Episode 208. “We make $157K at 22, but we’re afraid to spend money”



Javier (22) and Marco (22) are young, ambitious, and financially disciplined—but the future they dream about together is being challenged by how they handle money today.

They earn a combined income of $157,000, already have more than $60k invested, and live in New York City with shockingly low fixed costs. But despite their impressive financial habits, they’re stuck in a cycle of miscommunication. Javier wants to be cautious now to make big moves later, while Marco wants to split everything 50/50, even if it slows down their long-term progress.

With their income gap and no shared plan for spending, saving, or investing, can they plan for a wedding and build their future together?

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Transcript 

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[00:00:00] Javier: Just the classic, we can’t afford that. It’s too expensive. How much can we actually spend right now? Because you’re saying if we invest and save, yes, we’ll reach that. But if we scale things back, who knows?

[00:00:11] Ramit: What the [Bleep]? Hold on. Are you taking away the complete wrong message from this?

[00:00:14] Marco: He is actually the one that says he is so behind, not making enough, doesn’t have enough saved.

[00:00:20] Javier: I had an ex tell me that I was really bad with money, so out of spite, I wanted to learn a lot more.

[00:00:25] Ramit: Some people, they get a revenge body. You got a revenge portfolio.

[00:00:30] Marco: In my mind, I started saving my money late.

[00:00:34] Ramit: Just tell everyone how old you are again.

[00:00:35] Marco: 22.

[Narration]

[00:00:40] Ramit: Okay, this episode is going to blow your mind. This couple is young, and they are disciplined in a way that I have not seen before. I’m looking at their CSP right now. You can download your own conscious spending plan at iwt.com/csp. This couple’s 22 years old. They have $0 in assets, a combined gross income of $157,000 and they already have over $68,000 invested. And listen to this, their fixed costs are 32% in New York City.

[00:01:19] The application they wrote says, “We love to talk about our future life, but we talk in circles about our near-term goals. It becomes really difficult for us to talk about money. I think if we can’t figure this out now, our dreams will be crushed, and that will result in a large source of conflict for the rest of our relationship.”

[00:01:39] Looking at their numbers and their application, I am really excited to dive in because for 22 years old, their numbers are extremely impressive, and it’s a gift to be able to talk to couples when they are at the beginning of their financial journey. So let’s get started.

[Interview]

[00:01:58] Ramit: Javi, in your application, you wrote, “We love to talk about our future life, but we talk in circles about our near-term goals. I think it’s exhausting for both of us, and it becomes really difficult for us to talk about money. I can be weird about certain purchases, and I know that Marco gets frustrated with my views.” Is that an accurate representation? Marco, do you sometimes get frustrated with Javi’s views?

[00:02:27] Marco: Yes, 1,000%. We have a lot of the same shared goals, and I think it’s just a matter of how we’re executing them. I want to make sure we’re doing the right things, but I also want to make sure we’re doing what we want to do now and enjoy where we’re at in life while also doing the right things for the future.

[00:02:48] Ramit: Okay. Can you think of an example recently where you got frustrated with his financial views?

[00:02:53] Marco: Yes. This is something that we’ve talked about a lot, and it has to do with Spotify and subscriptions. So I have my own Spotify account and Javi is on a family plan, and it’s $0 because it’s his friend’s family. So he’s just a freeloader. So I pay for my own plan, but Spotify has a plan where you can do a duo subscription for 16 bucks. So it’d only be $8 a person.

[00:03:21] And so in my head I’m like, “Oh, great.” I could shave off a couple of dollars each month, and he’s not paying anything right now, so wouldn’t it be a huge lift for him to go on this subscription? But he didn’t want to because he’s on this plan where he doesn’t have to pay for it right now.

[00:03:36] I don’t really see how that $8 would have a huge financial burden on him to pitch in. I don’t know. It just didn’t really make sense in my head because it’s something that is so small in the grand scheme of things that it frustrated me.

[00:03:52] Ramit: How many times have you talked about it?

[00:03:54] Marco: We’ve probably talked about it between, I’d say, 7 and 10 times.

[00:03:59] Ramit: Okay. How often do you find yourself talking about small amounts of money like this?

[00:04:05] Javier: I would say a lot. There’s a few other examples of that.

[00:04:08] Ramit: Give it to me.

[00:04:10] Javier: We pay our rent every month through a portal. That portal accepts credit cards, and we love to get the points, or at least I do. So it’s always a battle on whether– because I’m always going to pay for that. There’s a 15-dollar fee on top of it, but Marco doesn’t want to pay for that fee. So we both talk about whether it’s worth it to pay for the credit card processing fee to pay our rent.

[00:04:31] Ramit: Okay. So let’s hear the conversation. Go ahead. Role play it for me.

[00:04:34] Marco: It probably starts with me. I’m like, “Is it worth it to add the extra $15 and get the credit card points? Or should I just do the bank transfer and just not get the points, but save that $15?

[00:04:46] Javier: We barely pay anything in rent now. It’s not going to be a big difference.

[00:04:50] Marco: But is it worth it to pay that extra $15?

[00:04:53] Javier: Yeah, you’ll get the points. And we can use them. It’s only $15 really. It’s not going to affect that much.

[00:04:59] Marco: And that’s usually how it goes.

[00:05:01] Ramit: All right. You guys like this conversation?

[00:05:04] Marco: I don’t like this conversation.

[00:05:05] Ramit: Are you sure? It sounds like hell to me.

[00:05:07] Marco: Oh.

[00:05:08] Ramit: But you’re both smiling. Deep down, do you actually enjoy it?

[00:05:11] Javier: It’s just laughable.

[00:05:12] Marco: I think it’s just so stupid and every single month we do it, and I don’t know why.

[00:05:18] Ramit: It could be that you fundamentally see money differently. We’ll find out. But I can see a lot of smiles, a lot of teasing. There’s a lot of affection. And the amounts are small, so it’s like, ah, you do it this way, you do it that, it’s not really a big deal, but it seems maybe it’s become a ritual. Okay, rent’s due. Let’s have this conversation. Have a little fun and then it’s all good. 

[00:05:43] Marco: Yeah, I would say there’s a little bit of truth to that for sure.

[00:05:45] Javier: Yeah, absolutely.

[00:05:46] Ramit: Okay. Let me understand a little bit more about the financial picture. Your income. I understand that there’s a discrepancy in the income. One of you makes more than the other. Do you think that the income discrepancy plays into how the two of you talk about money?

[00:06:01] Javier: Completely. I think that that plays a big part in it, honestly.

[00:06:05] Ramit: Okay. Marco, what about you?

[00:06:06] Marco: I think it affects us more in the long term and how we’re planning for our future. Our lease is up in August in our current apartment, and we’re trying to move on into a place on our own. So we’ve had a lot of conversations about what our max rent is going to be, how we’re going to split the rent when it’s just the two of us. It’s funny because he makes more than me, significant amount more than me, but I often feel like I am more willing to do more with my income, if that makes sense, than he is.

[00:06:41] Ramit: Okay. So let’s talk about the rent. Your lease is coming up. The two of you live together. And do you live with roommates right now?

[00:06:49] Javier: Yeah, we live with roommates currently.

[00:06:51] Ramit: So what? You’re talking about maybe getting your own place?

[00:06:54] Marco: Mm-hmm.

[00:06:55] Javier: Yeah.

[00:06:55] Ramit: All right. How’s that conversation going?

[00:06:57] Javier: That’s the part where the income discrepancy really comes into play, where I think we get frustrated on just all the aspects of trying to move in together. Whether that’s the actual rent or the phantom costs that go into moving.

[00:07:10] Ramit: Well, there’s nothing I like more than hearing two people spin in circles right in front of me. Can we just recreate the conversation?

[00:07:17] Marco: Okay, so our max rent is 2,200. How are we splitting it? Evenly, like how we’re doing now, or?

[00:07:24] Javier: No, I think we definitely should split that equitably, give you more room to breathe. And if anything, that’ll help us even out some of the costs. And yeah, that’s really it.

[00:07:35] Marco: There’s such a big discrepancy in our incomes. I feel like I am not contributing enough and you would be paying such a significant amount more, and I am too prideful to accept that to let that happen.

[00:07:49] Javier: Okay. I just don’t want to put you in a bad financial state by making you pay more. Or even if you want to pay more, I don’t want to basically stress you out because we’re paying more.

[00:08:00] Marco: I understand that, and I appreciate that, but I wish we could come to a compromise where I feel like I’m contributing enough.

[00:08:08] Javier: Completely. That makes sense, and I want you to feel that way, but I also want to make sure that we’re trying to save and invest for our future goals that we want to do. And I don’t want to push you down from that by making you pay more on things you shouldn’t have to.

[00:08:21] Marco: I understand that. I understand. I do.

[00:08:25] Ramit: Is this where it stops?

[00:08:26] Marco: Most of the time, yeah.

[00:08:28] Ramit: Y’all ever make a decision?

[00:08:29] Marco: No, we have not reached a decision yet.

[00:08:32] Ramit: So what does it feel like to have this conversation, not reach a decision, walk away from the conversation and then come back and do it again 2, 3, 6 weeks later? What does that feel like?

[00:08:44] Javier: Hell, like you said earlier.

[00:08:46] Ramit: What else?

[00:08:48] Marco: Uncomfortable.

[00:08:49] Ramit: Who’s the more decisive out of the two of you in general?

[00:08:52] Marco: Me.

[00:08:53] Ramit: Wow. Okay. And what makes you not as decisive during money conversation?

