238. "We’re in credit card debt again. Will this ever stop?"

Summary

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Podcast Summary: Money For Couples with Ramit Sethi

Episode 238: "We’re in credit card debt again. Will this ever stop?"

Date: December 9, 2025
Host: Ramit Sethi
Featured Couple: Otto & Gabby

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Episode Overview

In this emotionally charged episode, Ramit Sethi sits down with Otto and Gabby, a married couple in their 30s living in Phoenix with their young daughter. Despite a strong combined income approaching $180,000, they are trapped in a recurring cycle of credit card debt—having paid off and fallen back into debt five times over their relationship. Ramit digs into their financial and personal stories to uncover why they can’t seem to break free, challenging deeply ingrained money beliefs and habits along the way. The episode is a powerful illustration of how psychology, upbringing, values, and relationship dynamics often outweigh sheer numbers when it comes to financial change in couples.

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Key Discussion Points & Insights

1. The Debt Cycle: How Did They Get Here?

• Background: Otto and Gabby entered the relationship with debt (~$8K for Gabby, ~$2.5K for Otto), including significant student loans.
• Moving in together intensified permissiveness:
  • Gabby: “I think we had someone that, in a weird sense, gave us permission to do things we probably knew we shouldn't have.” [05:04]
• They enable each other into spending, often rationalizing purchases to make each other happy (e.g., new clothes, eating out, travel).
• Pattern: Pay off debt (sometimes via windfalls), swear things will change, but quickly relapse.
  • Notable Quote:
    • Otto: “We never told ourselves no.” [08:35]
    • Gabby: "We just do it, and then we figure it out later." [12:16]

2. Conscious Spending Plan (CSP) & The Numbers Behind the Story

• Net Worth: Negative $137,393
• Debt: $387,362 total – including $44,000 in credit card debt, $91,000 (Otto) and $26,000 (Gabby) student loans, IRS debt, loans for car/home improvements.
• Income: Highly variable (~$14,800/month gross, sometimes $18,000 NET in a month due to overtime/extra shifts)
• Spending Breakdown:
  • Fixed Costs: 83% (well above recommended, feeding anxiety and scarcity)
  • Investments: 0%
  • Savings: 9% (but only $1,000 in emergency fund)
  • ‘Guilt-free’ spending: Really 15–20+% ("We spend double what we think—sometimes $4,000/month or more if you factor in travel.") [54:46]

3. Emotional & Psychological Underpinnings

• Upbringing:
  • Gabby saw money used as a weapon during her chaotic childhood (parents racing to empty accounts during fights).
  • Otto’s immigrant family preached frugality/save, but he rebelled: "I’ve been told no so many times... I don’t want to tell myself no." [70:09]
• Trauma & Survival:
  • Both are shaped by formative crises—Otto as a Bosnian refugee, Gabby as a Hurricane Katrina survivor. This fuels a ‘live in the moment’ mindset.
    • Gabby: "We need to just live in the moment because when are our lives going to be over?... I think that's why we had that mentality with spending money." [99:44]
  • After a traumatic birth experience, Gabby’s priorities shifted further towards time and health over things: “I feel lucky to be here... What matters to me now is being healthy, spending time with my family... But to spend money on frivolous things... is not my priority anymore.” [26:42]

4. The Dance of Enabling & Deferral

• Relational Dynamics:
  • Rather than one partner reining in the other, both give permission at different times to spend in violation of their budget.
    • Ramit: “And the dance has begun...” [07:22]
  • Feelings of guilt and buyer's remorse ensue, but are quickly soothed by each other.
• Illusion of Control via Tracking:
  • Gabby meticulously tracks every expense, but admits: “That gives me comfort... but not a lot has changed.” [51:08]
  • Ramit: “You cannot actually change by tracking 250 numbers while eating chick-fil-a 10 minutes away from home. Those two are incompatible.” [53:21]

5. Avoiding Denial, Building a REAL Plan

• Facing the Facts:
  • “You are spending more than you make every single month... You’re not getting out of debt; you’re getting more into debt.” [56:22]
• Mental Gymnastics:
  • They rationalize expenses as 'rewards' for hard work, e.g., $170 Thai dinners.
    • Otto: “That's how I always rewarded myself. I treat myself.” [84:11]
  • Ramit: “Do you notice the mental gymnastics around rationalizing a freaking Chick-fil-A purchase? ...It’s the narrative that they have created for themselves.” [44:51]
• Ramit’s Challenge:
  • Move beyond the ‘tracking trap’ to actually change their spending behavior and their self-stories.
  • Build a vision for their family and align behavior toward it, not just rely on willpower or spreadsheets.

6. Action Steps & Breakthroughs

• Reallocating Spending:
  • Aggressively prioritize debt payoff—cut vacations until debt is gone.
  • Only three categories for discretionary spending: monthly date night (~$60), self-care/massage (~$170), possible babysitting (~$140).
  • Plan for emergency fund: $3,000/month contribution.
• No More Excuses:
  • Otto CAN and does make up to $15k/month take-home when he works aggressively—so there’s no income excuse.
  • Ramit: “Nobody who’s taking home $19,000 a month should have credit card debt. In no universe is that allowed.” [93:29]
• Behavioral Solutions:
  • Reward themselves through non-spending activities (e.g., sports, biking, walking, picnics).
  • Weekly finance meetings as a couple to maintain alignment and accountability.
  • Separate spending/savings accounts to avoid confusion and temptation.

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Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote | |-----------|---------|-------| | 05:04 | Gabby | “We had someone that, in a weird sense, gave us permission to do things we probably knew we shouldn’t have.” | | 08:35 | Otto | “We never told ourselves no.” | | 12:16 | Gabby | “We just do it, and then we figure it out later.” | | 20:57 | Ramit (to Gabby) | “You weren’t about to pay off debt. You’re actually about to take out more debt... Taking out a personal loan is not paying off debt... You’re not winning. You chose to lose. Do you recognize that now?” | | 44:51 | Ramit | “Do you notice the mental gymnastics around rationalizing a freaking Chick-fil-A purchase? ...It’s the narrative that they have created for themselves.” | | 51:08 | Gabby | “I feel like it gives me comfort in a sense.” (about logging expenses) | | 53:21 | Ramit | “You cannot actually change by tracking 250 numbers while eating chick-fil-a 10 minutes away from home. Those two are incompatible.” | | 70:09 | Otto | “I’ve been told no so many times... I don’t want to tell myself no.” | | 79:00 | Ramit | “People don’t want to deny themselves. So we have to think of it a different way... The way you will sustain changes is to give yourself a bigger, more powerful vision that you are working towards. Denial lasts about a week, but a powerful vision can last a lifetime.” | | 93:29 | Ramit | “Nobody who’s taking home $19,000 a month should have credit card debt. In no universe is that allowed.” |

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Important Timestamps

• Budget and CSP Reveal: 34:51–44:51
• The “Dance” of Spending/Enabling: 5:04–13:22
• Tracking Illusion vs. Real Change: 50:09–53:21
• Behavioral Breakthrough: 78:16–79:55
• Building New Routines & Self-Rewards: 84:07–88:13
• Income Realities & Aggressive Debt Payoff: 88:22–94:54
• Wrap-Up and Reflections: 95:47–97:17
• Follow-Up from Otto & Gabby (post-episode): 98:54–102:54

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Episode Takeaways

• Debt cycles are rarely about numbers—they’re about emotional patterns, relationship dynamics, and childhood scripts.
• Tracking spending without changing behavior is fantasy. Real change requires big, sometimes uncomfortable shifts in habits, self-perception, and partnership.
• Couples in real debt cannot justify “reward spending”—every dollar must be directed to their shared goal, until their financial house is in order.
• Shared vision and accountability are non-negotiable. Willpower isn’t enough; systems, clear plans, and mutual buy-in are needed to break the cycle.
• Privilege of high income means little without discipline or values-aligned actions. The solution is rarely “just make more”—it’s what you do with what you have.
• Personal and family histories matter; understanding your “money story” can be key to rewiring harmful scripts.
• Choosing discomfort now—aggressive debt reduction and strategic sacrifices—enables future freedom, rather than endless struggle.

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Post-Episode Update (Follow-Up)

One Month Later:

• Paid off five credit cards ($9,900), on track to pay off four more and Otto’s car loan soon.
• Saved $3,000 for their emergency fund, started a sinking fund.
• Set up separate spending and savings accounts to avoid draining emergency funds.
• Allocated $200/month for self-care, focused on finding free rewards.
• Weekly money meetings—now led by Otto—to ensure ongoing alignment and relieve Gabby.
• Gabby credits their shared background as survivors (refugee crisis, Katrina) as a major factor in their shared “live in the moment” money scripts.

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Conclusion

This episode is a clinic in how couples can be tripped up by subconscious beliefs and relational patterns, despite logical intentions or even high income. Ramit delivers tough love, humor, and actionable advice—emphasizing that true change comes not from tracking or willpower, but from rethinking your relationship with money and with each other. Otto and Gabby’s journey reveals that breaking free from the cycle of debt and anxiety is possible with honesty, partnership, and a reset of core money stories.

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For more practical tools, including the Conscious Spending Plan and money coaching, check out iwt.com.

Transcript

[Ramit Sethi]

Take a look at your calendar right now for the next couple of weeks. What do you see? More importantly, when you're looking at it, what do you feel? Do you feel excited about the events that you have coming up? Do you feel calm about how much open space you have? Do you feel dread or overwhelm? I want to show you how I apply my money principles to becoming Time Rich. Time Rich is the name of a new live event that I'm running on December 18th. And and we're going to sit down and redesign your calendar around what you actually want to do. I'm going to guide you through setting up daily and monthly time blocks that are protected just for you. And I'll show you some of the specific productivity techniques that I use in my own life. Because living a rich life is about more than just money. Join me on December 18th at 8pm Eastern. Register now at iwt.com/time rich.

[Otto]

We were like, we have all these credit cards that don't have any balances on them, do whatever we want. And then we did whatever we want. And then we went right back into debt.

[Gabby]

44,000 in credit card debt wasn't necessary.

[Ramit Sethi]

How long did it take you to go from out of debt with your credit cards to back in debt?

[Otto]

I think it was less than a year.

[Gabby]

Maybe we could lose everything. House, car, our entire livelihood.

[Ramit Sethi]

What are some other ways to reward yourself?

[Otto]

That's not spending money. I don't have one. That's how I always rewarded myself.

[Gabby]

I know I want to change, and I think I had convinced myself that I was changing.

[Ramit Sethi]

Just to put it very bluntly, you cannot actually change by tracking 250 numbers while eating chick fil a 10 minutes away from home. Those two are incompatible. Listen to this line from today's guest application. We have gotten in and out of $50,000 of debt at least 5, 5 times over the course of our relationship. Why can't we figure it out? If you've ever wondered how people stay in this cycle of debt for years, listen to this conversation. Today I'm speaking to Otto and Gabby. They're a married couple in their 30s. They live in Phoenix with their daughter, who's almost 2 years old, and together they earn almost $180,000 a year. And yet they've been trapped in a cycle of credit card debt for the entirety of their relationship. They pay it off, they swear it'll be different the next time around, and somehow they end up right back in it. Now, their backgrounds explain a little bit of it. Both of them have experienced a lot of fear and conflicting money messages around money. But there's more. After all, they make a lot of money, so why can't they pay this debt off? What is stopping them? The question today is, can they break free from from this fear and chaos and actually start living a rich life? We're going to find that out soon. I'm about to open up Otto and Gabby's conscious spending plan which breaks down their net worth, income and where they spend their money. This is the same tool that I use in every episode. Their assets, $238,400. Investments $10,569. Savings, $1,000. Debt, $387,362. That gives them a total net worth of negative $137,393. All right, fixed costs are 83%. I suspect this has a lot to do with some of their financial attitudes and behaviors. Investments, 0%. Well, that explains a lot. Savings, 9%. Interesting. Guilt free spending, 8%. I don't believe that. I have a lot of questions, but before we dive in, a quick shout out to our new listeners. Welcome to Money for Couples. Drop a comment below and let us know where you are tuning in from. And please remember that our guests are real people sharing their personal stories. That takes a lot of courage. You got to ask yourself, would you come on a show like this, seen by millions of people and share every number from behind closed doors? Let's keep the comments supportive and judgment free. My community knows how hard it is to ask for help and I hope you will join us in rooting for every guest on this show. Now let's get started with Otto and Gabby. Let's go back to the beginning of this debt cycle. When did it all begin?

