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BiggerPockets Money Podcast 243: Ramit Sethi’s Money Advice for Couples: Live a Rich Life, Together

BiggerPockets Money Podcast 243: Ramit Sethi’s Money Advice for Couples: Live a Rich Life, Together

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If you’re part of the FI community, you’re probably a saver. Heck, if you’re listening to this podcast you’re probably a saver. While we all are busy optimizing our budget, reinvesting dividends, and contributing to our retirement accounts, do we ever take a step back and ask, “why are we saving so much?” Maybe you have a simplistic answer for this: your kids, your spouse, your “future”. When it comes time to finally reap the rewards of all that saving and investing, we struggle, and often fail to do so.

Ramit Sethi, the author of I Will Teach You To Be Rich, has struggled with this in his personal life as well. When he got married, he and his wife spoke about what money meant to them, and they were shocked to have completely different answers. While Ramit loves setting up models and spreadsheets, he also encourages couples to speak about their finances through a shared vision. It isn’t “I’m saving this money so we can be happy”, it’s “WE are saving this money so we can take that camping trip we always dreamed of.”

We touch on other topics like joint bank accounts, creating a “worry-free number”, and building a rich life together, as partners. Ramit also gives personal advice to Mindy to help her realize that she has already won the “money game”, even if it doesn’t feel like it at times.

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Listen to the Podcast Here

Read the Transcript Here

Mindy:
Welcome to the bigger pockets money podcast, show number 243, where we talk to Ramit Satey about couples and their money.

Ramit:
Your feelings are totally independent of how much money you have. That’s why a lot of us know people who have money who feel bad about it or guilty. We also know people who don’t really make that much money at all, and they feel free and fine. So what I want is of course, I want people to save and invest and use IRAs and all kinds of tools, but I also want you to feel good about your money. I want you to live a rich life.

Mindy:
Hello, hello, hello, my name is Mindy Jensen and with me as always is my clear thinking co-host Scott Tretch.

Scott:
Always appreciate your clairvoyant intros, Mindy.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else to introduce you to every money story, because we truly believe that financial freedom is attainable for everyone. No matter when or where you’re starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business, or figure out what a rich life means to you. We’ll help you reach your financial goals and get money out of the way, so you can launch yourself towards those dreams.

Mindy:
As Scott alluded to today, we are speaking with Ramit Sati, and he is all about living your rich life. I don’t need to give you much more introduction than this because he has already joined us twice before. Before we bring in Ramit, let’s hear a note from today’s show sponsor. Okay, huge thanks to the sponsor of today’s show. Today, we are speaking with Ramit Sati, The author of I Will Teach You To Be Rich. He has been a guest on our show previously on episodes, 73 and 127. Both of which are totally amazing and you should listen to right now. Actually, you should go back and listen to them. After you listened to this one.
After being on our show, Ramit said to himself, “I could do that.” So he has his own new podcast out as well. Ramit Sati is the author of, I Will Teach You To Be Rich. He has been a guest on our show previously on episodes, 73 and 127, both of which are totally amazing and you should listen to them if you have not already. And after being on our show twice, he’s like, “I could do that”, so now he has a new podcast out. It’s called, I Will Teach You To Be Rich, kind of on brand for you Ramit. Welcome back to the bigger pockets money podcast. I’m super excited to talk to you today.

Ramit:
Thank You and thanks for having me back. I always love speaking to both of you, so it’s a honor to be back. So

Mindy:
I want to talk about the couples that you have had on your podcast so far. It seems to me that most of them are not combining finances. So first of all I want to know, do you combine finances with your spouse?

Ramit:
I do. We have joint finances, but we also have separate finances. My wife is an entrepreneur like I am so we each have our business, we each have our individual personal and then we have our joint. So it’s somewhat of a complex situation, but I like that because it took us quite a while to align our finances and when we were engaged, we were coming together from very different financial backgrounds. And so that took quite a bit of discussion, sometimes arguments about how we were going to set up our finances. And then once we got married, I thought, “Oh great. It’s all easy sailing from now on.” No, then it’s really the nuts and bolts of where does the money go on a day to day or month to month basis. And that’s a whole separate challenge.

Scott:
Well, zooming out on this question, we’ve come across couples that have combined their finances. We have couples that separate their finances. It sounds like most of the couples so far on your show have chosen to split their finances. I personally view it as a toolkit where there’s no right answer. There’s just a different set of tools and a different set of processes that you can apply to different couples for different reasons with that. Do you view it the same way or do you feel like there is a one size fits all or a bias towards a approach that works for most? Or how do you think about a beginning to architect or frame that problem about whether couples should combine or split them?

Ramit:
So, I think that I don’t like the answer, it depends. I think that’s intellectually lazy and you hear this a lot. People go, “Hey, what’s a good savings rate?” And every single personal finance expert out there goes, “It depends.” Well, actually not really. Actually, most people are mostly the same. I think that’s really important to recognize. You’ll hear a lot of people on social media saying personal finances, personal. Yeah okay, it’s personal at the marginal 0.5%, but for the most part, a good savings rate, good would be 10 to 20%. Good. You want to be excellent, we’re talking about 20 plus. But we know the data and yes, of course it depends on how old you are and what’s your goal, et cetera. But people who are asking that question are not looking for the answer of it depends. They’re looking for a rule of thumb. And once you give them a good rule of thumb, they can go from there.
And if they choose to go five steps further, they can maybe get individualized. I think that a good answer for most couples is that it pays to have a joint account, and it pays to have two individual personal accounts where you can have no questions asked money. It’s pretty simple. It’s pretty straightforward. But the why of it is what’s particularly interesting. So Scott and Mindy, you both mentioned that on my show, it seems that many couples have chosen to keep their finances separate, right? And before I tell you what I think of that, I’m curious, what do you think of that? Mindy, I know in particular this is a thing for you. What do you think about that?

Mindy:
Yeah. So before I get all judgey because I’m about to, I’m going to say that of course, and I do say this a lot, personal finances, personal. The only people that your finances have to work for are you and your spouse or you personally if you’re not married. I think that Ty and Talet McNeilly said it best when they said, “If you are having children with somebody but you won’t share your finances with somebody, something’s wrong.” And there are outlying circumstances where it makes more sense to you or it’s a better mindset for you to not share your finances with your spouse.
I know a lot of people who are on a second or third marriage where they had maybe financial infidelity or financial abuse in the first marriage, where they can’t be comfortable sharing their finances with somebody else. And that’s understandable based on their past experiences. I’ve only been married once, we combined finances from the beginning. And that’s what works for us because when you marry someone, I mean in my mindset, what’s yours is mine and what’s mine is yours. And if we can’t share this basic thing, then what else are we going to not share with each other? So that’s where I’m coming from it but I fully remember that that is kind of judgey.

Scott:
And I would just say, I generally agree with Ramit as to the topic of what may work for many couples with that. And perhaps I generally agree just because I’ve been married one year and that’s exactly what I’m doing. We have one joint account and then separate accounts that are no questions asked personal accounts with that and I see a lot of advantages to that. You can control the spending that is coming through your lane and the household lane, and then also have no questions asked and if I want to order Uber Eats for lunch, not a big deal.
I can do that with those types of things and it gives you that that control, but also the amount of flexibility. So I can kind of see where I think Ramit, you got your personal structure from, where it sounds like you’re doing something very similar and just also layering on top the businesses that you guys jointly run and operate, which of course you are the CEO of one business and she sounds like is the CEO of another business. So you should not have a say in the finances of that business except for maybe at a high level, you can have the household to talk about what is the reasonable contribution that each spouse is expected to bring in. So I like that. That’s what I’m observing and I’m doing essentially the same thing.

Mindy:
Okay, I got some questions here. First of all, Ramit, how long have you been married?

Ramit:
Three years.

Mindy:
Oh, three years. Okay. I’ve been married almost 20 years and Scott’s been married almost one. You said one Scott, but it’s just almost one. So these are very different places that we’ve been in, I think that’s interesting. How do you determine how much goes into the joint and how much stays in the personal, or how much goes into the personal and how much… Is there a formula? And this is for both of you, but is there a formula that you use or do you just kind of whatever it?

