56 Minutes of Money Wisdom for High-Earning Couples
Money, Marriage, and Monthly Meetings - January 6, 2025 (about 1 year ago) • 56:39
Transcript
| Start Time | Speaker | Text |
|---|---|---|
Ramit Sethi | **50%** of the couples who talk to me do not know their household income. **Money**, for most, is not a source of connection — it's a wedge. | |
Sam Parr | I wanna go deep on this this is actually cool | |
Ramit Sethi | in most relationships there is one money person and this is a huge mistake | |
Sam Parr | how do you get someone who's a worrier to start spending you need to | |
Ramit Sethi | Learn the skill of **managing money**, but you also need to learn the skill of **spending money meaningfully**. | |
Sam Parr | tell me what to do | |
Ramit Sethi | I have 7 quick steps it's very easy first off | |
Sam Parr | Alright, we're live, Ramit. The reason I wanted to have you on was because Sean and I were talking the other day, and at the end of the episode—around minute 55—we got to the very end and somehow it came up that my wife, Sarah, and I do this thing that we just call our *monthly money meeting*.
The way it works is we break down our monthly expenses, our income, and we also look at our net worth. We talk about how we can spend the next month to make ourselves happier—how we can use money as a tool—and whether we're happy with our consumption in the previous month.
Sean made fun of me and he was like, "You're running that like a corporation, like a business." At first I was embarrassed to say I was *running my marriage like a business*, and then afterwards I thought, actually no: I can love my wife, and that's the number one reason why I do this. Also, in order to make it run effectively, you kind of have to run a tight ship like a business or have business attributes.
You have this book *Money for Couples*, and you tweet all about this stuff—relationships and running them like a business—and I thought you should come on and talk about the other aspects of a relationship, other than love, which require running it a little bit like a business. | |
Ramit Sethi | Well, first of all, I appreciate that **Sean makes fun of you** — that's one of my favorite parts of this podcast.
When you are married, you are running a business: it is the business of running a household together. It's only in the last ~100 years or so that **Americans** became infatuated with the idea of *"love as the only reason to get married."* That's ahistorical; that's not been the case for a long time.
Just to give you an example: it's so culturally dependent — my parents knew each other seven days before they got married. You have to remember that it's not unromantic to talk about money. I actually find it very romantic that you are building a connection, and there are a whole bunch of other benefits that I'm sure you and I both experience because we talk about money regularly. | |
Sam Parr | "And you've got this amazing podcast, and a lot of the people you have are, like, really wealthy. I think you had someone who was making, like, **$2 or $3 million a year**, and they talked about spending. But I think your typical bread-and-butter is low-ish **six figures**.
Our audience makes, like—I'm going to just make up the 'sabotage' of like **2 to $400,000 a year**—and they work at tech companies. [Clarification: the speaker likely meant "salary of about $200,000 to $400,000 a year."]" | |
Ramit Sethi | I think this topic is so fascinating to me because it cuts across psychology, numbers, and communication. I personally think it's *underexplored*.
A lot of people online talk about how to make money and how to invest money. Very few people talk about how to spend it meaningfully, and even fewer talk about how to do it in a relationship.
So, if you're listening and you're single, dating, or you've been married for 20 years, odds are very likely that you have not substantively talked about money with your partner. It's important — it is one of the core things in a relationship. That's why I love talking about this. | |
Sam Parr | Do you remember Tim Ferriss in *The 4-Hour Workweek*? He had this thing called the "dream scenario" or something. It's very similar to the stuff that you do. The idea is: write down all the things you want to own, then reverse-engineer it to figure out how much you have to earn in order to afford them. Be intentional about what you want, specifically say it, and work backwards toward it.
I used to do that as a 22-year-old. I think at one point I had owned everything that was on that list. After I owned them, I realized I didn't really care about half the list.
I remember a year into dating my wife it felt promising — it appeared we were heading toward marriage, which was great — and we did that "dreamlining" together [Tim Ferriss calls this "dreamlining"]. We used to do it all the time: "What's your ideal life scenario? How would you like to live? How much would that require? What responsibilities are you willing to take, and what should I take on?"
It was so helpful to do that early on in a relationship. It sounds weird, but it was a great conversation. | |
Ramit Sethi | I love that—it's amazing that the two of you did that early on. It's one thing to do it solo; it's entirely another to do it with a partner. What is amazing is that you two were on the same page about even talking about it.
You have to remember: most couples aren't like that. They're not sitting down to dream. One person is probably a worrier; another person might be an avoider. Or, for the people listening, they're *optimizers*—spreadsheet freaks who love to look at compound interest all the time, and they're not even communicating in the same way.
One person is like, "Look at our returns, look at our net worth," and the other's like, "Why are you talking about this? I don't think we're going to have enough. Why did you spend $20 at the gas station?" You guys were speaking the same language. **Most couples aren't even on the same planet when it comes to money.** | |
Sam Parr | optimizers what is that | |
Ramit Sethi | Oh, there are four money types I talk about in my book. I talk to thousands and thousands of people and I found these four types that describe a lot of people.
**Avoider.** This is the most common. Avoiders avoid money; they use a series of conscious and unconscious techniques to do it. If they're in a relationship they'll say things like, "You're just better at money. I'm not good at math." Sometimes they even sabotage conversations by saying, "Why do you always have to talk about money? Can't we just have a good time?" That's an avoider. There are a whole bunch of techniques you can use to stop being an avoider or to handle a partner who is an avoider.
**Optimizer.** That is *me*, that's *you*, that's a lot of people listening. Optimizers can do a lot of good because they're saving and investing. The problem is when you take it to the logical extreme: they become incredibly boring and cheap. All they care about is the cost and "How much is it gonna be?" For example: "We shouldn't buy this Coke can because if we compounded that for 45 years it would actually be $1,200." It's like, get a life. Optimizers are really hard to be partners with because they always ask, "How much does it cost?" That's all they're concerned with — but they can change as well.
