$428,000 in Debt and Fixed Costs at 154% of Take-Home Pay: Ramit Sethi Coaches a Couple Living on Future Money
I Will Teach You To Be Rich
Addison, 39, and James, 43, have been married for a little over a year. They earn about $138,000 a year, have no savings, and owe more than $428,000. On their Conscious Spending Plan (CSP), fixed costs alone come to 154% of their take-home pay. Ramit Sethi calls that "one of the highest numbers I've ever seen." Addison's application to the show warned that they will likely divorce if things continue as they have.
The couple already know they are in trouble. They have read the books, watched the episodes, and built spreadsheets, and nothing has changed. Ramit's position is that they don't have an information problem. They have a behavior problem, held in place by a relationship dynamic and by money scripts from childhood. He sets out to expose those patterns before rebuilding their spending plan from the ground up.
What the numbers showed before the conversation
Before talking to the couple, Ramit went through their transactions, which were connected to the budgeting app Monarch for the show. In one month they had earned $2,690 and spent $7,889. He went back to July and found fixed costs of $14,659, or 154% of take-home pay. In his words, they were spending more than they made every month on fixed costs alone, "not even at 100%, 154%."
Several line items stood out to him. Pet spending that month was $2,667. Their planned grocery budget, for two people, was $3,363 a month. Ramit read that as a sign they weren't looking at the big picture and weren't in touch with where their money should go. They also planned to spend $1,798 a month on debt payments. Only $4,882 of credit card debt was visible, so he suspected tens of thousands of dollars of debt that wasn't showing up.
The application written at 4 a.m.
Ramit opened by reading Addison's application back to her. Six years ago, when they started dating, James told her, "I'm not good with finances." Addison wrote that she now knew what he meant and hadn't known it was this bad. Elsewhere she wrote that she had taken on more work and more student loan debt to subsidize James's career at the expense of her own, and that if they didn't fix this now, they would "retire homeless."
Addison said she wrote it around 4 a.m. "in a moment of desperation." They had struggled to pay rent on time. In the past, James had refused to talk about money until he felt confident and had money in hand. That left her managing the finances and running the household. She asked herself whether she had a partner or whether she was a caretaker who wasn't caring for herself.
The two had moved in the same circles for about 20 years before getting together. They have no children and two dogs. James works in garage door sales and service. Addison is an academic researcher and consultant, and later in the conversation she says she is a PhD student who teaches two classes a quarter.
James said the application made him feel guilty. It forced him to see that he had been getting by on wishful thinking and making promises based on it, and that this was eroding the foundations of the relationship. For years he had worked commission-only door-to-door solar sales, living on "feast or famine windfalls" with the big win always around the corner. Asked what he thought of that approach now, he said, "It was very foolish... you can't plan a life on vibes." He admitted he had been relying on Addison's steady income. His main change since the application was taking a job with steady income, which comes with 60-hour weeks. He saw that steadier income as his contribution.
Good intentions that never last
Addison said their relationship with money had not changed significantly. After the application she set up spreadsheets and a CSP and called weekly money meetings. They were shocked by what they saw, since neither of them had tracked spending before. One week they challenged themselves to spend under $150 on groceries. They did it, but it took two to three hours of shopping, which Addison said she doesn't have time for. The next week they spent about $500, spread across Costco, Target, and Trader Joe's.
Ramit asked what she noticed. Addison called it a trend: they make a commitment in a completely unsustainable way, then drop it. Cutting back on restaurants and on beer garden visits with the dogs followed the same path. She works from home and needs to get out, James works 60 hours, they're tired, and so they tell themselves they deserve it. "Convenience that we simply can't afford," she said.
Monarch had flagged the beer garden as a recurring cost. Addison said she didn't want a life built around the dog park, the beer garden, and wings. James said he liked that part of their life but would accept dialing it back. Ramit pushed: "Guys, we can't get any further if you're not honest about what's going on." If spending is so consistent that an app treats it as a fixed cost, he said, that means they love it. They could still decide it's out of line with what they want or that they can't afford it, but they should start by being honest. Addison then admitted she enjoys it, and that they are "living way beyond our means."
As goals for the session, James wanted a new framework for understanding money that they could use together. Addison wanted to understand their psychology: "how we got here."
The dreamer and the safety net
Ramit asked for a recent disagreement about money. James described starting his new job. He planned to pick up extra shifts in the first few months, so he said yes to concert tickets and a weekend away that Addison suggested. Once training ended, the job turned out to be much more demanding than he expected, and the extra shifts didn't make sense. The money he had promised never showed up.
Ramit had them role-play the original phone call. Addison, as herself, proposed a hot springs trip at Mount Princeton for about $600, then camping, then concert tickets with $800 lodging because of awkward transportation. James agreed to all of it: "Like, I'm crushing it." Addison explained what came next. She had wanted them to start splitting costs, and James told her he could pay for this trip. In the end she paid for all of it. She described it as a return to the start of their relationship, where she supported his career and was the safety net and he said he'd pay her back but never did. She estimated she has covered about $30,000 in trips, rent, and bills over the years. They fought throughout the trip, and Addison said she was "done with the defensiveness and the excuses."
Addison said she believed him this time because the job was new and he was even being paid during training. She also admitted she "should have known better," since James tends to be more optimistic than reality warrants. Ramit said nobody wants a relationship where they can't take their partner at their word.
James said he projects confidence about money "too often" even when he doesn't feel it, and he didn't know why. Addison's explanation was that it always works out because she is the safety net, so there have never been real consequences. Ramit named the pattern: James is the dreamer, for whom success is always around the corner, and "the dreamer is almost always able to exist because they are subsidized by somebody else." James agreed that without Addison he would radically change his spending. Addison said that if she stopped helping, they might be evicted or her credit might collapse.
"I think I've been using that word wrong my whole life"
Asked what needs to change, James said he needs to understand money, "in particular, the word afford. I don't think I know what that means." Ramit called it one of the best answers he had heard. He went back to the role-play: after saying they could afford it, James had added "I'm working hard." Ramit asked what that meant. James answered: "That I am betting on money that's not there yet." He said it was hard to admit to himself but deep down he knew. Ramit told him that radical change requires admitting uncomfortable things like this.
Addison said she needs to get clear on what she wants her life to look like and face the long-term consequences of today's choices. Otherwise, when money shows up in the account, she is tempted to spend it on instant gratification after a stressful week because she feels she deserves a treat. Ramit thanked her for acknowledging that she co-created the dynamic and also spends money they don't have.
James's unspoken frustration
Ramit asked James whether he had ever been frustrated with Addison's spending. He had. Student loan money arrives every quarter, most recently a $35,000 loan. When they adopted a second dog, James pushed back and was promised it wouldn't cost much. He later learned Addison had spent $6,000, all loan money. He said it frustrated him that loan money in the account seemed to give her a "carte blanche" to spend freely, even though it isn't income.
He had never told her. Ramit guessed why: James feels so guilty about his own spending that he doesn't think he has a leg to stand on, and if he raises money, it will be turned back on him. James said, "Nailed it." He described keeping a mental "days since the last accident" sign for whenever his past mistakes come up, and avoiding anything that might reset it to zero.
Ramit called this a "quicksand money dynamic." Both partners have made genuinely bad decisions, so the subject has become too touchy to raise, and the roles stay locked in. He also rejected the standard advice that couples just need to communicate. In his view, communicating alone never works. Right now they communicate about each other "like two boxers," not about money and not toward any vision. Addison agreed they have no shared vision. She said she wants money conversations to be fun and exciting instead of crisis management over how to pay the next bill.
The skeletons in the CSP
Addison said building the CSP together was shocking and painful because she kept learning new things. She knew about James's personal loan. She didn't know he had three credit cards or about $50,000 in federal back taxes, which she learned of the day after submitting the CSP. Ramit pointed out that she had "glossed right over the $6,000 on the dog." Addison said she was shocked by that total too. The dog was free and was an emotional adoption: he is the father of their first dog, who died of cancer a couple of years ago, and nobody wanted him because he was old.
Speaking to the audience, Ramit said it would be easy to accept a familiar caricature: the irresponsible husband who won't talk about money and the long-suffering wife begging him to engage. But when he dug in, he found Addison spends a lot too. Both of them, he said, love to spend today and not think about tomorrow. His question was where that pattern comes from.
The full balance sheet
Reading from the CSP, Addison reported assets of $20,780, investments of $14,227, savings of $0, and debt of $428,263. She said the debt should be about $22,000 higher. Net worth was –$393,256. About $350,000 is her student loans. They revised the other balances to roughly $15,000 on credit cards and $25,000 in personal loans. James put his back taxes at $40,000.
Addison expects to earn $150,000–$200,000 after graduating. She is on a 30-year repayment plan with payments she has calculated at about $1,000 a month, and the balance is forgiven after 30 years.
Their combined gross monthly income is $11,550, or about $138,600 a year. Neither knew that. James thought they made closer to $200,000 when Addison works full time. Addison said she had no idea, partly because James's new job is still commission-based. Both said $138,600 is not a lot.
Ramit spelled out what 154% means: they go deeper into debt every month, and "it's literally just a matter of time until you lose everything." The huge student loan hides the danger, he said, because it feels like a separate thing that doesn't really count. Meanwhile, the credit cards, the personal loans (which he was willing to bet carry high interest), and the back taxes keep growing.
Ubers, gas stations, and other conveniences
The fixed costs included utilities at $700, insurance at $500, and a "car payment" line of $1,353. That line covered a car payment of about $638 plus Ubers and the train. The couple use Uber to get to shows, avoid parking, and avoid DUIs when drinking. Ramit compared this to a past guest who justified an expensive truck payment by saying he needed it to pull his trailer. James replied, "We overvalue the almighty convenience." Addison said they shouldn't be going to the shows in the first place: "We're spending money to spend money that we don't have." Ramit compared it to someone with $75,000 in credit card debt choosing a cheaper casino: "You shouldn't even be in Nevada right now."
He told them that at 154%, trimming a phone bill by $20 does nothing. What's required is a "complete inside out lifestyle change." When James said they had known for a while this wasn't sustainable, Ramit answered that if knowing hasn't changed anything, knowing isn't the key. Everyone knows to eat more vegetables. What matters is invisible scripts, meaning deeply held beliefs, and behavioral rules, such as never going to the beer garden again or automatically saving $200 every week.
Other categories:
- Clothes and personal care: over $1,000 a month. Addison had rebuilt her wardrobe after their cross-country move and buys hair products and gets her nails done.
- Pets: $1,029 a month in the plan. Addison admitted they went "a little bit overboard with Chewy."
- Subscriptions and entertainment: $1,754.
Ramit said he had often told indebted parents their kids don't "deserve" luxuries, and that this was his first chance to say it about a dog: at 154% fixed costs, "your dog does not deserve $1,029 of food, treat, and toys per month." He had the couple bring their two Bernese mountain dogs, Baka (short for Chewbacca) and Rainbow, on camera so he could tell them they were going on a strict diet.
Below the fixed costs, the CSP showed $0 for investments, $0 for savings, and –$5,000 for guilt-free spending. Addison said they live in the here and now: money comes in and goes out. James said "YOLO" had become their approach, then corrected himself: "I don't think enough thought went into them to qualify them as decisions." Ramit agreed. There were no decisions, only swipe after swipe.
In the transactions, Ramit found two days of Uber charges of $111 (four trips) and $106. James's frequent stops at Circle K, 7-Eleven, and other convenience stores were mostly Gatorade, water, and energy drinks, sometimes a snack or a hot dog. He brings drinks from home but runs out. Asked why he doesn't pack more, he admitted he enjoys the break in the air conditioning and feels he has earned a treat. Addison said she does something similar: she has a pound of her favorite green tea at home but still buys it at the coffee shop to get out of the house. Ramit asked how people who also like getting out avoid going into debt. Addison said she didn't know. Ramit said what struck him was their lack of curiosity about how anyone else lives, noting that millions of families don't spend $3,000 a month on food.
The pet category that month showed $2,667, including a $1,500 vet bill. Addison said they probably couldn't afford the second dog and hadn't run any numbers. She had told herself it would cost an extra bag of food and a few wellness checks because she wanted the dog and needed to reassure them both. Asked how many of their decisions follow the pattern "I want this, so I'll find a logical-sounding reason," she said, "The majority," adding that they support each other's justifications.
