188. “She makes 2x but wants me to treat her” Nate and Serena return
In this episode of the "I Will Teach You To Be Rich" podcast, host Ramit Sethi sits down with Serena and Nate, a couple facing financial tensions due to an income disparity and differing communication styles around money. The conversation delves into the emotional issues and past experiences that underlie their struggles with splitting expenses fairly and addressing Nate's significant student debt.
As they anticipate Nate's transition from a medical residency earning $45,000 to a $300,000+ salary as a doctor, Serena and Nate discuss the need to develop a shared financial vision and approach. Sethi offers guidance on navigating this substantial income increase through strategic saving, investing, and open communication about their evolving financial dynamics.
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1-Page Summary
Communication and emotions around money in their relationship
Serena and Nate's relationship faces stress due to difficulties in discussing money matters, a struggle made complex by their emotional associations with money, according to financial expert Ramit Sethi.
Conflicts over loaned money due to differing communication styles
Frequent conflicts arise over a $3,000 loan from Serena to Nate, which Serena anxiously brings up as soon as Nate gets home from work. Nate feels unable to discuss it right away, wishing for less frequent money talks. Serena says her heart pounds during these conversations; Nate feels uncomfortable asking Serena for money.
Underlying emotional issues around money
Their communication woes stem from deeper emotional issues related to money, possibly rooted in past experiences. Serena admits not prioritizing Nate financially; Nate dislikes feeling dependency.
Splitting expenses and financial responsibilities as a couple
Serena and Nate navigate an unequal split of expenses due to income disparity, causing financial strain and hesitation over shared financial responsibilities.
Serena pays more rent due to Nate's limited budget
Serena contributes $1360 to their $2560 rent, while Nate pays $1200 - a negotiated split as Nate's fixed costs consume 97% of his income. Serena feels hesitant taking on more financial burden.
Difficulties with equal contributions given income gap
Attempts to split expenses 60-40 highlight the complexities of balancing finances fairly as a couple with an income gap. Nate feels stretched affording his share.
Nate's student loan debt and financial situation as a resident
Nate faces substantial student debt from medical school but remains optimistic about managing it once he starts earning a higher income as a doctor.
Nate has around $450,000 in student loans
In his medical residency earning $45,000, Nate has accumulated around $450,000 in student debt. Though daunting, Sethi reassures Nate can tackle it aggressively with his future, higher specialist income.
Plan to repay debt once earning potential increases
Nate feels overwhelmed by the debt now but has a plan to aggressively repay it once his earnings rise. Serena assumes they'll address repayment when Nate's income increases.
Their future financial outlook and managing a large income increase
Serena and Nate anticipate Nate's transition from residency to a $300,000+ salary as a doctor, requiring a strategic approach to manage this substantial income growth.
Expectation of abrupt, significant income increase
Nate expects to earn around $300,000 post-residency - a 6-10x rise. Sethi notes this allows Nate to be comfortable with current debts, knowing he can aggressively repay and invest once earning more.
Need to develop shared financial vision and new approach
The couple realizes their current financial dynamics must change. Sethi advises making only modest lifestyle changes, instead aggressively saving and investing while having ongoing discussions to refine their financial plans together.
1-Page Summary
Additional Materials
Counterarguments
- While Serena and Nate face stress discussing money, it's possible that open communication could strengthen their relationship by fostering trust and teamwork.
- The conflict over the $3,000 loan might be symptomatic of broader issues in their relationship, such as trust or power dynamics, rather than just communication styles.
- Emotional issues around money are common, but framing them as solely negative ignores the potential for growth and the opportunity to develop healthier attitudes towards finances.
- Serena paying more rent could be seen as a practical adaptation to their current circumstances rather than a source of strain, recognizing the reality of their differing financial capabilities.
- The difficulties with equal contributions might be mitigated by focusing on proportional rather than equal contributions, recognizing that fairness isn't always about being identical.
- Nate's student loan debt is substantial, but it's also an investment in his future earning potential, which could be viewed as a calculated risk rather than just a burden.
- The plan to repay debt once earning potential increases is sensible, but it could also be argued that small contributions towards the debt now could instill good financial habits and reduce interest accumulation over time.
- The expectation of a significant income increase post-residency should be balanced with the understanding that higher income also brings new financial challenges, such as increased taxes and lifestyle inflation.
- The need to develop a shared financial vision is important, but it's also crucial to maintain individual financial identities and personal goals within a relationship.
Actionables
- You can create a "relationship financial planner" that includes both partners' incomes, debts, and expenses to visualize how money flows and where it can be better managed. This tool would allow you to input various scenarios, like changes in income or unexpected expenses, to see how it affects your joint financial health. For example, if one partner gets a raise or the other has to take a pay cut, you can adjust the figures to see how to maintain balance.