Ramit:
That is the most subjective and contentious question in all of joint finance, because the number could be an absolute number or it could be a percentage. It could be $1,000, it could be $13,000 a month. It’s a vast range of what’s possible. I like proportional. I think that that’s a good amount, just the same as perhaps two people who are unmarried who might decide to live together and they say, “Hey, we’re going to contribute proportionally to the rent.” That also plays out pretty nicely in a marriage. Of course, you’re not just talking about rent or mortgage. You may also be talking about groceries and et cetera. So that’s pretty straightforward. What I think becomes a little bit more challenging are the edge cases. I’ll give you an example. I like nice hotels, okay? I like them.
I read all the nice hotel forums. I have a list of every hotel I want to go to in my… I mean, I’m a freak for hotels. I like it, okay? It’s what I call my money dial. And everyone’s got a money dial, at least one. The most common ones are eating out, travel and then health and wellness. And then there’s a few you other ones, like convenience is another one of mine. So my wife, she appreciates a nice hotel but she’s not planning trips based on certain hotels. It’s not her thing. Okay, so what if we decide to go on vacation and she says, “Well, let’s stay at a modest hotel”, and I say, “I really have this one in mind”, and the one that I choose happens to be much more expensive. Okay, so what do you do there?
That’s a very interesting edge case and it pays to focus on a couple of these edge cases. One person wants a nicer car. One person wants to visit family in Wyoming for Christmas, whatever the case may be. That is where a lot of the arguments come up. Because day to day, if you decide, “Oh, we’re going to contribute proportionally to groceries”, big deal. And even if one person wants an extra serving of carrots, who really cares? We’re talking about 13 cents. I don’t even want to talk about that. But things like a car or where you want to live, that’s a real issue. So one solution is take what a mid-priced hotel would be, sort of the average and then for anything above that, I would pay for that. Okay? That’s one solution. So let me give you an example. Let’s say that we want to go somewhere and the mid price hotel for that would be $250 a night.
Okay? And I happen to want to go to a $500 a night hotel. Okay, fine. So jointly, we would contribute 250 and then I would pay the additional 250 because it’s kind of my thing. Now again, that’s just one solution. Mindy, I totally agree with you. What works for you is the solution you should use. Now you may be listening to this and saying, “I don’t want to do that”, or, “I don’t really care about hotels”, or whatever.
That’s not the point. The point is to find a solution that works for you and then codify it. Write it down because you do not want to be arguing about your hotel or your carrots or your car for the next 25 years of your life. You just go back to your dock, you say, “Hey, we agreed to this and if we want to change it, that’s cool.” We also have a system every January 5th. We sit down, we review our system, “Hey, do we still agree? Do we want to change it? We’re making more, we’re making less, let’s review everything.” But this is what we agreed to so why don’t we just stick with the system? That’s what we both are participating in.

Scott:
So I want to chime in next and then have Mindy go because like you, I am idealistic and early on into what I hope is a lifetime wonderful marriage with this kind of stuff. And I’m doing the exact same thing. We have a vision document that we curate and put together on an annual basis, and then review every quarter and have our goals from there and that kind of stuff. And that drives in a number of things, including our spending and investing philosophy and all that kind of stuff with that. So Mindy, I have a question. Does that work over the decades? Does that sustain with that into a long and healthy relationship? Do you do something similar? Do you not do that?

Mindy:
I don’t do that at all. We don’t have a vision document, but I’ve also been married longer than the term vision document’s been around. So my underlying factor is I want to stay married. The number one thing that couples fight about is money. I don’t want to have fights with my husband. I don’t know if you guys have had a fight yet. They’re not fun. I don’t want to do that. I want to have conversations. So my mantra is, if I want to know something I ask and if I want him to know something, I tell him and we don’t fight a lot. And there’s people, “Oh, you don’t fight ever.” We very rarely fight because we agree on a lot of things. I mean, that’s why I married him because we are so similar.
We’re also different in a lot of ways, but where we are different is things that I don’t care about. We agree on cars. I don’t really need a fancy car. We had a fancy car, we decided it wasn’t for us. Now we drive two very old cars and we don’t care. We like to travel, but we are not staying in the same hotels that Ramit staying in. You said $500 a night, I’m like, “Oh my God, I don’t think I’ve ever stayed at a hotel that’s $500 a night.” But again, that’s not something that means anything to me. I want to spend time with my girls. I have a really, really nice bike. So I’m short so it was like an off size and it was three years old, but still brand new, they just hadn’t been able to sell it.
It was $1,300, which to me is a lot of money, back then it certainly was. But it was like a $3,000 bike, which I think is kind of insane for a bicycle, but it’s a really great bike and I’ve had it for God 20 years, probably. So my husband has a bunch of bikes. Oh my God. My garage looks like a bicycle warehouse, but that’s something that’s important to us. We have spent a lot of money on those things. But we combine our finances and we have a system where if we are going to spend money on something that I would call frivolous, we discuss it first. And it’s a real quick discussion. Hey, I found this purse do you care if I buy it? And he is like, “No, I don’t care.”
It’s always, no, I don’t care. He wants to buy another step machine for the basement. Well, I don’t care. He’s looking for a used one, it’s still going to be like $2,000. That’s an amount that we want to discuss before we make that purchase. But we’ve also never really sat down and put a number on it. Either of you, do you have a number that you… Like a threshold of, “Hey, if it’s going to cost more than X, then we need to discuss it.”

Ramit:
Yeah, we have a worry free number. That’s what I call it. And I encourage everybody to develop a worry free number. It’s called a worry free number because below that number, you do not worry about it. I’m frankly sick of hearing about people who have $800,000 in the bank and they go to the grocery store and they agonize over whether to get precut broccoli or not. It’s a complete waste of time. It’s a waste of limited cognitive resources and it’s playing small. I always say stop focusing on $3 questions. You should be asking 30,000 or in their case, $300,000 questions. So set a worry free number. For a lot of people when we grow up it’s like, pack of gum, whatever. Pack of gum, it’s a buck, buck 50, No big deal. No problem. Here’s the problem. As you become more financially successful, you rarely adjust your worry free number.
So you have these people who have lots of money, a huge investment portfolio and they’re sitting there agonizing over $1.75. Stop it. You need to update your worry free number. And so for people, $5. When I was starting out in my early career, okay five bucks, fine. But at a certain point, your worry free number might be 100, it might be 1000. I know couples for whom it is 10,000. They don’t even talk about anything below $10,000. Now that’s a multi-millionaire couple, but I interview a lot of those on my podcast as well.
Multimillionaires, who one of them goes out to a restaurant and tells his wife, “I really want the steak tonight, but you know what? I’m going to get the chicken, because it’s $5 cheaper.” Now just think about that. Is that the kind of life that you’re working for? You build your investment portfolio, you sit there, you run your Monte Carlo simulations and you’re not even ordering the meat you want when you go out to eat? No. Worry free number. We have one for ourselves jointly, but I have my own individual number where I just don’t care and I shouldn’t care. I need my attention to be focused on more important things.

Scott:
I love that. And we always come back to there are four levers you can pull in your finance journey fundamentally. You can spend less, you can earn more, you can invest or you can create. There’s bonus ones like marry rich or win the lottery or whatever. But those are the four that most people want to operate and control with that. And they move throughout your journey. When you’re just getting started, why is there so much focus in the personal finance community around spending and controlling those $5 expenditures? Because they do matter when you’re just getting started and beginning to pay off the first… Getting out of debt or undoing poor financial decisions for a period of time. But they cease to matter over a period of time, somewhere between probably the 50 and $500,000 mark. They begin to diminish with those types of things and your levers move towards things like major career decisions, or entrepreneurial decisions or major investment decisions with that.
So I totally agree with that framework, but I do want to observe that probably most people who are listening to bigger pockets money right now, are not in that camp of being a multi-million who needs to move their number up, their worry free number up with that. And most people, I think we’d agree that the three of us have thought about finances more than most. I’d hope so since we do this for a living to a certain extent. I’m sensing you have a process in place that people can follow to discuss finances with their significant other and get on the same page and move those things forward. So if you’re not an expert, you’re not a multi-millionaire, you’re getting started in a wealth building journey and you want to do things right, how do I approach that with my significant other and begin that discussion and get going?

Ramit:
First off, I don’t want anyone to take away from my example that you have to be a multi-millionaire to have a worry free number. By contrast, I share that example of a multi-millionaire who won’t order steak because I want to show you what will happen if you don’t develop a worry free number. You will be on your journey, you’ll be saving, you’ll be investing and you think magically one day you’re going to wake up and you’ll be some kind of millionaire and confetti flies down from heaven. And then you go, “Oh my God, I’m so cool. I’m so loose with my money. I’m so relaxed.” No, you’re going to feel the same exact guilt, anxiety and shame that you felt back when you had no money because you believe that more money means finally, I can feel good about money. No, you felt bad when you had no money, you’re going to feel bad when you have a lot of money.
These are the couples I speak to on my podcast. A lot of them have made it. Not all, but a lot of them have done very well and they still squabble over tiny details. So the way you feel about money is highly uncorrelated with how much money you have in your bank account. I want to say it again because I want you to hear this. The way you feel about your money is highly uncorrelated with the amount you have in your bank account. I know, you’re sitting there thinking, “Oh my God, I know if I do a 7.5… Okay, let’s just be conservative. 7% return compounded. I’m adding 20%. Soon, I’m going to have X dollars.” And then what’s implicit in that statement? Then I’m going to feel good.
I’m going to feel in control. Wrong. Your feelings are totally independent of how much money you have. That’s why a lot of us know people who have money who feel bad about it or guilty. We also know people who don’t really make that much money at all and they feel free and fine. So what I want is of course I want people to save and invest and use IRAs and all kinds of tools, but I also want you to feel good about your money. I want you to live a rich life. Okay?
So that’s just a little preface. I will tell you about my process. Can I start with what happened with my wife and me when we started our financial journey?

Scott:
Sounds great.