One memorable experience versus five forgettable ones
A $300 dinner turned out to be a birthday-and-anniversary meal, and James said it was excellent. Asked how they plan such occasions, he said decisions are "based on the menu and never on the price." Ramit voiced the obvious objection himself: a life of choosing by price sounds depressing, like going to Wendy's for an anniversary. James agreed it sounded depressing. Addison reframed it: after reviewing their spending, what really "kind of sucks" is spending hundreds on mediocre restaurants and frequent beer garden trips. She would rather go to one great restaurant once a quarter, if they can afford it. Ramit said he would rather have "one memorable experience than five forgettable experiences," and that cutting spending only works if they find joy and meaning in the process.
The shopping transactions (Amazon, Macy's, Costco, Home Depot, IKEA, more gas stations) drew the words "unconscious" from one of them and "reckless" from the other. Ramit pointed to more than $50 a day of random spending with no focus. Splurging on a favorite sushi place would at least show what they care about. He also said much of it was Addison's spending, which she acknowledged: she does most of the household spending.
When she added that they don't need everything she buys, Ramit asked why she was telling him that. She said it was to justify it to herself and everyone in the room. He said both of them constantly explain and justify: "We need this for the dog... I've been inside all day." He doesn't explain his own purchases, he said, because he planned and set money aside for them long ago. If you find yourself launching into an explanation, it's a signal you've taken a wrong turn.
James's childhood: "We can't afford it"
James grew up in the 1990s. His father was a top salesman at a Fortune 500 pharmaceutical company for 42 years. There was food on the table and there were vacations, but James remembers money stress during the industry's mergers: his father pounding the table, his parents going over budgets. In his late teens or early twenties his parents gave him an envelope budgeting system. He followed it briefly and then went back to his old ways. Ramit linked this to James following Addison's financial files for about a week before stopping. James guessed that, having seen his parents' stress, he had concluded that earning just enough to get by meant he could "breathe easy," which he admitted "sounds insane."
His parents are retired and doing fine financially. He doesn't talk to them about money out of "pride and shame." He is in his mid-forties, doesn't want to admit he has messed it all up after pretending for so long, and fears their disappointment. Ramit noted it was the same reason he avoids money conversations with Addison. James described telling her as needing to "rip the freaking band-aid off." Ramit noted that the phrase implies a wound, and modeled a different framing: admitting that discomfort with money has hurt his family, committing to build the skills through books, a therapist, or a coach, setting a fixed Saturday money meeting that James runs, and expecting it to feel good within about six months. James said he had told himself that in his head many times, but never out loud.
Ramit added that many men, in particular, don't want to "burden" their wives with money problems. He called this a toxic masculine idea that is actually demeaning, since it treats a wife as unable to handle hard conversations, and the person who takes on the burden alone is often not even good at it.
Addison brought up a story James had told her. On a hunting trip as a child, he asked his father for a soda and chips at a gas station and was told they couldn't afford it. James had recently seen one of his father's paychecks for a couple thousand dollars and couldn't understand how they couldn't afford something with that much money. "I don't know if I ever figured that out," he said. He now assumes his parents' tight budget had no room that month for gas station purchases. Addison noted that their disciplined plan let them retire to a home on a lake that the couple visits, and said she and James are "not taking a note out of their playbook at all."
Ramit saw it differently. One sign of being good with money, he argued, is teaching your children, and James's parents didn't. "We can't afford it" sends a confusing mixed message: we just went hunting and stayed at a lodge, but we can't buy chips? He believes kids who hear that phrase over and over come to associate money with bad feelings and conclude that affordability is made up. He urged parents to say instead "that's not part of our plan," or "in this family we don't care about $300 shoes," or "we can save for it and do it in three years." He also told adults raised this way that they can't change their parents and need to take responsibility for their own financial lives now.
Addison's childhood: poverty and debt-funded Christmases
Addison grew up "incredibly poor" on a farm. There were hand-me-downs, frequent fights about money, and a fatalistic attitude that "we're going to die poor." At times there was very little food. She knew she was poor from comparing herself to others and because her parents said so directly. Even so, her mother put things on credit cards and layaway to keep up with the Joneses, and financed Christmas because the kids "deserve" a nice one. Addison sees the same pattern in herself. Her parents barely communicate about money now: her mother handles everything and her father is secretive and proud. When Addison asked her mother for advice about James, her mother said she couldn't help because Addison's father is the same, and asked Addison to tell her if she ever figures it out.
Addison resented growing up poor and told her parents she would go to college and escape. She became the first in her family to go to college, and Ramit called her PhD and teaching extremely impressive given her background. But she said she is doing "the same stuff in a different place," maybe with fancier things. She has very little in her 401(k) and has cashed out several 401(k)s to pay for cross-country moves for school. She described feeling disappointed and frustrated with herself.
Ramit pointed out that her frustration only appears when she pulls their numbers, about three times a year, or when money runs short for rent or health care. The rest of the time they enjoy themselves. Neither of them plans, he said, but that is normal: most Americans don't plan more than a month ahead, which is why talk of compound interest over 40 years "might as well speak Martian." In a side comment to the audience he noted how hard it is to escape the class structure you grew up in: a PhD does not by itself change your psychology around money.
Why change at all
Asked why they would put themselves through this, Addison said she doesn't want to divorce, be homeless, move back in with either set of parents, or work forever. James said the cycle of feast or famine, uncertainty, and embarrassment had produced "horrible outcomes" repeatedly, even before Addison, and now threatens his marriage: "I'm ready for a way out." Addison added that she wants them to feel excited and proud talking about money instead of scared and fighting.
Before the rebuild, Ramit showed Monarch's analysis of the past year: shopping was their largest category, at 30% of spending. James read off the vendors: Amazon, Target, Etsy, Costco, Macy's, Amazon again. Ramit had Addison hold out her palm and asked what they got for it. She said it felt empty because she couldn't remember some of the purchases and didn't need them. Ramit said he has nothing against spending, even a lot, as long as it is meaningful.
Rebuilding the plan: from 154% to 63%
The target was to bring fixed costs from 154% down to 60%. Ramit first showed that cutting pet spending from $1,029 to $800 moved the percentage by only about 2 points. The couple concluded they had to go big.
They set a philosophy. James: "We treat money with respect." Addison: money is a finite resource, like time. Their rule was no unnecessary spending until they have $10,000 in savings. Ramit pressed them to define "unnecessary." When Addison suggested still going to a gyro place with music occasionally, he replied, "I never met a couple in $400,000 of debt that went to a beer garden once a week with tacos."
The cuts, in order, with the fixed-cost percentage after each:
- Food and beverage, including all dining out: $3,363 → $800, to be done with Sunday meal prep in place of their usual Sunday brunch (127%). Ramit liked that every minute spent meal prepping is a minute not spent shopping.
- Subscriptions: cut to ChatGPT, YouTube, Adobe, and the "Doodle" subscription, for $55. Concerts and shows dropped, in favor of the city's free entertainment.
- Pets: $250 a month for food and training treats (101%).
- Car and transport: about $1,000, with no Ubers and debts being paid off (98%).
- Clothes and personal care: $300 (89%).
- Utilities: $500, despite four phones between them (87%).
- Miscellaneous: $300, which Ramit kept because of uncategorized, sloppy spending they need to go through line by line (83%).
When the couple worried about going cold turkey on eating out, especially when friends or family visit, Ramit told them they were using family, the dogs, and their need to get outside as "political shields," because no one can argue against those things. They should plan for what they will do, not for sporadic maybes. If family comes and wants to go out to dinner, they can simply say it isn't in their plan and go for a walk. Addison agreed and said their apartment amenities make that easy.
He also asked whether they'd rather fund retirement or the dogs' future vet bills. Addison asked if they could do both, which Ramit called an attempt to wiggle out of the rule she herself had set. She held her ground: the dogs are like their children, so she wanted to cut elsewhere to make room for both. Ramit later said he loved that pushback.
The largest single change came on the income side. Addison is returning to full-time work, raising her net monthly income from $4,000 to $7,100. That brought fixed costs to 63%, and Ramit pointed out they had cut expenses by more than half.
Where the remaining money goes
That left $4,697 a month. Ramit warned that if the money sits in their account, they will spend it. Since they have zero savings, he favored putting more toward savings first. Ideally, at around $8,000 a month in expenses, he said they would hold at least $50,000, roughly six months' worth, built up over years. They set about $3,000 a month for savings.
Addison knew her debt timeline: excluding student loans, everything is paid off by 2031, with about $1,000 a month freeing up across 2026, 2027, and 2029. She wants that money to go toward retirement, where she feels far behind. Ramit said she'll need to be even more aggressive. He praised her for knowing her payoff plan, saying fewer than 5% of people do. James didn't know it, and Ramit said Addison can't be the only one holding these numbers anymore.
Further changes:
- Retirement: $500 a month.
- Self-care: Addison gives up nails, bringing personal care to about $70. James's $60 haircut plus 20% tip every five to six weeks is cut to roughly $30–40 ("Supercuts, here we come"). Ramit's point was that things they take for granted are assumptions.
- Back taxes and credit cards: James should call and try to negotiate both.
With 12% ($1,457) left for guilt-free spending, Ramit thought that was too much. On the dogs, Addison first proposed $100 a month, then estimated $2,000 a year for medical costs. Ramit argued for conservative planning on any expense with no upper limit. As an example, he assumes the high end of the typical 1–3% a year for home maintenance. Addison settled on $5,000 a year, noting their pet insurance covers about 90%, so they set $400 a month in a separate "dog health" savings account.
That still left about $1,057. Ramit normally recommends 20–35% for guilt-free spending, and they were at 8%. Because their habits show that "when you give yourself an inch, you take a mile," he recommended going lower. Addison suggested zero, saying they had already spent their fun money in advance. Ramit said he didn't want this to be punishment. He framed it as respect: redirecting a finite amount of money "with ruthless and relentless force" toward what matters. He proposed putting $800 toward investments and leaving $257 a month for fun. That means water instead of Gatorade, no shows, and at most a planned monthly brewery trip with one beer. In the final plan, savings is about 27%. Addison suggested they could reward themselves a little more once the $10,000 savings goal is reached. Ramit predicted that such a small fun budget would force them to plan and talk about it, and that they would appreciate those outings more.
Reactions and Ramit's observations
James said he had expected more resistance from himself. After 26 years of adulthood that had "viscerally punished" him for his decisions, the possibility of relief felt good. Addison said she had expected shame but left with a concrete plan and felt excited about having an emergency fund and retirement savings.
Ramit called these some of the biggest changes made on the podcast. If they experience the plan as their old lifestyle being removed "one finger after another," it will feel hopeless. What he noticed instead was that they had started moving toward something: a philosophy, rules, and a goal. He left them with three observations:
- Overexplaining is a warning sign worth noticing.
- They lean on comfort and double talk, and should be honest that comfort was the guiding force of their past.
- The plan will succeed or fail based on whether they become teammates. He described their current pattern as one where he works and disengages, she manages through spreadsheets without a clear allocation, they fight, and he retreats.
Speaking afterward, Ramit said the early part of the conversation was a little combative and took some responsibility for that. He saw an inflection point where both started taking responsibility and thinking about the future. He predicted they will make serious changes, partly because some ideas, such as not having to eat out when family visits, were simply new to them. He also expected childhood scripts to resurface as rationalizations, for example: "We saved 8,000. That's pretty close to 10,000. Let's go out and celebrate." Their chances, he said, depend on recognizing those voices as "the voice from yesterday."
Their reflections and the one-month update
In post-session comments, Addison said what surprised her most was the amount of mindless spending, beyond big one-time costs like their wedding and the cross-country move. Her takeaway was that they don't need to spend money to experience comfort and joy, and that their spending had actually produced less of both because of stress and fighting. She said the cuts had not felt like a sacrifice because they were finally on the same page.
James said the gap between his perception and reality on small convenience purchases was shocking. He called it humbling to realize they had both lived with "more of a sense of entitlement than I really care to admit," and said they need to understand why they do these things instead of only making surface changes. He listed no more convenience store treats, no eating out, meal planning, a grocery budget, an emergency fund, paying down credit cards, and starting an IRA.
In their one-month update, the couple said their Monarch categories are more organized than ever. They now redo their CSP monthly to account for variable income and hold weekly money meetings. They hired a CPA for the back taxes. They opened joint accounts so everything is transparent, and they describe having shared goals and a shared definition of necessary versus unnecessary spending. They said they had the information and tools before, but without the session they don't think they would have put them into practice. They were, in their words, "just getting started." The open question Ramit raised remains: whether the old scripts will talk them out of the plan once the first savings goal is in sight.
The spending is out of control. We have no savings. We are living way beyond our means.
Fixed costs, 154%. That is one of the highest numbers I've ever seen.