- Start a monthly "money date" where you and your partner set aside time to discuss finances in a relaxed, non-confrontational setting. During these dates, bring a list of financial goals and concerns to the table, and use the time to brainstorm creative solutions together, such as starting a side hustle or cutting back on non-essential spending. This regular check-in keeps communication open and ensures both partners are on the same page.
- Experiment with a "contribution-based savings challenge" where each partner contributes to savings or debt repayment relative to their income. For instance, if one partner makes 70% of the total household income, they would contribute 70% to the savings or debt repayment. This approach acknowledges income disparities while fostering a sense of teamwork and shared responsibility for financial goals.
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Communication and emotions around money in their relationship
Serena and Nate's relationship faces stress due to difficulties in discussing money matters, highlighting a struggle that is both complex and emotionally charged.
Serena and Nate struggle to discuss money in a constructive manner, leading to conflicts and stress in their relationship
Serena and Nate face repetitive conflicts around finances, exacerbated by their approaches to communication immediately after work. Serena routinely brings up the repayment of a $3,000 loan for a trip to see her family within minutes of Nate's return from work, often after their initial greetings and interactions with their dog. Nate, tired and looking for a moment to switch gears after work, finds it hard to focus immediately and wishes for discussions about money to occur less frequently, perhaps once a month.
Discussions regarding money are met with a physical reaction in Serena, noting her heart pounding and feeling stress in her chest, indicating a strong emotional response to these conversations. Conversely, Nate admits a discomfort in asking Serena to pay, leading him to either split the bill or avoid discussing finances altogether.
Serena feels anxious and annoyed when Nate doesn't have a clear plan to pay back the loan, and she frequently brings it up, causing tension
The owed money is always in Serena's mind, creating anxiety and annoyance. She desires a clear repayment plan from Nate, such as $100 a month starting in three months, to mitigate the uncertainty and stress. Not only does the lack of a plan for repayment trouble Serena, but the prospect of the debt being forgotten and never repaid also looms large, even though she does not truly believe that would happen. This anxiety influences their daily life decisions, including going out to dinner or contemplating future expenses like vacations.
Nate notes that discussions about money become repetitive and states that the situation hasn't changed much since the last inquiry, which creates a loop of tension between them. Serena finally expresses her willingness to treat Nate financially, a small breakthrough in their strained communication.
Ramit Sethi, a financial expert, emphasizes that discussing money is challenging and can manifest in unexpected ways for both parties. Serena's persistent inquiries about Nate's debt repayment are not just badgering but stem from her desire for control and her anxiety when lacking answers about money.
Nate feels like he has to grovel when asking for financial help, which makes him uncomfortable and affects how he communicates about money
The issue also impa ...
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Communication and emotions around money in their relationship
Additional Materials
Actionables
- Schedule a "financial date night" to create a relaxed atmosphere for money talks. Choose a time when both partners are not stressed from work or other obligations, perhaps over a weekend brunch or a quiet evening at home. Use this time to discuss financial matters with a set agenda, ensuring both parties are mentally prepared and the setting is conducive to open, stress-free conversation.
- Develop a "money emotions" journal to track feelings during financial discussions. Each partner can keep a personal journal where they note their emotions and physical reactions when money topics arise. Review these journals together during your financial date nights to understand each other's emotional triggers and work on addressing them constructively.
- Create a "debt re ...
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Splitting expenses and financial responsibilities as a couple
Serena and Nate face a difficult situation where the division of their finances is causing tension and strain.
Serena and Nate have an unequal split of their rent payments, with Serena paying a larger portion despite their income disparity
Serena and Nate's rent or mortgage totals $2560. Due to a nearly 30% increase in rent prices, their original equal split of approximately $1000 each became unsustainable for Nate. Despite her initial reluctance, Serena now contributes $1360, and Nate pays $1200, a split that was decided after negotiation and Serena's preference to remain in their current, pricier area.
Serena is hesitant to take on a larger financial responsibility in their relationship
Serena admits she doesn't want the act of paying for Nate to become a habit. She reveals her hesitation to take on more financial responsibility despite earning significantly more than Nate. This situation is perhaps influenced by societal expectations and a desire for maintaining financial independence.
Nate feels stretched thin by the rent payments and has little room in his budget for other expenses
Nate is under financial stress, with his fixed costs constituting 97% of his take-home pay, and about $600 of that going to gas every month. Dinner outings and other expenses exacerbate this strain, as Nate feels obligated to contribute or pay fully despite the potential financial strain. This financial imbalance affects Nate's ability to be generous in the relationship, causing him stress and impacting his solvency.
Adjustments in financial contributions
Serena and Nate have made attempts to adjust the ...