Ramit:
So we met and we got engaged and we were coming from different financial places. At the time she worked at a nine to five job. I’d been an entrepreneur for like 15 years at that time. We both were raised very similarly. Our parents had similar jobs, we were raised middle class, but by virtue of my job and a lot of luck, I had grown my financial portfolio, et cetera. And I’ve been thinking about money basically every day for 20 years. Like you Scott and Mindy, this is our job. This is what we do.

Ramit:
Like you Scott and Mindy, like this is our job, this is what we do. So we first started discussing money because she actually brought it up. She goes, “Hey, you know about my finances, but I don’t know anything about yours.” That was mistake number one, which was, I was not the first to offer, “let’s talk about it.” And if you are in a relationship, particularly where you are the high earner, you need to be sensitive to the dynamics. Very sensitive. You will hear the lower earner in a relationship, they will constantly use this one word. Does anybody know what this one word is? Can anybody guess, Mindy? You know what it is. Scott? They’re obsessed with this concept.

Scott:
I don’t know.

Ramit:
How do I contribute? How do I contribute to the relationship? Because the higher earner is bringing in the objective thing, the money. And in some cases it’s so much more than the other partner that the low earning partner goes, “How am I supposed to contribute?” And I hear this consistently, you will hear this language on many of the episodes. First of all, I immediately realized, “Oh man, I really messed this up.” I didn’t even take my own advice about talking about money. So yes, for everyone, who want to go, “Ramit, you suck.” This is definitely one area where I did not fulfill my own, I will teach, be rich rules. So we sit down, we start talking about the money. Great. And that was a beautiful conversation. It was like, what do we get to do with our lives? Where do we want to live? Do we want to travel with our family, all that stuff.
Great. Then I discussed, later on I brought up that a prenup was really important. That actually was received pretty well. And my now wife, we started having discussions. And if you want to hear more about that, I’ve written about it. I’ve also talked about it on the Tim Ferris podcast. Happy to answer any questions about that conversation. That went really well, and then it stopped going well, it became very contentious. Again, we’re approaching money differently. We have different amounts. We ended up going to find a therapist to talk to. And that therapist, we sat down and she asked some really provocative questions. She said, “When you think of what’s one word you use to describe it.” And she asked me to go first, I answered like it was the most obvious answer in the world. Growth! What are you talking about?
Growth? It’s so obvious. And I’m sitting there, I can see the compound interest charts in my head. It’s superimposed on the world, I could see all this stuff. And then she asks my wife that, and my wife says, “Safety.” I go, “What? What does that word mean? That’s like saying metal. I don’t understand the relationship, what does this word mean at all?” And of course it meant something totally different to her, completely. So here I am talking about, let’s invest aggressively and let’s do this and that. And my wife is looking at it completely differently. And so suddenly things started to become a lot clearer. It took a lot more work. And finally, we worked through that. So now I’m thinking, okay, great, we work through this prenup process. We’ve discussed money. We got married. Life is good. Like I let’s move on.

Scott:
I just want to chime in really quickly here. The prenup can be a really difficult topic. And I just want to chime in and say, we devoted essentially an entire episode to that concept with Aaron Lowry. And that can be found on episode 169 of the bigger pockets money podcast. That’s be bigger pockets.com/moneyshow1 69. The biggest takeaway I got from that is a one liner, which is, if you don’t have a prenup with your spouse, you still have a prenup. It’s just the laws of the state that you’re getting married in, or the state that may govern a future split if were to happen that you might be living in, in the future. So it’s, do you want those terms to govern your finances? Or do you want terms that you agree to, to govern your finances with that? And so I think that was a really good framework and sorry to interrupt, but wanted to just throw that in there. As I know that’s a big topic that surrounds a lot of this.

Mindy:
Yeah. I have one really quick thing to add, when my husband and I got married, he’s suggesting getting a prenup and I was not receptive in any way, but also we were starting off from a place of pretty much zero. So there wasn’t a huge nest egg for either of us to cover. So I’m wondering since you got married after having been an entrepreneur for 15 years, I would say you’ve had at least a little bit of success, right? So you have something to protect.

Ramit:
Yes, and yes, absolutely. When there’s a disparity in incomes or certainly if there’s a disparity in net worth, or if there’s a business involved. There’s a lot of reasons to talk about a prenup. Now I think that one of the reasons that I came out talking about this on Tim’s podcast and publicly is that when we think of prenups, what do we think of? We think of some Richie rich asshole who comes out in his limo and it’s almost always a he, and he tells his partner, you need to sign this document. And it is so insulting, and it diminishes what actually happens with a prenup and why it makes sense. Again, I’m not suggesting this for everyone. Typically you need to have some large disparity or something, but it’s not like one person is trying to screw the other.
No, quite the contrary, you have independent representation and you need to both find a way that makes an agreement palatable for both. So again, there’s more on that, and it sounds like your episode was fascinating. I’m going to listen to that myself actually. So we get married and we go, “Okay, life is good, we solved all of our money problems.” Wrong. Now the question is how do we deal with the day to day? So for example, the basic question is when we go to the grocery store, which debit card or credit card are we using? That’s a very simple question, but things like, how much are we investing? Are we going to buy this type of bike or this type of couch? Or are we going to this place for the holidays? Those become quite complex. If you don’t have some type of guidelines, some type of framework.
Now, again, I made the mistake. I’m like, “Let’s build a model. This model will tell us everything, it will be so sophisticated. I love my model, it’s a logical.” And I know a lot of you, fire folks are listening. Let’s build a model and you wonder why doesn’t anyone listen to me when I talk about my highly sophisticated model that took me 13 years to build, because nobody cares about your stupid model. They don’t care. The model is the last thing that matters. What first matters is what we learned from that therapist. Like what does money mean to you? How do we think about it? What is a rich life to us? So we sat down and I said to myself, “Ramit, shut your mouth. Don’t even say the word. If it starts with an M don’t even say it. Oh, oh babe, I have this beautiful Mo- nevermind, let’s go back to what money means to us.”
So we sit down and we just started off with these series of conversations. How’d you grow up? What do you remember your parents talking about when it came to money? Little phrases that we all remember, things like money doesn’t grow on trees, or what do you think I’m made out of money? Or we don’t talk about money in this family. There’s also positive phrases that we hear. Right? I remember my parents would say, “Look, if you can get into a good college, don’t worry about the money. The money will take care of itself.” Now, by the way, that’s very care culture to the personal finance world. But it’s very on brand for Indians. Indian people will spend effectively anything on education or they will find a way. And indeed, when I got into a good college, guess what? I found a series of scholarships and had financial aid.
So there’s a lot of ways that sometimes you can plan for it, sometimes it just works out if you have a lot of luck as well. So, we start having these conversations. Notice I say conversations, not conversation. A lot of times we believe that we need to be efficient. This is the wrong place to be efficient. You want to stretch it out. You want to have lots of short conversations where you declare victory at the end and say, “That was great, babe. All right, let’s go for a walk. Let’s go celebrate. Let’s go just have some fun.” You don’t need to squeeze the blood out of this conversation on the first time. In fact, you’re going to have these conversations for the next 30 years. So ,that’s very important to recognize it.
Finally, we started talking about, and this is the critical distinction. I said to my wife, “Look, my worst nightmare is having to look over some receipt from Safeway when I’m 58 years old and say, why did we spend this much on asparagus?” I’d rather not be alive. I don’t want to do it, it’s not my life. It’s the worst life on earth. So I said, “Look, I have a few suggestions for simple things I call money rules, but they’re our rules. Rules that we can come up with together, so that we don’t have to ever worry about, can I buy this salad or whatever?” One of my simple rules was I want to save and invest a minimum of 20% per year gross. And then my wife’s like, “Well, okay, well where does that number come from?”
So I talk about it and we discuss it together and hey, if that’s too much, why don’t we start at 8%? And then every year we can increase it by 1%. Whatever, we have a long time period. That’s great, so we started there and then the crux of it was, what do we want to accomplish in our next 10 years? So I want to do a quick exercise with both of you, if you would allow me to. I sat down with my wife and I said, “Okay, what’s our 10 year bucket list? The things that we want to do in the next 10 years, that would make it truly a rich life.” So Mindy, and then Scott, if I were to ask you in the next 10 years, what is on your bucket list? Give me a few things that come to mind.

Mindy:
I want to have a house in the mountains, I want to have a house by the beach, and I want to have both of my girls graduate it from high school. And in 10 years, my oldest will have graduated from college. She’s a freshman this year. So yeah, wow. And I say, I want her to graduate from college. College is her choice, college is her path. And I just want to say that it’s not everybody’s path, but it is going to be her path. I don’t know that it’s going to be my younger daughter’s path. She’s in sixth grade. So in 10 years she will have just graduated high school and finish my house. I do live in flips. So I’m living in my flip right now. And I want to finish that.

Ramit:
I love the vision. So let me see if I can read that back to you. You want to have a house in the mountains. You want to have a house on the beach, your oldest daughter to have graduated from college, your youngest daughter, you’re not sure about. And then you want to finish your current house, right? And that’s a rich life for you. If you look back after 10 years, you’re going to say yes, I really lived a beautifully rich life. Okay, love it, Scott, what about for you?