Shocking to see the numbers and a little painful in that I was finding out the debt that James has is just way more than I could have ever anticipated.
It was very foolish. You can't plan a life on vibes.
I never met a couple in $400,000 of debt that went to a beer garden once a week with tacos. We overvalue the almighty convenience.
You said we will likely divorce if things continue on as they have.
I am supporting his career. I am the safety net and I am taking care of everything. Just done with the defensiveness and the excuses and the reasons why. I can't literally keep doing this anymore.
Guys, we can't get any further if you're not honest about what's going on. 154%. It's not about cutting your phone bill down by $20 a month. If you want to make radical change, you have to admit some deep things about yourself that might be quite uncomfortable.
You ever feel a little nosy? I do. And recently, I started having couples on my podcast connect all of their accounts to Monarch so that I could see every transaction. Monarch is a platform that puts all of your accounts, your income, even those individual transactions in one place.
Today, I'm speaking to Addison and James. They're 39 and 43, newly married, and Addison says they will likely divorce if things continue as they have. Listen to this line from the application: "I've had to actually take on more work and student loan debt to subsidize his career growth and financial stability at the literal expense of my own. If we don't nip this in the bud now, we will retire homeless." From their application, you can see that the stakes are as high as they come.
Okay, let's take a look here. We have $2,690 earned but $7,889 spent. Where's the savings? Where's the investments? What's going on here? All right, I'm starting to develop some suspicions. Let's go back a month and see what happened the month before. I'm back here in July.
Fixed costs now at $14,659. That's 154% of take-home pay. Well, that's the ball game right there. You are spending more than you make every single month just in fixed costs. And not even at 100%, 154%. I mean, take a look here. I can see pets that month at $2,667.
Notice another thing: their groceries, the amount they planned to spend in one month, $3,363 for two people. The fact that they are planning to have that much money spent on groceries in a month tells me that they're probably not looking at the big picture, nor are they particularly in touch with where their money should go.
Also, notice that the amount they have planned to spend on debt every month, $1,798. If you're spending almost $2,000 a month to pay off debt, you probably have a huge amount of debt. The question is, where does it show up here? I'm not seeing any particular debt. I'm seeing $4,882 on credit cards, which is a somewhat reasonable amount, but there's got to be a large amount, tens of thousands of dollars of debt somewhere that's not showing up here. I want to find out where it is. We have a lot of work to do. Let's talk to Addison and James.
Addison, when you applied to speak to me, you wrote something in your application. I'd like to read it back to you. You said, "One of the first things James said to me when we first started seeing each other six years ago was, 'I'm not good with finances.' I now know what he meant, and I didn't know it was this bad. We will likely divorce if things continue on as they have." Where were you and what was happening when you wrote this application?
It was probably 4:00 a.m. on my computer at a moment of desperation. We had been trying to have more conversations around money and just having transparency about our lives, what we want, how we're going to move forward, challenges with being able to pay rent on time. In the past, it was just flat out, "I won't talk about it until I feel confident, until I have money." So the burden's been on me to manage that and also to be the project manager of the rest of our house and everything.
And I just got to a point where I felt like I was putting myself on hold and feeling responsible for everything while not moving forward with my own career. And I was just really nervous about how things were going to look moving forward. Do I really have a partner or am I a caretaker and I'm not caring for myself? So out of desperation, I sat down and typed up a very, very long application and sent it your way.
Okay. I'd like to ask just a couple of questions about your relationship and then, James, I'd love to hear your thoughts. How long have you been married?
A little over a year.
Okay. And how long have you known each other before you got married?
A long time.
So we knew each other, at least were running in the same circles and kind of in adjacent friend groups, for 20 years before we got together.
Okay. Any children?
No.
No, just the two dogs.
What do you both do for a living?
I work in garage door sales and service.
Academic scholarship researcher, consultant.
Great. Okay. Now, James, hearing Addison's application, some pretty strong words, how does that strike you?
It made me feel guilty and kind of forced me to confront the realization that I had been getting by on a lot of wishful thinking financially and making promises based on that, and that it was gutting and deteriorating some of the foundations of our relationship.
When did you first hear about the application? Was it just now or was it weeks ago?
Weeks ago. She read it to me.
We had both watched the podcast and read the books and been aware of you and this program and everything for a couple of years, I think, for a good while.
How were you aware of it, but you were not making changes in your own financial life?
I at that time had been working in commission door-to-door solar sales and relying on feast-or-famine windfalls was kind of how my income came in. The big wins were always just around the corner. And so, as Addison mentioned, I was reluctant to talk about it until I had closed enough deals to have enough in the coffer to be comfortable talking about how to use finances.
Looking back now, what do you think about that approach?
It was very foolish.
Why?
Because you can't plan a life on vibes.
I was just sort of relying on Addison's steady income.
Once Addison told you this application, what did you do?
Took a deep breath. I thought it was very fair. I think I apologized.
And then what did you do?
I guess we talked about it and I agreed that change needs to happen.
What changes have you made since you had that conversation with Addison?
At the time that it happened, I just started a new job and the changes that I think needed to be made that led up to that letter was working jobs for several years that were with no base. So one big change I did make was getting a good job that has steady income.
Great.
I guess that had occurred right around the same time and I jumped into these 60-hour weeks and I felt like that was kind of my contribution, is I'm bringing something more steady and reliable to the table.
Okay. Addison, has your combined relationship with money changed significantly since you wrote that application or not?
I wouldn't say significantly. I think initially following the application and the discussion about it, I started putting together some spreadsheets and a CSP and calling for money meetings, and we were having those every week, and that was new. Being able to talk about it and look at our spending on both of our parts and just being like, "Oh my gosh," really taken aback by what we're seeing here because neither of us up until that point had really been tracking things.
We're just kind of getting through life and it's happening as it's happening and, "Oh, we're out of money." So we're finally looking at things, being more conscious about spending at the grocery store or on other things.
Sorry. What does it mean when you say being more conscious about spending at the grocery store specifically?
That week we put ourselves on a challenge to do under $150. We just wanted to see if we can do it and we did it. But it also took hours, about two to three hours, and I just don't have that kind of time. So that wasn't something we were able to realistically keep up on a weekly basis.
What happened the next week with groceries? How much did you spend?
Probably up to 500. We'll go to a Costco run. We'll go to Target. We'll go to TJ's. We'll do all the things.
What do you notice about that? Going like, "We're going to do 150 in a week," which is quite lean, and then, "Hey, this is not sustainable." So we kind of really loosen it and go back to 600 a week. What do you notice about that?
It's a trend. It's like we make a commitment to do something, but we've gone about it in a completely unsustainable way. And so, kind of same thing with, "Let's dial back our restaurants and going out to eat or going down to the beer garden with the dogs," because I'm at home all the time. I need to get out of my four walls here. He's working 60 hours. We're tired. So we'll make the excuse and justify to ourselves that we deserve this. We can do this because we're tired. We don't have time. This isn't sustainable. So we're going for the convenience. Convenience that we simply can't afford.
You like it?
I don't like where it's leading us, that's for sure. When we are putting our CSP together, there's all of those fixed costs. And we're like, "Well, what do we do with our beer garden and entertainment and going down to get wings? That should probably go with that last one at the very bottom, right?"
After we signed up for Monarch, it sent me a notification regarding my recurring costs and that being the beer garden. So it's a fixed cost, and I don't see my life being we go to the dog park and the beer garden and we go to get wings. I'd rather use my money for anything else besides that.
What do you say, James? What was your reaction when you got that alert?
I like that aspect of our life. If it needs to be dialed back, I accept that.
Guys, we can't get any further if you're not honest about what's going on. If you're getting alerts that you spend so much so consistently that it is a fixed cost, that tells me you love it. Now, you might say, "Hey, this is out of alignment with what I want our life to be." Or looking at it, "We can't afford this, so I like it, but we need to make a change." But I'm not hearing that. I'm hearing, "Well, we spend a lot of time apart, so we need to spend some time together." Do you love it or do you not?
I enjoy it, but to your point, the spending is out of control on those areas of our life. We have no savings. We are living way beyond our means and we can't just do all the things we love all the time. We don't have unlimited time or resources to do that. I don't want to take that part of our life away. It's important for our own socialization. So I wouldn't want to just stop doing it because I do enjoy those things. We just can't do it as much as we have been doing it to the point where Monarch says, "Hey, this is the recurring cost." I don't love that.
What do you want to get out of today? Like 10 out of 10, we have an awesome conversation. And James, what would you walk out of here with?
A newly established framework and understanding of money and personal finance that we can use together to build a future that we want.
Okay. Addison?
I want to understand how we got here. The end. I'm really interested in our psychology around money because I feel like I've read books, we've watched the episodes, we have conversations, and nothing is changing.
I love that Addison is asking this question because she already knows that just learning more about money is not enough. That tells me something important. Addison and James realize that they do not have an information problem. They have a behavior problem. They can recognize what they're doing. They can agree that it needs to change. They can even make a plan. But when real life happens, they keep falling right back into the same old habits. So before I give them yet another plan, I want to understand what happens between them when money gets hard.
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Can you think of a time in the last few months where the two of you really disagreed about money?
So when I started this new job, I had plans to work a bunch of extra shifts in the first couple months. And there were some concert tickets that came up and there was a weekend away that Addison had suggested we plan and I said yes to those things. And once I got out of training and started the new job, it turned out it's a lot more than I expected and we learned it didn't make sense for me to pick up the extra. And therefore, I didn't have the money I said I would. And we got in a number of heated arguments.
Okay. Take me back there. In fact, just roleplay it with each other. I just want to watch you have that conversation again.
Hi, James. Hey, how are things in Phoenix?
They're busy, but good.
So I'm really excited for you to come home. Do you want to go to Mount
Princeton and go to the hot springs maybe to celebrate when you get back? It's going to be like $600 probably. Is that going to be okay?
Yeah, absolutely. I'm going to be working super hard when I get back. I'm picking up all these extra shifts, so we should definitely do that. Sounds great.
Okay. Well, I will go ahead and get all of that booked today. A couple other things, some camping. Found a couple of really rad camping spots, so that's not going to cost as much. Probably like 50 bucks for the weekend. And then tickets to a concert. But with the concert, the transportation situation is really weird. So I would recommend that we stay at the lakeside camping, but it's going to be like $800 for the lodging.
Perfect. Let's do it. I'll be good. I'm crushing it.
Okay, awesome. So I'm going to go ahead and get all of that booked here today. Just keep me posted on how things are going. I'm so excited to see you, and then let me know about your flight and I'll pick you up, and then we can just head to the hot springs.
Okay, so.
Great job. Great job. Thank you. That was very good, very enlightening for me. I was following along, noting some things. And then what's the tension part? What happened on the next conversation? Go ahead.
I really wanted us to start splitting those costs a little bit more instead of it all being on me. So called, got the permission, was told that he was going to be able to pay for this trip. We could go on said trip and I pay for it all.
And it is back to the beginning of our relationship where I am supporting his career and I am the safety net and I am taking care of everything, and "I'll get you back for that." And then it never happened. It's about $30,000 of trips and things and rent and bills over the years that I've just been covering. And it's why I work full-time. I teach two classes every quarter. I'm a PhD student. Being in a relationship is really expensive, especially when you have to bear the burden of all the finances on your own. And so we fought a lot on that trip about my frustrations of taking on all the project management in the household, all the financial responsibility, the detriment to my career.
And when you had this argument, was the dynamic you sharing these things, all of the debt that you have put yourself into to support his career, all of the work, all the labor, emotional labor, all of this stuff, and James agreeing and saying, "I will do better"?
Yes. And with some defensiveness, understandably. I'm just done with the defensiveness and the excuses and the reasons why. We need to make changes. I can't literally keep doing this anymore.
Okay. I want to ask another question as well. So you brought up to him, can we go to the concert and this place and that place, and it's going to cost this much and that much? And James was quite agreeable in this role play. "Yeah, let's do it. I'm killing it at work. It's going to be good." Did you believe him?
And maybe that's Bali. This is not the first, second, third or fourth time this has happened, but it was a new job and things were going well and he was even getting paid during training. So I really did believe him this time. I should have known better because James does tend to be a little bit more optimistic than what reality presents itself. But I also want to be able to trust my partner at the same time.
Yes. Nobody wants to be in a relationship where you can't take your partner at their word. If they say something, by default we want to believe it. I get that. Of course, that's where we want to go. James, when you answered that question, it kind of rolled off the tongue. "Yeah, let's go."
At the time, I had planned on just picking up any extra work necessary. So, no.
Why'd you say yes?
