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Two Homes, One Baby, 85% Fixed Costs: Nicole and Drew Weigh Selling the House in Maui

I Will Teach You To Be Rich · ▶ 1:57:36 · 30 min read
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Overview

On this episode of I Will Teach You To Be Rich, Ramit Sethi talks with Nicole and Drew, a 39- and 40-year-old couple whose first child is due in less than two weeks. They split their lives between Southern California and Maui, and each of them owns a home. Nicole wrote in her application that Drew "basically needed me to buy a house" and that she wondered whether it was a mistake. She also wrote that they could not eat out or go to concerts because all their money went to housing and necessities.

30 min read

The question at the center of the conversation is whether a household earning nearly $300,000 a year can keep two homes in two states. Ramit's answer, developed over the episode, is that their current plan depends on too many things going right. He pushes them to consider a version of their "Rich Life" that does not require Drew to double her income within a year.

The setup: a bicoastal couple with two houses

Nicole teaches developmental psychology and research methods. She owns a two-bedroom, one-bath house in Southern California, close to her family and community. Drew is a life coach in the final year of graduate school for a therapist license. She owns a 50% share of a house in Maui that is set up "kind of like a boarding house": two three-bedroom units and two studios. Drew lives in one of the three-bedroom units and rents out the rest.

The couple spends roughly half the year in each place. Nicole needs a bit more time in California because she has to be on campus. When they are in Maui, Nicole rents out the California house, and when they are in California, Drew rents out her three-bedroom unit. Drew says the Maui rental income is consistent. The repairs are not, and because she is new to being a landlord she did not yet know what to expect. Asked whether the property makes a profit, she said, "Yeah, sometimes."

They have been together about two and a half years and are working toward a domestic partnership, which Nicole describes as "just more legal hurdles." Both describe their conversations about housing as tough. Each is deeply attached to her home base, and they keep coming back to the question of whether their income can actually support two households.

How Nicole ended up buying a house

Nicole spent years as what she calls "a really poor grad student." She paid her own tuition to avoid student loans and lived with roommates. She kept living with roommates after landing a full-time professorship in her 30s, holding housing to about 12% of her income. Ramit called this refreshingly countercultural. Nicole says it felt great: she could finally catch up on retirement, eat out without worrying, and skip budgeting because she knew she could cover everything.

Then she met Drew. According to Nicole, Drew told her that if Nicole wanted her to come spend time with her, there could be no roommates. Nicole did not want a fully long-distance relationship. She was already saving $4,000 a month toward a house, so she decided to move up her timeline by about two years. The $4,000 would go to a mortgage instead of a savings fund.

Nicole says there was pushback. The two had first discussed it six to nine months earlier, and Nicole had asked to wait a year. After six months, Drew said she couldn't keep doing it and would not come for the next semester otherwise. Nicole bought a house about three months after that conversation, in a housing market she describes as "crazy." Drew explains that she felt like she was back in college and couldn't return to living with "random people," though she says it might have worked with more private space or a better bathroom arrangement.

Nicole says the purchase felt defensible at the time. She ran the numbers, the payment came to roughly a third of her income ("a little on the high end"), and she had already been saving that amount every month. Ramit agrees that this part of the decision was sound.

Numbers person meets "vibes" person

Asked about a recent money conflict, Drew remembered a conversation under a tree at Nicole's parents' house. She doesn't recall the specifics, only feeling so agitated she wanted to "hit the eject button" and go for a walk before she could return for "another hour" of numbers. Nicole remembers the topic: Drew's tuition, and instability with the Maui rentals. Nicole's position was that they needed enough cushion that when something goes wrong, they don't have to scramble to rent to just anyone.

Drew says she agreed in principle but felt overwhelmed. She didn't know the numbers or how to make it happen, and the detail was too fine for her. Nicole describes herself as "really numbers driven and practical." She's the one with the spreadsheet and uses 12-month or six-month averages. Drew says she has dyscalculia and goes "by vibes." If something costs somewhere between five and fifteen dollars, she's fine with that. There's no need to know whether it's $8.95.