Here’s what you’ll find in our full summary
Splitting expenses and financial responsibilities as a couple
Additional Materials
Counterarguments
- Serena's hesitation to take on more financial responsibility could be seen as a prudent personal financial boundary rather than a negative aspect, ensuring she maintains her financial health.
- Nate's feeling of being stretched thin might be addressed by reevaluating his budget or finding ways to reduce expenses, such as finding a more fuel-efficient mode of transportation to cut down on the $600 gas expense.
- The obligation Nate feels to contribute to dinner outings and other expenses could be mitigated by having open conversations about discretionary spending and setting mutual expectations that are comfortable for both parties.
- The 60-40 split suggested by Serena, while intended to alleviate Nate's burden, may not be the most sustainable or fair solution if it doesn't align with their respective financial capabilities and long-term goals.
- The challenge of adjusting financial contributions in the face of income disparity and societal ...
Actionables
- You can create a shared expense tracking system with your partner to visualize and manage financial contributions. Start by setting up a joint spreadsheet or using a budgeting app where both partners log their income and expenses. This transparency can lead to more informed discussions about how to equitably split costs based on income and expenses, rather than sticking to traditional splits or percentages.
- Consider adopting a 'value-based spending' approach to your personal finances to prioritize expenses that bring the most satisfaction. Write down all your monthly expenses and rank them based on how much value or happiness they bring to your life. This can help you identify areas where you might be willing to cut back, such as opting for less frequent dinner outings, to alleviate financial pressure without feeling deprived.
- Ex ...
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Nate's student loan debt and financial situation as a resident
Nate's journey through medical school has left him shouldering a substantial amount of debt, but he remains positive about the future, banking on his prospective earnings as a specialist in a lucrative field to manage his financial burdens.
Nate has accumulated a substantial amount of student loan debt from medical school, totaling around $450,000
Caller #2, who is Nate, is in the second year of his residency and aspires to become a specialist in a high-paying medical field. He has accumulated around $450,000 in student loan debt from medical school. Nate acknowledges the weight of his financial liabilities, which include about $27,000 from his undergraduate studies. Although Nate is currently in a tough financial situation due to his modest earnings as a resident, he implies having a plan to aggressively tackle this debt once he starts earning a higher income as a doctor.
Financial expert Ramit Sethi recognizes that Nate's debt is daunting but reassures him that with a strategic approach and high future income, the debt is manageable. Although the transcript does not explicitly state that Nate feels overwhelmed, his current financial constraints as a resident imply an underlying stress about his loans. Nate is aware of the severity of his debt, indicated by the specific figure of -$432,000, yet at this moment, it appears that he cannot take significant action against it, other than to plan for future repayment.
Nate feels overwhelmed by the debt but has a plan to aggressively pay it off once he starts earning a higher income as a doctor
Nate's circumstances reflect the common crisis many medical professionals face early in their careers: holding substantial student loan debt while working in residencies with limited pay. His sense of being momentarily overwhelmed by the situation is tempered by a proactive o ...
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Nate's student loan debt and financial situation as a resident
Additional Materials
Counterarguments
- While Nate is optimistic about paying off his debt with future earnings, there is no guarantee that his income will be as high as anticipated, which could affect his ability to pay off the debt as planned.
- Relying on a high future income to manage debt can be risky due to potential changes in the healthcare industry, job market fluctuations, or personal circumstances.
- Nate's plan to aggressively pay off his debt after residency may not account for other financial responsibilities that could arise, such as family expenses, mortgage payments, or unforeseen emergencies.
- The assumption that discussing Nate's debt repayment plan can wait until his income increases may lead to missed opportunities for financial planning, such as exploring loan forgiveness programs, refinancing options, or budget adjustments.
- Serena's postponement of the debt discussion could potentially lead to financial strain in their relationship if not addressed proactively.
- Ramit Sethi's reassurance about the manageability of Nate's debt with a strategic approach may not fully consider the psychological impact of carrying such a large debt burden, which can affect mental health and well-being.
- The text does not mention exploring additional income streams during residency, whic ...
Actionables
- Create a visual debt timeline to track and plan your repayment journey, using a simple spreadsheet or a free online graphing tool. Start by plotting your current debt and project forward to your expected income increases, setting milestones for debt reduction. This visual aid can serve as a motivational tool and a reality check, ensuring you're aware of the long-term trajectory and can make adjustments as needed.
- Engage your partner in a monthly financial date night to discuss and strategize around debt management. Use this time to review your budget, discuss any upcoming expenses, and make sure you're both on the same page regarding financial goals. This can help prevent misunderstandings and create a supportive environment for tackling debt together.
- Experiment with a side gig that complements your current schedule a ...
