Holy. We have a couple here who's making $400,000 plus per year and you are saying it feels like we are living paycheck to paycheck.
We're not organized in how we manage it. It feels like, nope, it's here. Might as well spend it.
$2.18 million net worth. What do you think about those numbers?
To me, net worth is just a number.
I'm not sure that it's enough. I don't have confidence.
The two of you are really stuck in a cycle. The real cost here is that the two of you just are not having fun with money.
Is this like how she really thinks of me? Like I thought 140 was a respectable income. I know it's not anywhere near what she makes.
When he said 140, I'm like, the math ain't math. And he flashed his phone in my face and was like, bam, you're wrong.
I feel drained.
You don't trust the financial adviser you spoke to. You don't trust your husband. You don't trust yourself. What the is going on right now?
You know why I occasionally feature couples who make a lot of money and still worry if they'll have enough? Because you'll probably do the exact same thing when you have a lot more money, unless you start to master your money psychology right now. Like imagine this: what if you made over $450,000 a year and you still felt like it wasn't enough? It sounds ridiculous to even hear that. But if you keep saving and investing just like you're doing right now, one day you will have more money than you ever thought you would. Here's my question: will you magically change the way you feel about money then?
Today I'm talking with Chris and Heather. 41 years old, 39 years old. They're a Bay Area couple who on paper are doing great, but they don't feel that way. Chris and Heather are haunted by one question: is it enough? I am bringing them on this podcast as a crystal ball to show you what you might face as you become more financially successful.
Think about it. Consider when you were younger, like a little kid, how much you thought a lot of money was. Was it 50 bucks? Was it $50,000 a year? And when you achieved those numbers, did you sit back and smile and say, 'Wow, I finally made it. I don't need anything else'? No. Almost nobody does. That's why I want to hear from you. Tell me about a goal that you achieved and how you felt about it. Maybe it was saving your first $100 or earning six figures or saving enough to buy a jacket that you had your eye on for months. I would love to hear what it felt like once you achieved that goal. And I read every comment, so just leave yours below.
Now, when we talk about our finances, we often overfocus on the math and we underfocus on the psychology. What makes this conversation even more interesting is that Chris and Heather actually submitted separate applications to be on this show. So throughout this episode, I'm going to be comparing what each of them wrote, and it's quite revealing how they see money differently. Before we get to their interview, let's take a look at their conscious spending plan. This includes all of their key numbers. If you want my help with your own conscious spending plan, you can join my money coaching program at iwt.com/moneycoaching.
Income $450,000, net worth 2.1 million, assets 863,000, investments 1.46 million, savings 89K, debt 221K. Fixed costs are 56%, investments 5%, savings 1%, and guilt-free spending 37%, or $8,000 a month. On paper, these stats are extremely impressive. But when you have investments and savings like they do, and you are agonizing over whether you can afford to finish painting part of your house, you've probably taken a very wrong turn somewhere back in time. Already, when I'm looking at the numbers and how they feel about money, I can see a major disconnect, most likely driven by fear. Here now is my conversation with Chris and Heather.
If you or your partner has fallen for a scam, I want to help. Especially if you've recently fallen for an email or text scam, or you've gotten bad financial advice from someone who did not keep their promises, or maybe you just have not even told your partner because you are embarrassed. If this is you, I want to talk. Apply for free coaching with me by being on my podcast. Apply today at iwt.com/apply. That's iwt.com/apply.
I was struck by the difference in your applications to me. Chris said, 'Biggest challenge: she wants to spend everything we make and then she complains about how she feels like she is behind on retirement while also saying she wants to retire early.' Heather's application: 'Biggest challenge: we need a framework and to hear some real advice. We hired financial help when we were younger. They told us you're doing everything you're supposed to, but I don't believe them. My husband pretends to be the money expert, but I don't trust him either.' What do you hear in both of those applications?
Chris writes, 'I am a saver and she is a spender. I am an investor that can tolerate fluctuations and risk, but she just wants to invest in bonds and then complain how she is never going to meet her retirement goal. Then she says ridiculous things like how she wants 20% returns with no falls or fluctuations.' What do you think?
I feel like when he wrote that application, it was like when emotions were high.
I was telling him what I talked about in my application and I suggested that he apply as well, and yeah, there's a lot of emotional charge in there.
Chris, what do you hear in the applications?
Yeah, I mean it's pretty sharp. I probably should have toned it down a little bit, like she said. When I did apply, it was after we had a little bit of a discussion about how much money I make. So I felt a little offended at the end of that. And then I was also trying to get the kids ready for bed.
Hold on. I think you're letting me in on a good tip. If I want to get the most raw responses, I should instruct people: only fill this application after 9:00 p.m. at night and after you've spent an hour and a half getting the kids in bed. Is that what you're telling me?
