Ramit Sethi: Never Split The Bill, It's A Red Flag & Renting Isn't Wasting Money! - Episodio exclusivo para mecenas

How can you talk about renting? You're just throwing money away. B.S. Should I just dismantle these arguments once and for all?

Because there's some shocking math behind a mortgage. And most people don't know this stuff. Let's get into it. We need safety.

The financial expert and entrepreneur is back. To teach you how to take control of your money and confront the financial problems that hold us back. Most people fall into four money types that I've identified. Number one is avoiders.

And they hate talking about money. But if your partner simply will not talk about money, that's a huge red flag. Because 50% of the people I talk to do not know their household income. 90% who are in debt do not know how much debt they're in.

And 100% of the people I talk to do credit card debt also have trouble with debt. That is shocking. Next up, optimizer. They can get you to a very good place.

They'll be investing. We love to live in a spreadsheet. But it can be taken too far. And then the dreamer who believes that success is one deal away.

And they tend to fall into crypto coin scans. Like all this B.S. Finally, worriers. They love to work.

Are you going to have enough? What if you run out of money? Typically, they picked up worrying from their parents who said stuff like money doesn't grow on trees. And the problem is you can take it a little too.

And they become cheap and become so obsessed with $3 questions. Like agonizing over buying a coffee. But everybody listen closely because I want to break down how you can change any of these types. So, Ruth, the only investment that couples make is buying a house.

What is the old topic? This is where real wealth is from. Let's simplify the whole thing. I have four numbers that everyone should be talking about.

The first topic is your name. Ruth, if someone's just kept in this conversation, please explain to me exactly why they should say and listen to what we're about to discuss on the basis that we're about to talk about the things you've written in this book. If you are single and dating, if you are engaged or if you have been married for 25 years, money is one of the central parts of our lives. And most of us think about money as something to be avoided.

It's something we only talk about when things have gone wrong. What a terrible way to live. And there is a different way, which is we can use money as a source of connection, possibility, and joy. And that is what we're going to talk about today.

I had a conversation a couple of days ago, actually, with James Sexton, who's a divorce expert. He's a divorce lawyer by trade, but he knows more about divorce than anybody else. And he said to me, there's two things which cause people to end up in his office going through a divorce. Number one is cheating, infidelity.

And the second thing is money problems in the relationship. So I find it especially sort of pertinent to have this conversation with you about couples' relationship with money because clearly one of the things that is most likely to end my relationship or I guess prevent me getting into one is this financial avoidance that most of us engage in. You've interviewed hundreds and hundreds of couples about money on the podcast. What have you learned about our relationship with money in relationships from that?

I've learned that 50% of the people I talk to do not know their household income. 90% of the people I talk to who are in debt do not know how much debt they're in. And 100% of the people I talk to in credit card debt also have trouble saying no to their children. Isn't that shocking?

Each of those things, 50% do not know how much income they make because most of us are simply living by looking at our checking account and that's it. The debt part kind of makes sense. Why would you want to know how much debt you owe? You don't really want to think about it so you ignore those emails and envelopes.

And the credit card debt part, that is really interesting. The idea that if you can't say no to spending, so you've racked up a bunch of credit card debt, the same principle applies to saying no to kids. For me, when I discovered these, I find them absolutely fascinating. But the good news is you can also change these things.

And what's the difference between men and women in terms of spending habits, interrelationships, secrecy, avoidance, arguments? Well, let's start with the roles. Men always describe themselves as providers, always. That's what we are taught.

It exists in culture. The problem is, of course, what happens when they are not the top earner, which is happening increasingly more now. So when I often ask them, who are you financially speaking if you're not a provider? And they're just stumped.

But there's gotta be something more than simply being a provider. You can be a provider and you can be a nurturer. You can be a provider. You can be a helper, a leader.

There's so many different ways. Often what you'll see with women is discussions about a secret bank account. Keep a little money aside just in case. We have to remember that in the US, many grandmothers were not allowed to open up their own bank accounts.

That happened in two generations ago. And so there has been a rightful message that has been passed down orally. Keep a little bit of money aside just in case, whether it be physical abuse, financial abuse, divorce, et cetera. And I totally respect that message.

I don't think you should have a secret account. I do think you should have an account that is yours only, but no secrets in a relationship. What about arguments as it relates to money relationships? What are the causes of the arguments?

Is it someone spending too much? Is it hiding money? Is it something else? It's usually not hiding money.

That's very small extreme. The biggest phrase that I get from couples is, he or she's a spender and I'm a saver. So it's creating this identity that they're a spender, I'm a saver, or they don't want to talk about money ever. Why can't I get them to finally sit down with me and get on the same page?

That's a phrase that's tossed around everywhere. When I ask them, what is getting on the same page? The answer is, I don't know. I just want to talk about it.

So when it comes to money, yes, there are the numbers that we need to understand, of course. But what I often tell people, the way you feel about money is highly uncorrelated to the amount in your bank account. That's why I speak to so many multimillionaires who still worry about money. They think if I just have 50,000 more, 500,000 more, $5 million more, well, guess what?

I've had all those folks on my podcast and they still worry about money. That means there's two things you need to do to master your relationship with money. One, you got to know your numbers. This is a language you have to learn the basics of personal finance.

Two, you have to master your money psychology. That means you need to change the way that you talk about money and behave with money so that you can ultimately change the way you feel about money. You do those two things, you're going to have a very healthy relationship with money. We'll get into all of those things and how you do them.

On this point of gender roles, obviously society has changed in the last couple of decades in terms of equality and more women are in work, high-level positions in corporations in the C-suite, earning much more money. This has caused a shift, I should say, in the sort of typical gender roles and assumptions of what each gender is supposed to be doing in couples. I'm wondering now, with more women earning more money, in many cases they're going to be earning more than their husband in heterosexual relationships. Have you seen new dynamics and new issues created because of this?

In terms of like, I mean, insecure men feeling emasculated or the woman not being happy that she's contributing more. And I ask this because I had someone on my podcast a couple of months back who said to me that I think 70 or 80% of women expect that their romantic partner will earn more than them. But that gap is closing now because we're not earning more and more money. I'm just wondering if you've seen in those couples scenarios where the woman earns more of its causing problems.

I've seen it all the time. I've seen it all the time. I think that we see different gender dynamics. I recall one episode where I spoke to a young woman and her boyfriend.

She was around four years old. She made way more than her boyfriend. Can you guess how much she makes per month? $20,000?

$200,000 per month. She has a business. It's doing very well. She's around the age of 40.

Now her boyfriend was never taught about money when he was growing up. Most people are not. He never learned about investing. Certainly no one was telling him about a Roth IRA when he was 12 years old.

And he had started his own business and he was on the upswing. He's making a few thousand dollars a month. Good for him. She's making $200,000 a month.

Her parents started talking to her about investing when she was five years old. So here we already see a difference not just in gender but in socioeconomic status. And over time that progressed. So they come to me and she says I want him to pay for dinner occasionally.

Fine. Super reasonable. He even said no problem. I want to.

So he would take his credit card out and he would offer to pay and she would say no I want you to contribute more to your IRA. So in many ways she wanted him to pay. She wanted to feel taken care of which is totally reasonable but when he offered she said no. So this is the kind of thing that I often see which is I think I want one thing but when I get that thing I don't actually want it.

It doesn't make me feel the way I thought it would. I want to earn 50k more. I think that'll make me feel safe. Oh my god I am earning 50k more.

It doesn't actually change the way I feel. So I worked with this couple and I helped them understand why they both felt this way about money and you know from the outside it's like this is so irrational if you make more just pay more if I were in that situation et cetera et cetera none of that stuff matters. When you are in the couple in that relationship you will feel a certain way and we got to work with you individually not what everybody else says. In the end the conclusion that they came to was she wanted him to occasionally pay for dinner but she also wanted him to fill up his IRA so this is what they did.

