Search

$143,000 a Year, 102% Fixed Costs: Ramit Sethi's Session With a Couple Weeks From Missing Rent

I Will Teach You To Be Rich · ▶ 1:43:27 · 32 min read
English日本語
Open on YouTube ↗
Overview

Freya (45) and Blake (47) have two young children, a combined gross income of about $143,000 a year, and no savings. When Freya applied to Ramit Sethi's Money for Couples show, she wrote that they were "literally broke to the point that I'm worried we will be homeless." Their Conscious Spending Plan (CSP) showed $5,000 in assets, $180 in investments, zero savings, $96,179 in debt, and a net worth of minus $90,999. Fixed costs came to 102% of take-home pay, and the guilt-free spending line was minus 2%, which Sethi pointed out is impossible.

32 min read

Sethi said the numbers alone invite "a huge hatchet," but his aim was first to find out why they got there, so the plan would address the root problem. His conclusion was that the problem was less the debt than avoidance, guilt, and the lack of any real financial partnership between them.

"One missed rent payment away"

Sethi opened with a line from Freya's application: "We're basically one missed rent payment away from an eviction notice." She said it felt accurate. Their current landlords are not the forgiving kind they once had. They have never received an eviction notice, but Freya said that was part of the problem. She had "always managed to make it work": coming up with money somehow, or talking her way out of being a month late on rent. Both dated the crisis to the middle of the pandemic.

Asked which of them feels the weight more, Freya said she honestly didn't know how Blake felt. She thinks and talks about it more. Blake said he thinks about it "all the time, every day," late at night. Sethi remarked that it was telling they didn't know how each other felt about money. Freya explained that Blake doesn't like to talk about it. They start weekly follow-ups, the follow-ups stop, she starts feeling like a nag, and the cycle repeats.

Blake described his reaction to "we need a budget meeting" as "dread, and then anxiety." To him it means "I need to make more money," which he called his classic response. Freya likes that kind of work. She keeps separate to-do notebooks for work, the household, the kids, and her personal growth, though she admitted this "doesn't always translate" into the rest of her life.

The ski trip and the Mexico trip

For an example of their communication problem, Freya described a day trip to Mount Bachelor. They had just moved, it was the end of the month, and money was tight as usual. Blake wanted to go skiing. They had lift passes, but he also wanted lessons for the kids, who had never skied, and for Freya, who doesn't ski. She said they couldn't afford it and they fought. Blake backed down. Then Freya felt guilty, because he was so excited and hadn't skied in about ten years, and she said, "Okay, fine. Let's just do it. We'll figure it out." The day cost about $2,000, money they said they did not have. Freya admitted she says yes more often than no. Blake said that in that situation he would not have been the one to say no. He said they have occasionally cancelled things for money reasons, and Freya added that it's rare.

The second example was a summer trip to La Paz, Mexico, with Blake's parents. Blake said his freelance income is volatile and late summer is always thin, so he leaned toward not going, but Freya wanted to go and he wanted to go too. Freya was "the driver and the planner, 100%." Blake described his own role as coming along and trying not to spend too much, making money before and after. Asked when he had said no to anything during the trip, the answer was essentially never. Blake's mother wanted a private chef for the week. His parents paid part of the cost, covering the house. The couple's share, about $3,500 and possibly more, went on a credit card. Blake called the return home "a kick in the teeth." The trip later became "ammo" in their arguments: Blake would say Freya decided they should go, and Freya would say she did it for the kids and his parents. Both said this kind of blame happens "a lot."

They used to see a therapist but stopped, partly because at $175 a session it was too expensive. Freya had also written that they couldn't even afford a bankruptcy attorney.

"Too smart for your own good"

Sethi told his audience this couple is clearly intelligent, noting words like "vicissitudes" and the trip to La Paz, and yet they are nearly $100,000 in debt. His point was that intelligence matters but does not make you wealthy or keep you out of debt. Many smart people assume they'll "just figure it out." He said he would rather take a ten-point IQ drop and think, "I don't understand this, I better read a book." He asked viewers inclined to write angry comments whether they could picture themselves in the same situation.

