Kristen (30) and Josh (36) married just last year, but their honeymoon phase is buried under $40,000 of debt and a sense of being “trapped.” Kristen is meticulous, tracking every dollar and carrying deep guilt around spending—even on herself. Josh, meanwhile, shrugs off the stress with a “we’ll figure it out” attitude, though his impulse purchases and nicotine habit don’t help.
With 82% of their income tied up in fixed costs, they’re left with almost nothing for fun, savings, or their dreams of a bigger space for pets and cars. Kristen is exhausted from budgeting every penny, while Josh wonders if more discipline is really the answer. Can Ramit help them break free from the cycle of guilt, fear, and deprivation—and finally learn how to enjoy life while paying off debt?
In this episode we uncover:
Why Kristen describes her daily life as feeling “trapped” by debt and second-guessing over small purchases
How Josh’s role as the “ignorant reassurer” undermines their partnership
The moment Kristen admits she feels like the “manager” of their household finances, while Josh feels like an “employee”
Why 82% of their income goes to fixed costs
How Josh’s nicotine habit consumes nearly all of their guilt-free spending
Kristen’s pride in maintaining her cars and what it reveals about her resourcefulness
The trade-offs Kristen faced leaving a toxic job for lower pay
How Josh’s childhood poverty and lessons in “patience” continue to shape his money mindset today
Kristen’s upbringing in a family of secrecy and mixed financial messages
The deep guilt Kristen feels about spending and the quiet fear Josh carries that he’ll “never get ahead”
How Ramit challenges them to imagine freedom beyond budgeting and debt payoff
Chapters:
(00:00:00) “I feel trapped by $50”
(00:19:44) Ramit breaks down their numbers
(00:36:45) “Zero interest… but still stressed”
(00:43:45) “We packed coolers instead of eating out”
(00:51:54) “When money gets hard, I just work harder”
(01:06:08) “I want a partner, not an employee”
(01:13:31) Turning side hustles into new income
(01:19:45) “What do we do with too much money?”
(01:28:44) Choosing how to design their Rich Life
(01:36:03) Where are they now? Kristen and Josh’s follow-ups
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Transcript
Download the full transcript PDF
[00:00:03] Kristen: I feel so trapped.
[00:00:04] Ramit: Can you tell me what trapped looks like in your daily life?
[00:00:07] Kristen: Having to second guess yourself if you spend this 30, 40, $50.
[00:00:11] Josh: With everything being so expensive, it doesn’t seem like could ever get ahead have that freedom.
[00:00:17] Kristen: I’m like, “Oh, I really like this.” And Josh would be like, “Get it. Just get it. It’s fine, babe. We have the money.” We get to this checkout and it’s like $50 over what I intended to spend. It feels like I’m a manager.
[00:00:26] Ramit: And if you’re a manager, then what is Josh?
[00:00:28] Kristen: An employee. I don’t want an employee.
[00:00:30] Ramit: What do you want?
[00:00:30] Kristen: A partner.
[00:00:31] Josh: My dad, I remember going to one of his houses and there was a dirt floor. I want to spend it all. There’s a difference in being happy. Yeah, be happy now, but also be happy in the future. It’s just hard to live like that. It’s impossible.
[Narration]
[00:00:48] Ramit: This episode is going to feel different because it is different. I know that most of the couples on this podcast often earn more than the median household income. And I love talking to them because there are very few places where you can hear high-earning couples speaking candidly about money.
[00:01:05] But I also want to show you people earning lower incomes because their stories are real, and I want you to hear what specific challenges they face. It is personally important for me to share as many diverse stories as I can on this show. Different situations, different ages, geographies, sexual orientations, and incomes.
[00:01:25] So today you’re going to hear from Kristen who applied because she didn’t see herself represented on the show, and I love that. She and her husband, Josh, earn about $65,000 combined, and she wanted to know what options are available to couples like them. At first, their story sounds familiar. One partner is stressing out about money, the other’s brushing it off and avoiding it.
[00:01:47] But when Josh opens up about his past, what he reveals really surprised me, and I think it will surprise you too. Before we dive in, let me open up Kristen and Josh’s conscious spending plan, which breaks down their net worth, income, and where they spend their money. You can download and create your own conscious spending plan at iwt.com/csp.
[00:02:08] Here’s the overview. Their assets, 19,500. Investments, 8,790. Savings 2,500. And debt, just over $40,000. Net worth is a negative $9,400. Combined annual income, $65,000 per year. Fixed costs are 82%, which is a big red flag. Investments at 5%, savings at 3%, and guilt-free spending at 10%.
[Interview]
[00:02:37] Ramit: In your application you wrote you are earning $65,000 a year. You have about $40,000 in debt. You’re doing everything right with debt payments, but you don’t feel that you are allowed to enjoy anything. And you used the word in your application, which really stood out to me, the word trapped.
[00:02:59] Kristen: Mm-hmm.
[00:03:00] Ramit: You feel trapped because you can’t spend freely, and you rarely go out to eat. Can you tell me what trapped looks like for you in your daily life?
[00:03:11] Kristen: Yeah. Just that heavy weight of like, “Okay.” It’s like switching money from one area to another mentally. If we go out to eat now, that means we’re going to have to cut the cost of something. Let’s say we have to buy less groceries or maybe put a little less in savings or pay a little bit off in debt.
[00:03:30] Ramit: Would you say the opposite of trapped is free?
[00:03:36] Kristen: Yeah.
[00:03:37] Ramit: Okay. And what would that look like if you were free with your money?
[00:03:41] Kristen: I think just not having to second guess yourself or second guess that you’re going to be okay and taken care of if you spend this 30, 40, $50, let’s say, one night to eat something, as an example.
[00:03:56] Ramit: Do you think that there’s a path for you to be free to not have to second guess $50?
[00:04:01] Kristen: I think so. I definitely think so.
[00:04:03] Ramit: Okay. Does Josh? Josh, do you define free the same way?
[00:04:07] Josh: Yes.
[00:04:08] Ramit: Okay. You ever talk about this, free, trapped, that kind of thing?
[00:04:12] Kristen: Yeah.
[00:04:13] Josh: Yeah.
[00:04:13] Ramit: What do you say?
[00:04:15] Kristen: Oh, I feel so trapped.
[00:04:17] Josh: Yeah.
[00:04:18] Ramit: So you talk about the problem.
[00:04:20] Kristen: Yeah.
[00:04:20] Ramit: It’s very common. Do you talk about, hmm, what’s the opposite of this problem? How do we get out of this problem? What’s the solution? Do you talk about any of That?
[00:04:29] Josh: We hint upon it.
[00:04:33] Ramit: What does that mean? Hint.
[00:04:34] Josh: Well, we can make more money. And then Kristen, you set up all these side hustles. You want that freedom. You want that freedom.
[00:04:42] Kristen: Yeah.
[00:04:42] Ramit: What about you, Josh?
[00:04:46] Josh: My job, it’s a great job, but with everything being so expensive and what I make it, it doesn’t seem like I could ever get ahead to have that freedom. And also, when I’m stressed, I use nicotine. And so that’s a problem I wish I could cut back because the more stress I get, the more money goes to that. When I look at the money going to that, it’s keeping me–
[00:05:29] Kristen: Stresses you out more.
[00:05:30] Josh: It is holding me back. And yeah, it does. It stresses me out more to see what I’m spending on on that side of it, just to feel normal almost.
[00:05:41] Ramit: How much do you spend per month on nicotine?
[00:05:45] Josh: $300.
[00:05:47] Ramit: 300 bucks. Okay. And what form of nicotine are you getting?
[00:05:52] Josh: Usually the pouches.
[00:05:54] Ramit: Okay. How often do you talk about money?
[00:05:58] Josh: I’ve never felt comfortable talking about money because I guess I’ve always had this part where– if I’m saving money, I don’t really want people to know about it.
[00:06:10] Ramit: Why?
[00:06:11] Josh: Because I don’t know why I get this feeling, but they’re using me or whatever.
[00:06:19] Ramit: Did you grow up poor?
[00:06:21] Josh: Yes.
[00:06:22] Ramit: Yeah. Okay. All right. So Josh, you don’t feel comfortable talking about money. Kristen, how often do you talk about money?
[00:06:29] Kristen: I think I bring it up more.
[00:06:31] Ramit: How often?
[00:06:32] Kristen: No, let’s round it up to once or twice a week.
[00:06:35] Ramit: Okay. And what’s the context of that? Give me an example where you would bring up money.
[00:06:39] Kristen: Just yesterday I texted Josh and I was like– I’m a little budgeter. And I was like, “Okay, so I figured out that after I pay off this credit card, I transfer this over there, and I’ll be paid off all my credit cards by like March.”
[00:06:54] Ramit: Oh.
[00:06:55] Kristen: That type of stuff usually.
[00:06:56] Ramit: I like that. And I could see the energy. It’s like you have a solution. It seems like you’re getting excited about it.
[00:07:02] Kristen: Absolutely.
[00:07:03] Ramit: Wow.
[00:07:04] Kristen: I’m very solution-oriented. If I see a problem and I can figure out a way to fix it, I need to fix it. If you had to describe me in a sentence, that’s it.
[00:07:15] Ramit: Wow. Josh, you agree?
[00:07:17] Josh: Yes.
[00:07:18] Ramit: Wow. Okay, cool. All right. Take me to a time in the last three, six months where you two were not on the same page about money. Can we actually go there? Let’s recreate that conversation.
[00:07:29] Kristen: Yes.
[00:07:30] Ramit: Okay. All right. Kristen has it in her mind. Kristen, set the scene. Where are we right now?
[00:07:36] Kristen: Okay. We were at grocery shopping. I’ll pass by stuff and I’m like, “Oh, I really like this.” And Josh would be like, “Let’s just get it.” So this time it was a pack of cookies and then maybe it was a different drink. Aldi Finds, they got a cute, little cat thing. Oh. And he’s like, “Oh, get it. Just get it. It’s fine, babe. We have the money.” And we get to this checkout and it’s like $50 over what I intended to spend.
[00:07:56] Ramit: Did you end up buying the over $50 cat thing?
[00:08:00] Kristen: I think I did and then I returned it.
[00:08:03] Ramit: Really?
[00:08:04] Kristen: Yeah.
[00:08:05] Ramit: Okay. So you got this cat thing and it puts you over the amount you were planning to spend by $50. How many days after that did you take it back?
[00:08:13] Kristen: I think it was two days after because I was lazy to go to the store.
[00:08:17] Ramit: And what did you feel when you drove it back and went into the store? What did you feel?
[00:08:22] Kristen: Relief. I was like, “I don’t need that.” I’ve gotten better at that. So yeah, I felt relieved because I was like, “I don’t need that.”
[00:08:31] Ramit: Would Josh have wanted to take it back?
[00:08:35] Kristen: Probably not.
[00:08:36] Ramit: Yeah. Josh, in that story, would you agree that the way Kristen shared it was pretty accurate?
[00:08:45] Josh: Yeah.
[00:08:46] Ramit: So she mentions like, “Oh, I like that.” Or, “That looks cool.” And you said, “Get it. Treat yourself. It’s fine.” What’s behind that? How did you know that you will “have enough?”
[00:08:58] Josh: It comes from her talking about like that guilt-free spending and telling myself that everything’s going to be fine. It’s there. If it makes you happy, get it.