[00:08:59] Marco: He does make more money than me, and so I feel like it’s hard for me to make decisions in a space where like I feel like I shouldn’t be calling the shots.

[00:09:08] Ramit: Ah. So in your mind, the invisible script is he who makes more money calls the shots.

[00:09:13] Marco: No, I don’t believe that, but–

[00:09:16] Ramit: Let’s take another scenario. Let’s say that one of you gets sick. Let’s say Javi gets sick. Now Marco is earning more. Marco, do you suddenly call the shots when it comes to money?

[00:09:28] Marco: No, I wouldn’t feel comfortable doing that.

[00:09:30] Ramit: Yeah. All right. So maybe that’s an invisible script or a belief that could be interrogated a little bit. Javi, what do you think? Marco is more decisive in real life, but less decisive around money. Why do you think that is?

[00:09:41] Javier: Us having these conversations about money is newer to Marco, and so I think he just feels a little bit more uncomfortable to be confident and decisive in that when it’s something that’s still new to him and that we’re navigating together.

[00:09:55] Ramit: Marco, true?

[00:09:57] Marco: True.

[00:09:57] Ramit: All right. I can see that. There’s one element I noticed in the couple of examples we’ve done together. Marco, each time you talk about money, your first instinct is to ask a question. Have you noticed that?

[00:10:09] Marco: I have noticed that.

[00:10:10] Ramit: Yeah. It’s like, what do you think we should do? Or how should we do that? Which I don’t mind. I like a good question. I love the curiosity. I think asking a question’s a nice way to break the ice. However, sometimes asking a question, especially in this dynamic, invites the other person to ask a question and then you’re just asking questions for the next 40 years.

[00:10:30] I’m like, “Can somebody take the first step in this dance and say, I think we should do this?” Kind of scary. Maybe you’re wrong. Maybe your partner’s going to disagree. But with a good partnership, they can say, “Hey, I hear where you’re coming from. Maybe let’s try it this way.” And that starts moving you towards a solution.

[Narration]

[00:10:46] Ramit: Now, I have to tell you, I especially love talking to young couples. Javi and Marco are 22 years old, but they’re already asking the kinds of questions that most couples avoid for decades. How do we make decisions when one person earns a lot more than the other? What does power look like in a relationship where there’s a huge income differential? What about fairness when it comes to money?

[00:11:10] And this income disparity is something that I see all the time. One person makes more and suddenly the other feels like they have lost their seat at the table. They feel like they have to justify everything. They become obsessed with the C word, contribution. Am I contributing enough? I know it doesn’t show up in the spreadsheet, but am I contributing enough?

[00:11:31] The thing is, that’s not unusual. That is human. In America, we value that which is quantifiable. And for some reason, if we can’t see it as a number in black and white on a spreadsheet, we think it’s not valuable. Wrong. That’s been the point of this podcast.

[00:11:49] There’s so many ways to contribute. With Javi and Marco, what’s rare is them having these conversations early. It’s not perfect. They’re spinning in lots of ways. They’re still figuring it out. But the fact that they are here talking about money openly, amazing. Now I’m curious. How did they land on $2,200 as their target rent? Let’s take a look.

[Interview]

[00:12:13] Ramit: So the $2,200 budget, is that a real number?

[00:12:15] Javier: Yeah.

[00:12:16] Ramit: All right. Who came up with the $2,200 rent budget?

[00:12:19] Javier: I think I did.

[00:12:21] Ramit: And how did you choose that number?

[00:12:23] Javier: We actually went through our own conscious spending plan. I went through the percentages and was like, “What’s going to be good for our income together?” All of that. But also–

[00:12:32] Ramit: I [Bleep] love it. Hold on. I need to take a moment to enjoy this. Someone I’m talking to actually ran a single number in their life. Guys, this is a first. This is a [Bleep] first. I can’t believe it. And aren’t you guys like 22 years old?

[00:12:48] Marco: Mm-hmm.

[00:12:49] Ramit: Holy [Bleep].

[00:12:49] Javier: Yeah.

[00:12:50] Ramit: Listen up all you freak Money for Couple listeners. 40 years old, sitting around earning all this money. Oh, I don’t know. Boohoo. Why do I feel this way? Because you never ran a [Bleep] number. Here we have two 22-year-old guys pulling up a CSP and running some calculations. Learn something. Okay, so you ran some numbers, and you came up with $2,200.

[00:13:11] Javier: Yeah.

[00:13:12] Marco: I think it’s also based on the areas that we want to live, because obviously we wanted somewhere that’s within our means, but also somewhere that’s accessible in terms of our jobs and where we want to be.

[00:13:26] Ramit: Yeah, I get it. What general vicinity are you in, just so I understand?

[00:13:30] Javier: New York City.

[00:13:31] Ramit: Okay. And what are you guys paying right now for your rent?

[00:13:34] Marco: We pay 540 each.

[00:13:37] Ramit: $540. I [Bleep] love you guys. That’s so awesome.

[00:13:44] Marco: Yeah, we got lucky.

[00:13:45] Ramit: Wait, this is so crazy. We need to explain this to people because everyone’s like, New York City, it’s so expensive. And it is expensive. That’s for sure. But can you explain to everybody, how are you able to live for $540 each?

[00:13:58] Javier: I would say the first step is the fact that we’re a couple. We can share a room. So that obviously knocks it down a bunch. But I would say in general, living in New York City, I would say doesn’t define you to Manhattan. So we didn’t really look in Manhattan. We live in Brooklyn.

[00:14:11] We love our area, and we just had to compromise in that sense. And we feel like we found a good spot in just finding roommates. I’m still trying to convince him to have roommates moving forward still. Because I still believe in the cost.

[00:14:23] Ramit: Okay, that’s an open discussion.

[00:14:24] Javier: Yeah.

[00:14:24] Ramit: And Marco, what do you say to that?

[00:14:26] Marco: I would say I don’t want roommates because I’ve had bad roommates in the past.

[00:14:31] Ramit: Got you. I’m just reflecting on how much rent I paid and how long I had a roommate for. [Bleep], I think I had a roommate until I was 27 years old. And I liked it. I enjoyed it. And then once I went to have my own place, I never had a roommate after that. Okay. Just cool.

[00:14:49] It’s awesome to hear you guys at 22, how you’re thinking about your costs and how you’re navigating these decisions. I think it’s really cool. Okay. When was the first time that you had a real substantive conversation about money?

[00:15:03] Marco: I feel like probably when we decided to move in together, because we moved in together when we moved to New York. So obviously, those are two really big financial shifts.

[00:15:14] Ramit: What came up in that conversation?

[00:15:16] Javier: I think a lot of, how are we going to live in New York, and how are we going to live together, and then how are we going to look at money moving forward.

[00:15:24] Ramit: And what did you decide? 

[00:15:26] Javier: We came up with a few just ground rules on things. For example, like groceries, we go every week. We switch who’s going to pay for that. We set our own rules, like $30 or less, like, we’re not going to pay each other for that. What’s another one that we have, Marco? I’m trying to think of others.

[00:15:44] Marco: We split everything pretty much equally when it comes to the house, I think– like rent, utilities, all of that.

[00:15:52] Ramit: Okay. All right. I got to say, I love that you created a few rules. It’s a great sign. I think a lot of us have a negative view of the word rules, usually because rules were imposed upon us. But as adults, we get to create rules for ourself. And rules aren’t always bad.

[00:16:11] I love the freeing rule that you have. Anything below 30 bucks, it’s fine. That’s an awesome rule. I don’t want to sit there freaking log into Venmo. Waste of time. Waste of life. And then also, I like that you came up with these other rules. That’s really cool. Something you can carry throughout life and also adapt as your financial situation changes.

[00:16:31] Javier: We’re in the process of that right now, actually, adapting to our new changes, kind of.

[00:16:35] Ramit: Like what?

[00:16:36] Javier: He just got a raise. I just got a new job. So we’re trying to navigate that and that also plays a big part in everything that we’re talking about.

[00:16:46] Ramit: Oh, wow. I didn’t know that. So are you both together making a lot more money than you used to make?

[00:16:51] Javier: I would say yes.

[00:16:53] Marco: Yeah.

[Narration]

[00:16:53] Ramit: Okay. Now we’ve heard how Javi and Marco talk about money. I’m really starting to see how they think differently about it. One of them is super structured, loves a good spreadsheet. The other is still figuring out how to feel confident making money decisions. That contrast is very common, but again, this is the time to deal with it.

[00:17:16] Now, because they’re in the midst of big changes, new jobs, possibly a new place to live, a new phase of life, one makes more than the other, imagine if they didn’t change a thing. Imagine if they didn’t talk about this. The difference between them would become greater and greater, and we’ve seen this with lots of couples. It leads to communication problems. It can lead to resentment and even worse.

[00:17:42] But if we can tackle this now, we can actually get them talking about money, making decisions together. If we do that, we can change the trajectory of their lives. Imagine as you’re listening and watching this, you could do the same thing too.

[00:17:56] When we come back, I’m going to open up their conscious spending plan, and trust me, the numbers are going to blow your mind.

[Interview]

[00:18:04] Ramit: I want to take a look at your numbers. What was it like doing the CSP together?

[00:18:08] Javier: It was really good, really productive. But honestly, I don’t even know completely for the current spending if that reflects true spending for sure because of our new jobs and all that.

