Episode #176: “I’m 8 mos pregnant. He only wants to talk about how much the baby will cost”

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[00:00:00] Megan: Any time I spend money, it’s all guilt full. There’s never a moment that I think, I deserve this.

[00:00:05] Ramit: Today meet Jason and Megan.

[00:00:07] Megan: I’m trying to keep up with him and with the lifestyle, but I also know that I can’t actually afford that.

[00:00:13] Jason: We should be able to have some agreements on how this works.

[00:00:16] Ramit: He’s a 40-year-old COO. She’s a 34-year-old flight attendant. And their finances have gotten very sloppy.

[00:00:23] Jason: We have not done an excellent job of executing the postpay cut plans.

[00:00:28] Megan: Can I actually afford this? No. But am I still going to do it? Yes.

[00:00:32] Ramit: But what’s really stressing them out, Megan is eight months pregnant.

[00:00:35] Jason: The maternity rules for work it was like, I’ll take three months off. And then it was like, I’m going to take six. Oh, the company gives me 12. Oh, now it’s 15.

[00:00:43] Megan: How much is the baby going to cost? I would like to have a doula at our birth. Where is that money coming from?

[00:00:48] Ramit: Can they make the changes to their finances and their relationship to work together?

[00:00:53] Jason: With baby coming, how do we figure out how much work is needed from each of us to support the fam?

[00:00:58] Ramit: And do you have a plan?

[00:00:59] Megan: No, I just don’t go to work. That’s the plan

[Narration]

[00:01:01] Ramit: All right. Let’s take a look at the CSP. What? Okay. Wow. $3 million in assets, but of that $3,073,000, $3,053,000 is from partner one. Partner two has $20,000 in assets. Hugely unbalanced. Okay. It can work. It’s just something to note. Savings at 27k– pretty low relative to the other numbers. And then debt at 778,000, which is fine with all the rest of the stuff. So a total net worth of $3.1 million. Okay. At age of 34 and 40, extremely impressive.

[00:01:45] But odd. Why is there only 27k in savings when you have $3 million in assets? That’s odd. Just to clarify, when you have $3 million in assets, those assets cost money. So if this is real estate, which I assume it is, you get one repair, that’s $20,000. So people who have a lot of assets should have a lot of liquid money to be able to maintain those assets.

[00:02:13] This is something that you have to remember as you start to get more money and you start to buy more things. I’m talking about assets. You have to remember those assets aren’t free. They take maintenance. They take staff. They take all kinds of stuff. So it’s a bit odd, but we’ll figure that out. Wow. Okay. Income is 21,000 a month gross, but of that 17,000 comes from one partner who I assume is the person writing the application. Debt. What the hell? Debt payments is at 1,200 bucks? Why? Why do you have debt? Why do you have credit card debt and you have 3 million bucks? It makes no sense. It makes zero sense.

[00:02:48] Okay. I’m going to give a fresh perspective on the CSP. First off is they’re not really saving and investing very much at all. On the other hand, this couple may have very consciously decided, hey, we’re going to be asset rich. We’re going to invest or buy a lot of assets, and we love our guilt-free life. We love traveling or buying cool stuff, eating out five times a week, whatever. And maybe that’s what they decided to do.

[00:03:18] It’s okay. If you have $3 million in assets, you can make certain decisions that you would not make if you’re making $50,000 a year with basically no net worth. So I have a lot of questions to ask primarily about, number one, what are all these assets? Number two, why do you have such low savings relative to the other numbers? And three, where’s all this guilt-free spending going? I just want to know. Looking forward to speaking to them.

[Interview]

[00:03:44] Jason: We were in the midst of discussions about what’s going to happen when baby comes from a lifestyle change, income change, and expense change. So we were actively talking about that together. I was asking Megan, what’s your plan for when baby comes? What does your employer offer? How is income going to change? Because I wanted to plan ahead and know what, if anything, I need to do about it. So we started there and had to ask that lots and lots of times.

[00:04:20] Ramit: Why?

[00:04:20] Jason: Because I couldn’t get a straight answer.

[00:04:24] Megan: He didn’t like my answers.

[00:04:25] Ramit: What were those answers, Megan?

[00:04:28] Megan: They were, well, I can take this much. And then I kept learning more of how much, so I didn’t have a concise answer originally. And then I learned what the maximum benefit is and what the maximum amount of time I can take is, and that’s where I emotionally landed.

[00:04:50] Ramit: Hmm.

[00:04:50] Jason: The way I would describe it is I learned about her plan through overhearing her explain her plan to her friends. So originally it was, I will take the first three months off, basically through winter, and then the next friend, it was, yeah, probably about six months I’ll take off and then I’ll go back to work to some degree. Then the next one, it was a year, and then the last was 15 months.

[00:05:16] Ramit: Wow.

[00:05:17] Jason: And so my eyes just got bigger, bigger, bigger.

[00:05:19] Ramit: And when you say they got bigger, why? What’s the implication?

[00:05:23] Jason: The longer there’s a lack or low income is a larger problem that I’ll need to solve or a bigger dollar amount I need to cover.

[00:05:39] Ramit: Meaning her income will cease and you’re going to have to be the sole income earner. And that becomes stressful.

[00:05:48] Jason: If she just said, I want to have baby and not go back to work, cool. Let me work on that and I’ll see how possible that is, and I’ll come back to her with the impacts. Okay. Just so you understand, that means no more of this, no more of this, no more of this. This changes. I need a new job, whatever it is. And let’s go through the impacts. 

[00:06:07] And then she’ll come back and say, well, okay, maybe I could do this right, and then I’ll have another scenario. But what’s been difficult is without a plan and then time to plan, it becomes impossible to solve that. And then that makes it impossible to come up with changes or get ahead. So here we are at, what’s it due? Seven weeks or something?

[00:06:35] Megan: Baby’s coming out in seven weeks.

[00:06:37] Ramit: I want to hear from you, Megan. Tell me about your perspective on these discussions.

[00:06:42] Megan: I did tell Jason that I wanted to have a baby ages ago, and in the last five years I’ve been financially preparing for that. And once I learned the finer rules and what I could actually do is when it became more of a conversation and more of like a, I don’t actually think I need to– my income doesn’t really impact our lives very much because we’ve focused on putting more money to my 401k and saving for my lonely future rather than our together future.

[00:07:21] Ramit: So what if Jason asked you like, how long do you want to be home? It seems like from his perspective, he’s not getting a straight answer. Is that accurate, or do you see it differently?

[00:07:37] Megan: I would say initially, yes, it’s accurate, but my answer of, “I will go back by baby’s first birthday” has been very steady for the last six months.

[00:07:47] Ramit: Oh, okay. So your answer is, “one year I want to stay home, and then I’m back to work.”

[00:07:53] Megan: Yeah.

[00:07:54] Ramit: If you had to do an educated guess right now, what capacity would you go back at after a baby’s first birthday?

[00:08:02] Megan: I would go back at 50 to 55 hours a month. Whereas 120 is full-time that we’ve calculated in the past.

[00:08:11] Ramit: Okay. Does that work, Jason?

[00:08:15] Jason: It’s very doable. It’s not going to like screw anything up, but it does have impact in stuff you plan for ahead of time. So what you’re going to do, or what additional income do you need to come up with, or what do you need to turn off for a time?

[00:08:30] Ramit: So you’re saying, hey, if she goes back at 50%, probably we can’t afford to do all the things if she was working 100%, right?

[00:08:39] Jason: Fact, yes.

[00:08:39] Ramit: Fine. Do we all agree on that?

[00:08:41] Megan: I don’t agree with that because we’re adding this new factor of a baby in, so can we go back to doing all the things? We’ve already added a whole other variable. So whether that’s childcare costs, if I’m working at 100% time, where is this baby going to be? Do I want to be away from this baby? I don’t want to be away from this baby for 100% of what I have been doing in the past.

[00:09:05] Jason: Yeah. But we also have some ideas like, what amount can you work without introducing childcare cost? And how can we work that out?