Every so often before they went out to dinner she would give him her credit card and she would say here I want you to pay for it tonight and he said cool he understood it they went out and that's what they did. Now to us sitting here we're like this dance makes no sense why don't they just do it this way or that way guess what every single one of us has some irrational thing we do with money every single one of us and I think that we are ready to actually have conversations about how we are irrational money is not just dollars and cents on a page that's why you don't feel good about money even when you have more than you ever thought you would that's why you worry about money but you have never read a single book on personal finance we are all irrational including me and when you get into a relationship you gotta acknowledge that and then you gotta say hey what is our vision of a rich life together let's build that if it means we do a little dance about the credit card once every two months fine do we both feel good is it fair what's going on there with her because it sounds like there's this battle between her mind and maybe her heart or it's almost like the social expectations coming in but then her brain is saying no invest in the IRA and an IRA for anyone that doesn't know it's a retirement account so she's saying invest in the future but also buy my dinner well it's the same we all have these things that society has told us but then we don't quite agree and we're not sure what to do last time I was here we talked about how you don't necessarily need to buy a house in order to live a rich life and in my case I have rented for the last 20 years by choice and I made more money renting and investing the difference than I would have by buying a house and this is shocking to people like we saw the comments last time people went berserk how can you talk about renting you're just throwing money away on rent and this is something we have been fed constantly for generations that in order to be successful you must buy a house so when somebody like me comes around and says actually you should run the numbers because sometimes renting can be better people are shocked same thing with if you want to be taken care of or you want someone to treat you or you want someone to pay for the first date same thing when men come and they talk about being a provider but in certain relationships where they actually earn less I'll say to them if we look at the numbers you're not the provider so who are you and they're stumped and that is when we need to start grappling with the idea that maybe what we were told is not exactly true for us in our situation today and that's okay do you think it causes more problems in terms of the relationship dynamics and that sort of emasculation and the man not feeling like a provider when the woman earns more money than the man from what you've seen not necessarily I think that it is a different framework than we're used to when we think about my parents for example my mom stayed home with us my dad went to work single earner simple everybody knew where they stood what the roles were it was very simple it's very difficult to do that today housing is historically expensive healthcare is expensive especially in the US and so you have two people earning in urban cities you have young women earning more than men in their 20s a lot of us are trying to figure out what does this role mean for me and for my partner and for our relationship that makes it tricky I wonder if a lot of men are choosing to remain single until they've kind of worked on themselves because I think actually that's probably the path I would have taken if I'm being completely honest and what I kind of did take is I didn't have a relationship until I was able to really provide oh the p word yeah and where did that word come from provide like watching my father watching movies everything exactly yeah no one ever says like you are a provider but we learn it from a million different perspectives and yeah I hear a lot of guys I mean when I was living in New York and I had a lot of single friends topic of conversation was I'm not ready to get married I need to get to a certain point in my career first we have all these words for it and deep down there's a feeling that we're often expressing maybe I'm not ready maybe I'm not enough maybe I need to do XYZ before I do the thing that I want and so part of what we talk about when it comes to relationships and money is like let's actually shine a light on that let's not be shy about it if you want someone to pay for your dinner fine that's totally fine let's have that conversation if you want to be the sole earner in your household okay let's see what it would take and too often we don't have those conversations we just dance around them for 50 years who should pay for the first date then my answer is doesn't matter it would be nice if the person who suggested the date pays but I think we spend way too much time focusing on the first date and way too little time thinking about the next 14,625 days it's like a couple who's obsessed with the wedding fine you want a nice wedding great what about the marriage same thing with money first date okay we can have that conversation but aren't you more interested in how your partner thinks about money and talks about money are they a cheapskate are they generous are they abundant did they grow up the same or different than you that is something we don't talk about meanwhile we have 5 million YouTube videos on who's going to pay on the first date we are missing the real point the point of money in a relationship is not just about the first date that's fun for clicks but it's about do we see money the same way do we connect are we going to be rowing in the same direction or are you going to be doing that and I'm doing this and we can never get aligned you can only make a first impression once right and if you are a guy this is just how I feel anyway if I go on a date a first date with a woman and we have a wonderful date it's a nice restaurant and it gets to the end of the day and then I turn to her and say should we spit the bill I can't even say it with a straight face frankly I couldn't I definitely couldn't I just could never and I think if you anonymously polled 10 of my female friends and said how would you feel if on the first date the guy asked you to pay I think privately they would say that's a bit of a turn off that's a red flag that's an ick I think probably that's true and again goes to the power of socialization like culture is very difficult to change we've got to admit that we've got to acknowledge that and when I was dating I paid for dates so I don't have a problem with it I like to be generous I think that when you are in a relationship you like to know that your partner is generous too now generous comes in lots of ways it could be paying for dates it could be planning a trip it could be being thoughtful and you know buying extra toothpaste because we're running low there's so many different ways to be generous but generosity for me would be a value paying for a date sure I pay for dates I'm happy to I like to do it but generosity to me is way more important to talk about that in a relationship versus the date itself because chivalry you know there's this idea that the man is to lead in that regard and to you know open the door and open the car door and pull out the chair yeah but think about it I agree with all that stuff I support it but think about what message that sends when you tell men you're supposed to be chivalrous but there's no real context no real teaching around it and let's say you have a 26 year old guy now who's earning less than his girlfriend so he wants to be chivalrous but for him he's like well look at our bank accounts and so what I want to emphasize to people is you can be chivalrous you can be generous money is just a small part of that let's not over fixate on who's paying for tapas okay and let's actually think about the important things when it comes to money we are so obsessed with $3 questions people are obsessing over should I buy this coffee can I afford this appetizer on and on and on about $3 questions we totally neglect the $30,000 questions or the $300,000 questions is this person financially aligned with me how do I even find out am I investing 5-10% of take home pay every month are we doing it together do we talk about money regularly and proactively and positively those things matter and they're actually worth hundreds of thousands of dollars these $3 questions including who's paying for appetizers or should I buy a latte irrelevant get the big answers in life right and you can buy all the appetizers you ever want what are the financial red flags in the relationship then number one is they don't want to talk about money if you don't want to talk about money red flag the biggest red flag of all because we could differ on how we see money we can even have different values for a few things but if your partner simply will not talk about money you have a huge problem why if you can't talk about money then you can't even understand where they're coming from and they are not curious about what you want so how are you ever going to get on the same page think about this a lot of people think we need to have the conversation about money the com as if it's one conversation would you have the conversation about raising kids no you'll have thousands in your life that's the way it should be money is very much like parenting not like uh should we play pickleball or tennis today irrelevant so we want to have lots of conversations about money and that means we need to first of all be willing to talk about it and then we need to find a way to have fun doing it why don't we and who doesn't is it men is it women that don't do it more or who's not talking about money why are they talking about it it's not about gender couple it has nothing to do with gender in terms of who does or doesn't talk about money there are avoiders that's one of four categories uh money types that i've identified avoiders hate talking about money and they will use a series of conscious and unconscious techniques to avoid talking about money they'll say things like um uh why do you all have to talk about money can't we just have a nice night out or you're so much better at this you just handle it you're just so much savvier at this stuff that's an avoider do they know their own financial situation no so they don't know their own financial situation and they don't talk about it correct and by the way we all have something like this it could be our fitness it could be our relationship with our parents there's something in our life that we know we should deep down but we avoid it yeah and there's no there's no immediate consequence like if i don't call my college friend it's fine i can probably call him tomorrow and you can go on and on like that until one day you can't same thing with our fitness it's very easy to procrastinate on fitness or money because it's not like your house is being taken away or even your cable's being shut off they'll probably be fine until one day you hit this brick wall and it's not so that's the avoidant that's the first money time yep next up optimizer i have a soft spot because i am an optimizer optimizers we love to live in the spreadsheet it's like let me sit and calculate this what if i run a compound interest calculation a monte carlo calculation and what if we do this but not that i love calculating everything and left alone i'll sit there and do that for the rest of my life okay the problem is you can take it a little too far now i don't think i've taken it too far i think i'm perfect on my spreadsheets but my wife has taught me enough's enough we we've won that part of life let's focus on another part connection and fun and experience these people often do this boring yes they are they are deep down they are boring i was boring when i was sitting there thinking money is only about numbers it's not money is about adventure and possibility and generosity and you'll often find optimizers i'll give them a challenge i'll give them a hundred dollar challenge so you have to take a hundred dollars in the next week and spend it on yourself they cannot do it they will spend it on their dog they'll spend it on their kid they'll spend it on their partner but they will not do it for themselves and i go why didn't you do it they go ramit do you know that if you put a hundred dollars in the s p 500 and you compound that for the next 45 years it'll turn into this much i don't give a shit spend the money because money is not simply meant to be hoarded right it's meant to create a rich life and when you have optimizers the thing is they can get you to a very good place they will probably have your account set up dialed in they'll be investing great they're going to be very proud look at the compound interest returns all that is fantastic but it can be taken too far these are the people that die and then you figure out they have like nine million dollars in a saving account what a waste yeah like people send these newspaper articles around like oh a local librarian discovered to have nine million dollars and i go what a tragedy what a tragedy to live a smaller life than you have to i want you to save i want you to invest but i also want you to try a nice meal or if you don't like nice food or you don't want a nice t-shirt also fine get super generous give that money surprise the people around you tip 50 so those are optimizers the third category is worriers they love to worry typically they picked up worrying from their parents almost always and their entire relationship with money is worrying are we gonna have enough what if we run out of money what if we don't have enough to pay at the gas station and oftentimes it's very surprising because i told you that 50 couples don't know how much they make right so they'll say like we need more we don't have enough right