Drew connects this to her history. She spent her adult life in Taiwan, where she says rent was minimal, she didn't have a car, and everyone had health insurance without going through an employer. Moving to the United States as an adult left her feeling destabilized and behind. She has had to "ground in to reality" by learning about insurance, houses, and finances she never had to think about before. She calls herself "very much a dreamer" who is becoming excited about numbers.

What their Rich Life looks like

When Ramit asked about their shared vision, Drew first said "more of a cushion" and retiring with money. Ramit pushed back that this only covered today and thirty years from now. Given a second try, Drew described community: renting a place in Joshua Tree for a week with friends, hosting people in Maui, eating great food at restaurants, and having work that is steady, fulfilling, and "pretty stress-free." The baby, she said, arrived faster than planned since they conceived on the first try. He'll be brought into a life "filled with love and play and community."

Nicole says their shared values are what drew her to Drew: community, work-life balance, and living in the present rather than for the future. Her personal goal is to spend no more than 40% of her capacity on work and keep 60% for herself, her community, and her family. They talk about retirement a lot, she says, because they worry about when it will happen, not because they want to postpone enjoying life.

The Conscious Spending Plan: assets, debt, and a $96,000 surprise

Their Conscious Spending Plan (CSP) showed $1,252,000 in assets, $183,764 in investments, $67,269 in savings, and $986,526 in debt, for a net worth of $516,507. Their homes are worth roughly $644,000 and $608,000. Most of the investments and savings are Nicole's. Drew has a $427,000 mortgage and about $11,000 in other debt, and Nicole's mortgage is $545,000. Nicole's main concern was that $67,000 in savings wouldn't last long. Drew found the debt total "astonishing," even though she understands it's mostly mortgage and is "very American."

Their gross combined monthly income is $24,725, or $296,700 a year. In the application, Drew had written $200,000. She knew her own income but had never thought about their combined total, only that "it was enough." Nicole would have guessed about $250,000. Ramit then asked whether earning $50,000 to $96,000 more than they thought solved the problem. Both said no, because costs eat nearly all of it and they still struggle every month. Nicole said even another $50,000 a year probably wouldn't fix it.

Fixed costs were 77%. Ramit says that one number explains the stress and the arguments under the tree. Investments were 3%, about $600 a month, on top of $1,200 a month in pre-tax contributions. Ramit called the combination fine but not high. Savings and guilt-free spending were each listed at 10%. Nicole said actual guilt-free spending has been even lower, because they have been saving for $17,000 in legal costs related to the domestic partnership, the baby's adoption, and estate planning. She has paid $12,000 of it so far.

The couple conceived with a known donor, a friend who agreed to help. They only had to pay for the court documents that protect everyone involved. Otherwise, they say, the cost could have been tens or hundreds of thousands of dollars. Ramit notes that friends of his spent more than $250,000 on a surrogate, and says these are costs people in heterosexual relationships may never consider.

Inside the fixed costs: 40.5% on housing

Housing across both properties is $10,022 a month, about $4,000 and $6,000, or 40.5% of gross income. Ramit's guideline is under 28%, stretching to 32–33% in high-cost areas like both of theirs. Nicole says that at 40% housing is "eating into all of our ability to do anything else."

Ramit notes that if they had consciously chosen to give up eating out for five years to build equity, he'd applaud it. He asked whether that was the case. It wasn't. Drew said, "I don't want to just exist in the two houses, not doing anything." Ramit says that sentence describes how many Americans live, and Nicole added, "And then we're trapped."

The rest of the fixed costs included $1,125 a month for two car payments, one car in each city. Debt payments were $1,071 a month, for Drew's graduate school debt of $15,000. She'll need another $10,200 or so by the end of May to graduate, bringing the total to about $25,000. Asked where that money would come from, Drew said, "I don't know." Nicole said it's an open question.

A category the couple labeled "clothes/home/home repair and renovation" came to $1,400 a month. Nicole explained it ran high after Drew's Maui house flooded. The kitchen, probably built in the 1970s and never renovated, had to lose its flooring, so they replaced the cabinets as well. The work cost about $10,000. They hired the cheapest contractors they could and laid the flooring themselves. Ramit sarcastically brought up the online claim that landlords simply pass costs on to tenants. Drew said she couldn't. Rent is set by what the market will bear, and on Maui an emergency proclamation after the Lahaina fires is still blocking rent increases. The couple added that they wouldn't raise rent anyway. Total fixed costs came to about $17,000 a month.