[00:09:17] Ramit: Do you guys find that you talk about certain things and spin a lot, but don’t make decisions?

[00:09:22] Megan: Yes.

[00:09:23] Ramit: Wow, that’s shocking.

[00:09:24] Megan: Whoa, Ramit. Whoa.

[00:09:26] Ramit: What I asked is, can we all agree that if one of you is not working at 100%, then you can’t spend the same as if that person was working at 100%. Seems like pretty basic math to me. If one of you is not making as much money as you used to, you can’t spend as much.

[00:09:43] Jason: Facts.

[00:09:43] Megan: I agree with that statement.

[00:09:45] Ramit: So let’s talk about how we got to this position. I can already tell, Jason, you’re the optimizer. You love the numbers. And Megan?

[00:09:57] Megan: I’ve traditionally been very good at it. I can set a number for what full-time is like, how can I swing this and how can I flex in my savings?

[00:10:07] Jason: I would rephrase that to be, Megan will run the numbers to figure out how little she can work to get everything she wants.

[00:10:12] Ramit: Okay, that’s fair.

[00:10:14] Megan: True. Okay. I agree with that. Actually, you’re right. You’re right, Jason.

[00:10:18] Ramit: Meaning you try to be as efficient as possible. You want to work as little as possible and get the maximum financial benefit.

[00:10:24] Megan: Correct.

[00:10:25] Ramit: Fine. Nothing wrong with that. Okay. That’s good to know.

[00:10:28] Jason: With baby coming, lots of things are different. And some of these decisions, some are happening. We don’t have a choice. They’re going to come. But what we really want to understand is how do we better plan and then execute what comes next.

[00:10:49] Primarily with income is a big one. How much does Megan need to work? And then do I need to change and when? And then what needs to change in lifestyle and expenses? In the past we haven’t had to be so diligent because I had much higher income. With adjustment to lower income, we did have to make many, many adjustments and say, what do we cut out? How do we make this work? And I feel like this is the next step of that.

[00:11:17] Ramit: Okay. What adjustments did you make when your income went down?

[00:11:22] Jason: So Megan took a side job and we started renting rooms in our house to get additional income. And then we also cut back on a bunch of spending.

[00:11:36] Ramit: Like?

[00:11:38] Jason: Travel way fewer trips. We cut back on some expensive subscriptions. We cut back on attending live sports and events. Yeah. What else, Megs?

[00:11:56] Megan: I think we only really cut out two subscriptions.

[00:12:00] Ramit: What subscriptions?

[00:12:02] Megan: We gave up one theater, and we gave up symphony.

[00:12:09] Ramit: Oh, okay. How much are those, out of curiosity?

[00:12:12] Jason: Each of those is in the probably 1,000 to 2,000 bucks a year. We had season hockey tickets.

[00:12:21] Megan: Oh yeah. I didn’t like that one.

[00:12:23] Ramit: Okay.

[00:12:23] Jason: Season hockey tickets. That’s expensive. That was 17,000.

[00:12:25] Megan: That was really expensive.

[00:12:26] Ramit: 17 how much?

[00:12:27] Jason: 17,000.

[00:12:28] Ramit: $17,000 for hockey tickets.

[00:12:32] Megan: Yeah. Ramit, I agree.

[00:12:34] Ramit: Wait, wait, wait. Where? Wait, wait. No, no, no, no, no. I’m not judging. I just don’t know anything about this. $17,000 for two seats? What are we talking about?

[00:12:44] Jason: Yeah. Two seats, 44 games. 200 something bucks per seat, per game.

[00:12:49] Ramit: Is this in a box?

[00:12:52] Jason: No.

[00:12:52] Ramit: Holy [Bleep]. Wow.

[00:12:54] Jason: Yeah. That’s pretty standard here. Almost the entire arena goes for that much.

[00:13:00] Ramit: Did you say $17,000 per season?

[00:13:03] Jason: Yes.

[00:13:04] Ramit: Man, I had no idea. I would’ve been wildly off. Every single person who’s listening, including my friends who– I have friends who are baseball agents and stuff. They’re like, this guy is so [Bleep] dumb. Wow. I appreciate it. On this show, I get to learn things I would’ve had no idea about. That’s amazing. All right. So you cut back on those things. That’s cool. And was it difficult for you to have these discussions and to make the decision?

[00:13:31] Jason: The stuff with the house is difficult because I want to get more income there and Megan’s like, get everybody out of here. This is my space.

[00:13:39] Ramit: What about for you, Megan? Was it difficult to make those decisions?

[00:13:42] Megan: No, I didn’t want hockey that badly. Hockey’s lame.

[00:13:46] Ramit: So you took a pay cut. What was the salary before and the current salary?

[00:13:52] Jason: The before was depending on performance for the year, was 350 to 450, and after it went down to 185.

[00:14:05] Ramit: Wow. That’s a significant drop. What happened there?

[00:14:08] Jason: So left a job where people turned evil and went to a place where people were good, but it was from a larger publicly traded company to a startup.

[00:14:19] Ramit: Okay. Was the evil company a whole life insurance company, out of curiosity?

[00:14:24] Jason: Not that evil.

[00:14:28] Ramit: Okay. Got it. So that’s a big drop. Makes sense. And then we heard that, Megan, you had been cutting back on time. Just give me a sense of the scale. If you’re working 100% time, what are you making versus 50% time?

[00:14:45] Megan: Four, 5k down to 2k a month.

[00:14:50] Ramit: Okay. Got it. The scale is like you cut your pay by 30,000 or 40,000. Meanwhile we’re over here talking about you cut your pay by 300,000 or 200,000, something like that. Okay. All right. So big changes. Got it.

[Narration]

[00:15:04] Ramit: Jason wants certainty. He’s the planner. And as the person who’s the money guy in the relationship, he wants to know concrete numbers. How much are you going to work? How much money are you going to make? Just give me the numbers, and I’ll plug it in the model. He chases Megan for the answers. Megan avoids the answers.

[00:15:22] As you can see, they’ve entered into the chaser-avoider dynamic. What’s interesting is how cagey Megan is. Most avoiders just openly avoid conversations about money or they use a variety of techniques, for example, getting mad and saying things like, can’t we go a single day without talking about money?

[00:15:41] Megan does this trickle truth thing by saying, I want to stay home for five months, no six months, no 15 months. Now, understandably, no first time parent knows exactly what having a baby’s going to look like, but importantly, you have to be able to make at least some assumptions, which you can always change later. Am I going to stay home for one month or two years?

[00:16:05] We need to be able to put something down on paper and then we can change it if needed. That is how you make a plan. So from my initial conversation, it looks like Jason just wants a number and Megan doesn’t want to give it, but I suspect it’s more complicated, especially when Megan reveals she’s talking about a few thousand dollars difference.

[00:16:25] Welcome back. Let’s keep going.

[Interview]

[00:16:27] Jason: The first time Megan and I had a really good productive financial conversation was prepping to buy the house.

[00:16:36] Ramit: Fantastic.

[00:16:37] Jason: Yeah. Because we wanted very different things in a house. I wanted it to have downside protection and cash flow and do all these different things, and she’s like, I want a house for the family. And so we had a really good discussion of what we each wanted, and then we looked for what was out there that had everything we wanted, and then we ran all the numbers, made sure we had the down payment, made sure we could have a backup plan that, hey, if something really did change, this mortgage is covered no matter what.

[00:17:09] Ramit: [Bleep], yes. Hey, for everybody listening, all you real estate denialist freaks, who always argue with my basic premise that all I want you to do is run the numbers on the biggest purchase of your life, I hope you’re listening to this couple. You don’t need to earn $600,000 a year. All you got to do is simply run the numbers. Okay. Good job. I’m very proud of you both. So here you are. It’s interesting to me. You already went through a $250,000-plus pay cut. Aren’t we only talking about losing a few thousand bucks now?

[00:17:45] Jason: Here’s the thing.

[00:17:46] Ramit: Tell me.

[00:17:47] Jason: We have not done an excellent job of executing the postpay cut plans. There’s been several something happens over the past few years that made things difficult.