Well, I didn't get them in bed yet. I was in the process of doing that. So I kind of felt like a little time constraint working against me, like I had to fill out this application because that's what she wanted me to do.
What was the argument? Take me back.
So I was sitting on the couch in my living room. She got to the final question of her application, which was like, 'What is your household income or whatever.' So she asked me how much it was. And I was like, 'Okay, well, if I make 140.' And then when I got to that part, she cut me off and she just said, 'I just need to know how much you make.' I'm like, 'Okay, well, if we're talking about gross, then it's 140.' And then she said, 'Well, what's on your W2?' Like she didn't believe me. She was googling like, 'Oh, how do you find out how much you made? What's your gross versus your net? Is your total gross on your W2?' It became like this googling contest about like what my actual income was.
I guess she accepted my answer at some point, and then after that she just told me that I should fill out the application too.
Did it feel good to be right?
I think that whatever feeling I had about being right was overshadowed by my feelings of her questioning how much I make.
I felt like, is this like how she really thinks of me? Like, I mean, I thought 140 was a respectable income. I know it's not anywhere near what she makes, but I was pretty proud of where I was at. So just to have this like this petty argument about it, especially after we just filed our taxes and all our numbers are laid out right there, I thought it was a lot of time and effort and stress over just the small simple question that I guess just kind of hurt. Like I think I would know out of everybody how much I make. It just kind of seems silly to be questioning me about how much I make when I'm the one that's making it and reporting it.
Got it. Heather, I'm curious to get your perspective. Do you remember this conversation?
Okay. Take me back to that moment. You were filling out the application. You asked him for his income. And then what happened?
He told me a number that sounded higher than what I had remembered his income being.
What did you remember it being?
I thought it was around 100.
Based on our last tax return. And we do our taxes together. We work together on it. So the numbers aren't a secret from one another. And in my mind, I thought I made three times as much as he did. When he said 140, I'm like, 'The math ain't math.' And are you sure? Then it got into the Google contest. And I'll tell you how that ended: is when he flashed his phone in my face of what he had looked up and was like, 'Bam, you're wrong.'
I was like, 'Okay, I'm just asking, are you sure?' Because we're going to put it down on this paper and I just don't want to say something that's incorrect.
Why did you ask him, are you sure? Was it 'are you sure' or 'are you sure?' What would you say the tone of that was?
I just said, are you sure about that?
Okay, Chris, would you agree?
I honestly can't remember exactly how she said it. I just remember thinking it's kind of ridiculous to ask me if I'm sure about what I make.
Do you mean it's ridiculous because it's your income or because you know more about money than she does?
I don't think that I know more than her.
Yeah, you do. You wrote it in your application.
'We can't go crazy on some vacation because she feels poor, but we aren't poor. I am focused on retirement and her focus is short-term. She will say ridiculous things like, "We lost $5,000 in the stock market today. Should we sell?" Even though we haven't lost anything because we haven't sold. She's just looking at the unrealized loss.' Sounds like you probably do know more than her. Would that be fair to say?
I don't think it'd be fair to say. I think that I probably look and watch it more than she does, but I think that from where she used to be, which she didn't really know a whole lot, to now she's made a lot of progress. And I don't think she knows more than me.
Who knows more than the other about money?
Come on. You guys want to ask me who knows more about money with my wife and me? I'll tell you right now. Who knows more about style? I'll tell you that right now, too. Right. This is the easiest question you're going to answer today. Let me put it that way. Heather, would you care to answer? Who knows more about money?
Yes, he knows more about it. I've always kind of deferred to him in that realm. I just want to be sure. I'm just doing a little team checking. I don't want him to have to carry the burden of the financial direction of the family by himself. I want to support where I can. And if that means double-checking him along the way here or there, I'll do that.
Really?
Chris, you agree with that? You know more about money, but she wants to help by double-checking you.
I will say that any financial decision that we make, we make together. When I first met her, she probably didn't know a whole lot about stocks, bonds, mutual funds, and investments and things like that. But together, we kind of go over everything and make decisions.
If we have an awesome conversation today, what would each of you walk out of here with?
I guess just like a more clear picture about the future. I mean, I'm always focused on retirement and there's just a lot of uncertainty.
I think a 10 out of 10 conversation today would feel like we're coming out of it knowing that, hey, this is how we've been spending and if we continue along this trajectory, this is where we're going to be when it's time for retirement and whatnot. My overall goal is that we can have a balance of having our sort of rich life now and rich life later. We don't want to, you know, be too one way or the other. Sorry.
I've had some deaths in the family recently where my grandma had dementia, and so my grandma and my uncle both died last year and this year of dementia. And so to me it's like that is a real possibility for me down the line, and that memory care stuff can be very expensive too. So I'm just trying to live a rich life now, plan appropriately for later.
Yeah. I'm sorry that you lost two of your family members. That's really tough. Yeah.