I was feeling confident that I would have the money.
How often do you feel confident about money?
Too often I project that confidence even if I don't feel that confidence. I don't know. I don't know why that is. But that's not healthy at all.
I think part of it is it's always worked out because I've been there as a safety net. So there's been no actual consequences really for anything, and he's really confident until the shoe drops and I'm picking things up and then getting upset about it. I think he dreads those conversations and the disappointment that comes along with the expectations weren't met.
Do you both like this dynamic?
No.
Okay. Because I hate it. I see it all the time. We have the dreamer here. James, you're the dreamer. Success is right around the corner. If I just close this deal, if I just get this job, I can pay off all the debt and actually build up our savings and we're going to be good. Sound familiar, right?
Yeah.
Yeah. And the dreamer is almost always able to exist because they are subsidized by somebody else. James, if you did not have Addison picking up the pieces, what would happen to you?
I would radically change my spending habits and what I'm able to do with the money that I make.
I agree. Addison, any thoughts on that?
I feel like if I would stop, but then if I stop helping, then we might get evicted. We're not going to get our bills paid, or my credit's going to tank because I'm not taking care of the things that we mutually should be taking care of.
What do both of you think needs to happen for you to change?
I need to radically transform and establish an understanding of money and how it works. In particular, the word afford.
Wow.
I don't think I know what that means. I think I've been using that word wrong my whole life.
Wow. Okay. Wow. That may have been one of the best answers I've ever heard. Well, let me just ask you. When she said, "Can we go to this concert? It's going to be 500 bucks." And you said, "Yeah, sounds great." What was the sentence you said after that?
We can afford it.
Yeah. And then after that?
We got this. I can.
No, you said, "I'm working hard."
Oh, yeah.
So what does that mean?
That I am betting on money that's not there yet.
Bingo. Did you know that?
I think deep down that it's hard to admit to myself, but yes.
If you want to make radical change, you have to admit some deep things about yourself that might be quite uncomfortable. This is just one of them. So I appreciate that. I think that was really, really insightful. Addison, what do you think needs to change here?
I really need to get a grasp on what I want my life to look like and really come to terms with the consequences of not making better choices today that are in line with that. I just need to be thinking a little bit more about safety, security, and the long-term consequences if we don't change. Otherwise, I'm going to see the money's in the account and probably be very tempted to spend it on the things I want now for instant gratification versus my long-term stability and quality of life. It's easy for me to just forget and want to live in the moment because I've had a really stressful day, a really stressful week, and I feel like I deserve to treat myself.
I appreciate you admitting that you have a role in this dynamic, that you have co-created it, that you spend money too that you both don't have. James is nodding. Addison, I can tell that you've been frustrated at the way James spends and manages money. James, have you ever been frustrated at Addison for the same thing?
Yes.
Really? Tell me.
Every quarter there is student loan money or other loan money. Most recently, a $35,000 loan that came out a couple months ago. And we adopted a dog, and I pushed back pretty hard on whether that was a smart move and promised it's not going to be that much. And I found out after the dog was here, after everything else, that she spent $6,000. And that's money she took out. That's loan money. But I guess it frustrates me a little that Addison sort of feels almost like a carte blanche to just go hog wild because there's a bunch of loan money in the account, which isn't really that income.
Did you say this to her?
I did not. They suppressed frustration now.
And can I guess why? I'm going to guess that because you feel so guilty about the way you spend, you feel you don't really have a leg to stand on. And anyway, if you bring up money, then she's going to turn it back on you and say, "Well, what about this? What about that? What about this?" So you say, "Better just not talk about it at all."
Nailed it.
Yeah. Those signs at workplaces, however many days since the accident, if it's an accident. I feel like I have a mental one of those for when my past transgressions get brought up in an argument, and so anything I can do to avoid that sign going back to zero.
It's very difficult to escape from the quicksand money dynamic that the two of you have willingly entered into. There have been legitimate bad financial decisions made on both sides, and because of the particular way that you have enacted this relationship and this dynamic, it's really touchy.
Yeah. So everybody kind of tiptoes around it and the roles are set. Can we change this?
We have to.
Yes, we have to.
I believe we can.
Good answer. I think couples often revert to the very American idea of y'all just need to talk it out. You need to communicate. We love it. We love saying communicate. It never works. Just communicating alone is not an effective strategy. Right now you are communicating about each other. You're not even communicating about money. You're just communicating about each other like two boxers. But what are you communicating towards? Is there a vision?
We don't have a shared solidified vision. We are just wantonly spending on things that may or may not be aligned with the life that we want to have now.
You're right. Talking about money when it's just like here's a crisis or I'm upset about this or there's a problem we need to solve right now, it's not enjoyable. I'd like talking about money to be fun and exciting. And perhaps if we had this plan that brings us excitement about things, that we're not going to go to the beer garden this week two times and we're going to put that towards something else that we're really looking forward to and really want to spend our time on, would be, I think, way more enjoyable. But we're definitely not there. We're trying to figure out crises. How are we going to pay this bill? It's not fun.
Let's take a look at your numbers. All right. What was it like doing the Conscious Spending Plan together?
Shocking to see the numbers, like, "Oh my God, this is out of control." And a little painful in that I was finding out new information. The debt that James has is just way, way more than I could have ever anticipated. I knew he took out a personal loan. Didn't know he had three credit cards. Didn't know he had $50,000 in federal back taxes, which is not even in the CSP because I found that out the day after I submitted it. I'm just finding out about all these skeletons. So that was just frustrating.
You rightfully are upset about all these, what you put, skeletons in the closet, but you kind of glossed right over the $6,000 on the dog. How do you think he feels about that? Do you think he feels similarly?
Yeah, he definitely has shared that. And I honestly was shocked that it was at that amount, too. I was not out there going, "This is my budget for the dog." The dog was free. It was a very emotional purchase. He is the dad of our first dog, who died a couple of years ago from cancer, and nobody wanted to adopt him because he was old.
It's pretty interesting that Addison is sure the problem is James. She brings up multiple ways that James has been guilty of being irresponsible with money, and I agree the way that he behaves with money is not great. However, she is also part of the mix here. And it's very tempting when she paints the picture of James being absent with money, not picking up on the labor, to suddenly say, "Oh, I recognize this pattern." We have the man here who doesn't talk about money. He's irresponsible with money. And we have the beleaguered wife who's here, "Please talk to me about money. Please connect with me." We've seen that pattern many, many times. But we can't just accept the caricature of a pattern.
When I dig in, I find out that she's also spending a lot of money. Both of them actually have a dynamic where they love to spend money today and not think about tomorrow. So that is what I'm starting to pick up on. The question I have is where is this pattern coming from? That's my job. I want to keep digging so I can start to understand how they got here.
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Okay, I'm going to put up the CSP on screen. Addison, can you read the word in bold and then the household number next to it, please?
Assets, $20,780. Investments, 14,227.
Savings zero. Debt $428,263.
And that should be about $22,000 more.
Total net worth negative $393,256.
What's the debt?
Majority of that is student loans.
How much?
About $350,000.
How much on the credit cards?
Ballpark, let's say 20.
20. Okay. Personal loans?
Let's actually do 25 there and 15 on the credit cards.
Okay. And then there was back taxes.
Yes. And that would be the repeating amount plus 22.
James, do you know how much you owe in back taxes?
$40,000.
All right. How much are you going to make when you graduate?
Between 150 and two, realistically.
How are you going to pay off $350,000 of loans?
It's a long term. It's a 30-year repayment plan. And I've already calculated my payment will be at that $1,000 a month.
Does it get forgiven at all?
Yes.
In 30 years?
Yep.
Okay. Let's look at income. James, can you read off your combined gross monthly income, please?
Gross monthly income $11,550.
Okay. So, you all make $138,000 per year. Did you know that?
Silence suggests no.
Okay. What do you think you made?
I thought it was a little closer to two.
200?
Between the two of us when she's working full-time.
Okay. And Addison, how much did you think you made?
Honestly, I had really no idea. I knew how much I was bringing in. I did not know what to expect from James when he started his new job, how much we realistically could be expecting because it's still a commission-based job. So I had no idea. I just knew my own stuff.
What do you think about making $138,600 a year? Is that a lot or no?
No. It's not.
Okay. Both say no. Okay. Let's just go down and look at the fixed cost here because this number really caught my eye. Fixed cost 154%. What does that mean?
Things are out of control.
It means that you are spending far more than you make and you have no savings. So you are going into debt every month. And it means that it's literally just a matter of time until you lose everything. There are moments where it becomes irrecoverable, and right now that's obscured because you have a humongous student loan. So you go, "That's just this big thing. It doesn't really count." But you are actually incurring serious debt. The credit cards are very high interest. Personal loans, I'm willing to bet, are. Back taxes is a huge amount. There's a lot. And every month you're going further and further into the red.
Let's take a look at the rest of the fixed costs. We have utilities at $700. Insurance at 500. Car payment $1,353. That's a lot. What do you think about that?
It will go down soon. That includes my car payment, which is about 638. Ubers. We need to be taking less Ubers. And then also the train.
Why do you take Uber?
To get around town and get to shows, not deal with parking, not deal with DUIs if we want to have drinks at a show. It's convenient because we could also take the train, but Uber is a lot faster.
One time I had a couple on this show, and they were in a lot of debt. I asked them, they had some car payment or something. It was pretty high. I was like, "Why do you pay so much for this car?" They go, "It's not a car, it's a truck." I go, "Oh, okay. Why do you buy this expensive truck?" And he looked at me like I'm crazy. He goes, "So I can pull my trailer." Do you see any similarities to what you just said? We take Ubers so that we can go out to shows and have drinks. And P.S., we are spending 154% of net income on fixed costs.
We overvalue the almighty convenience, I think pretty clearly.
Okay. What do you see, Addison?
We shouldn't be going to these shows in the first place.
That's right.
Let alone the Ubers. We're spending money to spend money that we don't have.
That's correct. It's like people saying, "I actually decided to go to a cheaper casino even though I'm in $75,000 of credit card debt. I went to Circus Circus because it's actually cheaper slots there." It's like, you shouldn't be in that casino. You shouldn't even be in Nevada right now.
So, when you both talk about radical change, we're not even scratching the surface yet. But I want to share this with you because I need you to know the truth, the reality of what it will take. 154%. It's not about cutting your phone bill down by $20 a month. That's going to do nothing. It's a complete inside-out lifestyle change, complete inside-out way of looking at the world that has to change. Again, you don't have to. I'm just telling you, we're only on the fifth line of the fixed cost, but this is what I'm observing.
We absolutely have to come to terms with these numbers. It's not even about alignment at this point with our rich life and how we want to be living. We're not going to be able to live if we keep living like this.
That's correct. James?
We've known this is coming. We know this is not sustainable.
If you've known this and changed nothing, then maybe knowing actually is not the key here. You all have had the spreadsheets and had access to all this information. You didn't do anything with it. Knowing is highly overrated for many parts of behavioral change. Everybody knows they should probably eat more vegetables. They don't do it.
So, we actually need to stop this endless search for knowing and take a much deeper look at what is the way that we are looking at the world. What are our deeply held beliefs that I call invisible scripts? And what kind of behavioral changes can I make? Maybe I don't actually need to know anything different. Maybe I need to literally create a rule that says we're not ever going to the beer garden again. Or a more positive one would be every single week we are putting $200 into a savings account.
That's what we're talking about. We're not talking about knowing, although I will show you some stuff. Let's go through the rest. Whoa. Clothes and personal care are $1,66 per month. What kind of clothes?
I redid my entire wardrobe when we moved from where we were living before to here, across the country. We got rid of everything.
Okay.
So those numbers will definitely not be the norm.
What about the other self-care?
All new hair products, getting all of those things. I get my nails done.
Okay, got it. Let's go to pet expenses. $1,029 a month. Food, treats, toys, vet, etc.
Yep, that's what that is. Definitely a little bit overboard with Chewy.
This is a great opportunity for me because I've had a lot of parents here in severe debt, and they go, "Our kids deserve the best this or the best that." And I'm like, "No, they don't." I point blank will be like, "Your kids don't deserve that. How can they? Your kids deserve to have a safe household, not to be homeless, to have parents that are not stressed out about money." But I've never gotten the chance to say that about a dog. So allow me to be the first.
I'm sorry, but your dog does not deserve $1,029 of food, treats, and toys per month. America, hear my voice. Your dog does not deserve it. I'm sorry. If you are at 154% fixed cost, your dog doesn't deserve it. What's your reaction, Addison?
They'll live.
Should we get that dog on camera? Where is that dog?