**Worrier.** Worriers worry about everything. Many of them saw that growing up. When I ask them, "What would it look like if you didn't worry about money?" they have no idea, because that's all they've ever known.
**Dreamer.** Dreamers believe that success is just around the corner — it's the next gig, it's the next deal. These are the folks who typically fall into get-rich-quick schemes. They are incredibly difficult to be partners with: they're not listening, they're not reading my book, let's put it that way. The only reason they can live in la-la land is that they are often subsidized by someone else, often their partner.
Those are the four money types. | |
Sam Parr | You teach us stuff, so I assume—and I know it's true—that you have your *act together* when it comes to money. You're an **optimizer** now.
"What flaws do you still have, and how do they present themselves on a daily basis?" | |
Ramit Sethi | Yeah. For everyone listening: Sam and I were texting. Sam was like, "Hey, what are you getting on Black Friday?" I replied, "I don't shop at any place that does Black Friday sales."
That's the difference. But the fact is, you're an *optimizer* and so am I — we just manifest it in different ways. | |
Sam Parr | so where do yours manifest in in ways that are good but also in annoying ways | |
Ramit Sethi | Dude, the annoying ways are the ones that — when I was 22 it was all about, "look at these numbers, you just need to do this; it's so easy, it's so clear." I could see people's eyes glazing over, but I didn't know why.
Once you get a little older, a little more mature, and a little better at communicating, you realize nobody wants to be talked to like that. In fact, in the areas where I've been really weak — like fitness, where I didn't grow up knowing what protein was until my late twenties — if someone had said, "Dude, it's so simple," it would have been overwhelming and it would have made me feel stupid.
So I learned how to slow down and become a little more emotionally connective. But dude, it's still there. When I'm talking about money, sometimes I'm like, "Okay, I get it — let's get to the part where we do the numbers." It happens regularly.
My wife and I have monthly money meetings. We have our annual *Rich Life* review, and I can see it in myself: I just want to get to the end. For me, you know, I was raised that **efficiency is a virtue**; getting to that part is a virtue. I've had to really try to learn, and I'm still learning: sometimes slow it down, take the journey, have fun along the way. We'll get there, but don't be in a rush to get where we're gonna get anyway. | |
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Sam Parr | What's this? You know, it's **December 30th** when we're filming this. What's the **annual review**? | |
Ramit Sethi | Oh man — we're in the middle of it right now. This is one of my favorite times of the year.
Every December we have an annual **Rich Life Review**, and I would encourage everybody to do this. We sit down and do it over several days; we're in no rush. We start by going through our photos from the year and ask, "What were our most memorable things that happened this year?"
A lot of them are favorites, but some of them are not so good — things that bring up visceral memories.
</FormattedResponse> | |
Sam Parr | you're talking about like a like a death or yeah something like that yeah | |
Ramit Sethi | Yeah. Something bad happened, but there were a lot of good things too—like travel and family; we saw things like that. *You just know it when you see it; you just know it.*
Looking over our photos, what we do is we just select about 10–20 and text them to each other. Then we talk about them. | |
Sam Parr | What's this look like, though? Actually, what does it look like *in the evening*? Are you just hanging out over dinner? What are you guys doing? | |
Ramit Sethi | what if I'm like sam I told you we're running a freaking business we're in a conference room what do you think no okay the truth is when we did this just recently we were sitting across from each other like basically on our couch chilling but most of the time we have these conversations we're actually traveling so we love to do this in a place that is different than our normal place it's expansive usually we try to surround ourself with beauty but you know that's not always possible so the. The setting helps but it's just about the 2 of us having time and space so here I am looking at my photos and it becomes very obvious to me the photos I chose like out of 20 18 of them were with friends and family wow like that really tells me something about what's important to me and so we start off there like wow what was memorable we then talk about we had this little exercise that we did this year I came up with these questions which was what if 2025 next year was incredibly generous and we started there and we're just like what would we do if we were incredibly generous and we just like came up with the idea back and forth next adventurous so it was like like a wilderness course you know I don't even know how to start a fire what if I went to a 3 day wilderness course and and my wife was like go on your own I'm not trying to go to that but that's cool too you find out what you like what you don't like next was luxurious that was cool relaxed and then social so we're just dreaming we're just like coming up with ideas and we're writing them down and that's it then we start getting into a little bit more specific stuff what did we love this year what do we wanna do more of these would be things like take a trip with friends spend time with our parents that kind of thing and then we're like what do we not like what do I wanna do less of oh we tried to eat at this we got this reservation at this restaurant and it was a big deal and we actually don't really care about that type of stuff and then the last thing we do is we get into the numbers | |
Sam Parr | You don't need to say your numbers, but tell me the *titles* of the numbers. For example: you look at, like, your personal/family's annual burn, your personal/family's income—what else? | |
Ramit Sethi | We're talking at the expense level now, so we're talking line item—but these are the major categories in my *conscious spending plan*. Things like housing; travel (for us, a big discretionary expense); all the clothes; fitness. Those are the items we're talking about.
And we're like, "Okay, we projected this, we hit this—why did we diverge?" Then it's like, do we need to tweak it next year, or do we need to add more income? This is the type of stuff where we're talking about, "What are our distributions? I don't know if we can handle that next year," etc. | |
Sam Parr | And when you—this is like, *I want to go deep on this*—so you're setting the **budget for the next year** as well. When you're doing the review, what percentage on track are you typically? Are you typically over? Is your family over or under?
</FormattedResponse> | |
Ramit Sethi | That's a very good question. We're never exactly on—never. We are, well, we are definitely over in certain categories. *Travel* is almost always over, so we adjust it every year.