I feel like we're just overwhelmed with even where to go, where to start.
I, you know, watched your Netflix show a while back and then saw you on Instagram later and just starting to get into some of the podcasts, you know, shared it with my husband. Listening to other people's stories makes us think like, oh, you know, we don't have a CSP. We didn't categorize where our money was going. And even just...
I feel like even in this answer, you're overwhelmed. I want to try to rein you in here. You guys already talked to a financial adviser. They told you you're going to be fine.
What does that mean, though?
Well, why didn't you ask that person?
The last time we talked to them, it was not too long after we'd gotten married. Things have changed. We have two kids now.
They changed their model to be fee-based. You know, they want to take a percentage instead of just a flat fee. And we weren't satisfied with the original answer of 'you're doing okay, just keep doing what you're doing.' Why? It just doesn't sound like a plan.
All right, Heather, you wrote, 'We have enough money, but still feel like we live paycheck to paycheck because we don't have a budget.' Now, the two of you make over $400,000 per year. Yet, that's a big smile on Chris's face. It looks like a bit of an embarrassed smile. Heather is just completely shut.
Well, when you say it like that, it sounds like a big number.
The way you describe money is as if it is never enough. Would you say that's a fair way of how you feel?
I would say because we're not organized in how we manage it, then it feels like, nope, it's here. Might as well spend it.
Okay, Chris, you can only focus on one or two things at a time. Like you can't focus on retirement and saving while also like spending all your money and whooping it up and having a good time.
Since we don't really have a coordinated plan, it just kind of feels like we're not making any progress.
Do you think that you're missing a plan? Is that the problem?
I think a plan would help.
Yeah, I think that would help.
Then why don't you guys get a plan?
In preparation for this show, we started following some things, but I'm not sure that it's right or enough or I don't have confidence.
Not my area of expertise.
If you ask him, I think he would say yes. And I think he's being modest too because he's answering your question.
What's going on, Chris? I feel like the way you're describing your knowledge with money is sandbagging. Like you talk about fluctuation and risk and you're talking about early retirement. Like that's not beginner level stuff. Why don't we just be honest with each other?
I honestly don't know. I mean, like I said, I've always been focused on retirement. I've seen many of my friends retire throughout the years. So anytime that they're getting ready to retire, they always, you know, talk about it and I always listen and try to get some information.
When you say that you are living paycheck to paycheck, Heather, what does that mean to you?
That just means that I pay the credit card bill and so the paycheck comes in and a huge chunk, if not all of it, goes to paying off our credit card.
No. Holy dear America, do you see why you should never use this phrase, paycheck? I need to... I'm sorry. I know I'm here to help you, but I need to help myself right now. Otherwise, I'm gonna explode. This goddamn stupid phrase that everybody uses. Oh, 75% of Americans are living paycheck to paycheck. First of all, what the does it mean? We have a couple here who's making $400,000 plus per year and they're saying we're living paycheck to paycheck. I haven't even looked at the amounts, but I guarantee you are saving and investing a lot of money and you are saying it feels like we are living paycheck to paycheck. You are not. And this is why we should stop using this phrase.
Paycheck to paycheck is a made-up term. It doesn't actually mean anything. You have a couple making almost half a million dollars, then you have a couple making $45,000. You think they're in the same universe? No. All right. We need to stop doing that. And we also need to recognize that the way we feel about money is not correlated with the amount in our bank account. Would you agree, Heather, that perhaps the way you feel about money at $400,000 per year might not be accurate?
It's possible, but we live in a high cost of living area.
Okay, I'm going to just skip right to the numbers. Forget the preamble. Here we go. Looking at the numbers, just on a 401k, you both collectively contribute $28,320 per year just to your 401ks. What do you think about that?
That sounds pretty good. That doesn't sound like, oh, we live... it's crazy, we can barely put anything aside. Not to mention, there's over $1,000 a month going in other investment vehicles per month. Have you guys ever had anyone talk to you like this about money? I doubt it.
What does the financial adviser in his ill-fitting suit say?
Oh, wow. Well, from a safe withdrawal rate, it looks like if we use a conservative 3.5%, we'll be at a nominal rate.
Yeah. I don't think you need somebody to walk you through cell D46. I think you need someone to give you a little bit of a shake and say, 'What the is going on right now?' Are you guys open to that kind of conversation today?
Yes. It's what we're here for. Straight talk.