There's both of them. They're out there taking—
Wait, are they close?
Yeah, they're close.
Okay, bring that dog. I want to tell him or her.
It's a him and a her. We have—
Okay, bring them both. I'm going to tell them. This is the greatest day of my life.
Oh, they're literally right there. Oh, she's gesturing. They're well trained. She's gesturing to them. Oh my God, this dog came right. Wait, are these Bernese mountain dogs?
Yeah, they're—
Huge. They're beautiful dogs. Okay, what are their names?
Bacca, as in Chewbacca, and Rainbow.
Bacca. I assume that's Bacca.
Yeah.
I need to tell you something. You and your sister are lovely dogs, but y'all are going on a very, very, very strict diet. And I'm talking about toys, too. It's been a nice run, but that's it. It's time to batten down the hatches. And mom and dad are going to be extremely strict with you. All right. Thank you for that. Let's continue on.
Subscriptions and entertainment, $1,754. All right. We're going to dig into this in a minute. Miscellaneous is fine. Just scrolling down, looking at the CSP, I notice that after we get to the fixed costs, which are $14,659 a month, then we have $0 on investments, $0 on savings, and negative $5,000 on guilt-free spending, which of course we know cannot be true. Before I go on, I want to drill into some of this actual spending. What does it tell you about you?
We're living in the here and now and not taking a modicum of time to think about tomorrow, let alone the secure and stable future we want for retirement. It comes in, it goes out. What we need today, we get.
Great. James?
I don't know if the kids still say YOLO, but that's, I think, what we've adopted for our financial decisions. In fact, I don't even know if I would call them financial decisions because I don't think enough thought went into them to qualify them as decisions.
That's very good. That's a very good catch on your language. Most people say, "I have goals," or, "We're not living up to our goals," or, "We're not making the right decisions." You're actually not making any decisions at all. It's literally whatever's in front of us: toys, nails, clothes, beer garden, shows. It's just swipe, swipe, swipe, swipe, swipe. There's no decision at all. I think that is honest.
Okay. I would like to look at the actual spending. And this is going into your Monarch account. And we're going to do a little drill down here. So I want to look at, for example, your debt payments. So we have Bureau of Tax. This is your back tax. Is that right, James?
Yeah, that's a state and best of state taxes for this last year.
Have you called them and tried to negotiate that?
No. No. I just took that.
Call them. Okay, negotiate. Sometimes they will be able to do that. Here, let's go back a month ago. Let's look at transportation. On one day, July 20th, we have Ubers for $111, four trips. A couple days before, we have $106. We have a gas station and parking, etc. Lots of Ubers here. You notice that?
Mhm.
Do you think that couples who have $400,000 of debt take Uber?
No.
We do.
Well, yes.
Yeah, both of you are correct. No, they typically don't, but we do. And that needs to change. Let's keep looking. Groceries, always very interesting. Let's look at the actual spending on groceries. So we have King Soopers. Interestingly, that's $11.56. Who shops for $11.56 at a grocery store? What'd you get?
For James, that might be, maybe he popped in and got a sandwich while you were out.
Yeah, that's likely what that was because my job, I'm driving all day.
All right, let's look. Circle K, 7-Eleven, Circle K, Murphy USA, and Maverik. Lots of gas stations and convenience stores.
Mhm.
Lots. Look at how many. What do you make of that?
Just a quick break for me to go in and grab a snack or an electrolyte beverage or something cold to drink because I'm out working outside. I mean, there's no excuse for it, but that's what that is.
What do you get at the gas station?
Gatorade, water, energy drinks, probably 90%. Occasionally a slice of pizza or a snack.
You get a hot dog.
Occasionally a hot dog. Usually it's beverages because I'm working outside a lot.
Out of curiosity, why not just buy the beverages from Costco or something and take them in your car with you?
We do. We bring it and then it's not enough. I want another one.
Why not bring two or three or five?
I just need to get that bigger cooler.
What do you think's behind your answer? Why do you think you really don't pack enough water or something for a long day out on the road?
I think I enjoy the break in the AC.
Yes.
I feel like I deserve it.
Yeah. Yeah. Why do you deserve it?
I feel like I earned it. I earned this little treat, whatever it happens to be that day.
I've been driving out in the sun. I've been talking to a lot of people. Maybe I close a deal or I'm going to close a deal tomorrow. We're talking about a $4 Rice Krispies Treat. I deserve this. I've been working hard. That's the thing, right?
Mhm.
Okay, Addison, what else? What do you notice?
I do hear and understand James' need to get out of the van. And I do similar things. I have a pound of green tea here, my favorite kind, but I still go down to the coffee shop to go get it from the coffee shop.
Because?
Because I want to get out of the house. I like getting out of the house and socializing with other people.
Sorry. How do you think people who like to get out of the house, but they don't go into debt, how do they do it?
I am not sure what they are doing. I am only sure what we are doing, and it's spending money on things we shouldn't be spending money on.
What's striking to me is the lack of curiosity about how other people do it. I don't think you've really thought about anybody except for what you two want.
That's fair.
Because there are millions and millions of families who don't spend $3,000 a month on groceries and food and beverage. You all put in your CSP $3,363 a month for groceries, food, and beverage. That is one of the highest numbers I've ever seen. And this is two people. We're not talking about a family of six. Even still, I would tell them it's too much.
All right, let's look at a couple other things in Monarch. Pets. You planned for $1,029. I see $2,667. This is in one month. Somebody get sick this month?
Yes. We had a gnarly vet bill.
Yeah, there's a lot. I can tell. I mean, one vet bill is $1,500. I then see Chewy for $114, $60, and a lot more. What do you think about spending thousands of dollars on dogs when you're in this much debt?
It doesn't seem to make any sense, and we can't afford to continue spending on the dogs like we have been. And we probably couldn't afford this second dog, but we didn't crunch any numbers. I think I realistically said, "Oh, it's just going to be an extra bag of food and maybe a couple of vet bills here and there for wellness checks."
Why did you say that?
I think I wanted this dog, and I needed to reassure ourselves we could afford it when we really couldn't.
How much of the decisions you make around money are, "I want this, and I'm going to come up with a reason that sounds logical to justify it"?
The majority. And we'll justify to each other and support each other in our justifications.
Mhm. How do other people make decisions like this?
They look at the pre-planned budget and base decisions off of that.
Yeah. You have that, though. I mean, you have a CSP. All right, let's look at a couple more expenses. I want to see what's going on with dining out. One of my favorites. Let's read off some of these, shall we? Wendy's, Mexican place, some beer garden, and tavern the same day. What's this one for? For $300.
Birthday, anniversary dinner.
What do you think about that? Was it good?
Excellent.
It was.
That's a good answer. Yeah, it was good. Okay, I like that. Can I ask you a question? When a birthday or an anniversary or holiday's coming up, how do you decide what you're going to do and how much you're going to spend?
The decision is based on the menu and never on the price.
Yeah. Yeah. What does it feel like to even imagine a future where you have to make many, maybe most, of the decisions based on price?
It feels like, I mean, if you're responsible—
Who wants to be responsible? I'd rather have fun.
Yeah. But look where fun got us.
To me it sounds depressing.
Yeah.
If I'm being honest.
Yeah.
It sounds horrible. You're telling me that I got to do all this fun stuff, and look, we got a pretty nice place we live in, and now you're suggesting that I have to look at price for everything. So that means what? We have to go to Wendy's for our anniversary. Sounds like it sucks.
Yeah.
What do you think?
Said that way, it sounds like it sucks. But having had the opportunity to review all of our finances and our spending, I think it kind of sucks to spend money on mid-tier restaurants or go to the beer garden as often as we were. I'd rather once a quarter go to a really nice, awesome restaurant if we can afford it versus just spending hundreds and hundreds of dollars on mid.
Wow, that is a great response. I happen to agree. I would rather have one memorable experience than five forgettable experiences. So I love that reframe because if you go through life saying, "Oh my God, we have to look at price as the first thing and basically we have to get the cheapest thing always," it's going to suck. Your entire life is just going to feel depressing, and you cannot win when you feel depressed about something. You have to find a way to find joy and purpose and meaning, and you can do that simultaneously while cutting expenses and saving and investing more.
Okay, I'm getting on board. Shopping. Yes. Amazon, Macy's, Costco, Rocket. Is that what I think it is?
Another gas station.
Oh, okay. That's a gas station. All right. Shop at a lot of gas stations. Home Depot. I hate that place. Okay. Costco, love that place. IKEA. So looking at this spending, it's quite interesting. How would you describe the spending in a word or two?
Unconscious.
Reckless.
I agree with both of those. What strikes me is that there's a huge volume of spending. We are talking about 50-plus dollars a day essentially on gas stations and random things, purchases, food for the dog, random stuff. I don't see a lot of focus. If you were to have one expensive sushi place or one expensive dinner place per year or even every six months, I'd be like, "Oh wow, they're foodies," or, "They love this," or, "They love that with their dogs." I don't see that. I just see a lot of random stuff. I also am surprised that it's not all James' spending. Addison, you contribute a lot to this spending.
I absolutely do. I do most of the spending in our household, but we don't need all the things that I bring.
Why did you just tell me that? What's the point?
To justify it to myself and to everyone in this room.
The two of you talk a lot when it comes to your spending. And when you talk, you are justifying. You are explaining. And you do it to each other. I don't even think you might even hear the words sometimes. It's just spending and then blah blah blah blah blah blah blah. And whatever is being said in there is sort of irrelevant. It's just, "Here's why I need a way to justify it to me or to you or to us. We need this for the dog. We need this for us. We need to take a trip. I need to go outside. I've been inside all day. You've been inside, and so I need a thermos," and on and on and on.
I don't talk like this with money. If I buy it, I don't need to explain it and justify it because I made a good decision months or years ago. I planned for it. There's money set aside. You're explaining because you realize you probably shouldn't be doing it.
Yeah.
So that's a good cue for yourself. If you find yourself already launching into this thing, you've probably taken a wrong turn. James, I want to understand about how you grew up with money. What do you remember your family saying about money when you were a kid?
I remember money being a source of stress, although my folks were pretty good with the money they made. My dad did really well. He was a top salesman for a Fortune 500 pharmaceutical company. Same company for 42 years. But growing up, which for me was in the '90s, all these pharmaceutical mergers happened. We had food on the table. We were able to take vacations and everything else. It wasn't scarcity, but seeing my dad very frustrated occasionally, pounding his fist on the table or my parents going over their budgets, it was a really, I guess, tough time in that industry.
Did they teach you how money worked?
My dad tried once I got out of the house and started making money mistakes almost immediately.
Yeah.
My parents were very generous, very good with money. I remember late teens, maybe early 20s, they got me this little organizational thing where I'm supposed to put money in envelopes, and this is how you budget. And I got it, and I sort of paid attention to it for a bit, and then it just reverted right back to basically how I've always lived my life.
Do you see any connection between that and then what Addison did recently, where she brought you all the files and, "We need to really buckle down," and you did it for about a week and then you stopped?
Yeah.
Yeah. What does it tell you?
Maybe determined for some reason to avoid digging into money organization. I think I just remember the stress, seeing my parents stressed about it when I was a kid, and maybe just subconsciously or consciously connecting that, where if I just make enough to get by and make, then I can breathe easy. Which sounds insane.
Are both your parents still alive?
Yeah.
Are they still together?
Yeah.
How are they doing financially?
Fine. My dad retired. They're doing great.
Do you talk to them about money?
No.
How come?
I think a mixture of pride and shame.
Mhm. Tell me.
I'm in my mid-40s. I don't want to admit again that I've messed it all up. And I don't want to ask for advice this late in the game because I feel like I've probably pretended like I knew what I was doing so long that I have to admit that I don't. I only got so much time to spend with them. I don't want to spend time on that.
Finish the sentence. I don't want to spend time on that, meaning money, because...
Afraid of their reaction.
Which will be...
Disappointment.
Yeah. Another similarity to when you don't bring up topics with Addison. Do you notice that?
Yeah. I don't want to disappoint her or hurt her far worse than if I would have just ripped the freaking Band-Aid off.
