Episode #111: “We rushed into buying a $730K house. Now I can’t sleep at night”

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[00:00:00] Jonathan: We put the offer down in the house, and literally, I woke up the next day, and actually, for the two weeks before closing, almost every night I had panic attacks. Yeah, crazy level of anxiety. The psychological burden of debt for me, I don’t know, I felt it in my body in a very real way.

[00:00:20] Shalom: We weren’t at the healthiest place. On the other hand, he had to make a financial decision. So a lot of the conversations we had was, I’m doing this for you, but do you want it? 

[00:00:33] Ramit: What was your monthly payment on the place you were renting right before this? 

[00:00:38] Jonathan: We’re paying about 1,800, um, per month for rent.

[00:00:42] Ramit: And now what are you paying?

[00:00:44] Jonathan: We’re paying 4,150. When I put my head down my pillow at night, it’s like, okay, so even if all the numbers work fine, this seems like there’s this huge liability of the house hanging over my head. 

[00:00:55] Shalom: I have this big picture of like, oh, it’s fine. We’ll be fine. And the stress is on him because he does everything for planning, and finance, and all of that stuff, and I don’t. So I live with peace, and he loses his sleep.

[Narration]

[00:01:09] Ramit: Meet Jonathan and Shalom. Jonathan is 31, Shalom is 27, and they’ve been married for five years. He works in tech as a program manager, and she is a nurse having recently finished her second degree. What we’re going to talk about today is how they have started to disagree about money when it comes to their house.

They recently bought a house, and I want you to hear the way they talk about money and about things like getting a couch because so many of us will have the exact same conversations at some point in our lives. As always, remember that you can watch this full episode on YouTube, which is quite entertaining to see the facial expressions and body language. All right. Let’s get to it.

[Interview]

[00:01:54] Ramit: Why’d you guys buy this house, by the way? Oh, I can’t wait for this.

[00:02:01] Shalom: I’ll let you speak. 

[00:02:02] Ramit: They’re just laughing. 

[00:02:03] Jonathan: You’ll let me talk?

[00:02:04] Shalom: Yes.

[00:02:05] Jonathan: What made us make the leap?

[00:02:06] Ramit: Yeah.

[00:02:08] Jonathan: Yeah, so I think–

[00:02:10] Ramit: Wow. There’s a lot of smiles going on right now. What in the hell is happening? Everybody’s looking down. 

[00:02:16] Jonathan: I was originally super against buying a house, but I agreed, let’s at least see what’s out there. Be open-minded. 

[00:02:25] Shalom: When we first started looking for a house, we did it as a date thing.

[00:02:30] Ramit: Okay. Like Sunday date, let’s just go see what’s around.

[00:02:33] Shalom: Saturdays. Why don’t we do open house and see what’s on the market, and how much it is, and what the process is? Because I don’t know how– buying a house– my parents don’t own a place or a house, a property in the US. So, um, we started attending open houses, and it just went really fast. And we saw this place, and then we had to buy it a week after.

[00:02:56] Ramit: The two of you were like, oh, let’s go on date night today. What do you want to do? I want to go to ice cream. I want to go to an open house. And then you blink your eyes, and you tripped and you fell, and you handed over $500,000 or something. It’s the most expensive fucking date night in history. 

[00:03:14] Shalom: And I think when we had the conversation– housing is so expensive in Seattle, and this was on the lower house market. And if we ever buy a place, this might be the lowest price we would get for the area we’re in. And that was the rational I had, if we end up having kids, that we’re going to need a place that’s bigger than just an apartment. For our freedom too. We both grew up before I came to the US, or Jonathan also grew up with a big backyard. And we had a very good memory just playing outside and running around.

For me, I want to be able to do that for the kids we’re going to have, and I don’t want to waste kids in an apartment, a very tight area. With that emotion, though, I think we rushed into, hey, we need to get the house, and whatever we can with the budget or with the price that we can buy it now.

[00:04:18] Jonathan: Things go very, very fast. You start looking at houses, and then you get into negotiations, and then things go very fast. The house we were looking at, someone else had an offer down. So I think it’d gotten like, how can we win the house? And then the issue is once you put your money down, uh, put big earnest payment, then–

[00:04:42] Ramit: What was your first bid for the house?

[00:04:44] Jonathan: Um, so our first bid was originally going for 700.

[00:04:47] Ramit: Uh-huh. And what’d you end up getting it at?

[00:04:55] Jonathan: Uh, we had to counter the full price.

[00:04:59] Ramit: Full was what?

[00:05:00] Jonathan: 730. I don’t think I realized just financially, um, and emotionally everything that goes into buying a house?

[00:05:06] Ramit: What do you mean? It’s just, uh, you look at the internet, and everybody says you buy a house, and then it prints money, and then if you don’t like it, you just rent it out, and that’s how you create generational wealth. Are you telling me they’re not telling you the full story, Jonathan?

[00:05:20] Jonathan: No, and I did run the numbers as it were. Yeah, I would just say that there’s things that you’ll look at in a spreadsheet, and it works out. The numbers may work, but just the psychological element of being in that much debt and then how there’s– fixed costs are not the same thing as, uh, your other money. It’s required of you every single month.

[Narration]

[00:05:48] Ramit: All of this is hilarious, and I really like Jonathan and Shalom, so we’re all having fun. One thing I do want to point out is that offhand comment she made about, if we have kids, we’re going to need a bigger place. And we grew up with a lawn, and it has so many good memories. It is no accident that when people go through life changes in America, they all say the same thing. 

