Episode 50. “Maybe buying this condo was a mistake” (Part 2)

Eric and Elena (Part 2)

Date: July 5, 2022

In part 2 of Elena and Eric’s story, we learn about the deep emotional ties that Elena associates with the condo that’s draining their savings account—and why she’s so anxious about outside opinions in the event they decide to sell it. 

To recap, they’re 25 and make $160k/year combined. They love to go to music festivals and bought a condo (with a down payment gift from their parents) about seven months ago. “Society” tells them that’s great, so they think they’re doing great.

They’re not. Between transaction fees, mortgage, and maintenance, the purchase has bombarded them with phantom costs that require them to spend $2,000 a month from their savings to stay above water. At this rate, they’ll be broke in two years.

No amount of cutting back on sushi or music festivals will solve this problem. This one’s all about money psychology. Eric and Elena have some tall emotional hurdles to get over before they can make the right decision and stand confidently in their truth to outsiders. Listen in to see if they can commit to selling their home and living their Rich Life. 

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Episode Transcript

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Ramit Sethi:  [00:00:02] You’re out of money two years from now. Do you want to have to make a decision with your back against the wall?

Elena:  [00:00:08] No, definitely not. What are we prioritizing? Are we prioritizing a mortgage? Are we going to prioritize the fact that we are young, and we love to travel, and we love to do these things? So I think, what is it going to take changing my perspective that this condo is the representation to everybody of what we have? The hard part is going backwards, or at least in society’s point of view, going backward. There’s going to be a lot of backlash. 

Ramit Sethi:  [00:00:39] Welcome to part 2 of my conversation with Eric and Elena. As a quick refresher, they came to me telling me, well, we look for financial advice, but most of it’s for beginners. We’re already doing pretty well. We’re looking for the advanced stuff. And they believed that their problem was they spend too much money going to music festivals. 

Well, I took a look at their finances. And in the last episode, it was revealed that they are living paycheck to paycheck. And what’s worse, they’re actually losing money every single month, and no amount of sushi or even festivals would really change that. And what’s more, they don’t want to give up the festivals. 


We discovered that their condo is costing them way more than they thought. They bought the condo using a big down payment with help from their parents. They didn’t have enough for it. And it turns out that they are spending over $2,000 more than they were when they were renting. They’re basically spending too much on their condo relative to what they thought. And this is causing them a lot of problems.

So why’d they do it? They did it for the same reason that so many of us believe we have to buy a house. They believed that they were throwing money away on rent. They believed all the realtors and parents that told us that you have to buy a house, otherwise you’re just a poor renter. And so today, in part 2 of this conversation, we’re starting to grapple with what would happen if they sold the condo? 

Turns out the condo is much more than just a place to live for them. It’s something that they built together. Elena even admitted that they both agreed to keep the condo before they got on this call with me. So think about what this means for her. Think about what this means for them. 


The most important things in our lives typically transcend dollars. Yet here I am suggesting the very thing she loves in particular, the very thing that represents their relationship to her might not be the right decision for them. So today, we’re going to grapple with money psychology, money emotions, and peer pressure to keep a house because, of course, we are told over and over that you must buy a house. It’s the greatest investment of all. Now as we go through today’s episode, I will be talking about some of their numbers. We used a conscious spending plan. If you’d like to get a template of the conscious spending plan yourself, go to iwt.com/episode50. This is the I Will Teach You To Be Rich podcast. Let’s get into it.

[Interview]

Eric:  [00:03:31] I’m wondering if we have to sell the condo. I’m wondering if we need to take this as a lesson learned as we got taken by the wave and take it as like it happened and get out of it and then restart.

Elena:  [00:03:49] I don’t think we’re going to sell the condo. As much as you don’t want to hear, we honestly we both went into this call being like, we support our condo decision. This was the right thing for us. And I think we’ve definitely realized some things. But I don’t think the solution is necessarily to sell the condo. You really think we should try to sell this condo?

Eric:  [00:04:10] I mean, you heard what he said before, right? It’s like you can stop going to sushi, you can cut out 50% of your music festivals, which I doubt that we will, I just don’t know if us cutting out all of these expenses– and I think I’d rather take the hits and take the embarrassment of running with this.