[00:18:02] Ramit: Like?

[00:18:03] Jason: Megan got injured and was out of work for majority of the year.

[00:18:08] Ramit: Okay.

[00:18:09] Jason: I was hit and run and somebody flipped my truck, so then I was injured and had no vehicle to commute in and had to do that. I don’t know. Other little things.

[00:18:22] Megan: We’ve had a series of floods in our condo.

[00:18:24] Jason: Yeah. Our place has flooded three times and insurance only covered one time. So the second two were self-insured.

[00:18:31] Ramit: Okay.

[00:18:32] Jason: Stuff like that.

[00:18:33] Ramit: You’re basically saying, look, when we made over half a million dollars a year, if things came our way, we could deal with it. We had plenty of cashflow. At this time, it’s getting tighter and tighter. We still have cashflow, but it’s getting a little stricter. We’re not particularly great at following that plan, but we’re concerned. We can’t be thinking the same way as when we were making multiples of our income. We have to be tighter. Right?

[00:19:00] Jason: Yeah. We have to be tighter. And when these things happen, we will need to do something, and sometimes those things go on credit cards, and then we have to fight the credit card machines.

[00:19:09] Megan, what is your central challenge? It sounds like you have a vision. You want to stay home for a year. You want to go back at 50% time.

[00:19:22] Megan: My challenge is not living in my realm. I’ve had enough windfalls where I can wipe out all my credit card debt and it’s fine, and then they just fill back up.

[00:19:39] Ramit: Do you have credit card debt right now?

[00:19:41] Megan: Yes, I have $13,000. And I just looked at all of my other money sources and I’m like, can I just take all this and pay it off? Yes.

[00:19:53] Ramit: Why don’t you?

[00:19:55] Megan: That’s a great question because maybe Bitcoin’s going to come up for me and maybe I’m going to be a whale.

[00:20:02] Ramit: Yeah. Maybe.

[00:20:03] Jason: I do think that’s an interesting question to ask you, Ramit, is like, in those situations where you can redirect, would you redirect?

[00:20:15] Ramit: Yeah.

[00:20:16] Jason: Or would you only redirect if you have confidence that you know you’re not going to get back in there?

[00:20:24] Ramit: Wait a minute. I’m confused here. Do you two combine your incomes?

[00:20:27] Megan: No, we live separately financially.

[00:20:31] Heather: Why?

[00:20:31] Megan: This is the first time he ever let me know how much money he makes.

[00:20:34] Ramit: What?

[00:20:35] Jason: That’s not true. We ran all the numbers together for the house, so way back in 2019, 2020.

[00:20:43] Megan: Okay. That’s acceptable.

[00:20:45] Ramit: You’re all married and having a kid, right?

[00:20:47] Megan: We’re not married. He’s my lover of eight years.

[00:20:52] Ramit: Been together. Okay. That’s good. Why are your finances separate, out of curiosity? I guess because you’re not married?

[00:20:59] Jason: No, haven’t had a need or reason to.

[00:21:03] Ramit: Okay. And you own a house together or is it separate?

[00:21:05] Megan: His name’s on it.

[00:21:06] Jason: Yeah, my name’s on it. Yeah.

[00:21:08] Ramit: Okay. Do you make payments?

[00:21:09] Megan: I feel entitled to it sometimes.

[00:21:11] Ramit: Okay. Do you pay for it, Megan?

[00:21:14] Megan: Emotionally.

[Narration]

[00:21:15] Ramit: Notice these peculiar responses that Megan keeps giving me. Now, we need to acknowledge that Megan probably grew up with some unusual messages about money, and she’s about to have a baby, and they’re talking to me for the first time about this intimate topic. So I don’t mind people being nervous, but I think it goes much deeper than that.

[00:21:33] Megan is an avoider, and avoiders have a series of conscious and unconscious techniques they employ when conversations make them uncomfortable, and you’re going to hear lots of them through today’s discussion. Now, before we hear Megan’s answer, I need a quick favor from you. Hit that Subscribe button because it really helps my team and me grow this podcast.

[Interview]

[00:21:54] Ramit: Mm-hmm. How about financially?

[00:21:57] Megan: Financially, yes. Traditionally, yes. I just direct deposit money into Jason’s account from my paycheck.

[00:22:04] Jason: All the expenses come basically, and I pay for it.

[00:22:06] Ramit: Why is your financial situation more confusing than mine? It doesn’t make any sense. I have a very complex financial situation, but I have simplified it a lot. Okay, let me make sure I understand the relationship status. So unmarried, own a house that’s in your name, Jason, and having a child. Any plans to get married or combine finances? It’s fine either way. I’m just asking.

[00:22:38] Jason: No.

[00:22:39] Ramit: Okay.

[00:22:40] Jason: What, if any, benefits there are to combining something? I guess I have a bit of an expectation that there’s probably going to be a need with baby to have Megan have access to funds. Typically though, she’ll just take a card of mine. We don’t actually go change accounts and stuff. It’s just like, hey, take this card.

[00:22:59] Ramit: In general, you can definitely go through life without combining your finances or getting married. Of course, I would never sit here and tell you you have to get married or you have to combine. I do think that you will find that over time, especially with a little one, your lives will structurally be set up to be individualistic and even diverge.

[00:23:28] And it really helps if you were to have your finances combined because it actually helps you make these joint decisions. Like right now, there’s a lot of negotiating and going back and forth, and part of the basis, and the part of the reason for that is that you’re not actually operating as a unit.

[00:23:47] It’s like, what can I get away with and like, hey, I need clarity on your number so I can plug it into my calculator. It’s not together. One of the easiest ways to change that is just to put your money together. Now, it becomes very tricky because putting your money together without being married has all kinds of implications and co-mingling. I get all that. Plus the property. There’s all kinds of stuff.

[00:24:09] The simplest thing, not saying you have to do it, is simply get married, combine your finances. That is the simplest thing. But I’m all for people having alternative perspectives and alternative views. That doesn’t bother me at all. We can make it work.

[00:24:24] Jason: I think the simplest is, here’s a card to an account that has cash in it. Spend what you need.

[00:24:30] Ramit: It could be that basically the envelope system, which is like, we agree that every month there’s X dollars in the account relating to these categories, yourself, your personal care, perhaps baby, perhaps whatever responsibilities you focus on. I’m focusing on these things.

[00:24:48] Yeah, you could make that work. No problem. How do you deal with things like, say, eating out or the hockey tickets for that matter? Who decided on that one? Because clearly one person wants them and the other’s not as into it. How do you decide on those kinds of things?

[00:25:04] Jason: If it’s something small, usually we will either just do it or she’ll ask her or whatever. Hey, what about this? And then it’s usually like, yep, fine, whatever. Let’s just do it.

[00:25:15] Ramit: What about the big things like the hockey?

[00:25:17] Jason: Then we talk about it and try to figure it out.

[00:25:21] Megan: I guess like with my most recent car, it was a discussion. Where’s the money coming from? How are you going to pay for it?

[00:25:28] Jason: How it usually goes. Megan, what do you want? I want this. How much does that cost? I don’t know. Great. Let’s figure it out. We figure that costs this much. That means this many dollars per month. Wow, that’s way too much. Cool. I think that this much would be doable, and you can get something like this for that cost.

[00:25:47] Ramit: And Megan, what is with the, “I don’t know” response?

[00:25:50] Megan: In my mind, I just think it’s always going to work out.

[00:25:53] Ramit: Mm-hmm.

[00:25:54] Megan: I don’t feel like I’m ever going to be homeless, carless, or any dire strait situation.

[00:26:01] Jason: One thing that Megan has available to her is a fully scalable income mechanism with these multiple roles. It’s like you can work more nearly infinitely, and if you want to change your income and buy a car in the next three months, you can just out and get overtime.

[00:26:22] Ramit: Okay.

