about every car they bought. At this point in the conversation, we have been talking for two hours. And I finally had to stop her to ask what was really going on here? Number one, because we’re going to spend the next 22 hours on this call, but number two, I’m guessing there’s something really important here because very few people do what Katie is doing. If I ask a question, they usually give me a pretty straight answer. Katie is not and I want to find out why. 

[Interview] 

Ramit Sethi:  [00:29:06] How come it’s always the details with you, Katie? I’m curious because I’m finding it very difficult to get to the heart of the matter here. And just do you find yourself constantly spinning over details? 

Katie:  [00:29:19] Yeah, for sure. 

Ramit Sethi:  [00:29:20] Why is that? 

Katie:  [00:29:21] I don’t know. 

Ramit Sethi:  [00:29:23] Does it give you comfort?

Katie:  [00:29:25] Maybe. I think so.

Ramit Sethi:  [00:29:26] Does it give you a sense of control? 

Katie:  [00:29:28] Yeah, that’s true. 

Ramit Sethi:  [00:29:32] I think you’re going to have to gently give up a little bit of control in this conversation because I can’t push against you. It’s just not working. Do you trust that I’m going to take us to a place that will help the two of you?

Katie:  [00:29:49] Yeah.  

Ramit Sethi:  [00:29:50] Okay. 

Cal:  [00:29:49] She’s been looking forward to this for a long time. I know she’s quite nervous.

Ramit Sethi:  [00:29:55] I understand you’re nervous. I get it. It’s an unusual situation. But, Katie, I really need you to trust that I’m here to help you. And the way that you can show that trust is answer my questions and know that deeply, I want to get to the root of what’s going on. But I can’t get there if we’re getting distracted by all these details that are going through your head. Put your hands in mine. Let’s go there together. We’ll all go there together. 

[Narration] 

Ramit Sethi:  [00:30:23] I find this pretty interesting. I think Katie’s probably being honest. I think her way of answering questions does give her a sense of control. I often find that people feel they need to give me all the context to their answers because they really feel that I need to understand every little detail. That’s very common. 

I also suspect there’s probably some element of the way she was raised. Maybe it was her belonging to that church and living with all the people from the church. Maybe it was the way she was raised as a kid. But you’ll often find in certain backgrounds that people are expected to paint a pretty picture on everything. And that’s really what Katie did with that last question. I said, wait a second, your mom is making you pay $14,000 back? And she found it extremely difficult to simply say yes because that’s obviously bad. So her natural response was to point out the silver lining. Well, I mean, we’ve paid off some of it. 

Whatever the reason, I hope that Katie takes this little dialog we had and thinks about it. Because it’s impossible to get ahead if you are focused on spinning over tiny little details. Now that we have established a little bit of trust, I want to understand more about what is going on with her mom, this third party who seems to be in the middle of Cal and Katie’s relationship. 

[Interview]

Ramit Sethi:  [00:31:56] Does anybody think that that’s unusual for somebody to essentially force them to buy a car? 

Cal:  [00:32:03] Yeah. Very.

Katie:  [00:32:05] She’s admitted to it too. She was like, I know I saddled you with this. How do you feel about it? And now I’m like, well, because of the bankruptcy, we don’t have any other options. So it is what it is. It’s unfortunate that a part to play in it.

Ramit Sethi:  [00:32:20] That’s not the answer. That’s not really an answer, is it? How do you feel about me saddling you with a car you didn’t even ask for? What is your real answer to that?

Katie:  [00:32:29] Embarrassed and like a child.

Cal:  [00:32:33] I haven’t really told my parents the real circumstance of us having that vehicle. That’s how embarrassed we are of this situation.

Katie:  [00:32:41] It’s so embarrassing, this whole thing.

[Narration]

Ramit Sethi:  [00:32:46] Look at that. There’s so much to unpack here. But I hope you notice that once I took away their details that they’re both so comfortable living in, we got right into visceral emotions. That’s real. They’ve been made to feel like children, embarrassed, ashamed. Honestly, I think anyone would, based on the situation that they’re in. 

[Narration] 

Ramit Sethi:  [00:33:14] Let’s keep going. 

Katie:  [00:33:14] It’s not in his forefront of mind because it’s my family, my mom, my dad. I’m the one dealing with it. It’s on this side of the relationship and he’s very not involved.

Cal:  [00:33:20] It get out of sight, out of mind, I guess, in a sense. I have a basic understanding of how much we owe, but I don’t know any of the numbers truly.

Ramit Sethi:  [00:33:43] And what are the consequences of you not knowing?

Cal:  [00:33:47] Not being able to effectively plan and coordinate and talk with my wife about it. 

Ramit Sethi:  [00:33:56] And how does she feel right now? 

Cal:  [00:33:59] Abandoned, alone.

Ramit Sethi:  [00:34:02] And so where does she go to get help from?

Cal:  [00:34:07] If she can’t get it from me, she goes to her mom because we’re a family and just the cycle just keeps on going.

Ramit Sethi:  [00:34:12] Can you walk me through these conversations you have with your mom? What is an example where the two of you couldn’t make a decision so, Katie, you went to your mom?

Katie:  [00:34:23] Just today because the car Cal was driving back and forth to work broke down. She knew it broke down because she had to come pick us up from the tow truck. And I couldn’t hide it or anything like that. So she knows about the situation. And she knows we need to get another vehicle. So she’s providing her thoughts on what we should do. And then–

Ramit Sethi:  [00:34:44] And how did she say that to you?