[00:18:19] Ramit: We can adjust the numbers. Don’t worry about that. That’s actually the beauty of the CSP, is I encourage people to try something out. Let’s plug it in and see what would happen. And then if we don’t like it, command Z. Go back. It’s all good. All right. Marco, what was it like for you to do the CSP together?

[00:18:35] Marco: I’m a very visual person, so I enjoyed being able to see it all on paper and see it physically divvied up.

[00:18:43] Ramit: I feel the same way. It’s like all these concepts in my head. I just need to see the numbers in a very simple one pager. It just gives me so much clarity.

[00:18:53] Marco: Me too.

[00:18:54] Ramit: All right. Let’s play it out. I’m going to put these on screen. Javi, can you read the word in bold and then the number in full next to it for this entire first box?

[00:19:02] Javier: Assets, 0. Investments, 68,400. Savings, 47,600. Debt, 0, for a total net worth of $116,000.

[00:19:15] Ramit: How do you both feel about those numbers?

[00:19:17] Marco: I feel good about them. I feel very lucky and grateful that we don’t have any debt. That’s something a lot of people struggle with, especially at this age. So I feel good about it.

[00:19:27] Ramit: Great. Javi, how about you?

[00:19:28] Javier: Yeah, I think in terms of debt, I feel the same way. Very lucky and privileged that we’re in this position with no debt and have the ability to save and invest. Although I think that we could be doing more in some ways to increase that further and make sure we’re hitting the goals we want to in the future.

[00:19:45] Ramit: Cool. All right. We will talk about what those are. Let’s look at the income. Marco, what is your combined gross monthly income?

[00:19:55] Marco: 13,166.

[00:19:57] Ramit: Okay. That means your household income is $157,000. Did you guys know that?

[00:20:03] Marco: Did not know that.

[00:20:05] Javier: I knew that. I knew that.

[00:20:07] Marco: I’m sure he did.

[00:20:08] Ramit: 50%. Okay. Love it. 50% of people do not know their household income. And Marco, just so everybody knows, how could you not know your household income?

[00:20:19] Marco: I think part of me still views us separately because we’re not married or anything like that. So I think I still view some of our finances as individuals.

[00:20:32] Ramit: I think that’s a fair comment. You two are not married. You do live together. But if we were to break out your income, at least the one on the CSP, you would make $48,000 a year, which is considerably different than $157,000 household income. I think it’s important to know your household income for a couple of reasons.

[00:20:52] One, you got to know your numbers. In order to live a Rich Life, one of the two key tenets, you got to know your numbers. The other is you got to master your psychology. I also think sometimes people play small. They often just have a feeling about how much they make or how much things cost, and they don’t adjust their psychology when the numbers change.

[00:21:12] We have to stay in tune with the numbers just like we have to stay in tune with fashion changes and all kinds of stuff. So to know, hey, I make 48,000, we, if we were to combine it all, make 157,000. How should a couple that makes $157,000 act? It’s probably a good question. A couple who makes almost $160,000, should they be talking about Spotify every week? Probably not.

[00:21:40] Javier: Yeah.

[00:21:40] Ramit: Right? There’s something incongruous there. It doesn’t make sense.

[00:21:43] Marco: Yeah.

[00:21:44] Javier: Yeah. And also there’s technically more in that income that we didn’t account for as well.

[00:21:48] Ramit: Oh, let’s do it right now. I know. We’re going to do it right now. All right, let’s fix it. Everybody knows Javi’s very, very excited to adjust this income and reflect the current numbers. Go ahead, Javi. Tell me. What changed?

[00:22:00] Javier: It’s not actual money that we have right now because my job is base plus commission.

[00:22:05] Ramit: How much more ballpark?

[00:22:07] Javier: My on-target earnings will be around 45,000 more.

[00:22:12] Ramit: Goddammit. I was like, “Finally, we have some people who are not making hundreds and hundreds of thousands of dollars per year and then it turns out, oh, I’m going to make an extra 45 grand”. [Bleep]. I’m going to get in so much trouble on the Internet now. All right. Fine, Javi. I’ll add an extra 45,000.

[00:22:29] And then what about you, Marco? Is there an extra 200 grand sitting around in your pocket?

[00:22:34] Marco: No, but I base it off 40 hours a week. I typically work 45 to 50. And I make overtime. So it’s a splash more, but nothing crazy.

[00:22:46] Ramit: Well, a splash more would mean, instead of 3,000 a month, you’re making 4,000 a month net ballpark. That’s a lot, right?

[00:22:55] Marco: Yeah.

[00:22:56] Ramit: You guys want to see what happens if we adjust it? Let’s just play it. I’ll just show you something. All right, for everybody listening, first, let me just give you the baseline numbers because they’re [Bleep] crazy. Your fixed costs are 32%. That’s one of the lowest numbers I’ve ever seen. What do you guys think about that?

[00:23:11] Javier: It’s low, but I heard someone on your Boston show they had 28% or something.

[00:23:18] Ramit: Wow. Okay. All right. You’re very competitive. I like that.

[00:23:21] Marco: Oh my God.

[00:23:24] Ramit: All right. Everybody listening, listen. Let me tell you their numbers. Your rent is $1,112. Phenomenal. Now, that’s because you guys have roommates among other things. Your car payment, you don’t have a car probably. You have train pass. 300 bucks a month. That’s the benefit of living in a city. You often don’t have to have a very expensive car. Amazing. Groceries are 500 bucks. Is that true?

[00:23:50] Javier: I said it was more. I said it was more like 600.

[00:23:52] Ramit: Okay. I’m going to adjust this number to 600. The number goes from 32% to 34%. Wow. We’re in the danger zone now. Rest of your fixed costs here, clothes are 100 bucks a month. Phone, 75. One of you’s not paying for a phone.

[00:24:07] Marco: Well, I’m on my family plan, so I don’t pay for my phone.

[00:24:09] Ramit: What the [Bleep]? All right. Get off that. Subscriptions are $135 a month. Fine. 34%. You have so much margin to play with. Let’s keep going down. Your investments are at 30% of take-home pay. So first off, anybody doing any pre-tax, 401(k)s or anything like that?

[00:24:29] Javier: Yeah. I’m trying to max out my 401(k) in this new job, so I think that’s why my post-tax is pretty low, I would say.

[00:24:35] Ramit: Great. Currently, your gross is 9,100 bucks, and your take home is $4,500.

[00:24:43] Javier: Yeah.

[00:24:44] Ramit: Okay, great. So that’s 25,000 plus right there. And then you’re investing an additional $1,830 a month, which is great. That’s over 20k there. Marco, you’re doing 13%, 400 bucks a month. Nice. Savings are at 15%. So you’ve got $1,100 a month going towards an emergency fund. I want to point out that you currently have $47,000 in a savings account. That’s a couple of years of your fixed cost expenses.

[Narration]

[00:25:18] Ramit: I got to give Javi and Marco some serious props. Their savings and investment numbers are amazing. Over $68,000 invested at age 22, that’s not luck. That is consistent, boring, discipline. Also, I just have to ask a question. Why are they even thinking about moving out of their place? They pay $540 a month.

[00:25:42] Listen, sometimes when I’m talking to people, I tell them there are these golden moments you have with money. And when you have those moments, you hold onto them as long as possible. As an example, when your car payment ends, hold onto that moment. Do not run out and get a new car. If you pay off your mortgage, stay there. Don’t go and get a new house immediately. And in their case, they have $540 a month for rent.

[00:26:11] If you can do it, I don’t care if the ceiling caves in. Slap a tar on that thing. Use some duct tape and just stack that cash. But okay, I understand. Not everybody wants to stay in the same place forever. I get it. Life is not just about keeping your expenses low. I just want you to know these golden moments don’t come around that often. So when you have them, take them.

[00:26:32] All right, fine. They’re thinking about moving. We can make that happen. What’s interesting to me also is the dynamic when they talk about money. Did you catch it? They spin. They talk through the same issues over and over– rent, Spotify, how to split bills– and then they walk away never having decided anything. This is incredibly frustrating. It’s frustrating to listen to.

[00:26:55] It’s also frustrating to be in that situation. I actually think being indecisive is one of the most frustrating qualities to have. You talk and talk and talk but get nowhere. So I’m going to work with them on how to become more decisive. It’s one of the best skills you can ever build. Next up I’m going to talk to them about their guilt-free spending, which actually gives me a huge clue on what’s going on.

[Interview]

[00:27:19] Ramit: And then finally your guilt-free spending is at 22%, which is $1,668 a month. Is that accurate? You guys spend that much on guilt-free stuff?

[00:27:30] Marco: I can’t imagine we do.

[00:27:32] Javier: I would say it’s more, to be honest, or maybe that’s just on my end.

[00:27:36] Marco: I think there’s no way we’re spending– yes, we live in New York, so things are expensive, but at the same time, I think we’re super conscious of that and we’re not going out to dinner every single weekend. If there’s a special occasion, we’ll go to dinner, but that’s what? 150 bucks here and there.

[00:27:56] Ramit: You ever take a trip?

[00:27:58] Javier: Yeah, we take many trips. That’s the other thing.

[00:28:00] Ramit: Oh.

[00:28:01] Javier: Well, not many, but–

[00:28:03] Ramit: What’s the last trip you took?

[00:28:04] Javier: We went to San Francisco in February, but that was partly paid for by my parents.

[00:28:09] Ramit: What’s the trip that the two of you took where you paid for it?

[00:28:12] Marco: I think San Diego.

[00:28:14] Ramit: So ballpark, what do you think you spent there total– transportation, tax, tip, eating out, everything?