The dream is like, "You're gonna nail it," but we never will. We leave buffer. We always leave buffer. You add **20%**.
Oh yeah, I have handy guidelines for buffers. For example, for a wedding you 2.5x it, like right there. | |
Sam Parr | yeah | |
Ramit Sethi | Okay — for a trip, for travel, add **50%** right off the bat. So if you think your trip is going to be $3,000, it's actually going to be $4,500. | |
Sam Parr | Got it. So it's *not like unilaterally* — "Alright, we budgeted $100." Just assume that our 'in' [unclear] or whatever: $100,000 for the year; for our whole life, assume that it's gonna be $120,000.
</FormattedResponse> | |
Ramit Sethi | We would do that for **fixed costs**. So, fixed costs are things like your rent, your auto, you know, your fixings. Typically I would say **add 15%**, because there are things that people forget about. That's just your guideline. | |
Sam Parr | By the way, that's what I do with my businesses. I like—whatever we say the budget is, in my head I'm like **30% over**. | |
Ramit Sethi | Okay, let me tell you why I think there are so many different ways with money you can internalize lessons—like fitness and luxury.
I had this experience: we stayed in a hotel in Thailand. It's a high-end hotel. Whenever I go to one of these hotels, I always ask to see the general manager, and I go on a walk around the property with him. | |
Sam Parr | him or her | |
Ramit Sethi | and I go why why are you laughing it's weird | |
Sam Parr | it's just that's a really karen thing to do but you're doing it for a positive thing | |
Ramit Sethi | *What the hell are you talking about?* I'm not saying, "hear all the things that are wrong." I asked them, but tell me how you run this hotel. What are the clientele? So if... | |
Shaan Puri | we do do you | |
Sam Parr | Do that at the front desk, or does your assistant—or you—send an email? I'll be checking in.
"Like, dude, I wanna get..." Yeah. Let me explain, Ari. Here's why: Ramit said, "Hey, do you wanna come to New York City and hang out with me? I'm gonna plan something for us to do." I was like, "Hell yeah." He was like, "What do you wanna do?" I was like, "Whatever you're interested in, because I know you're super into it—take me along."
So we went to the Amangiri—or Aman New York? Is that what it's called? "Aman? Aman New York?" | |
Ramit Sethi | yep | |
Sam Parr | Like, **the fanciest hotel in New York City** — the general manager, or some manager-type, gave us a one-hour specialty tour of this $3,000 or $4,000-a-night hotel. I was like, "Dude, who did you email to get this?" | |
Ramit Sethi | **So I like hotels.** I like hospitality, and whenever I go to these hotels, the manager—when you're staying there—will come up to you at a certain [time] and greet you. I'm always like, "Hey, I'd love to learn more about the property. Do you have any time?" They love it. They love it. | |
Sam Parr | got it | |
Ramit Sethi | So we went on a walk, and it was December at the time. I said, "What's your occupancy?" They had something like 40 keys — or 40 hotel rooms.
He said, "It's about to get busy. Christmas is our busiest of all, but we always keep one room off market."
I'm like, "Why would you do that when it's the busiest, most high-demand, most expensive time of the year?"
He goes, "Luxury is about always having something in your back pocket. Maybe our regular guests who come every year for the last decade bring an extra family member. We need to be able to accommodate that, so I will hold it off market."
I'm like, "Ah — that's a very expensive thing." But I think about my mom growing up: she always had extra food if we brought a friend over. *Luxury* — just at a different level.
So same thing with money: I want to always build in a buffer so that if something happens, we're good. | |
Sam Parr | No sweat. And how much? What percentage do you—like... do you assume that every year your spending is going to go up, like, **5%** or **10%**? | |
Ramit Sethi | No — I probably should, but I don't do that. That would be good.
We look at what we're going to do next year. Typically, certain things don't really change; for example, rent or similar expenses won't change that much. But if there are big life events, those might change.
So **we're not doing it on a percentage basis**. We're looking at **big, discrete events** because we already have the foundation kind of laid out. | |
Sam Parr | And then, do you assume — you guys are both **entrepreneurs**, so let's do it for the question of you and me as entrepreneurs. Also, let's do this for a **Facebook** employee: do you assume that your income is **flat**, **up**, or **down**? | |
Ramit Sethi | Great question. My wife and I are both entrepreneurs, so we take a standard salary, which we talk about at that annual **Rich Life review**: "What is our salary going to be?" It's typically the same. I didn't change my salary for like 13 years.
But we talk about distributions — how does the business look next year? What numbers are we going for? What do we think our distributions will be?
We use distributions, which makes our system a little bit complex. We get them on a quarterly basis, if we take them. Then we have a determination: we have a percentage — where does it go? How does it get split up? All that stuff is documented.
We look at the document once a year in December and we decide, "Is this fair? Does this feel good? Do we need to tweak anything?" But it's once a year. | |
Sam Parr | Yeah — that's where it gets complicated. I do this with Sarah, and I'm like, "Well, if business goes well, then it could be this." But if something happened... *shit happens*.
For example, if you run an SEO-based company, Google makes a change and my situation has just changed.</FormattedResponse> | |
Ramit Sethi | I have to tell you: this is maybe a **strength** and also a **weakness**. I don't want to have to go backwards, right? So that appeals to me. That's true in a lot of parts of life.
For example, speaking of hotels: if I stayed at one hotel room one time, I'm not going to a lower-level hotel room. I want to stay at the same level or go higher. Why? Just because for me that's a point of pride and something I value. For other people it might be their car — they finally got a nice car and they don't want to go back to the Honda Civic they grew up driving.