Asked directly what was going on, Freya said she was kicked out as a teenager and has supported herself since 17. She is so used to money coming and going, and to having nothing, that it feels almost comfortable. She said it hadn't worried her much, partly because she felt she had plenty of time to fix things. She has also had money taken from her in bad relationships, so even when she has money she doesn't see it as permanent: "Eh, it'll work itself out."

Blake also said money comes and goes. In the past there was always a safety net of savings or quick freelance gigs. Over the last few years they drew it down to pay off a card here or cover something there, until it was gone. His 401(k) was cashed out to cover monthly costs. Freya said she suggested it and Blake was more hesitant. It happened during the pandemic, when neither was working and she was pregnant.

Who carries the weight

Both agreed Freya drives the finances and Blake goes along, "maybe putting up some slight resistance," as Sethi summarized. Blake said he thinks about money constantly and tries to limit spending, since he doesn't buy much for himself. Freya pushed back. Blake calls her the spender, she said, but she does all the planning, the kids' needs, and the grocery shopping: "you're not spending any money because you're not doing any of the things that need to be done."

Sethi said he hates this dynamic, which he sees often in heterosexual couples. The woman tracks everything and worries because she sees the numbers. The man pays little attention. The gap widens because she is "down in the weeds" carrying the emotional labor while he stays oblivious. "It's just not partnership," he said.

Day to day, Freya said, they depend mostly on Blake's sporadic income, since she hasn't worked much while caring for the kids. Each month is "a scramble" over which hole to plug first: late rent, a couple of utilities, then summer camp. "When we have it, we spend it. And then when we don't, we panic." When a few hundred dollars appear, they go to dinner, or to see a friend they want to stay close to. Freya said dinner out gives her "a minute of escape" from the financial stress, which she acknowledged is "completely backwards." Blake said he is the same: kick the can down the road, enjoy the moment, then work hard to make the money back. He called it "myopic," with "no real future planning," and recalled realizing they had spent a thousand dollars on dinners in one month.

They described some recent changes. They cut subscriptions, and Freya bought budgeting software about a month earlier and has been tracking everything. She noted that tracking isn't the same as saving. They also started weekly sit-downs and saving receipts, but they have held only two and none in the past three weeks. Sethi's reading was that even the recent effort was just Freya doing more work.

Freya said she has tried this before and ends up giving up because she feels she is doing everything alone. Asked what she gets out of it, she said: "I get to say, well, I tried," which lets her feel it isn't her fault and shift some of the blame. Asked the same question, Blake said he gets guilt and anxiety, and couldn't explain why he doesn't change. Freya's view was that Blake grew up privileged, without real responsibility, and that he gets "complete avoidance": someone else, currently her, takes care of the problem. She had called him an ostrich with money, and Blake agreed "100%": "I just try to make more money and then not talk about it," hoping the conversations go away. Sethi said that description explained the pattern but didn't say what to do, and turned to the numbers.

Reading the numbers out loud

Freya had built the CSP alone and sent Blake the link. Sethi called that "kind of missing the spirit." They later went through it together on the couch. Blake was shocked by $750 a month in subscriptions, by insurance still being paid on the house they had rented in Venice (it became unbundled when they cancelled the car policy), and by food spending above $3,000 a month for groceries and eating out combined. Freya is a chef. Blake said they eat "like we're at a restaurant almost every night."

Asked to read the net-worth numbers aloud, Freya called them "nauseating." Blake said they felt "awful." The debt is mostly credit cards, plus some back taxes on a small business. Both said the numbers felt like failure, and Freya added, "especially with kids." Blake said he looks back over decades and wonders what small shifts he could have made, such as saying yes to discussions about personal finance. Freya said she loves her kids but doesn't think they were in a position to have two when they did. She also thinks she could have tried harder to find work, and she didn't pay attention to where money went even in years when earning was easier. She used to blame her parents for teaching her nothing about money, but now calls that a cop-out, given the internet, books, and classes. She is reading and building skills to find more work, but said it "feels so late in the game."

Their combined gross monthly income was $11,933. Blake said it isn't where he wants it to be, and relative to how they've lived for the past seven years it isn't a great income. Both estimated they had been living like a household earning around $250,000. Blake once earned about $225,000 plus bonus, and combined they had been at roughly that level. Income fell to about $140,000, they added two children, and they changed almost nothing. Freya said they "never talked about it" and "just avoided it," and that their friends all earned much more, so they "leaned into" that lifestyle even when she wasn't working.