[00:28:20] Javier: 400 maybe each of us though. So 800, 1,000 total. Not including the flights, though. The flights.

[00:28:28] Ramit: Put those in there too.

[00:28:29] Marco: We went to a music festival, so the tickets for that too.

[00:28:33] Ramit: How much on the drugs? Don’t forget about that.

[00:28:35] Marco: We don’t do drugs.

[00:28:36] Javier: Yeah.

[00:28:36] Ramit: I’m just kidding with you. Also, I got to tell you, I’m very, very, very out of touch with how much drugs cost.

[00:28:42] Marco: Honestly, cheaper than you’d expect.

[00:28:44] Ramit: Yeah, that’s what I learned. I’m still in like RoboCop days. I thought everything’s $25,000. And my friends are like, “You’re so [Bleep] stupid, dude.” I’m like, “Oh, capitalism is so efficient.” All right. So what do we say? Including airplanes, everything, how much?

[00:29:01] Marco: I’d say maybe 5 or 600

[00:29:04] Ramit: All right. Let’s just say 1,500 bucks total. So 1500 bucks total is an extra $120 a month on your guilt-free spending. And that’s just one trip. So you can see if you take four or five, six trips, maybe one of them or two of them are more expensive, it sets your floor higher. So I don’t know how much you guys spend on guilt-free spending, but I can tell a couple of things.

[00:29:25] Number one, this number is not right, which is okay. It almost never is the first time. That’s fine. I’m actually not sure which direction it’s right. Is it higher or lower? I don’t know. But I don’t think you’re spending $5,000 a month on guilt-free spending. I think you’re plus or minus a few percentage points. And you could track it down. You should. But it’s reasonable. And the fact is you have tons of margin to play with because your fixed costs are so low.

[00:29:49] Javier: We’re not necessarily tracking certain things like that closely. I think during the week we’re really good. But then on the weekend we might go out to dinner or go out with friends and get drinks or whatever. And then we also might have trips or concerts. So that on top of we want to move in together into our own place, to me, that’s where the ballooning, the lifestyle inflation goes. And that’s what worries me.

[00:30:08] Ramit: Lifestyle inflation. You worried about that?

[00:30:11] Javier: I say, yes.

[00:30:13] Ramit: Marco?

[00:30:15] Marco: I am not worried about that because I think we’re both very conscious about wanting to save. And I think right now there’s much more that we could be doing that we don’t do because we are putting that money away.

[00:30:31] Ramit: Can I tell you guys? I don’t believe in lifestyle inflation. I know the phrases out there. I know all the personal finance folks will try to scare you. Take every dollar of raise you get and put it into the market. Don’t inflate your lifestyle. I don’t believe that. When I spend money on expensive stuff or stuff that’s meaningful to me, I didn’t trip and fall and accidentally swipe my credit card. I know what I’m doing– eyes wide open.

[00:30:53] So one of the goals that I have for everybody who reads my material or I get a chance to help is to help them gain the confidence and knowledge to say, I’m not worried about this ephemeral phrase, lifestyle inflation happening to me because I cause things to happen to the world.

[00:31:13] Can I tell you what I see looking at these numbers? Honestly, I think they’re pretty [Bleep] awesome. At 22 years old, [Bleep], you could be 30 years old. I would be impressed. You have a nice household income and potentially even more with a bonus. You have extremely low fixed costs. Oh my God. Having those low fixed costs allow you so much buffer, so much margin to play with.

[00:31:40] It’s like you have thousands of extra dollars every single month. And then what really impresses me is that you chose to invest and save aggressively. Now, I love that. I want you to spend money on the things you love. I love that you went to San Diego. In fact, we could find a way for you all to spend more if you want to.

[00:31:57] But when I was 22 and 24 and 26 and I was basically living with a roommate, my expenses were relatively low, by putting a bunch of money into investments, I knew that it was my golden age in terms of investing. Because life gets more expensive. I got a little bit nicer tastes in things, and eventually I got engaged and got married, and I wanted to spend more on my fixed costs. And so the fact that the two of you are so aggressive about saving and investing, I find amazing and very inspiring.

[Narration]

[00:32:33] Okay, yes, Javi and Marco are crushing it financially speaking, but I’ve learned something about optimizers. The very habits that make them good with money can also box them in. That’s why optimizers, taken to the logical extreme, become unbearably cheap. They’re always planning for the future, preparing for what can go wrong, and then that joy and spontaneity that money should provide disappears. They lose the ability to say, “Yeah, let’s do this now.”

[00:33:05] They can’t even buy lunch out because that sourdough bread could be invested and compound for 35 more years. Ooh, put the cheese aside. We can buy five slices of cheese when we’re 92 years old. What the [Bleep]? We need to blend art and science.

[00:33:22] We need to know that money involves numbers, and yes, we should have a healthy savings and investing rate, but it’s not here to simply be accumulated or hoarded. Money is here to provide us a Rich Life. I can already see this happening with Javi, worrying about lifestyle inflation, hesitant to spend, out planning every possibility. As it turns out, lifestyle inflation is not the only thing Javi’s worried about. There’s something deeper going on.

[00:33:50] After this break, we’re going to get into it.

Interview]

[00:33:54] Ramit: Javi, you wrote something on your application, which I’ve been thinking about since I read it. You wrote, “Our biggest challenge is aligning today’s vision for tomorrow’s future. We have a lot of big goals in the next few years, but we spend a lot and live in a high-cost area. I don’t know if we’ll ever reach those goals.” What do you mean by that?

[00:34:16] Javier: I think we’re really trying to find the balance of enjoying our life right now and then also investing for the future. I know you mentioned we save and invest aggressively, but I think there’s still room for trying to do more in some ways because before we’re 30, we want to do certain things together, and those are expensive.

[00:34:36] Ramit: Like what?

[00:34:37] Javier: Like getting married for example, marriage is a huge, I would say, cost. We would love to have a big wedding. And then also, after a certain age we’re going to move back to California because we’re both from California. But we’d either move to one of the bigger cities.

[00:34:51] So either LA where Marco’s from, or SF, which is closer to me. So what I was thinking is that we buy property in a town where I’m from, so I can have a property closer to my parents. It’s cheaper, whatever. But to be able to have that later down the line if I need to be closer to them at some point. And then also, if we ever got priced out of the big cities, we can go back to that property.

[00:35:13] Ramit: And right now you’re not sure if you’ll be able to accomplish that.

[00:35:16] Javier: Yeah, accomplish both of those and also retire. And also support our parents if we need to when they retire. So just a lot of things on the line, I guess, in a way.

[00:35:25] Ramit: What if you went through life for the next 70 years, feeling behind?

[00:35:30] Javier: Yeah, that would suck.

[00:35:32] Ramit: Marco, what do you think?

[00:35:34] Marco: I think that he very well could do that. But I have that shared goal, where I do want to end up back in California. But it’s difficult picturing those big numbers right now.

[00:35:49] Ramit: Why?

[00:35:50] Marco: Because I’m still thinking of it in an individual mindset. It’s hard to imagine that I’ll get there one day. So I think it’s just more of a mental thing in terms of aligning and making sure that we’re both working towards those goals.

[00:36:09] Ramit: I think that’s pretty honest. I think, 22 years old, you all have been together, what, two years, right?

[00:36:14] Marco: Mm-hmm.

[00:36:15] Ramit: Okay. So I think that that’s a valid thing. It’s like, hey, we are actually not married. We’re 22. Of course, we have shared goals, and we don’t know where life is going to take us. From 22 to 30, a lot of things change. Okay. We can accept that change might happen, and we can still talk about a shared vision.

[00:36:36] We can create the structure for that shared vision to happen, and we can independently save and invest money so that at some point if we combine our incomes, it’s like merging onto the freeway at the same speed as everybody. Everyone’s already going 65 and you can just merge smoothly. And if not, that’s okay too. Things change. 22 years old. But you know what? I sure would like the two of you to be set up and be driving the same speed in the same direction.

[Narration]

[00:37:02] Ramit: Hearing Javi talk about his future goals was a big insight into his money psychology. He’s doing all the right things– saving, investing, planning– but he’s still consumed by this feeling that he’s behind. That it’s not enough. I know a lot of people like this. They go through life disguising their anxiety with logic. Ooh, need to plan for a wedding. Ooh, got to plan for a down payment. Ooh, kid. Ooh, travel, retirement.

[00:37:35] At a certain point, it becomes comical. They realize even they cannot justify saving at the rate they are because making all the money they’ve made and then complaining about the price of a coffee just sounds absurd. And so what do they do? There’s always one thing in America you can point to that nobody can argue with you. What about long-term care? What about it?

[00:37:57] That just is the perfect politically correct excuse to be able to save and save. And suddenly you’re 82 years old, you spent your entire life worrying about something as small as coffee or something as large as long-term care, and you never actually enjoyed the process. What a waste. What a waste of a Rich Life.

[00:38:17] I don’t want anybody, including my guests, including you, to go through life like that. Yes, I want you to save prudently. Yes, I want you to invest aggressively. But the point is to enjoy our Rich Life. So where does this feeling of being behind come from? I want to understand how Javi and Marco both grew up with money.

[Interview]

[00:38:37] Ramit: Let’s see. Javi, what do you remember your family saying about money when you were young?

[00:38:42] Javier: It’s interesting because it was very split. My dad on one side was very much like, save and work hard for your money. And he would always tell me that Rolling Stone song. You can’t always get what you want, but if you try so hard you might get what you need. So just always a reminder of that type of thing.

