Episode #198: “I work 7 jobs but can’t get ahead. Are we doomed?”

Download the full transcript PDF.

[00:00:00] Juan: At one point I had almost 50,000.

[00:00:01] Ramit: In savings? What happened to it? Don’t say the motorcycle.

[00:00:04] Juan: We have five motorcycles.

[00:00:06] Ramit: Five [Bleep] motorcycles? I don’t even have five books I wrote. Why do you have five motorcycles?

[00:00:11] Juan: This is your fault. This is my Rich Life.

[00:00:14] Ramit: What happened the first time you met?

[00:00:15] Juan: Amber tried to tell me how to run my business.

[00:00:17] Amber: Yeah. He was doing it all wrong.

[00:00:19] Juan: I didn’t have a good role model for money growing up. I am so far behind on any kind of savings. Amber’s behind as well. We really need to step up how much we’re putting away.

[00:00:30] Ramit: What did you do with that money?

[00:00:32] Juan: I bought a lot of weed with that money. I was not a good sibling. I was not a good son. Caused a lot of heartache and a lot of grief. I’m forever trying to make up for that.

[00:00:42] Ramit: Have you ever had to declare bankruptcy?

[00:00:45] Amber: In college. I got in over my head. The collection of agencies were following up with me and I tried to pay them a smaller amount and they refused.

[00:00:53] Ramit: Did you think that bankruptcy was serious?

[Narration]

[00:01:05] Ramit: I’m about to open up Juan and Amber’s conscious spending plan, which breaks down their net worth income and where they spend their money. This is a simple one pager. You can download the template for free at iwt.com/csp.

[00:01:19] All right, I’m looking at the CSP here. 43 years old and 40 years old. Assets of $65,000, investments of $80,000. Okay. Savings of 28,000, and debt of 74,000. Total net worth of $98,000. Interesting. Let’s look at the income. That’ll tell me a lot. So their gross monthly income is $16,560. That’s a lot of money. That’s $198,000 a year.

[00:01:50] Why do they only have 80k of investments at the age of 40 and 43? Also, why do they only have $28,000 of savings? Now, one possibility is that they just started earning this kind of money. That’s possible. Let’s take a look at what else. Fixed costs are 57%. That’s really good. Their rent is at $230. What? $115 each? This is a typo. All right, fine.

[00:02:18] So basically, they’re not paying much for housing at all. Insurance is a little high at 1,000 bucks. Car payment at 923. You know what’s interesting? As I work my way down this list, I’m like, if you are paying basically no housing costs or very little, then how is your fixed cost at 57%? Shouldn’t it be more like 25 or 30%?

[00:02:37] So where is the heavy expense under fixed costs? There it is. Debt payments at $2,581. Wow, that’s pretty aggressive. They have a artificially low fixed cost because they’re not paying housing costs, but they’ve artificially raised their fixed cost by probably overpaying towards debt. All right, fine. Groceries are fine. Nothing else really stands out. At 57%, personally, I think that number should be lower. But I’d be curious to hear more about what’s up with the debt.

[00:03:09] Payment investments are at 10%. At 40 and 43, though, they need to be doing more. I can tell you that right now, especially because they only have $80,000 invested and they are not going to own a house on this trajectory. They will need to dramatically increase their investments. Savings are at 7%. They’re putting 200 bucks a month away for gifts. No way. That needs to go to investments. Long-term emergency fund at 400, fine. Family at 200. I’ll have to see what that’s about.

[00:03:39] And then guilt-free spending at 25%? No, no, no, no, no. That needs to come way down. At age 40 and 43, if you haven’t started investing aggressively by that point and you are not on track to own a house, then you’ve got to be investing aggressively. So just off the bat, instead of 25%, that’d be down to 15%. All that would be going into investments. I need to talk to the couple to understand what’s actually going on here.

[Interview]

[00:04:06] Amber: Juan and I do a really good job at living our  Rich Life today, but because of that approach, we’re not really well set up for retirement.

[00:04:17] Ramit: Okay. So you two are not married, correct?

[00:04:20] Juan: Mm-hmm.

[00:04:21] Ramit: Live together?

[00:04:22] Juan: Mm-hmm.

[00:04:22] Amber: Yes.

[00:04:22] Juan: Yeah.

[00:04:23] Ramit: How long have you been together?

[00:04:24] Juan: Three and a half years.

[00:04:25] Ramit: Okay. All right, cool. Juan, you said in your application, “I have not been able to stop thinking about preparing for the future, but instead of it being a bright outlook, it’s often thought of with worry and fear. What do you mean by that?

[00:04:44] Juan: Everything I learned about money and savings I learned from Amber. I didn’t have a good role model for money growing up. So the things that I learned about how important it is to save and to leverage money and credit and things like that, I learned from Amber.

[00:05:06] And the more that I learned about those things and because of the place where I’m at in my life now, I can see that I am so far behind on any savings that would have me feeling comfortable about retirement age. And that’s just the worry that I feel for myself. But I also have an incredible amount of guilt and worry about being able to take care of my family.

[00:05:31] Ramit: Which family?

[00:05:32] Juan: My mom and my brother and my sister. And I really want to be there for them. But I think Amber once showed me a calculator that showed, if we put away this much money, this is how much we can expect to have. And I was like, yeah, that’s not going to happen. I don’t even think we can help ourselves with the amounts that we’re showing on there. I’m really behind. It sounds like Amber’s behind as well. We really need to step up how much we’re putting away, and the number just seemed insurmountable to me.

[00:06:03] Ramit: I see. You’re 43 years old, so you said that the only thing you’ve learned about money have come from Amber. And since you’ve been together for three years, that means you really started learning about money around the age of 40, is that correct?

[00:06:19] Juan: Mm-hmm.

[00:06:19] Ramit: Amber, any of this surprise you?

[00:06:22] Amber: No. Yeah, we’ve talked about it a lot. I think there are definitely a lot of things that Juan and I will sometimes have trouble discussing, but money has always been something that we talked about pretty openly.

[00:06:35] To hear that level of worry come from him was a bit surprising  because I think– and this also touches upon me wanting us to be on the same page and have the same goals, is that, historically Juan has always been the one that’s like, this level of stuff is enough. We can live within this small amount and do just fine. And I’ve always been the one that’s like, no, let’s elevate things. Let’s earn more. Let’s experience more. Let’s do this.

[00:07:04] Ramit: The way you’re talking about it sounds like things have changed, but have they?

[00:07:08] Juan: I have slowly come around to the idea of the Rich Life, which Amber had introduced me to. And sometimes it can be a point of friction between us because I am really conservative in a lot of the way I live, partially because I have never really learned how to leverage my skills for the amount of money that they’re worth. So the idea of abundance really scares me.

[00:07:31] Ramit: Mm. Amber, are you surprised to hear him say the word scared?

[00:07:35] Amber: Yes. Very surprised.

[00:07:38] Ramit: Why is that?

[00:07:39] Amber: These are not things that he’ll openly share.

[00:07:42] Ramit: Why is it that a guy like me who has struggled connecting to my own emotions comes on here for five minutes and suddenly we’re talking about words like scared and behind and sharing our feelings for the first time in three years? What is happening right now?

[00:07:57] I don’t know, but I love it. I’ll tell you that. Sometimes we do need just somebody else to make us more comfortable sharing what we have been feeling for years. So I appreciate that you’re letting me be that person today. Of course, my hope is that I give you some tools, some suggestions, so that you two can continue that even when I’m not here. Juan, you said you want to be there for your family. What does that mean for you?

[00:08:27] Juan: We’re a small family, so we’re pretty tight knit. I have a younger brother and a younger sister, and then it’s just my mom. So it’s a single parent family. And I think we’re there for each other emotionally. We know how to support each other in that way. But the thing that really pulls at me is the financial stuff.

[00:08:44] My mom has worked seven days a week for decades. She currently still works seven days a week, and she’s well over 60. And enough’s enough. She is at retirement age, and because of the sacrifices that she made in order to have us succeed, she is not set up.

[00:09:07] The only savings that she has set up is, once Amber taught me about money, I immediately opened up an IRA for her. And every month her and I contribute to it together. But we’re talking about only a few years of contributing to this IRA. And I don’t expect her to be able to make up decades worth of missed income.

[00:09:28] And I don’t have any illusions of taking care of all three or all four of us. I also have my partner to think about. But if my brother and sister were to need something that I could pitch in with, I want to be able to comfortably say like, “Yes, I have this to give to you.”

[00:09:45] Ramit: Okay. Let me understand a little bit more about your family and what it was like growing up when it comes to money. What do you remember about money as a kid?

[00:09:55] Juan: Four years old is, I think, a great place to start because that’s when I immigrated to the United States. So I was four, my brother was two, my sister was not yet born. We’re seven years apart. But the level of poverty that we experienced upon arriving to the United States was to the level of having to go to the church to ask for stipends to be able to purchase things like milk and basic necessities.

[00:10:20] I have a really vivid recollection of a tree with dates of going to a park and collecting a bunch of those so that we could have little snacks and stuff to hold us over sometimes between meals, and we didn’t live that type of poverty for very long, thankfully.

[00:10:35] But it was enough to make an impression that we didn’t have enough, and that also we shouldn’t be a burden and ask for more because it was hard enough to have just what we had at the moment. But I saw my mom fight tooth and nail and work dust till dawn to get us out of that situation as quickly as possible, moving us up into middle class by any means necessary.

[00:10:56] Ramit: How did she take you to the middle class as a single mom of three while working crazy amounts of hours?

[00:11:06] Juan: So my mom’s specialty is cleaning, but she did everything. She would clean offices at night, graveyard shift, and then come home in the morning, sleep a couple of hours, and then go to a construction site and put up drywall. And then after that, then she would go and clean houses, or she would get a job in the apartment complex that we had, cleaning out vacant apartments to earn more income.

[00:11:27] And so it was basically just a few hours of sleep in between jobs here and there. Sometimes she would take us to the movies just so she could take a nap during the movie and then be ready to go to work.

[00:11:39] Ramit: Wow. Were there any phrases she ever said about money?

[00:11:44] Juan: There were never any phrases about money because we just didn’t talk about it. And she just never wanted us to go without. I think, even though, we understood that this was a huge undertaking. And so we didn’t ask. She also wanted to make sure that we didn’t go without, so anything that we needed for school, for clothes, for anything like that, once we had the means, then it was always provided for us.

[00:12:12] Ramit: That’s pretty amazing. She sounds like an amazing lady.

[00:12:15] Juan: My hero. There’s nobody I hold higher.

[00:12:19] Ramit: Wow. When you got a little older, let’s say 13, 14, 15, did you get a job?

[00:12:26] Juan: I did. Yeah.