Sethi said he could understand how hard it is to go from $250,000 to $140,000, and how long someone might avoid decisions. What he couldn't understand was why there had been no radical change now. Freya objected that she had cut subscriptions to around $250 (some are needed for work), researched and switched grocery stores, and let their babysitter go. Sethi described a point where people stop "tinkering" and get quiet enough to realize "there's nobody coming to save us." Freya first said she was there, then corrected herself: "I don't think I have, because I haven't changed anything."

"It means you are broke"

Freya read the fixed-cost figure, 102%. "It feels like a joke," she said, and then that they were living beyond their means. Sethi put it more bluntly: it means they are broke and spend more than they earn every month just to keep the lights on. No tinkering at the edges fixes that. Combined with zero savings, he said, it meant they were "weeks away from not being able to pay your rent."

In his commentary, Sethi called this one of the worst financial situations he had seen on the show: almost $90,000 of high-interest debt, which he considered nearly impossible to escape on its face, plus fixed costs above income and no savings. He said he wonders whether children in households like this will appear on his show thirty years later saying their parents never taught them about money and hid their debt, and that he wants to break those generational cycles. He added that he has no secret math formula. The value of the show, he said, is that people can stop spinning and see the real issues.

Asked to name those issues, Blake listed avoidance, lack of proactivity, operating from "a negative space" with a "fix it with more income" mentality, and not being as good a partner to Freya as he should be. He added that it has to be about "action and not words." Freya said she feels siloed, not in a partnership. She feels she has to do it alone, can't, and stops. She feels helpless, lost, and overwhelmed. She avoids pushing the conversations because they so often end in fights. "I feel like I need a partner."

Freya's upbringing and the habit of never saying no

Discretionary spending came to at least $1,200 a month by their estimate. It included eating out about three times a month and a lot of kids' spending: clothes for growing children, tennis lessons for one, dance for the other. Sethi asked whether children in a family with nearly $100,000 of credit card debt should be taking tennis lessons. Freya said "ours do and they probably shouldn't," and connected it to how she was raised.

She grew up in a "hardcore" Jehovah's Witness family, one of five children. She was taken out of school at ten and had no formal education until 17. She was not allowed lessons, fun, or vacations, and was always told money was scarce. She remembers winter coats bought on layaway. She now believes her family was actually middle class and thinks the religion, and a lot of money going to the church, explained the constant "we can't afford it." When she talked about careers, she was told to become a locksmith so she could preach during the day and work at night. She was on her own at 17, lived "hand-to-mouth" for a long time, and slept on a train when she first moved to New York. She got a diploma through homeschooling, got herself into a fashion school, and built a career from there. None of her siblings are religious anymore, and neither is her father. All but one sibling are in similar financial trouble.

She said growing up with that much deprivation and learning early that she had to be completely self-reliant turned into "I'm going to do whatever I need to do for me to feel good," which meant not saving and not denying herself things. In Blake she found "my soulmate" in not saying no to oneself. They clicked over a shared "embrace life while you can" outlook and a strong hustle mentality. Sethi's response was that hustle works until it doesn't. It works when fixed costs are low, or "when you're 25," as Freya added, but not with high fixed costs, $90,000 of debt, and two children. Freya said they were realizing that now.

In his commentary, Sethi said he felt for Freya and found it "quite illuminating" that someone kicked out of her home at 17 might be weeks from being kicked out again, this time as a mother. He said the ways we grow up often stay "inescapable unless we make huge changes."

Blake's upbringing, a hidden Roth IRA, and boarding school

Blake grew up in Eastern Tennessee, in the Bible Belt. "We don't talk about money. We're southern," and they didn't talk about emotions either. His father was a small-town doctor. There was no layaway, and there was an annual summer trip. He said he felt privileged and gave money little thought. When he recently told his father about coming on the show, his father said it "must be nice to be able to talk to someone about that." Blake wished he had asked more questions twenty years ago.

He also revealed that at one point he and Freya had to borrow "5K or whatever or 10K" from his parents because they were about to be evicted. His parents helped, which he called a band-aid he was grateful for, and then told him they too had struggled at times to make their mortgage, which he had never known. The one lesson he remembers from them was "Invest. Roth IRA."