I’d rather have a small wedding and put a down payment on a house, or we’re having kids, so we need a bigger car and a house with a yard. Do you find that interesting? Do you think that every one of us just independently came up with the exact same phrases? Do you think that other people in other countries say the same things? Or do you think there might be a series of organizations who stand to profit from you believing you need to spend hundreds of thousands of dollars at a very specific time in your life? 

Just remember, these peculiar beliefs about money pop up in very specific circumstances over and over again. If you decide you want a house with a lawn or a certain type of car, fantastic. If you can afford it, you run the numbers, and it’s joyful to you, great. But do not simply slide into someone else’s idea of a rich life. 

[Interview]

[00:07:02] Ramit: What was your monthly payment on the place you were renting right before this?

[00:07:07] Jonathan: Yeah, that was part of the thing that was really stressful. So we’re paying We’re paying about 1,800, um, per month for rent. 

[00:07:15] Ramit: 1,800. And now what are you paying?

[00:07:18] Jonathan: We’re paying 4,150, which I didn’t put on the plan, but next year, it’s going to be going up 500, and then the year after that, it’s going up 500.

[00:07:28] Ramit: No, no, that can’t be, because everybody tells me that real estate allows you to lock in your price and you never pay more. That’s what the internet told me. Uh, and by the way, your utilities cost 400 bucks a month, right? Let’s not forget that.

[00:07:40] Jonathan: Mm-hmm. 

[00:07:41] Ramit: All right. That’s a considerable jump. You went from 1,800 a month in rent, which was all in. That’s how much you paid. That was it. To now, 4,500 plus assorted phantom costs that haven’t even really been added. Let’s just say, I don’t know, four, 500 bucks extra a month. Ballpark. That’s a huge jump.

[00:08:03] Shalom: Mm-hmm.

[00:08:04] Ramit: More than double.

[00:08:06] Jonathan: When I put my head down my pillow at night, it’s like, okay, so even if all the numbers work fine, this seems like there’s this huge liability of the house hanging over my head. It’s just like those things, like flood, there’s mold. I mean, there could be a tornado hits the house. I mean, and it is one of those things where, um, I feel that weight.

[00:08:28] Ramit: Shalom, what happens when your head hits the pillow? Are you thinking about the spreadsheet?

[00:08:32] Shalom: I fall asleep. No.

[00:08:34] Ramit: It’s so interesting. 

[00:08:36] Shalom: I have this big picture of like, oh, it’s fine. We’ll be fine. And the stress is on him because he does everything for planning, and finance, and all of that stuff, and I don’t. So I live with peace, and he loses his sleep. 

[00:08:50] Ramit: It’s so interesting. I wonder if there are any patterns here. Um, the person who just lapsed into taking care of the money is the one who’s consumed with worrying about it, and the one who goes to work and says like, oh, I trust him, she’s fallen asleep within two seconds. Any patterns here, anybody? Y’all see the pattern?

[00:09:16] Shalom: I Yeah, I can see the pattern.

[00:09:18] Jonathan: I think mainly in, probably a fear, um, side of things. So we put we put the offer down in the house, and literally, I woke up the next day, and, uh, actually, for the two weeks before closing, I almost every night I had panic attacks. Yeah, crazy level of anxiety. I think it started to– the psychological burden of debt for me, I don’t know, I felt it in my body in a very real way.

[00:09:48] Shalom: We weren’t at the healthiest place, both of us. I got attached to the house because we toured so many houses, and this felt like it was the house. And for Jonathan, on one hand, when he says no, he felt like he was not doing the right thing for me. On the other hand, he had to make a financial decision. So a lot of the conversations we had was, I’m doing this for you, but do you want it? 

[Narration]

This is the most American story I’ve ever heard in my life. Two people are just going out for coffee, having a nice walk, they stumble into a Saturday open house, and then they go, you know what, we should do this every Saturday. They do it for months. They get so tired. In their ears, meanwhile, people are chirping saying, you need to buy a house. You’re just throwing money away on rent. 

Meanwhile, they’re looking at prices going, how are we ever going to afford something like this? Then one of them starts going, well, what about kids? Well, we don’t have kids yet. Well, one day we’re going to have kids, and then we need to have a yard and a lawn for them. Then the other one starts having panic attacks. Then they start arguing. What about me? What about you? 

And finally, they go, screw it. Let’s just write a check. I’m done with this. And then seven months later, they end up looking back and going, uh, we’re paying more than double what we paid in rent. Okay, look, buying might end up being a good decision for them, but the way they made this decision is fascinating to me. It is exactly what the real estate industry wants people to do.

[Interview]

[00:11:10] Shalom: I never had to live by myself after– we got married right after graduation, so I never had to experience even after getting a job what it means to plan or actually budget. A lot of it has been done by Jonathan. 

[00:11:25] Ramit: Mm-hmm. 

[00:11:26] Shalom: Our income is combined, but a lot of it is done by him, how we budget our life and what we do.

[00:11:33] Jonathan: Early on in our relationship, I was the one who just had a little bit more fluency around money. Um, little more background around money. I probably, in the began relationship, uh, just handled things. I wouldn’t say I was overly controlling, but that’s the default roles we fell into.

[00:11:49] Ramit: So what is an example of something that you previously were totally aligned on, financially speaking?

[00:11:55] Shalom: Traveling. 

[00:11:56] Ramit: Where did you go?

[00:11:56] Shalom: We do a lot of travel. We’ve been to a lot of different places. Italy, Mexico, Ethiopia.

[00:12:04] Jonathan: Sweden.

[00:12:05] Shalom: Yeah, we travel quite a bit. So in those areas, we tend to agree on how much we spend and the amount of money we allocate toward those things.

[00:12:15] Ramit: What would be perhaps the most expensive trip that you have taken together?

[00:12:21] Shalom: Europe, Italy, and England.

