178. How to Get on the Same Page with Your Partner about Money
In this episode of the "I Will Teach You To Be Rich" podcast, Ramit Sethi addresses the challenges couples face in discussing finances openly. He guides two couples through exercises to help them express their contrasting money experiences and aspirations, highlighting the importance of acknowledging feelings for a healthier financial dialogue.
Sethi also shares strategies to align couples' financial goals, such as crafting a shared vision focused on the meaning behind experiences. By involving the audience, he encourages couples to have constructive conversations about how they can use their wealth to enhance their lives.
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Couples' Communication and Dynamics Around Money
Ramit Sethi highlights couples' difficulties in openly discussing finances due to fear, vulnerability, and differing money mindsets. He guides Sophia and Charlie through a "first positive money conversation," prompting them to express their contrasting financial experiences and aspirations. Sethi emphasizes the importance of acknowledging feelings, setting a foundation for healthier financial dialogue.
Financial Success and Mindset
Ramit is surprised by Megan and Ryan's $4.2 million net worth and frugal habits despite their high incomes. After calculating their potential $29.4 million net worth at retirement age, he encourages them to live more expansively now instead of just accumulating wealth. Megan envisions splurging on trips, embracing their capacity for a "rich life."
Ramit's Strategies and Frameworks
Ramit suggests a "Rich Life Fill in the Blanks" exercise to help Megan and Ryan craft a shared vision, focusing on experiences' meaning over numbers. He involves the audience, asking how they'd use extra funds to improve their lives. Ramit urges couples to continue these constructive money conversations.
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Counterarguments
- While acknowledging feelings is important, some couples may require more structured financial planning and advice beyond just communication to manage their finances effectively.
- The surprise at Megan and Ryan's frugality despite their high net worth could be seen as a judgment of their personal financial choices, which may be perfectly valid for their comfort and long-term goals.
- Encouraging Megan and Ryan to live more expansively now may not align with their personal values or financial strategies, such as early retirement or philanthropic goals.
- The "Rich Life Fill in the Blanks" exercise might not be suitable for all couples, especially those who are struggling with debt or living paycheck to paycheck, as it assumes a level of discretionary income.
- The focus on crafting a shared vision based on experiences might not address the practical aspects of financial planning, such as budgeting, investing, and saving for emergencies.
- Involving the audience in discussing how they'd use extra funds could lead to social comparison and feelings of inadequacy for those who are not in a position to have "extra funds."
- Continual constructive money conversations are beneficial, but without actionable steps and financial education, conversations alone may not lead to improved financial outcomes.
Actionables
- Create a financial vision board with your partner to visualize shared goals and inspire open conversations about money. Start by gathering magazines, printouts, or digital images that represent your joint financial aspirations, such as a dream home, travel destinations, or experiences you both value. Spend an evening together cutting out these images and arranging them on a board or a digital collage. This visual representation can serve as a starting point for discussions about your financial future and help align your spending and saving habits with your shared dreams.
- Develop a "spend-to-save" challenge where you and your partner agree to match discretionary spending with equal contributions to savings or investments. For example, if you decide to spend $100 on a night out, you also transfer $100 to your savings account or investment portfolio. This practice encourages you to think twice about your spending while simultaneously boosting your savings, fostering a balance between enjoying the present and preparing for the future.
- Organize a monthly "financial date night" where you and your partner review your finances in a relaxed and enjoyable setting. Choose a comfortable location, perhaps your favorite café or a cozy spot at home, and bring along your financial statements, budgeting tools, and any relevant financial information. Use this time to celebrate financial wins, discuss challenges, and set goals for the upcoming month. Incorporating a positive and regular routine around money management can help demystify financial discussions and build a stronger financial partnership.
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Couples' Communication and Dynamics Around Money
Couples often face significant challenges when it comes to discussing finances, a topic that tends to be fraught with emotional baggage and differing perspectives.
Couples struggle to have healthy, positive conversations about money
Couples often avoid or struggle with talking about money due to fear, vulnerability, and unspoken assumptions
Ramit highlights how discussions around money often elicit feelings of "scary" and "stressful" from individuals, indicating a widespread discomfort with the topic. Couples, including Sophia and Charlie, tend to struggle with these conversations due to fear, vulnerability and differing management styles – with Sophia as the cautious saver and Charlie as the impulsive spender. This is compounded by unspoken assumptions and past baggage, which callers mention as contributing factors to avoiding discussions or fearing conflict.
Sophia reveals her challenges in communicating her financial perspectives to Charlie, who, albeit open to learning, feels vulnerable in these conversations. Other callers similarly reflect on the difficulties and discomfort they encounter when talking about money, many of which avoid the topic out of fear of hurting their partner's feelings or due to the awkwardness involved.
Ramit guides the couples through a structured "first positive money conversation" to set a new tone
Ramit Sethi recognizes that many couples have never had a healthy conversation about money and proposes initiating a "first positive money conversation" on the podcast. The aim is to set a new tone for how money is discussed, focusing on positivity and the shared vision for the future, rather than immediate financial details.