Scott:
Sure. So I’m going to share parts of this that are mine to share and try to keep my wife’s, some of those that she may not feel comfortable sharing, obviously private with that. But some of the big things are we want to live in a beautiful place where we wake up every day and think this is paradise with that. And that could mean different things, and I think we think that that is going to mean different things. There may be a period of three to five years in this location or that location or that location, but that theme has to be true during that, we want to be healthy and fit, dieting well and exercising regularly. We want a day to day that is comprised of daily exercise, reading, two hours outside every day, biking, walking, running, likely some sort of water activities as well. Cause we love the water.
We have favorite fruits and seafood that we want to eat almost every single day with that kind of stuff. And then we have career objectives with that, including writing for Virginia, my wife. And then I would like to continue to bring the best of my abilities to my work here at Bigger Pockets and in expanding and helping people achieve fire or their version of financial independence with that. And I want to be excited about what I’m doing at at least 90% of the time with that, making sure that the job is going to entail some bad days. How would I reflect that? And I love that about this, but I want to make sure that I’m thrilled about my work almost all the time with that. I want to feel that I’m making a real positive impact on people’s lives on a day to day basis.

Ramit:
Beautiful. Okay. Very vivid. Clearly you’ve been thinking about this. I don’t know if you could see me, but I was getting very excited listening to both of your visions. So to me, this is the beginning. When you sit down with your partner and it is completely counter to what we typically think of doing, which is, let’s look at how much we spent last month and implicit in that statement is then I’m going to judge you all right. I don’t want to do it. I don’t want any part of that anyway. What are we going to judge? Oh, you spent $7 on this chicken. Why? No, I don’t even want to talk about it. I love starting with what the two of you did. So I sat down with my wife, we did this exercise. We took separate pieces of paper and it was fun. Let’s just dream big and it could be for you and could be for us. It could be for our family, whatever. So we wrote it down and I’ll share a couple of mines as well. Mine, one of them was, I want to design a house from the ground up with you, with my wife. So I know you both like this guy’s nuts.

Scott:
I love it. I just love his expression on that one.

Ramit:
Yeah, I know. He’s like, “You are making a wrong call.” You’re probably right Mindy, this is a terrible decision, but we got to do it. You got to do it once.

Mindy:
Design, yes.

Ramit:
So then another one of them was, I want to write part of another book in a beautiful hotel. Again, I love hotels, I love being taken care of and a lot of writers, that’s a historical thing. Great. I want to do that. You know, my wife had her own, she wants to learn another language she wants to do X, Y, Z. First of all, this is just a fun conversation. Oh my God, you want to do that? No way. That’s crazy. Oh my God, we should do that this year. We’re having a lot of fun. And then I said let’s pick one of these things and let’s see if we can actually put some money behind it.
So she was like, “Okay.” So we have a vision that for our 10 year anniversary, we’re going to have a big anniversary party abroad. And we were inspired by our friends who had a 10 year anniversary in France. And we said, “Who does that?” And then we thought, “You know what? Life is too short. We want to celebrate more.” So 10 years we want to bring all of our friends and family to this beautiful spot. We know it, we have the vision. I said, “Babe, how much do you think that’s going to cost?” And she had no idea. I said, “Just ballpark it. Let’s just both write down our numbers.” So we take our piece of paper and we write down a number. Again, no research at all, just back of the napkin. Funny thing was my number was like multiples larger than her number, way bigger.
And she was uncomfortable. She goes, “There’s no way. We’re not going to spend that much money.” And again, in my head, I’m sitting there doing compounding exercises and I know all the math and stuff. And I go, “Here’s my thinking. If we have two different numbers and these are the things that are going to comprise our 10 year rich life vision, if we have two different numbers, why don’t we just pick the bigger number? Because even if we only get 70% of the way there, that’s still amazing, what an accomplishment. And second, I really think that with eight plus years, we can save and invest more than we can dream if we’re successful, and if we work hard and if we’re lucky.” So she was a bit uncomfortable, but she goes, “Okay, fine.” What we did, and this is what I would encourage you to do is we picked roughly three to five things that are really meaningful for us, meaningful in the next 10 years.
So one of them would be that, for a lot of people it might be taking a dream vacation to Italy, whatever, and you ballpark the prices. I really mean it because people get hung up on the precision of, “Oh my God, how much is the train going to be?” Irrelevant, we’re talking about a 10 year lifespan here, pick within 10,000 or even $30,000. And over 10 years, especially with compounding, it’s sort of marginal difference. Guess what? Now, when we have our monthly financial meetings, we have, of course our expenses, and I can talk about how we go through this meeting. But the most exciting part of it is seeing our year wedding anniversary. How much do we need to save? How much have we saved? What’s our progress towards goal? And every month we’re like, “Oh my God, it’s getting closer. Oh my God, we can see the beautiful courtyard and our friends are going to come there for the first time.” That is a rich life. That’s how you keep your partner and you excited about joint money. I love it. Is

Scott:
I love it, does it compressed to like a 5.7 year anniversary party at some point with that? Or does the party just get bigger?

Ramit:
Yes, yes and yes, it definitely has gotten bigger.

Scott:
That’s awesome. I love it. And so what I want to point out here and if anyone listening has followed Dave Ramsey in the past with these types of things, he bring two dynamics to the world, the marriage or the partnership when it comes to money, the free spirit and the nerd with this, that he says, both, both are equally important. And I think what you’ve said, what I’ve gathered is you can feel free to shut this down if this is not correct, but it seems like you kind of approached it with, from a nerd mentality at first, where I’m going to come in and build my model and talk about it from these types of things.
And if you’re the person listening to Bigger Pockets Money, I have bad news for you. It’s likely that you are in the nerd camp, more so than your spouse, on this. And so what you’ve done here, and I think it’s a great tool is come up with an approach that the many spouses, nerd or free spirit, can embrace with this kind of stuff. And I think it’s a really powerful approach with that, but I also want to acknowledge that you’ve now referenced multiple times, that you have a model that you have a process.

Ramit:
Of course, I have a model. This model is the best, most sophisticated model in the world. I had to get to the model. I have the model deep inside me.

Scott:
You just don’t start with that when framing the conversation with your spouse, you start with the life you want to achieve and those types of things, and then you bring in these tools that we get really excited about, to govern the day to day and, and month to month progress against that.

Ramit:
So in, in personal finance, you see a lot of tail wagging the dog. You see people letting their tax tail wag the dog where they go, “I’m going to make this frankly dumb decision because of taxes.” Don’t let the tax tail wag the dog. You want to make good decisions, and then you deal with the tax implications of it, if and when you need to. Secondly, you see the tail wagging the dog with infrastructure, things like models, and how often am I checking my finances? You have people who are checking their finances every day. That is not even efficient, it’s just a bad strategy because a rich life is lived outside the spreadsheet. If you find yourself running the 10000th simulation, or if you find yourself tweaking your numbers again, and again and again, you’re living in this spreadsheet and a rich life is lived outside the spreadsheet.
A rich life is, we took that trip and we went to this beautiful place. And we didn’t even look at the prices when we ate out at a restaurant. Why? Because we planned for it well ahead of the time. Or we were having such a great time with our family, we decided to extend the trip by a couple of days. Oh my, what a luxury to be able to spend even more time with our family and everything was just worry free. That’s a rich life, the model, much as I love my model, I love it. I’ll talk about it all day. The model is just one of the means to get there. When we have our monthly meetings, I’ll talk a little bit about the structure. We have an agenda, we have a running Google doc, each person contributes to that agenda.
So if there are issues that we want to talk about or in, “Hey, do we have the right account?”, “Hey, I’m thinking about what should we do with these extra points?” We put it on the agenda. We sit down, we start off and we look at our expenses. I don’t want to act like we don’t look at expenses. Here’s how we manage our expenses. We set out buckets for the major categories of expenses. And when I say categories, I’m talking like there’s 10 to 15 categories. We don’t need every single category to be broken out, that’s over complex. The more advanced you get, the more you must fight for simplicity. We have multiple credit cards, multiple accounts, multiple businesses. It would be very easy to try to the last 0.5% for every single one. That is a huge mistake.
The more advanced you get, the more you must fight for simplicity. So we have about 10 to 15 categories. Groceries, we don’t need to break it out by 10 different categories. Just groceries is fine. And we have one called gifts. So we know every year we sit down at the end of the year and we have an annual planning and we’ll say, “Okay, who’s in our life that we’re going to give gifts to?” And with about 85% accuracy, you can kind of make a list. You have all these people you write and down, and then we just assume, okay, how much are we going to give is a gift for each person. And we try to make it consistent. Of course, maybe there’s some people you give more to or less to if they’re children or something, but we plan that out.
And then we just add on 15% just because we figure we’re going to forget somebody. Now it’s all bucketed. So there’s no surprise. I don’t want surprises in my life. I got enough surprises, I don’t want surprises in my finances. So it’s all planned for, and we sit down every month we look at it, we go, “Okay. Are our groceries over? If so, why? If it’s like 10 bucks, let’s not even talk about it. If it’s, I don’t know, 300 or 800 over, “Hey, what, what happened there? What was going on?” Oh, okay. We didn’t plan.