[00:12:23] Ramit: So how did you decide how much to spend? Was that decided ahead of time, or was it after the fact? Talk to me about that.

[00:12:33] Jonathan: I’d say we went in with the budget. Um, I think we did end up exceeding it a little bit, but yeah, we were pretty careful in how we went forward with spending and so forth. 

[00:12:42] Ramit: Who came up with the budget?

[00:12:45] Shalom: Jonathan did. 

[00:12:46] Jonathan: That was me.

[00:12:47] Ramit: I’m going to guess that’s a trend, right?

[00:12:49] Shalom: Yes. And it’s a reflection I’m actually thinking about right now. We do travel a lot together, but a lot of the budgeting is put by Jonathan, and I don’t even have to worry about how much we’re planning because he does a lot of the planning, and I trust his planning, and, um, I trust whatever happens afterwards.

[00:13:11] Ramit: Mm-hmm. So I have a question for you. You said, I don’t have to worry. I noticed you used that word worry. Is thinking about money the same as worrying about it?

[00:13:20] Shalom: Yeah. Sometimes. Since we moved in, there’s a couple things that needed to get done, painting the house, fixing floors, that kind of stuff. And now, for me, it’s like, let me furnish the house, but Jonathan has been putting a pause on those things and saying we don’t have the budget for that now, and we can’t do those things. And in my head, the house is empty, so we need to go and actually make it feel like a home.

[00:13:46] Ramit: Is it empty? Literally empty?

[00:13:49] Shalom: Not literally, but there are things that should be there that are not. They’re not there. 

[00:13:55] Ramit: Can I see?

[00:13:56] Shalom: The living room? Okay.

[00:13:58] Ramit: All right, let’s get a look here.

[00:13:59] Shalom: House tour.

[00:14:01] Ramit: How new is this house? 

[00:14:03] Shalom: Uh, we moved in completely last week.

[00:14:07] Ramit: Oh, wow. Okay. Pretty new. All right. And you just bought it. Is that correct? 

[00:14:11] Shalom: Yes.

[00:14:12] Ramit: All right.

[00:14:12] Shalom: So it’s a little messy, but this is what it looks like right now. 

[00:14:15] Ramit: All right. Hold it right there. Don’t move. So we’re looking at, what is this? Your family room?

[00:14:20] Shalom: Yes.

[00:14:20] Ramit: Beautiful living room. So you think that’s missing a couch?

[00:14:26] Shalom: Yeah. Should be better to have a couch, but we have another couch that’s by the entrance, which is right there. There’s all the paper on the floor, so excuse me for that. Um, Jonathan wants that couch to move on that side, and we don’t need another couch.

[00:14:43] Ramit: Ah. And is that a source of disagreement with the two of you?

[00:14:46] Shalom: Yes.

[00:14:50] Ramit: Uh, just pan over that way towards the couch, would you? I just want to get a feel for this. All right. Thank you. I’m sure there’s more, but I think we get the idea.

[00:14:57] Shalom: Yes.

[00:15:02] Ramit: That’s cool. I like that. We just got the home tour. Thank you. This might be the first– are we the first people who have ever seen your house?

[00:15:09] Shalom: Yeah.

[00:15:10] Jonathan: I think so. We haven’t had people over yet, so we’re probably doing a housewarming party in a week or so.

[00:15:14] Ramit: Love it. All right.

[00:15:15] Jonathan: I’ll send you an invite. 

[00:15:17] Ramit: All right, please. Me and just a few million other people who are going to see this. This is great. All right. So you move in about a week ago, and you’ve been talking about getting new stuff, furnishing it.

[00:15:29] Shalom: I say, we should probably get a couch for the living room, and Jonathan responds– you can go ahead and respond.

[00:15:37] Jonathan: Yeah, I usually count it in terms of trying to create a budget for it, and then planning for it, and distributing that amount we put every month to getting it. 

[00:15:49] Ramit: Okay. 

[00:15:49] Jonathan: Usually, I count for it. 

[00:15:52] Shalom: I don’t get upset right away, but I try to get rational out of him. So yes, budgeting makes sense, but at the same time, we just moved to a new house. And after we do the basics, then we can save. Getting a couch, and then we can put money if we need to do anything else on the house.

[00:16:15] Ramit: So how long do you want to go before you get a couch, Jonathan?

[00:16:17] Jonathan: That’s a good question. Probably a good year. I guess I tend to have pretty simple requirements.

[00:16:26] Ramit: That noise was Shalom bursting into laughter. Why are you laughing?

[00:16:30] Shalom: I’m laughing because it’s funny to me. How can you live without a couch for a year?

[Narration]

[00:16:35] Ramit: This is actually pretty interesting. It’s funny, but I can also see both sides. Jonathan says, we should save for a couch, then buy it. Shalom’s like, um, how long can you live without a couch? A year? Remember this detail.

[Interview]

[00:16:49] Ramit: Well, this is going to happen pretty soon, right? You’re having this get together next week.

[00:16:52] Shalom: Exactly. 

[00:16:53] Ramit: Oh wow. The stakes are high. Wait, so what’s going to happen? Right now, if you had people come over tonight, what would they do?

[00:17:01] Shalom: Will you please answer that, Jonathan?

[00:17:03] Jonathan: I mean, we do have a nice backyard, so it’d probably be a long party kind of thing.

[00:17:09] Ramit: Standing?

[00:17:10] Jonathan: Um, could be standing. Yeah. Or picnic blankets maybe. So yeah. 

[00:17:15] Shalom: I can’t wait see that.

[00:17:16] Jonathan: What does a house mean to you?