[00:12:28] Ramit: Okay. What was the job?

[00:12:29] Juan: McDonald’s.

[00:12:30] Ramit: Yeah. Nice. Okay, cool. What did you do with that money?

[00:12:35] Juan: We can say whatever on the podcast?

[00:12:36] Ramit: Yeah. He’s like, “I bought drugs. I bought cocaine.”

[00:12:42] Juan: I bought a lot of weed. I bought a lot of weed with that money.

[00:12:49] Ramit: That’s so [Bleep] funny. I thought he was going to be like, I gave it to my mom. Mom, here you go. I love you. He’s like, “I bought a ton of weed, bro.” Well, that’s real. That’s a real show. All right. So you did that. All right, fine.

[00:13:05] Juan: I know we’re laughing about buying a lot of weed, but part of the guilt that comes with wanting to make sure that I’m there for my family is that in those pivotal years, 14 to 18, when I was just trying to make sense of the world and trying to understand like how I fit into everything, I was not a good sibling. I was not a good son. I caused a lot of heartache and a lot of grief, and that was before knowing anything about what life was like and what it cost. And so I’m forever trying to make up for that.

[00:13:36] Ramit: I hear you on that. Do you ever tell them that, your family?

[00:13:40] Juan: I remember just talking to them one by one and just saying like– I remember it took me a long time just to tell my brother, I’m really sorry, man, for just being such a jerk to you when we were little. And my sister too. I wasn’t a jerk to my sister because she was so much littler than I am, but just not setting a good example and just not being there for anything that she might’ve needed.

[00:14:03] And by the time I was really old enough to start figuring any of those things out and the impact that they had, I had already moved away because I moved away at 18. So I couldn’t even make up for the fact. And so I’ve just spent my entire adult life trying.

[00:14:16] Ramit: And what did it feel like for you to say that maybe for the first time?

[00:14:21] Juan: Yeah. It was definitely a burden off of the shoulders, for sure. It felt like relief. I think it’s easier for them to forgive me than it is for me to forgive myself.

[00:14:32] Ramit: That’s very insightful.

[00:14:34] Juan: I just want to say like, “Hey, I was [Bleep] to you for a period of time when you probably really needed my help and guidance because I’m the oldest, and I freaking let you down. So if you need something, I wouldn’t be able to give that to you.

[00:14:47] Ramit: Okay. That’s cool. I appreciate that. Sounds like your family really appreciates it. Amber, before I ask you about your family, did anything that Juan just said surprise you?

[00:14:59] Amber: No. That’s also one of the things that I really love about him, and I love how family oriented he is. And you can just tell Juan is such an amazing perso. And his family’s amazing. And I also agree. I want us to do well so that we can take care of them. And that’s also why I am continually harping on Juan sometimes to be like, we need to think bigger.

[00:15:22] Ramit: Mm-hmm. When you say the word harping, what does that mean?

[00:15:26] Amber: Even from the first time we really hung out and we started getting to know each other, I came in–

[00:15:32] Ramit: Wait. What does that look? Hold on. Juan just broke into a big old smile. What happened the first time you met?

[00:15:37] Juan: Amber tried to tell me how to run my business.

[00:15:40] Amber: Yeah. He was doing it all wrong. I was like, “You need to charge like double.”

[00:15:42] Ramit: Wait. Okay. Hold on. Hold on. Take me back. Where’d you meet?

[00:15:45] Amber: We had a mutual friend who was setting us up, and so we had a group dinner coordinated at Juan’s apartment and then these friends conveniently had to leave early.

[00:15:54] Ramit: Whoa.

[00:15:55] Amber: Just the two of us

[00:15:56] Ramit:  All right. Matchmakers. All right. Respect to all the matchmakers out there. So you end up having dinner and then was it 12 minutes into the conversation, you’re like, “Pull out your whiteboard and diagram your business model”?

[00:16:08] Juan: Were you there? Were you there that night? Ramit was there. He was there. 

[00:16:13] Ramit: Amber, is this what happened?

[00:16:16] Amber: More or less.

[00:16:18] Ramit: Oh my God. This is what half the FIRE community recommends on a first date. They’re like, “You have to talk about everything. Break it down.”

[00:16:26] Amber: I think we were both thinking, this is not a match. And I remember getting in my car and laughing like, ha, I just went the last 40 minutes telling this man how to run his business.

[00:16:38] Juan: But we went out again, and unbeknownst to you, you were an integral part of the beginning of our relationship.

[00:16:44] Ramit: Me?

[00:16:45] Juan: Yeah.

[00:16:45] Amber: Mm-hmm.

[00:16:45] Ramit: How?

[00:16:46] Juan: Yeah, yeah. Can I tell him about sour, our second date?

[00:16:52] Amber: Sure.

[00:16:53] Juan: So I had this motorcycle and I was like, “Hey, can I pick you up on my bike, take you out for on this date? And I think all the stars aligned for this date. I picked her up. It was beautiful. No rain, clear skies. Stars are out, full moon. We’re on the floating bridge, having a picnic, and we’re just having these really awesome conversations. And I’m just like, “Yeah, a kiss is going to happen.” And we’re inching closer together and I didn’t realize that she was just leaning in so that she could look me dead in my eye, dead in my eye, and ask me what my credit score was and if I had any debt.

[00:17:33] Ramit: Is this for real right now?

[00:17:35] Amber: Yeah.

[00:17:36] Juan: Can’t make it up.

[00:17:37] Ramit: Amber, is this seriously what happened?

[00:17:38] Amber: Yes, yes. This is seriously what happened.

[00:17:42] Ramit: Hold on. I’m trying to get a grasp for this. This is freaky. I never heard anyone ask this on a second date. Did you get the answer you wanted, Amber?

[00:17:54] Amber: It was really funny because I’d been married before. I had just gotten out of a divorce, and I was like, “Woof, that was a lot. Wow, I never want to get myself in a bad situation again.” And so, yeah, I needed to know what I was working with and where things stood, and I figured I would just be upfront, figure things out right away.

[00:18:17] Ramit: Cool. I appreciate it. All right. So it worked. You two connected. I love that.

[Narration]

[00:18:21] Ramit: I have to say, I love hearing from couples that talk about money early in their relationship. And I’m flattered to be able to play just a small part in the early days of their courtship. I also want to jump in here and point out a couple of clues I heard when Juan described his childhood. Did you notice anything about the words he used when he described his early relationship with money?

[00:18:44] He used words including poverty, guilt, worried and scared. And when he described his current goal of saving more money, he used the word insurmountable. The words we use to describe money are very telling, and the common thread here is that they’re all negative, which tells me one has a negative relationship with money.

[00:19:07] Just listen to your own language. When you talk about it, do you use words like stressed, overwhelmed, guilty, shame, never enough, too far behind? That’s very telling. It’s hard to feel good about money when you are constantly using negative words. I also want to point out that this is a common theme I’ve noticed among many immigrants and certainly children of immigrant parents.

[00:19:28] The idea is that if you want to have money, you have to work hard for it. Not just hard, but you have to be exhausted. You have to give everything you’ve got. It shouldn’t be easy. It should be hard. And in Juan’s case, he watched his mother give up sleep to take on as many jobs as possible to provide for her kids.

[00:19:48] So it’s easy to come to the conclusion that he did, which is you have to suffer to have money. What’s interesting is that this very same line of thinking is preventing him from reaching his financial goals. And now that we know a little bit more of the root cause towards his mindset around money, now we can work on changing it.

[00:20:09] We’ll dig into Amber’s background with money after a quick break to support our sponsors.

[00:20:15] Now back to Juan and Amber

[Interview]

[00:20:17] Ramit: Amber, I wonder if I can learn a little bit about what growing up was like for you as it relates to money. You remember any phrases, any things your family said about money when you were a kid?

[00:20:28] Amber: I grew up primarily with my dad, who was basically raising me as a single dad  because my mom was living elsewhere. And so my dad was just a lot like Juan actually. Just really hard worker, big heart. But he would often work two jobs just to provide for us.

[00:20:46] We lived very simply, but my dad made enough money to eventually buy his own house, and he’s been living there ever since. I’m from Hawaii, so cost of living there is exceptionally high. There was a lot of things that I went without in my childhood that maybe other kids got to do.

[00:21:04] Ramit: And did anything change as you got a little bit older?

[00:21:07] Amber: I think a lot of kids, as they grow up, they have this mindset that like, oh, my family’s going to pay for college. My family’s going to provide me a car. They’re going to do all of these things. And my family didn’t have the means to do that, so I knew from the get go, like, if I’m going to go to college, I got to figure that out for myself.

[00:21:26] So there was a lot of overachieving. I was part of all the clubs and trying to apply for all the scholarships and taking all the AP classes and just really trying to position myself so that I wouldn’t have to take on so many student loans getting out. It was always just this attitude of like, okay, I’ve got to be responsible for myself.

[00:21:45] But also, again, I was a teenager, so I didn’t really feel that strongly about money and saving back then. And then on the other hand, my mom was always the big spender in her relationships. And so as a result, I think she’s filed for bankruptcy once or twice.

[00:22:07] Ramit: Okay. Can we fast forward to today? In this relationship, who’s the spender?

[00:22:13] Amber: Oh, me for sure.

[00:22:14] Ramit: Oh, okay. And who is the nice person who works hard, sometimes has two jobs?

[00:22:21] Amber: Juan has what? Seven jobs? How many are we at right now?

[00:22:25] Juan: A lot of jobs.

[00:22:27] Ramit: How much of your family’s relationship, Amber, do you see in your current relationship?

[00:22:33] Amber: Yeah, I think there’s definitely some patterns playing out. I think just this sense of not having a really solid plan with my dad. He and I never talked about finances. I think my mom would talk to me more about her lack of finances or where she was at, but I never got a lot of input from my dad except for save your money, save your money, save your money.

[00:22:57] Ramit: Do you remember what my question was?

[00:22:58] Amber: No.

[00:23:00] Ramit: Okay. My question was what patterns from your family upbringing do you see being recreated in this relationship? And your answers were 1, 2, 3 examples of patterns that are not being recreated in this relationship. Can I tell you what I see?

[00:23:19] Amber: Yeah.

[00:23:19] Ramit: Okay. So you mentioned your mom was the spender. In this relationship, you are the spender. You said that your dad was the nice guy who would basically grind it out. If he needed to work more, he would work more. You paralleled that with Juan, who is a nice guy. He’s willing to work more. In fact, he has not two, but maybe seven jobs. And what I take away from that is your dad probably worked hard. That was what he knew.

[00:23:45] If he needs something, he will go and get another job and work extra hours for it. He will grind it out. Maybe did not understand money as well, the game of investing, the game of compound interest, those kinds of things. Probably relatively similar to Juan until recently. Fair?