Elena:  [00:04:37] I mean, I’m a little speechless. I feel like this was something we were so confident about. And it was a huge step we took together for our future. It’s all hard to hear. I love this place. We just did so much for it.


Eric:  [00:04:57] I think that we could build something together. And I think we didn’t build this condo, in a way we didn’t build to get to this condo. And I feel like we would minimize ourselves and we cocoon ourselves if we continued this way, and we would have to just take stuff out rather than add on to our life. And I think there is a chance that if we do come to the decision together to sell that we could maybe build something massive and be in a position where we can just buy the right house for us.

Ramit Sethi:  [00:05:43] Can I pause you both here? Can I just pause you? I just want to point something out. It feels like both of you are trying to convince the other person of your perspective. Have you noticed that dynamic?

Eric:  [00:05:55] Yeah.

Ramit Sethi:  [00:05:56] And is there another dynamic we could use right now?

Elena:  [00:06:03] Talking about how we feel about it.

Ramit Sethi:  [00:06:06] Let’s try that.

Elena:  [00:06:11] So you feel we could build something?

Eric:  [00:06:15] Yes. And I feel that I can help you and I can support you in all the conversations that we’re going to be having with different people.

Elena:  [00:06:33] I think that’d be essential is that support at that time, for me at least.

Eric:  [00:06:40] Yeah.

Ramit Sethi:  [00:06:42] Eric, do you maybe want to ask Elena anything?

Eric:  [00:06:51] What’s your biggest fear? 

Elena: [00:06:55] I think I have two fears. I think one of them is the fear that what if this was a good investment and it’s going to increase so much in the next few years, and we’re stupid for selling it now? That’s one of my fears is we don’t know how much it’s going to go up by. My other fear is definitely the people around us, what they’re going to feel about it, how they’re going to look at us because we did that. It worries me a little bit. I don’t think we’d hear the end of it ever, really. And I think it’d be once we do decide to purchase again, we’d have everybody breathing down our neck.


And it’d be hard, honestly. Because I feel like everybody we tell that we own a place, they’re like, oh, my god, that’s amazing. That’s such a great step. That’s such a great step towards your financial future. And I think for us to sell it, it would really be like, whoa, what happened? Why would you sell that? That’s not a smart idea. When you are going to purchase again? The price are going to go up. So I think there’s going to be a lot of backlash, at least for a short amount of time from friends. But I think from my parents, you’ll never hear the end of it.


[Narration]

Ramit Sethi:  [00:08:11] Okay, I get it. People listening are going to say, why would you care what other people think? Guys, all of us care what other people think. We are social animals. If you’re listening to this judging Elena right now, you would probably be in the same situation if you made a life-altering decision that everyone around you could see and everyone around you felt strongly about. 

We’re not talking about strangers on the street. We’re talking about Elena’s close friends and family. These are the people she sees at birthday parties, holidays all the time. How would you feel if you knew that every time you saw them they were going to ask you, why did you choose to rent again? What were you thinking? 


These barriers are significant. They’re not frivolous. They actually prevent us from making big changes in our lives because we are concerned what other people will say. And that’s real. It’s not something to be shamed or judged. It’s real. The best way to handle this is not to avoid it, in my opinion, it is to become knowledgeable and strong enough to have a confident answer if somebody asks us. But first, we’ve got to be honest that this is actually something that affects us.

[Interview]

Elena:  [00:09:34] So I think that’s going to be the hard part is going backwards, or at least in society’s point of view, going backwards. So I think that’s what I’m struggling with. But I’m also very known to not give a shit about what people think, and I don’t know why this area specifically bothers me so much. Because in other areas I don’t really mind if my parents don’t approve of it or our friends don’t like it or whatever it is. I think this is just such a big thing. And we’re going against everybody’s advice. And I think that is hard for me right now.

Eric:  [00:10:13] I don’t think we’re going against everyone’s advice.

Ramit Sethi:  [00:10:15] Hold on, Eric. I just want to point out you’re about to try to convince her. But are you curious? I’m very curious why? She’s mentioned in other parts of life I don’t give a shit. But for some reason in this part of life I do care. Are you curious why?