The tax error: 77% becomes 85%

Nicole pointed out that Drew will be able to earn more starting next year. As Ramit looked at Drew's column, he saw that her net income, $10,450 a month, equaled her gross. No taxes had been deducted. Drew said she pays 4.5% in local taxes and doesn't know the federal amount. Nicole estimated Drew's real net at about $8,000. With that correction, fixed costs jumped from 77% to 85%. Ramit said they were essentially spending more than they make every month and noted a "chill" in the room.

In a narration segment, Ramit explains that he doesn't want his team to pre-clean guests' CSPs, because seeing people's own numbers shows where their assumptions went wrong. He frames the situation as compounding risk. Two stable jobs at $296,000 with 85% fixed costs would already be risky. On top of that, one partner is an entrepreneur and a baby is on the way.

Could Drew double her income?

Drew had said she might need another $12,000 a month. Ramit modeled doubling her net to about $16,000, which brought fixed costs down to 61%. Drew said she thinks that's doable after graduation: as a therapist and coach she'll see more clients, and in private practice she can set her own rates. Asked whether she's comfortable charging market rates or more, given her reluctance to raise rent, she said yes. Her model is high-ticket clients whose fees subsidize a sliding scale, with some sessions for low-income clients at $30 or $60. With that, she said, they could keep both houses.

Ramit put a pin in the idea and raised the baby. Their answer surprised him. They plan to spend the baby's first year and a half or so in Maui. There, a group Drew and Nicole call the Pacific Birth Collective gives expecting and new parents a weekly bag of groceries, which they describe as largely local produce, staples, eggs, and chicken. It also offers free education classes and even massages. They weren't sure whether it's government-funded but said it is grant-funded. They expect community support in Maui and Nicole's parents, who live ten minutes away in California, to cover most childcare. They estimate maybe $200 for an occasional babysitter, less than once a week. Barring medical issues, they don't expect baby-related costs to rise much. Ramit called the fact that such a program surprises him a sign of how misaligned priorities are in the wealthiest country in the world.

Nicole's timing also helps. After the birth she'll use sick time to take 12 weeks off, then begin a year of fully paid sabbatical doing research from home. Ramit summarized the position: high income with potential for more, and a baby that barely raises expenses, which he calls "highly atypical." He calls this a "golden period" to split between investing, saving, and enjoying. He said the emergency fund of a few months should grow once a child arrives. Nicole wants 12 months, and Ramit agreed that families with kids should be more conservative. With the corrected taxes, guilt-free spending had dropped to 1%, or $273 a month, which Ramit said can't be right. The couple is drawing down savings.

Nicole said she expects they'll have to keep drawing down savings over the next year if they don't want to be "miserable all the time," and that this scares her. The biggest thing they could cut is a house. Ramit pointed out that they are already drawing on savings; they just hadn't acknowledged it.

Money stories: security versus "life will provide"

Nicole's father's side of the family is Chinese, and she says they didn't talk openly about numbers, feelings, or much of anything. Asking for help was only acceptable within the family, and even then it invited questions. She found coming on the show "kind of terrifying." Her father did have her open a credit card in high school to build credit and told her never to charge more than she could pay off. She did carry card debt once, deliberately. While adjuncting at about five schools, she cut back her paid work for a year to do unpaid university service, including academic senate and department work, to become competitive for a full-time job. She put the gap on a credit card rather than ask her father, who probably could have helped. She describes her family as middle class. Her mother was diagnosed with cancer when Nicole was four and spent the next five years fighting it. Nicole says what she learned was that memories and experiences matter more than anything. In narration, Ramit adds that her mother died when Nicole was nine. He suggests some people who lose a parent become especially focused on safety and security, which may explain Nicole's need to be okay in every scenario.