[00:24:04] Amber: Yeah, totally fair.

[00:24:06] Ramit: Okay. The reason that I’m pushing on this is, I always say, if you want to live a  Rich Life, you have to be honest with yourself and the people around you. And you can’t change a pattern if you don’t recognize it. And then we decide do we like the patterns or do we want to change them? Do you want to change any of those two patterns that I just described?

[00:24:28] Amber: I would love for there to be, I guess more balance in the relationship. Maybe spending a little less, or just being a little bit more intentional, I think, about where my spending is going, and having a situation where Juan doesn’t feel like he needs to have seven jobs.

[00:24:47] Ramit: Okay. Love it. We could definitely talk about that. Also, is this really seven jobs? Is that for real?

[00:24:55] Juan: Yeah. I work as a personal trainer for a boxing gym.

[00:25:00] Ramit: Okay.

[00:25:00] Juan: I also personal train for rock climbers.

[00:25:03] Ramit: Two.

[00:25:04] Juan: Then I also do some translating of documents from English to Spanish for a company that deals with human resources.

[00:25:11] Ramit: Three.

[00:25:12] Juan: Yeah. Then I also manage the building that we live in. It’s 100-unit apartment complex.

[00:25:18] Ramit: Four.

[00:25:19] Juan: And then I just got a job also teaching boxing classes at the gym that Amber and I weightlift at.

[00:25:25] Ramit: Five.

[00:25:26] Juan: I also guide outside for rock climbing. So I train climbers indoors, but then I guide outside.

[00:25:31] Ramit: Okay. Six.

[00:25:31] Juan: Yeah. It’s six jobs. Yeah.

[00:25:33] Amber: I feel like we’re forgetting one. There’s got to be more.

[00:25:36] Juan: Oh, oh, oh. The social media stuff that I do for [Inaudible] sometimes. Yeah.

[00:25:40] Amber: Oh, see. I knew it. I knew that there was more.

[00:25:43] Juan: Yeah, that’s right.

[00:25:43] Ramit: Why do you have so many jobs?

[00:25:46] Juan: This is a product of how I grew up. I’m influenced by the way that my mom made it so that we could stay in that middle class zone. The model that I had for money as it pertains to like savings, I had always learned it was like you put it under the mattress. That’s what I knew about savings. And then the other thing I learned is that you have to work hard for the things that you want. And if you want something and you don’t currently have enough to get it with the job that you have, that you get another job.

[00:26:21] Ramit: Whoa. Yeah. That is quite interesting. Do you think that most people grew up with that message?

[00:26:27] Juan: I don’t think so. I don’t think so.

[00:26:30] Ramit: They didn’t. That’s good to know though. Sometimes we grow up and we meet other people, maybe it’s in college, maybe it’s a coworker, and you start talking about stuff you just take for granted. And then you realize, oh my God, the stuff that I thought was totally normal in my family is actually not that common.

[00:26:44] And I think we can see that here. You grew up with your model of your mom getting more and more and more jobs and she just grinded it out. And that’s what you’ve done. Okay. That’s very interesting.

[Narration]

[00:26:56] Ramit: Real quick. If you enjoy these videos and you want to be the first to know when we drop a new one, make sure you hit the Subscribe button right now. It helps my team and me grow this channel.

[Interview]

[00:27:04] Ramit: Let me come back to Amber for a second. Amber, you mentioned that your mom declared bankruptcy once, maybe more times. Have you ever had to declare bankruptcy or any extreme financial decision?

[00:27:18] Amber: Yeah, for sure, in college. I got in over my head and it was such a small amount. It was $3,000, I think. So the collection of agencies were following up with me and I tried to work with them to pay them a smaller amount and they refused and they said, “No, you’ve got to pay us X amount.” And it was just such a high amount that I wasn’t able to pay it and also pay for my living expenses.

[00:27:43] Ramit: Did you think that bankruptcy was serious?

[00:27:47] Amber: Yes.

[00:27:48] Ramit: You did?

[00:27:49] Amber: Yeah, yeah. But I spoke to a lawyer and the lawyer was like, you are young enough. You’re going to bounce back. I would file for bankruptcy.

[00:27:57] Ramit: Did you talk to your mom about it?

[00:27:59] Amber: No.

[00:28:01] Ramit: Why is that?

[00:28:01] Amber: We weren’t close at the time. I think that might’ve been during a period where we actually were estranged for a bit.

[00:28:07] Ramit: I see. Okay. All right. So you declared bankruptcy and wiped that credit card debt away.

[00:28:16] Amber: Right.

[00:28:17] Ramit: But your credit was affected, etc. What were the effects over the next seven years?

[00:28:21] Amber: It definitely made getting an apartment difficult. And so I remember moving into a different place and just having to really tell my sob story to the landlords to see who would be willing to rent to me with my credit being so low. But it definitely refocused me quite a bit. And so I think I was able to bring it back up within a year and a half, I want to say.

[00:28:47] Ramit: Wow, that’s impressive. I appreciate that. What’d you learn from that entire experience?

[00:28:52] Amber: That it was just really important to be aware of things and not get myself into trouble.

[00:28:57] Ramit: You carry that lesson with you today?

[00:29:00] Amber: I’ve never had that issue come up again. I’ve just made sure that I’m no getting myself into massive amounts of debt credit card wise. And right now my credit score is 820, something like that.

[00:29:13] Ramit: When you had that second date and you asked about the credit score, etc., was this what was behind that?

[00:29:21] Amber: I think that was part of it. And also, in prior relationships, I’ve just been the person who had to support my partners, and I just didn’t want to play that role anymore.

[00:29:32] Ramit: But it’s interesting because, Juan, you said that you didn’t really know anything about money until you met Amber. So Amber, how did he pass that test or that question that you asked?

[00:29:42] Amber: Yeah. His answer was that he didn’t really have any credit.

[00:29:46] Ramit: Mm-hmm.

[00:29:47] Amber: But he also didn’t have any debt, and so I was like, “I can work with this.”

[00:29:52] Ramit: That is very interesting.

[00:29:54] Juan: I would’ve never asked Amber that because my approach has always been, I come in with what I have and that’s mine to either deal with or spend, and you have what you have. I don’t need to know about your debt because I’m not taking care of your debt. You’re taking care of your own debt.

[00:30:10] Ramit: Question, have you been in a serious relationship before?

[00:30:14] Juan: This is the most serious relationship I’ve ever been in.

[00:30:17] Ramit: Okay. That’s what I thought. No judgment. Just because when you first come into it, it’s like, yours is yours, mine is mine. And if there’s some crossover, we’ll figure it out. But as you get deeper and deeper intertwined, whether there’s kids involved, whether there’s a house involved, elderly parent involved, things necessarily become intertwined. They have to.

[00:30:41] Money is not just some peripheral thing. It’s central to a relationship and who we are. And so I totally understand Amber’s question. I get it. And I think that the deeper you go with this relationship, the more you’re going to realize, oh my God, getting on the same page with money, truly becoming teammates is actually one of the best things we could have done.

[00:31:05] One thing that I’m trying to figure out with both of you, you’ve both gone through a lot in the way that you were brought up with money, lots of things that most of us cannot imagine. And you’re here, and I’m thankful that we get a chance to explore and talk about this together. Juan, you grew up with a lot of scarcity around money and a model that if you need something, you get another job.

[00:31:27] It sounds like you have adopted what you grew up with, which was, if I need something, I’m going to work harder. You say, I live a conservative life. I can cut my spending. I don’t need to spend a lot. It’s very analogous with how you grew up with your family.

[00:31:43] Amber, you grew up with a mom who was a spender, a dad who grinded it out. Work hard. If you need something like college, you’re going to have to find a way to do it. You adopted a lot of that. You worked hard. You took AP classes. You figured it out. You made some financial mistakes similar to your mom.

[00:32:02] Now you have a job, you have money. But what’s interesting is, even with all the scarcity, all the things that you went through, you described yourself as the spender. So the two of you had similar childhoods at a high level when it comes to money, but one of you chose to be very frugal and the other calls herself the spender. How did that happen?

[00:32:27] Juan: I just always assumed that because I didn’t go to college and I didn’t have a degree that an abundance of money was just not going to be something that was going to be available to me. But, I didn’t want that to stop me from being able to have experiences. So I just learned every which way I could to be able to do that at the most basic level, but not deny myself the experience.

[00:32:52] Ramit: Okay. I appreciate that. What about you, Amber?

[00:32:55] Amber: For me, my family always had that attitude, or my dad did anyway, of like, save your money, be frugal, and I swung the other way and was like, no, I refuse. I want to have a much bigger, better life. I think that’s why I don’t mind spending more money on things to get like a higher quality experience or a higher quality item.

[00:33:18] Juan and I both really love traveling, and so that’s something that we spend a lot of our resources on. And one of the arguments that came up from one of our trips that we took last year is we went to Turkey. And so we had this budget in mind for–

[00:33:35] Ramit: Hold on. Let me guess, let me guess. $5,000.

[00:33:40] Juan: Oh, it was pretty close.

[00:33:42] Ramit: How much?

[00:33:42] Amber: No. That was not the budget. The budget was much less.

[00:33:46] Ramit: How much?

[00:33:46] Juan: Three.

[00:33:47] Ramit: Three. Okay. All right. And what ended up happening?

[00:33:51] Amber: Well, we spent a lot more.

[00:33:53] Ramit: Like how much?

[00:33:54] Amber: I think it was six. Yeah.

[00:34:02] Ramit: Hello.

[00:34:03] Amber: Yeah.

[00:34:04] Ramit: All right.

[00:34:04] Juan: Wait, this is where some of that friction comes in though.

[00:34:07] Ramit: Tell me what happened.

[00:34:08] Amber: So he had said in his mind the budget for the accommodations and I was like, “All right, fine. We’ll dial it back. We’ll stay at the hostels and whatever.” But when we were going to Cappadocia, I was like, “No, we’re only going to be here one time in our lives probably. I want to stay in this really nice place.”

[00:34:27] And so I sprung for the difference in price to get us this nice hotel. And I told Juan it cost a lot less so that the amount that we split was much closer to the budget we had set. And then we went there and Juan was like, “Holy [Bleep], this place is amazing.” And I’m like, “Yeah, I know.”

[00:34:45] Juan: Yes. And that was without me knowing how much it costs.

[00:34:49] Ramit: Then what happened? Did it change any of your dynamics around spending?

[00:34:52] Amber: No, I don’t think so.

[00:34:55] Ramit: But you did get the most important thing in a relationship, which is to be able to say, I told you so.

[00:35:00] Amber: I was right. Yeah.