Katie:  [00:34:47] I think you should do this. I think you should wait. I don’t think you can afford x. I think this.

Ramit Sethi:  [00:34:53] And how do you react to that? What words do you use? 

Katie:  [00:35:00] Okay. 

Ramit Sethi:  [00:35:02] How old are you again? 

Katie:  [00:35:04] 27. 

Ramit Sethi:  [00:35:05] And when you hear her getting into the, you should do this, you should do that, how would you characterize the way you react to her?

Katie:  [00:35:18] Now because I feel so shameful and I can’t make a good decision, I’m very submissive. 

Ramit Sethi:  [00:35:26] Yeah, like a child.

Cal:  [00:35:28] We had this conversation today.

Katie:  [00:35:30] We literally were having this conversation on the way here because it’s not just my mom, it’s my dad. My dad’s texting here, I found this car. You need to trade your truck and give XYZ amount of money that we don’t have, and then you can have this truck. And it’s never a conversation. It’s always we’re being told like children what we should do.

Ramit Sethi:  [00:35:54] And in the end do you do what they say?

Katie:  [00:35:56] I’m really proud of Cal because he actually became involved just this week with this particular situation, with the car, and said no to buying a new car at 19% interest, which was really awesome. And he walked in and–

Ramit Sethi:  [00:36:12] 19 fucking percent interest?

Katie:  [00:36:14] Yeah, he was like, absolutely not.

Ramit Sethi:  [00:36:16] Oh, my God, I cannot do another car story. However, I do love the example that Cal and Katie just gave me of Cal saying, no, we’re not going to do that. I am curious how her parents even had the guts or the space to have this kind of influence. And I want to get Cal involved here. I really want to understand how he thinks things ended up here because he doesn’t see it yet it seems easier for him to blame Katie’s mom than to really think about what led to the situation with Cal and Katie together, having their finances run by Katie’s mom.

Cal:  [00:37:08] I think one of the decision but I think not the top, was initially accepting the help from Katie’s mom. We just had this conversation. Katie told me that she had the realization when she accepted it that there was no going back as far as the measurement goes of our finances with her. I’d say that would be the biggest one.

Ramit Sethi:  [00:37:36] What about you avoiding conversations about money? 

Cal:  [00:37:41] Oh, yeah.

Ramit Sethi:  [00:37:43] It seems like maybe number one.

Cal:  [00:37:45] I just thought that in up higher.

Ramit Sethi:  [00:37:48] Yeah, I think so. I mean, look,– 

Katie:  [00:37:50] It’s like, he doesn’t want to be involved, and he’s so hands-off that I feel like I need to take control. And then I don’t feel equipped, so I involve my family.

Ramit Sethi:  [00:38:03] That’s pretty straightforward. And does it work?

Katie:  [00:38:06] No.

Cal:  [00:38:06]   No.

Katie:  [00:38:07] It doesn’t work because of the strings attached to it and the obligation. 

Ramit Sethi:  [00:38:12] Like what? 

Katie:  [00:38:14] When Cal spoke of the moment when I realized there was no going back, before then our money stuff was private. And now if I buy a new rug, it’s an issue.

Ramit Sethi:  [00:38:27] Really? A rug? 

Katie:  [00:38:28] Yeah. I’ve been told explicitly like, every extra cent you have needs to go towards this debt. You cannot be buying new rugs, and so then I feel shameful and try and hide things. 

Ramit Sethi:  [00:38:43] You two have a ghost in your relationship. It’s the two of you. And who’s the ghost? 

Katie:  [00:38:53] My mom. 

Ramit Sethi:  [00:38:54] Yeah. But you invited the ghost in, didn’t you? 

Katie:  [00:38:59] Mm-hmm. 

Cal:  [00:38:59] We did. 

Ramit Sethi:  [00:38:59] In fact, you leave the door open and every afternoon you say come on in, haunt us. That ghost is a welcome guest in your relationship. So you grew up, Katie, never saying no, having things taken care of it sounds like for you, getting married at 20, and if you look back at all those things, how do you think they all affected the way that you treat money today?

Katie:  [00:39:42] I never say no. I’ve never heard no. No is like a foreign concept to me I think.

Ramit Sethi:  [00:39:49] Okay, fair enough.

Katie:  [00:39:50] When it comes to money, it’s hard to say no and it’s also hard to hear no and yeah.

Ramit Sethi:  [00:39:59] Cal, what about you? When you think of money, what word comes to mind for you?

Cal:  [00:40:05]  I have a hard time rationalizing our spending and what’s a good purchase, and what’s not a good purchase in terms of where we are at financially within our budget. My home life, growing up, was not the best situation. No one ever talked about money. Money was not something that we ever really communicated about, no one ever. I didn’t know my family’s financial situation until I was an adult. I don’t want to delve into my parents’ relationship, but definitely, it was a very troublesome time growing up at points just from them fighting about it. They had a lot of fighting over money. 

Ramit Sethi:  [00:40:51] Really? Are they still together? 

Cal:  [00:40:53] No, they haven’t been for eight years now right before we got married. It could be roughly a year before we got married.

Ramit Sethi:  [00:41:02] What do you remember about those fights about money?