I feel the same with money. If we decide we want something, I'm going to be very, very careful before I commit to spending on something that could put us backwards. Otherwise, I just wouldn't do it.
As an example: if somebody starts to fly — well, I know you've talked about **flying private** — for a lot of entrepreneurs it's one of the things they want to do. Great. If that's a goal, I wouldn't do that until I knew I have *no financial chance of ever going backwards*, because that's actually really hard. | |
Sam Parr | And that's—well, that's rooted in your business, which means my business is stable enough that it's likely going to continue to grow, even if it's a small *5%* or *10%*. It's a stable, *recurring-ish* revenue business — that type of thing. | |
Ramit Sethi | Yeah, or you have enough net worth to float it. But what I'm really encouraging people to do is this: you don't have to do this for everything.
Some years you might splurge on a restaurant—maybe you'll go back, maybe not. If it's really important to you, though, it might be different: we're sending kids to this school, or we're going to decide that we're flying business class. **Be very, very careful before you make a purchase that is _recurring_.** You don't want to go back once you do it, so make sure you're solid forever. | |
Sam Parr | How long does this annual meeting—the annual review—last, and what's the homework to prepare for it? | |
Ramit Sethi | It lasts several days. We're in no rush, so it's like we'll talk for a couple of hours and then we're off doing whatever we're doing, whether we're— [sentence trails off] | |
Sam Parr | it on your calendar | |
Ramit Sethi | It's on the calendar. It has a link to all of our docs — the one from last year we review.
Some of it is structured, like we're talking about: we have these questions — "What do I want to change?" etcetera. Some of it, though, is really organic, and I think that is the part that might surprise people.
In my life I'm an *optimizer*, and I love structure. I think that has become a weakness of mine, where I always want the black-or-white answer and I need to make sure it fits in these cells. So I've been trying to become more *intuitive*, and I find that I'm most intuitive when I'm traveling because I'm like, "What do I feel like seeing? Where do I feel like going? What about us?" I'm trying to bring that to these meetings.
For example, the question about **"generous and adventurous"** was an intuitive thing I was thinking about, and then we started talking about it and there was a lot of energy. We spent a few hours talking about that. That is how I love to approach this — a combination of the literal and the intuitive. | |
Sam Parr | What's the monthly meeting look like? Ours usually looks like this: we use **Monarch Money**. Do you know Monarch Money? That's, in my opinion, a cool tool — it's my favorite for tracking monthly expenses.
We go over that, and then we say, "Alright, next month—what adventures or things do we have planned? Are there any deviations or alterations we want to make?"
We also talk about different goals we have throughout the year. For example, we might want to take the family on trips. Then it's, "Do we have that plan? What went well last time? What didn't go well?"
Finally, we talk about purchases: "Do you want to buy anything? Is there anything you want to buy?" | |
Ramit Sethi | I love that — I love every time I hear you guys talk about how you do money. It makes me really happy because there's a lot of *connection*, and I hope that's inspiring to other folks.
For most people, money is not a source of connection; it's a *wedge*. It's actually something that's avoided. Most couples really substantively talk about money about four times in their entire life. | |
Sam Parr | "What does that mean? So, is there a bunch of—I mean, I guess this is *obvious*; this is an obvious question—but are there typically a lot of wives out there who have no idea what the income is? Is that typically how it is?"
</FormattedResponse> | |
Ramit Sethi | **50% of the couples who talk to me do not know their household income.**
As an example: I had a couple recently who said, "I think we'd feel good if we made $120,000." I was looking at the numbers they prepared for me and, according to their preparation, they make $80,000.
So I dug into it and asked about bonuses. They said, "Oh yeah, we get a bonus once in a while." When I added everything together, it turned out they make about $121,000—and they looked completely dumbfounded.
Why? Because for years they've been telling themselves, "We'll stop worrying when we make $120,000." They've been making it for years.
**What this really shows is that the way you feel about money is highly uncorrelated to the amount in your bank account.**
They don't talk about money. Most see it as a negative thing. They see it as something to protect their partner from. They see it as something like, "you do the dishes" or "mow the lawn." But it's none of those—money has to be a source of connection. | |
Sam Parr | Which is the thing you talk about. But, by the way, you were giving me credit for these meetings. They still occasionally end in fighting. It doesn't always end well.
We are on the same page about discussing things, but we are not always on the same page about our wants. Sometimes there are decisions where there's a winner and a loser. So it's like, how can we both win in one of these situations?
It definitely becomes a question of **"who's the money person."** It's not just about *who's earning it*, but *who's driving* [the business/project]. I guess it's frustrating if I'm the one driving all the time — I want you to care about this as much as I care about it. | |
Ramit Sethi | Sam, I'm with you. Okay—listen. In most relationships, there is one "money person," and this is a huge mistake.
Again, most of us think of money as something that's just divided, like every couple does. We divide tasks based on time, intuition, etc., or just habit. But money—when I got together with my wife, of course it would have been natural for me to be the money person. | |
Shaan Puri | this is | |
Ramit Sethi | What I do for a living—I think about it every day—and very early on I realized that would be a horrible mistake. I told Cassandra, "We're gonna do this together." I'll tell you why.
**1.** One day I'm gonna get hit by a bus. Some shithead from Goldman Sachs Wealth Management is going to call her: "Oh, we'd love to help you be a steward of your portfolio." **Fuck you, wealth management industry.** So she knows exactly about expense ratios and fees. Otherwise I'd be looking up from hell saying, "What's about to happen right now with this conversation?"
**2.** I wanted us to have a second set of eyes. No matter how good you are with money, it's always better to have another person — to make decisions together.
**3.** It's way more fun to be doing this together. Where do you want to go next year? Who do you want to be generous with? All those things.