[Narration]

[00:35:02] Ramit: I love this story because it perfectly illustrates how differently their spending dynamics show up in everyday life. It’s interesting to me how two people with similar upbringings can take such different approaches to scarcity. For one, scarcity is what he knows. He’s most comfortable there, and so he is frugal.

[00:35:24] Amber is on the opposite side. For her, scarcity is uncomfortable, and so she says, “I want more.” I see this a lot. I will see two people raised in very similar upbringing, sometimes siblings raised in the same household, same parents, and yet their approach to life, certainly to money is completely different.

[00:35:47] One will overspend dramatically saying, oh, money comes, money goes. There’ll be more tomorrow. Another is fearful and frightened of money, and you ask yourself, how did this happen? And truthfully, nobody knows. Human beings are puzzles and we can’t predict everything about how people are going to react. That is why I love my job. Everybody’s a puzzle. Everybody has a story, and I get the chance to try to figure out what’s going on.

[00:36:16] I am curious how their opposing views show up in other areas of their life. So after a short break, we’ll come back and find out more.

[00:36:23] Welcome back. Listen in as I ask Juan about a common phrase that he uses in everyday life.

[Interview]

[00:36:29] Ramit: Juan, you’ve used this phrase before, it could be worse.

[00:36:33] Juan: I always say that because you got to know when enough is enough. Sometimes you have this thing that is good, and if you look downstream, it could be worse.

[00:36:47] Ramit: Is that your code, Juan, for let’s appreciate what we have because it could be worse?

[00:36:53] Juan: Yes.

[00:36:55] Amber: Yeah, for sure.

[00:36:56] Ramit: Okay. All right. I understand that. And then Amber, how do you respond to that?

[00:37:00] Amber: But it could be better, meaning there’s also so much more that we could be experiencing. And let’s not limit ourselves.

[00:37:08] Ramit: Do you say that because when he says, “It could be worse,” that’s basically putting a box around where you are and it’s saying, “This is where we are. We could have cockroaches running all over us, but we’re here.” And you’re saying, “I’m not even thinking about cockroaches. I’m thinking about we could have this view, or we could have this excursion of whatever.”

[00:37:32] Amber: Right, exactly.

[00:37:33] Ramit: Okay. That’s interesting. Okay. I understand both perspectives. Both seem valid to me. How do you resolve that when that comes up?

[00:37:45] Juan: Yeah. This is where Amber got me drinking the Kool-Aid about the  Rich Life.

[00:37:49] Ramit: Oh-oh.

[00:37:50] Juan: Yeah.

[00:37:50] Ramit: What is she saying?

[00:37:51] Juan: And this where I was saying that you play a pivotal point in the beginning of our relationship, because on our third date she tried to throw that book at me that you got back there, and I didn’t know anything about you.

[00:38:01] Ramit: I Will Teach You to Be Rich?

[00:38:02] Juan: Yeah.

[00:38:02] Ramit: How did you not hear about this book before? All right, that’s my marketing work on that. So she gives you the copy of the book and then when she says, what? Read this and report to me on the financial scams outlined in Chapter 6.

[00:38:13] Juan: Yeah. I got to be honest, man. I saw that title and I thought, this is snake oil. And I was like, “I’m not reading this.” I didn’t even take it.

[00:38:22] Amber: He was like, “No, I don’t need that.”

[00:38:23] Ramit: I have to tell you, it never gets old hearing how people reject my advice. There’s no end to it. People go, “This sounds like a scam. The [Bleep] covers ugly. I don’t like the paper in the book.” I’ve literally heard thousands of reasons people hate me and my work. And for some reason, it never gets old.

[00:38:44] I’m like, “Okay, what did you say then? You said it was a stupid [Bleep] book. That sounds like a goddamn scam.” Yeah? What happened next? All right. And then what happened?

[00:38:56] Juan: Amber and I were going on a trip to Bengo, and on the way there, and without telling me, she just put on a podcast episode with you and this other guy named Tim Ferris. I listened to this episode grudgingly, and man, I was sold, 100% sold on the idea of a Rich Life because it dawned on me that I Will Teach You to Be Rich wasn’t like, I will teach you to be rich millions, like pyramid scheme rich– is I will teach you how to make the most out of your life at any level that you’re at.

[00:39:33] And that really spoke to me because that’s the way I teach climbing. That’s the way I teach boxing. That’s the way I guide when I take people out. That’s the way I treat people, meeting them at their level.

[00:39:44] Ramit: Love that.

[00:39:45] Juan: It just resonated with me so much that then I was like, “What do we do? What do we do? I’ve been lost all this time. And that’s what started this whole thing about having us really take a look at how we agree and disagree with money, how we’re thinking about our futures.

[00:40:04] Ramit: First of all, I really appreciate that. Amber, I especially appreciate you not giving up. Not just because you’re sharing my material, which is very meaningful to me, but also because this is obviously something that’s important to you. And now that I understand your family and your childhood, I can understand why.

[00:40:23] And what I love is that you have been clear since date 1, date 2, about what’s important to you. And like any good partner, there are things that are important to one person and the other person might not connect with them. Maybe it’s the wrong time, maybe it’s the wrong source of information, whatever.

[00:40:43] You didn’t give up, and it turns out, in order to connect with one, we just need two bros sitting down, being slightly fratty and speaking for hours about a  Rich Life. And boom. Now the two of you have a common language. So I love that. Thank you, Amber. And I love that, Juan, you are open to hearing it, listening and then participating. I think that’s really cool.

[00:41:09] Juan: I am seeing the error of my ways, and I need to turn this around, but how do we work together to do that?

[00:41:16] Ramit: Let’s do this. Let’s take a look at your numbers. You have the CSP that you sent me. Before I put those numbers on screen, what was it like doing this CSP together?

[00:41:27] Amber: For me, it always feels a little anxiety-inducing because I always feel like, ugh, we’re behind, or this number should be higher. This one should be lower.

[00:41:36] Ramit: Okay. What about for you, Juan?

[00:41:38] Juan: It’s easy enough to plug the numbers in, but I just don’t know how to make sense of it all. I just know that somehow we’re not in debt, but somehow we’re also not increasing our savings at a rate that’s going to work for what we’re trying to do.

[00:41:58] Ramit: Fair enough. Let’s take a look. Amber, can you read off the word in bold and then the full number next to it? And let’s just work our way down this box. Go ahead, Amber.

[00:42:09] Amber: All right. Assets, 64,795. Investments 80,063. Savings, 28,674, and debt 74,847. And total net worth, 98,685.

[00:42:29] Ramit: Okay, cool. What do you think about those numbers?

[00:42:31] Amber: I would love to get rid of the debt and increase savings and investments. I think that for our age, that those numbers need to be a lot higher.

[00:42:40] Ramit: I love your answer, Amber. I’d like the good one to go higher, and I’d like the bad one to go away. Juan, what about you? What do you think about those numbers?

[00:42:49] Juan: I’d like the same things.

[00:42:51] Ramit: All right. Let’s continue. All right, let’s talk income. Juan, will you give me the combined gross monthly income?

[00:42:59] Juan: Yeah. It’s $16,560.

[00:43:02] Ramit: That means combined the two of you make $198,720. Did you know that?

[00:43:10] Juan: No.

[00:43:10] Ramit: Okay. He says no. Amber?

[00:43:13] Amber: Well, that number’s not accurate because we get a rent credit that inflates that number. It should be less. It should be 24,000 less.

[00:43:22] Ramit: Yeah. Okay. So you’re saying you actually make 175K.

[00:43:26] Juan: Mm-hmm.

[00:43:27] Amber: Yeah. That’s more realistic.

[00:43:29] Ramit: Okay. Fair enough. We’ll keep that in mind. You get a rent credit. Is that because you’re the handyman so you don’t pay for rent?

[00:43:37] Juan: Right.

[00:43:37] Ramit: All right, fine. Your net is 11,282. Probably a little bit less if we take out that rent thing. Fine. Your fixed costs are, who can read this number out loud to me?

[00:43:48] Amber: 57%.

[00:43:50] Ramit: All right. So I’m thinking to myself, they’re paying no rent. So how is their fixed cost 57%? There must be one massive expenditure, and it turns out yes, there is. Your debt payments are $2,581 a month. Whoa. There’s a lot of debt here. Let’s break it down. You have $74,847 of debt. How much of that is student loans?

[00:44:13] Amber: 50,000.

[00:44:15] Ramit: All right. So then you have $25,000 of credit card debt?

[00:44:20] Amber: No. My car debt is 18,000.

[00:44:24] Ramit: Okay. 18k for car loan.

[00:44:25] Amber: Mm-hmm. And then my credit card debt right now is 2,000.

[00:44:30] Ramit: And that’s trips, etc.

[00:44:32] Amber: Yeah.  Because we just took a trip last month basically.

[00:44:35] Ramit: How much is the interest rate on the car loan, and what kind of car?

[00:44:39] Amber: I have a Subaru Forester, and the interest rate is 4%.

[00:44:44] Ramit: All right. I don’t have hate in my heart for a Subaru. I don’t mind it. Let’s move on. Your rent/mortgage is $230, which is like nothing. We’re talking about like utilities, whatever. It’s some minor thing. It doesn’t even matter. Utilities, $154. Amazing. Insurance is 1,037. Huh? What’s that for?

[00:45:07] Amber: I am a freelancer, and I have to pay my own insurance. So my insurance alone is $650 a month.

[00:45:14] Ramit: All right, fine. So one person has a $645 car payment plus gas and all that stuff. And then another person has 278. Is that you, Juan? What kind of car you have?

[00:45:25] Juan: I took out a personal loan to purchase a motorcycle.

[00:45:28] Ramit: What kind of motorcycle and how much?

[00:45:30] Juan: It is a 2020 CB500X, and the personal loan I took out was for 7,000.

[00:45:37] Ramit: What’s the interest rate?

[00:45:38] Juan: I don’t know.

[00:45:39] Ramit: You don’t know. I also wish I hadn’t asked what kind of motorcycle it was, as if I [Bleep] know. I don’t even know. There’s 10,000 types of Harleys. Why am I even asking this question? Okay, you have a motorcycle. Fine. Paying off a ton in debt. I’m curious, Amber, why are you paying so much towards this debt?

[00:45:57] Amber: I’m trying to get rid of it. Last year I paid off one of my student loans, so it was actually higher.

[00:46:02] Ramit: Okay. Pet care is 100 bucks. What do y’all have? A dog or a fish or something?

[00:46:06] Amber: A dog.

[00:46:07] Ramit: All right. Phone is 135, and subscriptions are 421? What’s that?

[00:46:13] Amber: Gym memberships.

[00:46:14] Ramit: Aren’t you a boxing coach? Don’t you get a free membership?

[00:46:17] Juan: I do at the boxing gym.