Cal:  [00:41:08]  Not terribly a whole lot only because I remember I would just isolate myself out of the situation, in my room, I would, just been a teenager, play video games, put the headset on, zone, tune it out with my wife and not really understanding what was going on with them. I knew it wasn’t okay. I knew everything was divulging into what it would become. I could see it three years before it ever happened being a divorce. 

Ramit Sethi:  [00:41:42]   if you look back, you hear your parents arguing over money, you go into your room, turn on the video games, how would you characterize your response to your parents fighting over money? 

Cal:  [00:41:55] Tuned it out, zoned out. Didn’t care. Didn’t want to know.

Ramit Sethi:  [00:42:04]  And if we can fast forward about a decade later, when you have money problems at home with your wife, how would you characterize a grown-up Cal?

Cal:  [00:42:19] Very similar. Tune it out, zone it out. Don’t care, don’t want to have a part of it.

Ramit Sethi: 42:27] Katie’s nodding her head a lot and Cal is grinning. Cal, is it a realization for you? 

Cal:  [00:42:34] I guess it’s a yes. I’m just now in this moment making the connections between I don’t think I’ve ever really taken the time to really sit down and stop and think about that before. It makes a lot of sense.

Ramit Sethi:  [00:42:51] Yeah, you think your kids haven’t picked up on mommy and daddy fighting over money?

Cal:  [00:42:56] our senior son definitely he knows. 

Katie: [00:42:59] He knows, yeah.  

Ramit Sethi:  [00:43:00] Four years old, almost five. Cal, think about what you did when your parents fought about money.

Cal:  [00:43:10] yeah, ignored it.

Ramit Sethi:  [00:43:13] And then what did that little boy do as he grew up and took it into his relationship? 

Cal:  [00:43:18] Ignores it. 

Ramit Sethi:  [00:43:20] Did the same thing. This is how we pass these things on.

Katie:  [00:43:24] Right.

Cal:  [00:43:27] Yeah. 

[Narration] 

Ramit Sethi:  [00:43:29]  Lots of breakthroughs here, one for cow realizing the connection between how he behaved as a young child and how he’s behaving now, and then predictably, how their children are reacting to the way they treat money. Again, this is very common. Virtually every time I talk to parents, when I bring up how their children are going to react when they observe their parents treating money with disrespect or ignoring it or fighting, it clicks.  They instantly get it. And that’s exactly what we see here. 

[Interview] 

Ramit Sethi:  [00:44:09] What happens if one of you lose your job? How come the two of you haven’t thought about this? I mean, you’ve lost your jobs multiple times, you’ve moved, things have happened, how come you’re not factoring this in to your planning? 

Katie:  [00:44:29] I think Cal doesn’t know. He’s not involved at all. So it’s all up to me, and I just feel overwhelmed. So I just I don’t know. I feel like my expectation is that we’re going to fail from the start. So I don’t plan to win. I just plan there’s no way we’re going to be able to save that $500 by the end of the month. I’m not even going to budget for it. My expectation is to fail.

Ramit Sethi:  [00:45:01] Now that’s honest. You’re not even playing to win. You already have accepted that you’re going to lose. What a terrible way to live? 

Katie:  [00:45:17] Suppress it. 

Ramit Sethi:  [00:45:20] What do you think, Cal, hearing that from your wife?

Cal:  [00:45:22] No, that makes sense. And I haven’t thought about it that way. But those are the words that I didn’t know I needed to hear. But that makes perfect sense. We’re just trying to survive, trying to just push it onto another day.

Ramit Sethi:  [00:45:45] So you have options. What do you think your options are? You remember those Scantron tests we used to take? And you don’t know the answer. There’s multiple choice, but at least you can eliminate a few things. Is there anyone around you who you know you don’t want to take advice from?

Cal:  [00:46:09] Let’s say your dad.

Katie:  [00:46:09] We decided today that we’re going to completely cut my dad out of the loop after Cal was very good and assertive today with him, no, we’re not going to be buying that car. No, we’re not doing that. We’re going to sell the car as is that broke down and keep the money. And we will make the decision on when and if we want to use that money on a new car or a different car.

Ramit Sethi:  [00:46:32] So your dad is marked off. Who else?

Katie:  [00:46:34] This is the thing is like I want to be self-sufficient. And I’ve had this conversation with my mom that I do not want to be in debt to her forever. I don’t know how to get there. When I get to this point, it’s a block. It’s like, I don’t know how to uninvolved her now that we’ve got the bankruptcy. It’s not that I can take out another loan so that I owe a bank and not her.

Ramit Sethi:  [00:47:00] Okay, do you remember what my question was? 

Katie:  [00:47:03] Who to cut out. We would like to cut out my family, all of my family.

[Narration] 

Ramit Sethi:  [00:47:12] In a lot of ways, you can see what Katie’s constant spinning and focusing on irrelevant details gets her. It lets her avoid very uncomfortable answers. I pressed her on it just now. And you can see the answer she said. She said, I would like to cut out my family, all of my family. Now that’s real. And that is something she never would get to if she focuses on spinning, on irrelevant details, on everything but what actually matters. 