[00:38:59] And I think there was a lot of good lessons there, honestly, because for things I wanted, I worked towards. I remember, I wanted my first iPod when I was younger, and I was too young for a job at this point, so I recycled cans to get that iPod. So I feel like those were good lessons there.

[00:39:18] Ramit: How much did that iPod cost? Do you remember?

[00:39:20] Javier: Yeah, it was $200.

[00:39:21] Ramit: [Bleep], that’s a lot of money for a kid.

[00:39:25] Javier: Yeah.

[00:39:25] Ramit: What did it feel like getting that iPod finally?

[00:39:29] Javier: It felt way more rewarding, I think, than just receiving it.

[00:39:32] Ramit: And did you actually earn enough recycling $200 to buy the iPod yourself?

[00:39:38] Javier: Yeah. It took a while, but yes. There was a lot of cans involved.

[00:39:42] Ramit: I love hearing this story because I have similar stories growing up, especially in the last 15 or so years. Same principle. For me, it was just a honeymoon. That I wanted to have an amazing honeymoon or a big wedding. And I saved as well. Now, I wasn’t out there getting cans.

[00:39:59] The numbers were a little bigger, but the principle was exactly the same. It’s like, oh my God. When I finally got it, I appreciated it 10 times more than just writing a check. It was like I know every single thing I did to be able to do this today, and that makes me really proud of myself. It sounds like you had the same experience with the cans.

[00:40:18] Javier: Yeah, completely.

[00:40:19] Ramit: Okay. What was the takeaway now as an adult? So you look back on that iPod can story. What lessons do you take away from that?

[00:40:28] Javier: I think that, one, I just have to be patient about things. Sometimes I can be impulsive, but sometimes I definitely want to make sure that I’m building the right blocks to any goal that I have, especially financially. I think that was a really good lesson to learn about that.

[00:40:42] Ramit: Great. Okay. Anything else happen regarding money in your family as you grew up?

[00:40:47] Javier: Yeah, completely. I think the other side of the aisle was my mom, I would say, who’s a little bit more spendy, but she’s also very, I would say, focused on experiences more so. She’s like, “Yes, we can have a couple of these items at Marshalls, but if anything.” That was most important.

[00:41:03] So she was more the spender. My dad was more the saver. But sometimes those collided for me and sometimes there was a lot of guilt around money. For example, I was playing soccer when I grew up and my dad would tell me how expensive it was for him to invest in this. And I asked to switch a sport one time, and he was like, no, you could never switch sports because you’re going to invest so much money, all this stuff.

[00:41:23] Ramit: Did they teach you about investing?

[00:41:26] Javier: No. Actually, the other thing I was going to say is my parents thought for the most part that investing was gambling.

[00:41:32] Ramit: Investing was gambling. Did they invest themselves?

[00:41:35] Javier: My dad has a pension, and they don’t view their 401(k) as investing, [Inaudible].

[00:41:40] Ramit: Yeah, that’s what a lot of people think. I’m like, “Put all your investments down.” They’re like, “What about a 401(k)?” I’m like, “That’s a [Bleep] investment.”

[00:41:47] Javier: Yeah.

[00:41:47] Ramit: They think it’s retirement. They see it in a total mental bucket differently. Yes. Okay, so did they say to you, ever investing is gambling?

[00:41:56] Javier: Yeah. I remember I had my first job or something where I was getting money and I was saying like, “Oh, I just saw this thing on investing.” He’s like, “Don’t invest.” You’re going to lose your money. That’s gambling. Stuff like that.

[Narration]

[00:42:07] Ramit: When your family believes investing is gambling, it tells me a lot. It signals that your family is probably fearful of things they don’t understand. It tells me that throughout your family tree, there probably have not been a lot of people who have been savvy with money, and it tells me that it’s easier to stigmatize or shun or say, “Ugh, we don’t do that in our family.” Rather than saying, “Hmm, how are other people doing that? I wonder if we could learn something from that.”

[00:42:40] Investing is not gambling. It’s not. But if you don’t understand the basics of compound interest, if you don’t have anybody in your family or community that talks openly about investing, then it can seem like that. That would be like somebody saying, flying is magic. We shouldn’t do that. No. Flying on an airplane is not magic. It’s engineering.

[00:43:02] People who grew up hearing that investing equals gambling, they tend to internalize it, and it teaches them to be afraid to play small, certainly not to invest. Javi tells me a story about how he confronted his money beliefs that is quite illuminating. Listen up.

[Interview]

[00:43:19] Javier: When I got to college, I had an ex tell me that I was really bad with money, so out of spite I wanted to learn a lot more.

[00:43:25] Ramit: Some people, they get a revenge body. You got a revenge portfolio. That’s crazy. I never heard that before in my life. That’s amazing. All right. Good for you. And good for that ex. If you’re going to drop a bomb, you might as well drop that. You [Bleep] suck at money. And then you leave. There’s like a crater with smoke coming out of it and you just hope, oh, I hope they take that and learn.

[00:43:47] Javier: They don’t know what my numbers are, but to me, it feels good.

[00:43:50] Ramit: Hell yeah. All right. Good job. Very impressive. Especially the fact that you grew up being told investing is like gambling. People who grew up in families like that, they really believe it because they’ve heard it 1,000 times. The fact that you have learned that that’s not true and that investing actually can be a skill, especially with a long-time horizon, very impressive.

[00:44:11] Marco, I want to ask you, what do you remember about money in your family when you were a kid? Were there any phrases they used?

[00:44:19] Marco: Just the classic, we can’t afford that. It’s too expensive. To this day, my parents don’t talk about their money and don’t talk about their finances, so it was all very foreign to be growing up.

[00:44:32] Ramit: Okay. All right. What else, Marco?

[00:44:34] Marco: I grew up with two older brothers. They’re four and five years older than me. So when I was younger, they were going through high school and college. So I think a lot of the times, when they were in school, I didn’t get to do a lot of the same things that they did when they were in school because a lot of the money was going towards paying for their tuition and their expenses and things like that.

[00:44:52] Ramit: Did you go to college?

[00:44:54] Marco: Yes.

[00:44:55] Ramit: And did they pay for that?

[00:44:57] Marco: Yeah. I had a scholarship for school, so I actually got free tuition during my schooling, which was awesome.

[00:45:02] Ramit: Good for you. That’s awesome. Okay. How are your parents doing with money now?

[00:45:07] Marco: I have no idea. They mention things, concepts of retirement, but when it gets really down the nitty gritty of it, I have no clue where they stand financially. My dad wouldn’t even tell me how much they paid for our house when they bought it.

[00:45:24] Ramit: Really?

[00:45:25] Marco: Yeah. I have no clue.

[00:45:27] Ramit: [Bleep]. We’re about to do some Zillow research right now.

[00:45:30] Marco: I know, right?

[00:45:31] Ramit: So Marco, did you go through a process where you learned about money in college and things like that?

[00:45:38] Marco: It wasn’t until I met Javi, and we started dating that I really started to learn a lot about money, because I didn’t have a credit card till my junior year of college. I didn’t have a savings. I didn’t have really anything except for just a bank account. I still feel like I’m in the baby stages of learning about personal finance, but yeah, I’m definitely getting more of a hold on it.

[00:46:00] Ramit: What was that like for you, Javi, being in a relationship with Marco and you were very interested in money. And when you met Marco, he didn’t even have a credit card. What was that like for you?

[00:46:12] Javier: I think it was exciting because it’s an interest of mine. I love listening to money podcasts or TikToks or whatever. And I got to share that with him, and he was pretty open about it, but the money psychology around it has been the challenging part, trying to navigate that.

[00:46:27] Ramit: Marco, does the fact that Javi taught you about money affect the way that you make decisions about money?

[00:46:33] Marco: Somewhat. When it comes to where I spend my money, if it’s a big purchase, I’ll always consult him and ask him, what would you do? Do you think this is a good choice? And he always gives me pretty constructive advice, I think. And I also think it’s just a fun project for him to oversee someone else and give them advice. So I think we both enjoy it.

[00:46:55] Ramit: I love that there’s a good sharing of knowledge going on about money. I love that. And in any relationship, whatever the topic may be, there’s usually one person who maybe has more experience or some different type of experience. Do you think, Marco, that– you remember how I commented on you asking a lot of questions about money versus saying, “I think this.”?

[00:47:15] Marco: Hmm.

[00:47:16] Ramit: When do you think you get to the point where you have an opinion about money and it’s not a question? It’s a statement.

[00:47:23] Marco: I think once I feel confident enough in my knowledge of money, that’s when I’ll be able to be more decisive about where it goes. But right now, I think a lot of what I struggle with is putting money in certain places versus using it. Because in my mind, I started saving my money late. And so I’m always thinking I could be putting this away to make up for the times when I like didn’t even know that I was supposed to have a savings.

[00:47:57] Ramit: Just tell everyone how old you are again.

[00:47:59] Marco: 22.

[00:48:05] Ramit: [Bleep] amazing. I just spoke to a mid-40s couple and one of them goes, “I’m behind. We should have done this, da da, da, da.” And actually they were doing fine. They were not behind. They were fine. And then I just love hearing from a 22-year-old like, “I’m behind.” What it really shows me is that it has nothing to do with age. That the way we feel about our money is highly uncorrelated to the amount in the bank and the day we were born. It’s irrelevant. Is it possible you’re not behind, Marco?