[00:46:19] Ramit: Oh, you got another gym.

[00:46:19] Juan: Is part of that for weight training with Heather and all that stuff, Amber?

[00:46:23] Amber: Yeah, but not the personal training because we took that out last month.

[00:46:27] Juan: We had decided that once we knew that Amber’s income was going to change pretty dramatically, and that it was going to be unstable at best.

[00:46:34] Ramit: What happened with the income?

[00:46:37] Amber: I’ve had one client that’s been my primary source of income, and they’re pretty unstable at the moment, so I can’t rely on having the same high level of income that I’ve been having.

[00:46:49] Ramit: So right now the income breakdown is 6,500 a month for partner one. Is that Juan?

[00:46:58] Amber: Yes.

[00:46:59] Ramit: And then partner two makes 10,000 a month. That’s you, Amber. But you’re saying that number might drop?

[00:47:04] Amber: Yes.

[00:47:05] Ramit: Has it already dropped?

[00:47:07] Amber: Yeah.

[00:47:07] Ramit: How much? From 10,000 to what?

[00:47:10] Amber: 5,000 and 7,500.

[00:47:12] Ramit: Whoa.

[00:47:14] Amber: Yeah, big difference.

[00:47:15] Ramit: What happened when you did that?

[00:47:16] Juan: So the moment that that happened, I started looking for more jobs.

[00:47:22] Amber: Yeah.

[00:47:24] Ramit: Okay. And what about you, Amber?

[00:47:27] Amber: Yeah, I mean I also took on extra gigs, pet sitting. Those kinds of quick fixes. But then again, looked at where we could really cut most of our expenditure, and that’s where I cut out the personal training that I was having every month.

[00:47:41] Ramit: Good job reacting. That’s really smart. You all saw a change happening. You instantly made moves. That’s a great decision. All right. Again, your fixed costs are at 57%, which is overall good, but now that we see, number one, you’re paying basically no housing costs. So theoretically your numbers should be way lower than that.

[00:48:03] And second, your income might actually be going down, which means that fixed cost number will go up. Let’s continue on to investments. Investments at 10% post-tax and maybe a little pre-tax from what I can see. Is that accurate?

[00:48:20] Juan: Yeah.

[00:48:21] Ramit: All right. So you’re putting a little bit away into a 401k, things like that. That’s good. You’re investing aggressively. We can talk about how much more we want to put in there, but overall we have a nice baseline for your investments. Savings are at 7%. You have zero for vacations. Come on.

[00:48:40] You have 400 bucks a month for an emergency fund. Okay. 200 bucks a month for family. I assume this is where you’re funding that Roth IRA and helping family out, things like that. All right. 200 bucks a month for gifts, for a total of 800 bucks a month. I want to note that you have $28,000 in savings, which is almost five months of an emergency fund. Is there other reasons you have that much in savings?

[00:49:07] Juan: Well, most of that is Amber’s. 8,000 of that is mine. But at one point I had almost 50,000

[00:49:14] Ramit: In savings?

[00:49:15] Juan: Mm-hmm.

[00:49:16] Ramit: What happened to it? Don’t say the motorcycle. I [Bleep] knew it. Tell me.

[00:49:24] Juan: We have five motorcycles.

[00:49:26] Ramit: Five [Bleep] motorcycles? I don’t even have five books I wrote. Why do you have five motorcycles?

[00:49:32] Juan: This is your fault.

[00:49:33] Ramit: Oh, tell me.

[00:49:35] Juan: This is my Rich Life.

[00:49:37] Ramit: Don’t [Bleep] me on this. Goddammit. How many people take my advice,  Rich Life? Then they twirl around three times. They go, “Rich Life, Rich Life, Rich Life.” And then they just buy whatever the [Bleep] they want. That’s not how the concept works. You know this.

[00:49:51] Juan: This is the only thing I allowed myself. I was like, “I love bikes.”

[00:49:55] Ramit: Oh, me. I’m such a martyr, me. Little old me. I only allowed myself five [Bleep] motorcycles. What the hell? I got a series of questions about these motorcycles. When you go to get these bikes, what type of numbers do you run before you make these purchases?

[00:50:14] Juan: None.

[00:50:16] Ramit: No numbers. Okay. Got it.

[00:50:18] Juan: I’m like, “Do I have enough in the bank to pay for a cash?” Yes. Then I go and buy it.

[Narration]

[00:50:22] Ramit: What the [Bleep] is this? Everybody sees a guy like me and then I use the word rich, they go, “Rich? I want to be rich.  Rich Life. I’ll just buy whatever I want.” Guys, that’s not how it works. How many freaking times, how many books do I have to write where I talk about saving, investing, automating no credit card debt? Do I need to write a whole book saying, “Don’t misinterpret my [Bleep] philosophy?”

[00:50:44] Of course, I don’t, because you’re not going to read that book. You see the cover. It says the word rich. You go, “Rich. I’m [Bleep] rich. Let me buy everything.” Don’t do this. Don’t intentionally misinterpret my philosophy and then use it to justify your random discretionary purchases. That’s not how it works.

[00:51:00] We’re building a Rich Life, and a Rich Life involves a clear vision, involves discipline, involves knowing your numbers. God, what the hell am I doing on this podcast? I will say it is a little funny that he blames me. You’re going to blame me for your spending decision? Okay. That’s certainly one approach. I wouldn’t do it, but all right. That’s interesting.

[00:51:20] What’s really going on here, besides totally misunderstanding what I talk about is an unsophisticated account set up. Juan had a bunch of cash sitting in a savings account, and because it had no clear purpose, no direction, he spent it. And actually, this is really common. This is exactly why I recommend setting up your accounts correctly.

[00:51:42] In his case, the money could have been flowing to investments. It could have been flowing to specific sub-savings accounts called Tahiti Vacation, or Motorcycle Fund, or even family, Family Love with a little heart. And that would make it more specific. Trust me, you’re not going to dip out of your family love account to buy your freaking Yamasaki.

[00:52:03] I don’t even know if that exists anymore. It did when I was a kid. When your accounts are truly aligned with your Rich Life vision, it suddenly becomes very easy to see where your money should go, and you can find everything you need about opening up your accounts in Chapter 9 of my new book, Money for Couples.

[Interview]

[00:52:22] Ramit: Let’s go down to guilt-free spending. So your guilt-free spending is 25%, $2,835 a month. Is that accurate?

[00:52:30] Juan: I’ve never seen it.

[00:52:32] Amber: Yeah. I don’t know where that goes.

[00:52:34] Ramit: Ah, okay. So you don’t actually have any idea.

[00:52:37] Juan: I just know that we can do all the things that we want to do. We’ve been able to do all the things that we want to do. I know that every month I pay my credit card off 100%. But I don’t have this tangible money.

[00:52:50] Ramit: I totally understand your confusion. You’re like, “Hey, this freaking spreadsheet says $2,835 a month in guilt-free spending. Where’s my money? I want 2,800 bucks in my hand every month.” But that’s not how it works. This is simply a way of looking at the money that is flowing in and out of your accounts at different times. So because money comes in, it comes out, it all gets a bit confusing.

[00:53:14] So this is just basically a way of putting on a set of lenses, the conscious spending plan, that allows you to visualize, on a monthly basis, where’s our money going. And what the real magic of the conscious spending plan is is it allows the two of you to decide, where do we want our money to go?

[00:53:33] If you love traveling, amazing. If you love motorcycles, let’s figure out a way to support that. But what I find is that most people, they say, I love this thing or that thing, but their conscious spending plan actually does not match up.

[00:53:51] Amber: Mm-hmm.

[00:53:51] Ramit: So for example, Juan, you mentioned to me you want to support your family. You want to “be there” for them. I love it. It’s laudable. I’m all for it. Where on this CSP can I find that?

[00:54:03] Juan: Just under the $200 for a family?

[00:54:06] Ramit: I agree. You’re putting money aside, which I respect. That’s more than most. I love it. You’re also putting more than 10 times that amount towards guilt-free spending. What do you think of that?

[00:54:17] Juan: My guess is you’re pointing that out because you’re like, “Oh, if you want to support your family more, there’s a bunch of these things out here that you can cut out and you can give more to your family.” Right?

[00:54:26] Ramit: Could be. It’s your money, but yes, you could do that.

[00:54:29] Juan: Definitely do want to do it. Yeah.

[00:54:31] Ramit: Do you want to do it so much that you’ll sell one of your bikes?

[00:54:35] Juan: Yes, I would sell four out of five.

[00:54:41] Ramit: Guy was about to leave it all on the field. I would sell every– ah, [Bleep] it. Let me keep one of them. I love my family, but I got to have that bike.

[00:54:48] Juan: I got to keep one because that’s how I get around.

[00:54:50] Ramit: Okay. All right. That’s good to know. That’s good to know. Hey, how much would you get if you sold all those bikes?

[00:54:56] Juan: I think 20.

[00:54:57] Ramit: 20 grand? All right, cool. Is it offensive if I call a motorcycle a bike? Is it like calling a ship a boat?

[00:55:05] Juan: No, no. They’re bikes. Yeah.

[00:55:08] Biker Clip: I’m going to learn so much on this Godforsaken show that I’m going to be able to interact with every single different subculture on the planet. I’m going to roll up to a bunch of grizzled old motorcycle rows, whatever the [Bleep].

[00:55:22] Juan: Gearhead.

[00:55:23] Ramit: Yeah, gearhead. I’m going to have a fake tattoo. You know those ones you put on for Halloween? You get them on the Halloween store. And I’m just going to roll up with my [Bleep] jacket or whatever. Obviously, I don’t even know what I’m talking about. I can’t even say the right word. But they’re going to be like, damn, this is the first Indian guy I ever saw–

[00:55:38] Juan: Looking like this about [Inaudible] in spring and forts.

[00:55:43] Ramit: Okay. I don’t even know what any of those are, but I’m going to do that. All right. Good. So here we are. We have the CSP. Now, the two of you have not combined your finances. Is that accurate?

[00:55:56] Juan: We haven’t, and that is something I’m super interested in because I’ve never done it before. We watched the Netflix special, and there was a couple on there where the guy was like, we should combine income. And I was like, “Whoa. I had never have thought about something like that.”

[00:56:11] But that’s actually what it was with me and Amber when she was making a steady income. She was making 10, making three. And my whole thing was like, you work hard for that money. I don’t want to take any piece of your money. But when it got cut down to five, I was like, okay, now I might make more sense because you make five and I make three. But together we make eight.

[00:56:32] Ramit: That is powerful, to realize that as a team you have an ability to do things financially that you couldn’t do alone. And if you think about it one way or another, if you’re living apart, you’re each going to pay for internet.