Drew's parents came from poverty and trauma in Alabama and Louisiana and built a life through hard work. She says they used money for experiences, eating at restaurants about three days a week and once bringing both of her grandmothers on a multi-week trip around the Hawaiian islands. Drew grew up in Texas for ten years and in the Marshall Islands until 17, then went to college in Alabama. She named three messages she absorbed. First, you have to work hard to make money. She watched her father do that and reach retirement not in the shape to enjoy it. Second, money can be used as a tool of manipulation, which she saw in her family and connects to how women were historically kept from financial independence. Third, share money and "live it up." Her father also told her never to take out a student loan and never to buy a new car. Ramit noted she has done both: "Zero for two so far." Her father once offered the kids about $150 to read a finance book, which she thinks may have been Dave Ramsey or Warren Buffett, and she probably didn't read it. The couple said they read Ramit's book together.

Nicole says her biggest money belief is that money is useful but also scary. She's anxious about savings, retirement, the economy, and what happens "if the AI bubble bursts." She describes herself as an anxious person in general. Drew describes a kind of "flippancy" she has internalized: it'll work out, the approximation is good enough. Ramit asked whether she grew up religious. Her father was excommunicated when she was five, but her grandparents were very religious. She recognized the phrase "God will provide." She doesn't relate to the God part, but says she has a lot of privilege and that "privilege also will provide sometimes." Nicole confirmed that Drew often says she trusts the money will come. Ramit called it "the secular version of God will provide," and Nicole offered "the hippie, granola, woo-woo version." Both said these stories made sense of their CSP and their disagreements.

How the savings drained, and the Maui co-ownership

Nicole summarized the tipping point: Drew started school, the Maui flood happened, and emergencies piled up. The biggest was a $29,000 sewer replacement at the newly bought California house, running all the way to the street. Nicole's warning to buyers: get a full inspection, and if the sewer scope doesn't go all the way through, don't buy the house.

Their finances are partly separate. They share an emergency fund and hold power of attorney for each other, so they can act on each other's accounts. Drew says school and the Maui house drained her emergency fund, and Nicole has been covering the gap.

Asked what she'd have done without Nicole, Drew said she'd probably ask contacts for money, possibly the friend she co-owns the Maui house with. That led to a revelation. The house is owned 50/50 with a close friend, the friend doesn't cover 50% of expenses, all rental income goes to Drew, and the friend would get half if the house were sold. Drew then added that the split isn't settled: if she puts in much more time or personal money beyond the rental income, she'd expect to be compensated. There is no contract. "No, just vibes," Drew said. She said this was five years ago, she was "a different human," and she wouldn't do it the same way now. Nicole added, "Everybody do your contracts."

The long-term vision: bicoastal, with a school-year plan

Drew says their vision is to stay bicoastal. When she met Nicole she encouraged her to quit and move to Maui, and she's now glad Nicole refused, citing Nicole's retirement, paid health benefits, and pension. Both want to keep work stress at 40% or lower. Ramit asked how being bicoastal would work with a school-age child, say a 13-year-old today. Nicole said the child would be in Southern California for the school year, matching her teaching schedule, with summers in Maui. Ramit said he liked that plan.

On retirement, Nicole said she had been maxing out her 403(b). With her pension she had expected to retire around 55 and draw 4% from savings. Contributions have dropped because of the renovation and tuition, so she now figures 60 is reasonable. Ramit says a year or two of reduced contributions, even cut by 50–100%, usually matters less over 30 years than people fear, as long as there's a plan to return to the original rate within 18 to 36 months. He added that he dislikes the idea of "catching up" because it puts people in a bad mental state. Nicole said this was a relief after so much anxiety about being in the red.

Ramit says his concern isn't whether Nicole will have enough for retirement. It's that the two of them don't talk about money "at the same level." He asked them to build a plan that doesn't need everything to go right, since people plan as if life will be perfect and it never is. The goal he set was fixed costs of 60%.