[00:09:11] Ramit: Hmm. How well versed are you with your financial numbers in your household?
[00:09:16] Josh: Not very.
[00:09:17] Ramit: Okay. So you are reassuring her, it’s going to be fine, but you don’t really know much about the numbers.
[00:09:25] Josh: Yeah.
[00:09:25] Ramit: All right. Kristen, it sounds like you are the one tracking the numbers, paying attention to how much you have, even returning things when you went over while Josh is essentially saying, “It’s fine, we’ll figure it out.” Is that a fair characterization?
[00:09:44] Kristen: I think so.
[00:09:45] Ramit: Okay. Josh?
[00:09:46] Josh: Yes.
[00:09:47] Ramit: Okay. Can I just zoom out and say, what do you think about this dynamic? What do you notice about this dynamic?
[00:09:54] Kristen: It doesn’t feel equal almost.
[00:09:57] Ramit: Okay. Why?
[00:09:59] Kristen: Because it feels like I’m a manager. I don’t want to manage.
[00:10:05] Ramit: Okay. And if you’re a manager, then what is Josh?
[00:10:08] Kristen: I guess, an employee. I don’t want an employee.
[00:10:11] Ramit: Okay. What do you want?
[00:10:13] Kristen: A partner.
[00:10:14] Ramit: Okay, Josh, what do you think about this dynamic?
[00:10:20] Josh: It’s just hard to live like that. It’s impossible.
[00:10:25] Ramit: Why?
[00:10:26] Josh: Because you don’t have that equality to take some of the responsibility.
[00:10:36] Ramit: Who’s you? You said you don’t have that equality. Who’s you?
[00:10:40] Josh: Me and Kristen and the relationship.
[00:10:43] Ramit: She’s managing the numbers, sounds like. She’s keeping track of how much you both can afford. You two, have you combined money or no?
[00:10:52] Kristen: Not yet.
[00:10:53] Ramit: Oh. How long you been together?
[00:10:57] Kristen: Together for a couple years. We got married in February.
[00:11:02] Ramit: Congratulations. And you haven’t yet combined your finances. Okay. I understand. Josh, do you feel included in the financial planning?
[00:11:11] Josh: No. And I know a part of that with me is I just keep track of mine. I know what I have. I don’t look at the big picture.
[00:11:21] Ramit: Do you want be included?
[00:11:24] Josh: Yes.
[00:11:26] Ramit: You do?
[00:11:27] Josh: Yes.
[00:11:28] Ramit: Mm, Kristen, do you believe that?
[00:11:31] Kristen: I want him included. I think there were times in the past where it’s just like, “Babe, it’s going to be fine. Just don’t stress.” That’s the line.
[00:11:39] Ramit: He says that to you.
[00:11:40] Kristen: Yeah. Yeah.
[00:11:41] Ramit: Okay. Hold on, hold on. We got to stay on this for a second. So he says, “Don’t worry, babe. It’s going to be fine.” And then how do you feel when you hear that?
[00:11:48] Kristen: It’s like a shut-down feeling, like, “Okay, I’ll just go budget over here.”
[00:11:54] Ramit: Yeah. Josh, what do you do for a living?
[00:11:58] Josh: I work with the county government.
[00:12:01] Ramit: Okay. Are you handy, like hammer type of stuff?
[00:12:06] Josh: Yeah.
[00:12:07] Ramit: Okay. I’m not, at all. I don’t even own a hammer. I don’t know what type of screwdrivers. I don’t care. I don’t know. I’m not good at it. Let’s say you have a broken deck or something. You can tell how limited my knowledge is. I even know– you got a broken two by four something.
[00:12:26] So you tell me, “Ramit, I’m worried. This deck is not load bearing. We got a cat. The cat’s going to collapse and die, whatever.” And I go– a guy who doesn’t own a hammer or a screwdriver or anything, I go, “Josh, it’s going to be fine. Fine.” How do you feel?
[00:12:45] Josh: Yeah, that’s confusing. Confusing by that because I know the truth.
[00:12:51] Ramit: Which is?
[00:12:52] Josh: That it’s something that needs to be fixed.
[00:12:55] Ramit: Yeah, it’s bad. It’s a real problem. And then how does it feel to have a guy like me or a person like me, let’s say, telling you who actually is handy, “Ah, it going to be fine, Josh? Don’t worry about it.”
[00:13:08] Josh: Yeah. It doesn’t fit the situation.
[00:13:12] Ramit: Exactly, exactly. It just doesn’t make sense. So it’s confusing and it’s a little aggravating. It’s like, I got the doll. Don’t worry. We’re going to get it all for everybody. Okay, cool. All right. Josh, you work for the county government. Kristen, what do you do for a living?
[00:13:32] Kristen: I work at a med bank, so we help get people medication for low to no cost. I also started a nonprofit when I moved down here.
[00:13:41] Ramit: Ooh, what’s the topic?
[00:13:42] Kristen: Trap, neuter, and return stray and feral cats.
[00:13:45] Ramit: Cool. Okay, cool. All right.
[00:13:47] Kristen: I just started getting paid for that, which is awesome. I started when I moved down here for school. And we got the whole community involved, which has been huge.
[00:13:56] Ramit: Hold on, hold on, hold on. Do we want to give a shout out for this organization? Maybe some people would like to take a– go ahead.
[00:14:00] Kristen: Yeah. It’s called All Saints Cat TNR, and we’re located in Southern Georgia. We trap, neuter, and return stray and feral cats to the community. We cover the cost of surgery and provide people with anything that they need, so it keeps their colonies from reproducing, and you have less deaths and less cats.
[00:14:17] Ramit: Where can people go if they want to contribute?
[00:14:20] Kristen: Yeah, they can go to allsaintscattnr.org.
[00:14:24] Ramit: Great. Okay. Now Kristen, I understand that you recently left your job and your pay dropped. Can you tell me how much did your pay drop?
[00:14:33] Kristen: Okay, so I used to make gross 2,800. I probably make gross now about 2,000, but it’s supplemented now because I did start a cat sitting business.
[00:14:45] Ramit: Okay, got it. How did the change in your profession affect your household finances?
[00:14:52] Kristen: At first it was terrifying because it was just like our debt is going to go up. How are we going to afford this? But oddly enough, that’s what empowered me to make a positive change and to really grind down on paying off my debt properly.
[00:15:07] Ramit: Why’d you leave the other job that was paying you more?
[00:15:11] Kristen: There was just a lot of mismanagement. I was driving around, and they weren’t paying me for mileage for my car, which was a big thing because I love my cars. And it wasn’t a good environment. I didn’t feel respected in it, and I took a leap of faith. And after that is when the nonprofit started paying me a bit and when things kind of started to get better, even though I was making a little bit less, I figured out how to budget properly and cut things I really didn’t care about.
[00:15:36] Ramit: Cool.
[Narration]
[00:15:37] Ramit: You might have noticed Josh telling Kristen, “It’s fine. Just get it.” Even though he doesn’t actually know the numbers. This is what I like to call the ignorant reassurer. And 100% of the time it is a man being the ignorant reassurer. Ignorant because they don’t know the numbers, and reassurer because they’re trying to say, it’s going to be fine. It’s going to be fine. They’re trying to calm their partners emotions.
[00:15:59] Men have this invisible script that their job is to be a provider, and one of the ways that they provide is to be the “calming force” in a relationship. Ignorant reassurers will say things like, “It’s going to be fine,” even though they are literally ignorant or unaware of their finances.
[00:16:17] But with Josh, I sense something different. He’s open. He’s pretty self-aware. He’s said something offhand about money just a couple of minutes ago that really stayed with me. Did you catch it? He said, “I could never get ahead to freedom.” That struck me. It got me thinking. When you think about their income, $65,000 combined, you will understand why.
[00:16:38] This feeling of I can never get ahead can be crushing. Just imagine swimming and then the waves are coming over you and you finally get to take a breath, and then another wave comes and it’s over and over, and all you can see for the rest of your life is being stuck swimming against the waves.
[00:16:56] People in this position have phrases to describe it. One step forward, two steps back. They will try valiantly to save 50 bucks or 100 bucks, and then their car breaks down. Two steps back. If you’ve ever felt this way, like you are working so hard, but something always seems to come up, I want you to take the first step. Get clear on where your money is actually going.
[00:17:17] And trust me, most people think they know, but they don’t. And that is why they end up arbitrarily cutting back on things they love, feeling guilty every time they spend a dollar, but not actually effectively changing where their money’s going.
[00:17:32] In addition to the conscious spending plan, I created a free spending audit guide to help you. It’s a brand new resource, and in just a few minutes, you will see exactly where your money’s going. You’ll be able to cut out all the stuff you don’t care about, and take control of your spending. You can get this for free at iwt.com/spendingaudit. In just a second, we’re going to dig into their numbers. With a household income of $65,000 and 40k of debt, what does their conscious spending plan look like? Let’s find out.
[Interview]
[00:18:02] Ramit: All right. Let’s take a look at the numbers. What was it like creating the conscious spending plan together?
[00:18:09] Josh: I think it was fun. I know we have stuff to figure out, but it was good to get in there and really see and work together
[00:18:19] Ramit: Great. How long did it take you approximately to do the CSP?
[00:18:24] Kristen: Half an hour, I think.
[00:18:25] Josh: Half hour.
[00:18:26] Ramit: Great.
[00:18:26] Kristen: Yeah. We didn’t argue, which was great.
[00:18:28] Ramit: Great. I love hearing that. I love that you did It together. That’s the whole point.
[00:18:33] Kristen: Yeah. It felt very like, okay, here’s the structure instead of just these numbers and your head of like, “Okay, yeah, we think it’s that, and maybe it’s that.” But seeing it written down, it was like, okay. Oh, okay. And for me, I was like, “Oh, this is not really as bad as I thought it was.” It could be better, but okay, it’s not like we’re going to die, starve, lose our house, everything terrible. Or lose our rent. It felt empowering.
[00:18:59] Ramit: There is power in putting down the reality of the situation into a structured format, and there’s power in shining a light on it. Even if there’s big amounts of debt or not enough income or whatever, there’s power in just confronting it and saying like, “Okay, this is reality. Now let’s create a plan.” That’s what the CSP is all about. All right, let’s take a look. Okay. I’m going to ask Kristen to read this box. Read the word in bold, and then the number in full next to it, please.
[00:19:30] Kristen: So assets are 19,500. Investments, 8,790. Savings, 2,500. Debt, 40,200, and the total net worth being negative 9,410.
[00:19:48] Ramit: Okay. What do you think of those numbers?
[00:19:50] Kristen: I don’t like that it’s negative, but it’s a more manageable negative than I thought it would be.
[00:19:56] Ramit: What did you think it would be?
[00:19:58] Kristen: Negative 30,000.
[00:20:00] Ramit: Okay. Josh, what about you? What do you think about those numbers?
[00:20:03] Josh: Yeah. I think we’re in a better spot than I think we both thought we were.
[00:20:10] Ramit: Okay, okay. All right. Let’s look at the rest of the numbers here. Josh, I’m going to ask you to read off the combined gross monthly income number. What’s that number?
[00:20:22] Josh: Okay, the combined current monthly gross. We make 5,470.