[00:17:18] Shalom: As I said, we live in a community. This space provides that home for those people too. Family comes, stays with us. Friends traveling, they stay with us. And having that space for me is huge, versus, like, oh, it’s just a sofa. And, um, yeah, basically a little shelter.

[00:17:41] Ramit: All right. What does a house mean to you, Jonathan?

[00:17:45] Jonathan: Yeah, I’d say, um, a house, uh, [Inaudible] mean just renting a house, owning a house, or just house in general? 

[00:17:52] Ramit: Your house.

[00:17:53] Jonathan: My house. Yeah. I would say that a house is not really a good investment, but I think, for me, also there is an element of which when I’m done living in a house, uh, I don’t end up in a worse financial situation, even if I’m not getting great returns on it.

[00:18:09] Shalom: When it comes to house, he does not care. Literally, we can live in– we lived in a 500 square feet apartment. And that was his idle space to live in.

[00:18:20] Ramit: He doesn’t care, but you care.

[00:18:22] Shalom: I care about that stuff. Yeah.

[00:18:23] Jonathan: When it comes to the house, there’s all these different things around, like remodeling the house. So furniture was the first thing, but, uh, we’ve talked about– had contractors coming in, do estimates. Sham really wanted to get the kitchen done and turned out it was going to be about 60,000, I think was what we were looking at. For me, that was just complete shock. I reacted very strongly and said there’s no way. We just put down a huge amount for a house. There’s no way we can go ahead and throw more money into the house. 

I’m not sure I’d ever want to spend 60k on the house, I think is where I’m at. It feels like I’m putting all of my extra cash in something that, for me, isn’t, I would say as much part of my rich life. It’s more of those things, like experiences and so forth. And one of those things that really triggered it for me or brought on everything was, we just celebrated our fifth-year anniversary, and we spent about a $1,000 celebrating.

And it was a really fun time, but then I remember, um, about five years ago, when we got married, it was about 15,000 for a wedding. It was pretty decent, but first day we own the house, we end up remodeling the floors, and we paid the same amount. And so in my mind–

[00:19:42] Ramit: You paid 15k for the floors?

[00:19:44] Jonathan: Yeah, 15k for the floors. And so for me, I pay attention to numbers quite a bit, but the amount of joy and happiness that we had on our wedding and how much money we spent, how much we were able to create a really wonderful environment, really wonderful experience, and then the satisfaction I got from wood floors, which don’t get me wrong, they’re great wood floors, but that for me helped clarify I think where I see myself when I spend money.

[00:20:13] Ramit: Sounds like you got much more enjoyment from 15,000 spent on your wedding than 15,000 spent on floors. Is that right?

[00:20:20] Jonathan: That’s correct.

[00:20:21] Ramit: All right, Shalom, what did you enjoy more? Hold on. What did you enjoy more? Your wedding or the floors? 

[00:20:27] Shalom: My gosh, this is so hard. The floor. I think I would choose the floor because we’re going to have it for the next 30 years.

[00:20:41] Ramit: All right. Wait, I don’t even know what to say right now.

[00:20:48] Shalom: Yes, I loved my wedding. It is a wedding, and I cherished it, but the floor, it will last forever. Not forever, obviously. We’re not going to live here forever, but, uh, it sounds really stupid.

[Narration]

[00:21:02] Ramit: Okay, I was a 100% sure she was going to say, I love my wedding more than the floor that I walk on with my dirty feet. And Shalom looked me straight in the eye and said, I love this goddamn flooring. I am speechless. This is why I love my job.

[Interview]

[00:21:17] Jonathan: Where we live, it’s more expensive, uh, mortgage than, uh, to rent. So we couldn’t make the money. Uh, I think it’s about 3,500 to rent a similar house. So we’re already paying more than it would cost to rent.

[00:21:34] Ramit: Can I just articulate that so everybody understands it? So you’re telling me to rent a similar square footage, similar bedroom, bathroom in your neighborhood, it’s 3,500?

[00:21:45] Jonathan: Correct.

[00:21:46] Ramit: Everybody, listen up and listen closely. It’s 3,500 to rent a similar place, and you guys are paying how much per month all in? All in, how much what did you say?

[00:22:00] Shalom: Would be close to. 

[00:22:02] Jonathan: Yeah. This year, it’s probably going to be five. Maybe five and a half.

[00:22:06] Ramit: Yeah, exactly. 5,500, conservatively. Yes. So just so everybody understands. People go, it’s always cheaper to buy. No, it’s not. So you’d modeled it out. In your model, Jonathan, had you calculated that it would cost 5,500 a month?

[00:22:22] Jonathan: No. The issue is I used these ballpark numbers, but I didn’t actually get the real numbers. And so for me, I think I didn’t quite internalize it. I looked up online how much you generally spend on things, but because I was using just general numbers, I didn’t really personalize it. I think–

[00:22:41] Ramit: You’re picking 1% per year for maintenance, that kind of thing, which explains why this couch has become a central focus. Shalom, do you see that?

[00:22:51] Shalom: Yes. Yes, I do.

[00:22:52] Ramit: So it’s not just the couch. It’s like that old movie about washing dishes. Who is it? Rosie Perez, she’s like, I don’t want you to wash the dishes. I want you to want to wash the dishes.

[00:23:03] Shalom: I think the house has to do with the quality of life we’re living too. We spend so much time in the house. Um, whatever we buy for the house or we put into the house, we spend in it more than we spent time traveling. So it’s not just a house, it’s also our like dwelling space. 

[00:23:20] Ramit: You’d be willing to spend more on the house if it meant you traveled less?

[00:23:25] Shalom: I think house would come first for me.

[00:23:28] Ramit: Have you ever made these tradeoffs before with money?

[00:23:32] Shalom: No.

