Podcasts > I Will Teach You To Be Rich > 213. “We have a $1M trust - but a $30k budget” (Part 1)

213. “We have a $1M trust - but a $30k budget” (Part 1)

By Ramit Sethi

In this episode of I Will Teach You To Be Rich, a couple with an unusual financial situation—$1.8 million in net worth but only $30,000 in annual income—grapples with their complex relationship with money. Their story illustrates how family history and deep-rooted beliefs affect financial behaviors, with one partner carrying guilt from a privileged background while the other bears scars from past financial hardships.

The episode explores the challenges of transitioning from single-person to collaborative financial management, addressing how the couple manages their significant income gap through savings and various income streams. Their different lifestyle aspirations and approaches to spending highlight the importance of building a shared financial vision, while their situation demonstrates how wealth and income can be disconnected in ways that create unique financial challenges.

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213. “We have a $1M trust - but a $30k budget” (Part 1)

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213. “We have a $1M trust - but a $30k budget” (Part 1)

1-Page Summary

Money Mindsets & Family Histories: Impact on Couples' Finances & Relationships

A couple's complex relationship with money reveals how family history and deeply ingrained beliefs shape financial behaviors and relationships.

Individual Money Mindsets

Kate, raised in a wealthy family, struggles with guilt and unworthiness around money due to her parents' frugal mindset and belief that money is evil. Despite having wealth, she experiences anxiety about spending and maintains strict control over finances.

Keith's financial journey has been marked by limited financial education and a devastating bankruptcy during the 2008 financial crisis. These experiences have led to his passive role in financial management and fear of making financial decisions.

Transitioning to Collaborative Financial Management

The couple faces challenges in moving from Kate's sole control of finances to a more collaborative approach. Kate, whose past relationships left her financially drained, finds it difficult to release control despite valuing Keith's input. Meanwhile, Keith desires a more active role but fears judgment about his financial decisions.

Complex Relationship with Wealth

Kate and Keith's situation is complicated by their unusual financial position: they have a substantial net worth of $1.8 million but only earn $30,000 annually. Kate particularly struggles with feelings of unworthiness regarding their wealth, stemming from her privileged background and awareness of societal wealth gaps.

Building a Shared Vision

The couple has different lifestyle aspirations: Kate envisions a life rich in community and culture, including splitting time between the northeast and Hawaii, while Keith dreams of travel, time with loved ones, and the freedom to make financial decisions without scrutiny. Ramit Sethi suggests they begin collaborative financial planning with small steps, such as planning a trip or making daily purchases together, before tackling larger decisions.

Managing Financial Gaps

Their current financial situation presents unique challenges, with expenses exceeding their income by 126%. Kate's medical expenses, ranging from $25,000 to $30,000 annually, are covered by her parents. The couple manages the income gap through savings and various income streams, including freelance and contractor work. Ramit Sethi has involved partners at Facet to analyze their finances and provide customized options aligned with their goals.

1-Page Summary

Additional Materials

Actionables

  • You can create a "financial feelings journal" to explore your emotions around money, similar to how Kate deals with guilt and unworthiness. Start by writing down your feelings every time you make a financial decision, whether it's spending, saving, or investing. This can help you identify patterns in your emotional responses and work towards a healthier financial mindset.
  • Develop a "decision-sharing system" with your partner to foster equality in financial management, taking inspiration from Kate and Keith's dynamic. Set up a bi-weekly finance meeting where both of you must present and discuss one financial decision you've made independently. This practice encourages mutual respect, shared responsibility, and reduces the fear of judgment in financial matters.
  • Engage in "aspirational budgeting" to align your finances with your lifestyle goals, reflecting Kate and Keith's different aspirations. Create two separate budgets: one for your current lifestyle and another for your dream lifestyle, whether it's travel, community involvement, or cultural experiences. Compare them to see where you can realistically adjust your current spending and saving habits to gradually move towards your ideal life.

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213. “We have a $1M trust - but a $30k budget” (Part 1)

Money Mindsets & Family Histories: Impact on Couples' Finances & Relationships

A deep exploration into how family history and deeply ingrained beliefs about money shape the financial behaviors and relationships of couples uncovers complex emotional landscapes.

Kate's Complex Relationship With Money Stems From Her Family's Belief That It's "Evil" and Their "Depression-Era Mentality."

Kate’s emotional and complex relationship with money is rooted in her upbringing by a wealthy yet frugal family that believed money is evil and instilled feelings of guilt and unworthiness regarding wealth.

Kate's Wealthy Parents Instilled Guilt and Unworthiness Around Money

Kate speaks about feelings of unworthiness in relation to her family’s wealth, intimating that her parents’ attitudes towards money have had a lasting impact. Her dad, succeeding with a multinational corporation from humble beginnings, and her mom, inheriting a scarcity mindset from the Great Depression, contributed to Kate’s belief that they were less well-off than they were. The scrimping around festive events like Christmas exacerbated these feelings.