One of the reasons I do this podcast is that I want you to hear real couples telling me their story. Because when they tell me their story, you can hear that much of it is totally irrelevant. It’s interesting. And sure, we like to know what type of car they drive or where they eat, but when it comes to their money, there’s usually two or three things that actually matter and you can discard all the rest. This is a key skill you got to learn. 

When it comes to your money, there are about three to five things that actually matter for you. What’s your income? What’s your savings rate? What’s your debt? There’s a few big wins. And if you get those 5 to 10, big wins in life right, you never have to worry about the price of coffee, or can you order an extra dessert, or even can you stay an extra day on your vacation? 

Part of living a rich life is being able to hone in on those key factors, the things that really matter. And that’s why I love this podcast, because every time I come on one of these conversations, I don’t know what they’re going to tell me. I do know that they’re going to give me a lot of stories and a lot of information, and it’s my job to try to figure out what actually matters along with their help. Now we are really getting into it with Cal and Katie. 

[Interview] 

Ramit Sethi:  [00:49:24] Katie, have you ever told your mom no?

Katie:  [00:49:29] I’ve tried and it doesn’t work out very well.

Ramit Sethi:  [00:49:34] Okay, I’m going to ask that question again, and I want you to listen to your answer. Katie, have you ever told your mom no? 

Katie:  [00:49:41] Yes. 

Ramit Sethi:  [00:49:42] You have? Okay, give me an example.

Katie:  [00:49:47] She asked us to watch her dog a couple years ago right after she bought the car and I felt indebted. So I originally agreed because she was going out of town. And then Cal’s mom decided to come up. And I said, hey, change your plans. My mother in law is going to be staying with us. It’s really not convenient. Can we work together to find another solution? And all of a sudden, I’m like this horrible person. I’m so ungrateful, all those things. 

Ramit Sethi:  [00:50:20] Maybe I missed it. But where was the word no in that dialogue? 

Katie:  [00:50:24] Oh, I can no longer watch the dog. It’s not going to happen. So then I don’t really have no. 

Ramit Sethi:  [00:50:31] Okay. Thank you. So can we rewrite your story because you never told your mom no in your entire life? Come on. 

Katie:  [00:50:38] True. 

Ramit Sethi:  [00:50:39] I love the example you gave me, in that example, your first answer to your mom was yes. And then when it became inconvenient, you want to change your mind. You go, hey, mom, can we come up with a solution together? That’s not a no. Actually, I’m curious, Katie, have you ever told anyone aside from your kids or husband no? 

Katie:  [00:51:05] No. No. 

Ramit Sethi:  [00:51:11] What does that feel like to say?

Katie:  [00:51:13] I know it’s codependent. I know that it’s bad. I know it’s bad. I’m trying to be better, but– 

Ramit Sethi:  [00:51:25] I don’t know if it’s helping better. It’s a skill you may not have learned. 

Katie:  [00:51:29] Yeah, I’m trying to have better boundaries. But I don’t feel like I’ve ever been taught boundaries. So I don’t know. I just do it because I’d rather do it than hear about it or–  

Ramit Sethi:  [00:51:41] Are you seeing a therapist?

Katie:  [00:51:46] Yeah, I’m currently seeing one. 

Ramit Sethi:  [00:51:48] Good.

Katie:  [00:51:48] And it helps a lot for sure.

Ramit Sethi:  [00:51:51] Good, I’m glad. Did you tell your therapist about the conversation we were going to have? 

Katie:  [00:51:55] Not yet. 

Ramit Sethi:  [00:51:57] Well, I definitely want to be sensitive to the work that you’re doing with your therapist. I’m so glad you were seeing one. It sounds like it’s much deeper than your mom and a dog and a jeep.

Katie:  [00:52:11] Right. I think the reason it’s hard to get to the root of things is because everything feels so a meshed. And it’s like some of the same themes that you’re recognizing are some of the same themes that my therapist recognizes because it’s hard to sift through.

Ramit Sethi:  [00:52:25] Well, look at where your kids are right now. Look at the jeep that you’re driving. I mean, it’s every single place. 

[Narration] 

Ramit Sethi:  [00:52:32] I’m really happy to hear that Katie is working with a therapist. I always encourage my readers, my listeners, if appropriate, seek out a therapist. And I talk about my experience in seeing a therapist. When Cass and I were discussing a prenup, it got really hard. And we went to see a therapist, and it was immensely useful. Now, while I wish everyone would go and see a therapist, when appropriate in their life, the fact of the matter is, the vast majority of people will not. It’s expensive. It’s hard. It’s unfortunately stigmatized in our culture. And I don’t want any of that. That’s why I encourage people to see a therapist. And I talk about my own story. 

But with this podcast, I also wanted to set the context of where this podcast fits in. It is not therapy. And I don’t try to pretend it is. I have a lot of respect for therapists who are highly trained and work with people for many years. That is phenomenal. This podcast, I get to speak to a couple once, maybe a little bit of email follow up. But imagine because most people will never see a therapist, what do they do? They often will go on Tik Tok and get financial advice. They will try to read a book, but their partner won’t read it too. And so they’re stuck. 

And that’s why on this podcast, I wanted to go behind closed doors and show you how couples actually talk about money. For some, this alone is super helpful. It gives you the ability to have a conversation with your partner like you’ve never had one before. Others might say, wow, we should do this and we should actually go see a therapist. I think it’d be really helpful. Whatever you choose, I want you to know there are lots of options out there. I don’t want anyone to ever stigmatize seeing a therapist. And this podcast fits in but does not replace therapy. 