[00:23:32] Ramit: Okay. So if that’s the case, and your income is combined, and he “worries about money,” and it seems to work for you, then just out of curiosity, why not just let him handle the money for the house? Why is it different for the house?

[00:23:51] Shalom: Um, I think that is what’s making this a little hard for us too. We both love to travel. We both love to try new things and stuff. I am more into doing interior stuff and house stuff, and Jonathan dislikes or hates that actually. So I think that’s why we’re having a lot of disagreements. We don’t have the same value when it comes to home and house, but the rest of our values align when it comes to actually doing stuff together or spending money toward other things.

[00:24:23] Ramit: Jonathan, where’d you grow up?

[00:24:25] Jonathan: Uh, I grew up on Bainbridge Island, so it’s an island in the Pacific Northwest,

[00:24:30] Ramit: What would you describe, uh, your socioeconomic status growing up?

[00:24:34] Jonathan: Probably upper middle class.

[00:24:37] Ramit: Upper middle class. All right. What do you remember your parents– was it two parents? One parent?

[00:24:43] Jonathan: Yeah. Uh, it was two parents. Um, my dad, in our family, he’s the one who handles the spreadsheets. He’s got a spreadsheet larger than I can possibly imagine. Horizontal scrolls, vertical scrolls, a 100 columns. He’s got serious records, um, of every penny that goes out of the house. My mom, she trusts my dad, and he tends to do a pretty good job at it. So that’s their roles. So I think that’s definitely influenced me.

[00:25:15] Ramit: When did they talk to you about investing? What age?

[00:25:18] Jonathan: So investing, I’ve actually probably got to give you credit for that. I think even before it comes to investing, aside from saving, I actually came across that idea in your book in sophomore year in college. 

[00:25:34] Ramit: So you found that on your own. 

[00:25:35] Jonathan: Yeah.

[00:25:36] Ramit: You don’t recall your parents talking about that?

[00:25:39] Jonathan: No. I went to my parents afterwards and asked my dad a lot of questions, and he helped a lot, just filling in information, but yeah.

[00:25:45] Ramit: Uh, did your parents pay for college for you?

[00:25:48] Jonathan: Uh, no, they helped, but I paid.

[00:25:51] Ramit: Cool. How’d you do that?

[00:25:53] Jonathan: So I went into a fair bit of debt in college. And in sophomore year, uh, I read your book. Uh, and then after graduating, um, I lived in, essentially a closet for probably a few years. 

[00:26:11] Ramit: What was your rent?

[00:26:13] Jonathan: What was my rent? I paid $600 out of college. 

[00:26:17] Ramit: Okay. What do you do?

[00:26:18] Jonathan: I’m a program manager in tech. 

[00:26:21] Ramit: Cool. All right, so your parents were upper middle class. They did talk to you about finances, but not to the level of investing, and you went to school, sought out your own education, found my book, etc., lived frugally, and then eventually, I’m guessing, increased your income and paid off a bunch of debt. Right?

[00:26:42] Jonathan: Correct.

[00:26:43] Ramit: All right. Shalom, tell me about what you remember about money as a kid. Where did you grow up, by the way?

[00:26:50] Shalom: Um, I moved to the US when I was 14, so before that, I was in Ethiopia. Two parents and two younger siblings.

[00:26:57] Ramit: Got it. Are your parents still abroad?

[00:27:00] Shalom: No, they’re in the US. They live here in Washington.

[00:27:03] Ramit: Let’s start back to when you were in Ethiopia. What do you remember about money back then?

[00:27:10] Shalom: Culturally, from what I remember, people don’t really talk about money, but I remember my parents would try to invest in real estate. So they would have one home, and then they would do another apartment or something to invest or put money toward that, potentially rent it. Um, but there was never a conversation with us about how we should save or invest money.

But I remember in college, um, my dad was telling me that I should use money to serve me, not to become a slave of it. And in fact, I didn’t know anything about stocks or any of that until my youngest brother reached high school and started putting money towards stock. And I remember coming home, you’re about to lose a lot of your money. And he was in high school. He would work part-time after school, and he would put his money towards that. And I thought it was just some fraud that people had out there.

[00:28:12] Ramit: All right. And then what happened?

[00:28:14] Shalom: Um, I mean, he is well off now in college. He didn’t take any loans. He paid his college, and he bought a new brand new car for himself to commute. Yeah. He was very self-sufficient. 

[00:28:28] Ramit: All right. Great. So, um, when you graduated, how many years ago did you graduate from college.

[00:28:36] Shalom: 2017, and then I went back to school again for a different degree.

[00:28:41] Ramit: That’s awesome. All right. Fantastic. Okay, so that’s great to hear. And just so I understand correctly, you both, uh, when you met, which was more than five years ago, um, Jonathan started taking over day-to-day, what to do with the money. Is that right?

[00:29:03] Shalom: Mm-hmm.

[00:29:03] Ramit: Is that common? Is there a cultural thing here, Shalom, where yougrewup?

[00:29:09] Shalom: No. 

[00:29:10] Ramit: No, it’s not.

[00:29:11] Shalom: And my household, my mom is the one who managed the money, and she’s very much– my dad is basically in my position where, um, mom takes care of everything financially or manages everything. He knows, but I don’t think he has the interest. I feel like we’re on the same page. I am interested to the point that I know where the money flows going, but not to the point like, I want to know exactly what happens month to month.

[00:29:45] Ramit: 

[00:29:45] Shalom: I know it’s in a good hand, and it’s a safe hand in my head.

[00:29:49] Ramit: Okay. With Jonathan. 

[00:29:50] Shalom: Yes.

[00:29:50] Ramit: Okay. What does your mom say, by the way, about your money management?