That led to a surprise. Blake has a Roth IRA with about $18,000 that he had never told anyone about, because he didn't want to cash it out. He knew that everything else they had was already gone. Sethi noted that if it entered their current dynamic, it would simply be drained. Freya said she thought she would be angry but wasn't. She had once been talked into cashing out her own 401(k), so she understood, and she mostly felt relief that "there is something somewhere."

Then Freya said Blake was "being a little coy" about his upbringing: he went to boarding school, and his family's yearly vacations were weeks long in Europe. Sethi said that was a different caliber of wealth than "small-town doctor." In his commentary he called the two omissions secrets that change the story. He said he noticed only because he glanced at Freya's face ("the partner knows best"). He said he is not okay with guests hiding things when they've come for help, and that the omissions repeated Blake's pattern of staying superficial and vague.

Sethi then described Blake's arc as he saw it: a wealthy childhood with no money lessons, six figures in his thirties, spending it all, then suddenly facing $90,000 of debt and possible eviction, and assuming that more income would restore the life he grew up with. Blake called that "very, very accurate." He described himself as "very Peter Pan-esque," naively assuming his salary would keep rising and never imagining a worst case with no security blanket. He never missed a credit card payment in those years, which made putting things on cards more comfortable. He also named a lifelong problem with confrontation: "I'd rather just go with the bad idea and deal with it later."

Sethi told him that to succeed with money, or "frankly in order to not get evicted," he would have to confront the very thing he has avoided all his life: confrontation. Blake, emotional, said he had expected that, and that he has to do it for Freya and his children. He said he would rather his kids know about their problems than have them hidden, as his family hid theirs. The kids will eventually see the episode, and he said he would rather "strip down naked and tell the truth" so they or someone else can learn from his mistakes. Sethi called this the energy he hadn't seen all day and "a gift" to the children. In his commentary, he said Blake's acknowledgment was what gave him hope, because many people in bad situations spend their time justifying it.

Line by line: collections, adult children's phones, and "miscellaneous"

Rent is $3,480, 29% of take-home pay. Sethi said that isn't bad on its own but leaves no margin. Freya said they chose the place when she was earning more. She now earns about $2,200 a month gross, roughly half of before. Utilities are $450, insurance $488, and the car payment $636: a leased electric car, plus a second, fully paid-off car that runs on gas. When Blake sighed at the car question, Sethi joked that they should enjoy the car for the next twelve minutes.

Debt payments were listed at $290, but they admitted they had stopped paying the credit cards for the past couple of months, and the debt had just gone to collections. The reaction was to call a bankruptcy lawyer, be shocked at the cost, and wait while trying to "cobble the money together." Sethi called this the pattern in miniature: a very superficial engagement, reaching for the fastest surface-level exit because the problem feels bad, with no engagement with the numbers. "You cannot delegate your way out of this," he said. The hardest part is in the weeds, and it is the only way out.

Groceries were down to $1,200 from over $3,000. Clothing was $50, the phone bill $260, subscriptions $375. Freya had just removed her adult children from the phone plan, which she had paid for since they were ten, and also her former au pair's phone. Sethi was incredulous that parents in credit card debt pay for adult children's phones, with a tangent about young New Yorkers whose parents pay their rent. Freya said it came from guilt: her own parents gave her "negative," so paying for a phone felt like the bare minimum she could give. Sethi asked why she didn't feel guilty about nearly being evicted. He said that in her place he would be angry at himself, at his upbringing, at each other, at the dynamic, and he urged her to channel that anger "like a freaking magnifying glass till it lights this thing on fire." Freya said she is that focused in the rest of her life. With money, she is used to people taking from her, to not having, and to making it up somehow, "and it is not working anymore." Sethi listed the compounding decisions: Mexico, paying for adult children, not saying no, not holding meetings, not knowing grocery spending, not cutting expenses when income fell.

The remaining lines were childcare at $1,400 (the youngest is in preschool and there is no free pre-K where they live; it ends in August), kids' activities at $173, and miscellaneous at $1,320. When Sethi asked what else they spent money on, Freya mentioned books and art supplies. She sells some of her pieces. Pushed for "the ceiling, not the floor," Blake estimated about $300 a month across Ross, Michaels, books, and "machines that make things." Blake said the biggest surprise wasn't any number but "our inaction." Freya said it felt like it was happening to someone else, like there was a chasm between her and the numbers, and that she was annoyed, then "pissed," with herself.