[00:48:38] Marco: 100%. And Javi’s laughing because he is actually always the one that says he is so behind and he’s not making enough, and he doesn’t have enough saved. When in reality, I could only dream of having what he has in the bank.

[00:48:57] Ramit: And then by contrast, everyone listening and watching this podcast could only dream about being 22 years old and talking about this kind of stuff. So I guess there’s always somebody we can compare ourselves to.

[Narration]

[00:49:09] Listening to Marco talk about his childhood, the silence, the guesswork, the sense that money was always just out of reach explains a lot about why he still feels like he’s behind. Do you see the problem? You can be extremely successful on paper, and you can still feel behind. Most people in that situation, they don’t tackle their feelings. They simply double down and try to make more money.

[00:49:38] Ramit: Please remember the way you feel about money is highly uncorrelated with the amount in your bank account. That explains why Javi is hustling, trying to outrun that feeling. Let me save more, let me invest more. Doing everything except the very thing that will change the way he feels, confronting those feelings.

[00:49:59] And this is also the danger of growing up without a clear money model. For all the parents listening, the ones who don’t talk about money because you want to protect your kids, this is often what happens. Kids are left without a clear model of what does money mean, and they just pick up on tiny little clues. Mom worrying about money. Dad sitting at the kitchen table looking down.

[00:50:21] You want to fill that vacuum and provide the meaning of what money is. But I got to tell you something, you can’t provide that message to kids unless you yourself truly know it and internalize it.

[00:50:34] With Javi, he feels like he’s not enough. And over time, that mindset sticks with you. It pervades everything when it comes to your finances. But we’re going to flip that script. That’s why I’m here. Because when you actually run the numbers and when you start seeing the numbers on paper and you internalize and interpret those numbers, you can change the way you feel.

[00:50:56] I’m going to run their retirement projection for them. Obviously, they’re not behind, not even close, but I think they’re reaction will surprise you.

[Interview]

[00:51:06] Ramit: Shall we take a look at your projections for the future? Because I think that tells us a lot. All right. So your current investments are at 68 here. I’m going to show you this on screen. How many years should you plan to invest for?

[00:51:15] Javier: I don’t know. 40. Yeah.

[00:51:19] Ramit: I love dragging this thing all the way to the right. [Bleep] crazy. You’re currently adding, let’s just say, 26,000 a year. And that’s just post-tax. Post-tax without even factoring in a 401(k). What does this number in the bottom left say? How much are you going to have at retirement?

[00:51:35] Marco: Little under 7.7 million.

[00:51:37] Ramit: Yeah, $7.7 million. That already accounts for inflation. So please don’t write me a comment saying, “What about inflation?” I [Bleep] accounted for that in my math. But let’s add a little bit more, shall we? How about your 401(k)? What are we talking? Roughly 25,000 a year?

[00:51:54] Javier: Yeah. I think it’s a little less than that, but yeah.

[00:51:56] Ramit: Let’s just put 20,000 to be conservative. And I know there’s like a pre-tax post tax thing, but for the grand scheme, it doesn’t really matter that much. So instead of 26,000, it’s going to be 46,000. Look at this number on the bottom left. What’s that number right there? Javi, you better say that number loud.

[00:52:12] Javier: That’s 12,652,000.

[00:52:16] Ramit: 12.6 million [Bleep] dollars. Who cares about Spotify? The Spotify thing, we should solve that. We will solve it. But you can realize how absurd it is, right?

[00:52:29] Marco: Yeah.

[00:52:29] Ramit: $12 million. What do you guys think of that?

[00:52:32] Javier: It doesn’t sound real, to be honest.

[00:52:33] Marco: I can’t even fathom that.

[00:52:35] Ramit: Yeah, it’s a lot of money. Would you even know what to do with $12 million?

[00:52:38] Marco: No.

[00:52:39] Javier: No.

[00:52:40] Ramit: Yeah. You guys spend $1,100 on rent right now. That’s a lot more zeros in 12 million. But I want to say this. I’m not guaranteeing you, you’re going to have $12.6 million. If you continue doing what you are doing today, you could certainly have that number plus or minus whatever minor aberrations might happen over the next 43 years.

[00:53:00] I actually think that number is actually a big low ball. I think if you two continue on the path you are on, and you’re both obviously very smart and disciplined, you have great support for each other, I think you end up, my guess is 16, 17, 18 million. That’s a crazy amount of money. And that’s just at 65. By that point, you can’t stop at compounding. It’s growing like crazy every year. So before I tell you what I would do, what do you make of this?

[00:53:26] Marco: I think it puts it into perspective a lot and puts my mind at ease, I guess, a little bit. I really can’t like even fathom that amount of money. It’s like hard to conceptualize. So I don’t know. It’s interesting to think that way because I don’t see my money growing a lot now, and so I think as the years go on, I know obviously it’ll start to compound and grow and grow and grow. So I don’t know. It’s hard to see that within the future.

[00:53:55] Ramit: I hear you. It doesn’t feel real. It doesn’t feel like it’s you. And that number, while it’s interesting, and I’m sure you trust the math, it doesn’t reconcile with your current view of your reality. I totally get that. Javi, let me check in with you. What meaning do you take away from that example?

[00:54:13] Javier: We got to just keep hustling and pushing. I think that’s the thing, is like, how much can we actually spend more though right now? Because you’re saying if we invest and save this amount right now, yes, we’ll reach that. But if we scale things back, who knows what that’s actually going to look like?

[00:54:30] Ramit: What the [Bleep]? Hold on. Are you taking away the complete wrong message from this?

[00:54:33] Marco: Do you see?

[00:54:35] Ramit: I’m like, “Wait. What? This is not the message.” I think what you’re saying, Javi, is, okay, 13 million, but if we spend an extra $30 eating out, then we might only have 12.889 million.

[00:54:47] Javier: No. I’m more like, if we spend like 17, $1,800 each on rent, then we won’t be able to invest and save that much.

[00:54:55] Ramit: Do you need $13 million?

[00:54:58] Javier: No.

[00:54:59] Ramit: Oh. How much do you need?

[00:55:00] Javier: 4 million.

[00:55:01] Ramit: Okay. 4 million bucks investible assets that are earning you like 7%. Let’s take a look. So you’d be making about $160,000 a year from investments. How do you guys feel about that?

[00:55:13] Javier: At that age, that’s enough, I think. I’m pretty sure.

[00:55:17] Ramit: God, I love talking to you guys because it’s like when I was in college, I had this little group of friends and we would be like, “What’s your number?” And we would come up with a number. It is like the number means how much do you want to have liquid in investments so that it’s just generating money.

[00:55:35] And our number at the time was like 4.2 million. Basically, we wanted to be able to make 150k risk-free. And we were like, “We’ll be happy.” Exactly what you’re saying. 160k, you’re like, “Amazing. “And then what happened was, as I got a little bit older, I started to develop a little bit finer tastes. I wanted to travel more, etc.

[00:55:52] And I was like, yeah, I could definitely live on 150k, no doubt. However, if I have a choice, would I want more? Yeah. I’m going to actually help you guys dream a little bigger. You can always dial it forward and back. And you’re only 22, so things change over time. That’s fine.

[00:56:10] But maybe it’s a little more than 160. Maybe it’s 250. Fine. That’s a lot of money. That’s 250 in today’s dollars. That’s a lot of money. You guys don’t need $13 million for that. You need a fraction of $13 million. What do you think I’m saying, Javi?

[00:56:26] Javier: That we’re doing fine.

[00:56:28] Ramit: You’re doing better than fine. You guys are crushing it. I don’t think the numbers are a problem at all. At 22, you have awesome, awesome future ahead of you. The thing that I think is a bigger challenge is how the two of you relate to money together. Because one of you makes more than twice as much the other.

[00:56:45] Javi, you make a lot more. And Marco, you have this belief that he who makes the money calls the shots. Now, right now it’s fun. We joke around the rent thing every month. Ha ha ha. It becomes less fun when you’re talking about making big decisions like, what kind of apartment should we get, future family planning, maybe taking care of elderly parents, career decisions, moving to whatever. It becomes less funny and much more serious. So can we talk about that?

[00:57:13] Marco: Mm-hmm.

[00:57:13] Ramit: What does it look like? Put the amount people earn aside for just a second. What does it look like to have a healthy relationship with money?

[00:57:21] Marco: I think being able to have conversations where you actually come to a conclusion, which is something that I think oftentimes we struggle with. And I think our views on money are just generally pretty different. I don’t want to speak for Javi, but I think from his perspective, you’re always going to have the opportunity to get more, and if you’re not getting more, then you’re missing that opportunity. Whereas for me, I’m like, “For where we are right now, I think we’re doing great.”

[00:57:52] Ramit: Javi, you know that story about the guy goes to the party with all the rich people and somebody says like, “You must be jealous of this billionaire.” And then the guy says, “No, I have something he can never have.” “Oh, really?” “What is that?” “Enough.” Do you know what enough is?

[00:58:09] Javier: No, I don’t. I don’t even know the number. I think for me it’s just a game to be competitive right now because, yes, we’re doing fine, but I know I come from a competitive background I know people from my high school that are senior software engineers at Meta at 19 or Google and making $300,000 a year. So for me, I’m like, “Okay, I’m really behind.” So that I think motivates me.

[00:58:33] Ramit: I like competitive people. I like to win. I want to live an awesome lifestyle. But I want to tell you something that I think has been one of the key factors in me living an awesome life from the age of 20 to now and from now until I die. The key factor was I knew what enough was.