[00:29:56] Shalom: Um, I used to be known in the house for spending a lot.

[00:30:00] Ramit: Mm-hmm. And now?

[00:30:02] Shalom: And now I think I’m better. And actually, they warned Jonathan before we got married that I was very expensive.

[00:30:09] Ramit: And, uh, was that a half joke, like, ha ha ha, she’s expensive, but also like, she likes to spend money.

[00:30:18] Shalom: Yeah. Watch out. Both 

[Narration] 

[00:30:19] Ramit: Even though they have different views on money, they’re both very likable. They’re open with how they feel, and they’re young. So even if they’re not totally on the same page, they still have time to get there. Let’s see if we can look at the numbers.

[Interview]

[00:30:34] Ramit: Can you read off assets, and then tell us the number that’s next to it, please?

[00:30:40] Shalom: 730,000.

[00:30:43] Ramit: What are these assets that you have?

[00:30:48] Shalom: I don’t know. I think it’s stocks.

[00:30:52] Ramit: I don’t think it’s that.

[00:30:54] Shalom: Car, property. I don’t know. I think it’s the house.

[00:30:57] Ramit: Okay. You don’t know. That’s fine. Investments, what do you see?

[00:31:02] Shalom: Um, 90,000.

[00:31:04] Ramit: 90,000. All right. Savings, what do you see?

[00:31:07] Shalom: 60,000

[00:31:09] Ramit: Uh-huh. And debt?

[00:31:11] Shalom: 655,000.

[00:31:13] Ramit: What’s that total net worth that you have?

[00:31:15] Shalom: Um, 225,000.

[00:31:18] Ramit: All right. Have you ever seen these numbers before?

[00:31:21] Shalom: Not this part.

[00:31:26] Ramit: All right. The patterns always show up. It takes me a little while, but the patterns always show up, don’t they? All right. So I love putting Shalom on the spot when she’s never seen these numbers in her life. Uh, what do you think about this number, 225,000, as your total net worth? Is it good? Is it bad? What do you think?

[00:31:44] Shalom: I mean, it’s good. It’s a positive number.

[00:31:46] Ramit: Okay. All right. That’s what she’s got to say. All right. Positive numbers are good. 225,000, the two of are pretty young. That seems great to me. And then what’s this generosity number?

[00:31:59] Jonathan: So generosity, that’s a lump fund that we’d like to keep. Could be generosity just with like, let’s say we know someone who’s in need, also tithing for church, and that sort of thing. Basically whatever causes are important to us.

[00:32:17] Ramit: Your savings is 16%. That’s pretty aggressive. Why is your savings so high?

[00:32:24] Jonathan: So in general, I hear people say the rule for how much you should budget monthly for house is at least 1%.

[00:32:33] Ramit: This really shows you that when you buy a house, not only do you have to pay those expenses up in the fixed cost, but you actually have to start putting a lot of money for future stuff. 

[00:32:44] Jonathan: Yes.

[00:32:44] Ramit: It may be future stuff that you know about, like we want to do the backyard landscaping, or it may be future stuff that hasn’t broken yet, but it will break. Oh, he’s looking down, and he’s putting his head in his hands. What’s going on?

[00:32:56] Jonathan: You mentioned the landscaping, so that’s a whole other topic.

[00:33:00] Ramit: Oh, well, why don’t we just get into it right now?

[00:33:02] Jonathan: Sure. 

[00:33:02] Ramit: You know I live for this.

[00:33:04] Jonathan: It was the first day after we put the offer down, uh, I was at a family gathering, and, of course, the house comes up as it sometimes does, and, uh, we mentioned we put an offer down, and I showed pictures. That’s the thing you do after you say you bought a house. People want to see pictures. And so I go around with Redfin on my phone just showing people pictures. 

And my brother-in-law, who actually does a fair bit of gardening, he used to do landscaping back in the day, looks at the landscaping, he is like, wow, that’s gorgeous landscaping. Um, I hope you like landscaping. And just to give you some background. I’m someone who loves books. I don’t do thing anything really other than– I’ll mow the lawn. So when it comes to maintenance, that kind of thing, uh, I didn’t realize it until that conversation.

[00:34:03] Ramit: Wait. Hold on. Do you like Home Depot?

[00:34:05] Jonathan: I absolutely hate Home Depot. 

[00:34:08] Ramit: My man.

[00:34:09] Jonathan: I have a bit of trauma, I think, just childhood trauma. My parents would spend hours trying to find a light fixture.

[00:34:15] Ramit: Wait. Me too. I hate this place.

[00:34:18] Jonathan: Yeah. And there’s something, that smell of wood chips and chemicals 

[00:34:24] Ramit: Wood chips and despair. So your brother-in-law mentions this to you. And then?

[00:34:28] Jonathan: Yeah. So my brother-in-law mentions landscaping, and he’s like, [Inaudible] shrubs. The shrubs, you’re going to have to hire a pro to do it. You’re going to have to really go on YouTube and watch videos. That’s what people say.

[00:34:40] Ramit: I would’ve hired somebody off Upwork. Well, not even Upwork. I don’t even know where you hire people to come to your house, but I would’ve been like, bring a chainsaw and a garbage bag.

[00:34:49] Shalom: That’s exactly what he said.

[00:34:51] Ramit: Oh. Here’s 20 bucks. Be gone in 10 minutes. I don’t care how you do it. Did you say that?

[00:34:59] Jonathan: This is probably one of our biggest fights actually with the house. We’ve had some disagreements, but, um, Shalom was in the background, and I just pulled my brother-in-law, I’m like, oh, I can give the shrubbery a trim. It won’t need another one. And yeah, it’ll be gone. 