So it's a huge mistake to be the sole money person in a relationship or to let your partner be completely out of the loop. This is becoming more and more important because a lot of men die early; in heterosexual relationships they often leave their wife defenseless. The wife doesn't even know where the money is, much less how much, much less what to do with it. Bad, bad situation. So that is a big no-no. | |
Sam Parr | Dude, I was telling Sarah the other day. Ever since we had a kid, I have this *weird dream*. It sounds strange to even say it, but I dream that she dies [my wife].
The way my household works is I focus on making the money, and she is in charge of tracking and spending it — paying rent or the mortgage and things like that. When she died in my dream, I was like, "Who do I pay this rent to?" I literally don't know what health insurance provider we have, how they get their money, or who's our dentist. I didn't even know certain things like that.
It honestly freaked me out, and I couldn't imagine being on the other side of that — like, how do we earn... | |
Ramit Sethi | Exactly. I mean, it's kind of funny when you say it, but it's not funny if you're the person who doesn't know where the money comes from or how things are supposed to be paid. It's actually terrifying and a very, very bad situation to be in.
Alright, let me talk about the **monthly money meeting** and how to do it. It's quick — it's 60 minutes — so you're kind of moving through these things. I have 6—no, 7 quick steps. It's very easy.
Alright, first off: **appreciation** — kind of unexpected. Always start off with something you appreciate about your partner.
Look at Sam's face right now. Sam's going, "What the fuck is this? Woo-woo weirdo talking about 'move to L.A.' and start talking about appreciation — where are the crystals?" | |
Sam Parr | "I laugh because we do that, and it's definitely still uncomfortable." | |
Ramit Sethi | oh yeah okay fine damn impressed | |
Sam Parr | I think you told me about it. We've been doing these for years, but when you or someone else shares something, I'm like, *"I'm gonna add that."* | |
Ramit Sethi | Yeah, I'm thankful. I appreciate that. Whenever we travel as a family, you always make sure we get to the airport at the right time—simple. I mean, you cannot say enough nice things.
Alright, so that's number 1.
**1. Appreciation**
- A simple thank you and recognition for things like punctuality when traveling as a family.
**2. Partner 1 updates (quick things)**
- Usually each partner will own one part of the financial system. It could be tracking how much you spent on groceries last month, or making sure that one account flows to another and changing things as needed.
- Give a quick update if something hasn't gone right. For example:
- "Hey, we agreed that we're going to spend $700 on groceries last month. I actually wasn't able to hit that — it was $850. Here's what I'm doing about it next month."
- They own it, get ahead of it, and explain the plan. Shine a light on it—don't let it fester.
**3. Partner 2 updates**
- Partner 2 does the same thing for their area of responsibility.
**4. Joint updates**
- Discuss anything you need to talk about together. For example:
- "Hey, what's up with your 401(k)? Are you getting the correct match?"
**5. Review our numbers**
- Are there any critical numbers to review? I actually don't look at many numbers on a monthly basis because we plan annually and do a six-month quick check-in. That gives us time to adapt if needed.
- "I'm not trying to look at the freaking price of noodles in February — I don't want to talk about that."
**6. Open issues**
- Address anything still open or unresolved.
**7. Wrap it up**
- Always end with "I love you," "I appreciate you," and give each other a hug.
- Start to align money with feeling good. It might feel cheesy at first, but if you do it 4, 5, 10 times, you're going to actually start to feel it. | |
Sam Parr | You tweeted out this thing — or I think it was from the book you shared — that had benchmark percentages: *save this%*, *invest this%*, *spend this amount on guilt-free things*. Can you apply those same percentages to a couple that earns $300,000 — or, let's... we're actually going to round up for math — $500,000 a year? | |
Ramit Sethi | okay I'll give you the standard numbers first quickly and then let's talk about how things change if you earn more so there are 4 key numbers you need to know in your financial infrastructure I love it just 4 you don't need to track the price of pickles the the first is fixed costs that's rent mortgage groceries debt auto that's 50 to 60% of take home pay next up is investing that's 5 to 10% of take home pay of course that's where real wealth is created so I would prefer the higher the better next is saving this is an emergency fund saving for a down payment even saving for a kid's activity or a vacation 5 to 10% and finally my favorite one of all guilt free spending this is eating out travel buying a round of drinks whatever 20 to 35% so for me the beautiful part is if you can fit it in like tetris fantastic you can buy whatever you want as long as you're hitting these key numbers it's very freeing now when I look at couples or individuals who make a lot of money 500 k as an example there's a couple of things that are common the first is their fixed cost number tends to go lower because their income is higher so instead of 60% or in some cases people have 60 70 80% their number is like 50% it's on the lower end of that range once in a while depending on where they live it can even be lower than that their investing is typically higher people who are making that kind of money typically not always but typically tend to be a little savvier with investing and because the price of bread is basically the same like yeah you might spend double the price on bread but you're not gonna spend 50 times more on bread therefore you have more money left over typically that goes into investing some of them save aggressively so sorry they for investing they might have 15% of take home pay if they're in the fire community or they're very aggressive they might go 20 25% of net pay I like to see that number around 20% as your income gets up because you when you have that kind of money take it make it work for you you have the earlier you can do that you can really let it ride and grow savings 5 to 10% sometimes they go a little bit higher you know what I often find with guilt free spending they can certainly be spending at the higher end of that 35% of 500 k is a lot of money or 35% of the take home | |
Sam Parr | oh these are all post tax | |
Ramit Sethi | Correct — post-tax. Sometimes I will see people who are investing like crazy. They're doing 40% or 30% of take-home pay, and I'm like, there's a lot of money; your savings is really high. Then I get down to the bottom of the conscious spending plan and they're spending like 8% on *guilt-free spending*, and I'm like, what do you guys do for fun?