[Gabby]

We both came into the relationship with debt. I think at the time I had maybe like 8 to $10,000 of debt.

[Otto]

An auto, maybe like 2,500 if that.

[Ramit Sethi]

This is credit card debt or student loans. Oh, oh, I was just talking as usual. Nobody counts student loans. They go, oh, student loans. That thing over there which is totally non dischargeable in bankruptcy. That doesn't count. Okay, so you're talking about credit card debt.

[Gabby]

Yeah, credit card debt alone.

[Ramit Sethi]

8K for Gabby, 2k for Otto. And the student loans were a whole different thing. Yeah, all right, fine.

[Gabby]

I feel like when we moved in together, I think is when we sort of started to rarely deny ourselves. Let's say.

[Ramit Sethi]

Why did that happen with the two of you versus independently? Well, I guess it also happened independently. Cuz you were both in credit card debt. So what happened when you two of you moved in together? From a financial perspective, I think we.

[Gabby]

Had someone that, in a weird sense, gave us permission to do things we probably knew we shouldn't have. Because I think independently, yes, we had credit card debt, but obviously, us now being almost seven years later, we've given each other permission to go even deeper than we probably would have if we were still alone.

[Ramit Sethi]

Does it show up in any particular way? Like, one person's like, let's go out to eat. And the other one's like, no, like, we should stick to our numbers. And the other one goes like, ah, come on. Like, it's Friday. Any of that kind of stuff happen in your relationship all the time.

[Gabby]

All the time.

[Ramit Sethi]

Who's the one who says it?

[Otto]

Both of us. At different times.

[Ramit Sethi]

Give me the example.

[Otto]

So we'd be on a budget. We're not buying new clothes or anything. And Gabby, for example, she's like, let's go to the mall. Like, oh, we're just going to look around. I'm not going to buy anything. Of course, she walks right into her favorite store, anthropology, and is like, oh, look, this looks cute. And I'm like, okay, yeah, it looks cute. And then, oh, but this looks cute, too. I'm like, oh, yeah, that looks great. Like, you should definitely get it. And then Gabby's like, no, we just, like, we talked about a budget. I'm like, oh, but it looks so good on you. It's going to make you happy. I already know it. Let's just do it. And that'll be the cycle for me. Any time. She looks great in outfit, which she looks good in everything. And I'm like, okay, well, you have to get it because it looks great. Why wouldn't you get it?

[Ramit Sethi]

What about the reverse? Gabby? Give me an example.

[Gabby]

With me, I would say sometimes it's related to food. Like, okay, we're going to be on a budget. We're not going to eat out as much. We're going to cook at home. And, oh, I really don't want to eat anything that's at home, babe. Let's go out to eat. Or we haven't been to breakfast in a while, or, like, let's go out to dinner. And my bring up, like, oh, I thought we're in a budget. I'm like, oh, actually, you know, you're right. Let's stay inside. He's like, no, if you want to go, let's go. I'm like, okay, I do want to Go, let's get out of here and let's go have dinner.

[Ramit Sethi]

What do you think's going on in these examples that you giving me the clothing, the food, what. What do you first notice about the way that you describe it?

[Otto]

As soon as I see Gabby's face light up about something that I mentioned or, you know, her face lights up. So of course I want to do it.

[Gabby]

And I noticed that. I know if I bring it up, he's also going to want to get on board, even if he's like, you know, we should stick to the budget. I also know that he wants to eat out as well.

[Ramit Sethi]

And the dance has begun. You remember those old 1920s videos? You know, it's very coy, and somebody taps on the shoulder, and then the other one goes, how about a dance? And everyone's, like, dancing in circles like they used to do. The dance has begun. So Gabby brings up going out or a shirt. Otto says, I want to make you happy. So you go home with this bag in your hand, whether it's from Target or anthropology or whatever. What happens then?

[Gabby]

Guilt. We'll get home, we'll get settled, and I will immediately start thinking, I did not need this.

[Ramit Sethi]

And then.

[Gabby]

And then Otto will swoop in and say, no, you should. I'm glad you got it. You looked great. It's going to make you happy. You should keep it 80% of the time. It'll make me feel better, and I will keep the item, and we will go on with life.

[Ramit Sethi]

Otto, in your application, you wrote, we've gotten into debt and out of debt at least five times, and now we are back in debt. If you had to describe how that happened in one sentence, what would you say?

[Otto]

We never told ourselves no.

[Ramit Sethi]

Got it. And hearing yourself say that out loud, how does that feel?

[Otto]

Regretful. Now in the moment. Great.

[Ramit Sethi]

Okay. I appreciate the candor. Gabby, what about for you? What is. When you hear Otto describe that, what do you think?

[Gabby]

I think that we were consistently living above our means, and similar to what he said, we were living in the moment and we enjoyed the moments. But now I agree, it feels. Actually, no, I don't feel like I regret it because I really enjoyed the thing that we did, some of it. But I sometimes wish that we had denied ourselves a little bit more and lived a little less in the moment and more for the future.

[Ramit Sethi]

When. When you are living in the moment, what feels good about it? Give me an example.

[Gabby]

One of the things I think of is us living in the moment is when we traveled to Europe two Years ago, we were in Switzerland and went to an amazing spa that cost, I think, a thousand dollars a person. And it was luxurious and calming and relaxing and everything that we needed. And that felt good. Really good. So when I say I don't regret, it's moments like that. The moments I do regret is going to target and dropping 2, $300 and not having anything to associate that with the money, if that makes sense.

[Ramit Sethi]

How do you decide when you're going to target or when you're going to a Swiss spa, if you can afford it?

Wow. Both smiling okay, sorry. What's the answer?

[Gabby]

We don't. We just do it and then we figure it out later is what historically has happened?

[Ramit Sethi]

Do you figure it out?

[Otto]

I mean, it gets paid. It does, one way or another.

[Ramit Sethi]

How did that Swiss spa get paid for?

[Gabby]

So that was earlier in the trip. So we still had the budget for that. It was things later in the trip that caused us to go over budget. And then when we got home, we were a little bit tight for a month or two because we had overspent on our trip.

[Ramit Sethi]

How did you make it up when you got back home?

[Gabby]

Working extra?

[Otto]

Yeah.

[Ramit Sethi]

Ah, both of you?

[Gabby]

I think at the time it was mainly auto. So I work traditional nine to five and he has more of a traditional RN 12 and a half hour schedule. So he had the ability to pick up more within a week's time frame.

[Ramit Sethi]

So was it worth it to you, Otto, like when you were working the extra shifts a month later, were you like, yeah, I'm fine with this because we had that beautiful spa experience or were you like, I don't like this.

[Otto]

When it's to repay or remake up something like that. No, I don't regret it at all. I would do it any day. But when it's to repay things like random little trips, you know, like we went to target and spent 500 on new bedding because it was the beginning of the pandemic and we, we didn't.

[Ramit Sethi]

Know what to do.

[Otto]

We were just inside the house and I'm like, I want to make it look better. So we went to Target and spent a bunch of money. Those things. Yeah, I regret it. I don't want to work extra for those. But going to Hawaii, going to. On any trip that, like, we make memories, I don't regret it any bit.

[Gabby]

And the dance continues at a different date at a different time.

[Ramit Sethi]

Beautiful. Do you see, you see what I'm doing with my fingers here? It's the dance. Beautiful.

[Otto]

We love dancing. I mean, I always Feel like after that situation, we always have, like, an outsider looking and type of realization, but we forget. It's like, okay, well, it's already spent. We'll just move on. We'll make better decisions next time. And then we don't. And we don't. And then we don't. And then here we are talking to you about it.

[Gabby]

We just do it, and then we figure it out later.

[Ramit Sethi]

Gabby, what do you think hearing this dance?

[Gabby]

That it's a cycle I'd like to break because it's not sustainable.

[Ramit Sethi]

Would you, though? Candidly, the dance sounds great to me. What's the problem? It actually sounds quite nice to me.

[Otto]

We have different priorities now that we have a kid. That's my main thing, is that we have different priorities.

[Ramit Sethi]

How old is your kid?

[Otto]

Just 21 months.

[Ramit Sethi]

20 months. Okay. Gabby, is that your answer? Because what do you. I mean, like I said, it sounds good to me.

[Gabby]

No, that's not the only answer. I am tired of this dance because that has cost us thousands of dollars.

[Ramit Sethi]

Why? You told me that. You figure it out when you get home. Otto works extra. He doesn't really resent it. Except when you spend extra at Target or things that are not particularly memorable.

[Gabby]

It costs us monetarily, and it costs us having quality time as a family, because we have to work and make it up and pay for it.

[Ramit Sethi]

Mm.

[Gabby]

And clothes aren't that important to me anymore. They used to be. I feel like I held a lot of value in what I wore, in my appearance, but I don't feel that way anymore. At least not as much.

[Ramit Sethi]

When did that change? Was it 21 months ago?

[Gabby]

Probably. Yeah.

[Ramit Sethi]

Before you judge Otto and Gabby's spending, take a second to reflect on your own habits. In my opinion, almost every couple has their version of this dance. Maybe it's not credit card debt. Maybe it's buying the latest smartphone, even when your current phone works fine. Or splurging on a weekend getaway because you deserve it. Or upgrading your car when the old one is still running smoothly. Now, some couples have a dynamic where one person tempts the other by dangling a carrot, and then that person gives in. You both know better, but you do it anyway. And then you promise next time will be different. Or you say things like, we've got to do better, but it really never is, because that is the system and the dynamic that you have built. But Otto and Gabby are not just dancing for two anymore.

[Otto]

They have a little girl.

[Ramit Sethi]

She's watching and learning how money works from her parents. She's developing her relationship with money, which she's going to carry into adulthood. So I want to know why they keep spending money the way they do. Let me try to find out. Next Listen up. I'm going to solve your holiday gift shopping problems in the next 10 seconds. You don't have to waste your money on a last minute sweater or a random gift card. Instead, get your loved ones an aura frame which they will absolutely love. Aura frames are beautiful digital photo frames that are easy to set up and can hold an unlimited number of photos and videos on a rotating display. My colleague regularly adds photos and videos each month so she can relive those beautiful moments like a video of her daughter learning to swim or ride a bike for the first time, and she can enjoy those every single day. You can share the photos and videos easily straight from your phone and this is the perfect gift. Every frame comes packaged in a premium gift box with no price tag for a limited time. Save on the perfect gift by visiting auraframes.com to get $35 off Aura's best selling Carver mat frames. It's named number one by wire cutter by using promo code RAMIT at checkout. That's a U R A frames.com promo code RAMIT. This deal is exclusive to listeners and frames sell out fast so order yours now to get them in time for the holidays. Support this show by mentioning us at checkout. Code RAMIT terms and conditions apply.

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[Otto]

You mentioned earlier in the conversation student loans not being dischargeable in a bankruptcy. I filed for bankruptcy in 2016. Did it go through my bankruptcy? Yes. But I didn't realize what I had to do for my student loans. They sent me my first student loan payment, and it was $827. My income was not what it is now, and I couldn't afford that. So I just. I was like, well, I'm not paying this. I can't afford this. And just didn't do anything for about seven years about it.

[Ramit Sethi]

On a second. You declared bankruptcy before you and Gabby were together? Correct. Why?

[Otto]

It was credit cards. It's a car. I, like, bought a brand new car. It's a Nissan Versa because I couldn't afford anything else.

[Ramit Sethi]

Gabby, did you know this when you both got together?

Yeah.

[Otto]

You did. I told you.

[Gabby]

Okay. Yeah.

[Ramit Sethi]

Did you talk about debt before you got in a relationship?

[Gabby]

Not that I can recall.

[Ramit Sethi]

You know what's interesting? Money is almost never a concern for people when they're dating. Truthfully, nobody really cares. If you like somebody, they go, oh, I have student loans. Nobody cares. Oh, I have $20,000 in credit card debt.

[Gabby]

Mm.

[Ramit Sethi]

That sucks. People do not connect money to their future. As shocking as it is to hear, it is extremely rare that people will discover something about their partner, debt, financial infidelity, any of it, and actually change or end a relationship. It almost never happens. So I'm not surprised here. Are you ever skeptical of your relationship, the two of you together? When you're discussing money? I ask because you have not been successful at paying off your debt and keeping it off.