Defining a Rich Life from where they are

Sethi said cutting $200 here and there would make no difference. They had to start from a blank page, defining a Rich Life based on their situation today, not early retirement. Blake listed keeping the kids in some activities and family trips like camping. He mentioned the debt only when Sethi asked what role it played. Sethi pointed out the order, and Blake admitted it showed he was still avoiding it. Freya said she had expected him to say paying off debt first. Her Rich Life was paying down the debt, having savings for light-income months, and having a fulfilling career contributing more income. Mostly she wanted not to worry "every waking hour." Sethi said that anxiety fades by making a plan, and they had none. A decade of decisions got them here, and the change had to be big and fast. Both agreed.

Cutting fixed costs live

The usual CSP target is 60% for fixed costs, though Sethi said it would run higher for them because of debt payments. He had them take turns making bold cuts.

Blake went first with housing. He had raised moving before and Freya had worried that moving costs would cancel out a year of savings. Sethi called that concern "a way to put the brakes on any changes" and said a do-it-yourself move would be cheap compared with saving around $1,000 a month. Freya said she had been looking and could stay in the same school district. They conservatively estimated $800 in savings, which brought fixed costs from 102% to 94%. Freya offered going down to one car, saving about $484 plus insurance. They rounded to $500, bringing it to 89%, though Freya noted gas costs would rise. Childcare dropping to zero in August brought it to 75%, and Sethi paused to celebrate. Freya's phone was already down to $80. Moving Blake onto a family plan would make the total $120, bringing it to 73%.

Freya then offered to cut the kids' activities to zero. Sethi said he usually supports cutting kids' activities when a family is in debt, but there was something more obvious first: $1,320 in miscellaneous spending, which he said couples use as a loose, untracked buffer. A couple in this much debt has to be meticulous, down to not spending an extra $30 eating out because the kids are crying. Freya said the eating out is them, not the kids ("we're big snack packers"). She committed to no more eating out and to cooking for friends at home instead. Miscellaneous went to $200, books included, with Sethi recommending the public library. That brought fixed costs to 62%.

Groceries were the hardest negotiation. Freya offered $900, then $850. Sethi pushed back that a chef can do better, and said her approach was the same "how much can I get away with" energy she had described earlier. Blake asked whether the grocery budget included wine, which Sethi treated as the comic moment of the session. Freya said the grocery bill had also meant grass-fed beef. They now shop at WinCo. Freya compared the shift to going from a luxury hotel to "just a clean room," and they settled on $750 as a ceiling, not a target. She proposed seeing how long they could live off the pantry before shopping again. Sethi said three or four weeks of that could save thousands for the debt. Fixed costs reached 57%.

Freya then said she really didn't want to move, since they had moved many times and she personally had moved about 20 times. Restoring the rent put them back at 65%. She offered to raise her own income instead: from 10 hours a week to 20, adding roughly $1,000 a month to reach about $3,200, though she would need to find a new source of work. Sethi hard-coded income at $10,800, which he said was not exact but in the ballpark, and fixed costs landed at 60%. He proposed a decision rule: if Freya finds work generating a full $1,000 a month gross within four weeks, they stay. If not, they move. Both agreed.

Freya also asked Blake to plan meals with her so groceries weren't only her job. They agreed to build the menu together and put it on their Skylight digital calendar. Freya will do the shopping, and there will be no more unscheduled runs to the store.

Savings before debt, and Blake's "fire hose"

The revised plan left about $4,000 a month unallocated, which Blake could hardly believe. Asked what should come first, Freya first said debt, then changed to savings, because with the kids she couldn't face the risk of losing their home. Sethi agreed, while noting how unusual it was to say that to a couple with nearly six figures of credit card debt. He urged speed: live off the pantry, sell the car as soon as possible, recheck subscriptions, and treat even an extra $100 as savings. He said to "attack it with ferocity."