They always say the same thing: "We like to go… we go to the park. We actually have money set aside." Then I ask, "Do you actually spend it?" And they both look down because they wait until the end of the year — they don't spend their money.
And you know what they do with the money that's left over from guilt-free spending? They sweep it right into their investing and they say, "We're so good — we don't spend money, we invest it." That's a big mistake.
You need to learn the **skill of earning money**. You need to learn the **skill of managing money**. But you also need to learn the **skill of spending money meaningfully**. So if you're making $500K, you should be learning how to spend that on the things that are meaningful to you. | |
Sam Parr | how do you get someone who's a worrier to start spending | |
Ramit Sethi | It's very difficult. Let me tell you why it's so hard.
I frequently have multimillionaires who come on my show, and sometimes one or both of them will say, "We want to learn how to spend more." People listening are like, "What kind of freaks? Don't know how to spend money—that doesn't make any sense." | |
Sam Parr | I'm one of them | |
Ramit Sethi | Yes, it's a very common affliction. And it *is* an affliction because there are a lot of reasons for it.
Often, people grew up financially insecure. Family members only said, **"We can't afford it."** The only way they've related to money is *scarcity*. But when the numbers change, they change faster than the psychology changes.
The problem is that you can get to a point where you have more than enough but you're unable to actually spend. I see several things happening. First, I see people who realize, at a certain point, "This isn't right—something's wrong." We have these numbers on a spreadsheet, but it doesn't feel real. | |
Sam Parr | I went through this as an entrepreneur. I sold my business and had a windfall leading up to that. I think I ran the company for four years. For the first three years — well, the first two years — I paid myself roughly **$24,000** a year, which was so stupid. People should not do that, because my business was doing fine; I could have paid myself more.
The third year was higher — about **$100,000** a year — which in San Francisco is not a crazy amount of money. So there was a long period of “not a lot, not a lot, not a lot,” and then a lot. It took another three years to acclimate to that reality.
</FormattedResponse> | |
Ramit Sethi | I love that reality it's pretty unusual most people don't get the windfall like you did but it may as well be the same thing because they look at the numbers and they're still feeling the way they felt when they were 7 years old sitting around the dining table and their mom or dad said how dare you ask for that we can't afford that and so I know you've been on a journey to spend more money it's awesome to see you talking about menswear now talking about taking your family traveling like that's not easy that is really not easy what what I find is the ultimate thing that happens with folks is they start to ask for help and they look around and they make 2 mistakes 1 is they ask for help among a bunch of other frugal people so I see this in the fire community every day hey everybody I I realize I've crossed my fire number but I can't seem to know like I can't seem to bring myself to spend money and then within 3 comments people are like you don't actually need to spend money it's actually better to save you should save it because who knows what health care's gonna cost in 2,065 I'm like you're asking a bunch of frugalistas how to spend money you're asking the wrong community well it's like asking me how to go camping don't ask me I have no idea okay that's the first 2nd is they come around and they start to actually try something maybe they eat out at a restaurant whatever and the first time they do it it's it's not particularly great maybe they picked a bad restaurant maybe they don't have the palate for it maybe they hired somebody to come clean their apartment or house and they don't like how the person folds their clothes okay that happens so then they go this shit doesn't work I actually I'm a good person because I don't spend money I don't need to do all this frivolous stuff that other people do so they've created this self contained tautology which ensures that they're never gonna change there's a much better way to do it it's to build the skills now it's to start spending on little things discover what you like what you don't become clear with your money dials enjoy it do with a partner and over time you learn that spending money as a skill is often as important as earning and managing it too | |
Sam Parr | I think the important thing is figuring out *what makes you happy*, because there have been times when I'll talk to you — or you to me — and we force what makes us joyful onto the other person.
For example, you like fancy hotels and you'll say, "You should go stay at this hotel." That's just not it for me. I don't get joy out of that. What I love are services — like monthly services. For you, for example, you don't own a house because you just don't get joy from that. I don't know what your apartment looks like, but for all I know it could be very modest because you get joy spending elsewhere.
I think that's a really challenging thing for people to get over. For example, they'll say things like:
> "Buy a home. It's a great investment."
I will say, well, it's typically not a great investment — or at least that's not the reason to buy it. They'll say, "You're going to throw away money on rent." I'm like, you're not throwing money away; you're acquiring a service and it makes you happy. Meanwhile, my money is in an index fund that's growing, so that's a good investment for me.
Then they say, "So you shouldn't buy a home." And I'm like, no — definitely buy a house if it makes you happy. I bought a steak last night because it brought me joy. If owning a home makes you happy — and by the way it can often be a good store of value, which is just a cherry on top — do it because it makes you happy. That's a good reason.
It's hard for people to understand doing something just because it brings you joy. I've been there too. | |
Ramit Sethi | Yes. I love what you're saying, and I love watching you on **Twitter**, because you're one of the only people who actually understands that buying a primary residence is sometimes — but often not — a great *investment*.
Here's what I think: people use the word "investing" way too much. Like, I have a personal trainer — that's not an investment; that's a **luxury**.
If I were to buy a house today, that would not be an investment. That would be the most expensive luxury I have ever bought. I will lose one million one day when I buy a house. I guarantee it. I'm gonna lose a million, and I'm gonna do it with a big smile. | |
Sam Parr | And you're going to be ridiculed on the internet because people know you as the guy who has— they say, "But, Ramit, you said never buy a home." | |
Ramit Sethi | Well, illiterate people who don't actually read what I've said... I **never said, "don't buy a house."** I said, *run the numbers*, then consider the non-financial [factors]. And then, yes—you're right, there's gonna be... | |
Sam Parr | a big | |
Ramit Sethi | Problem: When I buy a house... anyway, we use the word *investing* a lot to justify purchases.