Playing with the doubled-income scenario

Drew's first instinct was to "hold on for the ride" until her income rises next May. Ramit modeled it. With her net doubled, fixed costs are about 61%, take-home is about $28,000 a month, and roughly $8,000 a month is free to allocate. When Nicole started to give a mathematical breakdown, Ramit stopped her, noting that changing that dynamic is part of the goal, and asked Drew instead. Drew proposed $2,200 each to spending, investing, and saving. That left investments at 10%, savings at 16%, and about $3,800 for guilt-free spending.

Drew then suggested investing whatever is left at the end of the month. Ramit introduced "pay yourself first": decide how much to save and invest, then spend the remainder. Putting the extra $3,873 into investments brought investing to 24% of gross and guilt-free spending to zero. Drew said the idea was having a hard time landing. Nicole got to it: if they know how much they need by 60 and have 20 years, they can pick that number and set it aside monthly. Ramit said that's exactly how to pay yourself first. He intuited the right investment rate at about 14–15%. After moving $2,200 down, investing was about 16% and guilt-free spending about 8%. Nicole said $3,000 of guilt-free spending would be more comfortable, and Ramit praised her for advocating for it. Saving about $4,400 a month toward a 12-month emergency fund of roughly $200,000 would take years. Ramit argues that a household at their income with high expenses needs that liquidity, because a $40,000 flood can't go on a credit card.

Retirement projections

Nicole said her pension would replace roughly 70% if she retires at 60; in the calculation Ramit used 60%, or about $102,000 a year. If nothing changes and Drew's income doesn't double, Ramit projects about $1.6 million at 60. A 4% withdrawal would yield about $67,000 a year. Nicole said that works only if the homes are paid off and housing is no longer 40%. Drew was surprised the number seemed so large. Nicole noted that without housing costs, fixed costs alone would consume that income. Adding the pension brings the total to about $170,000. But both mortgages are recent: Drew's is 30 years, and Nicole's is 25 because she pays extra. Nicole is 21 years from 60, so paying them off in time is uncertain. Ramit said this is within the realm of possibility, but "doesn't smell right" to him. He wants plans where, if he needs $1 million, he lands at $1.8 million "with my eyes closed," because something bad will happen along the way.

If Drew's income doubles, the projection rises to about $3.6 million at 60. Nicole calculated 4% in her head. That's about $147,000 a year, plus the $102,000 pension, for about $250,000, close to what they earn now. Nicole added that the Maui house could still produce some rental income in retirement, and Drew said she could keep working for an extra $50,000 or so.

The single point of failure

Ramit then questioned the premise. What if Drew's new income doesn't materialize, or she gets sick and can't work? At 85% fixed costs, Nicole said, they'd be stressed. Ramit spelled it out: they couldn't pay for one or both houses and would run out of money. Nicole said they'd end up living with her parents; Ramit added the other option would be roommates again. They agreed neither is tenable. The doubled-income plan assumes Drew graduates, lands work that doubles her income, and does it all within a year. Ramit calls that "a single point of failure." He listed other things that could happen: she might want to slow down to be with the baby, or a parent might get sick. Both said they were open to a plan that doesn't hinge on it.

Nicole raised selling a house as the obvious big lever. Drew said that if they want to keep Nicole's job and benefits, selling Maui makes the most sense, though that house also brings in a lot of income.

Modeling a Maui sale: from 85% to 65%

Drew estimated the house would sell for $1.5 million. Her half would be $750,000, and with about $500,000 owed, that leaves roughly $250,000. Ramit rounded down to about $150,000 after taxes and transaction costs. Drew thought it might be more but acknowledged capital gains would be large. Ramit said many homeowners think they'll get much more because they never factor in costs.

Removing the rental income, about $7,000 a month net, initially pushed fixed costs to 130%. Removing the Maui mortgage brought it to 84%, about the same as today, but now with $150,000 in cash. Removing that property's utilities, one car payment (they'd need only one car per city), and insurance got to 73%. Zeroing out the repair line reached 69%. Drew said her housing column would drop to about $500 because her space is much smaller, which brought fixed costs to about 65%.