Ramit:
Hey, what happened there? What was going, “Oh, okay. We didn’t plan that we were going to need to do this party or something,” and we just adjust. You can get most of the way there. I will tell you that when we look at our expenses, we spend probably three minutes on it, maybe less, because everything has kind of been pre-planned and bucketed, and we spend more of the time talking about the bigger picture, the rich life, where we want to go, that kind of stuff.
Do you have this process that you just outlined documented anywhere? Is it in a book, for example? Do you have a downloadable anywhere?

Scott:
It’s coming. It’s coming.

Ramit:
But I will tell you this, the emotional side of it, which is actually the most challenging part of it, the emotional part where the two people talk, that’s what the podcast is about. So I’ll tell you, when I started going through my conversations with my wife, I did not need another blog post saying, “Communicate. Have the conversation.”
I was like, “What conversation? I want to know exactly what words to say. Tell me how to do it,” and there was nothing out there.
So I started talking to my friends and other couples I knew, and they were telling me these crazy ways that they manage their money together, like absolutely bonkers. I’m taking notes, right? And I’m like, “This can’t be real.” I’m talking to more and more people. Yes, it turns out the way that couples do money behind closed doors is truly unbelievable.
So I started offering to help people, and I did it a couple times. I started off with a very simple Instagram live video, where I had a couple. They were both veterinarians and they had something like $550,000.00 in debt. Vets have the most debt of basically anybody, and it was really heartbreaking, but they were both committed to making a change.
Then I started to help more couples, and when you hear… Just think about it. When the last time you heard a real couple sharing real numbers about how they manage their money? Never. It happens on TV, but you’ve never heard a couple and they’re crying or they go, “Look, we have enough. Why are we still arguing over this?”
Because of my reach, and people trust that I want to help them, they started coming on the podcast and they use real numbers. They share everything. And suddenly you can hear how these couples are managing money and where they are stuck. They’re constantly talking in the same way. One of them is over-logical, or they’re just spinning, and if you can just help un-crack them for a second, oh my gosh, the relationship, they stop fighting about money and they actually start rowing in the same direction like partners. It’s a beautiful thing.

Scott:
Love it. I mean, that’s what we’re all about here as well with this. Right? And with our Finance Fridays and our money stories with that kind of stuff is walking through those journeys and saying, “How do we get to the next place? How do we zoom out? How do we think strategically, not tactically?” Right?
I mean, how many times do you talk to people and you find that they think that financial preparation is tracking every dollar to every place, and it is, and you have to do that, but that is one element. It should take you a few hours to set up initially, and then a few minutes a month to figure out all the loose ends that don’t fit neatly into your buckets, and then a three minute conversation, as you described, while I focus on, “Hey, great. Over the course of this year, I’m going to accumulate $10,000 or $20,000 or $30,000, or whatever it is in investments, and how am I going to allocate that?” That’s a much bigger decision.

Ramit:
Way bigger.

Scott:
That’s a $50,000.00 to a $100,000.00, $200,000.00 decision over a 30 year timeline, to your point with that. Right?

Ramit:
Yeah. It’s like people saying, “Hey, I really want to meet somebody. I want to get married. Okay, should I buy this type of shoelace or that type of shoelace?” Who really cares? Get the shoelace, and then let’s talk about other things which are much more influential.
Mindy, I wanted to come back to something you brought up. Your friend had observed that a lot of couples that I speak to on the podcast have not combined their finances. Can I tell you my suspicion on this?

Mindy:
Yes.

Ramit:
A lot of us think that people are intentional and strategic with their money, that these couples, for example, have chosen consciously not to combine their finances. I don’t believe that at all. I think that most people use momentum as their strategy for money. They did something when they were young. They keep doing it when they’re older.
Most of the couples I speak to, some have combined it, some have not. The ones who haven’t combined it, for the most part, it’s just life has gotten in the way. They never sat down and said, “You know what? Should we combine it? I don’t know.” They just went on as independent people, and then they got married, but they didn’t change their accounts.
And I don’t really mind if they have separate accounts or not. Again, what works for them is fine. I do recommend that they have a joint account, not because I think that the joint account in and of itself makes them successful. I want them to have the conversation, the intentional conversation about their finances.
And you will find that when most people do have the intentional conversation, they go, “Hey, it actually would be a lot simpler and probably better for us to have a joint account.” Some people decide not to. Whatever. That’s up to them, but I want them to have a series of conversations about money where they get deep, and when they do that, then they’re starting to be more intentional, but most people are not.

Scott:
I love that, and I think that impacts not just money with your spouse, but every aspect of finance for a lot of folks. Right? “Hey, that’s the investment approach I’ve been doing all this time. I’m going to stick with it. Hey, this is the career trajectory,” even when you can zoom out and clearly see exactly what’s going to happen over the next 10 years, and that that’s an unacceptable outcome. You can’t do that unless you’re able to pop out and zoom out and reconsider essentially everything as it comes to money and many other parts of life as well with that.
So I think it’s a great framework to think about and why this vision exercise can be so powerful, because it says, “No, no, no. I’m going to pop out. I’m going to say what I actually want to get to. How do I get there?” And then that leads to changes in every area of life essentially. It leads to changes in how you conduct your day-to-day with exercise and how you handle relationship conflict and how you handle your spending and how you handle your investing and what career decision you’re going to make with these types of things. It should impact all of those things.

Ramit:
The zooming out is so important and it’s so rare. It’s so rare that we get the chance to step back and really look at our life trajectory. It’s so rare. The last time that we got that chance was probably in college when our semester ended, and we got a chance to say, “Ooh, what do I want to take next semester?” But now we’re in this life that’s so overlapped and it has so much legacy in it, legacy decisions, that we rarely get the change to step back.
I’m going to share a story about a couple I spoke to. The title of this episode is, “Money is overwhelming, so we find instant gratification elsewhere.” This is a couple where mom stays at home and she has children. Dad goes to work and he comes back. He’s tired, she’s tired. They order takeout, knowing that it’s not really particularly healthy and it’s pretty expensive for them, and they acknowledged that they just don’t feel in control of their money.
And as I was listening to this couple really be honest, there are so many of us that are in this situation, where we’re operating on autopilot. Money is really not driving us towards a rich life. It’s just there. It’s something we use for instant gratification. So I have a lot of compassion for this couple.
So I really dug into why, what’s going on, and of course their first answers were, “We’re just tired,” but I never accept that answer. It’s always deeper, so I dig and dig and they came along with me. They were totally active participants. And in the episode, you discover some very startling things about both of their backgrounds, but here’s where the twist happened. I asked them to tell me about their rich life. And you know what they told me? They said, “We want to buy four cottages and rent them out.”
I said, “Beautiful. How come?”
They go, “Well, we want passive income, et cetera.”
I said, “I love it. Okay, great. What are going to do then?”
They said, “Well, eventually we want to be able to travel among them.”
And then I said, “Keep going.”
Turns out, they wanted to buy an RV and they wanted to take their children to this beautiful spot and look out on the stars, and take a one month trip to this particular place.
So first of all, I love the vision. I love it. Remember, you’ll never find me in an RV, but it’s not my rich life. It’s their rich life, so I love it. Mindy, you’re never going to find me with a… I didn’t even know people have multiple bikes until you told me this like 10 minutes ago. Not going to happen in my life, but I love that that’s your rich life. Just like you, you’re not into hotels, it’s my rich life.
So I loved hearing this couple articulate it, and I said to them, “Guys, how long until you can do this?”
And they just stopped, just stared at me, because as Scott pointed out, they have never stopped and zoomed out. And I calculated for them, just rough back of the napkin, that their kids would be something like 60 years old before they could ever take this trip. They’re going to be long dead before they can ever take this trip the way that they have envisioned it.
So I challenged them. I said, “Guys, what do you ultimately want to do?”
They go, “Well, we want to take the RV trip with our kids.”
“How old can you take your kids when they still want to hang with you?”
“10 years old, maybe in the next four years or whatever.”
“Great. Could you just rent an RV?”
“Yeah, I guess we could do that.”
“Could you just skip the whole cottage’s thing?”
“Yeah, I guess we could.”
“And instead of taking a month, could you maybe take two weeks and just go out in the stars and have a beautiful time?”
“Yeah, I guess we could.”
Suddenly this couple had a reason to save. Suddenly when they came home from work, they weren’t just berating each other. “Why’d you buy takeout?”
No. They go, “You know what, babe? Hey, let’s actually do some meal prep on Sunday? Why? Because we get to take our kids to this beautiful campsite in 18 months. Let’s do it. Let’s do it together.” That’s a rich life. That’s a system. That’s deciding what your vision of a rich life is, and this couple really did a beautiful job in seeing how they could use money to create their rich life.

Scott:
Well, I love it. I think that it comes back down to, if you don’t know what you want, you’re going to just kind of wander along this whole path with it. It’s not even a finance concept. It’s, “What do you want?” And then how does finances play one tool, or play one part into that journey with that? That’s the hardest question for most people, is figuring that out with it.