[00:35:18] Ramit: Done. Functional. Very utilitarian.

[00:35:22] Jonathan: Shalom heard chainsaw and the shrubs, and let’s just say she had a reaction,

[00:35:30] Ramit: Wait, what was your reaction? I’m asking very intently because one day this might happen to me, and I need to know.

[00:35:36] Shalom: Well, it sounded very ignorant. He was telling your people around the party that he’s going to just literally take that thing out when he goes back. And then I’m just hearing that– the lady who was here, she put a lot of work to it, and they’re not cheap shrubs. You call them whatever you want, but they’re not cheap trees.

[00:35:56] Ramit: I’m listening. Keep going. This is so funny.

[00:36:01] Shalom: Yes. So that’s what happened.

[00:36:03] Ramit: He wasn’t even kidding. He was serious. I’m going to just–

[00:36:05] Shalom: He was going around saying that.

[00:36:10] Ramit: This is amazing. All right. So, uh, are the shrubs still there?

[00:36:16] Shalom: Yes, they are.

[00:36:17] Ramit: And, uh, who takes care of these beautiful things?

[00:36:20] Shalom: We’re trying to figure that out right now.

[00:36:22] Jonathan: Yeah. I don’t want to put my generosity money for the shrub. I don’t know. 

[Narration]

[00:36:27] Ramit: I just love the idea of walking into their house, Jonathan and Shalom are sitting at opposite ends of the table, both of them looking at their phones, so angry with each other, and I’m like, hey guys, it’s Ramit Sethi here. How’s it going? And they totally set aside the years that it took for them to get to know each other, the unlikely journey it took for them to meet each other, to get married, to buy this house, and they just look up and start cursing about these shrubs.

You know what, I have this guide I put together of questions to ask before you buy a house. You know what I’m going to do? I’m going to add an extra section on expensive shrubs that can add massive relationship fights. Go ahead. You can find that link right in the show notes. I’m not kidding. Click the link. It’s in the show notes.

[Interview]

[00:37:12] Jonathan: I think it goes back to my principle of putting as much money as possible in creating experiences, everything. Just for me, it is a small amount of money. I could probably compromise. Uh, I think for me, I feel I’m already at the top of what I feel comfortable spending for total housing expenses.

[00:37:33] Ramit: Shalom, what did you just hear?

[00:37:37] Shalom: That he does not want to put more money into the house.

[00:37:42] Jonathan: There is a part of that. I think I’ve heard people often say, any money you put into the house, you get it back. 

[00:37:48] Ramit: Bullshit. 

[00:37:49] Jonathan: The top percent, if you’re really lucky, uh, in the right market and everything, you’ll get about 80% back on something. And that’s best case. And in my mind, maybe this is where I focus so much on spreadsheets. When someone says, I have an investment for you, and it’ll return you 80% of the money you put in it, I guess I have a hard time going with that.

[00:38:10] Ramit: I agree. First, let’s just clarify what Jonathan is saying, which is that a lot of people say, like, any money I put into the house basically turns into equity. And so if I paint or if I, uh, upgrade the kitchen or whatever for $50,000, then I’m going to be able to sell the house for $50,000 more. Which is largely bullshit because most upgrades people make in a house is purely a cost. You’re not going to recover much on it. 

Just go look at some people’s ghastly kitchens, or the window treatment. It’s like, I’m not going to pay for your horrible taste. I couldn’t care less that you spent 30,000 on that. Too bad. There are a couple of renovations in a house that tend to pay a little better. These are all easily googleable. But all that said, we should also remember that you are living in a house with your partner. And this isn’t purely a flip that you’re designed to spend as little as possible and squeeze out as much ROI.

That’s different. You’re actually living in this house. Because truthfully, Jonathan, if you wanted to take that approach and we took it to the logical extreme, you would have old floors. You wouldn’t do any landscaping, because why? You’re going to make no money on it. Obviously, you live there. You got to do something. The question is one of degree. How much money are you willing to put in? Shalom, what do you think hearing this?

[00:39:39] Shalom: I think you had a fair point, and that’s something I’m struggling with. Communication, or clarity, is a big thing, and I’ve been trying to communicate that. Yes, now I’m understanding the whole idea of it’s actually not just a house. It’s an investment. But at the same time, it’s a place we live in. So it has to be livable for both of us. 

[00:40:03] Ramit: Shalom, what happens when Jonathan gets hit by a bus one day?

[00:40:06] Shalom: That’s scary. Yeah. I thought about this, and we talked about this. When I signed up for retirement, I got angsty because I didn’t know what to choose and what to do with all this numbers, and I started losing it saying, I wish I had this much education when I was in high school, or the education a high school should be giving before we actually become adults. Because now I’m in late 20s, and I’m freaking out about signing up retirements. 

[00:40:35] Ramit: Yeah. So late. You’re so late. There’s no chance you can catch up now. 27. That’s it. It’s over. You had a chance, but didn’t want to–

[00:40:44] Shalom: I don’t believe so.

[00:40:45] Ramit: All right. So, uh, anyway, back to my question. What happens, uh, if he gets hit by a bus?

[00:40:51] Shalom: I don’t know. That’s a very good question.

[00:40:53] Ramit: And Jonathan, do you ever think about that?

[00:40:55] Jonathan: Yeah, no, I have thought about that. And one of the things that I think was really helpful, we almost never talked about money when we were first married, and we’ve come a long way, but it just seems like because the house is such a big burden, that it’s forced us to connect on that deeper level. And I think we’re still trying to have those conversations. 

