198. “I work 7 jobs but can’t get ahead. Are we doomed?”
In this episode of the I Will Teach You To Be Rich podcast, host Ramit Sethi explores the contrasting financial histories and mindsets of a couple, Juan and Amber. The discussion delves into the emotional baggage that can influence one's approach to finances, undervaluing skills, managing debt and investments, balancing family obligations, and strategies for generating higher income.
Sethi offers advice on pricing skills appropriately, aggressively investing for retirement, setting boundaries with family financial obligations, and making tough choices like selling assets to align spending with long-term goals. The episode sheds light on how past experiences shape financial behaviors and provides practical tips to overcome limiting mindsets and build wealth.
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1-Page Summary
Financial Histories and Mindsets
Ramit Sethi explores how Juan and Amber approach money differently due to contrasting financial backgrounds. Juan learned about money from Amber, while Amber was taught the value of saving and open communication about finances from her father. However, Juan associates money with worry, guilt, and fear—influenced by his immigrant family's struggles and his mother's need to work multiple jobs.
Pricing One's Skills and Services
Juan undervalues his skills as a climbing coach, charging only $75/hour despite 20 years of expertise. Sethi urges Juan to charge premium rates, arguing that serious clients will pay for quality. As an example, Sethi notes the professionalism and value he provides in his own business.
Debt, Savings, and Investment Management
Juan and Amber face debt from car loans, credit cards, and personal loans—limiting their ability to save and invest effectively for retirement. Sethi demonstrates how increasing investment contributions, selling assets like motorcycles, and reducing discretionary spending could dramatically improve their long-term financial outlook.
Balancing Family Obligations and Personal Financial Goals
Juan feels obligated to financially support his family, contributing to his mother's retirement fund and sending money to his sister regularly. However, Sethi advises setting boundaries and empowering family through financial education rather than just giving money.
Strategies For Increasing Income and Reaching Financial Goals
Sethi recommends Juan increase his rates to attract higher-paying clients, allowing him to invest more aggressively. He also suggests selling unnecessary assets like motorcycles to free up funds for investing, aligning spending with goals for financial security.
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Counterarguments
- Charging premium rates might alienate Juan's existing client base who may not be able to afford higher prices.
- Increasing rates does not guarantee that higher-paying clients will choose Juan's services over competitors.
- Selling assets like motorcycles may not be a viable option if those assets are used for essential transportation or contribute to Juan and Amber's quality of life.
- Reducing discretionary spending can be more complex in practice, as it may involve cutting down on activities that provide significant emotional and psychological benefits.
- Financially supporting family can be a cultural expectation that provides emotional and social benefits, and setting boundaries might strain family relationships.
- Empowering family through financial education assumes that they are willing and able to change their financial behaviors, which may not always be the case.
- The advice to increase investment contributions assumes that Juan and Amber have the financial literacy to manage investments wisely or that they have access to trustworthy financial advice.
- The suggestion to align spending with goals for financial security may not take into account the immediate needs and challenges that Juan and Amber face.
Actionables
- You can reframe your financial mindset by journaling your thoughts about money and challenging negative beliefs with positive affirmations. Start by writing down your immediate feelings about money, then counter each negative thought with a positive statement. For example, if you think "Money always leads to stress," you could write, "Money can provide security and opportunities for growth."
- Create a personal value-based pricing guide for any freelance or consulting work you do by listing your skills, years of experience, and unique offerings, then compare them to market rates. If you're a graphic designer with a decade of experience, research what others with similar experience charge and adjust your rates to reflect your expertise, ensuring they align with the value you provide.
- Develop a family financial empowerment plan by organizing monthly money meetings with your household to discuss budgets, savings goals, and financial education. Use free online resources or apps that offer budgeting templates and investment basics to facilitate these discussions. This can help create a shared understanding and collective approach to managing finances within the family.
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Financial Histories and Mindsets
Exploring different financial backgrounds and approaches, the conversation indicates that Juan and Amber have contrasting experiences and mindsets regarding money.
Juan vs. Amber: Different Money Backgrounds and Approaches
Juan did not have a good role model for money growing up and learned a lot about money and savings from Amber. In contrast, Amber talks openly about money, even asking Juan about his credit score and debt on their second date, showing a practical approach to understanding financial compatibility early in their relationship.