Ramit encourages couples to be open and vulnerable about their money mindsets and experiences
During this structured conversation, the couples, guided by Ramit, start to open up about their financial history, with Sophia and Charlie revealing their contrasting approaches to finances. Sophia’s tendency to save is rooted in a "Type A personality," while Charlie sees money as a tool for immediate opportunities, exemplified by a spontaneous purchase of a four-wheeler.
Ramit helps them acknowledge and express their past financial experiences and the feelings they associate with money – Sophia as "exhausted" and "protective," Charlie feeling "scared" but also "optimistic." He encourages the couples to articulate how they want to feel about money going forward, leading them to express desires to feel content and i ...
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Couples' Communication and Dynamics Around Money
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Clarifications
- Ramit Sethi is an American author, entrepreneur, and media personality known for his book "I Will Teach You to Be Rich" and related podcast. He focuses on personal finance education and has a background in technology and sociology from Stanford University. Sethi aims to help individuals improve their financial literacy and make better money decisions through his work.
- A "Type A personality" is a term used to describe individuals who are ambitious, competitive, and highly organized. They are often described as proactive, impatient with inefficiency, and focused on achieving goals. This personality type is associated with traits like time urgency, high levels of stress, and a strong drive for success.
- A four-wheeler is a type of off-road vehicle, typically referring to an all-terrain vehicle (ATV) with four wheels used for recreational purposes. These vehicles are designed for off-road use and can navigate various terrains like dirt trails, sand dunes, and rocky paths. They are popular for outdoor activities and adventures due to their versatility and ability to handle rough terrain. ...
Counterarguments
- While discussing money is important, some couples may find that too much focus on financial conversations can lead to unnecessary stress and tension, suggesting a balance is needed.
- The concept of a "first positive money conversation" might not be a one-size-fits-all solution, as different couples may require different approaches tailored to their unique situations.
- Encouraging vulnerability is beneficial, but not all individuals may be comfortable with or capable of this level of openness, especially if there are underlying trust issues or past traumas.
- The emphasis on aligning feelings and visions can be idealistic; practical and immediate financial concerns sometimes need to take precedence to ensure stability.
- The idea that couples need better communication and mutual financial education assumes that issues are always due to a lack of these elements, which may not account for external factors like economic conditions or personal mental health issues that affect financial decisions.
- Articulating how one wants to feel about money may not always lead to actual financial changes or i ...
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Financial Success and Mindset
Megan and Ryan, a financially successful young couple in their 30s, have caught the audience and Ramit Sethi by surprise with their massive net worth and frugal lifestyle. Sethi challenges them to consider a more meaningful application of their wealth now, rather than just accumulating more for the future.
Megan and Ryan have built significant wealth at a young age
Their massive net worth and investment portfolio surprises Ramit and the audience
Megan and Ryan's net worth stands at a staggering $4.2 million. This revelation comes as a shock to Ramit and the audience, not least because Megan and Ryan have only recently begun to comprehend the extent of their own wealth, thanks to their habit of tracking it in a monthly spreadsheet. Megan, a dentist, quickly paid off her student loans in three years and now enjoys the fruits of her labor, such as purchasing a BMW. Ryan, on the other hand, started off with a salary of $80,000 straight out of college as a software engineer and later took a gamble by joining a startup; that risk paid off when the startup went public, resulting in a significant boost to their collective wealth.
Megan and Ryan have maintained a frugal lifestyle despite their high income and net worth
Despite their substantial wealth, Megan and Ryan still experience anxiety over minor expenses, exemplified by their reluctance to buy a pair of Birkenstocks if not on sale. Megan previously lived frugally by renting a basement room for just $600 a month. Even now, they debate over small amounts of money and adopt a cautious approach to spending. Despite their prudent habits, they allow themselves the occasional splurge on luxuries like dining at Michelin-starred restaurants.
Ramit challenges Megan and Ryan to think bigger about how to use their wealth
Ramit calculates their potential future net worth, which shocks the couple
Sethi challenges Megan and Ryan to elevate their thinking concerning their finances. After a calculation, he predicts that at age 65, they could amass a net worth of $29.4 million, assuming they keep investing at their current rate with a 7% re ...
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Financial Success and Mindset
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Counterarguments
- Frugality can be a wise financial strategy, regardless of net worth, as it can protect against future uncertainties and economic downturns.
- Accumulating wealth for the future isn't inherently negative; it can be a responsible way to ensure financial security and the ability to support charitable causes or leave a legacy.
- A high net worth doesn't necessarily equate to a better quality of life; happiness and fulfillment can come from non-material experiences and relationships.
- The concept of a "rich life" is subjective and can vary greatly between individuals; some may find richness in simplicity and minimalism rather than in luxury spending.
- There may be psychological or emotional reasons behind Megan and Ryan's anxiety over minor expenses that could benefit from addressing beyond financial advice.
