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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A couple's complex relationship with money reveals how family history and deeply ingrained beliefs shape financial behaviors and relationships.
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.
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.
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.
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.
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
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 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 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 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 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.
Money Mindsets & Family Histories: Impact on Couples' Finances & Relationships
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 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 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.
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.
From Keith's perspective, his passive role in financial matters is largely influenced by his uncertainty and fears of judgement.
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 ...
Transitioning From Financial Role to Collaborative Approach As a Couple
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 expresses that having a substantial net worth has led her to struggle with a feeling of unworthiness.
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'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.
This financial discomfort is not merely about privilege and guilt but also about the practical confusion stemming from holding significant assets alongside a comparative ...
Complexities Of Navigating Wealth, Privilege, and Feeling Worthy
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 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'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.
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.
Ramit Sethi, the advisor, suggests that Keith should begin to involve himself in collaborative financial actions ...
Align on a Shared "Rich Life" Vision and Plan Together
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.
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.
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.
Managing Gaps Between High Net Worth and Low Income
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