[Otto]

I don't really like talking about money, if I'm being honest.

[Gabby]

In a sense, yeah. I remember maybe three or four years ago, we were on vacation actually, at the time, and I was feeling so anxious about our money situation, how much we had spent. We were in Markoska, Croatia.

[Ramit Sethi]

Okay, all right.

[Gabby]

Which is a beach town in Croatia.

We like to travel. And we had just had a beach day, and we came back in the room, and I am the one who is, I guess, the money person in the relationship. I like to keep tabs. I'm looking, and I'm like, oh, we're already over budget. I'm like, you know, I really Wish we could just have a fresh start. And we just did not have credit card debt. And I'm like, you know what, babe? I'm going to apply for a personal loan, a debt consolidation loan. At the time, Otto I'm pretty sure was like, okay, like, just kind of, like, off, kind of doing his own thing in the room. And I applied for it and we got it, and I am over the moon. I'm so excited. I'm telling him how this is a fresh start for us and this is going to be the time we need to stick to this budget. He's like, you always get really excited, excited when we're paying off debt. I'm like, yeah, because I feel like this is going to be the time. And I feel like in that moment, he was probably feeling skeptical, like, okay, this is going to be the time.

[Ramit Sethi]

Wow.

[Gabby]

This is going to be the time as we're currently on vacation in Europe with, like, two more weeks of our vacation to go.

[Ramit Sethi]

Very, very powerful observation, Otto. Let me repeat it for everybody. You get so excited when, what was it, Gabby? When you are about to pay off debt. Is that right?

[Gabby]

Yep.

[Ramit Sethi]

Funny, though. You weren't about to pay off debt. You're actually about to take out more debt. Otto, what did you mean by that observation? I find it very intriguing.

[Otto]

Well, it's like, it's. It's standing, saying, I have a budget of a Nissan Versa, but you're standing in a BMW dealership saying, oh, yeah, this is going to be great for us, but we don't have the budget for this. So that's why I'm like, you don't have the budget for him BMW, you have a budget for a Nissan Versa. So why are you, why are you so happy about this? To be in this place?

[Ramit Sethi]

That's interesting. I read it a little differently. Like, in my opinion, what Gabby was doing was she's in debt, driving a BMW at the BMW dealership, and then she says, you know what? We should get a Nissan as well. That will be cheaper than getting another BMW. Like, taking out a personal loan is not paying off debt. It's actually just taking out more debt to shift the way that you said we got approved. You should actually be dreading that. You should be angry at the personal loan company. Mother. You, personal loan company for allowing us to apply and for agreeing because, you know, we're not credit worthy, but we are dupes. We got duped into thinking that taking out more debt is winning. You're not winning. You chose to lose. Do you recognize that? Now?

[Gabby]

Now, yes.

[Ramit Sethi]

And how are we doing with the personal loan?

[Gabby]

Oh, it's paid off.

[Ramit Sethi]

And how about the credit cards?

[Gabby]

We'll get to that in the conscious spending plan.

[Ramit Sethi]

Okay. You've gotten in and out of debt around five times. Otto, you mentioned what happened when you got out of debt. That's what I want to know. How'd you do it?

[Otto]

Different ways. One of the times. Unfortunately, Gabby's father passed away and he had a, like, life insurance policy. So we use majority of that money to pay off debt.

[Ramit Sethi]

How much?

[Gabby]

It was around 50,000.

[Otto]

Okay, so besides student loans? Besides, it was just like, credit cards. And like, I think we paid off Gabby's car at the time. And then we were like, now we have all this. All these credit cards that don't have any balances on them. Do whatever we want. And then we did whatever we want, and then we went right back into debt.

[Ramit Sethi]

How long did it take you to go from out of debt with your credit cards to back in debt?

[Otto]

We're very efficient. I think it was less than a year, maybe.

[Ramit Sethi]

Okay.

[Otto]

We literally just did whatever we wanted. We bought whatever we wanted, went wherever we wanted. When we booked our trip a few years ago to Europe, we're like, oh, first class upgrade, Cool. I've never been on a first class flight. Let's do it. It was great.

[Ramit Sethi]

Money doesn't come into the question. Like, a first class upgrade, that's a lot of money. You know, I can understand, like, hey, let's get an extra bag of peanuts at Target or something. But like a first class upgrade, that's a lot of money. Most people would pause and be like, wait, 3,000 or $11,000?

[Gabby]

It was actually with $700. That's why we were like, oh, we could afford that. Well, I afforded probably not the right term to use for that, but we're like, oh, well, this won't eat into our budget too much. Let's do it. So we did.

[Ramit Sethi]

So 700 bucks for that doesn't flash like a signal. How else did you get out of debt after you ran up the credit cards a year later?

[Gabby]

Consolidation loans. Okay, so we've had at least 3.

[Otto]

Second mortgage on the condo that my family owned loans.

[Ramit Sethi]

Oh, you took out a second mortgage on the family condo to pay off the credit card debt?

[Gabby]

Yeah.

[Otto]

This last time. Yes. Yes.

[Ramit Sethi]

Got it. What's the type of conversation happening when you're doing these things like debt consolidation, second mortgage? Do both of you believe what you're saying when you're having that conversation in the Moment.

[Gabby]

Yeah, I believe it. And I'm hopeful, very hopeful that this is going to be the last time.

[Otto]

I, I, in the moment, I'm, I'm like, this is. We're on the same page. Yeah, we got this. This is it.

[Ramit Sethi]

Was there ever something you were considering buying or did buy that did flash a signal and said, whoa, that's a lot of money.

[Otto]

Not really. Honestly.

[Ramit Sethi]

Okay.

[Otto]

I just feel like we could technically afford it because I could technically work. That's how I thought about it.

[Ramit Sethi]

This is the, this is the plight of people who work on like a freelance or hourly basis or can pick up shifts. They start to calculate everything by number of hours. I can pick up three shifts and.

[Otto]

Like, fine all the time. I'm like, oh, I just have to work this many more hours of overtime and I can do it.

[Ramit Sethi]

Yeah.

[Otto]

And it was a lot.

[Ramit Sethi]

It's a trap.

[Otto]

Yeah, it is. Because it's not. My job is not very easy to be just picking up extra shifts. Like last year, I worked 24 days in a row during our hottest season, which means a lot of very dead people came into our facility that we had to revive. So working 20, I literally tell. Tell Gabby, like, I feel like I am a war veteran coming out of something and I don't even know how to function at home. Meanwhile, she was not functioning well at home because we had a six month old.

[Ramit Sethi]

What else changed for you? When was it? Did you have a boy or a girl?

[Gabby]

A girl.

[Ramit Sethi]

A girl. Okay. What changed for you when you had your daughter?

[Gabby]

So I had a very traumatic birth and both me and my daughter almost died.

And I feel like that moment changed a lot for all of us. I feel lucky to be here. I feel very lucky that she's here. And the things that mattered before do not matter to me.

What matters to me now is being healthy, spending time with my family while I'm here, and making memories with them. And so I'm willing to spend money on travel and to do and to see things that I've never seen before with my family. But to spend money on frivolous things that I deem as personally frivolous is not my priority anymore. It's not my goal. I could care less about a shirt or going to the mall. What I do care about is getting to the point that Auto doesn't have to work as much, that I don't have to work as much so that we can get time back. Because this time is being spent at work to pay for the things we've done. Whereas I Want that time spent as a family.

[Ramit Sethi]

Okay, I think I understand. I'm sorry you had to go through that. It sounds awful. Otto, do you feel the same way? Is that the major change that happened when your daughter was born, financially speaking?

[Otto]

Yes. And I think also more recently are. I'm transgender. I've been out for the last, like, three or four years, and with the most recent political things, I don't feel as safe. Not that I really felt very safe. I'm a Muslim refugee from Bosnia. My dad stayed back to fight in the war, and I was with my mom and older sister and her.

[Ramit Sethi]

Wow.

[Otto]

I was 7 days old when we had to leave our town. I'm a naturalized citizen now, but I think more. So my goal has changed from, like, spending money, you know, just randomly to trying to get out of the country. And so that's the biggest motivator for me to get on the right path. And that's like, that's when I said I want to plan for next steps. It's next steps so that we could go. We're already supposed to be in. In Europe in September, and now it's October and we're not there, and our plan has shifted to five years from now.

[Ramit Sethi]

God, this makes me so mad. I'm that we live in a country where someone who fled a genocide no longer feels safe to live here with his family. I think it's very troubling that we have entire groups of people who don't feel safe simply for existing. You know, I watch a lot of horrible things online, and very little of it affects me much. I've seen a lot of. I see some of the comments people make towards me. What, do you want to make fun of my eyebrows? Go ahead. But I watched these ICE videos of families being ripped apart, no warrants, masked men refusing to identify themselves, people being sent to foreign torture prisons illegally. And it sickens me. Now, why am I talking about this? Isn't this just an innocent money podcast? Well, the answer is that money is political. Politics is why your housing is expensive, why your health care is expensive, and why guys like me get huge tax cuts while poor and middle class Americans get huge fees and costs burden on them. You know, it's funny. Once in a while I see reviews of this podcast where people say, ramit got too political. Deep down, they want me to teach them how to maximize their credit card rewards and then shut my mouth. I'm going to be really direct. That's never going to be me. If you want someone to give you five ways to save on sourdough bread. I'm not the right person for you. What I do show you is how to use your money to live a rich life, how to invest, how to craft your money dials, and how to be generous with other people. So in light of this, I'm going to start highlighting organizations that I want us as a community to support. For example, my wife and I have donated to Immigrant Defenders Law center which is a nonprofit organization. They provide free legal services to refugees and asylum seekers. I'm going to ask you to donate and leave a comment below telling me why you did. Small amounts make a big difference, especially with a community of our size. Right after this break, we're going to get back to Otto and Gabby and dive into their csp. Thank you for listening and thank you for supporting the causes that I myself support as well. Check out what one of my listeners, Lauren, had to say about Facet this episode. Sponsor My wife and I are one of your Facet success stories. We were using a financial advisor who was one of her clients. After he tried to sell us whole life insurance and was charging us 1.5%, we decided to move to Facet. Running the numbers on what we would have paid him over the next 25 years made us sick. We love the non salesy advice we get from our planner. Now we can't thank you enough. Thank you for sharing. I'm very selective about the sponsors that I choose to work with and I really appreciate the feedback. Facet charges a flat membership fee for financial planning, not a percentage of your portfolio. You'll get access to a team of CFP professionals. Always a cfp, always a fiduciary who help you create a personalized financial plan. That plan is not static. It evolves with your life whether you are starting a family, changing jobs or getting close to retirement. Right now Facet is waiving their $250 enrollment fee for new annual members and if you Invest and maintain $5,000 within your first 90 days, they'll add $300 to your brokerage account. Head to facet.com/ramit to see which membership Core plus or Complete is right for you. Again, that's facet.com ramit I'm not a member of Facet and I have an incentive to endorse Facet as I have an ongoing fee based contract for cash compensation based on this endorsement. All opinions are my own and not a guarantee of similar outcomes and I am very selective about who I choose to work with.

All right. No one likes it when I talk about death, but listen closely. You're going to die. Let's just talk about it. Let's acknowledge it, let's plan for it. Like if I were hit by a bus tomorrow, I want to know that my family is set up and protected because I'm willing to have these awkward conversations and talk about what would happen next. If you have kids or if you have people who depend on your income, that could include getting term life insurance from Fabric by Gerber Life. Fabric by Gerber Life is term life insurance you can get done today. It's made for busy parents like you. It's all online, on your schedule, right from your couch. You could be covered in under 10 minutes with no health exam required. If you've got kids, especially if you are young and healthy, now may be the best time to lock in low rates. And even if you have life insurance through your employer, that may not be enough to protect your family, especially if you leave your job. Fabric offers flexible, high quality coverage for less than a dollar a day. And it's backed by Gerber Life, trusted by millions of families for over 50 years. Join the thousands of parents who trust fabric to help protect their family. Apply today in just minutes at meet fabric.com/ramit. That's meet fabric.com/ramit me. Fabric.com/ramit policies issued by Western Southern Life Assurance Company not available in certain states. Prices subject to underwriting and health questions.