Juan Learned Hard Work Is Necessary to Make Ends Meet; Amber's Father Emphasized Saving and Self-Reliance
Juan didn't go to college and assumed he wouldn’t have an abundance of money. He decided not to let his financial expectations limit his experiences. Amber’s father taught her the value of saving and frugality, yet Amber herself values quality experiences and items over mere saving. Both of them enjoy traveling, which is where a significant portion of their expenses go.
Juan mentions the idea of combining finances, a concept he never considered before watching a Netflix special. He has been reluctant to take Amber's money when she was earning more, but became open to combining incomes when her income dropped because it made more financial sense.
Juan's Negative Relationship With Money: "Scared," "Worried," "Insurmountable"
Juan’s negative association with money is influenced by his mother, who worked multiple jobs to maintain a middle-class lifestyle. Juan adopted his mother’s approach of working extra if the current job did not cover expenses. Commenting on Juan's financial mindset, Ramit Sethi notes the use of phrases like "it could be worse," reflecting his background where making ends meet was significant.
Juan describes his current feelings towards finances as filled with guilt, worry, and fear. He admits to being conservative with money due to not knowing how to leverage his skills for their worth. Sethi points out that Juan’s use of words such as "poverty ...
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Financial Histories and Mindsets
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Actionables
- You can start a "relationship financial health" discussion with your partner by setting a date night focused on sharing your financial histories, goals, and habits. This creates a safe space to understand each other's perspectives on money, similar to how Amber openly discusses finances. For example, each partner could prepare a brief presentation of their financial journey and future aspirations, which can lead to a deeper understanding and better financial synergy.
- Create a "Travel Savings Challenge" with your partner where you both contribute to a shared travel fund for future adventures. This can be a fun way to prioritize your shared love for travel while managing a significant expense. Set up a joint savings account or a piggy bank where you both deposit a set amount weekly or monthly, and watch your travel fund grow. You could even gamify it by setting challenges or milestones that, when reached, unlock a small reward or a special outing.
- Develop a personal "Money Mindset Makeover" plan to address any negative feel ...
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Pricing One's Skills and Services
Juan and Ramit engage in a discussion about the challenges and strategies of pricing one's skills appropriately, with Ramit offering insights and advice on how to effectively monetize expertise.
Juan Undervalues His Skills Due to "Dirtbag Climber" Mentality
Juan admits that he has struggled to monetize his skills for what they are actually worth. Coming from a 25-year background in climbing and living the "dirtbag climber" lifestyle, which emphasizes minimal expenses for the sake of climbing, he has adopted the mindset that his clients, too, have limited incomes. This outlook has caused him to charge very low rates for his training services. Even with almost 20 years of professional experience, he recently only raised his hourly coaching rate from $35 to $75, which still doesn't fully reflect the value of his expertise.
Charges Low Rates Believing Clients Can't Pay More, Despite 20 Years of Expertise
Juan carries an "ingrained mentality" about the worth of his services, resulting in him undercharging. He feels his offerings aren't worth much, which is reflected in his rates. However, by increasing his prices, he allows himself the opportunity to attract better-fit clients who can afford and appreciate the true market value of his extensive experience.
Ramit Urges Juan to Charge His Worth, Noting Higher-Paying Clients Value Quality
Juan Doubts His Worth, but Ramit Shows His Value
Ramit advises Juan that it's acceptable for him to lose price-sensitive customers and retain those who realize they are getting a bargain. Ramit advocates for Juan to adopt selective client choice, focusing on clients who are serious about climbing and who value his two decades of experience. Ramit challenges Juan to consider the positive "what ifs" of raising rates, like doubling income, reducing the number of jobs, enhancing client quality, and creating an upward success spiral.
Ramit encourages Juan to recognize the effort and expertise he has put into his career, making the ca ...
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Pricing One's Skills and Services
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Clarifications
- The "dirtbag climber" mentality is a term used in the climbing community to describe individuals who prioritize their passion for climbing above material possessions and financial stability. These climbers often live minimally, focusing on outdoor adventures and spending as much time as possible climbing rocks or mountains. The term reflects a lifestyle choice where individuals are willing to forgo traditional comforts and financial security in ...