[00:20:27] Ramit: Right. $5,470 a month combined gross, which means that together, the two of you make $65,640 per year. Who knew that number?
[00:20:41] Kristen: Nope.
[00:20:42] Ramit: Neither hand is going up. Okay. Neither of you knew that number. Okay. This is quite common. Very common. About 50% of the people I speak to do not know how much their household income is. And let’s remember that I have a very self-selected audience. In order to talk to me, you need to be a bit of a freak.
[00:21:01] You fill out an application, you go through all kinds of screening, and even still– so what that really tells us is that well over 50% of everyday people do not know their combined household income. Now, if you don’t know your combined income, how much your household makes, what do you think it tells you about your relationship with money.
[00:21:26] Kristen: Just shooting in the dark, really, and like, oh, that– you go off a feeling, like, “Oh, that feels like it’s too much. That feels like it’s too little.”
[00:21:35] Ramit: Right. Good. Josh, what about you?
[00:21:38] Josh: It’s just impossible to make a plan without real numbers.
[00:21:45] Ramit: I love talking about feelings, especially because as a young, Indian man, I was not really equipped to talk about my own feelings. If you had asked me, how do you feel about X, my answer would always be, I think blah, blah, blah. I didn’t have any internal access to how I felt.
[00:22:01] The only feeling I would say is good. How do you feel? Good. And I’ve since learned through the help of therapy and talking to my wife and just paying a lot of attention, is, oh, there are actually a lot of other feelings in the world besides anger and good. But it’s interesting that I believe in accessing more feelings, but I also think sometimes we need to feel a little bit less and we need to actually talk about numbers a little bit more.
[00:22:32] When it comes to knowing your household income, I’m not really interested in how people feel about it. I want a number. When I ask somebody how much house or car or even mattress can you afford? I certainly don’t want an answer that says, well, my back is the most important thing. I don’t care about your back. I’m sure it’s great. We need to fix your back.
[00:22:52] I’m asking the question about affordability. Your answer better have a number in it. So that’s why the CSP is so helpful. It’s getting us to look at the numbers and actually set aside our important, but nonetheless not relevant at certain times feelings. Our feelings are important, but sometimes they lead us astray. We need to put them aside in certain cases. And that’s what you’ve done. Okay, so you make $65,640 combined per year gross. How do you both feel about that income?
[00:23:24] Josh: It doesn’t feel good.
[00:23:25] Kristen: I feel better about it though.
[00:23:27] Ramit: Okay, you feel better because you thought it was 50, so now you’re making 65. Okay. And then Josh says?
[00:23:34] Josh: Yeah, it seems low.
[00:23:36] Ramit: What would be high?
[00:23:38] Josh: 70 to 80,000.
[00:23:40] Ramit: Okay. If you made 70k, what do you think would change?
[00:23:44] Josh: I want to say I’d save more. That would be the goal.
[00:23:53] Ramit: That’s like a student who doesn’t study. They’re like, “If I just had more time, then I would totally transform my life, and I would study all the time.” And then everyone in the room is looking at each other like, none of us believe this. Do you believe that you would save more magically if you made $70,000?
[00:24:15] Josh: Yeah.
[00:24:16] Ramit: Okay.
[00:24:17] Josh: Because it’d be more available. I could save now too. The discipline may not be there, but the action is. I just don’t really have it like I used to.
[00:24:34] Ramit: Okay. Let’s keep going down the numbers and we’ll see. So we have fixed costs. Kristen, what’s that number for fixed costs?
[00:24:42] Kristen: Fixed cost is 82%.
[00:24:45] Ramit: All right. 82%. That’s pretty high. Usually, we like to see that number 50 to 60%. Okay. We’re going to keep going and we’ll come back. Investments, 5%. Savings, 3%. And then guilt-free spending at 10% or $462 per month. Would you say these numbers are pretty accurate?
[00:25:08] Kristen: 85% guilt-free spending. That can fluctuate. It’s hard to do that.
[00:25:17] Ramit: You think it’s higher or lower?
[00:25:19] Kristen: I think it’s lower.
[00:25:20] Ramit: Lower?
[00:25:21] Kristen: Yeah.
[00:25:22] Ramit: Okay.
[00:25:23] Kristen: Because really, I get excited going to the grocery store and finding something really delicious. I can’t count that as guilt-free spending.
[00:25:33] Ramit: Okay. Do you eat out?
[00:25:36] Kristen: Not really. I’m a vegetarian, so living in the South, yeah, just–
[00:25:43] Ramit: And what about you, Josh? What do you spend money– you mentioned nicotine. Is that included in here?
[00:25:50] Josh: Yeah, we included that.
[00:25:51] Ramit: Where does that come out of? Hold on. Did I see a nicotine line item on fixed costs? No, I did not. Thank God. Where would that come out of?
[00:25:59] Josh: Yeah, I’m pretty sure we put in the guilt-free spending.
[00:26:03] Ramit: $314 a month. That’s pretty much what you said for nicotine, right?
[00:26:07] Josh: Yeah.
[00:26:09] Ramit: Okay. So you guys are spending essentially 100% of your guilt-free spending on nicotine. Nothing else?
[00:26:19] Kristen: No. I know it sounds crazy, but yeah.
[00:26:22] Ramit: No, I believe you, because it sounds like, Kristen, you’re quite on top of your numbers. I’m just trying to account for things that sometimes the human mind forgets, like a once-a-year trip or car repair. Is there anything else that might come to mind for you? One-time expenses.
[00:26:41] Josh: Not recently because we really stopped eating out.
[00:26:45] Ramit: What about the vet?
[00:26:47] Kristen: I will trifactor that into the pet care costs. Yeah. Or have an emergency savings for that. Yeah.
[00:26:54] Ramit: These are all great answers. I think your numbers are probably pretty accurate. Like you said, 85% accurate. Fantastic. Let’s talk about what the numbers tell us. So we got fixed costs at 82%. That’s high.
[00:27:09] If I see somebody who has 82% fixed costs, I go, “This couple is stressed out about money. This couple is perhaps fighting about money, or there’s some peculiar behaviors like one person ignoring it, another person stressing, that kind of thing.” And that’s what we see right here. Let’s take a look at each item. Your rent or mortgage is $1,020, which when combined with utilities is about 22 or 23%. Not bad.
[00:27:36] Kristen: Low cost of living area.
[00:27:37] Ramit: Yeah, exactly. Insurance is 463. Okay. Car payment is 515. How many cars do you have?
[00:27:46] Kristen: Three.
[00:27:48] Ramit: Hold on, let me make sure I’m not counting wrong. I see me, and there’s two people with three cars. Explain that to me please.
[00:27:56] Kristen: Okay. Let the record show, I am still driving my first car that I ever bought paid off, owned.
[00:28:02] Ramit: What was it?
[00:28:04] Kristen: It’s a 2008 Volkswagen, GTI.
[00:28:07] Ramit: Okay. I’m proud of you. That’s a horrible car, but
[00:28:11] Kristen: No, it’s not old.
[00:28:14] Ramit: Come on. How old are you, Kristen? You’re 30, right?
[00:28:16] Kristen: I’m 30 years old. Yes. I will tell you, people don’t maintain their cars. People don’t maintain their cars properly. And if you put in the money, you will have a car that lasts you forever, I promise you.
[00:28:28] Ramit: That’s actually a pretty good answer.
[00:28:30] Kristen: So do basic maintenance stuff or basic diagnostic stuff on the cars to the point where I take pride in fixing things that are broken. That is such a thing that I really pride myself on. I’m not going to go and junk something because like, oh, your rotor’s out, or, oh, your valve cover gasket is out.
[00:28:50] No, I can fix it. I can get it aftermarket. And I’ll take it somewhere if I can’t. And the car has been great to me. I paid it off in four years by myself. Nobody helped me. And yeah, I will keep it running forever because to me it’s worth it. That is something– yeah.
[00:29:08] Ramit: One of the greatest moments that ever happened on this show. That was amazing. Everybody learned from Kristen. That was incredible. It actually tells me a lot about who you are in terms of not just a car, but how you approach problems. You earlier mentioned you are solution oriented. I can see that with the car. Okay, well done. All right. So you have this car. It’s paid off. 2008 car. You treat it right. And then is there another car?
[00:29:33] Kristen: Yes. So for years I have been looking for my exact model car, but a 1987 or between the ’80, so an older vehicle. And I finally found. I’ve been looking. The only ones that they had were $4,000, not running, needs a new transmission, needs a new engine. I was like, “I didn’t want the [Bleep].” I didn’t want to deal with that.
[00:29:50] Ramit: What kind of car are we talking about?
[00:29:52] Kristen: Still Volkswagen but ’80s Volkswagen.
[00:29:55] Ramit: What? Like what? What’s the model?
[00:29:56] Kristen: It’s still a GTI, but it’s a classic Volkswagen, so it’s a classic car. Go look up a 1987 Volkswagen GTI.
[00:30:04] Ramit: I’m going to do it. Hold on. 1987.
[00:30:06] Kristen: It’s beautiful. It’s in Montana Green.
[00:30:09] Ramit: Oh God, I remember these cars. Okay.
[00:30:12] Kristen: So I’ve been looking for one forever, and all the ones were just like– people treat these cars like garbage because they were so cheap to find. They’re all rusted out. We found one. Two and a half hours, it ran. It’s great. It’s stick shift, and that’s the one I bought, and we are working on restoring it together. I’m learning manual on it. Yeah, so we’ve been like doing slow work on it, and it’s like our little fun project bonding thing.
[00:30:40] Ramit: How much that car cost?
[00:30:42] Kristen: 4,000.
[00:30:44] Ramit: 4,000. Okay. I learned how to drive manual on a VW. That’s why I [Bleep] hate those cars. All right. So you have two car. And then Josh, you have a car?
[00:30:55] Josh: Yeah, I have a ’07 Toyota Avalon.
[00:30:58] Ramit: Cool. Okay. All right. So you have three cars. I can understand. One of them is like a labor of love hobby type of thing. You have older cars that are well maintained, and sounds like you’re not spending too much on those cars.
[00:31:13] Kristen: No, the thing that I had spent on my cars was when I moved down here, people saw the car and they were like, “Oh.” They were just like very dumbfounded that I was a woman that knew about cars and that cost me in repairs because of people being stupid.
[00:30:28] Ramit: They ripped you off?
[00:31:30] Kristen: Oh yeah, they cut off my wheel and my bearing because they couldn’t get the lug nut off. Okay, too far. I’ll go into this forever.
[00:31:39] Ramit: I feel like this is my future, not because I’m a woman, but because I’m a rich guy who doesn’t know anything about home repair. So one day when, if and when we buy a house, I’m going to have, I don’t know, some door off the hinges or something, and the guy’s going to come by and he’s going to be like, “We need to repair your water heater.”
[00:32:00] I’ll be like, “Sounds good to me. How much?” He’ll be like, “$18,000.” I’m like, “Here’s the money. Just fix it.” I am totally going to get ripped off, and I don’t know what to do about it. But hearing from you, it doesn’t make me feel good. It actually makes me feel worse. This sucks. I feel inspired by you, but I’m also not going to do what you did. That’s cool. All right.
[00:32:20] Kristen: That’s totally fair.
[00:32:21] Ramit: Let’s keep moving.