[Interview] 

Ramit Sethi:  [00:54:36] Cal, if you’re honest and you look forward to years, where do you think you will be financially speaking?

Cal:  [00:54:41] One of the situations with us being able to buy a house, her mom has made it very clear and continues to make it very clear we need to pay her off first. So before we can even remotely think about saving for a house, we need to save to be able to pay her off.

Ramit Sethi:  [00:55:01] Well, you all owe her $25,000, correct? 

Cal:  [00:55:03] Yeah, I’d say it’s a fair thing. And we, me and Katie, both agreed to that. And we understand that, and this is something now that we’ve been working towards, and we’re trying to find out a solution on how to– we would like to find a solution to expedite that process.

Ramit Sethi:  [00:55:24] What happens after you pay off your debt? I didn’t get a clear answer to that. Have you two ever thought about life after debt?

Katie:  [00:55:34] I have. 

Cal:  [00:55:36] I can’t say that I’d necessarily have.

Ramit Sethi:  [00:55:39] Katie, what have you thought about?

Katie:  [00:55:41] I want to go on trips, I want to be able to make a purchase and not feel guilty about it later on. And I want to be able to take the kids to Disneyland and not have to have one of our family members come because they offered to pay for it. I want to be self-sufficient. I want to be able to do things for our kids and our family and start our own traditions and vacations and memories.

Ramit Sethi:  [00:56:15] That’s a powerful vision. Have you talked about that vision before together?

Cal:  [00:56:20] Yeah, now that she’s mentioned that, yes, we’ve communicated that with one another.

Ramit Sethi:  [00:56:25] That’s cool. I’m pleasantly surprised, because oftentimes, people who are in a lot of debt, it’s like they’re driving in the fog. They can only see 50 feet ahead of them. And if you ask them what’s past 50 feet, they go, man, I’m just trying to make it the next 50 feet. And so it’s cool to hear you have a vision. I love that. Being able to buy something without guilt, being able to go to Disneyland without a family member having to pay for it, I think that’s beautiful. Let’s figure out if we can get you there. What do you think would prevent you from paying off your debt?

Katie:  [00:57:02] We’re stressed out about having to make a big decision, and it’s literally crippling. So I feel like not making a bad decisions when it comes to big purchases like cars, or houses in the future, or taking a trip when we shouldn’t, stuff like that, that we can’t afford, would keep us from being able to get there.

Ramit Sethi:  [00:57:21] Cal, what’s going to stop you from paying off that debt?

Cal:  [00:57:24] I think Katie said it in a really good way. When it comes to big financial decisions, I think now, we get cold feet really fast, really easily. And we’re very nervous and anxious when it comes to having to make large or big decisions like that. And I think that could limit us and keep us from pushing ourselves out of our comfort zone to try to– 

Katie:  [00:58:01]  

Well, I think that leads us into the exact cycle that we’re in already. It’s like we feel like we’re not equipped to make the decision, so we refer back to my mom. And then she makes a decision for us, which is the very thing that we’re trying– the vision is being self-sufficient and confident and making our own decisions.

[Narration] 

Ramit Sethi:  [00:58:17] It’s funny one principle of psychology that I’ve observed with human nature is that most people would rather do the same thing for years and years, even if they are failing than try something new. Most people are more comfortable sticking with something and failing than trying something new and potentially failing. See how ridiculous that sounds. But that’s the way we do it. Think about it. People who have been frustrated about finding a job, they go about it the same way they’ve been doing it for years and years. They send a resume on a website and they wonder why they don’t get a response. 

I had a young woman on Instagram DMing me the other day. She’s tried this. She got eight applications and nobody responded to her. I said, why don’t you join the dream job program, we show you a better way of doing this? And she wrote back with a litany of all these reasons, it might not work for her. That indecision will probably cost her $250,000. But most people would rather do the same thing for years, even if they are failing than to try something new. So when Katie and Cal tell me that they do this, I feel a lot of compassion. I also know that there are a lot of other people out there who do the exact same thing. 

[Interview] 

Ramit Sethi:  [00:59:46] Let’s do this. You’ve got your family dynamic. Everyone has their own. I have my own too. Let’s get out of your situation and you transport over to mine. So I’m married too and we have our financial discussions together. What role do you think my parents play in those financial discussions that I have with my wife? 

Katie:  [01:00:08] Zero.

Cal:  [01:00:10] It’ll fuck you sick.  

Ramit Sethi:  [01:00:12] Of course. Are there certain times I would say no? Yeah. I share that because I want you to know that it is possible. What do you think exists in my dynamic that’s different than in yours?

Katie:  [01:00:31] Well, you don’t go to them with every single decision that you’re going to make. 

Ramit Sethi:  [01:00:36] Correct. What else? 

Katie:  [01:00:36] You don’t feel obligated to do that. I don’t know if your family gives you unsolicited advice, but when they do, you take it with a grain of salt.

Ramit Sethi:  [01:00:49] Look at my skin color. What is my background? 

Katie:  [01:00:54] You’re Indian. 

Ramit Sethi: [01:00:55] Do you think Indian parents give unsolicited advice? Have you ever heard any jokes about Asian people or Indian people? Yeah, I’m a master at getting unsolicited advice. What else? 