[00:26:24] Megan: We’ve also planned this. I see enough people who I work with who are divorced, and by the time they raise their kids, they go their separate ways after 20 years and they’re the women who stayed home with the kids, flew minimally, and now they have no money for retirement. So I’ve always known that. I’ve expressed those concerns with Jason in the past and him and I were always on the same page of protect my future self. So I’ve always been really grateful for that, but also it’s been part of the plan to make sure that future self is taken care of.

[00:27:02] Jason: That was probably the first financial discussion we had, was very early on. It was, what are your finances? And we had that chat. And do you have a match? Are you using it? And we had that chat early on. And so I encouraged her to max everything. I was like, don’t worry about stuff that we need to pay for. I’ll take care of all that. And she did an excellent, excellent job at that.

[Narration]

[00:27:27] Ramit: The way you set up your finances will affect the rest of your lives. In my opinion, the way they’re talking about their accounts, where Jason basically gives her an allowance without combining income, is going to set them up very poorly going forward. Who wants to have to ask their partner for an allowance, and who wants to have that conversation 300 times a month for groceries and diapers and a car and Starbucks?

[00:27:52] Jason has taken on the role of the money guy in this relationship, and he’s even continuing it with his idea of how to set their accounts up. And yet he’s frustrated he can’t get a straight answer out of Megan. He doesn’t quite see that when you don’t both have skin in the game, it’s very hard to recalibrate that relationship. This is why I insist both partners participate in a monthly money meeting. Sure, one might take the lead on investments, but both of you should be actively involved in the finances.

[00:28:25] We’ll open up their conscious spending plan after this.

[00:28:29] Ramit: Now back to the show.

[Interview]

[00:28:31] Ramit: Okay. Let’s move on to the CSP. Megan, can you read the word in bold and then the combined number next to it?

[00:28:40] Megan: Assets, $3,073,000. Investments, $859,095. Savings, $27,455. Debt, 778,835.

[00:29:00] Ramit: Total net worth.

[00:29:03] Megan: $3,180,715.

[00:29:06] Ramit: Okay, great. And I want to point out that Jason has a net worth of 3 million independently, and Megan, your net worth is $172,000.

[00:29:15] Heather: Yes.

[00:29:15] Ramit: Okay, got it. How do you all feel about those numbers?

[00:29:23] Jason: Not good enough.

[00:29:24] Ramit: Not good enough. Okay.

[00:29:24] Megan: Anxious.

[00:29:25] Ramit: Oh, wow. Why? Why is it so negative in here right now?

[00:29:32] Jason: For me, the cash flow still feels really tight.

[00:29:39] Megan: It just feels unsure, unstable, anxiety provoking.

[00:29:46] Ramit: Can I ask a couple of questions because I want to understand these numbers. So it says that you have $3 million of assets. Can you break that down for me?

[00:29:56] Jason: Yeah. We have a condo. We have a house, cars and then business. Condo’s worth 400-ish, something like that. House’s a million-ish.

[00:30:11] Ramit: Uh-huh

[00:30:13] Jason: Business is million-ish.

[00:30:17] Ramit: Cars? What the [Bleep]? How much are these cars worth?

[00:30:20] Jason: The most expensive one is like 60, 70. Most are in the 20-25, something like that.

[00:30:27] Ramit: How many cars are we talking about?

[00:30:29] Jason: I think it’s seven, including Megan’s?

[00:30:31] Ramit: This can’t be real. You have seven cars?

[00:30:34] Jason: Eight, with Megan’s.

[00:30:35] Ramit: Is this a joke?

[00:30:37] Megan: No. I wish it was, Ramit.

[00:30:40] Ramit: Why am I here? Hold on. Do you know I have a master’s degree and I’m here talking to a couple that’s worried about cash flow and they have eight goddamn cars. What the [Bleep] is going on here? Why do you have so many cars?

[00:30:53] Jason: I used to own and operate an automotive business. So I had cars and tools and stuff for that. And then with work changing and stuff, I put it into sleep mode, but have not fully wound it down.

[00:31:12] Ramit: Oh wow. So when you said we haven’t really cut our spending commensurate with our income going down by $300,000, you were referring to the eight cars. All right. We’ll get back to that. Investments are what?

[00:31:30] Megan: I have 7k in crypto.

[00:31:32] Ramit: Okay. What else? Most of it is index funds. Please tell me, God.

[00:31:39] Jason: Yeah, mostly.

[00:31:40] Ramit: All right. And then savings is whatever. What’s the debt? Break that down for me.

[00:31:45] Jason: Debt are, yeah, the two mortgages. And then on my side there’s 26k on the credit card right now.

[00:31:54] Ramit: Let’s go to income real quick. Jason, what’s the combined income?

[00:32:00] Jason: 101,408.

[00:32:02] Ramit: Okay, so that’s $256,000 a year. Did you all know that that’s how much you make?

[00:32:07] Jason: Definetly, yes. I knew that.

[00:32:09] Megan: I didn’t know. For me, I told you I didn’t know how much he made till recently.

[00:32:13] Ramit: In your case, you have a slight justification because you’re not married, I guess. But if I was having a kid with somebody, married or not, you know I would know their finances. I would’ve done a triple drill down into their investments. I would’ve been like, you invest in this dog [Bleep] fund? They have a 1.5% front-end load. What the [Bleep]? But that’s just me. We all look for different things in our partners. At $256,000 a year, how is it that you all have $40,000 of credit card debt?

[00:32:52] Jason: Floods, wrecked car, all that stuff.

[00:32:56] Ramit: All right, so accidents. That’s one thing. What else? Megan, why do you have credit card debt?

[00:33:01] Megan: Because I carry too much. I don’t live within what I make.

[00:33:08] Jason: Also, you are working less than you were, but not changing expense habits.

[00:33:12] Megan: Correct.

[00:33:13] Jason: Yeah.

[00:33:14] Megan: Haven’t changed them.

[00:33:14] Jason: Yeah. So to Megan, the costs and things stay the same, but the variable work went down. So my encouraging is variable work, get it back up.

[00:33:29] Ramit: Well, I think the larger problem is that you are the one having to tell her to get her income up. That’s really the problem. Why is Megan not in charge of her own independent finances if the two of you are not married?

[00:33:48] Megan: I argue I am, but I also feel in the moments where there’s a question of who should pay for what, if Jason doesn’t have a card for me to use for a household expense, or if there’s no room on a credit card, I will just cover it.

[00:34:06] Ramit: If that is what’s getting you in part into this credit card debt, that’s just sloppy financial management. Because a couple making $256,000 a year should not have the issue of there’s no room on a card. That’s crazy. That’s insane. If you’re going to live independently, not married, that’s totally fine. However, you got to have a really defined set of rules, like an SOP. It would be like a McDonald’s franchise.

[00:34:39] Jason: Sounds perfect.

[Narration]

[00:34:40] Ramit: Let me explain what an SOP is. An SOP is a standard operating procedure. It is a manual for how to do a task. McDonald’s employees have tons of SOPs, which is how they can hire someone who walked off the street and have them making fries very quickly.

[00:34:57] Same for airline pilots who religiously use their checklist. I [Bleep] love SOPs. I have an SOP for when I rebalance my investments. I have an SOP for how to handle unexpected income. My wife and I have an SOP for who loads the dishwasher and who empties it and when. Oh, no, Ramit. That’s so unromantic.

[00:35:14] Things should just happen. What are you talking about? Think of the things you do repetitively. It could be who mows the lawn or goes to the gym. It could even be when you talk about money, which as we both know is never, which is why I shared my exact monthly money meeting agenda in my new book, Money for Couples, available for pre-order now.

[00:35:36] The point is you can systematize and schedule the important things to you, which leaves you abundant free time to use guilt-free for the things you love. Is anybody seeing the similarity between the conscious spending plan and creating SOPs for your life? Am I the only one who’s becoming enraged and starting to sweat while sitting in front of a camera alone at the fact that more people don’t use SOPs? What the hell is wrong with me? Let’s get back to this episode.