Ramit:
Well, yeah. And many people teach us how to save, but nobody teaches us how to spend. Think about that. You ask a lot of people, “If you had a million dollars more, what would you do?”, and you’ll hear it. A sizable number of people in the personal finance community will say, ” I wouldn’t do anything different. I would invest it.”
I’m not impressed with that answer. I actually find it a little disappointing. The idea that you don’t have a vision for what you would do if you had $100,000.00 or a million dollars, if you don’t have that vision, then you’re not going to do it. And it could be, “I’m going to donate it to a local charity and I’m going to set up their budget for the next 15 years.” That’s a vision. I love it. It could be, “I’m going to buy every bike there is in this shop.” That’s a vision. It doesn’t matter to me what your vision is, but I want you to have a vision.
So if you are surrounded by advice that’s constantly telling you to cut, cut, cut, or save, save, save, yeah, okay, good, you should do that, of course. You should have a high savings rate. I believe in that, but you also got to learn how to spend. That’s a skill and that’s what I’m teaching.

Scott:
I want to push back a little bit on this one, because I agree. There’s no point in accumulating wealth over a lifetime for just the purpose of accumulating wealth and saying, “I’m going to be 60 years old with $20 million in the bank and scrutinizing my Safeway receipt for the carrot bill,” as you described earlier.
But I think that a lot of young people… I couldn’t have told you what I want to do with my life when I was 18, 19, 20, 23, 24. I’m starting to form that picture right now with that. I’ve gotten more vivid with that in the past year, as we kind of noted earlier in the show. But I think that, if you don’t have a reason or a why yet, you don’t need to be like, “Oh, I’ve got a form that right away before I figure things out.”
It’s better. I would argue that if you don’t know what you want to do with your life, go fire. Go all out and build towards that financial independence position with that, take some trips, do what you need to do to figure that out. But you’d rather have a pile of a few hundred thousand dollars and a really strong start in your late 20s, early 30s with that than not have that if that’s something that you’re going through early in life and haven’t figured out your life mission quite yet.

Ramit:
Okay. Provocative point, and I’m going to partially agree, partially disagree. So I think that I don’t believe that you have to create this grandiose vision when you’re 18, 20, even 40. I don’t believe you need a gigantic vision doc. I hope you get there, but it starts off with really simple things.
When I was in my early 20s, a rich life to me was being able to order appetizers, simple, because I never could when I was a kid. $10.00 and I felt rich, and it was being able to take a taxi if it was a hot muggy August day, not having to get on the subway if I was going to a meeting. Rich. $2.75, nothing, but over time, I’m building a practice of saying, “What is my rich life in this season of life?” Okay? And so, over time, it was traveling more and it was whatever the case may be.
I like that. It did not involve writing down this gigantic vision doc, but it was just, “Hey, I’m going to actively save,” which I totally agree with you, Scott. Hey, look, if life is going to pass you by one way or another, you might as well save a lot of money and have something to show financially. But the classic mistake is that people save and they start becoming very obsessive about it. Why? Because it’s logical, it’s not emotional, and they’re surrounded by other people who judge them and evaluate them based on their savings rate.
Savings rate, nobody really gives a shit about your savings rate in the grand scheme. Don’t feel superior to anyone because you have a 46% savings rate. I’m not impressed by that. I’ll be much more impressed if you have a 25% savings rate and you have a clearly defined rich life, and the rich life could be I go biking for two hours every day. Great. Love it. And, “Hey, I’m willing to spend a little of my 46% savings rate on that.” Oh my God, that’s a rich life.
So I think you and I are somewhat agreeing. Yes, you should save. Nobody’s saying spend it all. No, you’re not expected to have a gigantic vision doc, but it’s a practice to learn how to spend and that practice changes over time.

Scott:
Absolutely. I can’t argue with that, with those types of things, but one more push on this point, and I don’t know how to think about from my personal perspective, but I didn’t know what I wanted with all this kind of stuff, but to me, a rich life… Actually, that’s not true. To me, a rich life was having fun with my friends on the weekends with that kind of stuff when I got started. Everything else was not a part of that, and so I went completely all out to get on this other side of the wealth equation, where I had assets that began compounding with that.
And I think for a lot of folks that we’ve talked to on the MoneyShow, that grind has occurred in almost every case, where there was a flip of the script or a fairly extreme pursuit of getting ahead with that until you crested the hill and there’s some passive income and everything’s automated and I’ve got a very sustainable long-term situation, where I’ve got that growth trajectory going forward with that.
Well, what do you think about? I think that’s what you are digging at here in the finance community, is that this obsession, as you call it, with getting that savings rate over the hump, and yet, I’ve seen that obsession. I’ve been there. I’ve been the definite example of all out intensity and pursuing fi.
And I think, yeah, it’s not healthy to sustain that for a lifetime. But is it healthy to sustain that for a one to three year period while I’m getting out of debt and building my first $100,000.00 in net worth so that the rest of my life can be across that spectrum, versus taking a 5 to 10 year journey, which inevitably can result in the wealth being in the wrong place? It’s all in the home equity or the 401k with that kind of stuff, so think about that.

Ramit:
Scott, I love it. I love these. This is super provocative. Okay. I’ll answer your question directly. Is it better to do it for one to three years, and then have some accumulated asset base that can grow for a long time? Or to stretch it out for five, which might turn into 10 years? Yeah, it is better to do that. The problem is, most people, I’ll say some people who do that one to three year sprint end up turning that sprint into their life marathon, and you and I, we all see it every day in the personal finance community.
So on the other hand, if we step out of the financial community, we see a lot of people, they don’t know what a Roth IRA is and they don’t know what compound interest is and they have 0% savings for their entire life. That’s bad as well. Okay? So I don’t want overspending, but I don’t want over saving as well.
You can save too much money and it’s a very hard habit to get rid of. And I actually don’t need to talk to the people who are under-saving. I mean, I already talked to them. Read the book, “I Will Teach You To Be Rich.” Every single financial commentator in the media is like, “You need to save more money. Stop buying lattes.” I don’t care about any of that. $3.00 makes no difference in anybody’s life. Focus on the $30,000.00 questions, negotiate your salary, start a business, invest early, compound, all that stuff. But I think that there’s a neglected group of people. A lot of people who have saved, they have a 401k, particularly in the last 10 years, their investments have skyrocketed, and they go, “Hey, I started this sprint so that I could get out of debt or make some amount of money. I made the money. I don’t know what else to do. So you know what I’m going to do? I’m going to keep sprinting.” And when you keep sprinting, what happens?
Well, after a certain amount of time, you fall down and collapse, and I don’t want people waking up at 60, 65, 70 going, “Oh my gosh, I have this big asset base, but I don’t have the skills to learn how to spend it. I don’t have the time. I don’t have the body. My friends won’t come with me anymore.” It’s something that you can do as you are building your asset base. Even if it means you compromise on 2%, it’s worth it doing it along the way.

Mindy:
Yeah. So you’re saying all of these things and I’m thinking to myself, “Wow, I feel seen.” I am 100% who you’re talking about, because I don’t enjoy spending money. I have a very nice nest egg. My husband is retired. I could be retired, but I get to do this job, so why would I retire?
I grew up frugal. My mother’s one of eight. My dad’s one of seven. They grew up in the depression. They had no money ever. They never spent. I feel weird when I got out and spend $500.00 on a hotel room. Oh my goodness, Ramit, I’m never going to a hotel with you.

Ramit:
Mindy. First of all, okay. This is amazing. I think, nope. You know what? You don’t want to stay in a nice hotel, or let’s call it an expensive hotel?

Mindy:
No. I’m not that kind of person.

Ramit:
Oh, wait, wait. Hold on a second. Let me tweak that, because you don’t find value in a $500.00 a night hotel. I totally respect that. That is fine. However, when you say, “I’m not that kind of person,” that is an identity. I wasn’t the kind of person who could go into a store and buy a sweater without looking at the price tag. But guess what? I earned enough and changed my psychology so I could.
If you wanted to stay at a very nice hotel and truly enjoy whatever luxury amenities, you could be that kind of person, but you choose not to, which is totally fine. It’s not your identity.

Mindy:
You said, “Wanted,” and yeah, I don’t want to. I would rather do something else with my money.

Ramit:
I respect that. That’s conscious spending. But I don’t like when folks say, “I’m not the kind of person who X.” Well, think about it. You were born from parents who went through the depression and had large families. The kind of person you are is largely determined because of randomly where you were born. If you were born in a different country, you’d be a totally different type of person.
So I would much rather people say, “This is what I choose. It’s important to me. I’m going to spend extravagantly on those things, and I’m going to cut back, cut costs mercilessly on the things I don’t.” I also think it’s a tragedy to live a smaller life than you have to. It’s a tragedy. You have money. What is the purpose of it?
I talked to my dad. My dad was thinking about retiring. My mom had retired a while back, and he kept talking to me about his IRA and this and that. I looked at his numbers. He’s done fine. I said, “Dad, what are you going to do with this money?” And he wouldn’t give me a straight answer, so I finally… This is my joy in life, which is to get to talk to people about money and psychology, so I cornered him. I go, “Dad, what are you going to do with this money?”
And he finally said, “I don’t know. I guess give it to the kids,” meaning me and siblings.
I said, “Dad, we don’t want the money. We want you to spend every last cent of this money. Go, travel, buy whatever nice things, redecorate your house, buy a new shirt, whatever. Dad, we want you to spend it. That would give me the greatest joy, seeing you develop that spending skill.”
And so, Mindy, you don’t want to stay at that kind of hotel, I have no problem with it at all. I love that you know what you’re no interested in.

