208. “We make $157K at 22, but we’re afraid to spend money”

A close examination of Javi and Marco's financial upbringing reveals how their past influences their current beliefs and behaviors towards money management.

Upbringing Shapes Couple's Differing Views on Money

Javi's Father Valued Saving, His Mother Prioritized Experiences

Javi's upbringing was characterized by contrasting views on money. His dad emphasized the importance of saving and working hard for money, often quoting the Rolling Stones to illustrate the difference between wants and needs. Meanwhile, Javi's mother leaned towards spending money on experiences rather than saving, which positioned Javi at the intersection of frugality and the pursuit of enjoyment. This dichotomy is evident in Javi’s childhood recollection of wanting his first iPod and the diligent effort it took to save for it through recycling cans, well before he was old enough for a traditional job.

Lack of Financial Discussion Led To Poor Education and Confidence

An unidentified speaker details how a fear or misunderstanding of investing within their family led to a lack of financial education and confidence. This prevented a deeper understanding of money matters, and comparisons with gambling dissuaded any early curiosity about investing.

Couple's Past Experiences Influenced Their Money Mindset

Criticism Of Javi's Money Management Prompts Better Saving and Investing

Past criticisms about Javi being "really bad with money" served as a catalyst for him to reassess his financial habits. This led to a turnaround in his money management practices, where he dedicated himself to saving more diligently and learning about investing, creating what he facetiously calls a "revenge portfolio."

Marco Feels Financially Behind, Driving Competitiveness and Questioning Money Decisi ...

Javi and Marco, a couple with differing views on money management, face repeated discussions and challenges when making joint financial decisions.

Couple Struggles to Agree On Financial Decisions Due to Differing Views

Circular Discussions on Expenses: Spotify and Rent Payment Methods

Javi and Marco have ongoing debates about minor expenses like Spotify subscriptions. Marco, who pays for his plan, suggests a joint Spotify plan but Javi, currently on a free family plan, hesitates due to the principle of incurring a new expense. They also repeatedly joke and tease each other about whether to pay rent with a credit card to earn points but incur a fee or to save the fee with a bank transfer. Ramit Sethi, the host, sees these discussions as a ritual possibly meant for fun but also as potentially emblematic of deeper financial communication issues.

Marco's Questioning Hinders Couple's Decision-Making

The couple's discourse sometimes stalls due to Marco’s constant questioning, leading to an inability to reach decisions on items like rent payment methods. His assertive, inquiry-driven approach is meant to root out issues but sometimes contributes to indecision. Sethi recognizes Marco's approach and encourages him to guide conversations to a conclusive end.

Income Disparity Affects Partners' Power and Financial Comfort

Hesitant Javi Defers to Higher-Earning Marco

Javi’s discomfort with the income discrepancy causes him to defer to Marco, who earns more, even though Javi has strong decision-making skills in other areas of their relationship. The couple wrestles with how to split expenses and manage financial decisions without causing stress due to their uneven incomes.

Marco's Awareness of the Income Gap Causes Tension With Javi, Who Wants to Contribute

Marco is conscious of the income gap and tries not to overburden Javi, yet he feels that he should have more influence over financial decisions as the higher earner. This dynamic causes friction, especially as they consider the logistics of ...

Financial experts Ramit Sethi, and other speakers, shed light on the importance of balancing financial goals for short-term enjoyment with long-term planning for events like weddings, honeymoons, and home purchases.

Couple's Goals: Marriage, Home, Support Families

Javi and Marco are navigating their finances with the aim of realizing major life events such as marriage, but they find discussions around near-term goals challenging.

Estimate $60,000 Wedding Budget; Not Actively Saving Yet

Although Javi and Marco aspire to have a big wedding, estimating it may cost around $60,000, they have not yet initiated savings for the event that is planned eight years into the future. To meet this goal, they would need to start setting aside $625 a month starting now.

Moving To a Pricier Apartment May Affect Their Investment and Savings Ability

The couple is considering moving to a pricier apartment, either back to California in Los Angeles or San Francisco, which are more expensive. Buying property in a hometown is suggested as a more affordable alternative. However, spending more on rent could potentially interfere with their ability to save and invest.

Strong Financials: Low Expenses, High Savings/Investments

The couple's current financial behavior is analyzed by Ramit Sethi, who applauds them for their aggressive saving and investment strategies despite potential for higher spending.

Fixed Costs: 32% of Income, Allowing For Discretionary Spending and Investing

Javi and Marco have impressively low fixed costs, amounting to only 32% of their income, enabling them substantial margin for discretionary spending and investments. This, along with their combined gross income of $157,000 and over $68,000 already invested at 22 years old, puts them in a strong financial position. Their fixed costs, including rent and utilities, are split evenly and they have a policy for splitting smaller expenses, facilitating their str ...