Yes, I'm being really tough on them. I'm doing this on purpose because both of them are minimizing. They're almost shrinking back when I ask them direct questions. This is a very common phenomenon when I speak to couples. These couples will write incredibly vivid and evocative applications. They will write painful things about what they're going through, but then the minute we start talking, they minimize. 'Oh, it's actually not that bad for me.' 'No, you know what? It's actually better than we thought.' All right, then. Why are you here? Chris and Heather's tactic is to keep saying, 'We just need a plan.' Can we get real? I mean, come on. These are two capable adults. If they just needed a plan, they would have done it already. A plan is not hard, especially for two educated adults. We can knock out a plan in 20 minutes. What's going on here is deeper. And I want you to pay attention to this. If you say to yourself, 'I just need blank,' the next question you should ask yourself is, 'If I just... that's a code word, just need blank, then why haven't I done it?' That is where the real conversation begins. People systematically discount the psychological and relational dynamics of money. And that is exactly what we are seeing.
That's why I created my money coaching program. So if you're listening to this, you're going, 'Hm, I keep saying that I need to start investing, but I don't.' Then I would recommend you join Money Coaching. You can sign up at iwt.com/moneycoaching and focus on changing your own attitudes and behaviors around money. When we come back, we're going to dig in and understand Chris and Heather's relationship with money.
This episode of Money for Couples is brought to you by Wild Grain. If you dream of the smell of freshly baked artisanal pastries in your own home, you should check out Wild Grain. Wild Grain is the first bake-from-frozen subscription box for sourdough breads, artisanal pastries, and fresh pastas. Plus, all items conveniently bake in 25 minutes or less. Wild Grain's boxes are fully customizable. They have a variety box, they have a gluten-free box, vegan box, and a new protein box. One of my co-workers recently got a new box delivered from Wild Grain. It had croissants, sourdough bread, gluten-free chocolate chip cookies, butternut squash ravioli as well. And she told me, 'We had some friends come over with their kids a few Sunday mornings ago. I popped the pumpkin cinnamon rolls from Wild Grain straight from the freezer into the oven. 25 minutes later, they were ready. Everybody loved them and the house smelled amazing. There's nothing like having an artisanal bakery in your freezer to chase away that winter chill.' Now is the best time to stay in and enjoy comforting homemade meals with Wild Grain. I recommend giving Wild Grain a try. Right now, Wild Grain is offering our listeners $30 off your first box, plus free croissants for life when you go to wildgrain.com/rait to start your subscription today. That's $30 off your first box and free croissants for life when you visit wildgrain.com/rait or you use promo code rait at checkout.
I will admit that I am a recovering optimizer. I love a good spreadsheet. I love a good scenario plan. Hey, what happens if this variable changes and we're talking about the age of 72? Now, the good news is that planning has helped make me successful. The bad news is that I freaking love sitting around and playing with variables. Hey guys, if I just save an extra 30 cents per month, then by the end of the year, I can buy the name brand macaroni and cheese. It's not a good look and it doesn't take me to a good place. That is why I always say a rich life is lived outside the spreadsheet. If you want help zooming out and seeing the big picture, like the key drivers that actually matter, then I recommend working with Facet. Facet charges a flat membership fee for financial planning, never a percentage of your portfolio. You get access to a team of CFP professionals, always a CFP, always a fiduciary, who help you create a personalized financial plan for your rich life goals. And they handle important things like investments, retirement planning, starting a family, becoming empty nesters, estate planning, all of it. Your financial plan needs to adapt as your life changes. Facet makes getting professional financial advice more accessible without charging hidden exorbitant fees. As of the date of this recording, Facet is waiving the enrollment fee for new annual members. And for my audience, Facet is offering $300 into your brokerage account if you invest and maintain $5,000 within your first 90 days. You can head to facet.com/ramit to learn more about which membership option is best for you. Facet is an SEC-registered investment adviser. I'm not a member of Facet and I have an incentive to endorse Facet as I have an ongoing fee-based contract for cash compensation based on this endorsement. All opinions are my own and not a guarantee of a similar outcome.
Chris, you said you are confident that you are on track for retirement. And to that, Heather, you replied, 'I don't believe that's true.' Why don't you believe it?
I just think that so many things have gone sideways in the way that people are predicting money. So to use old projections and old frame of minds of projecting what retirement and stuff looks like. Who knows? Nobody knows.
Okay. So what's the alternative?
I think we just have to plan and do our best and be confident in what we are going to look like.
You told me you're not confident.
I just want to be able to balance now and later. And so when I said paycheck to paycheck, which I will stop saying, I just meant the money that comes in, it goes out. And you know, you talked about our 401k or whatever, but that's not money we see that comes out before we even get our, you know, paychecks or take-home pay.
So still real? You don't believe it's real, huh?
Well, we've seen retirement accounts cut in half from, you know, political and other world events happening and people having to work longer. And...
What are you reading on the news? What sources?
I don't mind if people are scared of money. I don't mind. It is scary for a lot of people because they don't understand it. So they see these headlines and they don't know what to make of it. And you only see the most hyperbolic headlines because algorithms push that stuff. I don't mind. I understand why it happens. To make life decisions based on a random Instagram account, that I mind. Especially when you're making over $400,000 a year. I really mind and resent that. Like, do you really want to go your whole life just being worried about money?