Eric:  [00:10:38] Yes. 

Ramit Sethi:  [00:10:39] So ask her. 


Eric:  [00:10:42] Why is it this particular thing? Why is it our condo?

Elena:  [00:10:47] I think it’s because it’s that. It’s because it’s our condo. Because we didn’t get married. We don’t have kids. This is an indication of something that’s ours. So I think that’s why it’s more hard. And it’s a little difficult.

Ramit Sethi:  [00:11:17] Ask another question.

Eric:  [00:11:18] I’m trying.

Ramit Sethi:  [00:11:19] I saw you. You did a great job. You’re about to launch into some monologue. Nobody wants to hear it. She’s saying something so important.

Eric:  [00:11:31] Do you think our finances are ours? Do think that our bank accounts are ours?

[Narration]

Ramit Sethi:  [00:11:39] It’s a clumsy question from Eric, but I don’t mind. At least he’s trying. The real insight here is that most partners just don’t ask enough questions. When I hear these conversations, I notice that most of you either explain to your partner, that’s what you love to do– explain– or you constantly complain and spin about all the things that worry you about money. 

These are toxic patterns. You got to stop that shit. You want to see how you stack up? Create a little document. And the next time you and your partner talk about money, make a little green check mark each time the other person asks a question. I guarantee you will be shocked at what you discover. 


[Interview]

Elena:  [00:11:46] Yeah, I mean, we have our own accounts. We also have our account and we can definitely build on our accounts. And instead of looking at it as our condo, we can look at as our investments or our savings, and still have that be a representation of our steps we’re taking towards our future together. It doesn’t have to be a condo itself.

Ramit Sethi:  [00:12:54] Can I ask you a couple of questions about that? Because it sounds like this is important to you, the people around you. And I understand that. Are the people who would be the loudest, are they in a financial situation you admire?

Elena:  [00:13:10] Not particularly admire, I think they just do what they can.

Ramit Sethi:  [00:13:18]  So you have people who are not in a situation you admire, who would be pressuring you to do something that they think is best, but causes you to lose money every month? How would you want to regard their advice?

Elena:  [00:13:32] Honestly, I think I would still regard their advice pretty highly. Even though I don’t admire the position they’re in, I think, because I love them and they’re such a huge part of my life, I would find it hard to believe they would steer me wrong. So if they believe it’s a good idea, then I will still listen to it. And that might be naive and not smart and not logical, but I really value the people in our lives.

[Narration]

Ramit Sethi:  [00:13:57] Let’s recap. In part 1, Eric and Elena came on the call telling me they’re looking for advanced advice. We walked through their love of music festivals, and I told them, I’m not going to stop you going to festivals. I know you’re not going to stop going anyway. I’m not going to take that away from you. It’s your money. We got real by talking about the numbers that they filled out in the conscious spending plan. And I pointed out that they are two years away from going broke. Then and only then did we start talking about the real issue– their condo. And that’s caught them totally off guard. 

So now we have a lot of work to do to talk about all the issues surrounding the condo, including what other people would think if they sold it. And that’s exactly where we are right now. It’s almost like they came in to buy a sports car, but I gently pointed out that they need a minivan and they are, “Really?” because it’s not what they expected to talk about. Now we have to talk about everything around buying a minivan, how it will affect their finances, what it will mean to drive a minivan, and what people will think. These ancillary concerns are really important. If we leave them unaddressed, people will not change. 


To help Eric and Elena make the right decision for them, I have to walk them through each step of their decision, even if it seems foolish or unimportant. I’m going to help Elena unpack some of her emotions around this decision to understand why she cares so much about what other people think. And you’ll notice half of what I’m doing here is just asking questions, and hopefully, trying to figure out what she’s really thinking and feeling about this decision.

[Interview]

Ramit Sethi:  [00:15:40] I think you can value the people in your life, but not necessarily agree with all of their advice. Do you understand why your parents believe so strongly in homeownership? 