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Debt, Savings, and Investment Management
As people navigate their financial journeys, debt often arises as a key obstacle, impacting one's ability to save and invest effectively. The interactions with Ramit Sethi shed light on the financial challenges and considerations of two callers, Amber and Juan, and provide insights into better managing their financial future.
Debt Accumulated by Juan and Amber
Debt Limits Saving and Investment Opportunities
Amber and Juan face significant debt, with Amber having a car loan balance of $18,000 and a credit card debt of $2,000, while Juan took out a $7,000 personal loan for a motorcycle. Their debt impacts their net worth of $98,000, which includes $65,000 in assets, $80,000 in investments, $28,000 in savings, but a total debt of $74,000—aggressively managed with high monthly payments due to artificially low housing costs. Amber's college experience of debt leading to bankruptcy demonstrates the lasting impact that mishandled debt can have.
Investment Levels Not on Track for Comfortable Retirement
Ramit Demonstrates how Boosting Investment Contributions Enhances Long-Term Financial Outlook
Although Juan pays off his credit card each month, the lack of tangible savings remains. Their current income of $56,000 a year rings alarm bells for Ramit concerning their retirement prospects. Juan and Amber allocate 10% to investments and 7% to savings, but Ramit suggests they need to invest more aggressively. Their $80,000 investment and a yearly addition of $20 ...
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Debt, Savings, and Investment Management
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Counterarguments
- While debt can limit saving and investment opportunities, it can also be a tool for leveraging investments or purchasing appreciating assets like education or property.
- Not all debt leads to bankruptcy; responsible management and strategic use of debt can enhance financial stability and creditworthiness.
- High monthly payments on debt can sometimes be a strategic choice to reduce interest paid over time, rather than a sign of poor financial management.
- A lack of tangible savings does not always indicate poor financial health if the individual has significant illiquid assets or investments that can be liquidated if necessary.
- A current income of $56,000 a year may be sufficient for retirement depending on the cost of living in the area, lifestyle choices, and other sources of retirement income such as social security or pensions.
- Allocating 10% to investments and 7% to savings might be appropriate for some individuals depending on their risk tolerance, financial goals, and other personal factors.
- Aggressive investing is not suitable for everyone; it depends on the individual's risk tolerance, investment knowledge, and financial situation.
- The assumption of a 7% return on investments is not guaranteed and is subje ...
Actionables
- You can automate your savings by setting up a direct deposit from your paycheck into a separate high-yield savings account. By doing this, you ensure that a portion of your income is saved without the temptation to spend it, and the high-yield account will provide a better return than a standard savings account.
- Consider a "savings swap" strategy where you identify a regular non-essential expense, like a weekly takeout meal, and redirect that money into an investment account. This approach allows you to maintain your lifestyle while gradually increasing your investment contributions without feeling the pinch.
- Create a "debt attack plan" by listing all your debts, ...
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Balancing Family Obligations and Personal Financial Goals
Juan considers it his duty to provide financial help to his family while grappling with his own finances and feeling the weight of his past actions.
Juan Feels Obligated to Support His Family Financially
Juan’s sense of obligation to his family's finances is deeply ingrained and emotional. He wants to ensure that his mother can retire comfortably, recognizing she isn’t well-prepared for retirement due to her sacrifices as a single parent working seven days a week. Juan also feels the need to support his siblings if necessary. To aid in his mother's retirement, Juan has set up an IRA, to which both he and his mother contribute monthly, although it’s only been active for a few years. He also admits to feelings of guilt stemming from his teenage years and acknowledges his negative influence on his siblings, reinforcing his commitment to their financial support.
Juan's financial dedication to his family includes stashing away $200 a month into a Roth IRA for his mother and sending about $300 every other month to his sister. His anxiety about not being able to provide financial aid, perhaps due to illness or injury, compounds his concern, as he fears the responsibility of support would revert to his already overworked, elderly mother.