[Narration]
[00:32:22] Ramit: Wow. I’m really impressed with Kristen’s mindset around her car. The word that I would use to describe her is resourceful. Sometimes my wife and I talk about people who have the dog in them. Basically, it means they won’t give up. They are resourceful. They are creative. You can count on them to figure something out.
[00:32:40] Kristen definitely has the dog in her, that resourcefulness, plus her long-term focus on fixing the car and maintaining and holding onto it for a long time. It tells me that she has a point of view on life, and I love somebody that has a point of view. It is extremely rare, and even though they have a tough financial reality, I’m seeing a lot of positive signs in the way that they approach life.
[Interview]
[00:33:06] Ramit: Okay. So you have debt payments of $800 a month.
[00:33:10] Kristen: Mm-hmm.
[00:33:11] Ramit: And that debt is $40,200. What’s that debt?
[00:33:14] Kristen: All right. It’s pretty much all of my debt. Well, let’s start. So my student loans are from Canada. I did the conversion. They are about $16,000 American. But get this, no interest. Zero. Zero interest.
[00:33:29] Ramit: Countries that actually treat their students right instead of freaking monetizing them. 16k. What else?
[00:33:34] Kristen: And then I have a line of credit or credit line, because when I moved down here, being a Canadian in the US going to school, you’re not allowed to work at all.
[00:33:43] Ramit: Okay. How much?
[00:33:45] Kristen: 17,000. That only has 8% interest.
[00:33:49] Ramit: Okay. What else?
[00:33:50] Kristen: Then I have a Visa that’s at 15%, and that is 5,500.
[00:33:59] Ramit: Mm-hmm.
[00:34:01] Kristen: And then I have one balance transfer that’s 1,400, but that’ll be paid off by October. That should be everything.
[00:34:08] Ramit: All right. Let’s take a look at the rest of the numbers here under fixed costs. We went through your debt. You’re paying 800 a month. Sounds like you have eyes on paying off. That $1,400 is going to be paid off in a few months. The rest of it, do you know?
[00:34:21] Kristen: So the visa will be paid off in April. The student loans, if I don’t increase the price or increase the amount on it, it would be seven years. But I’m going to readjust that based off of when I pay off that $5,500 Visa. So I haven’t– yeah.
[00:34:39] Ramit: You have a plan. All right. Groceries are 400 bucks a month. That’s pretty low.
[00:34:44] Kristen: Yeah.
[00:34:45] Ramit: Great.
[00:34:45] Kristen: It used to be very bad. We used to be bad at that.
[00:34:48] Ramit: Pets at 200.
[00:34:50] Kristen: Mm-hmm.
[00:34:51] Ramit: Phone at 40. How you doing that?
[00:34:54] Kristen: Mint Mobile.
[00:34:55] Ramit: Oh [Bleep]. Hold on. Give them a plug. They used to be a sponsor of ours. They’re great.
[00:35:00] Kristen: Mint Mobile is awesome. That’s fantastic. We both get 10 gigs a month, but if you pay the full year, you get a discount too. So we end up paying like 240 one time a year. Amazing.
[00:35:10] Ramit: I like this. I don’t care if they’re a sponsor or not. I think sometimes there are ways to save quite a bit of money, and you’re saving a lot using this. Now, of course, there’s a bit of a limitation, but okay. You can work around that. Great. I think that sometimes we just accept certain things in our life have to be that expensive. Oh, a phone to cost 100 or 120 per month, etc. No, no. You can actually save a lot, and you can redirect that money to high interest debt, savings, etc. All right. Your pets are 200, phone is 40, and subscriptions are eight. What’s the eight?
[00:35:49] Kristen: I am on a Spotify, and I think we have the Apple if you need to use some gigabyte storage or something.
[00:35:58] Ramit: All right. Investments are at 5%, which is $210 a month. Okay. Are you doing any pre-tax, 401(k), or anything like that?
[00:36:08] Josh: I have it through work. I thought 6% was going in, because there’s two different ones, but it’s only 3%. But I plan to up that.
[00:36:20] Ramit: Cool. All right. That’s good to know. Savings are at 3%. You have 25 bucks a month for pets. You have a long-term emergency fund for 100 bucks a month. And then unexpected car costs for 25. Good structure. I like how you’re planning ahead for things that can and will go wrong. Pets are going to have unexpected expenses. It’s going to happen. So are old cars. It’s going to happen. That’s great.
[00:36:42] In terms of your savings, you have 2,500, which is less than a month of fixed cost. That’s a problem. That’s a problem. And especially if one of you lost your job, we would be in a lot of trouble pretty quickly. You agree?
[00:36:59] Kristen: Absolutely.
[00:37:00] Ramit: All right. And then everything else, which is the guilt-free spending, that’s basically Josh’s nicotine expenses. 314 bucks a month, plus there’s 100 or so extra, but 150 bucks extra that’s just floating around.
[00:37:14] Kristen: Yeah.
[00:37:14] Ramit: Which could be reallocated.
[00:37:15] Kristen: Yeah.
[00:37:16] Ramit: Okay. What do you think about these numbers? How would you assess these numbers? Josh?
[00:37:22] Josh: I’m not sure.
[00:37:24] Ramit: Kristen?
[00:37:26] Kristen: I think they’re just needs. We’re focused on paying off higher interest debt right now. That’s what I see. I know that’s the motivation. But I think maybe we just need to make a bit more income.
[00:37:38] Ramit: Okay.
[00:37:39] Kristen: Because I think a lot of the things that we’re doing– we’re not frivolously spending on things really. I think it’s just a matter of maybe making a little bit more and trying to save more, whether it be 20 bucks a month into a high interest savings account or whatnot.
[00:37:57] Ramit: Okay. Kristen, you mentioned that your student loans are not a top priority because they are 0% interest. What is your top financial priority?
[00:38:08] Kristen: Right now, paying off the 1400 and the 5,500–
[00:38:13] Ramit: Debt?
[00:38:13] Kristen: –credit cards. Debt, yes. Those credit cards. Once those are all cleared, not get those high built up anymore. Build a more solid emergency fund and just a fund for stuff, just in case that happens. And then throw whatever extra I get into the line of credit until that’s paid off.
[00:38:34] Because I feel like with student loans, I can pay the minimum. I’m so lucky that I don’t have any interest on that, that Canada is just like, “Here, pay it however.” So that I can really focus on the things that are costing me money.
[00:38:46] Ramit: What about the big picture? So what you just told me is my top priority is debt. In this order, I hear you loud and clear. What is your financial priority overall beyond the debt?
[00:39:02] Kristen: To have a solid savings and emergency fund, and then to be able to contribute to that healthily and then also be able to, “Hey, let’s go out to eat. I don’t want to cook,” type of thing.
[00:39:18] Ramit: More flexibility, safety, flexibility.
[00:39:20] Kristen: Mm-hmm. Yeah. And just to know like [Bleep], we need new brakes. It’s okay. We have X set aside.
[00:39:27] Ramit: Hmm. What about you, Josh? When you think about your vision of money?
[00:39:34] Josh: Setting up more of a rigid plan as far as saving and investing.
[00:39:42] Ramit: What does it get you?
[00:39:44] Josh: Peace of mind down the road, a safety net, putting more to retirement. And then saving in little ways now so we can have that freedom to eat nice dinners every now and then and not worry about it.
[00:40:01] Ramit: Hmm. Okay.
[Narration]
[00:40:03] Ramit: Did you notice Josh’s silence when I asked about the numbers? He doesn’t really have a clear answer or a clear vision. Kristen can quickly zoom out and start building a plan. Josh can’t. That contrast is exactly why I want to know how they grew up with money because it’s going to help me understand how they treat money differently today.
[Interview]
[00:40:25] Ramit: Can I learn a little bit about how you grew up with money? Josh, what do you remember your family saying about money when you were a kid?
[00:40:36] Josh: We grew up fairly poor. My mom and dad had a divorce, but we still took good trips. I don’t think it was really a visible thing to see my parents save, whether they did or not, because we did go on vacations, even though it was poor at times.
[00:41:01] And then my dad, he was poor. I remember going to one of his houses and there was a dirt floor. On my mom’s side, not being as that bad, seeing both sides of it.
[00:41:21] Ramit: How did you know you were poor?
[00:41:23] Josh: I really didn’t until I was out of it and I looked back. I don’t really know that I was when I was growing up.
[00:41:36] Ramit: When you look back and you realized, oh wow, not everybody grows up like that, what were some of the clues that told you, looking back, that you grew up poor or somewhat poor?
[00:41:50] Josh: That the TV was smaller. The things that were had were more scarce rather than when I was at my mom’s, being able to go on trips. Every so often we’d go to Disney, California, Los Angeles, that area.
[00:42:09] Ramit: Wow. Did you drive or did you fly when you went to California?
[00:42:12] Josh: Oh, this is all driving.
[00:42:15] Ramit: Right, right. Okay. What’d you eat while there?
[00:42:17] Josh: Just regular, nothing fancy.
[00:42:22] Ramit: Like fast food type stuff?
[00:42:24] Josh: No, we’d always pack a cooler, have most of the food with us.
[00:42:29] Ramit: Yes.
[00:42:30] Josh: We’d stop every now and then to restock the cooler, but we never really stopped anywhere to eat.
[00:42:39] Ramit: Would you say you have positive memories about your childhood, negative? How do you think about that?
[00:42:44] Josh: When I think about it, I don’t regret it, growing up like that and seeing that side of it. So I see it as a good thing more than really a struggle. Because I didn’t really know I was struggling. I knew it was hard. It was hard, but looking back on it, I’m happy for it.
[00:43:04] Ramit: Because?
[00:43:05] Josh: It humbled me a lot. And I think it gave me a viewpoint where I would never make fun of somebody.
[00:43:15] Ramit: For being poor.
[00:43:16] Josh: For having less or whatever.
[00:43:18] Ramit: Yeah. Right on.
[00:43:21] Josh: So it was a good experience.
[00:43:24] Ramit: Why do you think that you’re able to look back on your childhood, which had some financial struggles, and look back and say things like, I don’t regret it? It gave me the ability to empathize. It was overall. It humbled me. And I think some people look back and they are angry or resentful, or they can’t come to terms with their financial upbringing.
[00:43:50] Josh: I’m not sure because I don’t resent my parents. I never blamed them for, oh, you should have made better choices.
[00:43:59] Ramit: When you look back on your childhood, all those experiences, parents living somewhat different financial lives, smaller TV, dirt floor, football game, trips to Niagara Falls and Disney, all those things, what are the lessons that you take away as an adult?
[00:44:21] Josh: Probably don’t take things for granted. Be thankful. Be grateful. It taught me a lot of patience.
[00:44:30] Ramit: Why is that?
[00:44:33] Josh: Just because before the trips, it was always, well, we got to wait. There was that patience side of it. I was brought up on an allowance. I had to earn it. I appreciate that. So when we ever did get to make a trip, it was the whole family, and it was just a warm time to look back in the warm memories.
[00:45:04] Ramit: Cool. Thanks for taking me back with you. I appreciate that. Kristen, any surprises when you hear Josh share his memories of his childhood?
[00:45:13] Kristen: Not really. He always has a positive outlook, and I think that’s where the, everything’s going to be okay. I don’t think that comes from any bad place. That’s why I never really take it as him just brushing me off. It gets frustrating, but I know it’s just because he just has that outlook and he just always sees the positive side of everything.