now and i'll ask them how much do you think you make this just happened a couple of weeks ago in a podcast episode they thought they made around 70 000 a year okay we add up other stuff they make 120 000 a year so i go well here you go you you wanted to make an extra 40k you actually make 50k more than you thought do you feel any better and she goes no because the way you feel about money is highly uncorrelated to the amount in your bank account so worriers worry that's how they relate they can't imagine any other relationship to money and my job is to help them realize first of all let's actually look at your numbers let me help you understand what it means do you have enough what does it take to have enough and then can you start to develop a new relationship with money it's almost like a new taste bud i'm never going to tell you to eat tomatoes if you hate tomatoes but i'm going to teach you maybe you like okra and we can develop a new taste for that finally the dreamer the dreamer believes that success is one deal away if we just close this deal if i just get this thing and they tend to fall into get rich quick schemes lots of scams mlms a lot of crypto shit coin scams like all this bs but they are extremely resistant to calm low-cost long-term investing in other words the way that most people build real wealth they think it's boring they even have little phrases like i don't want to be stuck in a nine to five like those suckers that's not gonna make ten times what you make what are you talking about but they have simply been surrounded with the idea one more deal and i'll finally make it it's impossible it's really really difficult they don't not only do they not want to talk about money when they finally do talk about money they're almost living in a different world often you will find that dreamers can only dream because they are being subsidized by someone in their life usually their partner and if their partner were to leave for example the house of cards would collapse and actually that's usually the only thing that gets them to truly change so if we put these four money types and the avoider the optimizer the warrior the dreamer in your view who lives a happier life you can live a happy life with any of these also you can change any of these types but on average one person's probably loving i'm the optimizer and i'm pretty happy so is that the answer optimizers are great they love their spreadsheet um i think that uh the warrior clearly is not gonna live the happiest life the dreamer is actually quite happy yeah the dreamer is quite happy yeah they're living in a world that's not real it's subsidized by somebody else they're always optimistic about what's gonna happen next week next month next year never realizing the catastrophe that they are leaving behind them that's that's the whole issue the reason i wrote the book is it's one thing to treat money in a certain way on your own when you're single you can be irresponsible you can be an optimizer but when you're in a relationship it's not about you anymore it's about the two of you as a unit and so you have to deeply understand yourself and then you have to be willing to communicate with your partner and really create a rich life vision for the two of you most couples i talk to have no vision for their money that's why they fight over who spent fifty dollars at target i go who gives a shit about target financial problems are almost never about overspending at target the biggest problem with couples and money is they have no rich life vision what is money to us what do we want to use money for how do we want to feel about it so they're confronted with a thousand different decisions with their money every week and they have no vision to guide them this is for us this is not for us one of the things i always wanted in relationships is how many couples know how much money the other couple has in their savings account in their totals with investment portfolio because i've never been in a relationship where i mean i've only been in two relationships you can say but i've been with you know dated people over the years and been with my current partner for many many years but even my current partner has no idea how much money when will you have that conversation should we bring him out right now let's bring him out i've just never had the conversation if we need something we can get it yeah and it's just always been like that yeah in my life okay so i made a mistake in my own relationship i was dating my now wife for many years and at one point she had asked some question about her 401k or something and i said well there is a book called i will teach you rich here's a copy of it i was joking around with her and so i ended up learning all about her finances so i knew about her entire financial picture it didn't occur to me to talk about my own and a little while later she she very assertively said this doesn't feel fair you know everything about my finances but i don't know about yours and i realized i violated my own rule in chapter nine of my first book which is talk about money early on talk about it regularly so we talked about it we talked about it's actually one of the most memorable conversations we had because talked about the numbers talked about my pride and how hard i had worked to build my business and invest for 20 years 25 years and um and we talked about what it meant for us like what kind of life do we want to have do we want to live here do we want to live there do we want to have kids do we want to eat this type of food travel like that conversation about possibility is the conversation i want every couple to have because it's about possibility and you can start to dream and that dream is important you can get to the logistics of course we'll get to that but so few of us still dream with our money but i think for someone like you who is the optimizer and he's probably quite proud of the system you created but there's gonna be so many people listening now that are in a relationship and they are early in the dating process and maybe they've been with the person six months they've taken out lots of my states and they have a thousand dollars in their savings account and their partner has no idea and they're thinking really if i tell my partner what's in this bank account she's gonna be shocked he's gonna be shocked and they're gonna leave me so i'm keeping this shit a secret because they are living under an illusion that i have more than i actually have but remember this just because you don't have as much money as you want doesn't mean that you are less of a person what could be more what could be more appealing than saying you know what would you be open to talk about our finances we're getting a little bit serious you know i know we're kind of talking about taking the next step i think money's gonna be an important part of it i know it is for me and i wonder if we could sit down and talk about it first just being proactive how many people watching and listening are like i wish my partner whether they're dating or my partner of 20 years would come to me and say can we sit down and talk about money but the part of that is shameful about the financial situation yes if i run it back 10 years just over 10 years ago i was living in an area called rushholm i was in a shared house with living with some um a few people who had come to the uk legally okay um i didn't have a carpet in my room i was in a single bed didn't have duvets or bed sheets or anything and every day i woke up and thought to myself how am i gonna eat today so i'll find different ways to find food at the same time i was dating this girl called ruby this girl called ruby had no idea she'd ever seen where i lived she wasn't aware that i was looking behind uh sofas in takeaways for pound coins there is no possibility in the world that i would have ever told ruby the financial situation i was in so i don't know what to do in that situation i'm sure i'm sure i would assert maybe 30 percent of people listening right now don't want to tell their partner their financial situation because they're deeply embarrassed or shameful to the point that they think their partner might leave like them less be attracted to them if they really mean the truth i totally agree i totally agree it's crazy how much shame we have around money and it's a young guy not having enough it's um a young woman who has 18 000 of credit card debt it's all over the spectrum that's the second point which is if you want to talk about money talk about money don't wait for your partner to do it bring it up yourself even if you feel embarrassed or ashamed okay if you're planning to make a life with this partner you gotta be able to talk about this because you're gonna be talking about a lot of other personal sensitive things over the course of your life the second thing is what could be more attractive than somebody saying you know when i was in my 20s i moved to the city i spent a lot of money going out and i wasn't super responsible i racked up a lot of credit card debt i've paid it down from 18 000 to 6 000 it's gonna be paid off next year and i just know that i'm never going back there again oh my god someone who acknowledges what they did has a good reason for it and then most importantly has a plan huge turn on so what i'm begging all of us to do is to realize just because you have more or less money does not make you a better or worse person i want to take shame away because we all have something that we are ashamed of but not talking about it and putting it in the corner in the darkness that doesn't solve it that's why i love talking about the most taboo of taboo subjects money gender prenups dating these are things that nobody's talking about so when you hear couples on the podcast and they're talking about being married for 15 years and they never actually had one conversation about money i want you and everyone watching to be inspired because stuff doesn't have to be shameful it doesn't have to be kept in the dark and what do you think about prenups do you think they are a good thing for all couples do you think couples should initiate a prenup no no not all couples there are some couples who should have one my wife and i have one so we went through this process and um who should get a prenup is if one or both partners are bringing substantial pre-marital assets to the marriage meaning before they get married they have a large investment portfolio a business rental property or a house like you should have a prenup but most people should not because when most people get married they don't have substantial assets what if your partner turns around and my partner said babe ramit told me to go get a prenup yeah and she goes absolutely not well that's not a good introduction i wouldn't say that although i don't mind you throw me under the bus oh this guy ramit he said this thing fine how to bring it up is an art so when i was deciding on a prenup i asked for lots of advice from lots of friends and um some of the advice out there especially online is not great um one of the most common pieces of advice is blame it on your lawyer i'm like get real you're about to build a life with your partner and you can't be honest about this thing this in the grand scheme is a minor topic so i'll tell you exactly what i said to my wife we sat down and um i said uh i want to talk to you about something um you know that because of how long i've been in business i've been very lucky i've been fortunate i worked hard i've built this business up and i'm really proud of what i've accomplished and saved and you also know my lifestyle i don't drive around in a lamborghini i like to travel i like to wear nice clothes and i like to save money and it's important to me that as we are getting closer in our relationship to getting married that we talk about a prenup and my heart was pounding i had planned it i had thought about it i talked to so many people what i knew is i wanted to take responsibility it's not some lawyer that wants it it's me it's important to me i wanted to bring up the topic and i wanted to reassure my wife that i'm not going to change overnight when we get married into someone who's blowing all of our money it's just important because of the business that i built and her response i was like like how is she gonna respond because bringing up prenups is very fraught she's the best she said okay i wasn't expecting that but i'm willing to learn more about it that's as good of a response i could have hoped so we started a series of conversations we both had lawyers it was going well at first until it wasn't and we were talking about numbers that to me seemed astronomical i started to feel resentful she didn't feel listened to she didn't feel heard she started to feel resentful and these conversations were were like so difficult i would say they were the most difficult conversations of our relationship at one point she said we should go see a therapist because these conversations are not good and i was like you're right so we went to see a therapist we sat in that therapist office i still remember therapist asked a bunch of questions including how do you see money and she turned to me i was like how do i see money growth i could literally see numbers floating in front of my eyes the optimizer in me was talking about the rule of 72 it was like so obvious what an obvious question then she turns to my wife how do you see money and she said safety i said what safety to me that was like saying charcoal like the two words don't relate at all but it started us on a new path of realizing that we were seeing money completely differently And that was exactly when I realized, I wish there were other couples talking about money from behind closed doors. That exactly was the genesis of me doing my podcast and my Netflix show to show people, not just tell them, but to show them how real couples deal with money. What was the resistance between you two in so much specific terms?