[Interview]

[00:36:00] Ramit: Yeah. I love a good SOP in the household. SOP for who empties the dishwasher. What time? SOP who’s doing the dishes, the laundry. Write it down. Don’t leave it up to romance and certainly not like, oh, let’s talk about it. Because the last thing you want to do is like, babe, can you give me money for formula 409?

[00:36:19] No, just SOP it, make an agreement, and then if you need to revisit it, revisit every six months. What concerns me is the fact that you’re all okay with having credit card debt with a baby on the way. [Bleep] about to get real.

[00:36:36] Jason: I don’t know if I’d say okay with it. The biggest chunks are what the unexpected stuff that wasn’t budget. We got rid of all the student loan debt. That was a big one. Then we got rid of all the credit card, and then it’s like the next thing. But I look at it as 100% income related because it’s hard to go down and then stay down.

[00:37:01] Ramit: You’re going to have to change the way that you both interact with money and probably create a new framework for how you deal with your finances individually and together. This doesn’t make any sense to me. With the income, if you guys were making 100k, okay. I would be like, we got to slash and burn.

[00:37:19] But you’re actually making way more than that. So there’s something going on here, and I can already see some of it. Let’s look at the fixed costs. Fixed costs are at 62%. That’s pretty good. You’re at 20% for your housing costs. Not bad. Not bad. All right. Fine. Transportation is 400 bucks. Oh, plus fuel. That’s 1,029. Okay, fine. Debt payments are killing you at $1,204 a month. That’s a lot. In fact, just for easy math, let’s zero that out. Watch what happens to the fixed cost number. Drops to 53%.

[00:37:56] Okay. So that’s good to know. We could tackle the debt. No problem. Groceries at 715. Okay. Clothes at 40, phone at one 178, and subscriptions at 336. If we actually look into the breakdown of how each of you is spending your fixed costs, Jason, you’re at 61%.

[00:38:18] Jason: Mm-hmm.

[00:38:18] Ramit: But Megan, you’re at 66%. Do you see that? So your blended average is 62%, but Megan, your number’s actually high.

[00:38:29] Megan: Yes.

[00:38:30] Ramit: That’s a problem. If the two of you were married, then we’d be having a discussion about how to do this as a team. But with the assumption that you’re going to continue as is, then what that implication is that each of you needs to be responsible for your own finances. Agreed?

[00:38:48] Jason: I think our intent is that we build this plan as a team. And so for example, and I think maybe this is obvious, but when her income goes to zero, her fixed costs come to mine.

[00:39:03] Ramit: All right. So you are approaching this as a team. That’s actually great clarification. Cool. All right. So if that’s the case, then that raises some very interesting questions. So let’s take a look here. On your fixed costs, then probably Jason might need to shoulder some more of Megan’s fixed costs if that’s the case, because your income is way higher.

[00:39:27] Just to put the numbers out there, Jason makes 17,000 a month gross, and Megan makes 4,000 a month gross. So something to think about. Let’s keep going down the list. Investments are at 2%. Are you doing some pre-tax investments?

[00:39:44] Jason: Yes.

[00:39:44] Ramit: How much are you taking out for each of you?

[00:39:48] Jason: Mine’s 13.7.

[00:39:49] Ramit: 13.7%.

[00:39:52] Jason: Yes. Percent.

[00:39:53] Ramit: And what about you, Megan?

[00:39:56] Megan: Mine was at 11 and I just reduced it to the company match at 7.5.

[00:40:01] Ramit: Great. So that’s great. That offers some margin to play with. We can look at all that stuff later. But right now your post-tax investments are basically very nominal at 2%. Fine. Your savings are at 3%. You’re saving 200 bucks a month for your emergency fund and 150 for your gifts. You basically have three months of emergency fund. That seems a little low.

[00:40:24] Jason: Agreed, yeah. We’ve had to tap the savings for the stuff that’s been happening.

[00:40:31] Ramit: That seems bad.

[00:40:32] Jason: Yes, exactly.

[00:40:34] Ramit: So you have to tap it. You also are at the low end of a emergency fund, and you have a baby coming. Plus income is going down. A lot of risk at once. So let’s focus on what matters. You have a lot of risk. What the [Bleep]? Your guilt-free spending is 33%, and I believe that. Is that true? 4,600 bucks a month on guilt-free spending?

[00:41:01] Jason: Yeah.

[00:41:02] Ramit: What do y’all spend it on?

[00:41:04] Jason: The theater tickets are in there, the sports ticks. The eating out budget’s in there.

[00:41:17] Megan: Theater should be plural. Sport should be plural.

[00:41:24] Ramit: Just have to say, I love this show. I love this show because I talk to people who bought a 78,000-dollar truck and their income is $60,000. I have that, and I have a couple, you, who has ballet, multiple theater tickets, and $17,000 for hockey tickets. This is the most diverse show on the internet.

[00:41:49] I [Bleep] love it. Everybody who’s always leaving comments, oh, Ramit. Boohoo. Always talking to rich people. Well, actually, in this case, you guys are pretty rich. But we also talk to people from all over the country, all over the world, all over the socioeconomic spectrum. I [Bleep] love it. What do you all think of this CSP plus a baby?

[00:42:07] Jason: I’ve never seen a CSP like it.

[00:42:09] Ramit: Every CSP is different. It actually to me is like the fingerprints of your life. It really shows what you value. And here it’s clear. Ballet, eating out. It’s very clear. Now, can we fit it? We will talk about that, but I can sure see who you are from this CSP. It tells me so much. Megan, what do you notice about the CSP?

[00:42:33] Megan: I don’t think it’s all encompassing. When we list out the things that we guilt-free spend on, it doesn’t have all the things that I think about and all the goals and the things that are going onto credit cards. My epic pass is coming up, so for our ski season and also any traveling. We’re still doing a lot of very cool things, and there’s the occasional Michelin-star restaurant, and that’s not in the budget in general, but also, I don’t feel like it’s accounted for. I want more detail, that’s what I see my CSP.

[00:43:11] Jason: Well, you want more guilt-free spending is what you want.

[00:43:13] Megan: I want more guilt free spending. Yes.

[00:43:16] Ramit: That’s good to know. I think that that’s a pretty candid answer. How would you address that?

[00:43:23] Megan: In years past, I would write out a list of all the things. I put it in order of priority, and that’s as far as I get.

[00:43:40] Ramit: Writing it down and prioritizing it is not actually the point. The point is just to have an honest, accurate assessment of where your money’s going. I’m guessing you’re underestimating your guilt-free spending by at least $2,000 a month. If it says $4,622 a month, maybe it’s 6,000 bucks a month.

[00:44:02] So for me, I always say, in order to live a Rich Life, you got to be honest– honest with yourself and honest with the people around you. First thing first is just to actually put those things in here. It doesn’t make you a bad person. You don’t need to prioritize it. Just put the numbers in here. It’s currently at 33%. If we made it 6,000, it’d be 43%. And that immediately is a red flag.

[00:44:25] It’s a red flag because it’s higher than average or higher than the recommended percentages, which probably means you’re compromising on your savings or investing goals. Now, if you already had maxed out everything and you are just coasting, you don’t need to invest anymore, fine. Spend the money. Go have a nice time. But I think in your case, you got a baby coming up, and that’s going to have its own unexpected expenses, right?

[00:44:50] Jason: Looking at the CSP, I feel like our gross to net number looks quite good.

[00:44:56] Ramit: You have other problems. One is that you’re in credit card debt, both of you. I don’t know about you, but if I was making $256,900 a year, I would have a no debt policy in my house. We are never getting into credit card debt. That’s just unacceptable for our family. That’s the equivalent of saying like, we’re not going to urinate on the rug in our house. It’s just not going to happen. This’s [Bleep] crazy. That’s how I feel at $256,000. There’s no debt. That’s ridiculous.

[00:45:29] Jason: Yeah.

[00:45:30] Ramit: What do y’all think about that? Is that too strong of a statement or do you agree?

[00:45:35] Jason: I love that.

[00:45:38] Megan: I agree.