I really appreciate you both sharing what you did with me. Sometimes I'm a little dismissive when people kind of run up a bunch of debt and then they have a son or a daughter and then they go, I want to do it all for the kids. And the reason that I'm a little dismissive of it, I probably shouldn't. And I think you're both a great reminder. But the reason that I don't love that reasoning is if you can't make a change for yourselves, it is very difficult to just take that focus and focus it on a little baby. A baby can be spiritual and can change everything, but it doesn't change the way that you look at money and treat money. You have to do that yourself. What I'm hearing from you is you actually have a bigger reason. You have a bigger, much more powerful reason, and I'm grateful for that because we probably have to make some serious changes today. Would you both agree?

[Gabby]

Absolutely.

[Otto]

Yeah, Absolutely.

[Ramit Sethi]

Can we take a look at the numbers?

[Gabby]

Let's take a look at the numbers.

[Otto]

Gabby's always been into finances. I knew she would Be excited about this.

[Gabby]

And I was. I was excited, and I was shocked that he had applied.

[Ramit Sethi]

Truthfully, it's kind of interesting, right? Like, Otto, you applied because you want Gabby to be happy. You find that interesting?

[Otto]

I. Cause I feel like Gabby and I talked about our finances more recently, and we thought we had a very good plan. And it's been going okay, but we're still not sure how to get to where we want to be. And when I say it's been okay, it's. It's. It's us paying off debt. That's. That's literally our conversation.

[Ramit Sethi]

All right, let's take a look at the csp. Gabby, can you read off in the net worth box the word in bold and the number in full next to it for this entire box, please?

[Gabby]

Yes. Assets, $238,400. Investments, $10,569. Savings, $1,000. Debt, 387,362, for a total net worth of negative $137,393.

[Ramit Sethi]

All right. How do you feel about those numbers?

[Gabby]

I wish that they were different, but this is where we're starting, and we're going to change things.

[Ramit Sethi]

Otto, how do you feel about those numbers? Like, why?

[Otto]

Because I wish they were different. But these are all the choices we've made.

[Ramit Sethi]

What do you see when you look at these numbers?

[Gabby]

If something were to happen to one or both of us, we would not be doing very well in terms of paying bills. In terms of debt, we have no emergency fund. We have nothing to fall back on. That's not enough savings to get us through a week.

[Ramit Sethi]

Truthfully, what would happen?

[Gabby]

We could lose everything. House, house, car, our entire livelihood.

[Ramit Sethi]

I'll read off some of the sub accounts that you noted here. His student loan, $91,000. Her student loan, 26,000. Credit cards, 44,000. IRS, 23,000. A air conditioning loan, 16,800. Auto loan, 12.6 K, family loan, 5,400 and home loan, 166,000. What do you see when I share those numbers out loud?

[Gabby]

Choices. And I feel anxiety. I feel regret.

[Ramit Sethi]

Which. Which parts do you feel regret over?

[Gabby]

The credit card especially. I just think it wasn't necessary. 44,000 in credit card debt wasn't necessary.

[Ramit Sethi]

A lot of things aren't necessary.

[Gabby]

This is true, but 44,000, that's not including, like, our bills are paid. All those things. This is just extra. Did we really need it?

[Ramit Sethi]

Did you?

[Gabby]

No, we didn't. Did we want it? Yes. And now we're at the point where we're going to have to pay for it. And paying for it sacrifices time.

[Ramit Sethi]

Okay, Otto, what about you? What do you see?

[Otto]

When I share those debt numbers, I feel like buying. And I'm not blaming my parents, but if I. I feel like if I had a little bit more guidance, I feel like some of these choices wouldn't have been made.

[Ramit Sethi]

Otto, can you read off your combined monthly income, please?

[Otto]

$14,830.

[Ramit Sethi]

That's the gross. So combine, the two of you make $177,960. Did you know that it's actually more. How much more?

[Gabby]

This is net, like take home. Anywhere between 6,000 to the highest. 18,000.

[Ramit Sethi]

18,000Amonth net, yes.

[Gabby]

In January of this year, he brought home $18,964.

[Ramit Sethi]

What the. You're a nurse, right?

[Otto]

Yeah. So I make like 43, almost $44 an hour.

[Ramit Sethi]

That's 80k, 85k, 86k, something like that.

[Otto]

Yeah. So plus, with like our extras that we have, I just make a lot.

[Gabby]

Plus, he was working nice at the time.

[Ramit Sethi]

And what does that get you?

[Otto]

18% difference. Oh, base pay. And then we have like, what this thing is called pssp, and you get like an extra $500 per shift.

[Ramit Sethi]

Wow. Gabby, are you a nurse as well?

[Gabby]

I am.

[Ramit Sethi]

Do you have the same situation?

[Gabby]

No. So he works traditional RN schedule of 12 and a half hour shifts. I'm an RN case manager, so I work five, eight and a half hour shifts.

[Ramit Sethi]

Five, eight. Okay, got it. Well, let's take a look at this because this is quite interesting. So your net right now is $10,860 combined. We show auto's take home as 6,600. But you're telling me that it could go up to as much as 18,000 in a month?

[Gabby]

Yeah. Last paycheck this month he made $10,606 net.

[Ramit Sethi]

So is it like, Otto, if you're just like, I want to make 10,000 next month, you can reliably do that pretty often, yeah. Amazing. Oh my God.

[Gabby]

We were trying to be conservative. Like if he didn't work a bunch of extra shifts, like this is what our take home would be. But realistically, with us trying to get out of debt to accomplish these goals, he's been able to pick up more to allow us to get out of debt faster.

[Ramit Sethi]

All right. I have a vision of what we're going to have to do. You might not like it, but you don't have to like everything I suggest to you. You may just Want to think about it and hopefully do it. We'll get to that. Your fixed costs are 83%. No wonder you feel anxious about money. Anyone with a 8 in front of the number on their fixed cost is going to feel anxious, worried, scarce about money. It's too much. Yeah, you can't do it. Let's take a look though. It's your debt payments at $3,075 a month that are the most expensive. Now let's take a look. You got Discover, Sapphire, Freedom, Amex, Amex Gold, Citi Venture, Platinum, Quicksilver. What the. Why do you have so many credit cards?

[Gabby]

Living above our beans. And when I say that it was during a time when we were heavily in debt, I mean, we're still in that time. Truthfully, I believe we weren't in debt and was like, oh, our credit score is really good. Let's see if we can get this card.

[Ramit Sethi]

Why?

[Gabby]

For no good reason.

[Otto]

Because we're stupid.

[Ramit Sethi]

We just think, no, you're not stupid, but you're, you're rewarding, you're being rewarded by the wrong things. Yeah. Investments are at zero. You are doing a little bit of pre tax investment, about 1100 bucks a month, which is good. Moving along. Your Savings are at 9%. Okay, well, this is obviously a lie. $1,000 a month to the emergency fund. And guess how much they have in their emergency fund. $1,000. So what, did you guys set this up like two days ago?

[Otto]

No, in the last month.

[Ramit Sethi]

In the last month, like, like just coincidentally. We're going to talk to Ramit Sethi. Let's set that freaking savings account up, huh?

[Otto]

We've had the savings account for them for all of our relationship. It's just been. There's sometimes been zero and there's sometimes been 10,000 and other times there's been less. Like when Gabby gave birth, we had about 12,000 in savings and I just started working at the job I'm working and her insurance for maternity, maternity leaves didn't kick in and I had to take unpaid time off because of the traumatic birth. So we relied on those savings.

[Ramit Sethi]

So that's like a good example of an emergency. That is a good example of one for sure. You know, it's interesting people's relationship with their savings account. I think your example for both of you with this traumatic birthday, perfect example. I would have tapped that in a split second. Just like you did. Great work, parent. That's super sick. You need to get on the first plane at an airport. I don't care about costs. I'M getting on the first plane. Boom. Those are the kind of things we're talking about. But the fact that you have $1,000 in savings is extremely problematic.

[Gabby]

It's very much so alarming.

[Ramit Sethi]

It's. Yeah, it's alarming. That's a good way to put it. Your fixed costs are $9,000, so it wouldn't even last you a week. No, that's it. If the two of you are not basically performing at the top level when it comes to work, that's it. It's over. The whole house of cards collapses. And then finally, okay, your guilt free spending says 8% or $838 a month. I don't really believe that number, do you?

[Gabby]

No.

[Ramit Sethi]

Okay. You. You eat out and stuff, right?

[Gabby]

Yeah.

[Ramit Sethi]

That was a very quick. Yeah. How many times a week do you eat out?

Oh, saw the smile. Here we go.

[Otto]

We just went out last week. We just went out last.

[Gabby]

We went out this. We went out this morning.

[Otto]

Oh, I forgot about that.

[Ramit Sethi]

Where'd you go?

[Gabby]

We went to Chick Fil A. Oh. We had doctor's appointments this morning. So we went in fasting, and then afterwards we hadn't eat. Obviously, we didn't bring anything with us. We're like, oh, let's stop and get something to eat.

[Ramit Sethi]

What do you mean, obviously we didn't bring anything with us?

[Gabby]

Oh, I shouldn't say obviously. We did not plan and we didn't bring anything with us to eat afterwards. So the only choice that was left was to get something on the way home.

[Otto]

I think it's just like, oh, let's 15, 20 bucks.

[Ramit Sethi]

Didn't you tell me that, you know, as of 21 months ago, with your daughter and the desire to move and et cetera, like, we have a new motivation.

[Otto]

Absolutely. Doesn't mean I can't afford things.

[Ramit Sethi]

Well, you can't afford them.

[Otto]

We paid debit. Sorry, I'm not trying to be rude, I promise.

[Ramit Sethi]

Let me read you the numbers. Otto, you have $387,000 in debt. You have a $91,000 student loan. She has a $26,000 student loan. You have four. $44,000 in credit card debt. IRS, $24,000. Air conditioning, 16, home loan, 12, family loan, $5,000, and then a home loan of 166. I don't think you can afford it, do you?

[Otto]

Within the budget that we set.

[Ramit Sethi]

What's the budget?

[Otto]

Like 700 for everything for two weeks?

[Ramit Sethi]

No, this is for a month. It says $838.

[Otto]

Oh.

[Gabby]

With the budget that we currently have included him having more income. So we give ourselves $750 per pay period. And in that we get gas, we get groceries, eating out, any diapers or wipes we need for our daughter. So as long as it stays within that $750, that's what we mean when we say it's in the budget.

[Ramit Sethi]

Do you notice the mental gymnastics around rationalizing a freaking Chick Fil A purchase? We can afford it, we pay debit. It's in the budget. Truthfully, this is less about their actual numbers and more about the narrative that they have created for themselves. We all tell ourselves stories about ourselves. We actually specialize in creating stories about ourselves, such as how much energy we have, how tired we are after work, how much physical activity we can take. And of course, with money, we specialize in telling ourselves stories that do not match up with the actual numbers. It's incredibly common for people with high debt to engage in these mental gymnastics to rationalize their spending. Most people have a total lack of connection between today's decisions and tomorrow's consequences. Like if I asked you how is that new car you're going to buy going to affect your retirement? You'd have no idea. The vast majority of people would not. They told me what matters in their rich life. Time together, a future overseas, freedom from all this stress. But when you look at their actual behavior, they are spending money on Chick Fil A, which by the way, is actually not anyone's rich life. I've talked to millions of people. Not a single person has ever said Ramit Seti, I love Chick Fil A. It's my rich life. Never said it. Never said it about Target. Never said it about freaking Seas candy. Never. Random commodities are not part of your rich life. I can promise you that. This is just comfort food that allows an escape from an otherwise mundane reality. Now, you could disagree with me. You could say, Ramit Sethi, I love Arby's roast beef sandwiches. That is part of my rich life. I have two responses to that. Number one, why do you have the palate of a stray dog? Number two, I don't really think that is your rich life. I just don't believe it. I don't believe that when you look back on your time on planet Earth that you're going to put in your top five areas of your rich life. Arby's roast beef sandwiches or hot tamales or freaking Febreze. It's not going to happen. It's going to be bigger, much more meaningful things like being able to spend time with my kids being able to support a friend when they need help, it's meaningful. Big things. I have never heard somebody say tide detergent is my rich life. Now, what's interesting here is that it's going to be challenging for them to actually start living their rich life until they pay off their debt. And they can't pay off their debt until they get control of their spending. So what's this budget they keep mentioning? I want to see their numbers, which we're going to do right after this break. This episode of Money for Couples is brought to you by Wild Grain. Do you have someone in your life who always tries to one up you like? If you bake a cake, they'll ask, hey, have you tried using hand milled flour? Because it just tastes so much better. You know, I prioritize my health. Hand milled flour. Do you think I have time for that, Amanda? No. Thankfully, we don't need to because any of us can still have delicious baked goods and pastas without the hassle using wild grain. Wild grain is the first bake from frozen subscription box for artisanal breads, seasonal pastries and fresh pastas, all conveniently baked in 25 minutes or less. You just take it out of the freezer, put it straight in the oven, no thawing, no prep, no stress. You can even customize the box picking between classic gluten free or plant based. My colleague recently went gluten free and tried one of their boxes. They sent her gluten free tortellini brioche rolls and giant chocolate chip cookies that her family loves and bakes. Every week for a limited time. Wild Grain is offering our listeners $30 off your first box plus free croissants in every box when you go to wildgrain.com ramit to start your subscription. That's right, Free croissants in every box and $30 off your first box when you go to wildgrain.com ramit that's wildgrain.com ramit or you can use promo code ramit at checkout.