Ramit laid out what the $150,000 could do. They could fund the emergency fund in one move, freeing the roughly $4,000 a month they'd been saving for retirement and enjoyment. Or they could set aside $1,000 a month to rent a place in Maui for a month a year with no maintenance. Nicole's reaction was that having no landlord stress "would be amazing": no more phone calls, no more flooding. She said the house has been a major source of stress and the idea felt like an exhale. Ramit tied this to their vision of limiting work, noting that being a landlord is work. Drew said a Maui travel fund would be essential, because she'd be devastated to be stuck in California all the time.

Ramit said people often believe that giving something up means losing it forever. His example is a guest who loves their BMW: why not rent one on Turo twice a month and get a nicer one? Nicole said the old plan felt like gritting their teeth and praying Drew got enough clients at the right fee. Now they could still try that, with a backup. Ramit added that lower fixed costs create upside: even a 50% income increase for Drew would make a big difference, and doubling it would leave "more money than you know what to do with." If they later want a place in Maui again, they'd approach it from a position of strength. He framed this as "playing to win" instead of "playing not to lose."

Drew said she felt excited and connected. The Maui decision was made before she knew Nicole and before their family, and it no longer has to rest entirely on her doubling her income. Nicole said she wanted to be able to keep "the ocean and the people in the community" no matter what. Drew wanted to see actual numbers for a three-month stay in Maui with their own place rather than staying with friends. Ramit said to include airfare and lodging. He suspects, but isn't sure, that even long stays won't equal the cost of ownership. Nicole reframed it: if being in Maui with their people is what matters, do they have to own a home to get there?

Next steps, a deadline, and "spaciousness"

Ramit wanted concrete next steps. Drew proposed running several scenarios before the baby arrives: selling, Nicole quitting and living in Maui on Drew's income, three months in Maui without owning, and different salary levels for Drew. She said the possibilities felt "fun," a word Ramit noted she doesn't usually use about money. He called quitting unlikely but worth modeling, and said the process is vision first, numbers second.

On timing, Nicole said Drew decides experientially, so she should spend at least a few months in Maui to feel out how much time she needs there each year. Drew said she felt seen. She was excited by a relatively short deadline because "we are not in a good place" and it calls for urgency. She suggested six months might work. Ramit said the timeline is theirs to set but should be driven by modeling savings and travel costs. He noted that deciding to sell doesn't mean the house sells right away, since there are seller's fees and prep work like painting. The alternative is to keep Maui and set an income target Drew must hit consistently, not with one-off clients, starting soon. Either way, he said, falling to $20,000–30,000 in savings from the current $67,000 would be a danger zone. He himself wouldn't let reserves drop much below three months of expenses.

Asked if her Rich Life vision had changed, Drew said she was feeling "the call for spaciousness," a core value she had lost: not stressed, not squeezed, not with her back against the wall. Nicole said community and work-life balance still matter, but she realized they had been "holding on so tightly to one specific way of doing it" that isn't serving the vision. Ramit said he'd never heard spaciousness tied to a Rich Life before and found it resonated with him. He compared people clinging to houses and SUVs while drowning to a monkey that won't let go of what's in its hand. Nicole said: "It's felt like drowning, and this feels like, oh, I could just stand up. We were in the shallow end."

Ramit's odds and the follow-up

In closing narration, Ramit gave the couple 50/50 odds, which he says is rare. Either they model it, go back to Maui, and realize they don't need to own the house there, or life and a newborn get in the way and they never decide. At 85% fixed costs, he said, not making a decision is itself a decision. He hoped they'd be direct with each other, consider selling, bank the money, and start over on a joint vision.

In a follow-up video, the baby has arrived. Nicole says she stepped back from leading money conversations and now lets Drew handle the spreadsheets, which made those conversations "more spacious" and playful. They modeled Nicole quitting and concluded it isn't feasible because her benefits would be very hard to match, so they'll remain bicoastal. Drew says she became "basically a CSP expert." She compared Airbnb, rental, and purchase costs in Maui and found that the best way to keep fixed costs at or below 60% is to sell the current property and most likely buy a condo with cash. She was emotional about selling at first, but about six weeks later says she has come to terms with it. She is letting the numbers guide the choice and leading with a Rich Life that feels "spacious," both stress-free and financially. Once the house sells and fixed costs hit their target, they plan to direct money back toward savings and investments.

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