[00:45:39] Ramit: This is overspending, like it almost always is when I see people in credit card debt. So to me this goes deeper than an SOP here and like, should we work an extra five hours? It’s not about that. It’s about the fact that I think you’ve gotten sloppy with your spending. I don’t think you have a clear vision on what kind of money policies and culture do you want to create in your household.

[00:46:11] And I think it’s slightly complicated by the fact that you do combine your income, but kind of not. You’re a team, but you don’t technically combine your income. So it’s like, who gets to say what the rules are? It’s very murky. The whole thing is murky. I hate murkiness.

[00:46:33] Megan: Very muddy.

[00:46:34] Ramit: It is. I want clear lines of demarcation. This is our rule. This is our policy. If this, then that. So first of all, how does that sound conceptually to you? Megan, do you like clear lines of demarcation or no?

[00:46:52] Megan: Yes.

[00:46:53] Ramit: You do?

[00:46:54] Megan: I do.

[00:46:55] Ramit: I’m surprised.

[00:46:56] Jason: I’m surprised too.

[00:46:57] Megan: In theory I do.

[00:46:58] Ramit: No, I don’t believe you. I don’t believe you. I feel like you try to squirrel out of that and you go like, I don’t know. It depends. Because in the end you want it your way and you’re like, it’s going to work out my way. I don’t want to give a straight answer and get pinned down.

[00:47:17] Megan: Wow.

[00:47:20] Ramit: Do you agree?

[00:47:21] Megan: Yes.

[00:47:22] Ramit: Or disagree?

[00:47:25] Megan: I agree.

[00:47:26] Ramit: Even in answer, you can’t say I agree. You’re like, I agree. What the [Bleep]? Agree or disagree?

[00:47:36] Megan: Ideally, I agree.

[00:47:37] Ramit: What is that?

[00:47:40] Megan: If we had rules, if we had these procedures, that’d be great. I would love that. I love operating within my rules. I do. I love that with my–

[00:47:51] Jason: But do you follow them?

[00:47:53] Megan: That’s the thing. I’m not sure. I know it comes from how I grew up and how I was raised is how this comes up, because I understand I can work a lot and I can get money and I can pay for things and live within my means, but then I also know that it’s been demonstrated to me that you can just put it on a credit card or like, it’s okay to have massive amounts of debt. I know that’s not okay conceptually. Ideally, I don’t want that. And when I’m debt free, it feels really nice. But then it’s also like, I get sloppy and then I get the slippery slope and then I just don’t live within my means.

[Narration]

[00:48:36] Ramit: We’ll be right back after this short break.

[00:48:39] Now back to the show.

[Interview]

[00:48:41] Ramit: Why don’t you live within your means, Megan?

[00:48:43] Megan: I don’t think I’d ever asked Jason to pay for something for me, something specific. Jason wanted me to go mountaineering with him, or whatever the activity is, I refuse to be taught by him, so I’ll hire people. So to learn how to ski and to learn how to rock climb and mountaineer, these were things that got put on a credit card because I wanted to be able to keep up in his lifestyle, but could I afford that? No, but the opportunity cost was there.

[00:49:30] So it’s this, I’m trying to keep up with him and with the lifestyle, but I also know that I can’t actually afford that. It’s this sloppy slippery slope of can I actually afford this? No. But I still going to do it? Yes.

[00:49:45] Ramit: Have you ever had a series of discussions about this?

[00:49:51] Megan: No.

[00:49:52] Ramit: Why?

[00:49:53] Megan: When I express frustration or costs of things that I would like to do, like I would like to have a doula at our birth, there’s questions of like, well, where is that money coming from? And so then I think, well, I want it, so I’m just going to put out my credit card, because that’s important to me. Can I afford it with my income? No.

[00:50:21] But I also know that because we keep our things so separate, I know that he’s covering so many other things in our finances. I don’t feel entitled to any of his money. When I say I want to do something that’s specific to my needs, rather than feel the pushback, then I’d rather just avoid that conversation, and I’d rather just put on a credit card and I’ll figure it out somehow. Kick it down the line.

[00:50:55] In years past, Jason will say, I’m going to get a bonus and we’ll just wipe out all our credit cards, and that’s going to be fine. And that’s great. But the last bonus could cover his credit cards. And it’s like, but we put a lot of mutual expenses on my credit cards. And so I just hold onto it and keep paying off what I can.

[00:51:20] Ramit: As you’re saying this to me, what are you hearing?

[00:51:24] Megan: A whiner. Inequality in our understanding and just operating in gray space rather than being firm.

[00:51:36] Ramit: I agree you’re operating in gray space. There’s a lot of murkiness. There’s a lot of things unspoken. Yes. What else?

[00:51:44] Megan: I try to be accommodating. Lots of moments where I’m not putting the logical rules down of if I want to do this, I should actually plan to do this. And just because it sounds great now doesn’t mean I need to do it right now.

[00:52:04] Ramit: Mm-hmm. There’s a lot of focus on the individual in the way that you conduct finances.

[00:52:13] Megan: Yes.

[00:52:14] Ramit: You do you. I do me. Sometimes we combine, but if I, Megan, can’t afford a ski jacket, I would have to ask. I would have to bring it up, and then I sometimes get pushback, which makes me not want to ask at all. It’s this default of every single time there’s a purchase decision, I have to agonize over which card is it on? Who’s going to pay? What if I can’t afford it?

[00:52:46] It’s exhausting, and it’s actually not working. You’re in credit card debt again. You have a baby coming. Your income is going down. It’s not working, and it’s actually not the sign of a unified money management system in a couple. Jason, what did you hear?

[00:53:07] Jason: I heard that, I think for the first time, that her decisions are, I’m just going do it on the credit card because I don’t want to talk about it.

[00:53:16] Ramit: That caught you by surprise, right?

[00:53:19] Jason: Yeah, yeah. Because in the past, she just gave the example of, oh, I can’t afford that. I can’t work for it. And I said, great, how much does that cost? How do we make it work? She tells me the cost and then, great, I can figure that out. That’s a dollar problem I could solve. But we haven’t done that discussion in years.

[00:53:36] Ramit: Megan, why are you crying?

[00:53:39] Megan: Pretty normal state these days with pregnancy, but I just had a lot of feelings and it brought up a lot of things that I’ve just been avoiding.

[00:53:46] Ramit: Oh, okay. Are part of those that sometimes having to ask and then get the question, where’s the money come from? How much is it going to cost? Is that upsetting sometimes?

[00:54:00] Megan: Yes, it is upsetting. And so it brings up a lot of like, well, I could figure out something. I can do a bandaid fix, and it’s all going to work out later and my bandaid fix is, I can just put it on a credit card.

[00:54:14] Ramit: Nobody in a relationship likes to have to ask for money, and then they certainly don’t like to be questioned, like, where’s it going? It feels very diminutive. It feels very like parental child. At the same time, Jason is like, well, I need some numbers here. I need to be able to operate somehow on the finances.

[00:54:39] And you can see this dynamic that’s been created. Jason is trying to get information. Megan is like, I don’t want to deal with it in this way. I’ll just do it myself. And it’s produced this dynamic where neither of you is feeling good about your money decisions. It’s certainly not a smooth-running machine, which is what I would love for the two of you to have.

[00:55:07] A clear understanding who owns what part of the spending, how much have we agreed. Clear boundaries of like, this is how much we’re going to put towards X, Y, Z, and much fewer questions back and forth about can we afford that? That question should not be coming up. What do you think would be a way for you both to feel good about money?

[00:55:35] Megan: My immediate response is to have more of it, but I don’t really need more of it but to have a plan, to have an understanding of where our budget is. It’s never been shared in this intentional detail before.

[00:55:55] Ramit: Well, now you have it. So what do you need going forward?

[00:55:58] Megan: I’d like it to all be combined. That would be very nice. I think an envelope system could be very nice for us. Anytime I spend money, when you say guilt-free, it’s all guilt full. There’s never a moment when I spend money that I think like, I deserve this.

