I have only listened to the first 30-ish minutes but my husband has listened to all of it and he just came in and was like “these people are ridiculous!”. They are very, very similar to us - almost identical income, similar ages, similar net worth, etc. We were just discussing their house. We can’t imagine having 1000 sq ft more than we already have. As it is I have a huge dedicated office, we have a guest bedroom that we only enter maybe once per month, we have a living room AND a family room, both girls have their own bedrooms. I just can’t imagine needing more and acting like a smaller house was non-negotiable.
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Yes! Right? They act like everything is non-negotiable. I can’t imagine being so inflexible. I’d have died of righteous indignation years ago, lol.
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Also @Economista I laugh so hard when people wax poetic about how they “never had” something before, but they’re around my age. This guy is saying the jeep he has (which they can’t afford) is the first car he’s “ever had” that was exactly the car he wanted. As if he’s been toiling at a job for 50 years, unable to afford reliable wheels. He was like, “I always had to settle for cars handed down from my parents,” hahahaha.
Like, not having something yet by your 30s isn’t exactly the mark of a hard scrabble life of deprivation. He literally said he’s dreading having to drive a car he “doesn’t like”.
My. Word.
At least Ramit said the dream of not having to ever think about money was delusional.
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A hand me down car from parents is a huge privilege and a leg up! My dad handed his car down to me after college, and it’s gotten me through all of my adult life so far with no car payment!
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Yeah, I’ve never been given a car in my life. Not even at 16. So much privilege!
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Gosh I must be really off my game. After the guy I thought was three sheets to the wind and the couple with the $55K elementary school tuition and someone whose fixed costs were 150% of their income, this couple struck me as almost rational.
I felt the real wake-up moment with this couple was when Ramit told them how much their investments would be worth in 20 year or so if they didn’t add anything to them - like $866K - and they were like, “That’s it?!? Oh no, we can’t retire on $35K a year, we’d better do something.”
In the follow-up, they’d gotten their fixed costs down from 98% to 80% of their income. Still a ways to go, but 20% of uncommitted money versus 2% has got to feel huge. I think the guy had picked up a side hustle - I give them credit for knowing what it is that’s important to them (the house, retirement), being on the same page, and willing to make some changes to make it happen.
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Whew, I have little to no hope for this couple. I fundamentally don’t understand people who know for a fact what they are doing isn’t working, but simultaneously don’t want to make any major changes. Like…what’s the worst thing that could happen from a change? Just try it! You can always go back to your terrible way of doing things, lol. I also think it’s a bad sign when people are super proud of themselves for not completing an assignment. Like, if the assignment is to get fixed costs to 65% and you feel really proud of yourself that you got it down to 80%…that’s bizarre to me. You failed the assignment.
These two reminded me a lot of the parents of a friend of mine from high school. They were high earners (surgeon and dentist) probably a household income around $500k. They had a gorgeous huge multimillion dollar house, a small beach house, sent all 3 kids to private colleges and grad schools, ate out a lot, nice clothes, lots of activities, vacations, etc. They both worked full time until 65+. They are both on government assistance now (and divorced) living in tiny apartments in pretty rough areas, and learning to budget on their small fixed-incomes. Last I heard the mom got involved in an MLM out of desperation.
I think a lot of high earners really don’t think it’s possible to outspend a high income, and this couple kept talking about how they’ll always make more money, etc. I think their real plan is to just “make more money” but people can spend an incredible income by just furnishing their lives to a nicer and nicer level.
You’re more optimistic than I am on this one @JRA64 haha
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They’ve got three kids under five. Or five and under? Anyway. It’s daycare eating them alive, 25% of net income. We have conversations on here about parents just trying to survive those years, forget about saving. I don’t know how you get fixed costs below 60% with that kind of daycare expense. Costs go down a bunch once they get those kids in public schools right?
If they stay in a private school, well, problems. But I got the sense that private preschool was more about a practical day care than a strong choice.
Their housing is 25% of gross, below the usual recommendation of 28%.
I think in a few years they’ll either be over the hump or so exhausted they’ll be ready to consider a smaller house.
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Had a conversation recently where it came up that for their 3 kids, the cost of daycare + afterschool care alone was going to be $100k/year.
Like. Nobody can out earn that. It wasnt fancy stuff, it was very standard daycare and afterschool care.
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Good point. I thought I heard them say it was the least expensive daycare available/that they could find.
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WHAT?! How did I miss that??? I’m so confused as to why Ramit was focused on housing the whole time. I wish he did a basic breakdown of income and costs at the top of the podcast.
That daycare is a lot. With so many kids I wonder if a live-in au pair would be cheaper? I still think their problem is the same, though (mentality). Because even as a person without kids, who mostly has friends without kids, I hear about the high cost of childcare all the time. Kids being expensive/exhausting is a constant topic, culturally, it’s in the air we breathe. What I’m getting at is childcare is not a hidden cost or something that they couldn’t have possibly expected. To me this means they just didn’t have a plan?