She, she wanted a different arrangement to the one that you wanted. Yeah, the terms are super technical in prenups. It's, um, so with a prenup, you have a variety of different rules or technicalities, which would be like, what if you separate in six months? What if you separate in 25 years, but there are children involved who gets the house?

What if you have a house? What if you have two houses? What if you have this much in your joint investment, but each of you have this much in individual investment? And so what happens is it's not even just the numbers themselves.

It's the fact that the process is set up to be adversarial. So they have a lawyer. We have a lawyer. We're communicating through lawyers when it comes to this topic.

When normally you're just talking to your fiance or your girlfriend, and there's an art to also managing the lawyers. See, the lawyers want, there's nothing bad. We have great lawyers. I'm happy with them, but lawyers' job is to look over every freaking contingency and make sure that nothing's left a chance.

And I think a good reminder for anyone considering a prenup is to remember you manage your lawyers and your job is to come to an agreement with your partner for the rest of your life. So sometimes you can be generous. You can be willing to let up on a few things here and there. As long as you are looking at the North Star, we're going to be together.

We want these premarital assets to be protected. And in case something goes wrong, we both want to feel good about what the arrangement is. And there is a 60% chance that you will break up if you look at the marriage statistics. Well, those statistics are a little skewed.

That includes second marriages. That also includes all different socioeconomic, everybody else. If you break it down, for example, just by having a bachelor's degree or certainly an advanced degree, that goes way down. First marriage goes down.

And in fact, the divorce rate has been decreasing for decades. So this 50, 60% thing that's kind of tossed around, not quite accurate, but whatever the statistic is, what's more important is if you should always think about how can things go right and also how can they go wrong. And I think with money, a lot of times we only think about one or the other. We buy a house, never asking ourselves, like, what if one of us loses our job?

And we get married without ever asking, like, what if we separate? So you want to be able to play both. What happens if things go right, incredibly right? And what happens if things go wrong?

Let's make a plan. What are the other red flags then? We mentioned the first thing, they don't want to talk about money. Ah, they have a money guy.

A money guy is so common. Everybody talks about, I'll have this money guy. Your money guy is probably a whole life insurance salesman charging you 1.25% AUM. Let me explain what that means.

So many people in America do not want to learn the basics of money. And so they hire a financial advisor. Now, I don't have anything against financial advisors in general, but a money guy that they're typically referring to is someone who charges them a percentage of their assets. So if I have a $100,000 portfolio, they'll charge, or let's say a million dollar portfolio, I might be paying 1%.

That 1% doesn't sound like a lot. But if you actually run the math, you will pay about 28% of your lifetime investment returns in fees. That's not $10 or $100. That's tens of thousands or sometimes hundreds of thousands of dollars.

So it's a red flag if someone has an advisor that they're paying a percentage-based fee to. I would much rather you pay an hourly or project or that type of fee to, okay? They're cheap. I can help a lot of people, but I can't help cheap.

Cheap is, cost is the first and last thing they always consider. So you might come home, you're so happy. Oh my gosh, look at this beautiful thing I got for the kids. How much was that?

And it just sucks the life out of every room. Cheap people are obsessed with cost. Cheap people rarely recognize the effect they're having on their loved ones. And cheap people find it very, very difficult to change.

They don't want to change. They actually reinterpret their behavior and call it a virtue. Oh, I'm not that. I don't need that fancy wine.

I'm perfectly happy with this. What if your partner wants one glass of wine? Basically, like a miserable group. Yeah, I don't like cheap people.

I don't like cheap people. I don't like cheap tippers. And their partners don't like them. So I'm not saying everybody has to want to spend a million dollars, but you've got to use money to live your rich life.

The point of money is not to just hoard it and save it. That's why when you create a rich life vision, you ask yourself, what do we want to spend extravagantly on? Not just a little bit, but extravagantly. And what do we want to cut costs mercilessly on?

You have to be able to play different notes like you're in a symphony. If your only note is spend less, that's a miserable existence. Are there any more red flags? I want to go into why people and where they develop these relationships with money, but are there any other sort of standout red flags that we should be looking for?

Well, if they follow Robert Kiyosaki, that's a huge fucking red flag. I mean, the guy, once Robert Kiyosaki wrote this well-known personal finance book, and the guy has really lost it in the last few years. He literally, I'm not joking. He literally told people the best investment you can have is a can of tuna.

I'm not joking. And I replied to him, Robert, I sold everything in my portfolio and bought 3 million cans of tuna. Is this a good investment? But sadly, I never heard back.

So beware of charlatans. Let me put it that way. Personal finance and money is filled with people who will promise you get rich quick, who will tell you that the sky is falling. And when it comes to money, we want to be balanced.

We want to have fun. We want to have a healthy relationship with money. It's very similar to fitness. Lots of people making promises.

You want to find people who are giving you long-term advice. You know these cheap people that you mentioned? You know any of them? A couple come to mind.

Tell the camera who they are. Where are these cheap people? They also fit into the category of worriers, in my experience. So someone who's a bit of a worrier can also be quite cheap.

And I'm just wondering, the hundreds of couples that you sat down with and interviewed, does there tend to be a origin story which links to their frugalness? Yes. Okay. Always, when I talk to people, I ask them, what do you remember your parents saying about money when you grew up?

Always. And they'll tell me. They are very conversant. They remember.

And usually the parents said stuff like, we can't afford it. And money doesn't grow on trees. We don't talk about money in this family. These are the type of things that people said.

But you'll often find, usually when kids are teenagers, when there's something really tragic that happens, and it's often that dad lost his job. And that meant that they completely changed socioeconomically. Often they had a big house. They had to shift into grandma's apartment.

That kind of thing. That affects people in a huge way. Now it affects people in one of two ways. And you cannot predict how.

Some people go, I'm never going to let that happen to me. Therefore, I'm going to have a high savings rate. I'm going to invest. I'm going to start a business.

And they develop a really healthy relationship with money. Others go the direction you're suggesting, which is they become incredibly cheap, incredibly worried about money. Anxiety is common. And they often do not see the connection at all until I point it out to them.