Katie:  [01:01:09]  You have to be competent with money so that you know whether or not the decision is right for you and right for the situation.

Ramit Sethi:  [01:01:21] That’s right. Because if you don’t, then you’re just this reactionary teenager who goes, mom, leave me alone, but you actually don’t know what’s good for you. Like, mom, leave me alone. I’m going to go run in traffic, not a good move. So you have to be good. And you also simultaneously have to build those communication skills. 

It sounds like getting rid of this ghost in their relationship is something that Cal and Katie both want to do. I’m glad that they are on board. It’s going to take a while, but I’m glad that they both have the same intention. Now, I want to get into some numbers. That’s going to help us understand what their next moves might be. So at $8,800 a month in gross income, let’s talk about your debt. So your debt is $39,000. Can you break that down for me?

Katie:  [01:02:17] That’s the 24,000 25,000 to my mom and then the jeep, also owned by my mom, the balance is 15,000.

Cal:  [01:02:26] One thing that’s weighing heavy on our minds, come October, the permanent fund dividend gets paid out to all residents of Alaska. And you everyone that’s of one year old, to how– it doesn’t matter, as long as you live in Alaska, if you’re at least one, you get a PFD. And this year’s total is going to be–

Katie:  [01:02:27] Almost 13 grands.  

Cal:  [01:02:28] Yeah, almost 13 grand that we’re going to get direct deposit into our bank account. On whatever day in the morning, boom, check our bank account, it’s there.

Katie:  [01:03:02] We’ve already been told what we’re going to do with it.

Ramit Sethi:  [01:03:05] Aha, you’ve been told by the ghost.

Cal:  [01:03:07] The ghost is already informed us what we should do with it, but we’re not too sure if that’s necessarily. 

Katie:  [01:03:13] We don’t even know if that’s a good thing. We don’t even know. 

Ramit Sethi:  [01:03:16] What did this ghost tell you that you are going to do with your $13,000?

Cal:  [01:03:20] Pay the jeep off. The ghost wants us to pay the jeep off and we’re not too sure if that’s the correct path for us.

Ramit Sethi:  [01:03:28] Well, I can answer that for you. But can I just point out that the last 10 years of your relationship have essentially been one tactical financial decision after another. And you’re still thinking like that. I said, what are your options to fix this entire situation? And here we are talking about a one-time $13,000 transaction.

Katie:  [01:03:52] Yeah, it’s always that. It’s always like PFDs, tax returns, this, that, this.

[Narration]

Ramit Sethi:  [01:04:00] This is so common, and it’s also so destructive. This is the idea that most people treat their money completely episodically and transactionally. To them, money is simply a series of random arbitrary decisions. Do I go to Target? Do I get the gummy bears on my frozen yogurt? Should we spend extra pay down our mortgage? Or should we get this shirt or that shirt? It’s just one transaction after another. There is no vision. And if you treat money this way, you will treat it that way until you die. Yogurt, gummy bear, shirt, death. What kind of life is that? 

They are living lost in the transactions. There’s no vision. And they are led there kept there by her mom. What I really wish for them is to zoom out and come up with a vision. That vision should incorporate what they love, what do they want to spend more on, their money dials. What’s the priority to them? Do they really want to pay this debt off? How fast? What are they willing to do in order to accomplish that? 

A set of money rules. They can be simple things like, we’re going to have a date night once a month, or we are only going to eat at this place once a quarter, whatever, it’s their money rules. That is how you come up with a vision. But if you don’t do that, you will spend the rest of your life just focusing episodically on random transactions and random money decisions over and over and over again. 

[Interview] 

Ramit Sethi:  [01:05:43] And your savings is 2,500. Your investments is 5,200. How do you feel about these numbers? 

Katie:  [01:05:53] It’s painful for me because the way we do spend big chunks of money, our tax return gone. We had $10,000 in that savings account, and now it’s dwindled down to 2,500. So it’s painful.

Ramit Sethi:  [01:06:07] Dwindled where? What do you spend on beyond your means? 

Katie:  [01:06:12] Eating out? 

Ramit Sethi:  [00:1:06:14 Where do you eat out? 

Katie:  [01:06:15] Coffee shops.

Ramit Sethi:  [01:06:16] Do you guys get delivery?

Katie:  [01:06:17] No. So up here, there’s these drive up coffee shops that are really good and going there every single day.

Ramit Sethi:  [01:06:31] Did you go there when he was at work? 

Katie:  [01:06:34] Oh, yeah, I would go there. I’ve been going every single day since I was about 16 years old. 

Ramit Sethi:  [01:06:41] Really? 

Katie:  [01:06:42] Yeah, genuinely, since I got my driver’s license. It’s about 7 to $8 a day. And then if I take the kids, I’ll sometimes get them something, not all the time, but then it can get upwards of like $15 with tip.

Ramit Sethi:  [01:06:56] Usually, I’m not operating at the coffee level. I don’t know if you’ve heard any of my other materials. I can tell you two things. First off, how important do you think your coffee habit is in light of your entire financial situation?

Katie:  [01:07:12] I know that it’s something that I’m willing to give up. It’s hard for me to find the willpower again, back to the mindset of like, well, I might as well get this $5 cup of coffee.