Elena:  [00:15:56] I think it’s because they purchased their home such long time ago, and it’s like five times its value. And for them, it’s really like, we sell this house and we’re fine. And they are. They’d be like have a lot of money and be fine. So I think that’s why. We’re of the same idea. It’s like, if shit really hits the fan, we sell this condo and we’re going to be okay, and we’ll start over. And I just didn’t think I’d be in a position where seven months into owning a condo, I’d even be thinking about selling it.

Ramit Sethi:  [00:16:31] Can I point out a couple of things? When your parents were growing up and when they bought their house, do you know approximately how much they made?

Elena:  [00:16:38] I think probably just my salary, and my mom didn’t even work. So I think there, yeah.

Ramit Sethi:  [00:16:46] So at 60k they bought a house sounds like on one income and they were able to make it work. Just out of curiosity, the two of you living in Toronto, could you buy an equivalent type of condo or house on one salary at 60k? No, of course not. And even corrected for inflation could you? No. Times are different. Housing is unaffordable. Toronto and Canada is insane. We know that. So they are telling you what worked for them operating off a playbook that’s 40 years old.

Elena:  [00:17:24]  Yes, it’s worth it to talk about it now and look at as possibility, but I definitely think I would still need a few nights to really come to terms with it, to not think with my heart as much, to think more with my brain. So I very much get emotionally charged and I’m like, we’ll come back to it. We’ll come back to it because I feel like I don’t say the right things when I’m emotionally charged. I don’t think logically when I’m very emotional. So I’m very open to your action, or what you think we should do. Or what do you think would be best for us?

[Narration]


Ramit Sethi:  [00:17:58] Let me highlight a few things that caught my attention in this last conversation with Elena. First, her idea that logical conversations are diametrically opposed to emotional conversations. And in her words, that logic is better. I disagree. I think we glamorize logic and we stigmatize emotions. But we actually all use emotions with money. Why not acknowledge it? This is why I gets so mad at those guys who buy a $75,000 truck they can’t afford to drive on flat roads to their job in an office building yet those same guys scoff at someone buying a Louis Vuitton handbag. 

We almost weaponize emotions in our culture, like they’re a sign of weakness. But emotions are real, and emotions are valuable. Of course, logic matters too. Math matters. For the biggest purchase of your life, you better understand how those numbers work. Otherwise, you’re just hoping and praying things will work out. 

Home ownership is not a religion. It’s a fucking financial purchase. Treat it accordingly. In other words, it’s okay to feel like you want a house. That’s totally fine. But you also need to pair it with numbers. It’s also fine to start with logic, here’s what the numbers tell us. But you also have to acknowledge how you feel about a purchase or a decision.


Second, let me emphasize that the advice from your parents might make sense today. It might have made sense back then, but it also might not make sense today. A lot of you have parents who are pressuring you to buy a house. Go and have a little fun. Go ask them what it costs to buy that house back then. Ask them how much they were making. Ask them how did they do it on that kind of income. And how did they pay for kids go to school and activities and saving money in their 401k. Oh, they didn’t have a 401k. They only had a pension. Oh, how interesting. 

The reason actions will be hilarious. First, they’ll start off with an enthusiastic yes, they’re proud they could buy a house on a modest income. And then as you start to probe a little bit more, they might get a little quieter. Like if you ask them, hey, Mom, hey, Dad, if a house in our neighborhood costs $600,000, and I make $75,000, how would you suggest I pay for it on one income? 

I don’t know, maybe you shouldn’t use this podcast to launch a verbal trap on your parents. But I’m sharing this to show you to put people’s advice in context. Your parents lived in a different time with different financial circumstances. Evaluate their advice accordingly. Same for all these dumb billboards you see on the side of the road telling you you must buy and if you don’t, you’re a loser. Put the advice in context, understand the numbers. Now, let me help Elena start to focus on their future. 


[Interview]

Ramit Sethi:  [00:21:00] So would it help if we paint the picture of what the future looks like? Let’s go through a couple of different scenarios. And you paint it for me. I’d like to hear what you think. Elena, let’s go through an amazing scenario. You keep the condo, and things work out great. Within two years, what would that look like?