On the debt, he told them to call the card issuers, explain the hardship, and use the negotiation scripts from chapter one of his book. Blake's credit was already damaged by collections, which could complicate a move, while Freya's credit is good and they want to protect it. Sethi estimated they would need to put a couple of thousand dollars a month toward the debt and told them to use the debt payoff calculator on his website. In his commentary he explained that he deliberately did not set the exact debt payment. Like a take-and-bake pizza, the plan means more if they work it out themselves and see for themselves how long payoff takes and how extra payments shorten it.

Then Blake named what he called the real game changer. He currently runs his own company with a partner, with good and bad months. As an in-house creative director, he said, he would typically earn a $200,000 to $250,000 salary, plus a 401(k). He put his chances at 75–80% and his timeline at three to six months. Sethi was surprised and told him to send a text right then and lock it down. Both agreed it was the route to take.

In commentary, Sethi said that a jump like that doesn't happen for most people, but that the lesson for everyone was different. Many people's houses are "burning down and there's a fire hose right there" that they don't pick up. He estimated that fewer than 5% of people are solution-oriented, and said money is the area where people most often agonize over problems without trying solutions.

He warned that the plan would likely fail at the point when income rises. Normally he tells couples who earn more to spend a little more. For them, he said, it would be better to decide "we're not those people anymore" and put everything into debt and savings, even when that seems nonsensical.

Freya wanted to involve the kids. Their six-year-old has been asking for a bank account and keeps a notebook of his change. She suggested having the children help plan and shop for meals, showing them why the answer is sometimes no, and giving them a small savings account. They also talked about a sticker chart where the kids award gold stars when their parents don't spend. Sethi said telling the kids "we need to make a change and we need your help" would also bind the parents to their new identity: "So, how can you go back on it?"

As an example, Sethi put $2,500 a month into savings. Asked separately how much guilt-free spending they needed, both said $250 a month, which Sethi called an amazing answer, enough for one thing with the kids and one for the two of them. That still left roughly $1,500 more a month for debt and savings. "How did we not do this before?" Freya asked. Sethi said most people never zoom out to see the bird's-eye view, and doing so requires working through psychology, emotion, and relationship issues first.

Freya said having an explicit goal mattered, because when they had tried to save before, it felt pointless: "What for?" Blake thanked her for pushing them to come and, near tears, said he wanted to become the "future selves" he knows they can be. Freya said she came in "hopeless and helpless" and now felt they could do it. Blake said being siloed is "not a fun place to be," and that the idea of partnership felt "a kind of beautiful thing." In his closing commentary, Sethi said he had not expected it given how severe their situation was, but he felt very confident about this couple. Both had cut fixed costs aggressively and both had offered to earn more, which he called rare even on his show. They arrived siloed and left encouraging each other.

The follow-ups

In a first video from home, Blake said his biggest surprise was how plausible the plan felt once they had looked at everything from the top down. Freya said it was how accessible it felt going line by line: "There's a light at the end of the tunnel." Both called it doable, "not a cakewalk," and said it depends on it being a team effort rather than one person working while the other avoids. Freya said they're "getting there." Blake said he now sees the same behavioral patterns throughout his life, not only in money, and needs to make fundamental changes.

Their decisions at that point were to go down to one car within a month or two, to have Freya try to cut the grocery bill almost in half, and to rein in small miscellaneous purchases, the $20 and $30 things that creep in. Freya floated a jar where any impulse item must either be returned or matched with the same amount in the jar. They decided not to move for now, though they still look at Zillow "all the time." Freya had updated her portfolio, LinkedIn, and resume. Blake said he had started telling people out loud that he was aggressively pursuing opportunities, rather than quietly "putting out feelers."

In a second update, Blake reported winning many jobs recently, so income was coming in. Freya had a job interview the following week for a role that fit their schedule. She had gotten groceries down to about $817, not $750, but a number she had thought almost impossible. She had put $1,500 into a high-yield savings account and left it untouched. The electric car lease runs until October, after which they will be a one-car family. They had been practicing, and it was harder than expected. The last preschool payment had just been made.

Two items were still open. For the debt, they had read the relevant chapters, researched online, talked to a lawyer, and written a list of everyone to call. The calls were scheduled for "tomorrow morning, 8:00," and they asked viewers to "hold me to it." The weekly financial check-in, which had failed before the show, was still not happening regularly. They said scheduling had been hard but they were working on it.

Article published