[Narration]

[00:56:20] Ramit: Extremely insightful. Megan says, I don’t feel entitled to his money. The invisible script here is talking about my needs makes me unreasonable, so I’ll just do it on my own. See, we’re all raised with this idea of independence in America. And independence can be good, but hyper independence, taken to an extreme, leaves you a pregnant woman in credit card debt who feels guilty even talking about money.

[00:56:50] Meanwhile, Jason wants numbers, which is fair to ask for, but his approach is not connecting with Megan at all. Megan has a ghost. If you remember from Episode 5 of this podcast, Sheena had a ghost of, I need to pay off debt. And anytime her partner, Peter, wanted to talk about how they can spend their money even for a special event like an anniversary, he was talking to her ghost, not to her. So can you identify Megan’s ghost? Let’s listen to her describe her childhood for a clue. Please be warned. There will be a discussion about suicide in the upcoming story.

[Interview]

[00:57:27] Ramit: What do you remember about earliest memories about your family talking about money?

[00:57:32] Megan: There’s never enough of it. I remember my parents arguing and one racing to the bank and I got in the second parent’s car to chase them because one was going to empty out their checking account. They later divorced, but it’s still like that’s scary though.

[00:57:52] Ramit: What did you take away from that now as an adult looking back?

[00:57:55] Megan: I’ve been operating in like, I have to protect myself. I know that no relationship is guaranteed to last for forever. And so the hesitation and always knowing to protect myself from my future is very much a part of the every paycheck understanding of what I put away and what I save for my future self.

[00:58:20] Ramit: You said protecting your future self, right?

[00:58:23] Megan: Yeah. My dad got laid off when I was a kid, 14-ish. He killed himself when I was 21. He never was employed between those ages. He was supported by selling off properties that he had owned with his dad and my uncle. And then toward the end of his life, it was asking his dad for cash. When he chose to take his life, it was money thing. He owed back child support, so he couldn’t protect himself.

[00:59:10] So I have that very much understanding. I also know that my mom and her husband have extreme amounts of debt, and they don’t have any retirement savings. They don’t have a way to protect themselves. This is very much like forefront of my mind since I was 21 years old, that I have to have a plan to protect myself at some point.

[00:59:39] So I did years of service after university because I knew that’s how I could beat down a bunch of student loan debt. So I took like a volunteer job because that gave me education grants at the end of it. I don’t have parents who can float me thousands of dollars if I were to ever be in a situation where I can’t pay for something or like I’m choosing to not get a job.

[01:00:07] Ramit: You mentioned the word protect many times.

[01:00:13] Megan: Yeah.

[01:00:13] Ramit: Protect yourself, protect your future. And now that I understand your family dynamics, that really makes a lot of sense. I’m so sorry for what happened to your dad. I can only imagine your relationship with money.

[Narration]

[01:00:31] Ramit: Before we hear Jason’s upbringing, let’s just acknowledge the horrific experience that Megan had growing up. I’m very glad that she’s in therapy, and I’m truly honored that she would come on this show to have a discussion with me. I think we can all start to understand that we have no idea how we would react if we had the same childhood as Megan. Now I wanted to understand more about her invisible scripts around money.

[Interview]

[01:00:57] Ramit: I am curious if protecting yourself is one of the primary ways you describe your relationship with money. How does it feel that you are the lower earner in this relationship, not married, pregnant, and if something happened in this relationship, you would be on your own?

[01:01:21] Megan: That’s also probably one of the reasons why I’ve not wanted to share finances with Jason in the past is because I know that he has a mentality to fight tooth and nail. And in the event of the demise of our relationship, if he knows all the things about me and all about my finances, he would win any argument based off of finances, and that didn’t matter until I chose to make a person with him.

[01:01:57] Ramit: Is this relationship on the way out or something? You’re two months away from having a baby.

[01:02:02] Megan: No, but it’s also like I am a planner in the sense of like, I feel like Jason and I make a really great team, and we have a lot of fun together. I didn’t trick him into having a baby or anything. There’s a lot of things that I’m like, I really want to go into all of these big life decisions intentionally, and it was all very intentional.

[01:02:29] But I also know people get divorces and people break up, and we’re going to be different people in 15 years and maybe we still like each other and we still respect each other. And hopefully that’s the case, we’ve grown together and not apart.

[01:02:46] Ramit: Would it be scary to you to say out loud, I want to be with Jason forever?

[01:02:52] Megan: No, no, because I try to trick him into saying that back at me because I tell him that.

[01:02:57] Ramit: Oh, that’s surprising to me.

[01:03:01] Megan: But he doesn’t necessarily say it in the right words that I would like to hear it back.“

[01:03:06] Jason: I think that is more scary for me than for her, but I also have more confidence in our ability as a team to do and execute these things we want to do. I think we’re good, happy, and want things to continue to get better.

[01:03:24] Ramit: Megan, I’m curious also that you use the word protect a lot, but you don’t seem to protect yourself when you overspend.

[01:03:34] Megan: True.

[01:03:36] Ramit: How do you reconcile that?

[01:03:37] Megan: I don’t know if I reconcile it. It’s just a naughty habit of trying to bridge the gap of whatever that is. If we are choosing to go to Ireland for the weekend and we’re booking our very discounted tickets, I put on my credit card. Should I said yes to put it on my credit card? No. Could I have really afforded that? No.

[01:04:06] But is there a rationalization that Jason and I go through when we’re like, well, we’re going to spend the same amount of money anyways on eating out for the weekend. Should I have asked Jason just to pull out his card for that if that was our choice as a couple? Yes. But in those moments, I’m not going to.

[01:04:25] Ramit: You’ve already lost at that point, if you have sit and decide who is pulling out their credit card. That’s a systems failure. Are you in touch with your mom? You mentioned that her finances are in trouble.

[01:04:40] Megan: Yeah, yeah. I’m very much like my mom in the sense of, well, I have a plan. This is the ABCs of it, but this outlier opportunity came out, so I’m just going to spend anyways, and it just gets tacked onto the bottom of this plan. So does this plan really exist? Theoretically. Do we follow it? No. And that’s how I also operate.

[01:05:09] Ramit: Yeah. You have a double whammy as well because in your job you can work as much as you want and make a lot of money. People who work these hourly type of jobs or jobs where more time equals more money, they end up getting a very distorted sense of reality. And it’s bad on both sides.

[01:05:32] One, they don’t really think credit card debt or anything is a problem because they’re like, I’ll just work a few extra weekends. It’s no big deal. But then second, when they are not working, they’re constantly thinking about how much money they’re losing. So it’s not just a trip to go skiing. It’s like, well, that trip is actually costing me $6,000.

[01:05:50] I see the nods on your faces. It’s an extremely perverse, unhealthy relationship with money. Unless you are strongly rooted in how money works, what are your values, and then your job, whether it be flight attendant or whatever, it becomes something that serves your Rich Life. Your finances are not meeting you where you need to be. And more importantly, the dynamic that the two of you set up is not serving you, especially with the upcoming major financial disruption.

[Narration]

[01:06:26] Ramit: I asked Jason now about his upbringing with money.

[Interview]

[01:06:30] Jason: When I was a kid, I would make as much money as I could and save it and not spend anything. So it was very much save, save, save, save, save, don’t spend. Started a business at 14. From 14 on, paid for all my own stuff. Did take loans to do school because parents didn’t have anything, so didn’t get the contribution there.

[01:06:56] Ramit: What did your parents say about money when you were a kid?

[01:06:58] Jason: My father, the only thing he ever said was buy low, sell high.

[01:07:02] Ramit: Mm-hmm.

[01:07:02] Jason: So it was, find the value deals. If you’re going to buy something, make sure it’s a value deal. He mostly made the money and my mother did balancing the checkbook and all that, paid the bills. But it was a very separate thing. She just sent the money to her and she took care of it.

[01:07:24] Ramit: And what do you think about that, looking back?

[01:07:26] Jason: It was generally fine. When you became an adolescent and started needing stuff on your own, it was like on your own. Figure it out. So I did, figured it out.