No, that's why we're here.
Okay, good. I appreciate that. And I'm going to help. Do you both talk about numbers or feelings more when it comes to money?
Maybe I talk about feelings.
So when you're saying the numbers, I'm like, 'Yeah, but I feel differently.'
Uh-oh.
You're yelling at me about it. It sounds very familiar to me and my early conversations with my wife. I was like, 'Look at the spreadsheet. I'm using conservative estimates.' It did not connect.
Money is not just numbers. Money is feelings. Money is a vision. Money is confidence and experience and how we were raised. It's all those things. How long have the two of you been married?
Great. Okay. And when was the first time you disagreed substantively about money?
Wow, quite a reaction. Maybe they're not fights, but they're just things that we disagree on. Like, you know, I grew up where if you're going to buy a car, you put a down payment, you take a car loan.
And my husband was like, 'No, we have to save up the entire car amount before we can even think about buying a car. We can't go into debt over needing to buy a car.'
He used his money to buy the car for me.
That's kind of an interesting example. Chris, what did you say?
I just told her that I don't like debt and payments and I'd rather not have that all hanging over my head. So if we have the money now to buy it now, then just buy it now. So then we just bought it.
How did you both feel about that? It doesn't feel like very satisfactory.
I mean, I was like, 'Cool, I don't have to pay 0.99% APR for five years, I guess.'
Is that really what the number was?
It was. Yeah, it was from Nissan and it was like a special rate at the time. Less than 1%.
What do you make of that, Chris?
I mean, 0.99% is a good rate. So if we had to make payments, it wouldn't be that big of a deal.
Yeah, but that's where he gets into feelings. He doesn't like to feel like a debt's hanging over his head, even though he could have been investing over that five years and making more than 0.99%.
What the... Where did that come from? Heather pulling out the intermediate knowledge of money. Most people who talk about, you know, retirement accounts being cut in half, like very fear-based stuff, they have never really looked into the mechanics of how money works. And your off-hand comment just now about, hey, you could take the difference and invest it over the course of five years is quite a bit more advanced than that. What do you make of that?
Well, that's how I talked him into financing our bed. It was 0%.
Okay, that's fine. You make plenty of money. I just have one question for you. Oh god. Please. Hold on. I just got a bunch of like blood tests and stuff yesterday, so I got my health report. I'm feeling good, but that might change right now. Was this $6,000 mattress a luxury or an investment?
It was definitely a luxury. I think we didn't need a $6,000 mattress, if that's what you were saying.
Thank you so much. I feel... What's the right answer?
Listen up, America. Your mattress is not an investment. I don't care how much better it makes you sleep. It's not an investment. It's a luxury. People are getting so mad right now watching this. I don't give a... The way people talk about their mattress is so insane in America. Calling it an investment is like me calling $500 face cream an investment. 'Oh, it's going to save me from having to go to the dermatologist 30 times.' This is obviously absurd. People cannot imagine that it's okay to actually spend money on a luxury, as you have done and admitted. Thank you. There's nothing wrong with spending on a luxury. Okay, enough. Thank you. That's great. Who brings up money in your relationship?
What about in the last six months? A time where you were not on the same page?
Our most recent car purchase.
We spent a long time in the market for a reasonable family car. We put in a down payment on a Toyota Grand Highlander hybrid. Then it went into this recall thing for almost a year and we sat there, no car. Then when it came back, they were still trying to charge a markup for it, which we were like, 'We're not paying a markup on a Toyota.' At that point, I was like, 'Well, let's just get the BMW that I've been wanting.'
He was like, 'No, let's get something comparable to the Toyota.'
Could you afford the BMW?
Because we didn't have any car payment at the time. And I said, 'Okay, this much down, this much a month, we could swing that.'
Yeah. The BMW was a little bit of a luxury thing and I was more inclined to save everything that we could and pay cash outright because I don't like debt and I would rather not have a payment that I have to make every month in case something happens.
Like I get hit by a car or my car breaks down or I don't know, a tree falls on my house.
I'm not disagreeing. It's fine. Some people are just like, 'I don't like debt.' Fine. But you seem like you understand investments and opportunity costs and things like that. If you put 20 or 50 or $80,000 down for a car, that's potentially $80,000 that could have been earning money in the market. What are your thoughts on that?
I agree that you could probably take the money and invest it and earn more than the interest on a car payment, but to me it just seems safer to just pay it and be done versus having this lingering payment over my head every single month until it goes away.
Can we take a look at the numbers together?
What was it like doing the conscious spending plan with both of you?
It was fine. I mean, we've done budgets before. This one was a little bit more simplistic than other ones that we've done in the past, which I appreciate. I mean, it was a little bit tedious just because budgets in general are tedious, but...
How dare you. Heather, what was it like for you?
It was not as bad as I thought it was going to be. I guess I was afraid of what I didn't know.