[00:58:55] I knew what it was before I had it. I recognized it when I had it, and I celebrated it. And then ever since then I’m like, “[Bleep], I have more than enough. And therefore, what kind of changes do I get to make in my lifestyle?” For example, I don’t work with people who I don’t like.

[00:59:13] I just don’t. I don’t need it. I get that privilege because I have more than enough. What would it look like if the two of you both identified how much enough was, and then you started talking about money together?

[00:59:25] Javier: I think it would look more decisive. We would go to a decision, and we just know because we know the numbers. We know what enough is. We know the rule behind it. That’s what’s going to get us to our goal of enough or going to take us behind that. That’s all we need to really know.

[00:59:41] Ramit: Love that. Marco, how about you?

[00:59:43] Marco: I think we’d be able to enjoy ourselves more and feel more freedom to do the things we want to do without feeling like the money could be better spent elsewhere.

[00:59:56] Ramit: Right now, if the only pedal you have in your car is more, then that’s the only way you’re going to play the game. And there’s so many different pedals in life. There’s more savings. There’s more fun, more adventure, more spontaneity, more generosity. And I want to give you guys different pedals in your car as opposed to just save more.

[01:00:17] Marco: Yeah, I agree.

[01:00:19] Ramit: Marco, you said that, you would be more decisive. You can’t spin when you got a household income of $157,000 and a potential net worth of $12-plus million. It’s a waste of time to spin on these things. You guys want to do a little exercise right now with Spotify?

[01:00:33] Marco: I would love to.

[01:00:35] Ramit: All right. Here’s the rules. One, you have to come to a decision before we finish this conversation. And two, it’s got to be fair. Those are the only two rules. Go ahead and discuss Spotify so that you can come to a conclusion.

[01:00:49] Marco: What really bothers me the most about the situation is the principle of it and how you are not willing to spend that $8 despite not spending anything right now.

[01:01:00] Javier: Yeah. No, that’s fair. You mentioned earlier I’m freeloading. I don’t want to do that. I don’t want to be proud of freeloading. So yeah, I agree with that.

[01:01:10] Marco: I’m just curious. Why were you so turned off at the idea of going in on the account?

[01:01:15] Javier: I think because I just envisioned myself dropping the ball on everything after that. If I got Spotify, I’d get Max. I’d get Netflix. I’d get every subscription on the book. That’s, I think, the fear that I had, that I would just feel like I can get anything and then end up spending $700,000 on subscriptions. That was really the thing. I don’t know why I felt that way, but that’s what I felt.

[01:01:40] Marco: Okay. I think that’s fair, but do you understand where I’m coming from, though?

[01:01:45] Javier: Completely, yeah. And if it brought us together, for example, I think it would be good to have a joint account because that would be our first joint account. And I think that would be, I don’t know, really cute. So I would really consider that. I just don’t think I was thinking that the first time.

[01:02:01] Ramit: Okay. What’s the decision? Let’s be crystal clear about it.

[01:02:04] Marco: I would like to have the joint Spotify.

[01:02:08] Javier: Okay, let’s do it.

[01:02:10] Ramit: [Bleep] yeah. Okay. That was great. What did y’all notice about that conversation? That was so good.

[01:02:16] Marco: I noticed a lot of more critical questions being asked rather than just asking why and why not? It was getting to the root of the problem. And that was the first time that I had heard his true reasoning behind it. I didn’t get into that subscription purgatory. I had never heard that before, so I thought that was a very fruitful comment.

[01:02:39] Ramit: Yes. Love that. Okay, I want to point some observations out. First of all, I like that you were communicating together. It felt very authentic. Like you said, Marco, you were getting to a level, I don’t think you’ve gotten to before when it comes to Spotify. I think that’s amazing.

[01:02:53] And just this little example, although it seems trivial, it’s actually quite powerful. I think the way that you would now talk about the rent checks, are you paying with this or that? I think that can have a deeper meaning. I think that certainly moving to a new apartment can have a deeper meaning. Amazing. Marco, I noticed you were very assertive at the beginning.

[01:03:11] I thought you just were going to ask your first question and then go for the close. No, you were like, “Hey, so before we wrap this, tell me why, blah, blah, blah, blah.” I was like, “[Bleep] yeah. This guy’s getting it all out on the table.” So that was awesome. I want to encourage you to focus, Marco, in your conversations with money, starting off with a statement. What is it you notice? What is it you feel? What is it you want?

[01:03:33] And then I want to encourage you to build that skill of coming to a close. I noticed at the end you were a little hesitant to say, okay, so here is what I think the decision is. Do you agree? Drive it home. We need to have something on paper. We both agreed to this.

[01:03:48] And then Javi, I love that you were so honest in your answer and very thoughtful. Like, “Hey, I actually think that probably the reason I thought that way was I worried I was going to trip and fall and buy $700 worth of subscriptions.” I think that is a very honest answer, and I think if you continue thinking about it, you’re probably going to find a lot more where that is. Javi, what if you eat a dessert or something like that? Do you feel like you’ll trip and fall and eat 20 desserts a day for the next 40 years?

[01:04:18] Javier: No.

[01:04:19] Ramit: No. How come?

[01:04:20] Javier: It’s just not what I think, I guess. I don’t know.

[01:04:24] Ramit: Yeah, it’s just like not in you.

[01:04:26] Javier: Yeah.

[01:04:27] Ramit: It’s not in me either. I can eat a cheesecake or something and I can enjoy it, and I know that tomorrow I’m not going to do it. I think the same is true for these incremental purchases, whether it be Spotify or subscription, maybe even a trip.

[Narration]

[01:04:40] Ramit: Javi and Marco just worked through something pretty small, Spotify subscription, but I really love this tiny little example as a microcosm for how they can talk about money together. It’s actually a big sign of progress because for a couple that spins on decisions, this was different.

[01:04:59] They picked a path. They moved forward. Do you know how many couples go 30 years without ever making a decision together? They did it. Tiny Spotify subscription and they did it. That sets an amazing precedent.

[01:05:17] Now I want to raise the stakes. Earlier they said they want to get married. Planning for a wedding, an amazing project that many couples go through together, and it’s bigger than a Spotify subscription. Also, it’s qualitatively different. It’s not just about numbers. It’s about a vision. It’s about joy. It’s about coming together. So let’s see if they can take what they just learned and use it on this very, very important decision.

[Interview]

[01:05:46] Ramit: You’re planning to get married at some point. Is that accurate?

[01:05:48] Marco: Yeah.

[01:05:49] Ramit: Do you all have money set aside for a wedding?

[01:05:51] Marco: No, not specifically.

[01:05:54] Ramit: Huh? Do you know how I was able to spend all that money on this beautiful, extravagant wedding? Because I saved before I even met my wife. I was putting money every single month aside. This is the exercise that I would go through. How much do we think our wedding would cost? Do y’all have an idea in your mind? Oh, this is going to be fun.

[01:06:13] Javier: Yeah. I say at least 50,000, probably 60.

[01:06:18] Ramit: 60. Okay, great. Marco?

[01:06:20] Marco: I honestly would agree with that. I love working a budget, so I definitely think we could make it work and have everything that we want.

[01:06:29] Ramit: Love that. 60k. And ballpark, how many years from now would you do it?

[01:06:33] Marco: I think we’re thinking late 20.

[01:06:35] Ramit: So let’s say eight years from now.

[01:06:38] Marco: Eight years. Yeah.

[01:06:39] Ramit: So technically you should be putting aside $625 a month. What do you guys think of that?

[01:06:43] Marco: I think that’s definitely not been happening.

[01:06:47] Ramit: Definitely not. And that’s if your wedding is 60k and eight years away. It’s shocking.

[01:06:52] Marco: Yeah.

[01:06:54] Ramit: Most people, the numbers are quite shocking. This is in chapter 9 of I Will Teach to Be Rich. I have a table showing how much you should be saving depending on your age. And the numbers are like staggering because we know the average age that men and women get married. We know the average cost of a wedding. So it’s just simple math.

[01:07:10] In your case, you should technically be saving hundreds of dollars a month. Now, the good news is you actually are saving it. You just have it going to random places. If I were in your situation, I would probably create a savings account called Incredible Wedding, and each person might be putting some money aside into their own version if you’re keeping it separate. And then if and when the wedding planning starts to happen, boom. You both know exactly how much you have, and you are just so far ahead. You think you could do it?

[01:07:38] Marco: I think we could definitely do it.

[01:07:40] Ramit: What do you think, Javi?

[01:07:41] Javier: Yeah, I think we could, but do I put that in cash or do I put that in the market instead? Because you never know. And then people are telling me like, you shouldn’t have this much cash at this age.

[01:07:52] Ramit: It’s a good question. I noticed that you jumped to the more advanced questions. I’m going to answer this question for you, but then I’m going to zoom back to talk about what I think is way more important. When I made these decisions, I had money for a wedding, honeymoon down payment on a house. If the number was over eight plus years, I invested it.

[01:08:11] For example, when my wife and I were together, we’re like, “Hey, are we planning to buy a house anytime soon?” The answer was no. I don’t need this cash right now. Put it in the market. Knowing that I’m not going to need it for at least eight years. So if it goes up and it goes down, whatever. By the time eight years came by, it was well more than double the amount. That means either a bigger down payment or a nicer house or whatever.