[00:45:36] And that’s what I love. I love that. I love that. Because I can be like, “Oh, I hate everybody. F this.” So I appreciate that he can see the small joys in life, and that’s helped me see the small joys in life too. So it’s definitely not a surprise, but just hearing it, it’s nice to hear. I just like that. Because that’s what really matters. At the end of the day, it’s those small moments. It’s the small things that matter.
[00:46:01] Ramit: Yeah. I appreciate that.
[Narration]
[00:46:03] Ramit: Poor people have learned that they have to be patient in ways that you or I almost never have to think about. Wait 45 minutes for the bus. That’s what they can afford. Going to the doctor and just having to sit there waiting. Or a two hour commute. These are ways of needing to be patient in American society that most people cannot fathom.
[00:46:27] There is something called the poor tax. For example, if you can’t afford more than one pair of shoes and you wear them every single day, those shoes wear out quickly. Well, how are you going to pay for the new pair of shoes? You probably have to buy a cheaper pair that wears down more quickly, which means you have to replace it more often.
[00:46:45] Or if your car breaks down, what are you going to do? Dip into your savings account? You might not have one. So then you have to take out a payday loan, which is exorbitantly expensive because of interest. There are so many poor taxes in America. And poor taxes is not just about money. It’s also time.
[00:47:03] So when he said, “I learned to be patient,” that is a huge clue that they grew up poor. Driving around to get a good deal. This idea of time is like having to wear an invisible 25-pound weight vest everywhere you go. It just feels heavy. Life is just harder. You might not even realize what it’s like to have to waste time just to do your normal day-to-day things.
[Interview]
[00:47:30] Ramit: Kristen, let me ask you about your upbringing.
[00:47:32] Kristen: Yeah.
[00:47:33] Ramit: What do you remember your family saying about money when you were young?
[00:47:37] Kristen: Okay. So, my family’s Italian. You don’t talk about money to other people, anybody. My dad came across on a boat when he was four, but my mom was born here, so it’s very old-school in that way. But my mom was always like, “Oh, it’s fine. We have this debt. It’s okay. I’m going to go and buy this.”
[00:48:00] And my dad was not so much more conservative, but he would spend on things, but she wouldn’t like that. So it was a weird dynamic. But you never talked with people about money? God forbid, they’re divorced now, but it’s still there. My dad had his own travel agency business.
[00:48:20] My mom worked in the bank for 40 years, so just not like– I had a hard time understanding the finances because sometimes they’d go, or my mom specifically would go and buy lavish things, but then it’s like, oh, we can’t go and take out food. It’s too expensive. Or we can’t do this.
[00:48:38] So it was a hard, weird thing for me to understand. So it was always secrecy around money, but there was never really a struggle, so to speak. I think we just lived an average middle class life at that time.
[00:48:52] Ramit: So you’re saying you had money secrecy from your parents, mixed messages because your mom might buy something lavish, but then you can’t eat out. Or your dad might buy something that your mom doesn’t agree with. That there’s a bit of a–
[00:49:07] Kristen: It’s a disconnect. Yeah, it was weird because he’d go and my mom would be like, “He bought the expensive grape.” To get mad at that, like so?
[00:49:18] Ramit: When you say your mom bought something lavish, what’s an example of something lavish?
[00:49:21] Kristen: Oh goodness. Like a designer purse or designer shoes, something like that.
[00:49:27] Ramit: Okay. What part of the country did you grow up in?
[00:49:30] Kristen: Canada.
[00:49:31] Ramit: What part?
[00:49:31] Kristen: 25 years of my life. Toronto.
[00:49:33] Ramit: Okay. What lessons do you think you took away, looking back now?
[00:49:39] Kristen: Mm-hmm. I think just who I am as a person, I did the opposite. So I’m like, “Oh, they didn’t talk about money? I’m going to talk about money.” Just to be rebellious and to be like, yeah, I have no shame. Everyone played it safe, kept it to themselves, and I’m like– I don’t really wear designer clothes. I’d rather do other things with my money. So I think I saw what they did and I did the opposite.
[00:50:11] Ramit: Was it challenging? Because you mentioned your dad was a travel agent, had his own firm, your mom worked at a bank. So I guess I would describe them as professional. I don’t know what the term I would use. And then you decided to get into social work, which is quite different. Was that a point of contention?
[00:50:30] Kristen: Not really. I’ve always, and I think everybody always agrees I’m the black sheep of my whole family because everyone went off and became teachers, and I’m like, “You know what? I’m going to move to another country and do different things.”
[00:50:42] Ramit: And when say black sheep, I know it sounds like maybe you’re half joking, but what does that mean to you, black sheep of the family?
[00:50:50] Kristen: I’ve always done things differently, and if I want to do something, I’m going to do it. If I have a goal in my mind, I’m going to accomplish it. And a lot of people will give up when it gets hard, but I see things get hard and I’m like, “Let’s go full force.”
[00:51:08] Ramit: Cool. That’s cool.
[00:51:10] Kristen: Yeah.
[00:51:11] Ramit: When it comes to money, can you finish a sentence for me? When money gets hard, I– what?
[00:51:20] Kristen: I work harder. When I realized, I was like, “Okay, I want to really pay off this debt.” And I was talking with Josh, and I was like, “What could I do? Where is there a lack in the community?” And I was like, “Oh my goodness, if we want to go somewhere, we want to travel somewhere, who’s going to come and check in on our cats?”
[00:51:39] I don’t want to bring my cat to the vet and board them. So I was like, “Boom, let me come in and check on your cats.” I started a business off of that. So that’s my side thing that I’m like, “Hey, do you have outdoor cats that you feed? Do you have indoor cats that you don’t want to bring? I’ll come in. I’ll check on them.” So that’s what I’m problem-solving. So when money gets hard, I’ll try and find a solution to make it easy or whatever way that may be.
[00:52:07] Ramit: The lessons that you observed growing up about money, whether they be really positive ones, challenging ones, when you learned about yourself and how you react to adversity, how do those lessons from your childhood show up in your relationship today?
[00:52:29] Kristen: If we get into an argument, let’s say we’re arguing about like, “Oh hey, I’m upset that you didn’t fill up the cat litter, and it got low.” I want to be like, okay, what’s the solution? Do you want me to take it over, or do you want me to remind you at a certain point? I’m solution-oriented. So I think that shows up in our relationship. If there’s issues, I’m like, “Let’s solve them.”
[00:52:53] Ramit: Josh?
[00:52:54] Josh: I think my positivity when I tell her, “Just go ahead and get it. If it’ll make you happy, just be happy in the moment because you might not know when you could have that next moment would be.”
[00:53:14] Ramit: You know what I noticed about both of your answers, is that they can both be a positive thing. But taken too far, they can become negative.
[00:53:23] Josh: Mm-hmm.
[00:53:24] Ramit: It’s like a backwards bending curve. It can be really good until it’s bad. So for example, Kristen, I love being solution-oriented. That’s great. Sometimes people don’t want solutions. Sometimes they just want to be heard. Kristen’s nodding her head like, “Uh-oh, I’ve heard this before in my life.”
[00:53:40] Yes, because solution-oriented people, sometimes they approach everything with the solution hammer, and sometimes people just want to be heard. And actually sometimes, like we’re doing right now, we’re not even talking about solutions. Are we? We’re just trying to understand.
[00:53:55] And doesn’t it feel good to have somebody actually asking about you and like genuinely curious about who you are? That is really connected. Again, solutions can be helpful, but taken too far, they can become a bludgeon. And then with Josh, positivity is great. That’s a great thing. You can see the positivity in situations that are good, sometimes bad.
[00:54:17] But taken too far, it can be, “It’s all going to be fine. Go ahead, get the thing you want to make you feel good in the moment.” Ignoring the long-term ramifications and also marginalizing somebody’s concern. If Kristen is concerned about, are we going to have enough? And you go, “Ah, it’s going to be fine.” That can be taken too far.
[00:54:40] Josh: Mm-hmm.
[00:54:42] Ramit: See? So again, the things which are often the most positive qualities of us can also be taken too far. Okay. I got questions for you. Where do you think I’m going to go from here? Josh?
[00:54:57] Josh: I don’t know. Probably a psychological side of it about my discipline with saving.
[00:55:06] Ramit: Tell me.
[00:55:07] Josh: Because I realize I can see it. At times, I do get too much in the moment where I’m destroying my and our future, my Rich Life. There’s a difference in being happy. Yeah, be happy now, but also be happy in the future.
[00:55:31] Ramit: Very good.
[00:55:32] Josh: And I lose that discipline. And I feel it. And then it gets more into the finding ways to be happy now, and then it just snowballs.
[00:55:45] Ramit: Let me see if I can restate what you just said. I want to make sure I understand it. You’re saying, I have had periods in my life where I was “disciplined.” Notice my quotes around that word disciplined. Sometimes for some reason that I’m not aware of, I lose that discipline. And when I lose that discipline, I’m disappointed in myself, so I try to self-soothe or reward myself with some immediate purchase, and that actually makes me even less disciplined. Did I get that correct?
[00:56:17] Josh: Yeah.
[00:56:18] Ramit: Okay. And Kristen is nodding as well as she hears it. Kristen?
[00:56:21] Kristen: Yeah, I can see that. Yeah.
[00:56:23] Ramit: Okay. Can I ask a question, Josh? You might be right. You might be right. What if we took the concept of discipline out of this entire equation? There is no discipline. Discipline doesn’t exist. Might there be something else going on here?
[00:56:37] Josh: I don’t know. I think sometimes how I feel about my resources is if I wait, there’ll be destroyed anyway.
[00:56:45] Ramit: Yes. Keep going.
[00:56:48] Josh: Like if I don’t do it now, I can’t see that future having it. So it’s squandered.
[00:56:57] Ramit: Where do you think that comes from?
[00:56:59] Josh: My dad, he was an alcoholic for a long time. And then on my mom’s side the divorce set off in both of their lives, things financially that were destructive. Because after that, my mom had a bankruptcy. I didn’t know at the time what that was.
[00:57:26] I’ve went through a house fire when and lost quite a bit of things that I have attained, collections. So yeah, seeing money as it’s either I want to save it all, or I want to spend it all.
[00:57:44] Ramit: Yes. All or nothing.
[00:57:46] Josh: Yeah, it’s a weird dynamic.
[00:57:50] Ramit: You have just put down all the puzzle pieces on the table. From Kristen’s look on her face, I feel she already can see the puzzle coming together. She knows how the piece fit together. Josh, you know how they fit together. You probably just never thought about these pieces fitting together in this way. Look back on what you just told me. I’ll lay out what you told me. You tell me how they fit together.
[00:58:13] You told me mom and dad divorced when they were young. It caused financial destruction on both sides. Dad was an alcoholic. You didn’t mention that before. Mom went through a bankruptcy. You didn’t mention that before. House fire where you lost things that were important to you. You also mentioned that when you have money, sometimes you just want to spend it because it’s either save it all or spend it all.
[00:58:45] Josh: Yeah, yeah. It is. I don’t want to feel like I’m losing something, so I’ll either lose it or try to keep it through saving everything or spending it because I’m in control.