[00:41:17] Ramit: Yeah. If you have a bad habit in some part of life, when the stakes get higher, that habit emerges. It’s like, I don’t know. If you’re bowling and you have a certain thing you do when you’re bowling, it’s fine when you’re just playing with your buddies. But if you’re playing at the professional level, that’s going to get exposed really quickly.

And in your case, for the last five years, it’s been fine. Your earnings were probably really good. Taking a trip for an extra $1,000, no big deal. But getting a house is the biggest purchase you ever do. And so any lack of communication, any bad financial habits, such as one partner doing everything and the other not really participating, it gets exposed, and there’s a gap that becomes wider between the two of you. Does that feel like it resonates with you?

[00:42:10] Shalom: Yes. For sure. When we had less to pay for, when we first got married, again, money was not a thing we talked about. 

[00:42:19] Ramit: Yeah. 

[00:42:21] Shalom: He and I made the money. We come together. We’ve put some to our traveling, rent, or whatever, and we never discussed, oh, we should probably save this month. It just automatically goes to things. But now, because there’s this big thing, cold house, and there’s a lot of things I want to do with it, I feel like we have more fights when it comes to money, more conversations that we’ve never had before. Yeah. That’s totally right.

[00:42:50] Ramit: Now, what do we get? What do we get to do with that money? You’re going to set up your monthly meeting, you’re going to talk about it, you’re going to have a calm way of discussing. You go, oh, you know what, I think we misallocated this. Gosh, this is how I’m feeling. And when I look at this, this is what I think. What do you think? I don’t know if I agree, but tell me more. And you talk about it. You go, okay, I see your point. Let’s go ahead and amend it. Done. But you can’t live your life playing defense with tiny little decisions like that.

Ironically, for the biggest financial decision of all, the two of you both admitted that you rushed right into it. So there’s a pretty fascinating dynamic going on here. I’d rather have you spend more time on the big stuff and less time on the little stuff. The other dynamic I want to point out is that, um, this is a good start with the CSP. It does feel a bit theoretical in the sense that, um, Shalom, you don’t talk about a CSP. You talk about a couch. This is how I would approach this conversation, Jonathan. I’d be like, okay, Shalom, I understand that you want a couch. What gets you excited about having a couch? Why do you want one?

[00:44:03] Shalom: A place to sit, to host.

[00:44:05] Ramit: Okay, but don’t we have that little couch by the front door?

[00:44:08] Shalom: Also the aesthetic.

[00:44:10] Ramit: Oh, so you want our house to look good? You don’t think it looks good right now?

[00:44:14] Shalom: Um, not yet. 

[00:44:15] Ramit: If we were able to get a couch, how much do you think a couch costs? Ballpark.

[00:44:26] Shalom: Let’s say two grand with everything.

[00:44:28] Ramit: Two grand. All right, cool. Okay. So you want a couch. It would be two grand. How soon are you thinking you want that couch? When do you want this couch?

[00:44:38] Shalom: I was thinking maybe in the next three months.

[00:44:43] Ramit: Uh, okay.

[00:44:44] Shalom: But then that’s not going to allow us, the budget. So I can wait. 

[00:44:47] Ramit: How long can you wait? For example–

[00:44:52] Shalom: I can wait a year. 

[00:44:53] Ramit: You can wait a year.

[00:44:54] Shalom: Yeah.

[00:44:55] Ramit: Okay. So that would be like– look at Jonathan’s face right now. The guy’s like, huh.

[00:44:59] Jonathan: I’m impressed. 

[00:45:00] Narration: [Narration]

[00:45:00] Ramit: Shalom’s change in perspective about the couch seems small, but I think it’s actually a bigger lesson that we can all apply. Most of us go through life seeing something and saying, I want that. I want that coffee. I want that night out with friends, that car, that house. But very few of us have a system to help us decide.

We basically just buy whatever we see, and we use very loose logic to decide if we can afford it, and then we wonder why we’re not getting ahead. This way of making decisions stays with us as we become more financially successful. That’s why you hear multi-millionaires on this show who still agonize over the price of gas or blueberries.

It’s not because they don’t have enough money. It’s because they are arbitrarily making decisions. They have no system. With Jonathan and Shalom, you see this pattern. Jonathan analyzes purchases. Shalom is much more casual about what she wants, but they haven’t developed a way of making financial decisions together.

The couch is really just a symptom. It’s a small thing, like training wheels. But together they’re going to face thousands of decisions about money. So from my perspective, this is a great opportunity to develop a shared vision, a shared system. And just note, about 45 minutes ago, Shalom couldn’t even believe waiting a year to get a couch. Now she seems much more open to it. 

Let’s hear their follow-ups. Jonathan said, “During the call, I was absolutely shocked that my wife said she would prefer to spend $15,000 on new wood floors than our wedding if she had to pick between the two. One of the biggest takeaways was the value in financial simplicity, which can take a lot of time and effort when there are two people involved with their own dreams and perspectives.

“Simplicity is not a starting point but something that has reached through a lot of communication and compromise. Reflecting after the call, what surprised me most was how much time we spend focusing and arguing about small financial decisions like whether to buy a couch or which restaurant to visit and how little time we spend on large, important, life-changing decisions like buying a house, where to live, travel, and our long-term savings goals.

“I’m grateful we had the opportunity to talk with Ramit. It really helped to get another perspective on our relationship with money as well as each other.” And Shalom’s follow up, unfortunately, we never heard back from Shalom. And we tried even as recently as last week to reach her. I’m wishing Jonathan and Shalom the very best going forward. I really enjoyed speaking with both of you.

And for those of you who enjoy this podcast, I’d like to encourage you to go to iwt.com/podcastnewsletter. Every single week, I share a new insight about money psychology right there in the newsletter. This is material you will never see publicly. It’s iwt.com/podcastnewsletter.