Elena:  [00:21:21] If things would go great and we still had the condo, that would mean that we’d be saving something, so managing to put something into savings. And I mean, hopefully still traveling as much as we can. But I know that if we’re putting stuff into savings, that means that we are definitely cutting out of other areas of our life that we both don’t want to cut out of. So I’m not sure. Honestly, I’m still a little speechless of the thought of selling it. So I’m not sure how to properly answer your question right now.

Ramit Sethi:  [00:21:56] Let’s take it step by step. So two years from now, you have the condo, you’re able to put more money into savings and investments, how would it work? How would you do that?

Elena:  [00:22:10] I think we would need to be very firm with ourselves. I think the only way we’re going to put money aside is by cutting things out. So it has to be one trip a year and pick whatever trip matters most to us that year. And that would save us shit ton of money that we could put aside.

Ramit Sethi:  [00:22:29] Out of curiosity, how many trips do you have booked for the rest of this year?

Elena:  [00:22:34] This year, we have about– so July, June, August, September, November– five trips. And we already had one earlier.

Ramit Sethi:  [00:22:46] Okay. Oh, sorry. When will you cancel all five of those?

Elena:  [00:22:50] We wouldn’t be able to cancel it. A lot of it is nonrefundable. It would really be one of those things like I’ll start my diet on Monday, where it’s like you need to do something now about it. 

Ramit Sethi:  [00:23:04] Do you believe that? Do you believe that you will start your diet next year?


Elena:  [00:23:11] I think it’d be really hard, and definitely not something we want to do. But you’re going to have to do things you don’t want to do sometimes.

Ramit Sethi:  [00:23:22] Notice that subtle psychological tell. She shifted from talking about herself using “I” to “you’re going to have to do things you don’t want to do sometimes.” In other words, talking about someone else. Deep down, Elena knows that she won’t start any kind of financial diet next year. You have five festivals for the rest of the year. You already locked in some prices, but you can still cancel them. You’ll still save money. You’ll save money on Uber, you’ll save money on flights. So you got to cancel five of them. Are you ready to do that?

Elena:  [00:24:00] Maybe not five, maybe three.

Ramit Sethi:  [00:24:04] But you told me in your own vision that you can go to one festival per year. You already went to one, so it’s time to cancel all five according to your vision.

Elena:  [00:24:15] Yeah.

Ramit Sethi:  [00:24:15] So should we just cancel them right now?

Elena:  [00:24:19] If canceling them means we keep the condo, I’d be open to it. I love this condo so much that I’d be okay putting aside some of these interests. But it’s also hard. I’m saying this from a very emotionally charged moment. So I don’t know. If push came to shove and right now you’re like cancel the five festivals or sell your condo, I would cancel the five festivals. But I don’t know. It’s a very hard thing for me to think about.

Ramit Sethi:  [00:24:55] Eric, you want to weigh in here?

Eric:  [00:24:57] I want to talk to Elena and I want to have a serious discussion about what our next steps should be here. It’s becoming more and more clear to me. I wouldn’t want to cancel the festivals. I’d sell the condo first before canceling the festivals personally.

Ramit Sethi:  [00:25:15] You two don’t need to, quote “get serious.” That’s just words. What does it really mean, “We got to get serious”? Nothing. It’s just words. You know what you two need? You need a system. You need a rich life vision, what are we working towards? What do we want? We want five festivals a year? Awesome. Let’s write it down. And we will commit to going to five festivals. And when we go, we already planned for it, so we are guilt free. Oh, we want the extra drinks or whatever. I don’t know. I don’t go this EDM shit. Get whatever. Great. Guilt free. And also where else do you want your money to be going besides rent and festivals? Where else?

Eric:  [00:26:01] Investments.

Ramit Sethi:  [00:26:02] Yes. And you have a number, a percentage. The conscious spending plan, what does it recommend?

Elena:  [00:26:07] 10.

Ramit Sethi:  [00:26:10] Yeah, 10% of take home pay. You can adjust it. You could make it nine. At your age, boy, if you walk away with 30 grand or so after all the fees and transactions and all that stuff, maybe you could put that in your investment account, put 20k, maybe put 25k, take 5k, go have a great time. Okay, wow, that would really boost some stuff up, catch up for not investing for a while. So you don’t need to just quote “get serious.” That’s just a word. You need to build in a system so your money is automatically going to the places it needs to go. That’s how you build wealth. Less effort, less guilt, more results.