Like maybe the childcare wouldn’t be a squeeze if they were renting, or moved one town over, or thought about alternative options, etc. I just have trouble believing they really thought about it and made the smartest decision possible when it doesn’t appear they did that in any other area. IDK about the private preschool decision. To me, it seems unlikely that only one kid will get one year of private preschool, but I guess it’s possible!
I’m just amazed I misheard this so badly, lol. I feel like Ramit was driving hard at the housing like it was way over the top? So I just assumed that was aligned with the cost of the housing? Weird he didn’t mention live-in help or renting a room out. If housing and childcare are both impossible to decrease the only other option is to gut all the other stuff, which he was kind of down on them doing. I’m v confused now, lol. Basically just pretend I said, “what ginja said” because now I understand what she was saying, haha.
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I found this one hard to figure out what was going on.
But for childcare (in general and not this couple specifically) the cost drives a lot of women out of the workplace when it isn’t subsidized. Some people I know choose 3-8 years of childcare debt to maintain their career. Over the next 30 years this can be worth it.
So back to the couple, maybe that is their plan or maybe they had an f it mentality
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I knew a therapist who suggested the mom work if she wanted to, even if daycare costs were high, to prevent divorce.
It can be worth it to maintain a career. The experience and raises earned stay with one throughout their career.
This couple also got points from me because they not only knew what YNAB was, they used it. Ramit didn’t rant about YNAB (I was a little surprised) but he also didn’t explain what it was, which could be a huge help in itself to many of his listeners.
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I also didn’t understand why Ramit was so opposed to the idea of “making more money.” The husband took a lower paying job to be happier, hence he clearly has higher earning potential. His old job might not be the right fit, but that’s not to say he can’t find a job that’s a better fit for more money.
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Another thing that sucks, at least in my city—you often don’t exactly have a choice? Maybe between two similarly priced places but there are not enough spaces for the kids that need them. So basically we’re going with the first one that has an opening. As renters we don’t have the space to nanny share
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Oh for sure! I’ve heard a lot of conversations/read may articles around how high childcare costs drive women out of the workforce. I’m also totally in favor of public childcare! We did it during WW2, after all. And I think if your career is that important to you and you want to go into debt for it, that’s ok too. It just needs to be planned. People go temporarily into debt for all kinds of stuff so I don’t think it’s a problem if you have a solid road map. Ramit should have focused on a longer term plan for them.
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I think because it’s the first thing a lot of people with major spending problems say? The $55k private school couple said that too, “make more money” but then Ramit showed them how they couldn’t outearn what they were spending on private school, etc. I think especially since the husband in this one had just chosen to make less money it felt a bit disingenuous. I think it would have been different if he was like, “well I could make more money and I’m doing xyz to help achieve that goal.” Rather than, “I could make more money even though I just gave up a higher paying job for a lower paying job.” Especially since he made that job decision while already in this bad financial situation, so obviously he isn’t serious about doing it? If he were serious about it he wouldn’t have traded down in salary. That’s my guess.
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Yikes! That must be a very HCOL area. I’d have to have 3 kids in infant care at the most expensive daycare in the area (LA) to get to $100,000.
I thought I heard for this couple that daycare/preschool is $2000/month total, which seems very reasonable to me for 3 kids.
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Is it just me or are their car expenses really really high? I heard nearly $1000/month, with $400 of that being the car payment. What’s the rest? Insurance? Gas?
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Yeah, it didn’t sound to me like their childcare expenses were actually that high. They live in Iowa, which is not a high cost of living location. I finished listening last night and Ry and I were talking about it before bed. I’m curious about why Ramit didn’t really discuss any of the other categories they have in “fixed expenses” and I’m also curious to see how he has this conscious spending plan broken out because for me personally, things like direct tv or groceries or eating out absolutely wouldn’t be part of “fixed expenses” because those are all discretionary.
Given where they live, they have approximately the same income we have but I’m going to guarantee their mortgage payment is cheaper than ours. If they have Direct tv then I’m also going to assume they are paying $200+ per month for their cell phones instead of being on cheap plans. The wife said that if they get rid of $100 per month in Direct tv then they would just spend $100 per month in streaming instead which is stupid and wrong - you can do one or two services per month for $10-15 each. Ramit kept steering them away from talking about small changes but it seems like they are type of people that have A LOT of those small expenses that add up to A LOT of money. Yes, making mistakes on your big expenses (car, house) will set you back, but you can also go into debt $100 at a time.
I totally understand the feeling of treading water while in the expensive baby years, I just think there are things you can do to try and cut expenses in other areas to help make up for the high baby expenses. How do they even have time to use their Direct tv? We only have 2 kids and we only get an hour each night for tv time. Cable would be a total waste for us.
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