Ramit Advises Juan to Set Boundaries and Empower His Family For Financial Improvement
Financial Education and Coaching May Be More Helpful Than Sending Money
Ramit Sethi challenges Juan's approach to assisting his family by suggesting alternatives to simply sending money which might perpetuate a dependency cycle. He underlines the importance of financial education and coaching as potentially more beneficial in the long run. Ramit recommends sending financial literature alongside the money or helping with a spending plan. He advises that Juan’s family may need a compelling reason to change their financial behavior and proposes they read personal finance books and engage in discussions about money.
Ramit sugges ...
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Balancing Family Obligations and Personal Financial Goals
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Actionables
- You can create a simple family newsletter to share financial tips and successes, fostering a culture of financial literacy. Start by gathering useful financial advice, tools, and personal success stories, then compile them into a monthly email or printed newsletter. This keeps your family informed and inspired about financial matters without direct monetary assistance.
- Organize a virtual book club focused on personal finance to encourage collective learning and discussion. Choose a beginner-friendly financial book and schedule regular online meetings to discuss each chapter, allowing family members to ask questions and share insights, which promotes financial independence and education.
- Develop a family em ...
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Strategies For Increasing Income and Reaching Financial Goals
Ramit Urges Rate Hike and Higher-Paying Clients For Juan and Amber
Increase Income to Invest More and Reach Goals Faster
Juan and Amber face a challenging situation as their income fluctuates and they look to increase their financial stability. Ramit Sethi identifies that they can tremendously improve their situation by increasing their rates and seeking higher-paying clients. Juan is convinced about the concept of a rich life, aligning with his philosophy of meeting people at their level, and so he considers charging more for his services. Ramit suggests Juan should put all the additional money into investments to compensate for feeling financially behind.
Ramit explains that it's feasible for Juan and Amber to earn an additional $50,000 per year combined and suggests investing $30,000 of that increase to reach their retirement goals. Ramit offers to share his business program with the couple to accelerate their progress. After speaking with Ramit, Amber discusses changes they've made, such as adjusting how they collect payments and what Juan charges for his services.
Moreover, Ramit encourages Juan to ask for higher rates, implying that the best clients value quality service, which allows increasing income and reaching financial goals faster. Ramit explains that raising rates would probably lead to a natural increase in income and consolidation of jobs, allowing more focus on higher value and higher return activities.
Ramit Suggests Selling Motorcycles and Other Assets to Free Funds For Investing
Prioritizing Financial Security Over Discretionary Spending
Another potential strategy for increasing income is through the selling of assets like motorcycles, which can f ...
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Strategies For Increasing Income and Reaching Financial Goals
Additional Materials
Counterarguments
- Increasing rates may lead to a loss of some clients who cannot afford the higher prices, potentially reducing income instead of increasing it.
- Seeking higher-paying clients often requires more time and resources, which may not be immediately available or could lead to increased stress and workload.
- Investing additional money assumes that Juan and Amber have the financial literacy to invest wisely or that they have access to trustworthy financial advice.
- The goal of earning an additional $50,000 per year may not be realistic for every industry or may require sacrifices in work-life balance that Juan and Amber are not willing to make.
- The suggestion to invest $30,000 to reach retirement goals does not consider individual risk tolerance or the potential for investment losses.
- Ramit's business program may not be a one-size-fits-all solution and could require an upfront investment that may not yield the promised acceleration in progress.
- Adjusting payment collection methods and service charges may not be feasible for all types of services or may not be well-received by existing clients.
- Consolidation of jobs may not be possible for all types of work and could lead to a decrease in job satisfaction or quality of service.
- Selling assets like motorcycles assumes that the assets are ...
Actionables
- You can create a personal rate card to negotiate better pay for your skills by researching the market value for your job role and experience level, then adjusting your expected compensation accordingly. For instance, if you're a freelance graphic designer, look at industry reports or job listings to determine the average pay for someone with your expertise, and use this data to set a higher freelance rate.
- Develop a skill swap network with friends or colleagues to reduce discretionary spending without sacrificing personal growth or enjoyment. For example, if you enjoy learning languages and a friend is skilled at it, offer to exchange a skill you're proficient in, like cooking or web design, for language lessons instead of paying for classes.
- Optimize your asset liquidation strategy ...
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