[Narration] 

Ramit Sethi:  [00:26:52] You guys, stop it with this “get serious” shit. Stop it with this, “we need to have a conversation.” Those are just words. You need a system. Anything else is a waste of time and doomed to failure. This is one of the core tenets of I Will Teach You To Be Rich– systems over intentions. That’s why I have the rich life system. Get it at iwt.com/rich. 

It shows you exactly what to do with your money, how to afford the dream vacation you want to take at the end of this year, how to see if you can afford a house, when you can buy a car. It helps you put your system together. Now, this was a big breakthrough for both of them. Elena is starting to think in terms of tradeoffs now, which is very good. I’m going to invite them to imagine a rich life that better fits the season of life they are currently in. Listen it.


 [Interview]

Ramit Sethi:  [00:27:53] How old are you both?



Eric:  [00:27:54]   25.

Ramit Sethi:  [00:27:55] 25 years old. I believe there are seasons in life. When I was 25 I was out, Taco Tuesdays. I was just out with my friends. That’s what I wanted to do. If somebody came in here and told me, you shouldn’t go out with your friends. I’d be like, fuck off. This is what I want to do. And I want to do it a lot. Okay, 30s in New York, going out, having fun, traveling more. That was my season of life. If somebody told me again, I would have told them, I don’t want to listen to your advice. I like going out. What season of life are you both in right now?

Eric: 23:37] Going out.

Elena:  [00:28:39] Yeah.

Eric:  [00:28:41] Significantly amplified by the fact that we didn’t go out for two years.

Elena:  [00:28:44] I completely agree. We’re constantly in between this, we’re young now and we should live life and we should save. That’s always the debate for us.

Ramit Sethi:  [00:28:55] But you’re not saving.

Elena:  [00:28:56] Like we’re 25 and we have the rest of our lives.

Ramit Sethi:  [00:29:00] But you’re not saving.

Elena:  [00:29:01] It got us to this point. We’re not because we’re going out, because we’re young, 25 and fit and ready to take on three days of standing and listening to a DJ. 

Ramit Sethi:  [00:29:13] Hold on. Hold on. You could do that. You could do that. You can go out. You make $160,000 a year. You can go out and save and invest. You can do all of that, set yourself up to get married and have kids. But you can’t do it with these condo expenses. The two of you can be millionaires if you want to. It’s not hard. It just takes discipline and time and automation. 

But if you’re losing over $1,000 a month, you can’t do it. In fact, two, you’re going broke. There’s a phrase we use it IWT, sometimes we try to be 40 before we’re 40. And I like thinking long term. I like planning ahead. Yes, but sometimes we try to be 40 before we’re 40. In business, we try to set up all these fancy legal structures. It’s like, you just need to find some people who want to pay you money. You don’t need the expensive lawyer right now. And in personal finance, sometimes we try to do all these complicated things, when it just doesn’t fit our lifestyle yet.


It’s up to you two to decide. But I can tell you that that’s the vibe I’m getting. I mean, the time that you to get happy is when you talk about going to festivals. That was in the first one minute of us talking. I said, great. If you love festivals, then we’re going to keep festivals, that’s okay with me. But we got to be honest about what we are really willing to do and what type of lifestyle we want to live. You’re out of money two years from now.

I never want people to have to make money decisions with their back against the wall. Sometimes it happens. You lose a job, ill parent, whatever, but I really hate it. It provides very bad outcomes. So a decision like this it’s better preventatively than to have to do it when things are dire. Now play it out for me if you don’t own the condo, and things go well. What does it mean to you? What does life look like?

Elena:  [00:31:13]  If we don’t own the condo and things go well, that means we’re renting, we’re traveling probably more than five times a year, we have some steady flow of income, that aside from our savings, we still have something left over. And things nice and more like the lifestyle that we’re living now in the sense of like being 25, wanting to go out and living life.