[Gabby]

We have a budget that we stick to in terms of we call it our living expenses account. We try to stay in that account, meaning that once that money is gone, it's gone. And we try not to pull from savings to replenish it.

[Ramit Sethi]

Can I see the budget? Yeah. Who maintains it, by the way?

[Gabby]

Me. All right, let's go back to October.

[Ramit Sethi]

All right. Where is it? There we go. All right, so let's take a look at what I see here. I see 13,005 coming in. $12,602 going out, which means there's $402 left to spend. Moving along to bills, money going out. We get just, like, a list of stuff here. Rent, Hoa, Netflix, Apple care, blah, blah, blah, blah, blah. Insurance. Okay, fine. And then we have expenses. Oh, I'm very interested in this. Okay, so we have coffee shop, Costco, date night. Date night is $170 so far. Daycare, diapers, eating out, formula, gas, groceries. We have self care, target vehicles. All right, so we have all this stuff. So what does this budget tell you?

[Gabby]

That we have a lot of work left to do.

[Ramit Sethi]

That's not an answer.

[Gabby]

That we're still overspending.

[Ramit Sethi]

Does it say that?

[Gabby]

No, it doesn't.

[Ramit Sethi]

Like if you walked in to see a patient and you saw the report, you know, by their bedside or whatever, you open it up, you look at it. It tells you something, right? They had a heart attack or whatever happened. It tells you something. What does this budget tell you?

[Gabby]

It tells me where money is going. Because I feel like for a long time.

[Ramit Sethi]

Hold on, I'll stop you right there. Okay. You track it all. And what does tracking it all tell you? When you look at the numbers and you track it all, what do you learn specifically about your spending?

[Gabby]

That not a lot has changed.

[Ramit Sethi]

Yeah, I think you're wasting your time. I don't think your financial situation is improving. You're tracking all this stuff. There's, like, 500 cells in this budget. What's the point? I can't tell. What is the number one thing to take away from that budget? There's so many freaking numbers on there. Can you.

[Gabby]

No.

[Ramit Sethi]

What's the point of it?

[Gabby]

I feel like it gives me comfort in a sense.

[Ramit Sethi]

Otto, where are you on this?

[Otto]

I hate that budget. It's too many numbers. It's not. It's complicated. I do not like tracking every one of my expenses. I don't. I don't want to do that.

[Ramit Sethi]

Yeah. So is this what happened? Both of you in debt, going through a series of like, oh, we got this money. We'll pay it off. We got that money. We're paid off back in this debt cycle. So then Gabby goes, okay, I know what we're gonna do. We're gonna keep a budget. We. But it's really. I. Gabby, you download this budget from somewhere, it has, like, 10 gajillion numbers on it. And then every month, meticulously tracking every number, but not actually changing anything about the way you spend money. Did I get that right?

[Gabby]

Yeah.

[Otto]

Yeah.

[Ramit Sethi]

Guys, motivation is not enough to change this. This requires a complete recalibration of your relationship with money. I'll take that budget. Take it out back. Bury it. But I have to encourage you, Gabby, we are not looking for confidence, okay? Confidence does not come from a spreadsheet. Trust me. Confidence comes from competence. And competence comes from actually changing the way that you are treating your money. And, Otto, you can't be like, I hate money. So Gabby's gonna track it, and as long as it's okay, I'm gonna spend it. Can't do it. That's part of the dynamic that's gotten you into this situation.

Are you both prepared to change the way that you relate to money?

[Otto]

Please, God, yes.

[Gabby]

Sorry.

[Ramit Sethi]

Take a second.

What's happening, Gabby? Sorry, I didn't catch that before.

[Gabby]

No, it's.

I think it's part of the, like, realization that, like, I know I want to change. And I think I had convinced myself that I was changing. And I feel like it's the realization that that actually was not happening. I was telling myself, but no behaviors have changed. And the tears are because I'm realizing that, like, I was making myself feel better by telling myself this story.

[Ramit Sethi]

Yes. Just to put it very bluntly, you cannot actually change by tracking 250 numbers while eating chick fil a 10 minutes away from home. Those two are incompatible. They are simply incompatible. And I say that specifically because neither one of you told me that your rich life is eating Chick Fil A. I know it's not. You told me that. You said my rich life. I regret spending all this money at Target and stuff. That's not creating memories. I want to travel. I don't feel safe. And spending 20 bucks at Chick Fil A, which indicates you spend way more than that over the course of a week. You told me that's not what you want to do. And yet your behavior is doing exactly that. And I appreciate that you're acknowledging that. Sometimes we do cry when we realize the thing that we claim is important to us is not how we are living our life. I don't mind it. That realignment is painful sometimes, but I'd rather go through the pain and then.

[Otto]

Realign a hundred percent.

[Ramit Sethi]

So the question, Gabby, is how much are you spending on discretionary spending per month? Clothes, eating out, coffee. Travel. Fun stuff.

[Gabby]

You know what will give us a more realistic picture is probably looking at September.

[Ramit Sethi]

Okay. Wow. A lot of red. The number in the CSP says 838. What's the actual number down there?

[Gabby]

$1,597.96 right there.

[Ramit Sethi]

We've doubled what you thought you spent, and that was. That took us five seconds. We also have not included travel. How many trips per year? 1. 2.

[Gabby]

Typically it's been at least 1.

[Ramit Sethi]

I don't want at least. I want at most. What's the most?

[Gabby]

3.

[Ramit Sethi]

3. And how much does each trip cost?

[Gabby]

If we are visiting family down south, probably about 2,000, including the flights. We went to Hawaii this year, and that total cost us about 6,000.

[Ramit Sethi]

Let's say 4,000 each. Let's round up to 5,000. Because I think sometimes there are hidden expenses that we don't account for, like taxis and blah, blah, blah, tips, whatever. Let's just say 5000 times three. 15,000. That's an extra 1250. So we've just doubled it again. You're spending, what, 2700 or something like that per month on discretionary spending? We haven't included birthday parties. We haven't included any one off expenses. But we're already at. Let's just round up and say $3,000 a month. I would bet it's probably closer to $4,000 per month. What do you make of that?

[Gabby]

I would agree.

[Ramit Sethi]

Okay, and what. What do you. What does it tell you, Otto?

[Otto]

That we don't really know where our money's going. And even though we have a budget that says this is where our money is going, because if you go back to. On some of that budget, if you go back months, months, months, there's never been a category where it hasn't been zero or hasn't been red.

[Ramit Sethi]

Yeah.

[Otto]

Yeah.

[Ramit Sethi]

It's a. It's a funny thing that people do. They track things. Even though it's red every single month, they're failing, and they're just like, hey, I know what I'll do. I'll keep tracking this. They don't actually change anything. They just track it. The big takeaway that you did not indicate, which I'm trying to get you to realize, is you are spending more than you make every single month. You're not getting out of debt. You're getting more into debt. So the fact that you can put it on a debit card for 20 bucks, okay, that's great. But you're actually getting more into debt every single month. At $838, that's all of your money left over. That's 838 when the number is actually like 4,000. What? Let's say 3, 500 or whatever. Just for easy math, you're broke. You're spending more than you make every single month. That is the meaning that I want you to understand is that tracking won't solve it. You actually have to substantively change your relationship with spending.

[Otto]

I don't think I realized it, to be honest. I don't. I think I'm kind of blindsided by it, because I'm thinking, okay, this one instance, we're spending, let's just say, 7,500 on a trip. That one instance, not how much I make the rest of the year. Like, okay, I have 7,500 right now I pay it off and we're good.

[Ramit Sethi]

Yeah.

[Otto]

I don't think about it spreading through the entire.

[Ramit Sethi]

It is a little complicated because in the months where you spend more, you probably make more. Right. So that's why you're spending flexes with your income. Right?

[Otto]

Yeah.

[Ramit Sethi]

And do you set that up, Gabby?

[Gabby]

Yeah.

[Ramit Sethi]

So you tell them, like, hey, this month I know you're going to work extra hours, so we're going to spend more on xyz. Is that how it works?

[Gabby]

Yeah, but typically it's. We're going to pay off more on xyz, but subsequently, we also spend more because there's more money coming in.

[Ramit Sethi]

So you're not getting ahead. The debt is racking up anyway because you're. You're paying some towards it, which is good, but it's not aggressive. I could tell it's not aggressive because you took a $5,000 trip to Hawaii this year. Guys, couples who are in credit card debt do not take vacations.

[Otto]

We've taken a vacation every year since we've been together.

[Ramit Sethi]

I know.

[Otto]

We go for a month to Europe. Yeah.

[Ramit Sethi]

Wait, I thought you told me that vacations are only 3,000. How do you spend $3,000 for a month in Europe?

[Otto]

We spent a month because it doesn't make sense to go any less to seek my family.

[Ramit Sethi]

How much does it cost?

[Otto]

10,000?

[Gabby]

I think it's more than that. Like, probably like 15 to 18,000.

[Ramit Sethi]

All right. And that happens every couple of years?

[Gabby]

Yeah, every.

[Otto]

Every year except this year.

[Ramit Sethi]

Every year except this year.

[Gabby]

Not every year. We've only done it twice, so.

[Otto]

Okay.

[Ramit Sethi]

Do you hear that? There's a lot of, like. Well, there's this, but not this, but this one. This one. Do you notice that there's a lot of kind of debate over the minutia? What's the actual takeaway of what I'm hearing right now?

[Gabby]

We don't know our numbers.

[Ramit Sethi]

Correct. And $15,000 every other year is still a ton of money. So when you tell me like, oh, we're serious about paying off our debt, you're not serious. You're not serious because it doesn't show in your spending. Couples in this kind of debt do not take $15,000 vacations. They just don't. Not if they want to pay off their debt.

[Otto]

Well, we didn't take one this year because we were trying to not do that. But I really wanted to go see my family. We just couldn't afford it.

[Ramit Sethi]

That's great.

[Otto]

Every time we. Well, we went to Hawaii instead, but every time we've taken a month off, it's been unpaid from work because we can never. I personally can never have any time off.

[Ramit Sethi]

Otto, what's the point? What are we talking about right now?

[Otto]

I don't. There's not really a point. I was just saying stuff.

[Ramit Sethi]

Does this happen a lot where you guys get in the weeds? Yeah, what's the point that I was making? You're spending $15,000 every other year. At least. You can't afford it. You cannot. And you have not properly added that to your monthly spending. Fifteen thousand dollars. That's an extra twelve hundred and fifty dollars per month that should properly be going. So when I told you you're probably spending an extra thousand dollars a month. There you go, right there. You guys are spending more than you make and you're going into more debt. No amount of tracking stuff is going to tell you that. But a simple just like looking at the major expenses in your life and being honest about them will. What does that tell you?

[Otto]

And no change has been made. Really?

[Ramit Sethi]

Agreed, Gabby.

[Gabby]

That we're stuck in the same cycle.

[Ramit Sethi]

Yes. Can you describe the cycle to me now?

[Gabby]

We don't decide we can afford something. We just do it.

[Ramit Sethi]

Yep. We'll figure it out later.