I've had people who literally said, "Buying a mattress — a $2,000 mattress — is an investment." That's not an investment; that's a luxury.
When I asked them — and this got me very obsessed — "How do you know if you can afford it?" Do you know what people said to me? They were like, "Your back is the most important investment you can make."
I was like, "Hey, when I ask a question about affordability, your answer better have a number in it. **Affordability is a number, not a feeling.**"
What I've realized is so many of us use *investment* to justify purchases. | |
Sam Parr | but what's the the ramit approved answer to that | |
Ramit Sethi | My answer for an **investment**: I narrowly define it as something that can provide a financial return. Simple.
Otherwise, here I am justifying a $3,000-a-night hotel—*oh, their air conditioning is triple-filtered; therefore the hair on my arm doesn't stand up; therefore I can write a new book that makes me $100,000.* It's BS.
Same for the face cream I use — it's not an investment. It's okay to say, "I like this and I'm going to buy it because I like it." That's totally fine.
Now the affordability question becomes more complicated. You have to know your numbers and you have to have your percentages dialed in. But affordability is a financial question; it is not about *feelings*.
For the optimizers listening: sometimes when you're talking to a partner who's not an optimizer, they want to talk about feelings. In the book I emphasize how important feelings are. You've got to meet your partner where they are; you can't just talk about numbers alone. But sometimes you need to actually engage with the numbers. Feelings are good—you should spend a lot of time on them—but at a certain... | |
Ramit Sethi | You're running a business the business of the household and you need to look at the numbers | |
Sam Parr | how do you get over disagreements like if you or your wife is complaining to each other | |
Ramit Sethi | The most common reason for these disagreements is that there is no **shared vision of a "rich life."** It's literally one episode after another of nitpicking.
The perfect example I have: a person wrote me on *Instagram DM* and said, "Can you convince my husband to stop buying iced tea every day?" I said, "Okay. How much does it cost?" She goes, "It's $5 every single day — we can make it at home." I said, "Okay, interesting. Hey, out of curiosity, what's your household income?"
She became very cagey when I asked her to share it. She lives in New York — she and her husband... you want to guess what they make?
</FormattedResponse> | |
Sam Parr | I don't know what $200,000 a year | |
Ramit Sethi | $600,000 a year.
So what you could see is that it's really not about the $5. To him, it was like, "Hey, we work hard — this is just a little treat that I enjoy every day." It was great. To her, it was values-based: how she was raised and why she would or wouldn't spend money.
A couple of thoughts when couples have disagreements, whatever the scale. The first is I always ask them, "What is your *rich life*?" Couples often don't know — they've never talked about it. They've only talked about, "Why'd you spend that much on a drink?" So ask: what do we want in our life? What's important to us? Do we want to travel? Do we want to send our kids to this activity? Get into all of that, which I go into detail on.
Next is to have your accounts set up so that you don't have to have $3 conversations. Sam, you said the audience we're talking about today makes $200,000+ per year. You should not be talking about $3 purchases if you're making $200,000 a year. If you are talking about $3 purchases, you have misaligned your money systems and you probably don't have a rich life.
The way to set up your accounts to be united in a marriage: I highly recommend all the money goes into a joint account. From there, each of you has some of the money flow to a separate individual account — a **no-questions-asked** account which both of you know about, but each of you only has access to your own. If that person wants to buy the $5 lemonade or give a $20 tip, it's totally up to them — that's their money, no questions asked.
That is how you unify your financial relationship and also give each other a little bit of flexibility. | |
Sam Parr | yeah I did that this year I have like my own little my own account | |
Ramit Sethi | how how did it change things | |
Sam Parr | You know, I think that even though you called me an *optimizer*, I'm more of a worrier. I definitely feel guilt oftentimes buying things if they're above a certain amount—maybe in the $1,000 range.
So I put $20 into an account because I was newly into clothing and got interested in the craftsmanship and a lot of this *Japanese* stuff that I love. It's pretty expensive—like $600 for a button-up shirt—but I'm just deeply fascinated by what I'm reading and I want to feel and touch it. It's interesting to me, but I would feel a sense of guilt around it.
So I was like, "Look, I've allocated $20,000 I can spend this guilt-free." And so I will spend it. I still feel guilt, but it's definitely less. At least now I know that I used to feel a little sense of *I'm disappointing Sarah*, because even though she's on board with it, I'm taking money away from the stuff she could use for something else. I'm also embarrassed to spend $600 on a shirt and I didn't want her to know.
It came from all this being raised poor stuff. That never goes away—you know, it's just like any other "daddy issues" anyone ever has. It never goes away; you just try to manage it.
</FormattedResponse> | |
Ramit Sethi | Yep. I like what you said about "I used to feel that I was taking away from her." What I see in the way you talk about it—and how curious you are, because we text about this stuff a lot—is that it feels to me now you are actually adding to your own curiosity.
Of course your family finances should be dialed in. Of course you should have all your ratios working and your money flowing. But we should remember that **two partners** have got to be intellectually and financially fulfilled. It makes them better partners. And as long as you're managing your joint money, you should be spending on your own.
One of the worst things I see—this happens a lot with men—is men become shells of who they used to be. You talk to a guy in his twenties and he has all these hobbies and interests. You talk to him by his fifties and I go, "What do you like to spend money on?" They go, "Whatever my wife does." I go, "We're not doing that here—answer my question: what do you like to spend money on?" A lot of times they've lost all hobbies.