All right, let's take a look at the numbers. Here we go. Chris, can you read off the words in bold and then the number in full next to it for this entire box, please?
Assets 863, investments 1,458,446, savings 89,320, debt 221,376. Total net worth $2,189,390.
$2.18 million net worth. What do you think about those numbers, Chris?
It was kind of surprising to see that. I never really looked at net worth or calculated it. To me, net worth is just a number.
Okay. Means nothing to you.
It sounds good, but I also don't feel an emotional connection to it because I don't want to say a fake number, a made-up number, but it's sort of like a snapshot of something. And...
That's what it is. It is indeed a snapshot of where you are today. What does it tell you?
We have more on the positive, which is great, but like our house is a huge chunk of that. Like we can't just sell our house and have $800,000 in our hands. So that's also money we can't touch or have access to. So...
Anybody happy about a number that's 2.18?
No, we're happy. We're happy. Is that enough, though?
I don't know. You tell me. You're 39 and 40 years old, correct? And you plan to retire, Chris, at 50?
Yeah, I just turned 41 and I plan to retire when I'm 50. Yes.
All right. So nine more years till you retire. So if we just approximate things, what's going to happen in nine years to your net worth?
Hopefully it goes up. Hopefully by then my house will be paid off and the cars will be paid off so I'll be debt-free.
Is this going to be enough or not? You can even guess. I'm not going to... if you get the answer wrong, it's okay. We will make changes.
I would say it is probably enough. But we just don't know what's going to happen between now and then and how long I'm going to live after retirement, what my needs are going to be after retirement.
Why don't you guys just wait till you're 90 to retire? That way you can be sure.
No, no, no. I don't want to work that long.
I can help you guys. No doubt. I can. But this idea of this uncertainty... you have an 8-year-old, correct?
What if your 8-year-old came to you and said, 'Oh my gosh, you know, I have a new school after kindergarten and all the people and I just don't know what's going to happen when I go to eat lunch today. I just don't know.' What would you tell them?
I would tell them, 'Get in there. Everything's going to be fine.'
Oh, wow. Both of you so confident. It's going to be fine. Get in there. But not with millions and millions of dollars.
I want to say that it's not that we're not on the right path. I just don't know. It's the unknown.
Do you know it's okay not to know every single thing about your money?
Okay, that's uncomfortable for me.
Because I just... I grew up without having it. So it was never a thought or conversation. And then when we do have it, it's like, I don't know what I'm doing.
And we have kids and we want to make sure we're doing the right thing.
Mhm. How do you manifest that when you don't feel confident about money? How does it come out?
It comes out in us just trying to save or put away. But then I'm like, are we doing the right thing by putting too much maybe in retirement or whatnot where we're not getting to travel as much now, you know.
And what else? The idea that you have a family history where you don't want to wait until you're 75, 85 years old to...
Start using it, so you use some of it now. Correct.
Yeah. And that seems to cause conflict between the two of you. Chris, would you agree?
I don't know if it would cause conflict, per se. I don't mind the luxury purchases as long as we can afford it.
Let me read from your application. Quote, I don't like debt, so I will save until I can buy a car outright, but then I have to hear it from her afterwards because we can't go crazy on some vacation that we are on because she feels poor. How is that not causing conflict, Chris?
So, yeah. I mean, I guess there's a little bit of conflict.
Chris, do you find yourself minimizing the problem on today's call? Because reading your application and the way you're talking today are two completely different people. If you don't feel that way anymore and you don't have a problem, we don't need to do this.
You're picking up on a lot of things that I wrote. I guess it's just something that I don't really acknowledge unless I'm writing an application with a bunch of emotions.
I just feel like we make a lot of money. So, if she wants to spend it on a luxury item here or there and we can afford it, then it's not that big of a deal.
Because it kind of is. And we should probably have a more concise plan about what we're going to do and where we want to be.
I think maybe it's more about the big purchases that, you know, some of this stuff comes up like the car. We're not buying cars every day, but we bought two in the last three years. And just some of the bigger fundamental ways that we think about money. We're not stressing over the day-to-day as much as other people might, but we don't have a good way to resolve some of our bigger purchases and bigger picture things about money.
Like cars. He doesn't want to go put a loan on it.
Yeah. You do? Okay. So, that's one. What else?
Stuff I want to do with the house like renovations.
How do you know if you can afford it?
I look at our bank account and our savings and I say that, you know, if we take out this amount, this is what we'll be left with. Are we comfortable with that?
And we haven't done anything like big big because of that.
Let's take a look at the rest of the CSP. Heather, can you read off the combined gross monthly income, please?
Combined gross monthly income is 37,693.
So, your household income is $452,000 per year. What do you think about that household income?
That's a lot. All right. I agree. Who makes 25,000 a month?
The bigger one? Yeah. That's you. What do you do for a living?