Ramit Sethi:  [01:07:24] Okay, so you totally ignored my question. All right. This is like number 10 on what you should be thinking about. Let me put it just bluntly. You two have 500 things that you’re thinking about. What rugs should we buy? We have this car. We have the PFD. He just got a reduced income. Oh my gosh, our bonus comes but it’s variable. I don’t know about these rugs. And you’re treating them all like they’re at the same level and it’s driving you both nuts. 

Katie:  [01:07:51] That’s true. 

Ramit Sethi:  [01:07:53] You two cannot get where you want to go by considering rugs at the same level as your debt. They are not the same. They’re not even the same animal. They’re not even the same universe. A coffee problem, we could talk about your coffee thing. It’s not the same as owing $40,000 to your mom for cars. They’re not in the same universe. 

Katie:  [01:08:21] But then she says if you just didn’t get your coffee, you could pay off this debt.

Ramit Sethi:  [01:08:26] Why are you listening to your debtor? 

Katie:  [01:08:31] You’re totally right. It’s bad hearing it out loud. 

Ramit Sethi:  [01:08:37] The worst nightmare would be that the two of you are just stuck in this pattern for the next 10 years. 

Katie:  [01:08:41] It’s my biggest fear. 

Ramit Sethi:  [01:08:43] Yeah, but in order to change, you have to change your behavior. Let’s see if you’re really serious. How much is that coffee? 

Katie:  [01:08:51] Coffee is almost as much as eating out. 

Ramit Sethi:  [01:08:54] So what do you want to do about that?

Katie:  [01:08:58] Same thing, pick a day or a couple of days that I go out for coffee.

Ramit Sethi:  [01:09:05] So right now it’s seven days a week. How many days do you want it to be?

Katie:  [01:09:10] Realistically, I think I could do four.

Ramit Sethi:  [01:09:13] Okay, once you cut it down, start at five. Do that for a couple of weeks, get used to it, and then cut it down to four. Take your time. Do it right. But each week, I want you to be noticing this is a great opportunity for you to write it in a journal. Oh my gosh, it’s my first day since I was 16 not going. This is how I feel and just get comfortable with it. We’re building new habits here. Doesn’t matter to me if it takes you an extra week or two to get to your target. You both want a fresh start, this is your chance. 

[Narration] 

Ramit Sethi:  [01:09:46] Normally I do not get to the coffee level when I work with people. I prefer to focus on things like asset allocation and money dials and investments and savings rates. But in this case, I actually think the coffee is really important. For Katie, the coffee matters because it is a symbol of old patterns, old routines. It is a symbol of letting old habits guide what you are doing today. And it displays a lack of vision of where she and Cal want to go. 

That’s why I’m pushing them on the coffee. And this is why I think that the opportunity for a fresh start is a deeply human need, something that we all love the idea of. And for Cal and Katie, they really get the chance to create a new vision of how they want to use money. And coffee fits into that because it is a routine that she goes to and spends money on every single day. 

[Interview]

Ramit Sethi:  [01:10:56] Continuing and looking on at your numbers here, your rent is fine. It’s roughly 17%. Don’t move. Your daycare is $1,000.

Katie:  [01:11:09] It’s so good.

Ramit Sethi:  [01:11:11] You were about to move, huh?

Cal:  [01:11:12] She was thinking about  it. She wanted to. 

Katie:  [01:11:14] I was looking at places, but then I was like, no, I should do the opposite of what I want to do, I think I should do–

Cal:  [01:11:22] She literally had to stop herself it was good. 

Katie: [01:11:23] Also thinking like what would it mean. Stay there. Okay, stay here.

Ramit Sethi:  [001:11:24] You know what? Usually, I don’t advise people, whatever you’re going to do just do the opposite. But maybe for the next six months, I do like to joke around with you, but I don’t want to joke around with you about you trusting yourself. Here’s what I would like instead. I don’t want you to leave this call saying, whatever I’m going to do I do the opposite, because that just further disempowers you.  

The direction you’re going to view both need to actually become competent and confident with money. So I’ll give you a lifeline. I’ll give you like bumper bowling. For the next six months, you think to yourself, what would Ramit do? How would he handle it? I

[Narration] 

Ramit Sethi:  [01:12:03] I made a mistake here. We were having a lot of fun, but I had to catch myself just now because I do not want them to do the opposite of everything they think. It sounds funny, but it’s actually not funny at all. It’s a trap. Because I need them to develop confidence and competence. And you can’t do that if you’re joking with your partner like, whatever we’re going to do, let’s do the opposite. 

That actually just demeans you, and it makes you feel stupid. You can’t take yourself seriously. If you can’t take yourself seriously, how can your partner take you seriously? So I caught myself there. I wish I hadn’t even gone down that route. I don’t want them to do the opposite of everything they think. I want them to build the skills so that they can think about money correctly. 

[Interview] 

Ramit Sethi:  [01:12:56] So do we want to change this? 

Cal:  [01:12:58] Absolutely. 

Ramit Sethi:  [01:12:59] How can you, Cal, help change this?

Cal:  [01:13:04] Step in and try to take a more active role. I mean, she’s not wrong, I definitely have taken a backseat in our financial situation. But hopping in the passenger seat instead of sitting in the backseat would be better. Or the copilot seat I guess would be a better analogy. Instead of being a passenger be a copilot.