[00:56:46] You live together, there’s some savings to be had. You probably don’t want to combine everything. I would keep things separate until you get married. I think that is important, that’s healthy, but it’s sure, good practice to have this joint expense.

[00:56:59] And I’m going to say one other thing. In my opinion, I would pay proportionally. The person who earns more, pays more. So you can add the numbers up and you can divide them. One of you makes, I don’t know, 70%, the other makes 30%. The person who makes 70% pays 70% of the joint expenses. That is proportional. And I think for joint expenses, when you’re not fully together, especially when you have a disparity like this, that can be a little bit more fair.

[00:57:30] Amber: Okay.

[00:57:30] Ramit: All right. So what that would do is that would increase the amount that you, Amber, are paying, and I think it would probably cause you to think about how much you’re paying towards debt. Because you’re paying a lot, and I respect that. But you may dial that back if you have to pay a little bit more proportionally.

[00:57:49] That would also allow you, Juan, to have more money each month for whatever you choose to. And considering you’re scared of being behind, if I were you, I would put all that money into investments. We’ll get back to the finances in a minute. But I do want to ask about the income because it’s really striking. So Juan, you work seven jobs, and you make $6,560 per month gross. What does that tell you?

[00:58:16] Juan: That I’m working too much for not enough money.

[00:58:20] Ramit: Yes. Do you agree with that?

[00:58:23] Juan: This is a sore spot, but the answer is yes.

[00:58:26] Ramit: What’s that smile on Amber’s face? Is that smile like, [Bleep], I’m so glad Ramit gets to talk about it because I’ve been talking about this for three goddamn years? Is that it?

[00:58:34] Juan: Exactly what that is.

[00:58:35] Amber: Yeah.

[00:58:37] Ramit: So what is that? Why do you have seven jobs? You’re making less than $1,000 a month per job?

[00:58:42] Juan: For a long time I didn’t know how to monetize my skills for what they were actually worth. I’ve been a climber for 25 years. There’s this term of endearment that exists among climbers called a dirtbag climber. The mentality of the dirtbag climber is that you live on as little as possible so that you can just have enough gas to make the trip to the next destination, and I just saw the world through that lens.

[00:59:07] I just assumed that everybody else was also in the same boat that I was with, like not a lot of income. And so then, even though I have perfected and really honed these really good skills that I can then pass on to people through all the trainings that I do, I always see it through the lens that they might also not have enough money to afford it. And so I usually price things like super, super low.

[00:59:35] Ramit: Okay. I appreciate that honesty, and I hear you loud and clear. That way of looking at the world, that’s real. Now, here’s my question for you. Are you good with that worldview?

[00:59:48] Juan: I’m good with the feeling it gives me in my heart, but it conflicts with the reason that Amber and I are here today speaking with you.

[00:59:55] Ramit: Which is?

[00:59:56] Juan: We want to make sure that we’re comfortable for the rest of our lives and to be able to help our families.

[01:00:05] Ramit: Would you be okay if being comfortable for you and your families meant that you might not be able to be that dirt bag climber anymore?

[01:00:16] Juan: It requires a shift in my way of thinking, but I am open to that, or I wouldn’t have applied.

[01:00:22] Ramit: Okay. What kind of shift do you think it requires?

[01:00:27] Juan: I just have this ingrained mentality about what I have to give is worth. For example, at the boxing gym, the owner of the boxing gym, when she asked me to work for her, she was like, “I’d love you to do private lessons here.” She’s like, “The gym rate is $65 an hour.” And that’s the first time that I realized I could potentially be worth $65 an hour.

[01:00:47] Ramit: How about if I walked in your gym as a client and I tell you I never put on a pair of gloves? I’m unathletic. I haven’t done any of this stuff since I was in high school. What would you tell me?

[01:01:00] Juan: It’s a point of personal pride for me to make sure that you feel good and successful about the session that you and I are going to have together in the gym. And you may come in thinking that, but you won’t walk out thinking that for sure.

[01:01:13] Ramit: Wow. [Bleep] love the confidence. Okay. I love that philosophy. That’s very inspiring. Let’s flip that. I want you to coach yourself right now. What would you tell you?

[01:01:24] Juan: I would say, you spent a lot of time honing skills. You’ve gone through a lot of trial and error. You have done really well at figuring out formulas and making things approachable and presentable to people, and that is worth something.

[01:01:39] Ramit: Love that. Amazing. Hold on. Round of applause. So good.

[01:01:43] Amber: Yeah.

[01:01:43] Ramit: So good. How did that feel? It felt very natural hearing it. How did it feel for you saying it?

[01:01:50] Juan: Uncomfortable. It’s not that I don’t believe those things. I think I’m just so tied to the mentality that I want to make sure that everybody has a chance to be able to benefit from these things that I’ve amassed and I’m able to teach.

[01:02:05] Amber: I feel like there’s also a sense of good and bad happening too, though. Because you also regard all of your clients as friends as well, and there’s a part of you that feels like it’s bad for me to ask my friends to pay more money for my services, so I’m going to continue to undercut myself.

[01:02:25] Ramit: That’s a vision of money that is very, very deep, the idea that paying money is bad. You are my friend. I don’t want to cause you harm, so I’m going to charge you the least I can get away with. I’m going to give you a different philosophy on money. The very best clients love to pay more. Have you ever met a client that loves to pay more, Juan?

[01:02:50] Juan: I don’t think so, because I never asked for more.

[01:02:53] Ramit: Yeah. It’s not even a figment of your reality. Okay. Well, you’re talking to one. I’m a client. I love to pay more. Why do you think I like to pay more?

[01:03:03] Juan: The thing that comes to mind is the experience. What you’re paying for is connection and somebody that really is invested in your success, right?

[01:03:13] Ramit: All that could be true. It’s a little vague. I’m going to tell you why I pay more.

[01:03:18] Juan: Okay.

[01:03:19] Ramit: I pay more because, I want somebody who’s going to be there when I get to the gym. They’re already there. I’m not waiting around for them to show up three minutes late. My time is too valuable. When we start, we have a program. In fact, we have a program mapped out for the entire year. We’re not just randomly doing whatever today. They map it out.

[01:03:36] Oh, you’re going to be traveling these two months? Perfect. We’re going to work around that. We’ll add a cut here, there, blah, blah, blah. Mapped out. They’re tracking sets. They’re tracking reps. They’re writing it down. They’re doing photos, check-ins, weigh-ins, all that kind of stuff. So what do I the client get to do? Show up and lift. But I know that every single other thing is taken care of at a highly professional level. Now, let me ask you a question. How long have you been doing this?

[01:04:04] Juan: Training climbers for almost 20 years.

[01:04:07] Ramit: 20 [Bleep] years?

[01:04:09] Juan: Yeah.

[01:04:10] Ramit: How much do you charge for that service?

[01:04:12] Juan: 75. That’s just until recently because I was charging 35.

[01:04:17] Ramit: 35 per hour? Juan, that’s the way you grew up. Having to pay was bad. Money was scarce. And so you always believe paying less is better. But there’s a whole world of people out there who actually can pay a premium rate or even a luxury rate because they’re not seeing the world by how little they can pay.

[01:04:39] They’re seeing the world by how many results can I get? How pleasant can the experience be? Do I like this coach, and do I believe he or she’s invested in me? And when you get to that level of connection, then the price in many cases becomes a mere triviality. Do you see a future where you could learn to believe that?

[01:04:59] Juan: I really, really enjoy the people that I work with. That’s why I call them friends and not clients, because they’re just so incredibly cool. So the question is, say like tomorrow I’m going to charge 125 but now I’m working with people that I don’t necessarily connect with. Is that worth it? Is it worth it to go up and then hate what you do for a living, or have it be just a job, or stay a little bit on the lower side and enjoy the work that you do?

[01:05:25] Ramit: I’m going to go to Amber’s phrase, which is, “It could be better.” Let me tell you what I mean by that. If you raise your rates, let me tell you what’s going to happen. Some of your clients are going to stick with you because deep down, they know they’re getting a deal, and they love you, and an extra 20 bucks or 30 bucks an hour is nothing to them.

[01:05:45] But there are also people who are price sensitive. You’re going to lose them. That’s okay because it could be better. Your future is bigger ahead of you. And what I mean by that is there’s lots of amazing people out there who will be a fit for you charging market rates. Some of these people are going to be incredible. You’re going to build new friendships. Some of them are going to be clients. Maybe you won’t like them. You don’t have to take every client.

[01:06:17] In fact, when you limit your availability and raise your rates, you can actually be more selective about who you choose. If you’ve been doing this for 20 years, you actually get to work with the best, the clients you like, the ones who show up, the ones who are serious.

[01:06:32] So I’m borrowing Amber’s phrase “it could be better” because you asked a really good question, but it was all focused on what if it gets worse. What if I raise my rates and I get worse clients and everybody leaves and I have no friends? The better question is, what if it gets better?

[01:06:47] What if I make almost double the money? What if I’m working less? What if I can stop working some of these jobs that are taking up all this time and actually making no money, spend more time with my family who I love, work with higher quality clients, get better results, and it goes into an upward spiral?

[01:07:04] It’s a different way of looking at the world, and deep down it really comes to you valuing yourself and realizing like, I’m worth it. And it’s probably not normal to be working seven jobs. If I’m working seven jobs making less than $7,000 a month, I probably should take a really tough look at, what are my goals? So what do I need to change? Well, the most obvious one is you need to charge what you’re worth.

[01:07:26] Juan: Yeah. So basically just listen to Amber.

[01:07:31] Amber: Yes.

[01:07:31] Ramit: I’m not going to say this.

[01:07:31] Amber: Validation. All right, we’re done here. We can pack it up.

[01:07:40] Ramit: How do you feel about hearing all this, Amber? I know there’s a bit of like, “I told you so.” I get that. But what else do you feel hearing this?

[01:07:46] Amber: It’s one thing to hear your partner saying that, but to have other people share this and say like, “Hey, with your level of experience and your skillset, it’s okay for you to charge more.” And I think that perspective is super helpful. I also think that Juan’s framework of how he doesn’t want to burden his friends or these other clients by charging more makes the assumption that everybody’s operating from that same mindset, which is not the case.

[01:08:14] Ramit: That’s so right. That’s such a great way of looking at it. Not everyone’s operating the way you are. In fact, you have a very unique upbringing, which in many ways made you so self-reliant, Juan. But it also has given you a bit of a distorted view on the industry you work in. The industry you work in is a luxury industry.

[01:08:33] Luxuries cost more. Nobody’s walking in to hire a personal trainer or a guide who doesn’t have discretionary income. Those are expensive industries. People know that. So I’ll tell you something. It actually, in a way, is a little bit weird. If I walk in and a trainer or a coach is like, “Oh, I’ll charge you like 25 bucks an hour or something.” I’m like, “What the [Bleep]?”