[Narration]
[00:59:06] Ramit: Listening to Josh, I keep thinking about how much of this comes down to the lottery of how we were born. If I had been born where he was born, to an alcoholic dad and a mom who went bankrupt, it’s honestly pretty likely I would feel the same way he does. Maybe I would even be addicted to nicotine too.
[00:59:25] There’s this famous question from political philosopher John Rawls, who asked, “How would you design a system if you didn’t know if you would end up rich or poor?” Think about that question. Would you design a robust safety net, or would it be winner take all, knowing that you might be born on the losing end of that? It is a profound political question for us to think about.
[00:59:49] I personally found that the more money I’ve made, the more empathetic I’ve become. In fact, the more liberal I’ve become with things like safety nets, because I realize how fragile it all is, how much of it is based purely on luck. If I wasn’t born to two educated parents who taught me how to read and how to build a work ethic, and if I wasn’t lucky enough to be born healthy, I would not be here on this show right now.
[01:00:13] The truth is America is a terrible place to be poor. We think of this country as a place where anyone can become anything, but actual statistics show that social mobility has gone down. I remember I once had a friend tell me, if I grew up in India, I would be just as successful as I am here.
[01:00:32] I thought to myself that is such a Western way of thinking, such an American way of thinking. And I don’t mean that as a compliment. I had just come back from India where I had met people who were maids, whose mothers were maids. And if they were lucky, their daughter might work in tech support. Yes, hard work matters of course, but culture and systems, these matter way more.
[01:01:00] That’s what I hear in Josh’s story. He’s not broken. He just didn’t have the model or the system to show him what stability looks like. So when he says, “I can never get ahead,” I’m not hearing a lack of discipline. I hear the reality of being born into a system that is stacked against you. I can guarantee nobody around him was talking about Roth IRAs like my dad was.
[01:01:22] And in my opinion, the humility that we should take away from all this is, had you been born where Josh was, you would probably be facing the same struggles too. He learned early on that money can disappear at any moment. So, like many other people who grew up poor, he spends it as quickly as he can.
[01:01:38] That also explains why even when the CSP is right in front of him, he struggles to see the big picture. And yet I have to tell you, I admire his outlook. He’s positive. He’s humble. He’s not looking down on anyone for having less. He’s proud of his work ethic. I have a lot of respect for that. And for someone coming on this podcast and sharing all of this with all of us, very courageous.
[01:02:03] Now we have work to do. His story helps us all understand his situation, but it’s also not an excuse. If he stays in the weeds and never learns to zoom out, Kristen is always going to be carrying the burden alone. The good news is that Josh now sees the puzzle pieces on the table. My job is to help them put them together and finally start creating a plan for their future.
[01:02:27] I think his story’s incredibly powerful. It’s not unique. There are a lot of people out there who are carrying the same weight, growing up without the right positive role models for financial stability, feeling like they will never get ahead. If you know someone like that, a friend, a coworker, anybody, send them this episode. It might just be the catalyst for them to see what is possible.
[Interview]
[01:02:48] Ramit: You mentioned that your dad was an alcoholic. I didn’t know that, and it came out of left field for me. Why did you mention that?
[01:02:57] Josh: Because I’ve seen how it affected him. I haven’t drank in a while, but I stopped altogether.
[01:03:10] Ramit: Okay. Kristen, I’m curious to check in with you. As we’re talking about these puzzle pieces of Josh, what do you notice?
[01:03:20] Kristen: I feel like it’s stuff that he has known and he knows, but I think having somebody who’s doesn’t really know anything about us, doesn’t know that every day, just asking you these questions that make you think about that and in a very non-judgmental– who expects to talk about money and bring up about your childhood. You know what I mean? It’s just not expected. It’s not like, oh, we’re going to therapy.
[01:03:46] But I’m also like, as a side note, just proud of him for talking about that because that’s not easy stuff to talk about. Especially related to family and addiction and bankruptcy, that’s stuff that is such a taboo that you can’t– you get this stigma around you who people think you are, people think you’re going to become.
[01:04:07] So I don’t know. It helps me understand him more too, more so in a non-judgmental way just to be more empathetic. So I’m proud of that, and yeah, I’m just happy to hear that. I’m happy to see him open up and just let that out.
[01:04:29] Ramit: That’s awesome. Josh, how do you take that?
[01:04:33] Josh: It feels good to, like she said, talk to somebody that is nonjudgmental way.
[01:04:39] Ramit: Yeah.
[01:04:40] Josh: It is like a therapeutic experience.
[01:04:44] Ramit: My observation from the way that you have described your history is you actually went through a lot of tough situations. Growing up, as you described it, poor. Growing up with divorced parents, even though they obviously loved you, you talk to them every day, that’s challenging no matter what for any kid.
[01:05:05] To have the bankruptcy and addiction in the family and then fire, that is challenging, no doubt. And it leaves effects. It leaves scars. It doesn’t mean anybody has to describe themselves as a victim. You choose how you want to describe yourself, but it causes things downstream.
[01:05:27] What I noticed from you is that you have this positive attitude. It’s unusually positive, I would say– unusually. And I think to myself, “Hmm, where did that come from?” And perhaps some of that is in a reaction to growing up where things were out of control. And if there’s one thing you can control, it is your positivity, your reaction to it.
[01:05:49] But somebody else growing up in exactly the same circumstances may have taken a negative approach. I even noticed that when you say to Kristen, “It’s going to be fine. Get it. It’s going to be fine.” This all or nothing approach. Either I save it all or I spend it all.
[01:06:08] And while I appreciate the range, because you’ve done both, I do think that there’s probably a healthy part of that spectrum where you could spend a little bit but also live for today and for tomorrow.
[01:06:24] Josh: Mm-hmm.
[01:06:26] Ramit: That’s what I noticed. Now, I could be wildly wrong. I could be 25% wrong, but those are some of the things that I take away. I’m curious what your reaction to that is.
[01:06:38] Josh: Yeah. Living with the balance. And recently, just talking with her after she applied to come on here, and we’ve been watching you for a while now, the plan is there, and I know I can do that. A lot has changed in my lifestyle recently from watching your videos and podcasts.
[01:07:09] A lot of the impulse buying has dried up, and I have started saving again. And it is that balance. A lot of it comes from being able to see it, realize it, and not shy away from it, but accept it and apply it to a plan that could work for both of us in the relationship.
[01:07:36] Ramit: That’s wisdom right there. I would challenge everybody to rewind and listen to what Josh just said because there is so much wisdom in that. The idea that a Rich Life is always going to have some element of balance in it, always. And of course, balance can occasionally have spending extravagantly and cutting costs mercilessly. That is totally fine.
[01:08:04] In fact, it’s encouraged. But there is a balance to be had. For example, we’re not going to eat out 30 days a week, but we love to eat out. So we’re going to do it once a week, twice a week, et cetera. What our numbers and our desires dictate the idea that you have to accept it.
[01:08:23] Gosh, fighting back on certain things in life is like swimming opposite the current in the ocean. You’ll never win. And so to accept I grew up this way, these are the downstream effects that it probably has had on me. Let me first accept that. Let me really look candidly at my own behavior and attitudes, and then I can decide if I want to change it, if I want to stop it, if I want to add a new dimension. But I first had to accept who I am and what I’ve been doing. That’s powerful. That’s really powerful.
[01:08:57] Kristen, I’m curious because you manage the family finances. You know the key numbers. You’re doing the grocery shopping. You have a debt payoff plan, which is quite precise. You mentioned that you want a partner in Josh, not an employee. How do you see us getting there?
[01:09:17] Kristen: I think having an open discussion and understanding. Or even having that discussion and saying, “Hey, this is not my strength.” And even with me, I can take from Josh more of that living in the moment because I don’t have to be like, “Hey, on March 25th at 2:55 PM, this debt is going to be paid up.” You know what I mean?
[01:09:37] And not have that wiggle room for like, oh, well, if I buy that shirt, it’s going to push it out by an hour or whatever it may be. I think it’s just having that balance and understanding that if this is something that maybe is not your strong suit or maybe you want to get there, let’s work together.
[01:09:57] Ramit: Yeah. Josh, what do you think about that?
[01:10:01] Josh: Yeah. I would take the mental burden, but I don’t know because it’s weird because like with rent and stuff, I don’t know. Just the accounts, we’re already set up. I never had to set them up. This is how I view it as easier. But it’s about having that open discussion, if she wants me to be in control of whatever, whether it’s going on Chewy and getting the pet food or whatever.
[01:10:38] Ramit: Would you be open to it?
[01:10:38] Josh: Yeah.
[01:10:40] Ramit: So if you’re both committed to coming up with a plan and feeling good about that plan together, I think we can make some pretty big moves right now. What do you say?
[01:10:51] Kristen: Yeah. Absolutely.
[01:10:52] Ramit: So right now, how would you describe your biggest pain point when it comes to money?
[01:10:58] Kristen: Paying off the debt. That’s what I’d think. Yeah, debt, 100%.
[01:11:02] Ramit: Okay. Josh?
[01:11:04] Josh: Mine’s probably income, making more income, having more income streams, whatever it may be.
[01:11:11] Ramit: Let’s take a look here. So to summarize, we have Kristen making $2,350 a month gross. And we have Josh making $3,120 a month gross for a total household gross income of $5,470 or $65,640. Okay. Your fixed costs are at 82%. That’s the primary reason, incorporating your income, that it’s really tough for you to save and invest.
[01:11:45] So let’s just do a couple of things. I want to show you something. Right now you’re paying 800 bucks a month towards debt. I know it’s going to take you several years to pay off your debt. I’m cool with that. I just want to zero this out to show you what happens. Kristen, have you ever done that?
[01:11:58] Kristen: I think for fun, I was like, “Ooh.”
[01:12:00] Ramit: It is fun. This is the only source of joy I have in my life. I just go through people’s CSPs and I change numbers. I go, “Oh my God. So [Bleep] cool.” All right. Look, 800 turns to zero. Watch what happens to your fixed cause number.
[01:12:14] Kristen: 64%.
[01:12:16] Ramit: Yeah, 64%. That’s a huge change. And I want to point out that we have to take into account your income. So when you are making an income that is relatively low, your fixed costs will naturally be higher. There are very few people making $65,000 in the US right now who have fixed costs under 60%.
[01:12:43] It would be incredibly difficult, especially with historically high housing costs. So Kristen and Josh, what does that imply if you want to bring those fixed costs down, pay off your debt faster, save more, and be less stressed about money?
[01:12:59] Kristen: Yeah, more income. I didn’t include the cat sitting into that plan because it’s not stable right now.
[01:13:06] Ramit: I don’t care about stable or not. Let’s include it. How much?
[01:13:08] Kristen: Last month, I made 1,200 extra there. This month it’s 300. It fluctuates.
[01:13:17] Ramit: Okay. The way that we do that is we take an average over the course of a year. And if you don’t know the average because you just started, what I would do is I would pick a number that I am conservatively confident that I can hit every single month. So it’s probably somewhere between 300 and 1,200. It’s probably not 300, probably not 1200. What do you think it is?
[01:13:39] Kristen: I would rather be conservative and then any extra, either throw it into savings or throw it at debt. So I want to even just say 250 just to be bottom barrel.
[01:13:49] Ramit: No, no.
[01:13:50] Kristen: 300, 300?