Kate Feels Anxious About Spending Despite Wealth

Kate discusses her anxiety around spending money, indicating that her savings habits are guided more by fear than strategic financial planning. Ramit Sethi, listening to her story, identifies the burden of "invisible scripts" regarding money passed down through the generations in Kate’s life. These scripts, he suspects, inform the anxiety Kate feels, rooted in outdated beliefs from her family’s experiences during the Depression era.

Keith's Limited Financial Education Led To a Passive Role in Managing Finances

Keith’s own financial path reflects how lack of education leads to avoidance and fear in financial decision-making, illustrated by his reluctance to take control of money matters after a personal financial catastrophe.

Keith Avoided Financ ...

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Money Mindsets & Family Histories: Impact on Couples' Finances & Relationships

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Counterarguments

  • While Kate's family's beliefs may have influenced her, it's possible that her anxiety around spending could also stem from personal experiences or her own unique psychological makeup, not solely from family-induced guilt and beliefs.
  • The notion that money is inherently "evil" could be challenged by the perspective that money is a neutral tool that can be used for both good and bad, depending on the intentions and actions of the individual.
  • Keith's avoidance of financial management might not only be due to a lack of education but could also be influenced by personality traits such as risk aversion or a general disinterest in financial matters.
  • Keith's response to his bankruptcy could be seen not just as a result of that event, but also as a reflection of his resilience and ability to learn from difficult experiences, potentially leading to more cautious and informed financial decisions in the future.
  • The idea that Keith took a passive role in managing finances could be reframed as a strategic ...

Actionables

  • You can rewrite your money narrative by journaling your current beliefs and crafting positive affirmations to counteract them. Start by listing out any negative beliefs you have about money, like "money is evil" or "I don't deserve wealth." Then, create affirmations that flip these beliefs into positive ones, such as "money is a tool for good in my hands" or "I am worthy of financial abundance." Repeat these affirmations daily to gradually shift your mindset.
  • Develop a habit of informed spending by creating a "mindful budget" that includes a section for emotional reflection. When setting up your budget, add a column next to your expenses where you can jot down how each purchase makes you feel. This practice can help you become more aware of your spending triggers and the emotions associated with money, allowing you to make more conscious decisions that align with your values and financial goals.
  • Build financial confidence through small, low-risk investment experiments. Start with a mod ...

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213. “We have a $1M trust - but a $30k budget” (Part 1)

Transitioning From Financial Role to Collaborative Approach As a Couple

Kate and Keith's financial dynamic represents a common struggle for couples trying to shift from a single-handed approach to a joint effort in managing finances. Below we explore their challenges and aspirations toward collaborative financial planning.

Kate Manages the Couple's Finances, Reinforcing Her Control and Discomfort With Sharing Responsibility

Kate exhibits a strong desire for control over the couple's finances, which can be tied to her past where she often felt like the financially responsible party in relationships. Her history of being in financially draining relationships might have led her to adopt a rigid saving practice and a matter-of-fact approach to money management.

Kate's Control Desire Stems From Past Financially Draining Relationships

Kate reveals that in previous relationships, she was "the drain or the drag," indicating that she was often left to bear the financial load. This background has fostered her need to control financial planning in her current marriage, making her cautious about sharing this responsibility.

Kate Values Keith's Help but Struggles to Release Financial Control

Despite her struggle, Kate is aware of the benefits of working together with her husband. She envisions a partnership where they can achieve more together than apart, particularly with their finances. However, she finds it challenging to let go of her control, admitting that she initially relished the freedom to manage money without interference.

Keith Wants a More Active Role but Fears Judgment in Financial Decisions

From Keith's perspective, his passive role in financial matters is largely influenced by his uncertainty and fears of judgement.

Keith Worries About Perceptions of His Financial Motives

Keith is hesitant to assert his opinions on financial issues due to concerns about how his motivations may be perceived. Having differing financial backgrounds, Keith is acutely aware of the potential for his choices to be scrutinized and is therefore cautious in expressing his financi ...

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Transitioning From Financial Role to Collaborative Approach As a Couple

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Counterarguments

  • While Kate's desire for control is linked to past experiences, it's possible that her approach could also stem from a lack of trust in Keith's financial acumen or a general discomfort with change, rather than just past relationships.
  • Keith's fear of judgment might not only be about perceptions but could also be due to a lack of financial literacy or previous negative experiences with financial decision-making.
  • It's possible that Keith's reluctance to participate is not solely due to fear of judgment but could also be due to a lack of interest in financial matters or a belief that Kate is more capable and thus should lead.
  • The idea that Keith lacks confidence compared to Kate could be challenged by suggesting that Keith may have different financial strengths or insights that are not being recognized or valued in their current dynamic.
  • The need for Kate and Keith to build confidence for collaborative financi ...

