Podcast Summary: Money For Couples with Ramit Sethi Episode 192: “We Spend 98% of What We Make—Where is it All Going?” Release Date: January 21, 2025

Introduction

In Episode 192 of Money For Couples with Ramit Sethi, host Ramit Sethi delves deep into the financial struggles faced by high-earning couples, illustrating how even substantial incomes can be squandered without proper financial planning. This episode features Justin and Deepika, a couple earning a combined $260,000 annually but finding themselves trapped in a cycle of debt and overspending.

Meeting Justin and Deepika

At the outset (00:40), Ramit introduces Justin (aged 40) and Deepika (aged 32), highlighting their paradoxical situation: despite a high income, they grapple with significant credit card debt and the stress of living paycheck to paycheck.

Deepika shares her anxiety:

“It feels like we are living paycheck to paycheck. And it stresses me because we just have the money we have, and then we wait for payday and we do it all over again.” (00:52)

Justin adds to their predicament by mentioning his side hustle, which hasn't taken off due to uncommitted business partners:

“I have a full-time job, and this business is more of a side hustle.” (05:52)

Analyzing Their Financial Situation

Ramit meticulously dissects Justin and Deepika's Conscious Spending Plan (CSP) (02:24), revealing alarming numbers:

• Assets: $5,000
• Investments: $111,000
• Savings: $38,000
• Debt: $43,000
• Monthly Income: $21,000

The crux of their problem lies in their fixed costs, which consume 98% of their income (03:11). Key expenditures include:

• Rent: $1,650/month
• Utilities: $700/month
• Insurance: $3,800/month
• Car Payments: $1,800/month
• Debt Payments: $4,000/month
• Groceries: $800/month
• Clothes: $200/month
• Savings and Investments: Negligible

Ramit identifies a critical flaw:

“You have 98% fixed costs at that income. ... All the money that you just mentioned, the $4,000 a month on credit cards, where did that go in this CSP?” (13:15)

Identifying the Root Causes

Several issues surface:

1. Excessive Insurance Payments: Initially at $3,800/month (20:49), dominated by an unnecessary whole life insurance policy.
2. High Car Payments: Spending $1,800/month on an AMG Mercedes (23:14).
3. Unresolved Utility Bills: An elusive high electric bill totaling $8,900 over a few years (15:12).

Ramit likens their financial mismanagement to a trauma patient needing urgent care, emphasizing the severity:

“How can you’t keep grinding when there are so many other ways to put your money to work for you.” (44:42)

Initial Guidance and Challenges

Ramit presents actionable steps:

• Crystallize a Financial Vision: Define what a "Rich Life" means for both partners.
• Educate Themselves on Money: Commit to learning and understanding financial principles together.
• Reallocate Funds: Cancel unnecessary expenses like whole life insurance and limit luxury spending.
• Address Side Hustles: Either solidify the business or cease wasting resources on unproductive ventures.

Justin acknowledges the need for change:

“We need to make now...” (01:56)

Progress After Reading "Money for Couples"

Fast forward six weeks, Justin and Deepika return to discuss their transformative journey after engaging with Ramit's Money for Couples book.

Key Changes Made:

1. Cancelling Whole Life Insurance: Saved $1,400/month (55:41).
2. Reevaluating Insurance Costs: Reduced from $3,800 to $2,500/month by eliminating redundant policies (74:50).
3. Selling Unnecessary Vehicles: Sold one of their two cars to cut down transportation costs (65:24).
4. Improving Budget Tracking: Transitioned Justin's paycheck to the checking account and created detailed spreadsheets (54:10).

Deepika reflects on the transformation:

“It's like, now the dollar can work for us and we know where to put our dollars.” (60:13)

Revising Their Conscious Spending Plan

Post-book adjustments led to significant improvements:

• Fixed Costs Reduced: From 98% to 49% (73:05).
• Debt Payments Trimmed: From $4,000 to $500/month by focusing solely on student loans (75:58).
• Enhanced Savings and Investments: Allocated additional funds towards high-yield savings and investments, setting clear goals for future purchases like a home (79:07).

Ramit commends their progress:

“Your fixed costs are well under control, meaning your rent mortgage is well under control. Your additional expenses are fairly minor.” (75:47)

Cultivating a "Rich Life" Vision

The couple redefined their financial goals to align with their vision:

• Deepika: Aspires to take regular vacations and purchase a larger family home without financial strain (36:56).
• Justin: Seeks financial stability to invest in his business, ensuring a secure future for his son (37:15).

Ramit emphasizes the importance of synchronized financial visions:

“Your vision makes the decision for you.” (84:01)

Overcoming Financial Habits and Mindsets

Justin and Deepika confronted their ingrained financial habits and cultural influences:

• Cultural Pressures: Limited financial autonomy due to familial and religious obligations (29:54).
• Scarcity Mindset: Transitioned from a mindset of scarcity to one of abundance and intentional allocation.

Deepika shares their newfound clarity:

“If you wanted to buy that place again because now I'm in a better place.” (42:15)

Final Thoughts and Transformation

By the episode's end, Justin and Deepika have:

• Simplified Their Budget: Eliminated unnecessary complexities, focusing on clear spending and saving categories.
• Increased Financial Transparency: Conducted monthly money meetings, fostering open communication and accountability (100:56).
• Enhanced Investment Strategies: Redirected funds from savings to investments, maximizing long-term growth (85:53).

Deepika concludes:

“It's been a literally life-changing experience to go through this book together.” (100:56)

Ramit celebrates their journey as a testament to the book's effectiveness:

“They have earned the right to now think about your son and what messages he's going to pick up.” (93:23)

Conclusion

Episode 192 of Money For Couples with Ramit Sethi serves as a powerful illustration of how high incomes can be mismanaged without strategic financial planning. Through Justin and Deepika's journey—from overspending and debt to financial clarity and intentional savings—the episode underscores the importance of aligning financial habits with personal visions. Ramit's guidance, coupled with the actionable insights from his book, empowers couples to transform their financial narratives and work collaboratively towards a prosperous future.

Notable Quotes

• Deepika (00:52):

  “It feels like we are living paycheck to paycheck. And it stresses me because we just have the money we have, and then we wait for payday and we do it all over again.”

• Justin (05:52):

  “I have a full-time job, and this business is more of a side hustle.”

• Deepika (10:15):

  “It's scary. There's really not much there.”

• Ramit Sethi (13:15):

  “All the money that you just mentioned, the $4,000 a month on credit cards, where did that go in this CSP?”

• Deepika (36:56):

  “Going on vacation twice a year and not having to worry about credit card debt when we come back.”

• Justin (37:15):

  “Being able to provide for my son without worrying about where that money's gonna come from.”

• Deepika (60:13):

  “It's like, now the dollar can work for us and we know where to put our dollars.”

• Justin (93:23):

  “We're grateful for your help. We've been looking for someone to help us for a really long time and the fact that it was sitting on our bookshelf for the last two years made a lot of difference.”

Transcript Timestamps

For ease of reference, notable timestamps from the transcript are hyperlinked in the sections above.