[01:13:52] Ramit: Part of what I’m going to do with both of you is actually– see, I like talking to you a lot. What I want to do is to actually take the attitude that you both have, which is very positive and constructive, and to take your work ethic, which I think is really positive, and I actually want to elevate you because I want to show you what is possible if you think about money and apply yourself to money differently. Just to be very blunt, I don’t want you to be stuck in this situation forever.
[01:14:22] Kristen: Yeah.
[01:14:23] Ramit: I need you to both escape this situation so that you have achieved escape velocity and you’re saving, investing aggressively, and even spending a little bit more.
[01:14:32] Kristen: Okay. Let’s say 450.
[01:14:34] Ramit: Perfect. Okay. Watch this. So we got 2,650. I’m going to change this number here.
[01:14:44] Kristen: Mm-hmm.
[01:14:45] Ramit: Watch what happens to your fixed costs. I’m taking your net up. Damn. What just happened?
[01:14:52] Kristen: Wow. Went down 14%.
[01:14:54] Ramit: Yeah, it’s down to 74%. That’s fixed cost around 74%. That’s good. And that is, I think, pretty achievable. Would you agree?
[01:15:06] Kristen: Oh, yeah. Yeah.
[01:15:07] Ramit: Okay. Is there other opportunities for earning more?
[01:15:15] Kristen: Me and the board are working more towards the nonprofit, getting me paid more there. Because it is getting to the point where it’s getting quite busy.
[01:15:27] Ramit: Mm-hmm.
[01:15:27] Kristen: So that could be something that eventually that is something that they want to do.
[01:15:31] Ramit: How eventual? Like next month?
[01:15:34] Kristen: Probably within the next six to 12 months, I want to say.
[Narration]
[01:15:38] Ramit: I need to cut in here for a second. Kristen works for a nonprofit. Notice how she’s tiptoeing around the idea of getting paid more, saying, “Maybe they could pay me a little more, eventually.” I want you to think back to the mid-2,000s when there was this belief among people donating to charities that you should look for efficiency in nonprofits. That basically you were looking for the lowest overhead.
[01:16:01] There were even websites that would allow you to sort by the lowest amount spent on staff, thinking that most of the money overwhelmingly should go to the cause. Okay, now sometimes there is value in efficiency, but we also know that this is a pretty old-fashioned way of looking at charity. In a nonprofit, you want a staff that is competent and confident. You don’t want a bunch of part-time unskilled workers working at a nonprofit. They’re just going to churn and eventually go out of business.
[01:16:31] So just the same as when you go to get heart surgery, you want your doctor to be well compensated, well-educated, why do we want different things for a nonprofit? I don’t. I want them to be paid well. And if you are working in a nonprofit, an industry that is rife with people trying to get away with paying you the least they can, I want to tell you, yes, you should pay yourself. You should communicate your value. You should be paid commensurate with the market.
[01:17:00] And if you’re running your own nonprofit, as we see here, the vision is to be able to pay yourself a solid amount of money that will allow you to continue doing amazing work. You’re not giving yourself a favor. I can do my best work at IWT because I am paid very well. Now listen to me coach Kristen on how she can start that conversation with the board.
[Interview]
[01:17:18] Ramit: Okay, here’s how people who are experienced with money would approach this. They would basically say to the board, just like you’ve been doing on this call today, instead of letting money be hidden in the shadows and never talked about like your parents modeled, they would go to them and say, “Look, I’m really enjoying this. We have a clear plan for growth. In order for my personal situation, here is how much I need to be able to earn. My timeline is nine months to be able to get this.”
[01:17:48] They’re going to negotiate with you. “Well, we can’t do it until two years.” “Two years is not going to work. I could stretch it to 12 months. In order to do that, here’s what I could deliver. I can grow the organization, blah, blah, blah. But this is the target number that I need to be able to hit.” That’s how business works, nonprofit or not. If they want to retain great people, and you are a founding part of it, then they got to pay.
[01:18:16] Kristen: Yeah. Definitely.
[01:18:17] Ramit: How do you feel about that?
[01:18:18] Kristen: Yeah, I feel good about that. It is in the works. I know. It’s been only a couple years, so we are slowly working at this, but we have been applying for grants and stuff. So I’m confident in that. But my heart’s in it, so yeah.
[01:18:36] Ramit: I like heart, but I like profit too.
[01:18:38] Kristen: Yeah.
[01:18:39] Ramit: That profit motive. I know you have a nonprofit, but there needs to be some money so that you can stay, because it cannot be a labor of love forever. And I need you to be able to bring up your household income so that not taking your considerable talents and focusing them at the grocery store, but rather focusing them on your job and your nonprofit.
[01:19:01] Kristen: Yeah.
[01:19:02] Ramit: Okay. Within a year, ballpark, how much do you think that your income could go up?
[01:19:08] Kristen: I’d say we could possibly double what I’m making at the nonprofit, not the overall income.
[01:19:14] Ramit: How much would that be?
[01:19:16] Kristen: There I make 600 a month. I think it could go up to 1,200 a month.
[01:19:20] Ramit: That’s awesome. But going from 600 to 1,200 a month that is very– I don’t know your exact organization, etc., what I’m trying to show you is that in the world of organizations and money, an extra $600 a month is very achievable.
[01:19:41] Kristen: Yeah.
[01:19:42] Ramit: So I want you to start operating not as if this is some distant goal. You’re not asking for a million dollars a month. 600 bucks a month, the way you walk, in the energy is like, of course, I’m going to get an extra– why are we even talking about this? Here’s what’s going to happen. This is what I’m going to do. And from your end, this is what I need to have happen.
[01:19:59] Kristen: Yeah.
[01:20:01] Ramit: Simple. Okay. I know I’m oversimplifying it as a third party, but I want to give you that type of energy. All right, Josh, now to you. Income wise, you talked about increasing your income. What’s possible here?
[01:20:14] Josh: I get a 1 to $2 raise automatic each year at new year.
[01:20:20] Ramit: Okay, okay.
[01:20:21] Josh: And then I’ve got my commercial driver’s license. I’m learning it, and I want to build that experience.
[01:20:30] Ramit: When do I see it on the CSP?
[01:20:32] Josh: Probably at the new year.
[01:20:35] Ramit: How much would you make more?
[01:20:38] Josh: Instead of 3,121 growth, it’d be 3,441 growth.
[01:20:46] Ramit: Okay. So an extra 300 bucks a month?
[01:20:48] Josh: And then the side stuff, I can drive a dump truck on the weekends for people that need stuff delivered.
[01:21:01] Ramit: Would want do that right now?
[01:21:04] Josh: Yeah, I would do that.
[01:21:05] Ramit: Say you get your skills up for commercial driving. End of the year, you’re qualified for one of these side jobs. Starting in January, you go out. And as you pick up a side job, maybe it’s driving something on the weekend etc. How much more could you make per month?
[01:21:24] Josh: 1,500.
[01:21:28] Ramit: Extra per month?.
[01:21:30] Josh: Yeah.
[01:21:31] Ramit: Oh [Bleep]. All right. Hold on. I’m getting excited. I never thought a dump truck could get me excited like this. Check it out. So we got 4,620 ballpark, right?
[01:21:42] Josh: Mm-hmm.
[01:21:43] Ramit: And then what’s the net on that? Ballpark, Josh?
[01:21:49] Josh: Probably 4,100, 4,000.
[01:21:52] Ramit: 4,000. Watch this number. Fixed costs. What the [Bleep]? Hey, somebody say what that number was.
[01:22:06] Kristen: What was it?
[01:22:07] Josh: 56.
[01:22:07] Ramit: 55%?
[01:22:08] Kristen: 55.
[01:22:10] Ramit: Guys. All right. Listen, I don’t know if all these things can happen perfectly. I don’t know. But what I do know is that these are the big levers to get your finances under control. Because there’s a time and a place to luxuriate in discussion and talk about your childhood. And there’s a time to make a [Bleep] plan.
[01:22:35] This is how we start to move faster. We identify the key levers, the things that make a big difference. Not 10, $20 here, but 1,500 bucks a month. That’s a big deal. And then we make a plan around that. How do you both feel about this example that we just went through? Kristen?
[01:22:56] Kristen: Positive. Me being solution-oriented, I’m like, “Ooh, yay. Yes, we’d have little things to tick off boxes that we can do.” Even if it’s not when we make $1,500 extra, even if it’s $1,000 extra, even if it’s $800 extra, it’s the fact that there’s a goal in mind and a direction that we’re going to head in.
[01:23:18] Like, “Hey, I’m going to actively try and apply to these places three out of five days a week.” Or, “I’m going to gather up resources to see where we can apply for grants for nonprofits That would pay me even $300, 400, 500 more, whatever it may be.” Just moving in that direction.
[01:23:36] Ramit: Josh, what about you? How do you feel with the plan we just discussed?
[01:23:40] Josh: To have a goal and see it and have the veracity to work towards it at any cost.
[01:23:47] Ramit: Yeah. We as humans, we actually respond typically pretty well when we have a mission, when we have something to work towards that is a stretch, but achievable, and it’s within a time period that we can control.
[01:24:09] One last thing. Can we talk about the cost real quick? Because I can’t let one other thing go. I’m going to leave this up on screen because we’re at 55%, which going from 82% to 55% in six months, which is, I think, very possible. And If you don’t get to 55, okay. You get to 60%. Amazing. That’s fine. I don’t really have much to say in terms of your fixed costs.
[01:24:37] I don’t think you’re spending anything crazy. I think it’s all quite realistic. I do want to go down here. Oh, [Bleep]. Hold on. Sorry. We got too much money now. Oh my God. Okay. Just so everybody knows, I just scrolled down the CSP, and because of the income, which automatically flows down to guilt-free spending, we now have too much money. What a nice problem to have. What do y’all want to do with that money?
[01:25:02] Josh: I would invest.
[01:25:03] Ramit: Okay.
[01:25:04] Kristen: Yeah. Invest and save.
[01:25:06] Ramit: Invest and save, okay. Break it down for me. How much do you want to put in each place?
[01:25:10] Kristen: Okay. Let’s see.
[01:25:10] Ramit: Hold on. I want to hear from Josh first because I know, Kristen, you have opinion. I’m going to get you too, but I want to hear from Josh.
[01:25:16] Josh: Probably starting out, just to build the savings.
[01:25:19] Ramit: Okay. How much?
[01:25:21] Josh: 75%.
[Narration]
[01:25:24] Ramit: Okay, listen. I know a lot of people are thinking, Ramit, they need to invest. But I also have to adapt my advice when I’m talking to people in different financial situations. For example, if I’m talking to someone with millions of dollars and they’re not spending enough money, yes, they should invest a lot and they should probably be spending a lot.
[01:25:43] But I wouldn’t say that same thing to people earning $65,000, especially because in their case, the fact of having a low income inherently means more risk, which means savings is even more important. When I say risk, for someone with a low income and not a lot of savings, one unexpected expense could topple them over.
[01:26:09] It’s almost like a ripple in a lake could topple over this fragile boat because they don’t have a lot of stability. They don’t have a lot of savings. I’ll give you an example from my own life. If I forgot my lunch at home, that’s a minor inconvenience. I’ll just go out to some place, spend 15 bucks on lunch, no problem. I won’t think twice.