Yes. Interesting choice of words. Even the idea that in order to communicate about uncomfortable things, you have to rip the Band-Aid off, implying pain, implying a wound. Maybe there's a different way to describe it. Maybe there's different ways such as, "Gosh, I've been uncomfortable talking about money for pretty much my entire adult life. And I've realized it's caused me a lot. It's caused a lot of pain to my wife and my family. And I realized that I don't want—I'm not that person anymore. And it's going to take me a lot of retraining. I'm going to have to have uncomfortable conversations. I don't even know if I have the skills to do it. But I'll tell you what, I'm going to build the skills. I'm going to do it on my own through books, through watching videos. I'm also going to get help through a therapist, a coach. And my commitment is that I'm going to talk to you at least every Saturday, 11 to 12:00 a.m. I'm making the agenda. I'm going to bring it up. And I think it's going to be hard. It's going to be uncomfortable right now, but my hope is that within six months, it's actually going to start to feel fun. It's going to start to feel pleasurable." That's a different way to look at it. What do you think about that, James?
It sounds like what I've said to myself in my head many times over the years.
Never out loud, though.
No.
Yeah. Your response is very common for a lot of people and especially for men, the idea of, "I don't want to disappoint." A lot of men will basically say, "I don't want to burden my wife with these kind of things." Look at the nodding in your head. It's a very kind of toxic masculine idea that I can take it on. I can take on the pain, but my wife, I don't want to burden her with it. And in a way, it actually is quite insulting to your wife to treat her like a delicate little flower that can't take conversations. Women are smart. They can handle a lot. It's quite demeaning to assume that they can't. And actually the people who then take on the burden themselves are often not even good at it. So we need to share, and we need to maybe reframe it as, "It's not a burden. It's just something that I'm not particularly good at yet, but we've got to both get good at it." Addison, do you want to add anything to what James told me about his upbringing with money?
He shared with me a number of times a situation where they were on a hunting trip. He was with his father, and they stopped in at a gas station. Gas station stops are generational here. And he asked Dad, "Hey, can I go in and get a soda, a bag of chips?" And his dad said, "No, we can't afford it." And James, what was your reaction?
I remember saying, "What do you mean we can't afford it?" I saw one of my dad's paychecks sitting there. It was some couple thousand dollars or something like that. And to me as a little kid, I was going, "Oh my gosh, it's so much money." Yeah, I remember not being able to wrap my head around how you couldn't afford something when you had that much money. And I don't know if I ever figured that out.
Did you tell your dad that?
No.
Okay, that's interesting. What do you make of it now?
The very tight and very to-the-dollar budget that they kept meant that there wasn't any room for buying stuff from gas stations that month, is my guess.
I would agree. And because they had a shared plan and they stuck to it, they were able to retire and buy a home on a beautiful lake that we visit often and get to enjoy. And we are not taking a note out of their playbook at all. And we are not going to be able to enjoy those things because we're too caught up in enjoying the everyday moments.
This is interesting. I see this a little differently. I think you might both be right. I don't necessarily think that you can say they were good with money because they may have done very well for themselves, but isn't one of the ultimate signs of being good with money that if you have children, you actually teach them, which they have failed to do? And another example of that is saying, "We can't afford it," which leaves kids feeling very confused. "What do you mean we can't afford it? We just went hunting. We just went fishing. We just stayed in a lodge for two days, and now I can't get a bag of chips." It doesn't make sense. Mixed messages. And so kids are left defenseless, not knowing what that means. And then they just go into the world. And in your case, you just were like, "Affordability is just made up. I don't really care if I have money or I even think I'm going to have money. Sounds good."
I think a different approach would have been for your parents and for both of you to say, "That's not part of our plan." Had your parents said that, you might have been like, "Wait, what's a plan? What do you mean by plan? Who made the plan? Can we change the plan? Because I really want these Doritos." But instead, it was just blanket, "We can't afford it." Kid left to figure out what that means.
Let this be a lesson for every parent, soon-to-be parent, maybe parent or kid of a parent on this show. Stop using the phrase, "We can't afford it." Please. That phrase causes often lifelong dysfunction with money. All because you want the kid to stop asking you some annoying question about money, which if you really trace it back is that you yourself are not good with money. So you want to shut the conversation down by saying, "We can't afford it." It will cost you and your children dearly.
Here's what happens. Kids hear you saying, "We can't afford it," not once, not 10 times, a thousand times over their childhood, and they start to associate feeling bad with money. Then they experience mixed messages. "Wait a second. We can't afford it, but we're also eating out at Cheesecake Factory. Huh?" And so they just start to believe money is just made up. Whatever somebody says, whatever. "Oh, we can't afford it, but then we actually can. So I'm just going to do the same thing with my money. Throw my hands up, spend on whatever I see in front of me, and boom, we'll figure it out later." You can see how the toxicity becomes layered and essentially intractable over time. We don't want that.
I would rather a parent say, "We're not going to buy that because in this family, we don't care about $300 shoes." Or, "We're not going to buy that because I love it too, but it's not on plan right now. However, we can start saving for it, and three years from now, we'll be able to do it." Love that. But you've got to go beyond, "We can't afford it."
Also, if you grew up with your parents saying, "We can't afford that," you can't change how your parents raised you. You can learn from it. You can adapt. You can start to zoom up and say, "Hey, they were probably trying their best. They maybe didn't know about money, but today, what can I do to get better with money? I'm listening to this podcast. I can join Ramit's Rich Life program. I can start to apply these principles differently, but I can't constantly live in the past because of something that my parents did to me. I'm now an adult. It's time for me to take responsibility for my rich life." And we're going to hear about the surprising way that Addison grew up with money right after this.
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Addison, what do you remember about growing up with money? What did your family say about it?
I grew up incredibly poor. Lots of hand-me-downs, lots of arguments between my parents about finances. Kind of this mentality like we can't take it with us and we're going to die poor.
Mhm.
So it was a very heavy topic, and I knew I was poor. It was embarrassing. Yet my mom, she would put things on credit card and layaway and
Got to keep up with the Joneses, and we need to. Very similar patterns I see in myself, where I want this thing, so I'm going to buy it.
We're going to finance Christmas if we have to because the kids really deserve to have a nice Christmas. I'm going to take on additional debt for vehicles. Eventually, went back to school and changed our family situation, but the spending continues.
They do not communicate really about finances anymore. My mom just handles everything. My dad is very secretive about things, has a lot of pride, and that's caused a lot of problems. And I talked to my mom about our own financial situation for guidance. And she's like, "I can't really help you when your dad's the same way. If you figure out how to work with James, you let me know." So not a lot of guidance, not having a plan, not really having anything to plan with. It was really hard.
That sounds really tough. I have a couple of questions for you. You mentioned you knew you were poor. How did you know?
Just comparison to other people. Also, my parents literally saying, "We're poor and we don't have any money," and based off the food or not having food.
You went sometimes without food.
Very little food at times.
Wow. That's tough. That's really difficult. How do you think that colors your view of money?
I was resentful of growing up poor and made a commitment to myself and very proudly and boldly shared with my parents, "I'm going to college and I'm going to have all these things in a different life. I'm not going to live my life like this, trapped on a farm in poverty. I'm going to break out of this."
And while I've left home and I've gone to college, I'm really not doing anything different. It's the same stuff in a different place. Maybe fancier stuff and I have more things, but it's also all balanced.
It's quite profound, the idea that you said, "I'm going to college." Were you the first to go to college?
Yeah.
Very impressive. Not only did you go to college, you're now a PhD student, teaching as well. Extremely impressive for anyone, but especially considering your background. Made a huge amount of change in terms of education and yet still find yourself repeating the same patterns as before. Just as you put it, just in a different place, maybe a little bit nicer stuff.
Yep. It's the same patterns and trends. It's like my mother, following right in her footsteps. I have very little in my 401(k) and have cashed out several 401(k)s to finance moves across the country for school. The future is there for me. There's no plan to get there whatsoever.
Mhm.
I feel like I know better, but I'm definitely not doing better. But perhaps I don't even know better as well.
Do you find yourself confused by your own behavior?
Not necessarily confused. Disappointed, frustrated with myself for not making better decisions on a day-to-day basis.
That's interesting. But I don't get the sense that you feel frustrated when you buy something for the dogs or clothes or you go out to the beer garden or a concert. When does the frustration come, if at all?
Pulling our numbers and seeing, why are our numbers like this?
How often does that happen when you pull the numbers?
Maybe three times in a year.
So you feel frustrated. Think about it. You feel frustrated for what? Three minutes times three, nine minutes a year, and the rest of the time you get to eat out and do all this cool stuff. Sounds like a pretty good deal to me.
And then when things are running low and they're tight and there's concerns about being able to actually cover costs like rent, our own healthcare, that's another point of frustration and disappointment. We had those funds at one point and they got spent frivolously on things we didn't need because we weren't planning for a rainy day or things that we actually do need to live and thrive.
Yeah. Neither of you plan.
No.
You don't plan for retirement. You don't plan for going out and driving for eight hours enough to take enough drinks for the day. There's a systemic lack of planning. Now, I'm going to tell you, most Americans do not plan. They don't plan for their retirement. They don't plan more than a month ahead with their money. So when you have all these financial people going on TV and talking about, "Look at this compound interest chart, and if you do 40 years from now," that might as well speak Martian to people. They're not thinking beyond a month later. And I'm not saying that to make you all feel like, "Oh, it's okay not to plan." I want you to know that it's quite normal that most people don't plan ahead with their money for the exact reasons that you are as well.
One of the things I love about this show is I get to speak to people from all over the socioeconomic spectrum. It is really hard to escape the social class and the structure that you grew up with. As the phrase goes, wherever you go, there you are. So here we have Addison getting her PhD, but still essentially spending the same way her mom did decades ago. Just because you make more money, just because you get a PhD does not mean that you are going to change your psychology around money or relationships. And that's what this show is about.
The numbers here are outrageous. I mean, 154% for fixed costs. One of the highest numbers I've ever seen on this show. If they want to get out of this, it's possible, but they will have to make severe, radical changes. And I wonder if they are willing to do that.
James, you have a magic wand. What do you think our approach should be together right now?
Wave it and be good with cutting back on everything.
Okay, cool. Addison, what's your magic wand? What would you do?
Similar. I want to get our CSP dialed in and based in reality, what we have to work with. I want more going towards savings and investments. And we need to reallocate this whole thing. We need to get a plan that we can commit to here together and then start implementing, knowing that if we don't commit to this and implement this, the future's looking pretty darn bleak.
Why? How bleak is it?
I don't want to get a divorce. I don't want to be homeless. I don't want to have to move in back with either of our parents. And I definitely am not going to be able to work for the rest of my life and want to be able to retire.
Okay, James, what about you? Why make the changes of cutting back? That sounds like a lot of work.
Because the pattern of feast or famine and uncertainty and embarrassment coming from not knowing which way is up with my finances has had horrible outcomes many times repeatedly before Addison and I were ever together.
Mhm.
And now it is to the detriment of my relationship and my marriage in addition to all of the other things. So I'm ready for a way out.
Okay, great. I love that. I love a couple that's ready to make changes. I can work with that. Addison, you want to add something?
Yeah. In thinking of a magic wand, if it was waved and we did this, I want us to feel good and excited and proud.
I like that.
Instead of this, "Oh gosh, that is scary and it's awful and we're going to fight about it and feel depressed about it." I want us to get excited talking about money.
Okay, I agree. We got to take a different approach. All right, so this is what we're going to do. We're going to redo the CSP.
First I want to highlight something. Using Monarch, I did an analysis here of your last year of spending. What do you think your biggest category of spending is? Take a look. What does that say?
Shopping.
30% of your spending was shopping. James, read off a few of the vendors on the left.
Amazon. Amazon. Amazon. Target. Bies. Google. Etsy. Costco. Amazon. Macy's. Costco.
What do you think of that?
It's a lot of spending. And as we're going through it, I'm like, "What was that for?"
What'd you get? Put your hand out like this. Put your hand out like this, palm up to the sky. What did we get?
It feels empty because I don't recall what we got for some of those transactions. It leaves me feeling empty because it's not something I needed.
Thank you. This is so much of how we spend money unconsciously. I'm not opposed to spending money. I'm not even opposed to spending a lot of money, but I want it to be meaningful. And it could be a physical item. I love a beautiful thing. It could be an experience. It could be a food. But something where you look back, you go, "Wow, that was awesome." But right now, just looking at this Amazon, Etsy, random stuff. What did we get? Nothing. We just bought what was in front of us.
So here's what we're going to do. We're going to throw this CSP up on screen and we're going to make some changes here. You're at 154% fixed costs. The goal is to get down to 60%. It's going to be really challenging, I'm going to be honest, but we are going to make some changes.
Now, here are the rules, because I've done this many times with couples. They inevitably end up fixating on, "Should we cut $20 or $40 off of our cell phone?" I'm just going to show you right now. If we go from 1,029 to 800, I'm just cutting off like 200 bucks. Look at this number up here, the 154%. It drops down 2%. So what does that tell you?