[Gabby]

We figure it out later every time.

[Ramit Sethi]

Which is always auto. Yeah, you should ban that phrase from your household. Figure it out later. No fucking way. We're not figuring anything out. You should respect your time so much that you stop giving yourself homework in the future. This is exactly why I hate budgets. Gabby has been tracking every expense, spending hours inputting every transaction into this spreadsheet. And yet she missed the only detail that matters. They are spending more than they make. That's it. What is the point of tracking every little thing when you miss the big picture? I'll tell you. When people dive into these complex budgets, it gives them the illusion of control. They feel like because it takes so much time and there's so many colors that they are being Meticulous, but in reality, they are missing the big picture. They are essentially wasting their time. And that is a very painful lesson for us to accept. It's like rearranging deck chairs on the Titanic. You, you're busy, you feel like you're productive, but you're not actually being effective in addressing the real issue. The freaking ship is sinking. This is exactly why I designed the conscious spending plan. Instead of having to track 10 million numbers and looking backwards, you can look forward and make sure that the four key numbers you track are aligned with your rich life. Now, I know a lot of you have already downloaded, maybe used the free template, but some of you might want a little bit more help. You might want to double check your numbers. You might want to know how to adapt the CSP for your specific situation. If that's you and you want extra help, you can join my money coaching program. It's designed to help you break free from the cycle of debt, stay accountable, stay in control of your money, and yes, I promise you will still be able to spend on the things you love. Sign up for the [e-mail] money coaching. I think Otto and Gabby are finally starting to see the issues here and that maybe they themselves are the reason for this debt. Now, to really understand why they behave the way they do, we have to go back to where they first learned their original money messages. Gabby, what do you remember about money when you were growing up? What'd your family say about it?

That's quite a sigh.

[Gabby]

I remember being told, we don't have it. But then there were also times that we could go somewhere, we can go to a store and I would get any and everything I asked for.

[Ramit Sethi]

Okay, what kind of store are we talking about normally?

[Gabby]

Clothing store, or even if we went to, like, Walmart at the time and I wanted a toy or something like that, I'd get it.

[Ramit Sethi]

Okay.

[Gabby]

But there were other money messages as well. I was in college. This is an example. I was in college. My mom had remarried, and her and her husband was not the best relationship. There was a lot of secrecy around money. Once I was visiting from college and we were driving in the car, and I think I asked him, like, hey, would it. Could I have a hundred bucks? Just like, kid asking their parents for, like, extra money. And my stepdad turned to me, he was like, well, what are you doing with the $200 your mom gives you every month? And I was like, what $200? And he was like, your mom sends you $200 every single month? I said, no, she doesn't. And then my mom gets mad at me because I was honest and I was genuinely confused about what money. What, what is this? I work three jobs. I'm a full time student. I would love an extra $200 a month. But she had been lying to him and saying that she had been sending me money. I don't know what she did with the money. There were also times that they would get into an argument and I would go with her because she would want not want to go alone. And depending on who got to the bank account first, they would pull all the checking and all the savings out.

[Ramit Sethi]

What would they do with it?

[Gabby]

Keep it put into a personal account. If they would get in an argument, the way in which they would get a one up on one another is whoever could get to the money first.

[Ramit Sethi]

Wow. Is money a weapon?

[Gabby]

I feel like it was used as one when I was younger. Absolutely.

[Ramit Sethi]

Gabby. That's a really chaotic way to grow up with money. It's a lot of mixed messages. Like back from when you're a little kid, we don't have money. Suddenly you can go buy whatever you want at Walmart or the clothing store. I'm willing to bet your family did not educate you as to the difference. Why are you able to buy it today versus why can we not afford these things another day? Right. Did they tell you any of that stuff? No, No.

[Gabby]

I had to beg my mom to even do my FAFSA because she didn't want to give her Social Security number because she felt like someone was going to steal her identity.

[Ramit Sethi]

This really drives me crazy. It really drives me crazy. I have to tell you, on a personal level, there are kids who want to do well. They want to go to college, they want financial aid. And it's confusing to fill out a FAFSA and figure out all this when you're like 16, 17 years old. And then to have parents who should presumably be the ones helping to lead the way, helping to guide their kids, and they're actually. A roadblock. It's very infuriating. I'm sorry you had to go through that. That I will say, the story you told me about using money as a weapon, about who can rush to the bank first and withdraw, that, that is a very vivid, like, I can see, like fire when I think about that. But, Gabby, I wonder if you're not using money as a weapon against your future self. I mean, think about it. If I told you, Gabby, I want you to figure out a way to as quickly and efficiently as possible. Destroy your own financial future. How would you do it?

[Gabby]

Continue on the path that I'm on.

[Otto]

Yeah.

[Ramit Sethi]

You would rack up a ton of debt on discretionary stuff. You would not pay attention to the critical levers in your finances. You would actually spend time focusing on stuff that is meaningless. You wouldn't talk about money with your partner, and you would spend on a bunch of stuff and then rationalize it for later.

Is that not what we have today?

[Gabby]

It's exactly what we have today.

[Ramit Sethi]

That's using money as a weapon. But not against Otto, but against myself. Against both of your futures. I don't think you two should be the enemy of yourselves. Why not be your greatest friend? You know, I love myself. I love my future self even more. I'm gonna put some money aside for that person so that their life can be easier. That's the way I might think about it. Otto, what about you? What do you remember your family talking about when it came to money as you were a kid?

[Otto]

Save, save, save, save, save, save more. Never get into debt. Pay things in cash. My parents never had any debt except a condo that, before we took out the HELOC, was at $95,000.

[Ramit Sethi]

Where'd you grow up?

[Otto]

I grew up here. I came here as a refugee when I was seven.

[Ramit Sethi]

You came here as a refugee when you were seven? How did that inform your relationship with money or your family's relationship?

[Otto]

We had all the essentials. I will say my dad was a lot more struggle than my mom. I think that's because of his mom. My mom was always, well, if we can pay for it in cash, that's fine. You can have it. My mom, especially about food, never said no.

[Ramit Sethi]

If it was, like.

[Otto]

Even if it was fast food or whatever, she would never say no.

[Ramit Sethi]

Why?

[Otto]

So after the war, we lived in a refugee camp for a little bit. And I didn't know these stories until later because I never felt like. I never felt like we didn't have anything. My mom always made it happen for us. I mean, my dad was like a commander in the army, so he had an income. But there's been times where we didn't have a lot to eat. And I didn't know those things because I was a kid. But growing up, like, when I'd ask her, like, hey, like, tell me about this time in my life, like, what happened? She would tell me. So now I know that, like, there's been times where we didn't. We had food, but it was just. It wasn't, like, a lot. So my parents, because of that reason, they were always frugal.

[Ramit Sethi]

Are your parents both still alive?

[Otto]

Yeah. They moved back three or four years ago to Bosnia. They've since built the house.

[Ramit Sethi]

Wow.

[Otto]

Well, they built the house in 2004.

[Ramit Sethi]

What messages do you think you learned from your family about money that you have brought into this relationship with Gabby?

[Otto]

Why? I. I did everything. The complete opposite of my parents.

[Ramit Sethi]

Yeah. Why is that?

[Otto]

I think I. I think I remember this one specific moment. I was like, 8 or 9, and I really wanted something in the store. It wasn't even expensive. It just wanted something. And my dad, look, well, how much is it? How much is it? How much is it? And I'm like, it doesn't really matter. I just want it. Like, can I just have this one thing? And it'd be like, how much is it? We don't need it. It's too expensive. And it would be, like, not anything that I would consider expensive or my mom would consider expensive. But my dad, like I said, he was the more frugal one.

[Ramit Sethi]

He.

[Otto]

And I think I understand his point of view in terms of, like, they always had. Cause they never learned fully, like, to speak English, so they always had to work very difficult jobs for very low money. And so they couldn't afford big, frivolous things. I mean, they just. They just couldn't. They. Their. Their motivation and goal was to go back home, and so they spent their money on building a new house. And so my. My thing now it's like, oh, if I want it, I'm going to get it. Because I've been told no so many times, and I don't want to tell myself no.

[Ramit Sethi]

I've been told no so many times. I don't want to tell myself no. If I can't afford it, I'll just work more. And I want to go home. I don't want to be here. It doesn't feel safe. I want to have enough money to go back home. Doesn't it all sound very familiar?

Yeah, but if you become the person who cannot spend money on things, like, if I had a magic wand and I said, otto, you cannot go on vacation and eat out anymore, who would you become?

[Otto]

Probably my parents.

[Ramit Sethi]

Your dad, the one who worked hard, who always said, how much does it cost? Who wanted to go back. The difference between you and your dad, there's many, but one of them is you earn a lot more money. Like, a lot. But you. You're not effectively using it in the way that they did. I don't know what they made, but I'M sure it was not nearly as much as you. And yet they had enough to get a condo and move back and build a house. That's pretty impressive, right?

[Otto]

Yeah.

[Ramit Sethi]

I just want to jump in quickly because hearing Otto's experience as a Bosnian refugee totally changes my perspective on their situation. You probably don't know this, but my dad was a refugee as well. In 1947, there was something called partition, and India and Pakistan were separated by basically some guy sitting in a conference room. Overnight, tens of millions of people were displaced. There were people who had been living in houses for generations. And suddenly neighbors turned against neighbors and people fled. My dad himself had to flee in the back of a truck. He had to disguise himself as a girl so he would not be killed. And my grandfather stayed as a political prisoner in Pakistan until he finally rejoined his family in India. I hope that you knowing a little bit about my family history informs how I show up when I talk about money and politics and luck. Do you understand that by pure virtue of luck, I ended up being born in America? And if I was not born in America and I was not born to two educated parents, it's probably very likely you would not be watching this or listening to this right now. That is why it is so important for me when I talk about money, to incorporate all the different elements, not just a freaking budget. In this case, safety is something that you and I take for granted, but it can vanish overnight. I know that from my own family history. Otto knows it as well. He grew up learning the world outside was not safe. Gabby actually told my producer she's a survivor of Hurricane Katrina. She and her family had to evacuate New Orleans. So all of this helps me to understand why they behave the way they do with money. I want you to understand that because there's so many people in the comments of this podcast who just point at people and say, stop doing that. So stupid. How could you do that? I'm trying to show you how complex human nature really is. It's easy for you to point at someone and just say, that's dumb. Why don't you stop doing that? But if you gave me 10 minutes with your own money or fitness or parenting or the way you live, hell, show me your bathroom. And it would be very easy to point the finger right back. I don't want that. I actually want us to go deeper and to try to understand why we do the things the way we do. With Gabby, she's probably looking for control. Otto is probably trying to find a place where he can finally Feel safe. This doesn't justify behavior, but it does help us understand it. Let's keep going. Do you have confidence that you can pay off your debt?

[Gabby]

Yes.

[Ramit Sethi]

Otto.

[Otto]

Yeah.

[Ramit Sethi]

Okay. Why?

[Otto]

I work a lot. We just paid $6,500 of credit or credit card debt in the last two weeks.

[Ramit Sethi]

Okay, let me ask it another way. Do you have confidence that you can pay off your debt and keep it paid off?

[Otto]

I personally don't have the confidence right this moment, but I'm hoping that we get there, Gabby.

[Gabby]

I do. I feel like we know what we want, but we need to envision the future that will get us there, or else we're going to keep going into the same or keep doing the same thing.

[Ramit Sethi]

So envision it. Let's hear it.

[Gabby]

I want to get out of debt, and I want to stay out of debt. We both have careers that afford us a pretty nice income. And instead of having all of our disposable extra income go toward debt payment. I would like a mix of that. I would like to mix and put some in savings, because we definitely need savings because the house is a little bit on fire right now. I want some to go toward investments for our future. And then I want to be able to spend right now and continue to go on a vacation once a year instead of all that extra money going towards debt.

[Ramit Sethi]

What's different about that than what you're doing right now?

[Otto]

The motivation, which is. So my motivation is to get out of the country. Like, this is my personal vision of how, why I want to get to that, like, why I want to fix this issue, to get to that.

[Ramit Sethi]

Okay, I understand the motivation is different. I'm. Now I'm talking about the vision of specifically how you get there. So Gabby said, I don't want to only pay off money towards the debt. I want to have some people to take a vacation once a year and to be able to save some. Like, how is that different than what you're doing right now?