Actionables

  • You can create a "financial date night" where you and your partner set aside time each week to discuss finances in a relaxed setting. Start by choosing a comfortable spot and bring snacks or a meal you both enjoy to create a positive atmosphere. During this time, openly discuss your financial goals, fears, and responsibilities. This can help both partners feel more involved and less judged, fostering a sense of teamwork.
  • Try using a financial decision-making app that requires dual approval for expenses over a certain amount. This tech solution can help balance control, as both partners must agree before a financial action is taken. It's a practical way to build trust and ensure that both voices are heard in financial planning.
  • Engage in a role-reversal exercise where each partner takes on the other's financial resp ...

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213. “We have a $1M trust - but a $30k budget” (Part 1)

Complexities Of Navigating Wealth, Privilege, and Feeling Worthy

Navigating personal finances, especially when they involve significant wealth, can be a complex experience, as it intertwines with deeper issues of privilege, guilt, and self-worth, as evidenced by the emotional responses of callers Kate and Keith.

Kate's $1.8 Million Net Worth and Worthiness Struggles

Kate expresses that having a substantial net worth has led her to struggle with a feeling of unworthiness.

Kate's Family History Instilled Guilt About Having More Money Than Others

Caller #1, who we know as Kate, admits to feeling unexpectedly emotional when discussing her financial status, saying, "I wasn't expecting to get emotional about it, but it feels as though I haven't felt worthy of having that." Her emotional response suggests that guilt is deeply ingrained, possibly because of her family's past experiences. She acknowledges the advantage of privilege granted by her parents, who ensured she wouldn’t have to face traditional debts that many others incur, such as college or auto loans. This disparity between her situation and others’ realities fuels her guilt and the notion that her easier life comes unearned, further feeding her sense of unworthiness.

Kate Defensively Discusses Her Financial Discomfort

Kate's discomfort with her wealth is palpable; her body language conveys embarrassment or unease when discussing financial matters. Even with the means to enjoy life, she holds back, indicating her discomfort with enjoying the assets she has. This conflict is not just internal but also affects her interactions, as Kate's defensiveness and embarrassment emerge when discussing money-related choices, such as hesitating to spend even $50.

Low Income vs. Substantial Assets: A Financial Conflict

This financial discomfort is not merely about privilege and guilt but also about the practical confusion stemming from holding significant assets alongside a comparative ...

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Complexities Of Navigating Wealth, Privilege, and Feeling Worthy

Additional Materials

Actionables

  • You can start a gratitude journal focusing on non-material aspects of life to counteract feelings of unworthiness related to wealth. By writing down three things you're grateful for each day that have nothing to do with money, you shift your focus to the value of experiences, relationships, and personal growth. For example, appreciating a good conversation, a walk in nature, or a personal achievement can help you find worth in aspects of life not measured by wealth.
  • Engage in volunteer work that aligns with your values to address feelings of guilt about having more money than others. Volunteering your time and skills to causes you care about can provide a sense of purpose and community connection. For instance, if you're passionate about education, you could tutor students from underprivileged backgrounds, thereby using your resources in a way that feels meaningful and reduces guilt.
  • Create a personal financial plan that ...

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213. “We have a $1M trust - but a $30k budget” (Part 1)

Align on a Shared "Rich Life" Vision and Plan Together

Kate and Keith seek to harmonize their lifestyle aspirations and spending habits to achieve a mutual vision of a "Rich Life," encompassing both financial freedom and fulfilling experiences.

Kate and Keith Differ On Lifestyle and Spending

Kate envisions a life rich in community, culture, and purpose, wanting to live part-time in the northeast and Hawaii while staying close to family. She expresses the desire for work to be optional, engaging deeply in community and volunteering in Hawaii.

Keith, on the other hand, yearns for the liberty to make financial decisions without scrutiny, aspiring for more travel and time with loved ones. He dreams of spending money on experiences such as taking friends out to dinner, chartered sailboat trips, and travelling carefree—reflecting a desire for financial freedom to enjoy life's pleasures.

Keith Seeks More Travel, Time With Loved Ones, and Financial Decision Freedom Without Scrutiny

Keith's vision includes starting a handyman business and purchasing a new pickup truck for practical purposes. He wishes to be able to make small purchases for his lifestyle, like spending $50 on his kids, without feeling stressed or questioned by Kate. They both share an interest in unscripted travel, which suggests a common goal of freedom within their financial life, without constant oversight.