Got to go big.
More drastic.
Exactly. We're talking massive changes. So we're going to go one at a time, and I want you to remember, we're trying to actually change your entire lifestyle. So before we jump into all this, tell me your philosophy on money. In our relationship, we what, James?
Treat money with respect.
Yes. Damn, that is great. We treat money with respect. Okay, Addison.
We recognize it's a finite resource just like our time and other resources. So we have to treat it with respect.
We treat it with respect. We recognize it's a finite resource, which is exactly what the CSP allows you to do. It's finite. You have this much money to distribute. Okay, great. And do we have any rules here? In our family, it might be, "We are a debt-free family," or, "We save at least 10% or 20%," or whatever. What kind of rules might you have?
Delaying or putting a hard stop on any excess spending until we have a savings or an emergency fund of X amount.
Why don't you just pick one?
$10,000.
Great. So what does excess spending mean?
We cut out going out to eat and a lot of gas station trips.
Yep. Unnecessary subscriptions, gas station, convenience, Ubers, all of the things that basically we don't require to live, but also giving ourselves a small amount of, we need to enjoy ourselves a little bit. I don't think we can go completely down to zero. So maybe it's like we go to the gyro one night and the music's there and the takis. We don't need to go 20 times.
I like the principle. I think that it will be important to get specific about what does unnecessary mean, because what James thinks is unnecessary is different than what Addison is, certainly different than what I think. I never met a couple in $400,000 of debt that went to a beer garden once a week with tacos. It's quite interesting. We should talk about it, though. Let's see how the numbers play out. So the rule is, at least the rule you're proposing is, we do not spend unnecessarily until we have $10,000 in a savings account. Is that right?
Mhm.
All right, let's give it a shot. James, make a change first, then toss it to Addison. What do you want to do?
I think groceries, food, and beverage can be slashed to $800 a month.
$800 a month. Okay. So you're going from 3,300 bucks to $800 a month. How are you going to do it specifically?
Meal prep on Sundays.
Okay. What time Sunday?
We do brunch a lot on Sunday. So maybe on Sunday for brunch time, we can do some meal prep together.
Very good. You know what's funny? Every minute that you are fulfilling one of the guidelines of your money rules, like prepping food on a Sunday, is a minute you are not out spending money. So that is a way to look at it, like, "Oh, this meal prep is doing us double good. Number one, we're going to get prepped food for the whole week. It's going to be awesome. Number two, every minute I'm doing this is a minute I'm not outside spending money at the gas station, at Home Depot, at any of these places." Double whammy. Awesome. Okay, let's keep going. I love that you're going to meal prep and $800 a month. Addison, are you cool? Because you're the one who does grocery shopping.
Yeah, I feel like that's a good amount because that whole category also includes food and beverage. That's all the restaurants, that's the beer gardens, that's the brunch, that's everything. So cutting all of that as an unnecessary expense out, that's realistic for groceries.
Okay. And eating out, that sort of implies you're eating out not much at all.
Yeah, that would be not much at all. Can we go cold turkey on this? I know that we need to, and this is something we have to commit to, and having a savings goal could help us with that. I don't know, James, can we never go out until we hit 10,000? Do you think that is realistic? I just think it's going to be hard. I think we should leave a little bit in the budget for when we have friends that are visiting, our families are in town.
Yeah. That goes back to that crash diet saying, "Mike, I guess it sounds really great. Can we do it, though?"
You're not thinking about it the right way.
Okay.
Both of you are expressing a fear of having to change your lifestyle. And the way that you are articulating this is by saying, "What about when our family visits?" Now, notice what is in that example. Number one, what about—it's this sporadic thing. We don't know when it's going to happen, so we can't even plan for it. It's just whenever. And second, it's family. And in your case, you use family, dogs, and your own need to be outside as political shields, because nobody can argue against the importance of family and the importance of recuperation and the importance of your beautiful dogs.
We have to change this entire way of operating. First of all, we're not going to plan for a random, sporadic, might-happen thing of other people visiting us. We are planning what we are going to do. We are the family that matters right now. And second, if they come, great, but we can't spend money with them. We don't have the ability to spend money. So they want to go out to dinner. "I'm sorry. That's just not in our plan." A phrase I wish your parents would have shared with you, James. "We can't." "Oh, what about this?" "Can't do it." "Oh, we really want to do this." "I'm sorry. We'd love to, but we have a nice patch of grass outside. Let's take 10,000 steps in that patch of grass. Let's have some fun." That's how you do it.
Yeah, that's feasible. And we have role models that are also modeling this behavior. We can easily do things like that with our apartment amenities.
Good. Good. And I like that. I like you said modeling. We have to remodel who you have been modeling after. Of course, it's so easy these days to just, "Oh, let's go out. Let's order something in," whatever. That can't happen under this. So, all right. While I am sensitive to the fact of going cold turkey is very difficult, I am not trying to make allowances for random family to come over. You simply do not have the money to be able to provide for that. So I'm going to keep it at 800 because right now you're at 127% fixed costs. Addison, you're next.
Let's go ahead and take a look at subscriptions. That's a fun category.
Subscriptions it is. Here we are. Let's read them off. We have Monarch for $210. Every guest on this show gets a free subscription to Monarch. YouTube, OpenAI, Spotify, Amazon, Google One, Uber, Paramount Plus, New York Times, Apple, Doodle, Prime Video. What do you want to cut, Addison?
Everything but ChatGPT, YouTube, Adobe, and the Doodle.
All right, so everything else is gone. What the? It went from $1,754 to $55. No, we got to look at what else is for entertainment here. What's Surf House?
Surf House is tickets to a show.
Okay. And the movies, Meow Wolf. What's that?
Interactive art exhibit.
Okay. Geocaching. AXS. What's that?
Tickets.
All right. So, it's a lot of shows and concerts. What do you want to do about that?
We got to stop. There is a lot of free entertainment options in our city. We do not need to spend hundreds and hundreds of dollars going to shows when we can see it for free.
All right, fine. So, what we have decided is that there are no more shows.
Yeah.
That's it. All right, I'm down. Let's keep moving. I like it. Back to you, James.
Let's do pet expenses.
Okay, $1,029. We got PetSmart, Rover, Chewy, vet, and on and on and on. What do you want to do?
I think just dog food and treats for training purposes.
For how much?
Each bag's $110. And we go through two of those for the two. So that's $220 for food. And then the jars of treats, we go through two of those. That's like 30 bucks. So $250.
Per month?
Yep.
Okay. So, I like the change. You're at 101%. But a lot of those expenses came from your dog being sick. So, what do you want to do about that?
I think we also need to allocate a little bit of money every month into a pet emergency account to help cover those because the teeth got cleaned every three years. They have to get cleaned.
Would you rather allocate money towards your retirement or towards your dog's upcoming health expenses?
Can we do both?
No. You told me that one of your money rules is that money is a finite resource.
Yeah.
Notice your initial reaction is to try to find a way to wiggle out of the rules that you yourself set. What would you rather put money aside for? Your retirement or your dog's upcoming health expenses?
It's a really difficult call. I want to make both work by cutting drastically in other areas where we can because those are two really important things. I want to retire, but these dogs are like our children.
Okay. The one option is that you cut so drastically that you then have extra money to put towards both. We can see if that's possible, but it will reflect on your lifestyle. Let's take a look. What's next to cut?
The car payment can come down a little bit because we will be paying things off. So, I think we can get that to about $1,000 because we're not going to be taking our Ubers.
Okay. Done. 98%. Addison, notice what you're doing. The overexplaining. What I'm looking for from the two of you is concise answers so we can move on. If you are spending a ton of time explaining decisions when we already made it, we're living in the past. We got to save that and focus on the future. Let's move on.
Yep. We could do clothes and personal care. That's mostly my category. We can bring that down to $300. That way haircuts are still possible.
Okay, we're at 89%. What else? Let's move fast.
Utilities, we can bring that down to five because we have four phones between the two of us. We can get that down to five.
$500 it is. Okay, fine. You're at 87%. Just want to point out at 87% you're still spending more than you make every single month. What about this miscellaneous? Let's take a look here. Miscellaneous. We have Upstart, Ivy, and...
Interest payment for a loan.
There's quite a bit of uncategorized and sloppy spending that needs to be corrected. I will not cut this down to zero, but I'll keep it at $300, which means you all need to be looking transaction by transaction until you really smooth out your spending. You're down to 83%. All right, I'm going up to income. What do you got?
I'm going to be resuming full-time, and so my income is going to go from $4,000 a month to $7,100.
Great. What's the take-home? Do you know?
That's going to be the net. That's the take-home.
Wow. $7,100 net. That's great. All right. Watch what happens to the numbers here. Wow. 63%, your fixed costs. That's not bad. That's really impressive. Great job so far. Very, very impressive. You cut your expenses down by over half. Great job. But we need to go one step further. Are you building savings if we end the call right now?
We are not currently, but we need to.
Okay. So, let's do that right now. One thing that people often do is they'll focus on expenses, which is great, but then they don't go the final step of saying, what do we do with the extra money now? And they just let it sit there, and then it gets spent because it's sitting there. And you two know if the money is in your account, you will spend it.
Yeah.
So look at this. You have $4,697 a month left. What do we want to do with that?
We got to hit $10K for that savings account that we talked about as our first rule. No other spending until that's built up. So, that's going to need to primarily go towards that, but I feel like we also need to be putting some towards retirement. And that's where I don't know. Do we build up our emergency account first and then start contributing?
You do both. First of all, right now you have zero dollars in savings. You're at extreme risk. If one of you gets in an accident or something happens, you're in real trouble. So, there is no perfect answer here. This is really about making a decision based on risk, age, all kinds of stuff. But if it were me, I would put more of the money available towards savings because I need to build a moat in case something happens.
Technically, if you all stuck to this at $8,000 a month, you should have like $50,000 minimum in a savings account for roughly six months of expenses. Okay, that would be $8,000 times six. But we can start with less than that, and we can build up over years. So let's take a look here. We can put, I don't know, maybe $3,000 a month towards savings. What's up with the debt? What's your debt payoff date?
So other than my student loans, I will have everything paid off in 2031, but I have a lot of stuff falling off in 2026 and 2027 and 2029.
Nice. In 2026 and the other 2020s, how much is the payment that you're going to now have?
About $1,000 will be off.
All right. So, what would you do with that $1,000 once it gets paid? Do not say the brewery.
No. No. Buy one. No. I would say I really am worried about retirement. I feel incredibly behind. And so I need to calculate what do we need or want for retirement and how much do I need to start putting towards. I think $1,000 is going to be a really healthy amount to get caught up since we're starting so late.
It's a good start. You're going to need to get even more aggressive with that. Much more. First of all, I love that you know your numbers. I'm so impressed. Less than 5% of people know their debt payoff plan. Extremely impressive. James, did you know that?
No.
Okay. You got to know it from now on. The idea of letting Addison know this stuff and carry these and have these numbers, it's not okay for the two of you as partners. So, I have to redo that relationship where the two of you know these key numbers and you know what they mean. Okay?
Yeah.
If that is the case, then here's what I propose. We are putting, let's just say, 500 bucks a month away for retirement. Not bad. Not bad. Not bad. Hair and clothes. What's 300 bucks a month? Because I don't know too many people with this much debt who spend $300 a month on self-care.
That's fair. I think that could probably go down to... How often do you need your haircut, James?
Every five to six weeks.
How much you pay for a haircut, James?
60 bucks.
How much you tip?
20%.
Okay. So 70 bucks for a haircut. Here's what I'm proposing. I don't care if you cut your hair at home. That's up to you. But I am proposing there are so many things that you both take for granted. Of course we got to go to a show. Of course, we have to have this and go to Uber and get a haircut every four weeks. How does a couple that does not go into debt, what do they do? I'll tell you right now, they don't get their haircut for $70 to $80 every four weeks. They stretch it out. They go to a cheaper place or they do it at home. Up to you what you want to do. But I'm trying to show you some of the things you just take for granted are actually just assumptions. And there are much cheaper ways to do them. What do you want to do for the amount of $300 a month for self-care?
I'd be willing to not do my nails and my other stuff.
What's the number?
So, I'd leave it at $70 a month.
Can you stretch that, James?
Yeah, I can do it elsewhere.
Love it. 40 bucks it is. That includes the tip, so make it 30.
Mhm.
Supercuts, here we come. All right. Next up. Call and negotiate your back taxes and even your credit card. See if you can do it. You might not be able to, but at least try.
Okay.