Ramit Sethi:  [00:31:46] How often are you checking your accounts? Because you’re saving thousands and investing thousands every single month? How often are you checking your accounts at that situation, Elena?

Elena:  [00:31:59] Ideally I don’t even think we’d be really checking. I think it would all be automated. And our credit cards would be paid directly from our checkings. And I check it once a month to make sure everything was done properly.

Ramit Sethi:  [00:32:10] Very good. That sounds pretty good to me. Everything Elena just said sounds like the kind of rich life she actually wants to be living. So let’s talk next steps. Is it possible for them to make this a reality? This is a key. What do you say to them? You can’t go in there like this, “We ran our numbers. And anyway, I think it’s a good decision for us. What do you think?” None of that shit? Elena, how would you say if somebody asked you, why are you selling this place and renting? What would your body language and tone be?

Elena:  [00:32:23] For us the best decision was to rent. I don’t feel like I would need to justify more than that.

Ramit Sethi:  [00:32:51] Love it.

Elena:  [00:32:51] It’s a decision between both of us. And are you living with us? No.

Ramit Sethi:  [00:33:03] Ah, where did this confidence come from? It’s so good. I love that. Again, go through the process. Make sure that you both feel it and you know it because you ran the numbers. Nobody can argue. And of course, no one even has the right to argue with you because if you want to make a decision that’s different than who really gives a shit. It’s your decision. It’s your money. 

[Narration] 

Ramit Sethi:  [00:33:23] What I’m doing here is something called inoculation. Remember in the ’80s, they would ask kids, if your friend tells you to smoke, what would you say? What they were doing was teaching those kids how to come up with counter arguments against something that they would one day face. That’s inoculation. In part 1 of this conversation, we learned that Eric and Elena are actually petrified of what everyone around them will say. And I actually love their kinder. 


Most of us are nervous, or even deeply fearful of what other people will say about our unconventional money decisions. Well, at least Eric and Elena are honest about that. When I teach people to start a business through earnable, we spend a lot of time talking about how to handle the pressures of people around them saying, why are you starting a business? You should just be lucky to have a job. And when I help people make an unconventional money decision, inevitably, they finally admit that they are worried about what people will say. This is a normal reaction to us being human. And being able to plan how you’re going to react, well, that’s a skill you can learn.

[Interview]

Ramit Sethi:  [00:34:32] If you had run the numbers, Elena, and realized what this condo would actually cost you, would you have bought it?

Elena:  [00:34:41] The logical answer is no. But I think when we did run the numbers, which we did, I mean kind of, but when we did write it all down on paper, we saw that the maintenance was this much, and this was the amount for rent, we saw that we weren’t going to be saving. And knowing the fact that we weren’t going to be saving, we still went ahead and purchased the condo. So I think now seeing it from this perspective of, this condo is just sucking even more money out of us than we thought it would, looking back at it, if I was in that specific moment, probably not. And it sucks. And it’s embarrassing to think about that we just made a $770,000 mistake.

Ramit Sethi:  [00:35:38] You did incorrectly run the numbers, fine. You had good intentions, also fine. But if you walk out of here with like 30k in profit, I don’t know, I’m not crying tears for the two of you, oh, boohoo, these mid 20s festival lovers walked out with 30k after a year, no, you need to flip the entire concept here. If you walk in and you’re like, how do I explain this really bad decision? You’re playing defense. You’re playing as if you lost. But you could just as easily say, okay, we learned something really valuable. And by the way, we were fortunate enough to make a profit from this lesson. Wow.

So here’s another thing you could say. You can say, you know what? We really loved the condo, but we realized when we ran the numbers after accounting for all of our expenses that it actually makes better financial sense for us to rent and to invest our money elsewhere. Now the only people who can argue is they’re going to say, real estate is the best investment ever. This fucking realtors are going to be telling, oh, what do you mean? Real estate only goes up. Real estate does not only go up. Real estate goes down. Things don’t just go up. 

So let them say what they’re going to say. They believe real estate is the greatest. You know how many people have told me over the last 15 years that renting is stupid. I’m throwing money away in rent. What about equity? And guess what? I made more money renting and investing the difference than I ever would have made owning in San Francisco, LA, or New York. Let them say what they’re going to say.