[01:07:40] Ramit: A lot of our parents, they had the same dynamic. One person, usually dad earning money, mom would maybe get the check and administer the household. Isn’t that happening in reverse then? She basically makes her paycheck and sends a little bit to you and you administer the household.

[01:07:57] Jason: Yeah. But not the full picture, obviously.

[01:08:01] Ramit: Because she has her own expenses, etc.

[01:08:03] Jason: Yeah. And if her own expenses were within her means, great. No problem. I don’t think we would have a problem. We wouldn’t be where we are.

[01:08:16] Ramit: Well, let’s not forget you have $26,000 of credit card debt too.

[01:08:20] Jason: Yeah, sure. But I also have means to take care of it. If we said at the end of this call, we’re like, that’s the number one priority we need to do it, it’s done before the end of the year.

[01:08:34] Ramit: I agree. That’s fair. At the same time, if Megan were not pregnant and needing to take care of the baby, she could theoretically get on a plane and rapidly pay it off too, right?

[01:08:46] Jason: Totally. Yeah.

[01:08:47] Ramit: Okay. I agree with your point. Technically, I think that biologically you got to acknowledge. Megan, you’re going to be home for a while, and that’s just reality. So I guess I want to know how much do you want to bring your money together? Because I can help you in any way you want. If you want to keep your money separate and you want to set up some rules, we can tighten them up. It’s not a problem. We’ll create some simple guidelines. You all understand where you stand.

[01:09:19] But ultimately each of you is responsible for your own finances. You’re basically running a business partnership. It’s like, here’s what you’re responsible for. Here’s what I’m responsible for. Transfer this much money each month, etc. You can do it. We can make it work, but each person has to hold up their end of the bargain, and it’s like, if you don’t, we need to talk about what happens then.

[01:09:43] Jason: I think that’s true for both sides. So for example, if we combine and then we plan 15 months later Megan does go back to work and she doesn’t, that impacts the plan. Similarly, if it’s separate, hey, I’ll take all the fixed costs. Keep your savings rates and stuff high the way they are, anything that comes down and hits your account as your guilt free for whatever you want. We could do it that way. But similarly, if you overspend, that creates a problem. And I feel like those problems all come to me. So eventually they all become my problems.

[01:10:21] Ramit: Right. Which is my point. It is a problem that all financial problems become your problem.

[01:10:30] Jason: Yes.

[01:10:30] Ramit: They should not be only your problem. The risks and rewards should be distributed, not necessarily 50-50, but everyone’s got to have some skin in the game. That’s exactly why I don’t do the family finances solely for my wife and me.

[01:10:48] Jason: Yeah.

[01:10:49] Ramit: I could. I made sure not to. My wife is extremely adept at the finances. She does parts of it. She does parts of it way better than I ever could. And we talk about it. We are rowing the same direction.

[01:11:01] Jason: I think a good example there is when we did the math on the house, we did the, what can we afford? What’s comfortable and good and easy? Which was way less than we could afford, of course. Didn’t want to spend what was possible. So bought under our means, and then we did all the picking out together and all that.

[01:11:24] But then when it came to actually understanding the mortgage, the costs, when those costs hit, what accounts they go to, how they’re paid for, all that, she did not want to participate.

[01:11:39] Ramit: I wouldn’t either if I was not owning the house. And Megan, you didn’t want to be a part owner of the house.

[01:11:48] Megan: I was there for signings and things and read documents, but there was never a, do you want to be on the house? There’s never that conversation. It was always a understanding that like, it was going to be Jason’s house. It was going to be his name. There was never like, well, do you want to be a part of this? And I offered my cash for it, but he declined and said no. So there was never like a, do you want–

[01:12:22] Ramit: Hold on. Did you offer your cash and he declined? 

[01:12:26] Jason: Yeah.

[01:12:27] Ramit: Why, Jason?

[01:12:28] Jason: Because she couldn’t afford it. My goal at the time was, get her savings, get her investments up because it wasn’t set up right. So it’s like, get your financial house there. I was like, we already planned for that. I already saved for that. We have it all in cash.

[01:12:49] Ramit: Jason, you remind me of me in my 20s in a good way and a bad way. I’ll tell you what I mean. The good way is like you have a high income, you are clearly interested in personal finance, and you’ve accomplished a lot. You own the house. Your investments are $694,000. It’s all very impressive. Okay, there’s a little bit of debt, but fine.

[01:13:15] All that is all manageable. It’s good. It’s really impressive, and obviously you’re going to, financially speaking, be very wealthy, etc. When I was in my early 20s, I was a very utilitarian guy. Like that poster you have behind you, if I even had a poster hanging on my wall, it wouldn’t even have a frame. It was just like, tack that [Bleep] up. Who gives a [Bleep]? Why do you need a poster? That’s frivolous, that kind of thing. And it was very efficient.

[01:13:46] Let’s get the numbers and then, boom, move on. And I hear some elements of that in the way that you talk to Megan about money. And the thing is like, yeah, of course, you need to understand the numbers. Yes. You need to have ratios. Yes. But I’ve learned, it took me a long time, that it’s so much more effective to meet people where they are. Remember Megan has had a very traumatic experience with money in her past. Then to paint the picture. What’s the vision? Connect emotionally. You’ll have a baby coming.

[01:14:25] Jason: Mm-hmm.

[01:14:26] Ramit: That raises so many questions, especially for women. And we’ve heard Megan use the word protect over and over. There’s definitely so much to be covered there. Connect. That’s what I learned. And then finally, on the very back end, I’m talking like the last 5%, is get the numbers dialed in. That’s the polish.

[01:14:46] What I hear though is the opposite. It’s like she comes to you. She’s talking about something. You go like, how much is it going to cost? And she’s instantly turned off. Like so many people are. Meeting her where she is is like, hey, let’s talk about it. What do you think? What would make you feel good?

[01:15:03] Here’s what would make me feel good. Gosh, this makes me a little concerned, but I’m not sure. How should we handle it together? It’s really shifting these conversations into a joint unit, us against the world. What do you think about that?

[01:15:21] Jason: Interesting. Megan’s been assertive about what she wants or decisions. That’s super helpful to me. I’m like, got it. Can work with that. That’s helpful. The vague stuff is very difficult.

[01:15:36] Ramit: I understand that it’s frustrating to get squirrely answers. I get that. And we can fix that. We can work on that. But I think what I’m really saying is starting off with like, how much does it cost? Let’s get the numbers. It’s not producing the result you want. And I’m going to just ask, Megan, does it feel good?

[01:15:57] Megan: No. It was also when I’m asked like, well, how much is the baby going to cost? I said, well, I don’t know. I don’t have that. I’ve never had a baby. It’s also very Googleable.

[01:16:07] Ramit: Totally. I believe that the person who makes more money, especially if they make vastly more than their partner, oftentimes they are more financially savvy, not always, but often. I believe it’s their responsibility to work with their partner and help bring them up to a level where you’re both effectively partners.

[01:16:33] And sometimes that means you got to deal with stuff where, of course, you’re like, Jason, just give me the number. Trust me. I get it. When I first got married, I was like, just give me the number. And I’m like, oh, [Bleep], this is not working. It’s not working. I have to connect with my wife. I have to understand where she’s coming from. I have to slow down in order to go together.

[01:16:57] And you might have to slow down in a way that feels like so unproductive to you. I’m very passionate. You can hear it in my voice because I know what that feels like. It feels like I just need a number in cell C13. That’s all I need. But actually, what we’re realizing is this whole conversation is so much bigger than a number, isn’t it?

[Narration]

Okay. So Megan is eight months pregnant. They keep their accounts separate. Both Megan and Jason are in credit card debt. Jason owns the house, and they don’t communicate effectively about money. Honestly, a lot of couples are in somewhat similar situations. Most couples only have an honest conversation about money maybe five times in their entire lives, and one of them is when they have children.

[01:17:41] Now, beyond the upcoming baby, which is really causing a lot of these conversations, you’ll notice the traumatic upbringing, the stories that they’ve created about each other, and how they are really not connecting. It just feels very transactional. Next week we’ll continue this conversation, and I promise you will be surprised.