You're in healthcare. Okay, cool. And Chris, you make 12,000 a month. What do you do?
I work for the state of California.
State of California. Nice. You got a pension?
That's cool. My dad worked for the state of California for a long time. I noticed you use the word hella in your application. Are you from Northern California?
Very nice. All right. Yeah, it's a big tell. Okay. So, continuing along on the CSP, I'd like to point out a few things again, notably the high income 452,000. You're contributing 28,000 a year to 401ks. Your fixed costs are 56%. Which is interesting to me. It's a little higher than I would have thought with that kind of income, but it's still within parameters, so whatever. We can dig into it later. Whoa. What the clothes are 2,200 a month.
I knew that was going to come up. It's not really clothes only.
It's a combination of purchases from Nordstrom, which include luxury handbags as well.
All right, that's fine with me. I mean, whatever. It's within 60%. God bless. All right, moving along. Investments are at 5%, but let's keep in mind, you are already investing a lot more than that from your 401k. Savings are at 1% and actually that's all going to your kids. That's 529. And that is because your savings are at $89,000 or seven months. Okay, fine. I can understand that. And finally, guilt-free spending is 37% or $8,000 per month. Is that accurate?
I feel like that includes like travel and everything else.
Okay. How do you all feel about these numbers?
It sounds good in the short term, but if we continue on this path, is that going to get us where we want to be?
Okay. And Chris, what do you think?
I'm happy with it. It would be nice if we had like steady investments into something other than just our 401 and things like that. I've heard on some of the other podcasts that you would talk about having an account specifically labeled for vacation or trips or fun things like that. It kind of sounded like an interesting plan that I was thinking about maybe implementing, but as far as the numbers go, yeah, I'm fine with it.
What do you think my reaction is to the CSP?
There's too much in guilt-free spending.
You think my answer is too much guilt-free spending? Okay. And Heather, you said the fixed costs were a little too high.
No, that's not what I said.
What the hell? On my clothes.
Oh, yeah. I was surprised by that and then you explained it and then what did I say?
No, I said fine with me. Which of you grew up religious?
I went to a private school, but we weren't like super religious or anything. We didn't go to church every week or anything.
Why are you guys wanting deep down? Why do you want me to discipline you right now? Because that's the attitude I'm getting. Like, tell us we're bad. I know we've been bad. Here's my hand. Slap it with a Why? What's going on right now?
No, this is just the first time we're kind of shining a light on our own spending and stuff, too. Putting the CSP together was like going through the last year's worth of credit card transactions and tallying it up. And I was like, damn, 2,200 on clothes and luxury handbags. Maybe I was yoloing a little too hard.
Maybe. But can I ask this, Heather? Do you know any women who spend a lot of money on things that they value and they are proud and unapologetic of it?
Exactly. Most women do not in my experience. And I'm on a mission to change this. Like my wife, she spends a lot of money on certain things, her money dials. She talks about it unapologetically and she tells me a lot about how her female friends do not talk about it and she's like very open and it's quite inspiring when she meets somebody else. Heather, why do you think you don't know anybody like that?
That's just not how I was raised. That's not how my friends are. That's not how, you know, we're just brought up in a humble upbringing and household. So to spend thousands on a handbag is stupid.
Do you think it's stupid for your handbags?
See, if you look at the trajectory of appreciation on certain brands and
No, we're not going to do that. We don't buy handbags because they happen to be worth more. That's not why we buy them. Sometimes they are, but that's not why we buy them. We buy them because
Yeah. And can you afford it?
Well, your fixed costs are below 60%. So, in general, without looking into the projections and stuff, seems very clear you can afford it. Can I give you some of the energy that I have around buying expensive stuff like this sweater? It's pretty expensive.
If you were like, damn, like that's a nice sweater. Where'd you get it from? I might mention it. How much did that cost? I might tell you. And then your first reaction, whoa. I go, yeah, I really love it. It feels good on me. It fits me really well. Depending on different sizes I'm at, it scales with me. I just love it. And clothes is one of the things I really love spending money on. What do you notice about my answer?
You had confidence in it. You owned it.
Yeah. I know my numbers. I know what's important to me. When I buy something, I'll never apologize for it. I didn't trip and fall into this sweater. Never. I did it because I decided, eyes wide open. Can you give me an example of that? Tell me about your favorite bag.
My favorite bag. I got it on a luxury resale site and I was getting a good deal on it.
We're not going to do that.
Just for fun, how much did the bag cost?
$8,000.
It's worth 10 or 12.
Nobody buys luxuries because they're getting a good deal on it. That's not luxury. Luxury is always irrationally expensive.