Ramit Sethi:  [01:13:30] I think that’s a great metaphor, copilots. Right now it almost feels like no one’s flying the plane. If anything, it’s mom. When the two of you are copilots, guess who can’t be in that cockpit anymore. 

Katie:  [01:13:44] Mom. 

Ramit Sethi:  [01:13:47] How is she going to feel about that? 

Katie:  [01:13:49] Not happy. She literally told me like, for example, when we buy a house, she’s like, you have to consult me. You guys cannot make this decision on your own. It’s like that repeated about every single decision just I have no confidence that I can do it.

Ramit Sethi:  [01:14:05] There’s a lot of techniques that people like your mom use a lot. And I’m sure that the work you’re doing with your therapist will help you uncover those. I’m really glad that you’re speaking to them. That’s a lifelong thing. But for me, speaking on the finances, I just can’t tell you how outrageous it is from an outside perspective to hear someone say, my mom bought me a car and then made me pay for it. And that saddled you. It will saddle you for years, the two of you. 

This is almost an opportunity for you to each develop skills as copilots. You get to tell your mom next week once the two of you solidify this, mom, we really appreciate that you have helped us with the car loan. We actually want to pay it off more aggressively. That’s going to shorten the time period from x to y years. And that’s it. It’s not up for discussion. Well, what about those PMDs? We’re going to handle that on our own, but this is what we’re prepared to do with this. Simple as that. I’m not asking, I’m telling. And if you do send an email, your therapist can help you with it. That 13,000 should not go towards your car loan. That money is for savings and investments. Put it aside. This is a rare opportunity. And honestly, that debt is low enough, and you do make enough that you could pay it off. It will just take you time.  

Katie:  [01:15:43]  So I’m just thinking because I know her, what if she says, you don’t pay it off, then I’m selling it? Then we won’t have a car.

Ramit Sethi: [01:15:54] Would she do that?

Cal:  [01:15:55] I want to put a buster in because she knows that would leave us in buying that vehicle she had which she wouldn’t.  

Katie:  [01:16:03] Yeah. 

Ramit Sethi:  [01:16:04] Would she do it or not?

Cal:  [01:16:05] But I wouldn’t put a buster.

Ramit Sethi:  [01:16:07] Cut it off with the past. I would say, we’re taking a new approach with our money. We’re prioritizing money. We’re being more responsible with money. And part of that is that I’m focusing on my discussions with Cal. And we are going to make decisions as a unit. End of story. Well, what about me what? We are making decisions as a unit. I love that because it’s so politically correct. It’s not saying, we’re not talking to you anymore because your decisions are horrible for us. It’s we are making decisions together as a unit and you just keep repeating that. 

Katie:  [01:16:41] I like that. 

Ramit Sethi:  [01:16:44] You will not be pushed around anymore with your finances. Because if it doesn’t stop here, it will go on for the rest of your lives. You start to see why it’s so important to decide at a high level what kind of life do we want? And it trickles all the way down to, Katie, you sitting there and saying, should I go break my rule of only going to eat, have coffee four times a week? No, because I have a bigger vision than coffee. I have a vision of being free, of being independent of my mom. 

The two of you are not bad people because you can’t will up this stuff to go right, but you have all the information you need. And you’re actually talking to the author of the book. Trust me, neither of you are magically changing after this call. The minute you start to accept that, the minute you can actually build a system that works. There is no trumpets playing at the end of this call, there’s no general saluting in the background with a tear running down his cheek, nope, none of that’s happening. The two of you came to this call and you are leaving the call basically the same people. That’s reality.  You can say, okay, I’m ready to make some changes, and I need some help. 

I spoke to Katie and Cal for hours and hours. It was one of the longest podcast recordings that I’ve ever done. And when I get off these calls, I always wish the couples the best, but I never know if they will actually change or not. A few days after speaking with them, I received follow-up letters from both of them. You can read the full letters at iwt.com/followups. But let me give you an excerpt from each of their notes to me. 

Katie said, in order to see change, we will need to systematically rewire the way we think and how we feel about money. That starts with being competent, reading your book and understanding the fundamentals, then tackling the shame both on my own and with a mental health professional. New rules. We don’t speak with others/family about our finances. We set up boundaries. Cal and I will wait to have conversations about money when we’re in the same room and able to concentrate and fully connect. Friday nights are for our family. We order pizza and do an outdoor activity together. Memories don’t need to be expensive. 

And Cal wrote, I know it has only been a week, but I feel a fire under my ass to get this debt paid off so we can live our rich lives. Katie and I work together to restructure our finances to be for the most part fully automated. Sitting down together, we did the math again for the pace we were going and said f that. We don’t want to be paying Katie’s mom off for another 20 years. 

Their letters go into much more detail about exactly what they did, including their new money rules. I would highly encourage you to check them out at iwt.com/followups. And all of this was possible because Cal and Katie were able to start having productive conversations about money. If you want to start talking to your partner about money, go to iwt.com/episode51, that’s episode 51, to give you everything you need to get started, including word-for-word scripts

Thanks for listening to I Will Teach You To Be Rich. I’m Ramit Sethi. Please follow the show on Apple, Spotify or wherever you listen to podcasts. If you haven’t read I Will Teach You To Be Rich, my book, pick up a copy. You can get it at any bookstore or any library and it will show you this specific tactics for how to build the I Will Teach You To Be Rich system into your personal finances.