[01:26:27] But for someone earning much less, that $15 could cascade over into an overdraft fee, which could cause all sorts of downstream problems, so they are already at risk. That is why I would overprioritize an emergency fund. When you have a low income in America, the system is set up against you.
[01:26:49] In many ways, they are inherently trapped unless they take radical changes. People who are very poor, for example, sometimes take out payday loans, not because they’re stupid, but because they are unbanked and there are not many options available for them. That is why I’m focused on savings even at the expense of long-term investing for right now.
[Interview]
[01:27:10] Ramit: 75%. Okay. Let’s say 1,700. Let’s see what happened here. So your savings went up to 28%, which is great. That’s like extremely high, but it makes sense for you. That would allow you to save $1,800 a month towards an emergency fund. That’s pretty good. So every two months, you would build up one month of emergency savings. That’s amazing.
[01:27:47] After a year of this, you would have more than a six month emergency fund and you could take that money and redirect it somewhere else, such as investments. Pretty cool. What else? What do you want to do with the rest? We’ve got about 900 bucks left over in guilt-free spending.
[01:28:05] Josh: Probably invest it.
[01:28:07] Ramit: Invest it. Okay. How much? All of it?
[01:28:12] Josh: Yeah, probably not all in investments. I’d probably want to save some to work on the 87 GTI.
[01:28:22] Ramit: Oh, okay, okay. I was like where are going? How about this? Wait, that doesn’t work. Hold on. I put 700 bucks in retirement per month. That leaves you with 212, which would naturally limit how much you could spend on nicotine, which I think is a good way to use financial structure to change your behavior, because if you know that’s how much I have. And then the next month you can bring that down to 200, then 180, etc. What do you think?
[01:28:53] Josh: Yeah. I like that. To have it change that habit, change that pathway in my brain. To use that pathway of the money instead of the pathway to losing the money.
[01:29:06] Ramit: Agreed. Can we create a positive pathway as well? So I think saving is great. And the way that I would reinforce the positivity is each month when the two of you have your monthly money meeting, which I cover in the Money for Couples book, at the very top should show a screenshot of how much is in your savings account.
[01:29:24] It’s like a video game. That thing is going to grow fast. I do think investing is awesome too. You should incorporate that as well. But I need something more immediate. Because we’re human beings. Unless you’re a freak optimizer, you’re not only wired to see numbers go up. So you all like to do something? You want to–
[01:29:46] Josh: Yeah, I think we would maybe take a trip to the beach.
[01:29:49] Kristen: Yeah.
[01:29:49] Josh: Great.
[01:29:50] Kristen: Yeah.
[01:29:51] Ramit: How much do you want to put aside for that every month?
[01:29:55] Kristen: What do you feel like? Do 100, that range?
[01:29:59] Josh: 50.
[01:30:00] Kristen: Yeah.
[01:30:00] Ramit: I was hoping you would say something like that. So I’m going to go ahead and I’m going to take this down, the savings, from 1,700 to 1,600. And I’m going to take that 100 that I just did, and I’m going to put it in my savings account. It’s just a savings account for vacations. So I basically moved $100 from emergency fund to vacation.
[01:30:26] Now, this is a bit controversial. People go, “Why the hell is this guy telling this couple– instead of putting everything they have into an emergency fund, why is he giving them 100 bucks a month?” Well, let me say two things. First of all, it’s your money not mine. So you decide. After this call ends, it’s going to be up to you.
[01:30:44] But secondly, I think that we got to live a Rich Life today and a richer life tomorrow. We are not set up to live in misery for 30 years and then to finally be free and to be able to spend money. Your skills deteriorate at spending money. You play small. I don’t want that. I want you to actually play bigger. So we got to find joy today.
[01:31:05] And with $100 a month, that’s not a problem, because in this situation, you’re saving $1,850 a month total. We can take hundred dollars out of that and put it towards a vacation. What are you noticing about this example of all the changes we just made?
[01:31:26] Josh: It frees up a lot of ideas, whether you want to save money. In that example, we rerouted the money I spent on that to create healthier habits that’s physically healthier and financially healthier.
[01:31:45] Ramit: Yes. Great. Kristen?
[01:31:49] Kristen: You feel more hopeful. Like there’s a plan in action that even if you stray a little bit from it, you still can be like, “Okay, yeah, this is achievable. This is possible.”
[01:32:02] Ramit: Yeah, totally. The things I notice are it’s important to identify your big wins or your key levers. We looked at the fixed costs. There’s really nothing to do in your fixed costs. Your fixed costs were very controllable. We can’t really cut more on the groceries. Your phone spending is minimal. There’s nothing to do there.
[01:32:25] So it turns out that the two key levers are increasing your earnings and the nicotine spending. That’s it. And so once we accept, as Josh put it, once we accept the reality of the situation, then it becomes clear we both need to increase our income. Okay, let’s dive in. Kristen goes, “Okay, I’m going to make an assumption about how much I’m going to make, and I’m not going to play small.”
[01:32:51] I’m actually going to play big. That’s great. So from now on, I know my mission. Approximately 500 bucks a month for the cat sitting business. And I’m going to be very clear in my organization, this is how much I need to make. And so I’m going to work towards that knowing that is my goal, and I’m going to make sure I talk about it.
[01:33:12] I’m not going to hope I make more. No. I’m going to mak,e that much within this time period. Perfect. Then with Josh, it’s like, “I have these skills. I’m accumulating them, hopefully, five years from now. Okay, great. I hope all that happens. But within six months I’m going to build these skills, I’m going to get certified and I’m going to take on I’m side thing.”
[01:33:33] And you both know that. You both hold each other accountable. You both encourage each other because if you both achieve something close to that, your financial life changes overnight. The final part was we started planning once you have the money. are you going to do? And that is the greatest conversation of all. What do we get?
[01:33:54] I always put my hand out. What do we get? My wife and I work hard. We work weekends, sometimes evenings. What do we get? And so this is the same thing I want every couple to do. And what I saw from you is you get massive payoffs in saving. You get massive payoffs in investments. One thing I forgot is paying off the debt even more aggressively.
[01:34:16] We didn’t talk about that. I think you probably should take some of that money and pay it off even quicker. I will leave that up to you. In fact, I’d be very interested in what you choose to do. And then we also talked a little bit about behavior. Sometimes we all have something in our life we want to change.
[01:34:32] We talked, Josh, about like, is your Rich Life really like the nicotine stuff? No. So part of it is taking some of that money and bringing it down. But also part of it is actually using the money for something more positive. It could be a dinner out once a month. We take that 100 bucks that would’ve gone there, and we actually go out to dinner.
[01:34:51] And while we’re there we go, “I am so grateful that we both get to be here. I would rather do this than that every month.” So that’s cool. Putting it towards emergency fund, putting towards the car stuff. Great. Again, you are using your money to live your Rich Life.
[Narration]
[01:35:08] Ramit: Once in a while I get comments from people saying, “I wish he would talk to people who have a low income. Let’s see him try it with real people.” The implication is that my advice only works with people earning $250,000 or that I’ve got some magic wand that I can wave to help people get out of a low income situation.
[01:35:27] Let me be real. When you are making a relatively low income, the only real path to dramatically change your financial life is to increase your income. That is it. Magic advice does not exist. So my advice to someone earning a low income is to carefully manage your costs and to focus on getting a higher income as quickly as possible.
[01:35:49] And people really do not like hearing this. They get frustrated, and understandably, it’s easy to get frustrated at the message than to really truly internalize that there are actually no ways around it. If you earn a low income in America, it is really hard to get ahead. It sucks, it’s not fair, and it’s also reality.
[01:36:12] So I don’t give the advice of earning more money to everyone. In fact, you’ll hear me talk to couples earning 2, $300,000 a year. You will often hear me tell them the opposite. Because we know that if they have a systemic overspending problem, making more money won’t solve it.
[01:36:28] But when you’re earning 65K, there is no magic wand for lowering your fixed costs. The rent is the rent. The price of bread is the price of bread. You can trimmer on the edges, but it will not change the overall picture. The only thing that moves the needle in a big way is income.
[01:36:44] That is why I was so encouraged to hear Kristen and Josh talking about new possibilities– the cat sitting business, growing the nonprofit, Josh getting certified for new work. They weren’t defensive. They were not making excuses. They were already thinking about what’s possible.
[01:37:00] And I also want to take a second to commend them as a couple. It would’ve been so easy for Kristen to come on here frustrated at Josh, to blame him for not knowing the numbers. She never did. She focused on wanting a partner, not an employee. And Josh, it would’ve been easy in his role as the ignorant reassurer to dig in to resist change. He never did either.
[01:37:23] He was humble. He was willing to be challenged. He was vulnerable about his past. I find that incredibly courageous. What I saw between the two of them was a lot of curiosity and respect, and most of all, a willingness to change together. That, more than any number on a spreadsheet, is what gives me a really positive hope for their future. So let’s hear their follow-ups now.
[01:37:47] Kristen: Hey, it is Kristen. I thoroughly enjoyed the conversation that we had. It was super awesome. It was super insightful. My plan going forward is a couple of things. I’m going to divert some of the money I’ve been putting into investments. I’m going to put it into the emergency fund until I get that to be at about maybe 10,000. And then I’ll go back to investing equal parts.
[01:38:09] I also plan to try and get more pet sitting opportunities and look for more ways that I can get paid higher cost or a higher amount at the jobs that I work. So that’s something that I’m working on, especially with the nonprofit. Just looking for grants that would do that. And just advertising my skills more. But yeah, super excited to see where it goes.
[01:38:32] Josh: Hey, guys, it’s Josh. So my biggest surprise was probably learning just how unbalanced my behavior around money has become as far as saving and spending. It’s either all of one or all of the other. Learning if I keep that at the forefront of my mind and not dismiss it or try to hide it away, a better ability to have that discipline, to see that and recognize it and move along in a healthier way.
[01:38:57] An important takeaway for me would probably be the realization that automation, it takes out the forgetfulness, the true track to success. You have human emotion getting involved when you see the money You’re thinking of all what could better be done with it before you even hit the transfer button to the savings or investments or whatever.
[01:39:18] A key change that would have a media benefit would definitely be more involvement in the household payments and budgeting systems. Taking more control of that would help better our financial goals
[01:39:32] Kristen: Okay, so it’s been a couple of weeks since we had the session. And what I’ve been doing is I set up sub accounts. I actually made an account for vacations along with unexpected costs and pet funds, and I invited Josh to come in and join those accounts. So we’ll both put, I don’t know, $10, $15 into a vacation fund or a fun fund. That way we have stuff to look forward to, and it’s not really coming out of our budget as much.
[01:40:03] The thing that stuck with me the most was really to try and make more income. That is definitely the ceiling that we’re hitting. So I have talked to the board that I’m on, the nonprofit. I applied for a couple of grants for us. So if those come through, hopefully I can get some more money, since we are doing a really, really good job.
[01:40:25] On top of that, I’m just spreading more information about the pet sitting that I’m doing. And at my day job that I do, I am looking into seeing if I can get a little bit more hours or maximizing the hours that I can work there. And that’s really helping to build that monthly income that comes in and take away some of the stress that I’m dealing with.
[01:40:44] Ramit: If you liked this episode, here’s another one that I think you would love. Check it out right here.