One thing I notice about Heather is that she's quite contradictory. Have you caught it? On one hand, I'm humble. I'm frugal. On the other, I insisted on a BMW and dropped $8,000 on a handbag. Now, I'm the last guy to shame anybody for buying a beautiful handbag or a nice car. Although, I do wonder why did you choose a BMW? Is it that you wanted to park diagonally across four parking spots to take up everybody else's parking? No, just the 10,000 BMW owners I've seen in my life. Okay, whatever. The point is, you have to be honest with yourself and the people around you if you want to live a rich life. And that means being honest about what you actually spend money on. You think I go around saying, "Hey everybody, I'm frugal. I actually got a great deal on this sweater." No, I paid a lot of money for this sweater because I love beautiful clothes and I can afford it. It's okay to admit what you love. You don't have to apologize for spending money that you can afford on the things you love. And in fact, it goes deeper because when you are not honest with the people around you and yourself, you are sending mixed messages to everybody. Here's what's really interesting. He called out these mixed messages in his application. It was one of his central complaints. But in this entire conversation, he didn't bring that up once. Not once. She says she wants to retire early, but she also wants luxury spending. Well, guess what the truth is? They could actually do both pretty easily. But you can't accomplish those great things if you don't admit what you want. Deep down, many people believe that becoming wealthy and living a rich life should be hard. The idea that if I actually admit that I love beautiful clothes or if I admit that I love a beautiful handbag, that that makes me a bad person and actually I should be tormented by spending on these things that I love. But also I know I'm bad. I'm so bad. And we create this torment for ourselves. But it doesn't have to be that way. In fact, when you understand money and you master your own money psychology, you actually get the beautiful privilege of saying, "Oh, this actually doesn't have to be hard in order for it to be fulfilling." That's why I always say nobody trips and falls into a rich life. If you want it, amazing, but you've got to be honest. Listening to this, I can also empathize with Chris. If you're him, you're sitting there saying, "Do you want this or do you want that? I don't understand." So, up next, we're going to explore how they actually talk about money as a couple.
Here are some of the most creative I Will Teach You To Be Rich businesses that my students have created. Nate turned his love of chess into a chess coaching and training business and started a legal strategy business for online entrepreneurs and creatives. Scott teaches yoga all over the world, including in the south of France. Now, what I love about all these, they're so different, but they started from the same question. What if I took the thing I love and turn it into a business? One of the things that entrepreneurs learn is how to keep it simple. That is why when I'm working with new IWT students who are just first-time entrepreneurs, I recommend that they get started with Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e-commerce in the US, including brands like Mattel and Gymshark. They've got ready-to-go beautiful templates for important things like your website, landing pages. Plus, they have helpful AI tools to make everyday tasks easier, like generating discount codes and enhancing your product images. It's like having a full marketing team behind you. They've got easy-to-run email and social media campaigns to help you connect with new customers. And everything is in one place. Tackle your inventory, payments, analytics, and more without having to jump from platform to platform. It's time to turn those what-ifs into withs with Shopify today. Sign up for your $1 per month trial today at shopify.com/rait. Go to shopify.com. That's shopify.com/rait.
My coworker just told me about a new ritual that she has with her children. They can go to bed at 7:30 or they can stay up an extra 45 minutes if they quietly read with their parents. Now they all sit on the couch together. They're sharing blankets and they're reading their own books in calm silence. Quite a meaningful way to help kids wind down from the day. If you want to do something else meaningful for your kids this year, make sure they are protected in case something happens to you. And that means getting set up with term life insurance as soon as possible with this episode sponsor, Fabric by Gerber Life. Fabric by Gerber Life is term life insurance you can get done today. It's made for busy parents like you. It's all online on your schedule right from your couch. You could be covered in under 10 minutes with no health exam required. If you've got kids, especially if you're young and healthy, now is the best time to lock in rates. And even if you have life insurance through your employer, it may not be enough to protect your family, especially if you leave your job or get let go. Join the thousands of parents who trust Fabric to help protect their family. You can apply today in just minutes at meetfabric.com/ra. Meetfabric.com/ra. Policies issued by Western & Southern Life Insurance Company, not available in certain states. Prices subject to underwriting and health questions.
Okay. So, just a couple of notes. You both are talking about do we have enough? How do you define enough?
I mean, I guess all your needs are met.
We're not stressed. We're not fighting.
What the You're fighting right now? Over $450,000 income. Hey, maybe if you guys make a million, then the fights will stop. What do you think? No. How much is enough?
You plan to retire in 9 years, Chris? How much do you need?
I don't know. I mean, I think I don't really know what my medical needs are going to be in the future or if we're going to move or like how much is my bank account supposed to be by the time I retire?
This is an extremely elementary question for somebody who plans to retire early. And I actually don't believe that you don't know this number because this is the primary thing that people who are in the early retirement community obsess over. They wake up, they plug it into a Monte Carlo simulation, they plug it into 20 different fire calculators. Please don't tell me you don't know the number that you've been orienting your entire professional life towards. How much do you need?