Ramit:
No problem with it at all. I love that you know what you’re not interested in, but what I would rather talk to you about is what are you interested in? And how could you turn that dial up if it’s… I’m just going to use the bike example, because you mentioned it to me. A lot of people go, “Well, I would buy another bike.” Okay, cool. You buy another bike. How could you turn that money dial up even more? Mindy, what would you do if you had to quadruple or 10x you’re spending on bikes? Tell me.

Mindy:
Ooh. I would keep my bike because it’s a perfect fit for me, but I would go on long distance bicycle trips.

Ramit:
Yes. And where would that be?

Mindy:
Around the country.

Ramit:
Yes.

Mindy:
Just randomly riding around.

Ramit:
Who would come with you?

Mindy:
My husband, my kids.

Ramit:
Ooh, and how would you plan this trip? Again, 10x spending on this. Look at this discomfort on your face. Mindy, why?

Mindy:
That’s all because first of all, I don’t any time. It would have to be in the summer because the kids got to school and-

Ramit:
Forget about that. Mindy-

Mindy:
And-

Ramit:
… the vision, stick with the vision. Stop thinking about the dollar amount, you have the dollars. Stick with the vision.

Mindy:
I do have the dollars. Where would I go? It’s you know what? A lot of it is time as well, but a bicycle trip doesn’t have to be super expensive. 10x, that’s a lot of money.

Ramit:
Yes. You have to spend 10x. I want you to play with this vision for a second. You have to.

Mindy:
Wow. This is going to be the most cringey podcast episode ever.

Ramit:
Why is it cringey for you to take the money you’ve worked so hard for and spend it on something you love with other people?

Mindy:
Oh, wow! That is a really, really, really good question. Whew. Why is it difficult? I don’t know. Because I just have been saving for so long.

Ramit:
Is this not what I’ve been talking about this whole episode?

Mindy:
Yeah. I just said this to you, I feel [crosstalk 01:10:55]-

Ramit:
You spend your entire life saving and then Scott, you see, people are not like you. Scott’s very unusual. Scott got out of the savings race. He also has this very clearly articulated. Most of us don’t, we save, save, save, and then we go, “Oh, shit. What am I going to do? Let me save more.” And-

Scott:
Yeah. Here’s how I thought about it. I’m going to get into the savings race. Why am I doing that? Well, because I don’t have another lever I can pull at this point. I don’t have any… I’m 23, I don’t have… At the time, I don’t have any skills around this. I don’t have any asset base to invest. I am already earning at the top of my income potential based on the fact that I took the highest paying job I could get out of college with that. So I have one lever with that. Then I’m going to invest in this house hack. I’m going to keep my expenses extremely low. I’m going to build an asset base. I’m going to get involved in a startup with this kind of stuff called BiggerPockets. I’m going to develop my career there with that kind of stuff.
But once you cross a threshold where your income sources are varied to a certain degree and there’s passive income with that, the point is to at least have the option to spend a tremendous amount of money. I may spend it… I spend a lot more money, three or four, five times as much money as I did when I was getting started on the journey. And that pattern may continue for the duration of my life. It may let ebb and flow, but it’s not about spending less. It’s for me, it was about getting the other side of this financial independence equation and then allowing the assets to balloon in essentially forever where my spending can be facilitated by passive income or a variety of income sources instead of just one, which is the job with that. So that’s how it was for me. And yeah, I will have no trouble spending a lot more money.

Ramit:
Scott, everything you said is the logical.

Scott:
Other things are going to layer in are going to be Teslas. That kind of stuff.

Ramit:
Everything you said, Scott is super logical and nobody else thinks like that. We can see the evidence right in front of our face. Mindy, can I come back to you? Can we just finish this exercise for second?

Mindy:
Sure, sure. Come on over.

Ramit:
Okay. Scott said something super good. He said it’s not about spending less. I want to finish the sentence with my phrase, which would be, it’s not about spending less, it’s about creating a richer life. Sometimes a rich life costs nothing, sitting in the park with your family, watching the kids play and having a nice picnic. That is a rich life. That’s beautiful. Okay. I am not only telling people you have to spend all your money on all this extravagant stuff. No. However, on the things that matter to you as Dan Kennedy said, “Why spend less? When you can spend more, when you have the money, when you’ve saved for it.” At a certain point, you say to myself, I have won the game. Mindy, do you believe you’ve won the game of money?

Mindy:
I do believe that I have won the game of money.

Ramit:
Okay. Love it. Thank you for saying that. That’s amazing. That’s very rare for people to admit. Now, let’s go back to the biking thing. You mentioned your family, which I love because the more successful you get… At a certain point, you can’t spend it all on yourself. Okay, you get a nice car, but ultimately you got to bring some people along with you. Family, friends, or charity, or even just tip so big tips. So let me just propose something to you, Mindy. You mentioned you like to go on bike trips. How long are these trips typically?

Mindy:
Well, typically, it’s not that long because I have a job.

Ramit:
Okay. Forget the job. Let’s take the constraints out of this. Pretend time is not an issue. Part of visioning is we got to take the constraints out of the equation, because most of us let constraints drive our lives. How long would your rich life bike trip be?

Mindy:
Probably, two months.

Ramit:
Whoa! Okay. Love it. That’s amazing.

Mindy:
Do cross-country.

Ramit:
Oh, okay. And by the way, Mindy, do you want to stay in the country or might you perhaps like to bike around Italy with your family?

Mindy:
Maybe like down the road, but I’d really like to do the US one again.

Ramit:
Okay. Beautiful. And what could be different about this? Are you going to be planning your route, making your food, stowing your bikes? What might make it a little more rich life experience for the family?

Mindy:
Staying in hotels or having an RV where we had a comfortable bed as opposed to camping. I did this once before and we camped the whole time and I didn’t get a ton of sleep. And you kind of need a lot of sleep when you’re biking all day long.

Ramit:
Okay. So suddenly, she’s staying at the same hotels I talked about just 10 minutes ago. Okay. Mindy, I’m going to see you at one of these hotels. I like it. No, I’m just kidding. You want to stay at hotels, it doesn’t have to be the most expensive, but hotels. What else? What about the food? Does your family like food?

Mindy:
Yeah, we eat quite a bit.

Ramit:
And would you call yourself foodies or no?

Mindy:
No, we just… I mean, I like good food, but I’m not a foodie.

Ramit:
Okay, fine. So food isn’t a big thing. What else? What’s the moment, that magical moment where you and your family are there outside? And you’re biking, yes, but maybe you stop and what is it? There’s a fire pit set up. And I don’t know how many you’re in your family. I’m just going to make it up. Four of you are out there and what’s happening in this beautiful vision, this moment where none of you will ever forget it?

Mindy:
We’re just talking. We’re just having a good conversation and enjoying each other.

Ramit:
Is anybody there maybe joining you as a surprise, relatives, friends?

Mindy:
I don’t think so. I think it would just be the four of us.

Ramit:
Okay, good. So this is two months of this. Give me an emotional climax moment because I love the vision. Every night you have family time, you have a hotel, you wake up in the morning. The food is fine. It’s not a big thing. You get on the bike. I love that. That’s a beautiful vision. I want a couple of moments that are just like, “Oh, my God. Mom, I’ll never forget when…” What?

Mindy:
We saw a moose off in the distance, so it’s not going to come get us. But we saw a moose. We saw a bear. We saw-

Ramit:
Love it.

Mindy:
… just beautiful sunsets and look at the mountains and look at the… I rode my bike down the mountains and it was so awesome.

Ramit:
I love it. And do you want to have any photos of this trip?

Mindy:
Yes. I’m not that great at taking photos, but my husband takes pictures of everything.

Ramit:
And is your husband in the photos?

Mindy:
Not that frequently, actually.

Ramit:
Yeah. Wouldn’t it be nice to have a beautiful professional photo of your family with the sunset behind you?

Mindy:
Yes.

Ramit:
Probably, [crosstalk 01:17:25] your family forever-

Mindy:
But we could just set up a tripod too.

Ramit:
What was that?

Mindy:
We could just set up a tripod too.

Ramit:
Mindy, you could do a lot of things. I can visually see you shrinking outside of the camera range. Can you tell me what’s going on with you?

Mindy:
This is uncomfortable.

Ramit:
Why?

Mindy:
Because I don’t think about things like this.

Ramit:
Yeah. And what do you think about instead, Mindy?

Mindy:
Savings.

Ramit:
Mindy, you save, you already won. You have enough.

Mindy:
I know.