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Their future financial outlook and managing a large income increase
Serena and Nate are poised for a significant financial shift as they anticipate Nate's transition from residency to practicing as a doctor. This chapter in their lives requires a strategic approach to managing their soon-to-be-increased income and potential wealth.
Serena and Nate anticipate a significant increase in their combined household income once Nate completes his residency and starts earning a much higher salary as a doctor
Caller #2, Nate, is currently earning about $45,000, but after his residency, he expects his salary to surge to around $300,000, which is a conservative estimate for his specialty outside of academia. Ramit Sethi, the host, observes that Nate's acknowledgment of this impending salary jump allows him to be comfortable with his current debts, knowing that he can aggressively pay off these debts and invest once he starts earning more.
The couple is grappling with the immediate reality of this increase, as they describe the change in income—potentially six to ten times more than Nate's current earnings—as abrupt and foreign. This considerable salary change is imminent, and it is evident that Serena and Nate are unfamiliar with managing such large sums of money.
They acknowledge that their current financial dynamics and communication patterns may need to change to effectively manage their newfound wealth and prevent potential future conflicts
Serena and Nate realize that the support system they presently have, where Serena contributes substantially to their finances, is only temporary. They recognize that Nate's future income will cover more than half of their mortgage or rent, implying a shift in their financial contribution dynamics.
Sethi underscores the importance of improving not just their financial strategies but also their psychological approach to money to prevent future conflicts. There are hidden complexities in earning a higher income, and having healthy financial communication is essential. The couple's current way of managing their finances and their communication about money will likely need to evolve to accommodate their new financial status.
Serena and Nate recognize the importance of proactively developing a shared vision for their financial future and making intentional decisions about how to allocate their increased income
Serena and Nate have yet to form a concrete plan for their future finances or discuss in detail what they will do with their increased income. This signals the need for a proactive approach to develop a shared financi ...
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Their future financial outlook and managing a large income increase
Additional Materials
Clarifications
- Ramit Sethi is a well-known personal finance advisor, author, and entrepreneur. He is the author of the bestselling book "I Will Teach You to Be Rich" and the founder of GrowthLab and I Will Teach You to Be Rich, a personal finance website. Sethi is known for his practical and no-nonsense approach to personal finance, focusing on strategies for saving, investing, and building wealth over time. He often provides advice on managing money, investing wisely, and achieving financial success through his books, courses, and online content.
- Nate's current earnings are around $45,000, and he anticipates his salary to increase significantly to approximately $300,000 after completing his residency and starting his career as a doctor. This expected salary increase is based on his specialty outside of academia and represents a substantial jump in income for him and his partner, Serena.
- Managing a significantly higher income involves challenges like adjusting to a new financial lifestyle, making strategic investment decisions, and potentially facing increased tax implications. It requires careful planning to avoid lifestyle inflation, prioritize savings and investments, and maintain financial stability in the long term. Additionally, managing a higher income often involves reevaluating financial goals, seeking professional advice, and adapting to the psychological impact of sudden wealth changes. Communication about money becomes crucial to align financial priorities and ensure both partners are on the same page regarding financial decisions and goals.
- Developing a shared financial vision involves creating a mutual understanding and agreement on financial goals and priorities between partners. It requires open communication, alignment on long-term objectives, and a joint strategy for managing finances. This proactive approach helps establish a roadmap for financial decisions, promotes unity in financial matters, and strengthens the foundation for achieving shared aspirations.
- Aggressive saving and investing strategies involve allocating a significant portion of income towards savings and investments to build wealth rapidly. This approach typically focuses on maximizing contributions to retirement accounts, investing in growth-oriented assets like stocks, and minimizing expenses to increase savings rate. It often involves taking calculated risks to potentially achieve higher returns over the long term. Regularly reassessing and adjusting the investment strategy based on financial goals and market conditions is cr ...
Counterarguments
- While anticipating a salary increase is positive, it's important not to count on future earnings before they materialize, as unexpected changes in the job market or personal circumstances could affect Nate's actual income.
- Being comfortable with current debts due to expected future income can be risky; if the anticipated income does not come through, they may find themselves over-leveraged.
- The couple's unfamiliarity with managing large sums of money could lead to financial missteps; it may be beneficial to seek professional financial advice rather than relying solely on self-education.
- Changes in financial dynamics could strain the relationship if not handled carefully; it's important to ensure both partners feel equally involved and respected in financial decision-making, regardless of income disparity.
- While aggressive saving and investing are generally sound advice, it's also important to balance future financial security with current quality of life, as overly aggressive saving can lead to burnout or feelings of deprivation.
- The advice against making significant lifestyle changes immediately is prudent, but a gradual plan for reasonable upgrades could be part of a balanced approach to enjoying the fruits of hard work without being irrespon ...
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