And when you talk about making this rich life vision together, what exactly does that mean? We start off in the book just talking about, let's have our first positive conversation about money. You have to remember, most people have never had a positive conversation about money. Money is the only way it comes up is, why did you spend that much at the gas station last week?

That's it. So we start off by just saying, I give them literally an agenda. You can read off these words and start off. It's like, why this is going to be awesome.

Here's how I feel about money today. How do you feel? Here's how I want to feel about money. How about you?

High five. I love you. We're good. That's it.

Part of having conversations about money is this philosophy of declare victory and go home. You don't need to talk about it all at once. Make it short. Make it fun.

And at the end, always say, I love you. That's it. Over time, you're going to associate talking about money with positivity. And that's what we want.

When it comes to a rich life vision, this is where it's really fun. So I have some fill in the blanks where you fill in like, I wish we spent more money on, and then you fill it in. I think we could probably cut back on, and then you fill it in, and you compare your notes. My wife and I did this really fun exercise, which I would encourage everyone to do.

And it is the 10-year bucket list. So imagine you sit down with your partner, and you go, let's each take a piece of paper, write down what would make the next 10 years incredibly rich, meaningful to me and to us. So you write it down, and then you compare notes. This is exactly what we did.

And you get excited. Oh, you want to learn Spanish? Amazing. Do you want to do it online, or do you want to go to Mexico City?

Oh, you want to go skydiving? That one's not for me, but I'll meet you at the ground. Have fun. And you just get excited.

You encourage the other person, and then you find one that you both want to do that's meaningful for both of you. So maybe it is we want to create an art studio in the garage. Love it. Maybe it is we want to take a round-the-world trip at some point in the next stage.

Okay, great. The difference with this exercise is you're actually going to make it happen. So right there on the spot, you estimate how much it would cost. Take five minutes.

Don't take more than that. You can estimate it within 80% like that. Decide when you want to do it. Maybe if there's kids involved, you're going to want to go in summer or winter, et cetera.

And then all you do is take the rough amount, divide it by the number of months, and that's how you know how much you have to save for it. We did this. And for us, what was really meaningful is to have a 10-year wedding anniversary. So we know where we want to do it.

We know the exact place. We know all the friends and family we want to have with us, and we knew when it was going to happen. So we had a funny experience because we each sat down and estimated the cost. And I think the number I picked was something like three times bigger than hers.

And in those cases, I say go with the bigger number. It helps you dream a little bigger. If you can't save that much money per month, that's okay. Shrink the dream a little bit, right?

Narrow the scope, or maybe extend it a little longer until you have to do it. But suddenly, every single month, when you sit down and talk about money, it's like a video game. You're like, oh, we're 3% closer to that goal. That is how you start to build a vision for money and have fun along the way.

And do you subscribe to this idea that you should have a joint bank account and then separate bank accounts? Because right now, I just have my bank account. How does it work? How does it work for you?

So do you just pay for most things? I think the context of what my partner is like. She really doesn't care about material things. So she's...

Avoid her? She doesn't care about whether we fly first class or economy. She doesn't care about if we stay in that hotel or this hotel. She doesn't care if we stay in the 70th floor penthouse we live there, or if she stays in a studio.

She doesn't care. What does she care about? She cares about quality time with me. She likes having nice experiences.

She likes going to places. She doesn't care how she gets there where she stays. She likes traveling and exploring. And she likes her simple things.

She's a very simple person. If I didn't get her birthday present or Valentine's Day present or Christmas present or if I just made her scrap every year she'd be thrilled. So I am the one that wants the nicest. You want them?

Okay, I'm the same. To a large extent. But we have a lot with it. You know, life costs money.

So I pay for most things. And you're cool with that, it's fine, right? Yeah, I'm really cool with it. Okay, cool.

So I'm particularly cool with it because she doesn't care. Right, right. Does that make sense? Yes, it makes sense.

There's no resentment because she doesn't care. I'm the one that's making sure does have her money dials. Money dollars are the things you love to spend money on and you can turn that dial up. But when we met, she was not into hotels at all.

I'm a hotel guy. I love hotels. And so we had to have some conversations. At first, I'm just like, oh yeah, of course I'm paying.

And then when we merged our finances, which I recommend couples do, well, suddenly it's not my money, it's our money. And so now we are forced to talk about that stuff and come up with a way, like she's like, I don't need to stay there. And like, personally, I don't really think it's worth it for our money. And I'm like, well, like, have you seen the suite at this place?

And do you know what type of would they use in that? She doesn't care. So how does that work? You said you merge your finances.

When you say you merge your finances, you mean you're paying into the same bank account? Correct. So, and this is what I recommend for almost all couples. You take your paychecks or if you're both business owners, you take whatever money comes in, put it in the joint checking account.

That joint checking account then pays a variety of different accounts. It pays our joint expenses, like our rent. And if we eat out, it pays for our joint credit card bill. The money also is paid out from the joint checking to her individual checking and individual savings, which she has her money, no questions asked.

If she wants to spend it on something, like she loves self-care, what am I going to ask? It's her money. It also sends some money over to me. That's no questions asked money.

The same money. Yeah, the money that came in from us two together is processed in the joint checking account and an amount goes to each of us. The same amount goes to each of you. Good question.

It could be the same. 50-50 I think is actually great. But once in a while, if you have somebody who's earning like let's say 10 times more, you may decide to make it proportional. So the higher earning partner might get more.

Because imagine just for argument's sake, imagine you're earning a million dollars a month. Easy enough. And suddenly you're getting like $2,000 a month for guilt-free spending. You're like, um, what the hell?

This doesn't make sense. Usually partners are totally cool with that. But I will tell you this. I used to be on the proportionality train, meaning everything's proportional, et cetera.

My wife and I did this for many years. It's really complicated. It gets really, really complicated. And what's more important is you want to set your accounts up so that they drive the right behavior.

Just like when you hire people, you set the right incentives to drive the right behavior. When our money was separate and we were doing all this proportionality calculation and all these different accounts, we didn't see the money as ours. Now all the money goes into that pot. It's ours.

So we sit down every month. We look at our numbers and we go, what's worth it? Do we care about this hotel? Do we care about that?

Et cetera, et cetera. We really love that. Let's keep spending on that and find a way to do that. It's about us.

And of course, we have our own individual money. So why didn't you just, the money coming in, why didn't it just go to you individually and then you pay into the joint account? Why did you make- That's what we did at first and it became really complicated. So the money came into each of us and then because we each run businesses that are each variable, we wanted it to be proportional.

Well, guess what? If it changes every single month, we had to recalculate the proportionality every single quarter. What a mess. So we're literally calculating every three months and then it changes and then at the end of the year, we have to reconcile all this stuff.

We're like, what is this? A marriage or a freaking multinational conglomerate? So part of a philosophy around a rich life vision is one of our values is fight for simplicity. Fight for it.

Because I talk to couples who have more complicated financial setups than we do. Shouldn't be the case. Most people's setups should be very simple. All your money comes into a joint checking account.

From there, it pays out to individual accounts and it pays all your joint expenses. Your life is together. Your rich life is together. That's it.

We're married. We're going to be married forever. Our future is together. So let's set our accounts up accordingly.

So then if you end up getting a divorce, that joint checking account, you just live in half full. Yeah. So this is a good question. When you are married, the money that is earned is community property.

So let's just say we put $100,000 in that checking account and we would get separated tomorrow. 50-50. Yeah. And that's reasonable, right?

It's community property. The prenup is the only concern with what happened before the marriage. So you're in the camp of not caring too much about the small expenses, the coffee. That's a waste of time.

Why is it a waste of time? Because they are $3 questions. If you actually added up how much they actually cost you, it's actually not that much. It's the simple joy that you enjoy in the morning and you could spend your entire life agonizing over buying a coffee.

But when I ask people, okay, so you stopped buying coffee for a month. How'd you feel? They go, oh, I felt okay. I go, what'd you do with the money you saved?

They go, I don't know. It's in my checking account. Not only do you have to make the decision every single day to save on these tiny little things, you then have to properly invest that money and you have to do this every single day for the rest of your life. What if we just got five critical decisions correct for the rest of our life and didn't have to worry about coffee?

Why are we playing so small? Oh, let's decide. Do we have enough money to buy this saran wrap? Who cares?

Let's talk about, are we investing properly? Do we have a target rate that we are doing? Watch this. I bet you so many couples watching this right now have had arguments about why'd you spend so much at the grocery store?