Ramit:
It’s time to shift into learning how to spend it and this skill, you can see it. By the way, I hope everybody can see this, because I think you have a lot of courage to do this with me. This is really hard stuff. So many thank you. You’re being very courageous. You’re changing not just your own way of thinking, but what was passed down to you from your parents and possibly their parents. And here we are. Look at this, we’re talking about maybe hiring a photographer. It would cost $500. It would cost nothing. It would be a memory in your family for generations. Mindy, you’re having the courage to discuss this. You think you’d have the courage to do it?

Mindy:
Wow. Put me on the spot. This is my show, not yours. We are slowly getting more comfortable with spending money, but it’s hard.

Ramit:
[inaudible 01:18:54] something you’ve been thinking about it one way for your entire life, and it’s served you well, you’ve done exceptionally well. My dream for you is not that you suddenly unleashed the floodgates and start spending it all this crazy way. That’s not my dream for you. Everything we talked about, Mindy was about a beautiful vision of you and your family on a bike trip. And I love it. I love that. For the most part you said, “Look, I’m not really interested in like fancy hotels. Food is whatever, it’s just fuel for us. I just want to be out with my family.” I think that’s beautiful. All I did was push you to think just a little bit bigger. And we got to the point where your husband takes photographs, but he’s not in them. And I think I would love for your husband to be in the photos with everybody else too.

Mindy:
I would too.

Ramit:
Thanks for doing that with me. That took a lot.

Mindy:
Yeah, thanks. Great.

Scott:
Well, I think what’s phenomenal about that kind of thing is that if you push yourself and think through those things, like you don’t have to quote unquote, have won at money to have an experience like that at that point. And I think that brings you back to Ramit’s highest level point with this is that figuring out what you want and what is truly going to make you happy with this kind of stuff and starting with that and then backing into it. You can arrive at these out outputs much sooner in life with that kind of stuff.

Ramit:
Yeah. It’s joyful. It’s joyful to see. And Mindy, I know that this is a challenging conversation, but to me, I only had this conversation with you because I could tell from our conversation that you’ve arrived, you have won and now, there’s room for that next chapter of your life. To me, money is joy. It’s joyful. They say money changes people. Have you ever heard people say that? Money changes. They always say it negatively. Yeah, money does change people. It changed me. It allowed me to be more adventurous, to dream bigger, to try new things, to bring other people with me to be more charitable. And I think that for everybody listening, money should change you. In fact, you should use money to change even today. It could be a $5 purchase. It could be a $5,000 purchase, but all of us have something in our life that would profoundly change. And often it’s not even as much as we think, but if we start with that rich life vision in mind, then money is simply a way to get there.

Scott:
I love it. Well, with this powerful note, I think we’re in a pretty good spot to maybe transition in the episode here. But are there any other points that you want to discuss, Ramit before we begin wrapping up?

Ramit:
I’d like to issue a challenge for everybody listening. Everybody listening, I call it the $100 challenge. I would like for you to think about something you love. And I would like for you to spend a hundred dollars in the next 48 hours. Now, here are the rules. You’re not allowed to spend it on your kids. You’re not allowed to spend it on your pet. You’re not allowed to spend it on anybody else. It’s only for you. And if you have a high net worth, I want you to adjust that number upwards. I spoke to a couple on my podcast. This episode is coming out in just a couple of weeks. They have an $8 million net worth and I issued the same challenge to them. They adjusted the numbers upward. So it’s up to you.
The point is I want you to build the skill of spending and I want you to write me, send me a DM on Instagram, or if you’re on my email newsletter, send me an email. My email’s all over there. I’m on Twitter as well. I want to hear what you did with your hundred dollar challenge. The point of this is to show yourself, you know what? I’m worth it. I can spend on myself. And when I do spend 100 or 500, whatever the number is you choose, the world is not going to end. My retirement is not going to fall off track. I can do it. And I can experience satisfaction, happiness, convenience. $100, that’s what I would like to issue that challenge to everybody listening.

Scott:
I love it. Whew. Ramit, where can-

Ramit:
Okay. I got to say-

Scott:
Yeah, yeah. I’m going to take that challenge as well and think about it and probably just up a little bit, like you said. Ramit, where can people find out more about you?

Ramit:
You can find me at iwt.com. I have a newsletter there with hundreds of thousands of subscribers. I send out lot on money in psychology. I’m on Instagram, @ramit, Twitter, @ramit, and my new podcast is called I Will Teach You To Be Rich with Ramit Sethi.

Scott:
Awesome. Well, we will link to all of those things at the show notes at biggerpockets.com/moneyshow. Oh, what? 243.

Mindy:
243.

Scott:
Money show 243. And you can also go directly to the links that Ramit just mentioned right there. Ramit, this is a really powerful episode. We love having you on the show and you’re welcome back anytime. And, we always learn a lot from you and get new perspectives from this. So thank you for sharing this and for bringing your mastery of money to our platform. We appreciate it.

Ramit:
Thank you. It’s an honor.

Mindy:
I do appreciate your perspective and I know you’re right.

Ramit:
Thank you. Thank you, Mindy, for really being all in with our conversation. That was quite amazing.

Mindy:
Well, thank you again for your time, and we’ll talk to you soon. Okay. That was Ramit Sethi, near the end of making me cry because money can be kind of tough.

Scott:
That’s right.

Mindy:
Scott, what did you think of the show?

Scott:
Well, I think it was great perspective with that, and I have not perceived it as a major item about, “Oh, hey, once you get by and get way on the other side of this finance equation and have more money than you need with these types of things, the challenge of figuring out how to spend it,” which I think Mindy, you and I may, or both be lucky enough to have that problem and need to kind of factor that into these types of things with that. I think it’s a great philosophical challenge. And I think this is the context of a great problem to have with it. It’s emotional and it’s powerful because it’s your life and all those types of things. But man, I hope that everyone listening can come in and have this type of challenge to look forward to in the future with these kinds of things. How do I use my net worth and my wealth to build that life and those memories that I want for me and my family.

Mindy:
I really liked his 10 year budget list vision conversation, where he said to his wife, “Let’s take one of these budget items or bucket…” I said budget list, I meant bucket list. “Let’s take one of these items from our bucket list and put some money behind it. Let’s make it happen before 10 years from now.” And that is whew. Now, that’s something I’m going to have to think about, Scott and that I left all of this in to the final recording, just because I want you to know that even though I spend all day every day talking about money, it still could be a really difficult conversation. I would love to be like, “Oh, I’m super perfect,” but I’m not, and it’s tough. And like you said, this is your life. And once you get past the I’ve always done it this way so that’s how I’m always going to do it. If you can get over that hump, then you can start looking at different ways to utilize, like you said, the tools in your toolbox to live your rich life.

Scott:
Absolutely. I do want to point out a couple of resources that we have curated over the last couple of years, that might be helpful for folks listening. One of those is at biggerpockets.com/moneyshow157, Mindy and I docked about a money date and there is a template in the show notes there again, biggerpockets.com/moneyshow157, or you can find a money date template that is downloadable. And it’s got a draft for your vision. It’s got an outline of talking points for the money date itself. It’s got a template for tracking spending, and reviewing spending and talking about patterns and how finances can tie into that vision. So it’s a little different, a little spin on what Ramit shared with us today, but that is a resource for you if you’re looking to do that. And then also with Ramit’s challenge, the hundred dollar challenge. With that, feel free to share your update on how you might have done that in our Facebook group at facebook.com/groups/bpmoney, or there’s a discussion section in the show notes at biggerpockets.com/moneyshow243 for the today’s episode.

Mindy:
He said, “Notice I said, conversations, not conversation. This is not the place to be efficient,” in the show earlier. He said, you’re going to be having these conversations for 30 years. And I really, really, really loved that. He pointed that out. My husband and I have ongoing money conversations. We don’t sit down and have a specific time to talk about our budget, but I think we should. We talk about it all the time, like multiple times a week. It’ll come up, it’ll be a three minute conversation. It’ll be a five minute conversation.
And we are at that point now, but I really liked his end of year money conversation and budget review, where they go over the past spending. And they’re like, “Okay. I think we’re going to spend about this much next year, and let’s add 15%.” He is in a place that he can do that. I am in a place I can do that. And I’m very curious to see how my 2022 budget shakes out. This might be a rather interesting next couple of months as I figure this out. And maybe I’ll even post that. What do you think, Scott? Maybe I’ll even post my budget projection and keep up with it in real time to see how I’m actually doing. That might be a really interesting exercise.

Scott:
Yeah. That could be really fascinating with that. I’m sure a lot of people would benefit from that.

Mindy:
Okay. Well, Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
From episode 243 of the BiggerPockets Money podcast. He is Scott Trench and I am Mindy Jensen saying peace out trout.

 

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In This Episode We Cover

  • Combining finances as a couple and creating a shared vision
  • How much to keep in your personal and joint bank accounts 
  • Creating your “worry-free” number that allows you to live life without money stress
  • The “money rules” that Ramit uses in his daily life
  • Getting over your “savings rate obsession” and finding joy in spending
  • Why spending can become painful for those who are on the road to financial independence
  • And So Much More!

Links from the Show

Book Mentioned in the Show

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