All right. We're at 4% on investments. That can come up over time. Right now, might be the best you can do. Savings at 24%, which is quite good. You know what? You all have 12% left, or $1,457, for guilt-free spending. That's too much. What are you going to do with $1,400? I know you'll spend it, but I think that money would rather be allocated somewhere else. You all want to take care of your dogs? All right. Well, here's where it comes from. How much you need to put aside for your dogs?
I'd say $100 a month.
What is happening right now? I saw the transactions where you spent $1,500 and then $200 and on and on and on. That happened last month. How much do you think on a yearly basis you're going to spend on medical or unexpected expenses for these dogs?
Probably two grand.
Two grand. Okay. I'll put it there if you want, but I'm going to try to show you a different way of thinking about it.
Yeah.
When I plan for uncapped expenses, first of all, I'm very wary of anything where there's a potential limitless amount that I will have to spend. I'm talking about houses, cars. But sometimes we have to have things that are just going to potentially cost money, and we don't know how much or how. That's okay. In those cases, I always am conservative.
So, for example, when people buy a house, the typical guideline is you assume 1 to 3% of the purchase price in maintenance every single year. I always assume 3%. Why? Because I don't want to be caught surprised with a $10,000 or $100,000 expense. Same thing here. Assume it's going to be bad and save for that. So, how much you want to save?
I'd say for the year, $5,000. Considering when we have insurance, I think we get 90% coverage. So, five in cash is going to go a long ways.
All right. So, I'm going to save dog health. All right. We're going to call it 400 bucks a month. And that's going to sit in a sub-savings account or a special savings account called dog health. And that's where you pull from. Okay. Damn. You still have $1,057 left. How much you want to have for, quote, fun?
Most times, people, I recommend they have 20 to 35%. Okay, you all are at 8% right now. So you're well below. But you also have a high income, and you're in a lot of debt with pretty poor habits. And your habits have shown that when you give yourself an inch, you take a mile. So sometimes it's easier to just cut it off completely and not have to think about it. Therefore, I would recommend you bring that number down. Even though it seems crazy, I rarely recommend somebody go this aggressive, but you actually need to be aggressive so you can send a signal to yourselves: our lifestyle is totally different now. Therefore, what percent do you think you should have in guilt-free spending?
I almost want to say zero because I feel like we've lived our fun life for so long.
Yeah.
And I'm feeling pretty guilty about that. So, I don't know if we deserve that right now. We've kind of spent that in advance of now.
I love the way you are thinking. That's awesome. I don't want this to be punitive. We're not doing the whole, you have sinned. That's not what this is. Okay? Instead, I would like you to look at it this way. We are taking our finite amount of money and we are redirecting it, allocating it with ruthless and relentless force towards the things that are important to us.
You told me we respect money in this family. I see that because you are saving a huge amount of money every month, 27%. And you need it because you have zero savings. That shows me respect. Hey, we made a mistake in our past, but we are fixing it. And we are fixing it with overwhelming focus and force now. That's respect. I see investments. It's small, but it's a start. I like that. That's respect. Hey, we'll do more once the other car is paid off and once we have the credit card. That money is going to go directly towards investments. Great.
I think you should give yourself a little bit of grace. If it were me, I might take 800 bucks and put it towards investments. So, that's a very healthy investment rate to start with, but I think, could you do $257 on fun for the entire month? Now, think about it. Fun includes Gatorade. From now on, we're drinking water. Oh, I need hydration. Salt. Goodbye. Next. No more shows. We already talked about that. No more brewery. You could go once a month, but you all have to plan ahead and say we are going to get one beer and no pretzels or whatever else. What do you all think?
The great thing about our plan is we set the rule. We're not spending anything until we get our savings built up. It's a huge goal and an accomplishment. And then maybe at that point we can reward ourselves with just a little bit more everything else.
Yeah, I love that. And can I add something else? You mentioned earlier, Addison, that you looked at your transactions and you're like, what do we even get for it? Just a bunch of random stuff. But if you have $257 per month and that is it for fun stuff, then I bet you the two of you are going to plan and talk about it. It's actually going to be meaningful.
So maybe you do decide to go to the brewery. It's on the calendar, and then you can talk about it. Hey, I think you should do January. I'll do February. You do March, I'll do April. What are we going to do? Well, let's do this. Oh, well, let's do that. Well, this is how much we have, including tax, tip, all of it. Do we want to take an Uber there? I don't know. That would cut into like 40% of our thing. So, you become actually hyperfocused. And when you get there, whether it's a movie, restaurant, you've looked at the menu, you're salivating, you're ready to go, and you actually appreciate it even more. That's how you do it. What surprised you about the changes that you have made today?
Although there was pushback and apprehension and explaining, less of it than I thought that it would be.
Why do you think that is?
26 years of adulthood that have viscerally punished me for all the decisions I've made. The potential relief from these decisions is looking, feeling pretty good right now.
Love that. Addison, what surprised you?
We actually have a concrete plan to move forward with, and it's not as painful as I thought it was going to be. Am I going to be really excited for some safety and security financially when we have an emergency account? Heck yeah. Am I excited about having retirement? Yeah. So, this was actually more fun and exciting than I thought it was going to be because I was very nervous, and we're going to have to dig through a lot of things and feel a lot of shame perhaps, but I'm leaving feeling excited, and I'm surprised I feel that way.
I love that. I love both of your receptivity to these changes. These are really big changes. They're not to be taken lightly. Some of the biggest changes that we have made on this podcast. And it's actually really hard because what you are seeing is the lifestyle that you knew being systematically removed one thing after another. And if that's the way you look at it, it's like I'm cutting off one finger after another. It's just increasingly depressing, sad, hopeless. But what I notice is that the two of you actually started to move towards something. And so it's like you have a philosophy, you have rules, you have a goal of having
$10,000 in a savings account and feeling more secure. And I kind of love that you push back on me with the dogs. You go, "Hey, these dogs are part of our family. We are going to find a way to do it." Amazing. That means you can't do this or that. And you both said, "Fine." That's priorities. I love that.
Addison, you came on asking to learn a little bit more about your psychology. A few things I want to observe. First, a lot of explaining and overexplaining is kind of a tip-off as the two of you go forward. If you find yourself overexplaining, maybe just pause, make a joke of it, but it's actually something to notice in your relationship. A lot of leaning on comfort and double talk. "Yeah, we like comfort, but actually it's not that important. It's because there was a new job and then this happened and that happened."
Important to be honest. "Hey, in our past chapter, we loved comfort. In fact, it was the overriding thing that guided us. And when we take a look at it from perspective, yeah, it was nice in the moment, but it didn't really leave us with anything of lasting meaning. And so we've decided to change to being a little bit more planful, a little bit more deliberate." And then when things come up, which they will, like your family visiting or a dog needs something special, then you go, "Okay, great. We already planned for it." Or, "Hey, we're not able to do this because that's not part of our plan." So that's a really savvy way to look at your money.
And then the two of you coming together will be the most important thing. This plan can work or fail based on the two of you. Right now there is still a disconnect between how both of you engage with money. It's a very common dynamic. He kind of goes to work and then comes home and is disconnected from the finances. She is managing the money, but managing to her means making a bunch of spreadsheets but not really having a clear distribution of money. And then they fight and she asks what's happening and he retreats. We don't want that anymore. We need to be teammates. When you do that as partners, it's going to be very, very connective the way it has been today.
This has been so helpful. Clearly we wanted to make changes. We got started. We just couldn't do it on our own. So we needed this firm intervention and it's been really great. So thank you is not enough to say.
It's absolutely my pleasure to see the way that you both came here, asked for help. With a little probing, you were honest, which I love. And as I said from the beginning, I'm not here to judge. I'm here to help you be honest with yourselves and with me and then make changes. And also, it is especially meaningful to me to help you because of the lack of financial education that you got growing up. And I don't mind if people did not learn this stuff. I never mind that. As long as you're willing to change, which you are, I love to lavish my time and attention on you. So thank you both. Stay in touch.
We will.
You will too.
Thank you.
I really like Addison and James. At the beginning of our conversation today, I think it was a little bit combative. I personally will take some responsibility for that. I was trying to pull out what's really going on here, feeling a little resistance, but I noticed this inflection point where they started to be more into it. They started to actually think about the future. James came along, Addison too. Both taking responsibility. I like that. And you could see my energy shift too. When they are open to change, I lean in. I get excited.
Will they follow through? I actually think they will make some serious changes. I think some of the examples that I shared with them today, they had simply never experienced them in their entire life. For example, the idea that if family comes around, you don't have to go out to eat with them. If you've never heard that, that might seem radical. It might seem like, "Wait, I can just not go out to eat with them?" And so I think they will make dramatic changes cutting down their spending.
I also think that they will find their childhood lessons coming up and they will start to reason away their plan. They will start to say, "I think we deserve it. We worked hard. We saved 8,000. That's pretty close to 10,000. Let's go out and celebrate." Those kinds of things. And I hope that they acknowledge those voices in the back of their head and they say, "Hey, that was the voice from yesterday, but today we are a different couple." If they can do that, they have a good shot at sticking with this plan.
What surprised me most is the amount of spending. We've had a couple of big spending periods like our wedding and moving across the country. But in looking at the details, there's also been a shocking amount of mindless, unnecessary spending with very little to show for it. Through all of this, my biggest takeaway is that we do not need to spend money to experience comfort and joy. And in fact, our out-of-control spending has resulted in less comfort and joy due to stress and arguments over money.
Thankfully, through this process, we have learned a lot about our relationship with finances, more about our financial reality, and we've begun to take some steps to do better. It's not sexy or groundbreaking, but for the first time ever, we are taking it upon ourselves to actually manage our money. We've taken some measures to reduce our fixed costs and we are committed to not spending beyond our fixed costs so we can focus on our savings goals as well as aggressively paying down our debt. Now, we've cut a lot, but we're still alive and kicking. It really has not felt like a sacrifice because for the first time ever, we are on the same page and we are actually investing in a future that we truly want.
I'd say my biggest surprise was just how far apart my perception was from reality when it came to all those little purchases, the convenience store and going out for beers, and just seeing it all laid out and how much it added up. It was shocking how much we spent on convenience. And when Ramit had asked Addison about that, it really made me think a lot about how much we spent on convenience.
The biggest takeaway, well, frankly, it was a pretty humbling realization that we've both lived with more of a sense of entitlement than I really care to admit. We work hard. We feel like we deserve these little treats, beers after a long day, going out to eat, etc. But seeing the financial impact of that made me realize we need to dig deeper into the why of why we're doing those things instead of just trying to treat those choices and change things on a surface level.
That said, we've made some big changes. No more convenience store treats. We're not eating out. And we've started meal planning and planning a grocery budget. We're also looking beyond immediate changes, allocating money towards an emergency fund, paying down our credit cards, getting out of debt, and starting an IRA, setting aside money for things to help plan for the future instead of just hoping that we'll get there.
Hey guys, it's Addison and James here checking in with our one-month update. We have been busier than ever, but we have some exciting progress updates to share with y'all.
Yeah. So we've been able to put a lot of the information and the tools that we received into practice. Our Monarch is more dialed in and categorized than it's ever been. And our CSP, we actually do that monthly now to account for our variable income. To track all this, we've been consistent with our weekly money meetings and getting all that dialed in. And then for some of the gnarlier stuff like the back taxes and such, we actually retained a CPA. So we would be working with him to help us navigate these challenges moving forward.
And reflecting on our session with Ramit and how we were approaching money and our relationship with money, we've really begun to both respect and manage all of our finite resources. So not just money but also our time and our energy, realizing, as was highlighted in our meeting, our reliance on convenience. So to counter that and to stay on track, we've been working intentionally to budget all of our resources.
And yeah, we've been doing that, really working together as a team more so than we ever have. We have a shared vision, shared goals now. We've really mapped all that out, where before it felt like we were just kind of shooting from the hip, which was clearly not working. But now we have a much clearer understanding, a shared understanding of what's necessary versus what's unnecessary and what we deem as such, supported accountability, and discussing the consequences for purchases as a factor as well. To kind of help with that, we also opened up a couple of joint accounts, and so we have those. Everything's out on the table. It's a lot easier now that it's all transparent and it helps us with our joint decision-making.
Yeah. So we're just really grateful for the opportunity and the experience. We've had the information and tools at our disposal, but I really think without this opportunity, we wouldn't be putting those into practice like we have been. And we wouldn't be on the path we are now, which gives us a lot of hope for the future. So we're just getting started, but we're really excited for the future and really grateful for Ramit and team and for everyone else who's also been along on this journey. So thanks the time.
Thank you guys.
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