Why can't you stop spending so much on the kids? And on and on. But have they ever had conversations like this? What is our savings rate?

Is it 4%, 6%, 7%? What is our investment rate? Is it 6%, 8%? Whatever the number is, let's make a rule that every December we increase it by 1%.

If you just did that, if you increase your investment rate, meaning the percentage of your net income that you invest every single month, I always recommend people start off at 5% to 10%. of thousands of dollars to you more than all the coffee you ever buy in your entire life so why the hell would you focus on coffee when you can make one decision per year and make way more than all those coffees combined most people think about investing or their investment rate the only investment most couples make together is buying a house yeah well and that's questionably not even investment most people think renting is wasting money yeah and the logic goes well if my rent is two thousand dollars a month or two thousand pounds a month my mortgage is only going to be two thousand pounds a month and so we might as well buy a house because then we get to keep the asset are you trying to get mad right now i'm starting to sweat just hearing this because you're right that's what they say should i just dismantle these arguments once and for all right now sure okay renting is not throwing away money just like going to a sushi restaurant is not throwing money away on sushi you're paying for something you're getting value it's fantastic the next argument they use is um you're paying your landlord's mortgage i go okay aren't you paying a sushi owner's mortgage when you go there and get sushi funny we never think about it like that we only think about paying the landlord's mortgage finally we have to understand that buying a house can be a good financial decision it can be but renting and investing the difference can also be a good decision and right now in the u.s in the top 50 u.s metro cities is cheaper to rent than to buy so let me give you some math let's say because i lived in new york uh close by if the rent was let's say three thousand bucks a month to own the equivalent property right next door would have been sixty six hundred a month that's three thousand six hundred dollars per month more just to own so most people don't know this they don't factor in phantom costs like maintenance taxes transaction opportunity cost they simply look at a number that says oh three thousand six hundred or whatever the number maybe and they go great investment we have got to get more sophisticated with the biggest purchase of our lives i'm just looking at some of the uh comments on our last conversation yeah what they say it's a balancing act there's two groups of people here there's people who attest to the fact that they bought a house and it's the single best thing they did um this person said what house it's the best thing i ever did it's launched my mindset in new directions remember that having your own space has profound psychological impacts and can change your life that's a good comment okay let's talk about that first i love that comment we have to remember that life is not just about a spreadsheet it's not so when it comes to a major purchase like a house or a car we gotta start with the numbers okay we have to start by amortization chart i have a whole bunch of stuff on buy versus rent and then we need to know can we afford it is this part of our rich life vision what if one of us loses our job and on and on but then second we need to say what kind of lifestyle do we want if we love to decorate that's probably worth something we should maybe we need to buy a house if we want our kids to be in a particular area maybe we need to buy there's so many non-financial reasons to buy or to rent and so we can't just do one or the other but my main argument is this most of us never run the numbers we will spend a million dollars in total cost of ownership for a house and we won't run one calculation so we gotta play multiple notes doing the financial and non-financial parts i think that's what a lot of people are actually saying a lot of people are saying you know i bought a house and this person's saying i used to be in a caravan i finally bought a house and i don't care about being rich necessarily having my own house means the world to me great great non-financial reason they want stability i totally value that i would also ask did you run the numbers i think the key thing is most people when they buy the house they see it as an investment and they see it as a good investment i think in part because they don't really know any other way to invest totally right so we grow up we think okay when you get enough money the first thing you have to do is buy a house i mean there's a real sequence of events in our lives that are given to us which is go to school go to college or university or something like that there get the degree get the job buy the house get married have the kids and then move to florida get skin cancer die oh retire okay have your pension die we don't have pensions anymore that was it's actually a very good life especially the way that our parents generation grew up where you know they could buy a house on a reasonable salary one salary but that doesn't exist right now housing is historically expensive and not through any fault of young people by the way there's a lot of stuff thrown around the media young people are buying too much avocado toast they're always buying a new iphone that's not why housing is expensive housing is expensive because people who bought their houses in the 60s 70s and 80s bought a house and then systematically prevented everyone else from building more housing so it is called nimbyism not in my backyard they have allowed almost no housing to be built particularly in the u.s that's why if you only have a limited supply guess what happens to the price it goes way up that's changing slowly housing prices will in certain cities like austin even santa monica have come down in certain areas it's really important to be able to build more housing so that young people middle class people poor people can afford housing we should not have people unable to afford rent or buying housing that's a big problem so are you saying that the average couple if they're looking to make a financial return on their joint savings account account they shouldn't invest that money in the house i personally would not consider my primary residence to be a great investment because it has massive costs right massive um maintenance opportunity cost of that down payment let's say you put down 50k or 100k that could have been invested it has all kinds of phantom costs and then you have to stay there for until you pay off presumably 30 years most people don't stay for 30 years there's some shocking math behind a mortgage like most people don't realize that they will be paying more towards their interest than towards principal for 21 years let me say that again most people when they take a 30-year mortgage right now interest rates the way they are they will be paying more towards interest than they are towards the mortgage in year 1 2 5 10 year 20 until finally year 21 when they are finally paying more towards their mortgage the principal rather than interest so you know that phrase i don't want to throw money away on rent we might more aptly say i don't want to throw money away on interest so if i'm a couple i'm in a relationship and my partner managed to save only 50k what is a better use of that 50k to drive a financial return okay so let's simplify the whole thing i have a conscious spending plan i have four numbers that couple should be talking about okay the first off is your fixed costs those should be roughly 50 to 60 percent of your take-home pay what's a fixed cost fixed costs includes your housing or uh that could be rent mortgage your utilities your car payment any debt payment anything that is consistent even groceries that you need to live every single month so 50 percent of my monthly income goes to this fixed monthly take-home post-tax 50 to 60 percent is the number you want to be targeting right there is um is the crux of why couples are stressed out about money it's because they are spending too much on fixed costs and within that there's two areas they spend too much on you know what they are housing is number one because it's so expensive and they don't calculate number two is cars usually trucks we love trucks trucks and suvs in america the cultural script is oh we're having a kid we need to get a big house and a big suv uh because we do so that right there is where people get stressed out about money next number is your savings this should be five to ten percent minimum this includes your emergency fund this includes saving for a down payment anything you're saving for money you don't need for between one to five years basically okay next up is investments this would be five to ten percent minimum this is where real wealth is created and this is where couples neglect they talk about saving and they'll say oh we try to save i don't try to brush my teeth i don't try to save i make it automatic that's what i want couples to do that's what i cover in the book and then finally my favorite category of all guilt free spending this is going out for drinks concerts travel 20 to 35 percent of take-home pay that's a lot that's a lot if you look at people wow yes and when you get down to that number and you're out and you're having drinks with your friends you're out to a beautiful experience you don't have to worry about anything else you don't have to feel guilty or anxious because you're already handling all these other three numbers you know you're set and you have this money set aside and you can enjoy it guilt free so this sort of 10 percent is automatically invested would you set up some kind of system that automatically invested always always you should not be doing any of this manually so your investments should be happening automatically and for a couple you actually get to celebrate every month you have a monthly money meeting where you talk about money every month most couples don't do this you will now after watching this and you talk about it you look at how your investments are doing you give each other a high five a big hug congratulations and once you do this for six months a year you really start to see how it adds up fast what if your partner wants to buy a house and you don't whoa that's tricky how would you handle it um it depends on my level of conviction about the decision i think you've got to pick it out in relationships but um i am probably more financially aware than my partner because my brother is he's been an investment for 30 years he works for me full-time okay he's my money guy yeah okay what's he charging what 25 percent uh he doesn't charge me no he works full-time in the business so he he manages much of my money but he would make the case to me of pretty much the case you've made yeah so based on an opportunity cost basis i.e. for a lot of people don't even know this money instead yes so based on all the opportunities you have available to you steve is buying this house a good use of that money and the answer was actually no when i bought my first house it was no unless this is a emotional decision because you and your partner want a psychological feeling of safety to bring up the kids whatever it might be just that if it is steve that's why you want to buy it and you think you're going to stay there for a considerable amount of years then go ahead we're going to kind of section this as a different rationale than the rest of your investments i didn't exactly what you said you bought it knowing it was an emotional decision yeah i bought it knowing it was a bad decision i love this yeah okay this is amazing everybody listen closely because i want to break down what you just said in a different term first off you got to run the numbers always for the biggest purchases in your life you need to calculate carefully what's my buy versus rent what's my opportunity cost what's it going to amortize that all these things that most people are not familiar with learn it it's not that complicated second you need to factor in the non-financial hey why am i doing this do i just feel a certain way there's nothing wrong with feeling irrational about money nothing you want to buy this thing and it's a bad financial decision okay first can i afford it if so we can continue the conversation and then you buy it eyes wide open saying i know it's not an investment i know it's not even a good financial that's a terrible financial and i'm still gonna do it yeah when i when my wife and i go to buy a house one day it will be the worst financial decision of our lives we already know that but we will probably still do it anyway same as you because there's more to life than just what's in a spreadsheet but you have to know all the pieces on the board before you make these big decisions and you have to be able to do with your partner you know it'd be very easy for you to do things unilaterally be very easy for me to do it as well what i've learned and what i emphasize on my podcast every episode is just because you may be the higher earner or have more money it's actually your obligation to bring your partner in and to get them involved and they may not be as savvy or even as interested but you have to find a way to bring them into this world and get them connected with you with my wife and me of course i know more about investments so i'm doing our investments but we're still talking about them i'm saying hey here's the numbers we are we still good with that let's take a look at it high five you know here's what we're thinking for next year that's the level we're talking about these are these are exactly the kind of conversations you want to have and i'm actually really thrilled you shared that example because i celebrate that you made a bad financial investment because it wasn't an investment it's just something you wanted and you could afford it yeah and we're both aware we have a conversation we're both aware that um this is one of the worst things we could spend the money on if our objective if our kpi our key performance indicator was to make more money this was a terrible decision to make yes but we're also aware we just didn't care we thought you know it's there's a lot of non-managing things that are going to be beneficial about this decision and i think that's what most people don't realize actually and i just think about my friends i think most of my friends believe that when they buy their house they're doing so because they don't know they don't know any other way to invest society hasn't given us an alternative so what is the alternative simple low cost long-term index funds are fantastic ways to invest i'll explain what they are the myth about investing is that you have to sit there and look at p.e ratios and things like that no you pick often one fund there's a simple example called a target date fund you pick the year you're going to retire in like if i'm going to retire in 2050 i pick a vanguard 2050 fund or fidelity or schwab 2050 fund all i do is literally send money every single month i set it up so it happens automatically it could be $50 a month 500 500 000 per month and that's all i do i just send it there it automatically buys the stock market it automatically diversifies and gets more conservative over time and that's it so you know the fitness world you've i've seen you training you've learned about fitness when you first start off so much information and so many different people giving you different pieces of advice right it's like oh my god how am i supposed to know what about my genetics and then over time you realize oh it's actually pretty simple once you cut through the noise that's the same thing with money that's the same thing with investing you have to cut through the noise and it actually becomes shockingly simple oh my god this is the way that real wealth is created it's about consistent investing it's about time it's about low fees that's it and you start to wonder what's all this stuff that they publish all the time in these magazines and newspapers and on tiktok it's just noise do you know when you sat down with those 180 odd couples you've spoken to about money in their relationship have you not had moments where one of the partners was shocked always for better and for worse yeah yeah actually yes um sometimes they are shocked before they meet me because i have them prepare their document with their financials and one of them has never actually looked at their financials sometimes both and they realize it's much worse than they thought or it's much better sometimes we're talking and one of the partners will actually talk about how they feel for the first time ever and the other partner will be crying give me some examples of the moments that you remember that shocked you most i think about one of the most shocking examples was a woman who was around the age of mid 40s maybe 50 and she had had a double lung transplant and um she had successfully had the transplant she was alive um she was healthy but she knew that she would live five or ten more years that's what the doctors wanted and she said i want to share this time with my daughters they were around 11 and 12 her husband and um i want to do that i said okay what's stopping you and she said um well i still have a job and i looked at her financials they were multi-millionaires they had saved consistently doing index funds over time nothing fancy just consistent investing they she could stop working tomorrow and they would have enough money forever she couldn't stop she said i like to work i like knowing that i have a job i like the consistent income so most people are used to getting an income and that's why they find it so difficult to retire among other reasons because the income will stop even though i can point out to them the investment portfolio you've built and social security all these things will actually pay you people are terrified of not seeing that money come into their checking account in this case she had a ticking clock we all have a clock but she knew how long hers would go for it she found it incredibly difficult to quit her job and spend time with her daughters now if we're listening to this it's like just quit it's so obvious to all of us but we're not the ones making the decision that was quite shocking to hear how difficult it can be even in cases of life or death wanting to have a stable income can affect us and what about earning like what role does earning play like just earning more money playing all of this stuff because i think i did how i'm gonna be honest i had a bias when i was 18 19 years old um i was fairly reckless with money and i had these four credit cards i maxed out the credit cards i blew the money i got two ccjs which is a county court judge in the uk okay i had huge debts of thousands of thousands of pounds and in my head i thought it will be fine if i just earn more no because i'm gonna have so much money that i'll just outpace this problem and that was like my bias my bias was like i'll just earn loads of money and when i figure out what credit score was and that one was destroyed i thought that way i'm always paying cash yeah classic um every couple i speak to who has a spending problem they always say the same thing they go we just need to earn more and these are the very same couples when we crush their numbers they'll often realize they were earning way more than they thought. And you can see their faces because I have the whole thing on YouTube.