[01:08:52] Juan: Yeah, it is just ways of looking at things that I’m not used to and that I don’t think about myself.

[01:08:59] Ramit: My suggestion, first off, Juan, is to get comfortable with realizing that charging money is not a bad thing. It’s actually a good thing. People want you to charge them fair, premium, sometimes luxury rates, and to deliver them an amazing experience. If you can deliver them an amazing experience, it makes perfect sense for you to charge accordingly. Amber, can we talk about your income for a second?

[01:09:29] Amber: Sure.

[01:09:30] Ramit: So your income may drop 25 to 50%. What are you going to do about–

[01:09:34] Amber: Yeah, it has already.

[01:09:35] Ramit: All right.  What are you going to do?

[01:09:36] Amber: Also, now I’ve got to hustle and find some other clients.

[01:09:41] Ramit: How are you going to do it?

[01:09:42] Amber: I set up a LinkedIn, but I’ve also been putting out feelers to friends who are also running their own businesses, and I’ve got a couple of leads so far.

[01:09:53] Ramit: What do you do?

[01:09:54] Amber: I help businesses become more profitable and successful.

[01:09:58] Ramit: Whoa. [Bleep] great. Okay. I love it. That was a great answer. If we want to make the big bucks, we got to act accordingly in everything we do. We show up early, we describe ourselves correctly in an enticing way. That’s how we do it. It’s everything we do. I have no problem with people charging above market rates, but I always insist you deliver above market returns for the people who are paying for your service. So that’s how we’re going to do it. Okay. I love that.

[Narration]

[01:10:27] Ramit: If you want to know how to start a business and grow it, go to iwt.com/earnable. I teach the same techniques I use to grow my own business, which has been around for over 20 years. That’s iwt.com/earnable.

[Interview]

[01:10:41] Ramit: How confident are you that you can replace your income and bring it back up to $10,000 a month?

[01:10:49] Amber: Pretty confident.

[01:10:51] Ramit: How many outreaches would you need to do in order to close a new client?

[01:10:55] Amber: I don’t even know, but I know it would be a numbers game, so I would probably just have to start reaching out to at least, I don’t know, 10 to 30 leads a week, maybe.

[01:11:06] Ramit: Okay. All right. I think that’s a good start. Can we get back to the numbers for a second?

[01:11:10] Amber: Yes.

[01:11:11] Ramit: So there was a lot of talk, Juan, especially that you said about taking care of your family. And right now you’re putting $200 a month aside in a Roth IRA for your mom, which I think is great.

[01:11:22] Amber: What about the money that goes to your siblings?

[01:11:24] Juan: I didn’t put that down.

[01:11:25] Ramit: How much?

[01:11:26] Juan: It is probably around $300.

[01:11:29] Ramit: Why are you sending them hundreds of dollars a month?

[01:11:33] Juan: It is actually my sister. My sister just didn’t set herself up very well.

[01:11:37] Ramit: Mm-hmm. Is she in a relationship?

[01:11:39] Juan: Yeah, she’s married.

[01:11:40] Ramit: And is it possible that she has a discussion with her partner and she’s able to have some financial relief from there?

[01:11:49] Juan: I would love for that to happen. One of the things that frustrates me is, on her husband’s part, I just don’t understand why it’s not possible for their finances to be enough. It’s not my business. It is just when she’s like, “We’re shot this month. Can you help me?” I just cannot say no.

[01:12:08] Ramit: Okay. How often does that happen?

[01:12:10] Juan: Semi-regularly. I’d say every other month.

[01:12:12] Ramit: How long has it been going on?

[01:12:13] Juan: Couple years, three years, four years. I wish it wasn’t that way. I just wish that they were in a better position. Also, that guilt comes back. I just was not a good role model. I wasn’t there for a lot of things that they could have used help and guidance with.

[01:12:28] Ramit: Are you being a good role model when you send cash every other month for years?

[01:12:33] Juan: I do think it’s a good role model.

[01:12:36] Ramit: Okay. Because?

[01:12:37] Juan: Yeah, because blood is blood, and if they need help, then you should be there to help them.

[01:12:45] Ramit: Could be. I’m never going to tell you not to take care of your family. I do think that if your family member is asking for financial help every other month, there’s probably a deeper issue here. And if you were multimillionaire, I would say just send the money. But you’re not. You don’t have a ton of extra money.

[01:13:07] Right now, you’re making 6,400 a month gross working seven jobs, and you only started investing at the age of 40. You have some serious investing to do just for yourself self. In addition to that, you have partner, Amber, who wants to live the life together with you that you’re co-creating, and you have your mom.

[01:13:27] So I don’t think you’re being a good role model for Amber. I don’t even know if you’re being a good role model for your sister when you simply say, “Yes, here you go.” every single month. I think there might be a different approach. The approach might be, “Look happy to send you some money to help, but I’m also going to send you a copy of this book. I would like you to read it. And I want you and I to talk about it a couple of weeks from now.” That’s an easy option.

[01:13:56] Another option is, “Hey, I’m happy to send this money to you, but if you want to talk about your spending plan, love to sit down with you and work through yours.” A third option, a little bit more aggressive is, “Hey, happy to send this to you. Here’s how much I can send you every year. This is what I can do. It’s up to you how you spend it, but once I send that money, that’s it. What do you think?

[01:14:21] Juan: Option number two intrigues me the most because it opens up a path. I think what that would do is enable us to further deepen our relationship, and she can see that I’m just trying to help her so that it doesn’t have to be this revolving thing where like, hey, we don’t have enough. I got to ask my brother.

[01:14:40] Ramit: Do you think that she would be receptive to that?

[01:14:42] Juan: Yeah. I just need to make sure that I phrase that in a way that shows a clear white flag to help.

[01:14:49] Ramit: Let’s just practice right now. I’ll be your sister. You be you. Let’s do it. Hi, Hermano. Sorry to have to ask again, but we’re a little short this month. Can you help?

[01:15:06] Juan: Yeah. Happy to. Just give me a couple minutes. I’ll send the money over via Venmo. And also, I wanted you to know that Amber and I had been working on this thing called the Conscious Spending Plan, and it has really helped us organize our finances. If you want, I can help you guys plug some numbers in so you can see how your money’s working and where you can make some changes to maybe have ends meet month to month.

[01:15:33] Ramit: Okay. Amazing. Good job. And now I’m going to make it a little harder for you. I’m going to be your sister, but watch my reaction. I want you to play along. We’re still in the role play now. That sounds really good, but right now there’s just a lot going on. Maybe in a couple of years when I have more time I can look at that. But right now, honestly, I just need just this, just to tie this over for now.

[01:15:53] Juan: Yeah. I don’t even know what to do, man. I would just give the money.

[01:15:57] Ramit: Okay. Do you want to keep doing that?

[01:15:59] Juan: I love the idea of empowering them to get their things in order a little bit more because there might be an event where I can’t do it.

[01:16:09] Ramit: What would happen then if you were sick from work, for example, for a month or two, you got injured, you couldn’t collect money, and then your sister asked for money? You couldn’t give it to her. What would happen then?

[01:16:18] Juan: It would default to my mom.

[01:16:20] Ramit: So they would take it from your mom who’s in her 60s or 70s, working seven days a week, and your mom would send it to them because she can’t say no, correct?

[01:16:29] Juan: Mm-hmm.

[01:16:29] Ramit: And then what would happen.

[01:16:30] Juan: It’d probably happen again.

[01:16:32] Ramit: Yeah. So do you see that by simply Venmoing them, you’re not actually empowering her. It’s been happening every other month for two years. It’s probably going to keep going on for years and years. There’s got to be something else besides just continuing to feed that, wouldn’t you say?

[01:16:47] Juan: I’m lucky in that I had Amber to start me on this journey about being curious and learning more about money. And I think what you’ve just done is presented an opportunity for me to be able to at least try to open that door for them. It’s about them being able to figure out a way to make things work. It doesn’t matter the circumstances that they find themselves in because we’re doing that.

[01:17:11] Ramit: Do you see that the same lesson your mom taught you is the same lesson that your sister also learned? You’ve got to take off these lenses that you grew up with and put on a different pair of lenses. The lenses in her case is probably, hey, we need to talk about what’s our money situation.

[01:17:31] They probably need to read both of these books together. They need to have a reason to change. But right now, with you just answering the call every other month and Venmoing money immediately, there’s actually no reason for them to change. So that’s something that I would really consider. It’s also something, if I were you, I would encourage you to talk to a therapist about, because setting boundary is really hard, especially with family.

[01:17:54] Juan: I appreciate the guidance, for sure.

[01:17:57] Ramit: Let’s take a look at the investments. You currently have $80,000 in investments. Whose money is that?

[01:18:07] Amber: 48,000 is mine.

[01:18:10] Ramit: Ah. And the remainder is yours, Juan?

[01:18:12] Juan: Mm-hmm.

[01:18:13] Ramit: Wow. Okay. That’s great. It’s basically equal. Let’s just call it equal for easy math, huh? Okay. 80,000. I’m going to plug it in this calculator. And how much are you adding every single year?

[01:18:27] Juan: I have $500 automatically deducted from my property management job, and that goes into, what did you call that, Amber? The 408P or something?

[01:18:37] Amber: I think that’s what it was called. Yeah.

[01:18:39] Ramit: 6,000 a year. Plus the Roth IRA, that’s another, let’s just say–

[01:18:42] Amber: Seven.

[01:18:43] Juan: Yeah.

[01:18:44] Ramit: Seven. Okay.

[01:18:45] Amber: Mm-hmm. And then my seven.

[01:18:47] Ramit: All right. 20k a year. Years to grow, 22, shall we say? All right. 7%. Factors in inflation, etc. That’s a nice conservative number. 1.4 million. That would be about $56,000 per year in income. And we should factor in that y’all would not own a house and you also are underpaying right now. You’re dramatically underpaying because you pay no rent. So this is not nearly enough. What does this make you feel when you hear this number?

[01:19:18] Juan: That makes me nervous. Scared, actually.

[01:19:22] Ramit: Why? You would just do what you’ve always done, which is just keep working. So why are you scared? That’s the future that you always thought you would have?

[01:19:28] Juan: I’m scared because now I’ve been shown that, there are other possibilities and if we want those other possibilities, they’re not going to happen on 56,000 a year.

[01:19:37] Ramit: That’s correct. There’s no way you could survive on 56,000 because you’d have to pay rent. Your rent alone might be a significant percentage of that. So should we make some changes?

[01:19:48] Juan: Yeah.