[Otto]

I mean, it's not. It's just the motivation's different to do it.

[Gabby]

Gabby, this time around, we don't have anything to save us. And what I mean by that is, before we had the life insurance plan or we did a debt consolidation loan or another debt consolidation loan or a HELOC or borrowing money from family, this is the first time that we are consistently paying the debt off, we're doing it. I'm not trying to take out more debt in order to pay this lump sum to, like, now have money on the credit card. So that we can pay off. And it feels different this time. It feels like we are doing this. We are paying it off.

[Ramit Sethi]

I've had times in my life where I had to make a big change. Big. And if someone had asked me, do you have the confidence that you could make this change? I would have said yes. But if they could see through me like Superman, you know, or they could see me telling the truth, I think deep down, in a deep place, that even I wouldn't have been able to admit I didn't have the confidence. And if someone had pointedly asked me, why do you have the confidence? I would have said, blah, blah, blah, blah, I can make a change, blah, blah, blah, blah, blah. But I wish they had simply said, I'm confused how you have the confidence to make this change because you've never been successful at it in your life. And it really would have shaken me out of it, and it would have made me ask myself, why? Why do I have this confidence?

[Gabby]

Not unless you had changed something about what you were doing.

[Ramit Sethi]

What do you think it would take?

[Otto]

I think it's hard because my income is so, like, not flexible, but in a sense, it's flexible.

[Ramit Sethi]

Well, there's several solutions to having irregular income. One, we can pick a conservative number, as you did with the csp, and then we can make a rule for what to do with any unexpected income. That's one way to do it.

[Otto]

Yeah.

[Ramit Sethi]

Another way to do it is you just become more consistent. You literally say, this is how much I'm going to work, and I'm not going to deviate from it, because I know from calculations that if I work this many hours, we are going to be in an okay financial situation.

[Otto]

Okay.

[Ramit Sethi]

So there's lots of ways to do it.

[Otto]

Sounds great.

[Ramit Sethi]

Okay, that's one. What else do you think needs to happen?

[Otto]

I need to change on how I think about my relationship with money.

[Gabby]

I think what he may be trying to get you to see is what behaviors are you going to change.

[Otto]

Yes.

[Gabby]

So instead of rarely denying ourselves anything, we're going to need to change that. We're going to have to start denying ourselves quite a bit together as a team so that we can reach the goals. But to deny ourselves, we really need to remember and have a solid foundation of why we're doing what we're doing. Because I feel like for a really long time, we thought we knew we were telling ourselves why and that we felt confident in what we were doing. But I think we're just kind of telling ourselves a story, and I feel like we're both realizing that now.

[Ramit Sethi]

What was the story you were telling yourselves, Otto?

[Otto]

That we have changed, that we have paid on this debt. We're not going to get into debt again. And then we got into debt again.

[Ramit Sethi]

And what was the reality?

[Otto]

That we got into debt again.

[Ramit Sethi]

And how did you get into debt?

[Otto]

By not denying ourselves.

[Ramit Sethi]

Yeah. So I'm gonna. I'm gonna offer a little bit of a different way to look at this, because the two of you told me that you never say no. If we start spending 20 minutes talking about denying yourselves, you guys are gonna nod your head politely, and then we're gonna end this call, and you're gonna be like, that guy. Okay. It is very difficult to go from eating chick fil a this morning to being like, okay, now we're gonna deny ourselves.

People don't want to deny themselves. So we have to think of it a different way. And then we have to build a plan. When I decide that I am 10 minutes from home and I'm going to drive home instead of stopping to eat whatever type of food, I am not denying myself. I am choosing to eat amazing food that I have at home in the fridge. When I don't go on a vacation, I'm not denying myself from that vacation. I'm actually choosing to have an even better and more amazing vacation next year. The way that you will sustain your changes is to give yourself a bigger, more powerful vision that you are working towards. Denial lasts about a week, but a powerful vision can last a lifetime. Shall we take a look at the numbers again and come up with a real plan?

[Gabby]

Yes, please.

[Ramit Sethi]

Our goal is to get our numbers in the conscious spending plan down to a more rational, goal focused set of numbers. What would you say is the primary financial goal in your relationship right now?

[Gabby]

I would say a combination of savings, emergency fund, and debt payoff.

[Ramit Sethi]

Okay, Otto, what about you?

[Otto]

Debt payoff.

[Ramit Sethi]

Okay, let's take a look. Your fixed costs are high. I want to highlight a couple of things. Your mortgage is quite low. $1,355. It's great. I have no comments about that. Stay there. Don't move for a long time. Your car payment total with gas and everything is 650. Great. No comments on that. Your groceries are a thousand. Is that accurate?

[Gabby]

I don't think it is.

[Ramit Sethi]

Oh, it's got to be higher.

[Gabby]

I think it might be higher. I think realistically that number is maybe like 1200.

[Ramit Sethi]

All right, we're at 85% fixed cost. Phone is 277. Can we cut that?

[Gabby]

Yes, so we actually talked about switching over to Mint Mobile.

[Ramit Sethi]

Okay, great. What is that going to be like? Let's call it 100 bucks. All right. We're down to 83%. Childcare is $1,760 per month.

[Gabby]

Yes.

[Ramit Sethi]

All right. And that's. That's the going rate. It's not going to change for the foreseeable future, right?

[Gabby]

No.

[Ramit Sethi]

All right, so we'll leave it there. You're saving $1,000 a month for the emergency fund. Okay, fine. Guilt free spending. It's time to actually create a real number. As for what you are allowed to spend on for guilt free spending. So you spend 850amonth right now, which is 8% if you just blank slate. What do you think is worth spending money on every single month for.

Non essential spending?

[Otto]

I can't really think anything.

[Gabby]

I. The one thing that I think of would be paying a babysitter for a date night once a month.

[Ramit Sethi]

Great. How much?

[Gabby]

About 140.

[Ramit Sethi]

140. All right, fine. What else?

[Otto]

For me with working so much, I would want a self care moment of sorts.

[Ramit Sethi]

What is it?

[Otto]

A massage.

[Ramit Sethi]

How much?

[Otto]

170.

[Ramit Sethi]

170. Is that per month?

[Otto]

Per month? Yeah.

[Ramit Sethi]

Great. What else? You guys are going cold turkey on eating out. You're never eating out again. The last thing that touched your lips was chicken nuggets. Is that how it's going to be?

[Gabby]

I would say that a part of me wants to just make our date night be our one time eating out. And instead of like going for fast food, let's have this date night be a nice dinner.

[Ramit Sethi]

Great. How much does it cost?

[Gabby]

I would say 150 for dinner is more than enough.

[Ramit Sethi]

It's way too much. Y' all cannot afford that. Okay, 150. What?

[Otto]

We just spent 170 on a dinner.

[Ramit Sethi]

Where'd you go?

[Otto]

Glybon. It's this Thailand Thai place that we like to go to.

[Ramit Sethi]

Wait, what do you get for 170 at a Thai restaurant?

[Gabby]

We're about to get judged.

[Ramit Sethi]

Wait, hold on, hold on. You think you're going to get judged more for eating at a Thai restaurant than Chick Fil A? You're on the wrong show. Tell me what you got at this Thai restaurant. I'm into it.

[Otto]

Pork skewers, chicken wings. I got pad Thai. She got this fried rice drink. We got two mocktails. We got a lot of appetizers and I made course in two mocktails.

[Ramit Sethi]

So can I ask you all this is a very important moment. You told me you want to Be debt free. Otto, you told me that for safety reasons you want to be able to move out of here. Take that, all of that stuff and tell me, how can you reconcile that with eating out at that Thai restaurant for roughly $170?

[Otto]

Truthfully, it's because it's like a reward. I've been working so much. We don't really get a lot of time to spend with each other. We could have this time to spend with each other. And it went, watch.

[Ramit Sethi]

Watch what I'm doing with my hand. I am a banana and I am unpeeling that layer from myself, throwing that away. That story about we are Rewarding ourselves with $170 is just a story. What are some other ways to reward.

[Otto]

Yourself that's not spending money?

[Ramit Sethi]

I don't know. You tell me.

[Otto]

I don't have one. That's how I always rewarded myself. I treat myself.

[Ramit Sethi]

Okay, no money. You're going to reward yourself. What are you going to do?

[Otto]

I don't. I don't have anything.

[Ramit Sethi]

How do other people do it?

[Otto]

I don't know.

[Ramit Sethi]

Think about it. Don't let yourself off that easy, Otto. How do other people who are not going to spend money but still want to enjoy life, what do they do?

[Otto]

I really don't know. I don't. I don't. I am surrounded by people that do that.

[Ramit Sethi]

Well, them. That's the kind of attitude you need to have. Not. I'm of course exaggerating. I. I mean nothing against them, but they are not you. And the reason that you are doing that, you simply have absorbed the social norms of them. I need you to find other people and other norms to adopt because you can't do that with the debt you've put yourself into. So I need you to get creative with me. Surely you can think about what somebody in America does to enjoy themselves without spending money.

[Otto]

You know, play a sport that they like.

[Ramit Sethi]

Great.

[Otto]

I like shooting hoops.

[Ramit Sethi]

Love it. That's one. What else? Go for a walk.

[Gabby]

The weather's getting nice out. We used to love going on picnics.

[Ramit Sethi]

Love it.

[Otto]

Yeah.

[Ramit Sethi]

What else?

[Otto]

Bought this $900 bike when I thought I was going to do a triathlon and I haven't ridden it since.

[Ramit Sethi]

Can we sell that thing?

[Otto]

I was. I was going to say I was going to.

[Ramit Sethi]

I'd rather have the money. Go for a walk.

[Otto]

Bam.

[Ramit Sethi]

All right. How much would you get for that?

[Otto]

Probably amount. The amount I bought it for.

[Ramit Sethi]

What else you guys have in your garage etc that can be sold?

[Gabby]

We actually went through a selling Spree already and got rid of and sold a lot, including old baby clothes.

[Ramit Sethi]

Yeah. All right. What'd you do with the money?

[Gabby]

Put it in our savings account.

[Ramit Sethi]

I'm pretty sure the $1,000.

[Gabby]

Yeah, we had. We were like a lot of people that we were using our savings account as a checking account for a really long time.

[Ramit Sethi]

Don't do that.

[Gabby]

I know.

[Ramit Sethi]

All right. Sell the bike. Put the 900 towards the debt. It'll do good for you. Otto, you and Gabby both need to come up with some specific ideas of what you're going to do to reward yourself the way that you are living right now. Your relationship with money is. I grind myself into almost dust at work, and then in order to rejuvenate, I need to spend a ton of money. Can't do it. Gonna have to find a different way.

[Otto]

We've always done that. And we literally tell each other, like, okay, well, I just worked a lot. All right, Gabby, we're gonna go out for dinner.

[Ramit Sethi]

Yeah, that's. That's the old peel. It's gone. You can't do that anymore. So you will have to find a new way to relate to work and to money. If it were me, what I would say is, hey, Gabby, you and I need to come up with a vision of what we are going to do with our work and with our money. My vision is I want to be able to pay off the debt and be able to move within seven years. I don't know. We got to run the numbers, and that in order to do that, that means I have to work a lot more. In order to work a lot more. Here's what I need. I need to have one massage per month because this is really hard on my body. I would love to go out for a date night once a month, and I'd like to have a modest dinner, but something that we can enjoy together on that day. But other than that, we need to plan our meals, because I need to be able to take food to work. I can't be eating out at work anymore. Gabby might say, I love that. And I want us to meal prep together. I can do it on this date. You can do it on this date. Let's coordinate our schedules. Otto, since you can earn a lot of money with the overtime stuff, let me figure out what I can do to support as well. And let's also talk about how we can spend time with our daughter in the time we have. It's going to be very difficult for us for the next few years, but if our goal is to get this debt paid off, we're going to have to change everything we think about our relationship with money. What do you think?

[Gabby]

Let's go.

[Otto]

Yeah.

[Ramit Sethi]

How much you want to spend on your dinners out for date night?

[Gabby]

Let's do 60.

[Ramit Sethi]

So right there, that's $370. What about vacations?

[Gabby]

We are not going on any vacations until our debt is paid off.

[Ramit Sethi]

Love it. Fantastic. That's what I'm talking about. Okay, if you had to guess how long it will take you to pay off your credit card debt, how long would you guess?