And it's this realization that, oh my God, the story I've been telling myself, if we just earned $25,000 more, and then they realize we actually are earning 25K more and they don't know what to do with it. What I tell them is you could be making $300,000 more right now, and it would not make one bit of difference because you have a hole in your bucket and all the money is going out. The next thing I ask overspenders is, do you want to make no change, small change, or big changes? A hundred percent of them say big changes.

I go, all right, I take my third word. And then we start going down the list and they find it incredibly difficult to strip out even the most minor of spending. So we have a couple here that will be in literally hundreds of thousands of dollars of debt. It's like, I'm having a heart attack watching them and they're very calm.

It's because I understand interest rates and I know what situation they're in. And so they go, big changes. Suddenly, 10 minutes later, we're debating whether they can keep their Netflix subscription around. And I go, guys, I'm not here to berate you.

I'm not the teacher who's telling the kid you've been a bad kid, which deep down a lot of them want. A lot of us want an authority figure to tell you, you've been bad. Now we got to be good. And that's just not what I do.

I help them realize it themselves and it goes slower. It takes a long time, but if they realize it themselves, they're able to make the change. Every couple says they want to make big changes. When it gets down to the spending, it's really difficult.

That's why you have to be incredibly careful which lifestyle purchases you make that are tied to your identity. So if you are a car person and you're driving a Rolls Royce, a really fancy car, it will be incredibly difficult for you to downgrade that car because it's part of your identity, right? Meanwhile, like if you have to get cheaper towels, whatever, nobody cares, but you have to be very careful about what you allow to become part of your identity. I'm not saying don't buy nice things and couples, you should buy nice things, but do it when you know that you can afford to do it forever.

Don't just do it because, oh, we want to buy private school this year, but we don't know how to pay for it next year. So do you think that couples should make a budget? I don't like budgets. I don't think they work.

I think they look backwards, whereas a conscious spending plan looks forward. But most couples think deep down, we just need to create a budget. Isn't a budget the thing you gave me, like the 50%, 60%? Different.

A budget is couples tracking every last line item. They're tracking how much they spent on corn. They're tracking how much they spent on diapers. Someone has to create and track this laborious spreadsheet.

And then at the end of the month, they look at it and they go, uh, I guess we spent that much. What are you supposed to do with that? Most couples have no idea. Does this budget tell you when you're going to be a millionaire?

Does it tell you what your net worth is? Does it tell you if you have enough? No, it doesn't stack up to anything. It's just a bunch of numbers tracking.

Budgets look backwards. A conscious spending plan looks forward. So a conscious spending plan allows you to zoom out and say, what is the vision for our rich life? How do we pick the things we want to spend extravagantly on and cut costs mercilessly on the things we don't?

So I give you these numbers, 50 to 60% for fixed costs. It's up to you how you want to hit the number. If you love your house, you want to spend more on your house, do it. Maybe it means you spend less on your car payment.