[01:19:48] Ramit: Okay. Do you all see now that these seemingly small expenses that you choose to pay will actually add up to tens of thousands, even hundreds of thousands of dollars? Who can name some of those seemingly small expenses that you both pay for routinely?

[01:20:07] Juan: Trips. 

[01:20:08] Ramit: Okay. That’s one.

[01:20:09] Amber: I’ll do DoorDash.

[01:20:11] Ramit: Great. DoorDash is two.

[01:20:13] Juan: Motorcycle stuff.

[01:20:15] Ramit: Motorcycles. I love how he’s like, I don’t know. Coffee. Guy has freaking 20k of motorcycles he could sell tomorrow. All right. Agreed. What else?

[01:20:25] Amber: Amazon purchases.

[01:20:26] Ramit: Great. That’s four. What else? Anything relating to family perhaps?

[01:20:30] Juan: 300 every other month. Yeah, that family stuff.

[01:20:34] Ramit: Right. There’s 1,200 bucks. There’s money for the mom, sister. I’m sure there’s some holiday stuff. There’s gifts and on and on and on and on and on. Thousands. Now you all want to see what this looks like? I’ll show you the calculation. Just pick one. Let’s go and do the calculation for gifts. What do you say you spend on gifts per year?

[01:20:53] Juan: Let’s say 10,000.

[01:20:54] Ramit: Let’s say you give no gifts anymore for the foreseeable future. You go, “Look, we can’t give gifts. We’re trying to build our financial future.” So instead of $20,000 a year, we’re doing $30,000 a year. Now watch what happens to the math. At $20,000 per year invested, you have $1.4 million. By just increasing that number to $30,000 a year, you now have $1.9 million. And then instead of 56,000, $77,000 a year in income. What do y’all think?

[01:21:30] Juan: To take Amber’s phrase, it could also be better.

[01:21:34] Ramit: Oh [Bleep]. [Inaudible]. Let’s make it better. You want to make it better? Let’s make it better. I agree, it could be better. But we’re going in the right direction. Would you agree?

[01:21:43] Juan: Yeah.

[01:21:44] Amber: Yeah.

[01:21:44] Ramit: All right. So let’s get rid of these [Bleep] bikes. 20k. Shall we just put them away? 20k. Sell them.

[01:21:51] Amber: Yes.

[01:21:52] Ramit: All right. So instead of 80k, I’m going to make this a 100k. So instead of 1.9 million at your age of 65, we now have $2,016,000. Not bad, not bad. We’re getting there. Candidly, I don’t think you’re in the position to be spending $10,000 a year on gifts. I definitely don’t think you’re in the position to have all these motorcycles. There’s just no way. You can’t afford it. Where else do you think are the big levers that you can pull to be able to really get to a Rich Life?

[01:22:25] Juan: Charging more.

[01:22:27] Ramit: Oh, charging more. Like how much more?

[01:22:29] Juan: If I was charging $85 an hour and I chose every six months to raise the rate but by a percentage amount, would that be a good strategy?

[01:22:41] Ramit: If you were to raise your rates, let me tell you what would happen. Naturally, you would start making more. You would realize, hey, it actually makes no sense for me to be doing this social media thing and this thing because I’m not making close to what I’m making over here.

[01:22:56] So you’re going to start naturally working more on the higher value, higher return thing, which you enjoy. You’ll probably end up having one, maybe two jobs. If you’re charging 85, 95, 110 an hour, why do you need two jobs? Crush it. Do an amazing job. Over deliver to your clients. How much more do you think you could be earning per year?

[01:23:21] Juan: Man, I’m terrible at math.

[01:23:22] Ramit: Let’s just approximate it. Right now, gross, you make $78,720 a year. Let’s just say 79,000. How much more could you earn?

[01:23:33] Juan: I’d love it if it was a six-figure salary. That was comparable to what Amber was making, so 100,000, 110,000.

[01:23:40] Ramit: Honestly, that’s only $2,000 a month more. That’s not much. I’ll run the math for you. 2,000 bucks divided by, what are you going to charge per hour? 85? That’s 23 hours of client work. Divided by what? Four. That’s six hours a week extra of that high value stuff. I’m being very simple here. It might be that some of your clients come back more often because you offer them something. This is totally doable. Amber’s smiling over here. She’s excited. But Amber, let’s talk about you. How much more can you make?

[01:24:17] Amber: I could easily get to 160 a year.

[01:24:22] Ramit: [Bleep]. So 40k more?

[01:24:25] Amber: Yeah.

[01:24:26] Ramit: I love it. Tell you what, let’s be conservative. Let’s say that the two of you make 50k more per year. One of you might make more this year, the other makes more next year, whatever. I like to be conservative with our estimates, but all I can see right now is you’re dramatically undercharging, Juan.

[01:24:43] Let’s say you’re making 50k more. We’ll say 30k of that you’re going to invest. Okay, I don’t know if this is realistic because this number is freaking huge, but I just want to show you what it looks like. It’s really big. Instead of 30k, I’m making it $60,000 a year invested. That’s a lot, wouldn’t you agree?

[01:25:03] Amber: Yeah, that’s a lot.

[01:25:05] Juan: That’s a salary.

[01:25:07] Ramit: Yeah. In this example though, what we’ve seen, if I came to you at the first five minutes of this call and I was like, “You guys need to invest $60,000,” you’d be like, [Bleep] off. This guy doesn’t know what he’s talking about. He doesn’t know us. But what we just did was we really broke it down.

[01:25:21] We’re like, “Hey, here’s what you’re currently doing. In order for you to have 30 k more to invest per year, that means each of you needs to do this. You need to break it down. It’s all math. It’s not magic.” And we realize this is feasible. In fact, I think you could probably do this in 12 to 18 months. Let’s take a look at what the math says. Are you all ready?

[01:25:43] Amber: Yeah.

[01:25:45] Ramit: All right. We’re starting with $100,000  because we sold those bikes. We’re investing $60,000 a year, 22 years to grow. Watch this. $3.5 million. What do y’all think? A lot of nods around the room. What’s going on right now?

[01:26:00] Juan: That’s a great number.

[01:26:01] Amber: Yeah. I think that’s closer to where we need to be.

[01:26:04] Ramit: That’s $143,000 a year in safe withdrawal.

[01:26:09] Amber: Wow.

[01:26:10] Ramit: Now that is what I’m talking about.

[01:26:12] Juan: Yeah.

[01:26:12] Amber: Mm-hmm.

[01:26:12] Ramit: So what do you need to do in order to get there?

[01:26:16] Juan: We have to make, obviously, some adjustments to the spending habits, and we have to sell some of the things that we don’t entirely need right now, or charge more.

[01:26:26] Ramit: Grow your business income. I agree. Yes. Amber, what do you see?

[01:26:30] Amber: Yeah, same thing. And also getting more clients, finding higher paying clients.

[01:26:36] Ramit: The way you both are talking, I 100% confidence you can knock that out. What’s the stuff you’re not talking about? What are the skills you need to develop that you are not talking about?

[01:26:49] Amber: I think we’d have to have more of a structured plan even between the two of us, where we’re actually sitting down and talking about how do we want to allocate our resources this month. Setting better boundaries with family and what that looks like.

[01:27:05] Ramit: Hmm. First time I heard that word today, boundaries. Because you can’t get where you’re going if you have no boundaries. You’ve got to have boundaries. That means that the skill you have to build is knowing what is your Rich Life and what is not part of your Rich Life. Maybe you want to support your family in some way.

[01:27:28] Love it. I’m all for it. But how much? There has to be a number. You have to decide proactively. It can’t simply be when somebody calls me, that affects my finances and our finances. You can’t let somebody else control your Rich Life. You’ve got to set a boundary.

[01:27:49] The Rich Life is about deciding, what do I want? What do we want? And then using your money to live that. You two come from a lot of sacrifice. You went through a lot in the way that you grew up with money. You also come from scarcity. Especially Juan, your family, when they call, it’s like, I’m here to help. I’m here to help, I’m here to help.

[01:28:15] But there’s so many ways to help besides writing a check or Venmo. So many ways. One of those ways is to actually become an amazing role model with money. The Rich Life is your decision together. It can’t simply be what other people in the world want from you. 

[01:28:32] Amber: Makes a lot of sense.

[01:28:33] Juan: Yeah, that’s a good message.

[Narration]

[01:28:35] Ramit: Thank you to Juan and Amber for sharing the details of their story so openly and so vividly. They both have a lot of work to reach their retirement goals, but given that they both run their own businesses, there’s actually no limit to how much they can earn. If they commit to increasing their client list and Juan increases his prices, I actually have a lot of confidence that they can get there, which is why I offered to share my business program with them to help them get to their goals faster. I wish them the best. Juan and Amber, I’d love to stay in touch. Please keep me updated.

[01:29:08] In the meantime, let’s hear about the changes they have made since we spoke just a few weeks ago. First up is Amber.

[01:29:15] Amber: One thing that really surprised me was how receptive Juan was to this discussion around his money mindset. It’s something that he and I have talked about a lot over the years, but something about this conversation with you really clicked for him. And it was amazing to see him finally start to believe that it’s okay to charge more for his services.

[01:29:35] He’s an exceptional coach, and he’s really effective at what he does, and he deserves to be paid more. And so we started making changes almost immediately from how we collect payments to what he’s actually charging. And it’s already making a difference.

[01:29:50] Another thing that I found really helpful was our discussion around gifts. Having that perspective shift really motivated me to find more creative ways to show that I care besides just spending money. Oh, and the credit card is officially paid off.

[01:30:04] I wasn’t too worried about it because I had the money, but it does feel good to start the month off with no balance. I’ve also scaled back on aggressively paying off my student loans so that I can divert those funds instead to building up our cash savings. So yeah, lots of positive changes already.

[01:30:22] Ramit: And now Juan’s follow-up video.

[01:30:24] Juan: Hey, Ramit. First, I just wanted to thank you. I think it was great that you let us know that we were on the right track with the things that we had already started, but also gave us a really objective view and opinion on the things that we could be doing better and things that we hadn’t yet thought of, which were really, really helpful.

[01:30:39] Speaking of one of those things, my sister did reach out for some income recently, and I was happy to provide her with that income, but I also took the opportunity to bring up the spreadsheet. I asked if she would be comfortable going over that with me to see if maybe I could help her get into a better place with her finances. And she was super receptive to that. I really appreciate you bringing that up in a way that made it comfortable for me to bring it with my family.

[01:31:04] You’ll also be happy to know that we put three of the five motorcycles up for sale. You helped me see that it is really important right now at this moment in time to prioritize setting money aside for retirement, especially if we want to take care of our families the way we say we want to. So it was no problem to put the bikes up for sale. I know that in time we’ll get back to that  Rich Life experience. So I’m happy to make those changes now.