"Planning and Collaborating: Overcoming Financial Roles and Mindsets For a Shared Future"

Kate and Keith Need Confidence to Share Financial Decisions For Their "Rich Life"

Kate and Keith's discussions about money often lead to defensiveness and hurt feelings. However, they both express a desire to move towards joint decision-making. Keith seeks a financial plan that allows Kate not to stress about money, reflecting a mutual need to build confidence in managing their wealth together and planning for their vision of a rich life. Kate acknowledges that she's on the right path and is open to sharing the planning responsibilities with Keith.

Professional Support for Financial Planning and Vision Execution

Ramit Sethi, the advisor, suggests that Keith should begin to involve himself in collaborative financial actions ...

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Align on a Shared "Rich Life" Vision and Plan Together

Additional Materials

Counterarguments

  • While Kate and Keith share a common goal of financial freedom, their individual visions of a "Rich Life" may require compromise and prioritization, which could lead to potential conflicts if not managed carefully.
  • Keith's desire for financial decision freedom without scrutiny could be at odds with the need for joint decision-making and transparency in a partnership.
  • The idea of starting a handyman business and purchasing a new pickup truck might not align with the immediate goal of financial freedom if it requires significant upfront investment and increases financial strain.
  • The emphasis on professional support for financial planning assumes that external guidance is necessary or beneficial for all couples, which may not be the case for those who are capable of or prefer to manage their finances independently.
  • The suggestion for Keith to plan for something small under $3,000 as a starting point for joint financial decision-making might not address deeper issues of trust and communication that could be affecting their financial decisions.
  • Encouraging Kate to grant herself permission to decide how to spend her money and time cou ...

Actionables

  • You can create a vision board with your partner to visualize your shared goals for a rich life. Start by gathering magazines, printouts, and any other visual materials that represent your aspirations for financial freedom, travel, and experiences. Spend an evening together cutting out images and phrases that resonate with both of you and arrange them on a board. This activity not only helps clarify your mutual vision but also serves as a daily reminder of what you're working towards.
  • Develop a "mini-adventure fund" by setting aside a small amount of money each week. Decide on an amount that feels comfortable for both of you to contribute, perhaps the cost of a coffee or lunch out, and put it into a separate savings account or a physical jar. Use this fund exclusively for spontaneous experiences or travel opportunities that align with your shared vision of unscripted adventures. This practice encourages joint financial decision-making and the joy of anticipating and enjoying these experiences together.
  • Schedule monthly "financial freedom dates" where you discuss progress, setbacks, ...

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213. “We have a $1M trust - but a $30k budget” (Part 1)

Managing Gaps Between High Net Worth and Low Income

Couple's $1.8M Net Worth Exceeds $30k Income

Kate and Keith reveal that despite their net worth of $1.89 million, they have a combined annual take-home income of just $30,000. This significant wealth is evidenced by their $1,205,000 in assets, $552,000 invested, and $206,000 in savings. The couple's wealth has been impacted by family assistance, with their parents having covered expenses like college and a car, and by providing a private mortgage to help with housing. Caller #1, presumably Kate, was informed about a trust set up for her, worth around $800,000 in her late teens for medical and education expenses, which over 30 years has only grown to around $1 million, not the expected $5 million.

Discrepancy From Kate's Family Wealth and Investment History

Kate's family wealth and investment history have contributed to their high net worth. Despite their substantial assets, the couple is in the unique position of navigating financial challenges due to Kate's long COVID or chronic fatigue syndrome which has significantly reduced her ability to work. Keith has attempted to compensate by taking on more work.

Kate emotionally struggles to feel deserving of her wealth, despite rationally understanding her worthiness. This internal conflict adds an emotional layer to their financial management.

Couple's Expenses Exceed Income, Requiring Savings Use

Kate and Keith's fixed costs are 126% of their net income, suggesting they spend more than they make each month. To manage the discrepancy between income and outgoings, they use their savings. Additionally, Kate's medical expenses, ranging from $25,000 to $30,000 a year, are also covered by her parents.

Keith talks about using money from his web development work to avoid touching their shared finances, indicative of the couple's careful financial management. Their reduced income due to health issues has led them to downsize their wedding photography business and take on freelance work and contractor work.

Strategically Align Spending With Long-Ter ...

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Managing Gaps Between High Net Worth and Low Income

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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 provides financial advice and strategies for personal finance management and wealth-building. Sethi has a background in sociology and has been involved in various ventures, including co-founding a commercial wiki website. He is recognized for his expertise in helping individuals optimize their finances and achieve their financial goals.
  • Rich life goals typically refer to financial objectives that align with an individual's desired lifestyle and aspirations. These goals may include achieving financial independence, funding specific experiences or purchases, or building wealth ...

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