- The assumption that a 7% return on investments will continue into the future may not account for potential market volatility or economic changes.
- Encouraging spending on luxury items and experiences may not align with everyone's values or long-term goals, and could lead to financial stress if not carefully managed.
- The idea of living more expansively now a ...
Actionables
- You can create a "Rich Life" vision board to visualize and prioritize experiences over possessions. Start by gathering images and phrases that represent the experiences you value most, such as travel, concerts, or family gatherings. Place this board somewhere you'll see it daily to remind yourself of what you're working towards and to help guide your spending decisions towards these experiences.
- Develop a "splurge savings" account for guilt-free spending on luxury experiences. Allocate a small percentage of your monthly income to this account, and use it exclusively for indulgences like fine dining or a weekend getaway. This method allows you to enjoy the fruits of your labor without impacting your overall financial goals.
- Engage in a mon ...
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Ramit's strategies and frameworks for improving money relationships
Ramit Sethi demonstrates his expertise in helping couples create a shared vision for their finances, emphasizing the importance of focusing on experiences and the meaning behind money decisions.
Ramit provides a structured exercise to help couples create a shared vision for their "rich life"
Ramit Sethi listens to the couple's perspectives on spending and suggests it is probably time to move beyond their current financial behaviors. He encourages the couple, Megan and Ryan, to envision more luxurious travel experiences and asks them to describe what an absolutely magical trip would look like for them.
Ramit guides Megan and Ryan through a "Rich Life Fill in the Blanks" exercise to spark their imagination
Prepared to help them craft a shared financial vision, Ramit introduces the "Rich Life Fill in the Blanks" exercise, part of the approach laid out in his new book, "Money for Couples." He prompts them with statements such as "My dream vacation is..." and "If I could hire a coach for anything, it would be for..." which helps the couple articulate specific desires.
Ramit emphasizes the importance of focusing on the experience and meaning, not just the numbers
During the exercise, Ramit chases the emotional aspect of planning, asking what the vacation would feel like rather than just considering the expenses. He shares personal experiences to illustrate crafting a magical experience that creates lasting memories and discusses the significant impact financial automation has on affording pleasures and rationalizing personal satisfaction.
Ramit encourages the audience to apply Ramit's principles to their own lives
In a live event format, Ramit engages the audience to contemplate how they would use varying amounts of money to improve their lives. Ramit walks around the audience, listening to their ideas for using extra funds—whether $100, $1,000, or $10,000—emphasizing the joy derived from spending on experiences and conveniences tha ...
Here’s what you’ll find in our full summary
Ramit's strategies and frameworks for improving money relationships
Additional Materials
Clarifications
- Ramit Sethi employs structured exercises like the "Rich Life Fill in the Blanks" to help couples articulate their financial goals and desires. He emphasizes focusing on experiences and emotions rather than just numbers when planning finances. Sethi encourages couples to envision and communicate their ideal lifestyle, incorporating elements of luxury and personal satisfaction. Additionally, he promotes ongoing communication and accountability in financial discussions to support couples in achieving their shared vision.
- The "Rich Life Fill in the Blanks" exercise is a structured activity designed to help individuals or couples articulate their specific desires and goals related to their ideal lifestyle and experiences. Participants are prompted with incomplete statements like "My dream vacation is..." or "If I could hire a coach for anything, it would be for..." to encourage them to think deeply about their aspirations and preferences. This exercise aims to spark imagination, clarify priorities, and facilitate discussions around personal values and financial goals. Ramit Sethi uses this exercise as a tool to guide individuals or couples in creating a shared vision for their future that goes beyond just financial numbers.
- Financial automation involves setting up systems to manage your finances automatically, such as automatic bill payments or savings transfers. By automating financial tasks, individuals can ensure that their financial responsibilities are met consistently without manual intervention. This can free up mental energy and time, allowing individuals to focus on enjoying experiences and deriving meaning from their financial decisions. Ultimately, the efficiency gained from financial automation can contribute to affording pleasures and enhancing overall satisfaction with one's lifestyle.
- Ramit Sethi's principles for personal finance focus on creating a "rich life" by aligning spending with meaningful experiences. He emphasizes the emotional aspect of financial planning, encouraging individuals to envision specific desires and the feelings associated with them. By prioritizing experiences and convenien ...
Counterarguments
- While focusing on experiences and the meaning behind money decisions can be enriching, it's also important to balance this with practical financial planning and saving for future needs, such as retirement or emergencies.
- The "Rich Life Fill in the Blanks" exercise might help spark imagination, but it could also lead to unrealistic expectations if a couple's financial situation doesn't allow for such dreams to be feasible in the near term.
- Applying Ramit's principles to one's own life can be beneficial, but personal finance is highly individual, and what works for one person or couple may not work for another due to different incomes, expenses, values, and financial goals.
- Asking the audience how they would use varying amounts of money to improve their lives can be an engaging exercise, but it may inadvertently encourage spending without addressing underlying financial issues such as debt or lack of savings.
- Continual money conversations are crucial ...
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