[Gabby]

Maybe eight months.

[Ramit Sethi]

Okay, Otto, what do you say?

[Otto]

About eight months? Yeah. With the way we started paying off this debt.

[Ramit Sethi]

So let's keep in mind that we're specifically talking about the credit card debt, which is roughly $44,000. But in addition to that, you have, you know, 91,000 plus 26,000, plus 23,000, plus 17,000, plus 12,000, plus 5,000, plus 166,000. That's all.

[Otto]

Separate all the debt.

[Ramit Sethi]

I don't expect you to pay that off in a matter of months. Okay. But the credit card debt is just overwhelming. Your current strategy for your credit card debt will take you 17 months to pay it off. In those 17 months, you will pay almost $10,000 in interest alone. But it took you a long time to accumulate it. You've had some bad financial habits, bad financial mindsets, and the two of you have not been holding each other accountable. You've actually been doing the opposite. So it's going to take some time. I do have some suggestions, though. Because if you increase your payments by $1500 per month, that cuts the payment down from 17 months to 11 months. If you were to increase it by 2500, that cuts the payments from 17 months initially to 9 months. So you have options.

[Otto]

My instant bot is I want to pay it off in the nine months.

[Ramit Sethi]

You want to get super aggressive.

[Otto]

Yes.

[Ramit Sethi]

Let me just check on this, Otto. If you worked, how much can you contribute extra auto on top of your $6,600 a month net income?

[Otto]

Well, given that my last paycheck was almost $11,000 and probably add another $5,000 to that one. Just being conservative.

[Ramit Sethi]

Damn. That's what I'm talking about. All right, so let's say you make an extra $5,000 a month. Is that right, Otto? So you're taking home 11k.

[Otto]

That's being. Yeah, it's being conservative. So in December last year, I made 24,000 in that month.

[Ramit Sethi]

Can you work that hard every month for a While. Yeah, like, for, like, a year.

[Otto]

I mean, I can work five days a week for the rest of my life if I needed to.

[Ramit Sethi]

How much does that mean you take home every month?

[Otto]

15,000.

[Ramit Sethi]

Yeah. All right, I'm putting the number in. This is what I'm talking about. Am I the only one getting pumped right now?

[Gabby]

No.

[Ramit Sethi]

All right, how much did you say? Eleven thou. What? What's the number?

[Otto]

Fifteen.

[Ramit Sethi]

$15,000. Holy. Oh, my God. What the. The fixed cost just dropped down to 47%. I'm sorry. I'm going to get roasted so hard on this episode. I am sorry, you guys. I never met anybody who's just like, hold on. I think I'll take home $15,000 for the next year, every single month. It's great. I know. I know. There's a cost to this, Otto. Not just financial, but I'm here to help with the finances.

[Otto]

Yeah.

[Ramit Sethi]

The fact that you can do that. We just solved a lot of problems.

[Gabby]

Yeah.

[Ramit Sethi]

Is going on.

[Gabby]

Thank you, babe.

[Ramit Sethi]

I'm kind of just like, why didn't you do this before? That's what everyone's wondering. Okay. Before you roast me in the comments for this magic income solution. I really did not know about this. I had no idea. And usually when I tell someone to make more money, it takes months, sometimes over a year to ask for a raise, start a side hustle, build a new skill. Nobody just shrugs and says, okay, yeah, no problem. I'll make an extra $5,000 this week. It's like they found freaking $60,000 between the cushions of their couch. Now, I have only encountered a few people that can do this in my 200 plus podcast episode, so I want to acknowledge this is pretty rare. It's very unexpected. But here's the thing. Auto has had the power to earn extra money every single month, and yet they are still in debt, still living this way. Do you see the point? You could have an unlimited money faucet, and if you have an unhealthy relationship with money, you'll probably be in a bad financial situation. Regardless of how much you earn, five shifts a week, tons of extra money. Debt will be paid off. You now have. Holy. I can't believe these numbers. Blowing my mind. Just to show you, when you add the 15,000 here to the net pay for Auto, you can see that your fixed costs drop. Okay. And you're taking home $19,000 per month. That is awesome, guys. Nobody who's taking home $19,000 a month should have credit card debt. In no universe is that allowed. This is the stuff that matters. Right. It's not about tracking these minute details. It's this strategy. You take the $9,000, you go. All right, well, look, we already know how much we need. We need per month. $370. Holy. Let's round up to 500 just in case. Okay, but of all the rest of this, what are we going to do with this money? Well, we're going to add a ton to the debt.

[Gabby]

Yeah.

[Ramit Sethi]

Pay that off aggressively. All right. But we're also going to add a lot to our savings because we are not going to put our freaking daughter at risk. Yeah, by not being prepared in case one of us gets sick or in an accident or something. So we're going to go over to our long term emergency fund. Instead of $1,000 a month, you know, we could put like $3,000 a month. We could do that so easily. You could even put more. But the point is, you choose how you want to allocate. And just out of curiosity, I'm curious, if you have roughly $9,000 per month, how would you split that payment?

[Gabby]

A 6,000 toward debt and 3,000 towards savings.

[Ramit Sethi]

Great. Hell, if you get sick, you're in trouble. We cannot let that happen. We need to build a backup plan. Guys, this is part of what I'm talking about, changing your mindset. We cannot only count on things always going perfectly. We need to have a backup plan for when, not if, but when things go bad.

[Gabby]

Yeah.

[Ramit Sethi]

All right. If you put $6,000 a month towards the debt, meaning you add $6,000 out of the 9,000, you could pay this credit card debt off in four months.

[Gabby]

I believe it.

[Ramit Sethi]

I mean, it's insane. And then, you know what you could do is you could simply take that, all that money, and you roll it over to the next debt. Guys, you could be debt free so fast with your income, it's actually crazy. But you could do it. You could live an incredible life. Gabby, how do you feel hearing that.

[Gabby]

When he has to work a lot? I struggle because it's really hard solo parenting sometimes. I also work full time, so picking up our daughter, coming home, spending quality time with her, doing dinner, doing bath, and doing bedtime night after night after night of not having your partner. It's hard. And it's not just hard because of the solo part. I love my husband so much. He is truly one of my best friends. So it's also hard not to get that quality time together consciously. I understand that, like, him working is putting us closer to our goals, but emotionally, it's still very difficult. So there's sacrifices on both sides. He's sacrificing time away to work. My sacrifice is solo parenting and being home alone with our daughter. But they're both sacrifices.

[Ramit Sethi]

I want to acknowledge we've talked about a lot about Otto and your role with work in particular, because you have this unique opportunity to make a huge amount of income, which in your situation is such a gift and so critical. Okay.

[Gabby]

Such a privilege.

[Ramit Sethi]

Yeah. That doesn't mean that it's not hard for both of you to be parents. And, Gabby, you're working full time as a nurse as well. We cannot ignore that. So I. I want to take a second to acknowledge that my take on this from a financial perspective is you both have made a series of decisions that have gotten you to this place, and it's going to be hard. It can be hard for a long time, like the rest of your life, and then your daughter can pick up the torch and it can be hard for her. Or you can both create a powerful vision where each of your roles is a partner. Because you cannot do this alone. And that's okay. There's no way around it. Both of you have examples from your family where things were hard. You both have a massive light at the end of the tunnel. So don't be afraid of things being hard.

[Otto]

Thank you so much. I. I just wanted to be on record. Gabby, thank you so much for doing our finances for the last and forever of our relationship. I'm going to take responsibility for a lot of it as well. So thank you for doing that for us, for our family.

[Gabby]

Thank you for acknowledging that. I appreciate it.

[Ramit Sethi]

Thank you both. This was such a treat to be able to speak to you today. There's a phrase we hear in the self development world. Choose your hard. Like things that are worthwhile are hard. Training for a triathlon is hard. Becoming a doctor is hard. Building a successful business is hard. But living with $50,000 of debt is also hard. No matter which path Otto and Gabby choose, it's going to be hard, but they will choose. And remember, by not making a choice, you are also choosing. If they want to move to Europe, if they want to build the life they dream of, if they want to stay debt free, they have to make a bold choice. And it's important to note that they can't just depend on willpower because they've tried that before and failed. They need real systems and they need a shared vision. If you are listening to this and you and perhaps your partner have decided to make a Massive change. The first question you've got to ask yourself is what's different this time? If your answer is just we're going to try harder, you're probably going to fail. If the answer is I need to do better, that's just words. Look at my hands. That's just words. What you really need is a total recalibration of your relationship with money. That means systems. It means a powerful vision. It probably means you need to change the way that you spend money down to what credit card is in your wallet. Now I teach all of this in my money coaching program. I would love to encourage you to join iwt.com money coaching. A huge thank you to Otto and Gabby for speaking with me and being so open today. Now let's check out their follow ups.

[Otto]

I think the biggest takeaway for me was kind of how unserious we really were about getting to our financial goals. We always just thought, oh yeah, we're doing it like we're paying off debt, but we're not really because we just get back into debt. So just having a conversation with an outsider looking in, it just showed us how unserious we were. One of the things that Remi mentioned was actually selling my bike, but I'm actually unfortunately not going to do that. Ramit, I'm sorry. I'm actually going to keep the bike so that I can ride it as part of my quote unquote free activity that I do for myself as part of self care as well. That's like probably the biggest change I'm going to do immediately is just find free or nearly free things to do to kind of self care or just use up time as a hobby.

[Gabby (follow-up speaker)]

Something I've been thinking about, especially as I'm driving to work is during the conversation he asked us, he gave us a couple examples and asked Otto and I, are these red flags? And to both Otto and I know they weren't red flags. And I've been thinking about that, like why were they not red flags? Like why are Otto and I so aligned in terms of like just spending and somewhat living in the moment and not denying ourselves. And one of the reasons why, I think is that something that we somewhat have in common is that we both went through a different but similar life experience. So Otto was living in a genocide, ended up having to go to a refugee camp and then eventually came to the US And I am a Hurricane Katrina survivor. When I was in middle school I lived in Orleans, Louisiana and we stayed during Hurricane Katrina and we were evacuated to, to Arizona So similar situations that we essentially left with the clothes on our back and that is all and ended up in this state. Interesting that we're together, like having had those experiences, but maybe not interesting at all. Maybe that's why we connect so much. But I also think that that's a part of the reason why we had that mentality with spending money, of we need to just live in the moment because when are our lives going to be over? Like, we both went through things that most people can't even dare to dream of, and I think that's why. So it's been about a month since we met with him and it was transformative for us as a couple, us individually and for our future. So we have quite a few updates.

[Otto]

We paid a total of five credit cards since right before our meeting with.

[Gabby (follow-up speaker)]

Ramit and right after with those five credit cards. So that was about $9,900. And we are on track to pay off four more credit cards along with Otto's car loan. Our goal is by the end of the year, but if that doesn't happen, it'll definitely be paid off by March 2026. Next is our emergency fund. So when we talked to Ramit, we Talked about saving 3,000 per month. So within that month we were able to save $3,000 and it is our goal to continue with that.

[Otto]

We also started a sinking fund. So we have about $700 in there, and that's to cover things like car maintenance.

[Gabby (follow-up speaker)]

The next thing we did was separated our accounts, so we had a bad habit of pulling from our emergency fund like it was a checking account. So we now have Charles Schwab as our spending account so that it's completely separate from our Discover, which we use for savings as well as for our bills.

[Otto]

And then we decided we're gonna allocate $200 for self care each month. So we're gonna just do massages each month or if we choose something else, but It'll be about $200 for that.

[Gabby (follow-up speaker)]

And next thing has been weekly meetings, which has been really nice because Otto has been bringing them up normally to me, like, hey, we should meet and talk. But every week it's been him. So that's been really exciting.

[Otto]

Yeah, I'm just trying to take away some of the burden off Gabby's shoulders with that. So, yeah, we're pretty excited. Bye.

[Ramit Sethi]

If you want my help with your specific money questions, you can apply to be on this [e-mail] apply or you can become a member of my money coaching program instantly. @iwt.com Money coaching in money Coaching, you get access to monthly calls where I answer your questions directly on a private, private call. And I get the chance to go much deeper on the concepts of money that have made a huge change in my life. Plus, you'll get access to a community of other people like you who will inspire you and push you to live your rich life. Check out money [e-mail] moneycoaching.