If you want to go to concerts, but you don't care about eating out, fantastic. Take the trip, go see Taylor Swift. So it's up to you to make the Tetris pieces fit, but you decide and all your money flows for those four numbers. How do we go about teaching our kids about money?

My brother and the one that works in our company, he has three kids under the age of six. And I'm wondering, because he's such an optimizer, is there a relationship between our parents and our kids? And if I want to, when I do have my kids, how do I make sure that they aren't worriers or avoiders? The number one thing that the couples in financial trouble say is when they were growing up, their parents never talked about money.

Never. There was an episode on our podcast with this couple living in Kansas in a low cost of living area. And they were making $130,000 a year. That's a very good income, especially for their area.

They should have had tons of money, tons of savings, but their daughter came home one day with food from the school because she had told her school, we don't have enough money to eat. Now they had plenty of money. Why? Because her mom and dad were always saying, we don't have enough.

We can't afford it. Daughter took that message to school and was given free food. This was horrifying to the dad. Horrifying.

And what he realized at that moment was the way that I'm communicating about money is not working. See, most parents deep down believe that money is something to protect kids from. They think it's bad. Deep down, most Americans, we have a love-hate relationship with money, but parents think their kids let them be kids.

But you would never teach a kid how to ride a bike by saying, we don't talk about bikes in this family. You would get them a bike. You would get them on. You would show them how to do it.

You would let them fall, and then you would help them get up again. So imagine this with your kids. Imagine that they are three years old. Young.

You pull them up, sit them, say, look, can you help me push this button? We're going to pay for the rent. This is for our beautiful house. Help me push that button.

Yay! Give them five. Okay? Getting them involved right from the get-go.

And this is, if they're living with two parents, this is mom and dad. You want them to see both. Because too often, people only see mom worrying about the bills, and so they come to associate mom with worrying, and therefore, if it's their daughter, they think they are supposed to worry as well. Now imagine the kid is eight, ten years old.

You say, hey, we have to go to the grocery store. Here's $100. We need to get all these things. How should we do it?

Let them. Let them make mistakes. They're going to forget about taxes. Let them learn, right?

They get a little older. They're planning a pizza or a restaurant for the family. Here's $100 for dinner. Problem is, they're going to pick someplace like Chili's.

It's horrible. You've got to go let them learn their lesson. By the time they are 16 years old, they have planned a family vacation. They are aware of trade-offs, taxes, tips, all kinds of stuff.

They have helped the family buy its new car. This is how you prepare kids. You don't simply say, we don't talk about money in this family. You let them learn about money, and you tell them what you've learned about money.

That's how you teach them. I'm somewhat scared of my kids being school-prats. I say to my partner sometimes, I'm like, when we have kids, should we be putting the kids in the back of the plane? Oh, yeah.

You know what I mean? Or should they be up front with us? What's the deal? Well, I'll tell you what.

I went to public school my entire childhood, and then I got a bunch of scholarships and went to a private school for college. And at that college, I remember in the first week, so many of the beliefs I had about money and kids were shattered. I had always assumed that if you went to a private school, you were spoiled, and you didn't really like to work. Within three days, I realized that was totally untrue.

Like, some kids are spoiled, some are not. The correlation with private school, not really there. It's about parents. It's about how they were taught, and it's also about some element of luck as well.

But can you teach kids not to be spoiled? Yes. There are so many wealthy kids who grew up not entitled, appreciating what they have. And the parents were still like, hey, I want to go to a nice hotel.

How? How do you raise kids that don't spoil what you think? So start at the very beginning when you're teaching them about, let's do this together. Money is something that we all do together.

Now imagine that when you're talking to your family. Just the same way we talk about creating a healthy relationship with food. How do you teach your kids to have a healthy relationship with food? You talk about it all the time.

You go to the grocery store together. You cut carrots together and potatoes, and you say, this is why we're putting potatoes in this thing. But we never do that with money. So you have a healthy relationship with money by shining a light on it, by talking, and asking them questions.

Do you know how we afford this house? What's a good thing to do with credit cards, and what's a bad thing to do with credit cards? Hey, what do you think that we have 200 bucks, and we want to give it to a worthy cause? How should we do it?

How should we pick? These are the kind of conversations that families should be having. And when kids start to engage with money, and they see parents doing it, and they realize it's not something to be ashamed of or hidden from, they go, oh my gosh, like I have some agency over this, some control. That's how you prevent them from being spoiled.

Have you got kids yet? No. When you have kids, if your kids come to you and they say, dad, I want to be rich. Love it.

I would say, what does rich mean to you? It means being able to have financial freedom. So not having to look at price tags when I go to restaurants or shops or browsing Amazon. I can just take care of myself.

I can lift something nice, drive a bus car, go on holiday when I want. It's freedom. What is the most important thing that I should be thinking about to create that wealth and preserve it so that I can be rich? Well, you'll first notice that when this hypothetical kid said, I want to be rich, what was my response?

What do you mean by rich? Yeah, amazing. What do you mean by rich? So excitement and curiosity.

The opposite would be, why do you want to be rich? You don't need to be rich. That's not for people like us, squashing those dreams. So when, like my nephew, a few things ago, he was young, and he said, I want to buy a Rolex.

Amazing. Where'd you get that? Tell me. What kind of Rolex?

How are you going to do it? How much is it going to cost? How much do you have to save to put that aside? That's encouraging kids.

Now they can figure out these trade-offs later, but just encouraging them, first off, is the first thing we do with kids when they talk about money. Kids are smart. They notice by age three, four, or five how their parents feel about money. I talk to parents all the time, and I speak to my own family, and their parents of younger kids, they'll tell me, my four-year-old is already worried about money.

Every time she gets a little bit of money, she puts it in an envelope and saves it because she's always worried about having enough. I go, wow, that's tough. Where do you think she got that from? And then mom starts crying, always.

I can have a very difficult financial situation. Two parents, they'll be in $150,000 of credit card debt. They're stoic about it. They ignore it.

We talk about it. They engage. But the minute I bring up the kids, tears. And the reason for that is that you can take on a lot of burden yourself, but when you realize that your behavior is being passed on to your kids, that is really difficult.

And that's why couples can get on the same page and build a healthy relationship for their kids as well. So what would you say then to your kid? You said, amazing, great. Love it, yep.

Tell me what it means. And they say, what are the principles of wealth creation that are keeping that money so I can be front of you free? It would be, number one, you have to find something you love to do. Work hard.

You have to love to work, okay, in your own way, whatever it is. Two, automatically invest every single month, right? That's great. And number three, you have to enjoy money.

Enjoy it, not just making it, not just managing it, but also spending it. And if they said, don't you want to get credit cards? They said, sure, of course. When the time is right, you should get a credit card.

You should always pay it off every month, but you should get a credit card. And when you start to spend enough, probably get a rewards card. You can get some free trips or cash back out of it. Notice that I'm not being restrictive.

If they say, I want to buy coffee every day, I would say, fantastic. Let's talk about how you can earn enough so you never have to worry about coffee. If they even said to me, I want to buy a Lamborghini. I'm not a Lamborghini guy, I couldn't care less.

I would say, amazing. How do you think you could do that? And what if they said, oh, you know, I want to be a school teacher. I'd say, okay, you know, have you talked to any school teachers and asked them how much they make?

Then calculate how long it would take you to buy a Lamborghini. Kids are smart. They can do these things. We just have to challenge them.

They say that I've only got my pocket money, so how am I going to become an investor? I don't have enough money yet. How much do you need to invest? I assume you need like thousands of pounds.

What if I told you you only need to start with a hundred dollars? I don't have a hundred dollars. I have seven pounds of pocket money. Have you asked anyone else how you could make an extra ninety three dollars?

No. What could you do to ask them to make ninety three dollars? What could you do? Clean the cars in the street.

Keep going. Paper round. And on and on and on. So here, I'm not giving them the answer.

I'm challenging them to learn how to think for themselves. And to make ninety three dollars for a kid, you could do it. It won't happen in one day, but you could do it very, very quickly. How much money do you think you need to start investing?

You should start investing as soon as you can. You could start investing 50 bucks a month. My dad helped me open a custodial account when I was 14 years old. So I started investing then.

And my dad immigrated from India. So I was very lucky that he pushed me. But if you're a parent, you should definitely be getting your kids to invest early. Even 50 bucks a month makes a huge difference.

So you invested at 14? Yeah. And I've been investing ever since. And have it out to you?