I see that in myself. I have to fight to try to find some new hobbies, because if it were just up to me I would simply shrink myself. This happens to a lot of people, but especially men, and I want to encourage us to try to fight against that. | |
Sam Parr | "When I was kind of up-and-coming in my entrepreneurial journey, I used to make fun of *self-development* people — which you, you fall in that category, and so do I. **I'm going to stop.**" | |
Ramit Sethi | playing right now | |
Sam Parr | Well, no — I wouldn't make fun of you, but just the idea of people saying, "I'm hiring an executive coach" or "I'm hiring a coach" — I'm like, what? *Man up. What are you doing?*
Then I started hiring a fitness coach, and then a nutritionist. By the way, a fitness coach could be as cheap as $50 or $100 a month with *Future* or one of these services. Basically someone to answer questions and tell me what to do. I started doing that for so many different things.
It starts with fitness because that's the easiest application. Then we actually hired a home-organization expert to come in and teach us. I'm like, dude, this is so much better than learning from a book or YouTube. Take the general knowledge from the book or YouTube, then have an expert come in — pay them money. It could be a small sum.
You could do a lot of this for $100 — like a cooking class or something really simple on Groupon, if you wanted to. Simple coaches to come in and teach you. But the **best situation** is some type of ongoing class, you know what I mean? It's the *greatest way to learn*. | |
Ramit Sethi | I love that you said that. I also love that you said, "I used to say *man up*," because just think about what's embedded in that phrase, right? That *suffering is masculine* and that if something is hard it is therefore more valuable. I think there's some truth to some of that, but I also think... | |
Sam Parr | that yeah yeah like there's grit grit's real | |
Ramit Sethi | Yeah, I agree. I think sometimes we make things too easy for ourselves, and there is value in a challenge. But I also think there's **no prize given for living a smaller life than you have to**.
I really want to inspire people to think about the things that they are interested in. There's probably somebody who can help them enjoy it more.
I talked to a guy in the fire community and he was like, "I just don't really like to spend money — I'm good." So I asked him what he liked, and he gave me these generic answers. I probed: "Tell me more." He goes, "I love coffee," and he says, "I buy these beans." That was the limit of what he thought he could do.
I said, "Hey, what if you hired a barista to come to your house and teach you how to make your coffee—even better?" It never occurred to him, and I loved that he was receptive. He later went on to do that. Imagine that — that's a $100–$200 investment. Incredible.
I had a book that I read about posture. I was like, "I don't understand these freaking diagrams—how am I supposed to do it? I don't get it." So I hired someone to come to my apartment and teach me how to improve my posture. That posture coach was transformative for me. | |
Sam Parr | did it work this that worked | |
Ramit Sethi | Dude, it changed my life. When we think about posture—I had something going on: when I would stand, I would find myself crossing my legs. It became uncomfortable in my back, and I thought, *this is weird; I'm a young guy—why?*
Going from *problem orientation* to *solution orientation* was a major shift for me. We can complain about stuff all day long, but some people go, "I want to fix this." I found her.
She came to my house. The first thing that happened when I opened the door was she looked at me and was shocked. She said something to the effect of, "My average client is about 75 years old," and I was in my late thirties at the time. I told her, "Look, I've got a little weird thing, but really this is preventive. I want to learn how to be better at this before I have problems."
That is the dream of any coach: for somebody to come to you *before* they have major problems, proactively.
We worked together, I think six or nine times. She taught me that posture is not just about putting your shoulders back—it starts from your feet, your knees, and your glutes. She videotaped the way I walk, changed that, and the pain is gone. More importantly, I now understand how the body works a little bit better than I used to. | |
Sam Parr | To the last question—I want to wrap up. This is funny that you put this on the doc we had. Someone messaged me. He's a good friend of mine and I love him to death, so I'm making fun of him, but I love him.
He was like, "I want to come in and talk about credit card hacks." I was like—you know, ways that you could save, get 5% cash back and shit like that. I get why you like that. Sometimes that's fun to geek out on—cool puzzles and whatever. But that's not needle-moving to me or to a lot of people. I don't give a shit about, you know, 2% cash back, because that means I gotta have like ten credit cards and that's fucking complicated. Just to make $1,000, I'm going to spend like ten hours on this, I'm probably going to forget to pay—this is a fucking nightmare.
And you have on here, you're like, **"fight for simplicity."** The more successful you get, the more you have to fight for simplicity. I have found that to be true. This is definitely a champagne problem, but as you make a little bit more money you start thinking, "Well, everyone else has a wealth adviser, or everyone else is doing this. People are investing in PE—should we do these things?" What's funny is maybe there's another level—I'm sure there is—when you're worth $100 or $1,000,000,000 where, yeah, you actually do need to be a little complicated. But for the most part, for most everyone listening, simplicity is the answer. I think— is that right? | |
Ramit Sethi | I think so. I understand why, when you're up-and-coming and young, it's fun to do credit-card hacking. I get it—it's fun to learn new skills.
But I have found that it's very difficult to turn off the grind mindset and become much more calm and run things like a **CEO**, not a hustler. I find this is true a lot with personal-finance people. I know people who are worth a lot of money and they still do credit-card hacks. If we look at how much they save, it's a negligible amount.
Like, I do it because I cannot turn the page on *what got me here*, and I don't realize that *"what got me here won't get me to the next level."* So part of **fighting for simplicity** is recognizing that as you advance—whether financially, relationally, etc.—there are things you simply cannot afford to do anymore.
For example, I would not afford to open up 10 new credit cards to save a total of $1,800 per year. That does not compute with what I'm trying to save, invest, and how I value my time. That's very important to know: as you advance, you've probably got to stop doing certain things that got you here and think about, "What is the new chapter of my life?" | |
Sam Parr | you're the man thank you for doing this | |
Ramit Sethi | thanks sam always a pleasure man | |
Sam Parr | when's the book officially out | |
Ramit Sethi | the book is officially out january 1st | |
Sam Parr | Oh, sick. Alright—two days? Two or three days. Thank you for doing this. **You're the man. We appreciate you.** |