[01:08:33] I agree that right now you have too much money just sitting in a lump sum cash account. It’s sloppy. It’s like having a junk drawer in your kitchen. We need to organize this a little bit. You guys are a little bit more conservative with your finances, so maybe six to eight months of an emergency fund. You have way more than that.

[01:08:52] Above that, I would probably start splitting it up into different accounts for things that I know are coming. I would name the accounts. Incredible Wedding, that should be getting full every month. And you can send money automatically to it, because you don’t need to send any more to your emergency fund. It’s full.

[01:09:05] What’s the amazing trip you guys want to take? Put that in there. What’s the anniversary thing you want to celebrate? Put that in there. You want to have roughly five accounts or fewer? Because above that, it starts to become too dilute. If you have extra money, amazing. Invest it, spend it. These are the kind of things you get to decide.

[01:09:22] But I think the larger question beyond how to organize your stuff is, are we actually just pushing the pedal to accumulate more without understanding why? Why are you guys on track for eight to $12 million and you don’t even know what to do with that? You wouldn’t even know what to do with half of that. That’s the question. How do you think you’ll be able to get to the answers?

[01:09:46] Marco: Yeah, right now I’m not planning for anything. I haven’t necessarily ever been putting anything in specific buckets to save towards a specific goal.

[01:09:54] Ramit: Okay. Have you read my book?

[01:09:56] Marco: I have not, no.

[01:09:57] Ramit: Okay. That’s fine. I think that part of, recalibrating the financial relationship between the two of you is that, Marco, I actually think you have to embrace that it’s time for you to learn money and not just from Javi. Javi’s done a great job helping you get educated and learn about this stuff, but now it’s time for you to actually bring your own knowledge to the table. That is what is going to allow you to start being more definitive and explicit about what you want.

[01:10:24] My suggestion is you read my book separately. Start to look at your accounts. You’re going to be like, “Oh [Bleep], I didn’t realize I should have this.” Or like, “Oh my God, I have money for that.” You’re also going to be able to make more of an educated contribution in terms of, hey, the apartment we’re talking about, here’s what I think we should do.

[01:10:41] Here’s how much I think we should spend. And it’s going to be less, I just want this thing and much more grounded with numbers and a vision of your Rich Life. That’s the thing that I like about the two of you, is each of you gets to bring your own vision together, and then you get to create something that fits you both. But in order to do that, you each have to have a clear vision yourself. Javi, you said, “I don’t want to have to worry when you retire.” Don’t you worry right now?

[01:11:09] Javier: Yeah.

[01:11:10] Ramit: So maybe 40 years from now you’ll magically stop worrying. Does that sound realistic?

[01:11:15] Javier: From watching your podcast and listening, no.

[01:11:18] Ramit: If anything, you could start doing the work right now to develop a new skill besides worrying. That would involve the two of you talking. Javi, it would involve you building a really clear vision of what you need. How much is enough? It is not just more. I can guarantee you guys that. What’s the theme for your conversations going forward? What word would you use to describe how you want your conversations about money to feel?

[01:11:43] Javier: I was going to say fulfilling.

[01:11:46] Ramit: Fulfilling. I love that. Okay, Marco?

[01:11:49] Marco: I would say honest and understanding from both of our perspectives.

[01:11:55] Ramit: These are good words. Fulfilling, honest, understanding. I like it. If I can suggest one, it would be teamwork. It would be that the two of you do this as a team. Each person has a vision. They come ready. I think we should do this. Oh, I think we should do that. Oh, let’s talk about it. And they collaborate and then they make a decision, and they move forward, and they do it together.

[01:12:17] Remember, no teammate is just valued more simply because they earn more money. Important reminder in this relationship. Just because you earn more money does not necessarily make you more valuable. Lots of different ways to contribute in a relationship. Income is just one. Fortunately, the two of you have a very nice, combined income, and your expenses are low. Can I make one suggestion for you to think about?

[01:12:39] Marco: Mm-hmm.

[01:12:39] Ramit: You’re all talking about spending more on your apartment. I don’t mind. You can do it. You can easily afford it. When I was in fourth grade, we did those sex ed classes, and a guy who was teaching us, he was talking about puberty and stuff, and he was talking about shaving. And he goes, “Hold off on shaving for as long as you can because once you start, you can never stop.”

[01:13:00] And I still remember that. And he was right. I had a little mustache when I was 14. I just let that thing grow because of what he said in fourth grade. I let it grow way too long. Think carefully about going to your own apartment because once you do, you’ll never go back. And I don’t mind it. Again, you guys can easily afford it. But in order for you to afford what would come to be more than twice as much on housing, you two will need to be very dialed in about your expenses.

[01:13:28] You’ll need to have a clear vision. You will both need to reduce the amount you save and invest. A lot of other things downstream will happen. Be very methodical about this decision. And if you want to do it, do it. I did it. I made a decision at a certain point in my late 20s where I was like, “Okay, cool, I’m going to be on my own.” And it was awesome.

[01:13:47] But I knew that once I did that I would never go back. These times where you have low expenses and a relatively high household income, they are so rare. And the good news is you’ve been taking advantage of it. You are crushing it on your investments. It’s amazing. I have no notes. I simply want you to think carefully about the ramifications of more than doubling your household expenses. Just do it eyes wide open, and make sure the two of you talk about it as teammates. Cool?

[01:14:15] Marco: Yeah.

[01:14:16] Ramit: All right. I have some questions for you. In today’s conversation, what was the most surprising thing? Javi, let’s start with you.

[01:14:25] Javier: One, the investment calculator. I’ve seen that like once or twice, but I just didn’t really pay any thought. The other thing, I think just the honesty in this conversation and Marco being direct. I think that was awesome.

[01:14:39] Ramit: That’s cool. I love that. Okay. Marco, how about you?

[01:14:43] Marco: I think what was most surprising for me was learning things about myself and how I think about money in ways that I didn’t know. I really never considered the fact that I had this underlying guiding principle that because he makes more money, I shouldn’t be calling the shots. But now that I think about it, it makes so much more sense because I’m very decisive in all other aspects of our relationship except for when it comes to that.

[01:15:12] Ramit: Yeah. Great realization. Honestly, I’m so happy that we get the chance to talk at this stage of life where you have so much ability to choose where you want to go. I’m so excited. Honestly, I think a lot of people would give anything to be 22, to know what the two of you know, to have the kind of conversations you’re having. Incredible.

[01:15:34] Marco: I’m feeling hopeful, and I think I’m feeling a lot more grounded in myself and in our relationship and our ability to do the things that we want to do and be more decisive about them. Because I also think sometimes because those things are so far off, it’s just like, oh, we don’t have to make a decision right now because it’s so far in the future. But I think this really put things into perspective.

[01:16:00] Ramit: Awesome. Javi?

[01:16:02] Javier: Yeah, I would basically agree with everything you said and just also add, I feel much more calculated in how we want to do things. It’s not just we invest more. We save more just because that’s a good thing to do at this point in your life.

[01:16:17] Ramit: I love that. You guys can do so many things in your Rich Life, individually and together, and it just has to be something that you calculate and it’s important to you. I talk to a lot of people. They buy stuff I would never buy. But if they can afford it and they love it, I’m all for it. Your Rich Life is yours.

[Narration]

[01:16:34] Ramit: I have fewer than five friends who tell me that they have enough. That’s it. Fewer than five. Almost nobody knows what enough is. We don’t know the number. We don’t know the feeling. But if you want to live a Rich Life, you have to.

[01:16:51] Javi and Marco are doing everything right, saving, investing, playing the long-term game. But when they see that $12 million retirement projection, it doesn’t feel real. It doesn’t feel like them. This is what I mean by talking about your identity with money.

[01:17:11] There’s something beautifully innocent about being an optimizer at age 22. When I was young, I was an optimizer as well. I’ll always be an optimizer to some extent. I knew that I didn’t have $12 million when I was 22, but I knew the math and I knew that someday it would turn into that much.

[01:17:32] And more importantly, I started to embrace the identity that one day I would have more money. I wasn’t there yet, but one day I would. And that meant that suddenly I was reading different magazines. I was looking at people sitting in first class, and instead of scoffing and saying, “So stupid.” I was like, “Huh, why would people who have money choose to spend it sitting there and pay four times the price?”

[01:17:58] I wasn’t there yet, but I was ready to accept a change in my identity. That is what I want for every single person on this podcast, is that who you are today, you’ll always be that to some extent, but you can open yourself up to changing your identity.

[01:18:14] And for Javi and Marco, what they’re seeing is that a Rich Life is not just a spreadsheet. It’s actually a symphony of all these different things changing together, and ultimately, your identity can change. That’s a powerful moment. And in order to get there, you got to learn how to step back. Not just focus on who’s paying this account and who’s paying that, but actually what do we want? What’s our vision? Who are we?

[01:18:40] Well, let’s hear what happened next. 

[01:18:47 Javier: I think you’ll be happy to know that we’ve been making some really good progress. We’re doing a lot better job at finding the happy medium between saving for our future while also trying to take advantage of where we are right now and our age and living in New York. In terms of the subscription that we talked about, that actually didn’t change, but I let Marco know that any subscription that does come up, that I would love to be jointly included in that. We actually got lucky with a situation where a friend is wanting to move in New York. So we’re moving in with her. I think we just have found some great situations and are still continuing, I think, to live life and spend and invest smartly, especially in this economy.

[01:19:26] Marco: I’m learning to make more decisions when it comes to our joint finances and be more decisive because it’s a group effort. It’s a team effort. Yeah, we’re moving in the right direction, so thank you.