In this episode of I Will Teach You To Be Rich, Ramit Sethi talks with Clara and Devin, a couple who earn $170,000 but have amassed $477,000 in debt through credit cards, student loans, mortgages, and car payments. Their conversation reveals complex financial dynamics: Clara has accumulated significant credit card debt on non-essentials while feeling controlled by Devin, who manages their finances with a parental approach.
The discussion examines how the couple's spending habits and financial choices, including daily dining out and an $80,000 home renovation, have left them with zero savings. Sethi explores Devin's unconventional wealth-building strategies, such as gambling and collecting, while addressing the couple's lack of concrete financial planning—their fixed costs consume 74% of their income, and they have no structured strategy for debt repayment or saving.
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During a conversation with financial advisor Ramit Sethi, callers Clara and Devin reveal significant financial troubles. Clara has accumulated $20,000 in credit card debt spread across five cards, spent on non-essentials like Taylor Swift concert tickets and backyard furnishings. While she's negotiated her debt down to $9,000, the couple's total debt reaches $477,000, including student loans, car notes, and mortgages. Their spending habits, including daily dining out and a $1,300 monthly car payment, have left them with zero savings.
The couple's financial relationship reveals concerning power dynamics. Devin, with his finance background, controls the finances like a "parent," leading to resentment from Clara, who feels disempowered by having to ask permission for basic purchases. Clara expresses a desire to prove her financial responsibility and earn Devin's trust, while Devin acknowledges feeling exhausted from constantly monitoring their finances.
Sethi expresses concern over Devin's risky financial approaches, which include gambling and collecting as attempts to build wealth. Instead of traditional investing or saving, Devin hopes to quickly multiply money through sports betting. Clara disapproves of these behaviors and has been trying to convince Devin to save more responsibly and contribute to their 401(k).
Sethi points out that the couple lacks a coherent financial strategy, with their fixed costs consuming 74% of their income. Despite vague goals of getting out of debt and saving more, they haven't developed concrete plans to achieve these objectives. Their spending on dining out, coffee, and an $80,000 home renovation has prevented any meaningful savings. Sethi advises them to develop a clear vision for their family's financial future and create a structured debt payoff plan.
1-Page Summary
Discussion with callers Clara and her partner reveals their struggle with significant financial troubles and questionable spending choices.
Clara, the first caller, confides that she has accrued $20,000 in credit card debt, spread across five credit cards. The purchases contributing to this debt include $4,600 for Taylor Swift concert floor tickets, new backyard furnishings such as a gazebo and dining set, and various clothes and toys for her children. She has even faced the ramifications of her spending habits, such as being sued, which resulted in a summon from the court. Clara's initial response was to ignore the issue by avoiding her mail, but the court summons forced her to face her debt.
Despite these alarming numbers, Clara has taken some steps towards debt control. She successfully negotiated her debt payments down with a collection company. Her $20,000 debt was reduced to $9,000, and she's now on a payment plan of $200 for each card. Clara has also identified potential areas for cutting her monthly expenses, such as subscription costs, phone bills, groceries, and using hand-me-down clothes for her children.
Caller #2, likely Clara's partner, reveals a total debt situation of $477,000 encompassing student loans, car notes, credit card debt, and mortgages on properties in New Jersey and the Philippines. This daunting sum highlights a broader issue with the couple's financial management.
Ramit Sethi, bringing further clarity to their spending habits, highlights the couple's pattern of eating out daily, a considerable expense that amounts to zero savings and thousands in credit card debt. This habit, compound ...
The Couple's Financial Issues and Spending Habits
Discussing the stress that imbalanced financial responsibility can bring to a relationship, Caller #1, Clara, and her husband, Devin, share their experiences with money management.
Devin has taken control over the management of finances, likening his approach to a parent-child dynamic where he is seen as the "responsible parent." His finance and accounting-heavy background contributes to him exerting a lot of control over the finances after Clara's spending on a Taylor Swift concert, which he indicated would not be acceptable moving forward. Sethi challenges Devin, asking him about his responsibility in their financial situation as the one ostensibly in charge of money.
Clara feels disempowered by having to ask for permission to make basic purchases and is unhappy with Devin's condescending tone when they discuss finances. She considers separating from him because she does not want to be constantly monitored and controlled in her spending.
With the help of Ramit Sethi's conversation, Clara decides to step up and retake her power in the relationship to be co-equal in handling finances, expressing enthusiasm about proving her maturity and financial responsibility to Devin, suggesting an aspiration to change the dynamic and earn trust and respect.
Clara realizes that she has been unaware of the urgency of their financial situation, feels irresponsible, and accepts reality to take on more responsibilit ...
Money, Power Dynamics, and Trust Issues in Relationships
Devin has been relying on unorthodox financial strategies such as gambling and collecting, but these methods are worsening his financial situation and causing tension with his partner, Clara. Host Ramit Sethi and Devin's partner express concerns over his approach to finance, which is more focused on the short term and lacks realism.
Devin reveals that he has resorted to gambling and more collection-driven activities in an attempt to make money. Instead of investing, he uses any small amount of money he has for gambling and collecting, without a cushion for proper investments. Ramit Sethi describes Devin as gambling on sports betting hoping to quickly double or triple his money. Devin also admits that this type of behavior is not sustainable for retirement.
Although not explicitly stated, it's implied in the concerns raised by both Clara and Sethi that Devin's behaviors worsen their financial stability. Clara's disapproval and frustration with Devin's gambling reflect eroding trust, while Caller #1 wants Devin to stop engaging in draft games and sports betting. Clarence has been trying to convince Devin to save more responsibly and to contribute to their 401(k), but Devin prefers spending money now rather than saving it, trying to get rich quick.
Devin's lack of a traditional financial plan is clear. He expresses a "g ...
Devin's Unconventional Financial Strategies and Their Impact
Clara and Devin’s financial troubles stem from not having a coherent financial strategy or clear goals, as revealed through their conversation with Ramit Sethi.
Throughout their discussion, it becomes clear there is no structured approach toward Clara and Devin’s finances. With high fixed costs taking up 74% of their income, the couple saves nothing each month. Ramit Sethi describes their net worth and investment situation as a red flag, also criticizing their Comprehensive Spending Plan (CSP) for reflecting their lack of real financial goals. Additionally, Clara and Devin seem to rationalize excessive spending, such as a $1,300 car payment, without considering a savings strategy.
Devin does not contribute to retirement savings, and there is no mention of a broader strategy to escape debt or improve their overall financial situation. They have vague goals, such as getting out of debt, saving more, and earning additional streams of income, but lack concrete plans to achieve these objectives. Clara wants to save for their children’s activities and retirement, but the couple's spending far outweighs their savings efforts. Spending on dining out, purchasing coffee, and $80,000 on home renovations has not left room for savings or other financial goals.
Devin's speculative and risky financial tactics suggest a lack of strategy, potentially leading to debt and missed financial opportunities. Clara's understanding that Devin doesn’t see her financial advice as credible adds another layer of complexity to their co-created financial dynamic. Despite negotiating debt payments with a collection company and considering selling a car, these decis ...
Couple's Lack of Financial Plan and Goals
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