Elena finally understands the severity of the situation they are in. Listen to her gradual change in tone as she finally connects all the dots from her past, present, and future. What has surprised you most on today’s call? 


Elena:  [00:37:38] I think what surprised me most was just how in like two hours, just how quickly my mind could change. As much as at the beginning I’m like, I love this condo, we’re not getting rid of it, it’s a great investment, my mind is changing about it. Of what are we prioritizing? Are we prioritizing a mortgage? Are we going to prioritize the fact that we are young and we’d love to travel and we’d love to do these things, just realizing that I don’t feel like we’re rock bottom. I feel like we still have quite a bit of room to make the changes. We are still 25 and we own a condo. We can sell it and start over.

And I think that’s what surprised me most is I don’t feel like this is detrimental. I think we’re getting there. I think even this conversation is such an indication of that. Why do we need to put ourselves in an uncomfortable financial position now when now should be the time that we’re making 160k and living life like we’re making 160k? So I think what is it going to take changing my perspective that this condo is the representation to everybody of what we have? Maybe it wasn’t a smart investment. And maybe we are a little embarrassed, but that doesn’t mean that it’s the end of the world right now. And it could be right for some people, but I think for us, unfortunately now it’s not the best. 

Eric:  [00:39:03] We’re realizing this together and that we’re coming to this point of like it did happen. I feel like this is almost like one of the best case scenarios to be bamboozled, like, damn, we bought a 600,000 condo, now it’s 700,000. We even made a little money out of a mistake.

Ramit Sethi:  [00:39:31] Outstanding. First off, I don’t want you to make any rapid decisions. Rapid decisions are what got you here. I want you to slow everything down. I want you both to feel totally comfortable whatever decision you both make. It’s your decision. You two have to really be thoughtful before you make it. Run your numbers carefully, and you have to be rock solid with each other. You two are a team. 

Right now you’re living together, you own something together, eventually you’ll be married. It’s going to be you against the world sometimes, maybe your parenting style, maybe where you choose to send your kids to school, maybe where you vacation, or the way you dress or decorate, whatever. You’re going to start doing something unconventional. 


Well, you already do this festival thing. It’s unconventional. I’m sure some people are like, that so foolish. So you have to find a way for the two of you to get united. This is us. We’re confident about this. You probably want to find some renter friends who are like, oh, yeah, we rent on purpose because it makes no fucking sense for us.

 [Narration]

Ramit Sethi:  [00:40:36] I really enjoyed speaking with Eric and Elena. For years, I’ve been telling people that real estate is not always the greatest investment, and to run the numbers before you buy a house, particularly as your primary residence. But it’s rare that I get a chance to speak with a couple that perfectly exemplifies this. Eric and Elena are young. 

They have things that they want to do right now in this season of life. They want to go to music festivals. I don’t find that frivolous. I think it’s awesome. They have something they love. But where they have chosen to spend their money does not line up with their core values. They are not living a rich life based on where they are spending their time and money. So it’s important to recognize the season of life you’re in and to use your money to support that lifestyle, even use it extravagantly. That’s how you use money to create joy. 


Now I received a follow up from Eric and Elena after I spoke with them. You can read the full letters at iwt.com/followups. And I highly encourage you to read these letters because they are absolutely amazing. Here’s an excerpt from what Elena said. It’s one of my favorite excerpts I have ever read on the show. She said, “This idea that was engraved in my mind before was that we need to make lifestyle changes to afford our condo. My perspective now is we need to make changes to our living arrangements to afford our lifestyle.” Did you hear that?

Instead of letting the tail wag the dog and deciding we need to buy a house and then whatever’s left over, we’ll use it to live our life, she flipped it. We’re going to use our money to live the rich life we want and if a house happens to fit in there, great, if not, also great. Our rich life comes first. A few days later, she emailed me again and said that they’d scheduled a meeting with their realtor to discuss selling the condo. You can read the full letters from Eric and Elena at iwt.com/followups. And to get a copy of the conscious spending plan that they used, go to iwt.com/episode50.

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 the specific tactics for how to build the I Will Teach You To Be Rich system into your personal finances.