215. “He wants a house, I don’t want to go bankrupt.”
In this episode of I Will Teach You To Be Rich, a couple navigates their conflicting views on homeownership and financial management. With a combined income of $100,000, Ari sees buying a house as an essential milestone and symbol of freedom, while Athena fears the financial burden might restrict their ability to enjoy life and start a family. Their different perspectives stem from contrasting upbringings: Ari's upper-middle-class background encouraged wealth-building, while Athena's religious, conservative upbringing created a scarcity mindset.
The summary explores how the couple handles their differing approaches to money management, from maintaining separate finances to reconsidering their 50/50 expense-sharing arrangement. It also examines how Athena's deeply ingrained beliefs about money affect her spending habits, and how therapy is helping her work through feelings of guilt around non-essential purchases.
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1-Page Summary
Differing Financial Mindsets and Beliefs Shaped by Upbringing
Athena and Ari's contrasting financial perspectives stem from their distinct upbringings. Athena's religious, conservative background instilled a scarcity mindset where wealth was viewed suspiciously, leading to discomfort with spending and a strong desire for financial independence. In contrast, Ari's upper-middle-class upbringing fostered a growth-oriented view of money, emphasizing saving and investing for the future, particularly toward homeownership.
Tension Around the Goal Of Buying a House
The couple's different perspectives create tension around homeownership. For Ari, a house represents freedom, privacy, and the ideal setting for raising a family. He expresses concern about not achieving this milestone by age 40, viewing it as a potential failure. Athena, however, fears becoming "house poor," worried that homeownership costs might compromise their ability to enjoy other aspects of life, such as travel and starting a family.
Combining Finances and Aligning Goals As a Couple
Ramit Sethi observes that Athena and Ari's separate "his and hers and theirs" financial model creates unnecessary complexity. While combining finances could simplify their relationship, both express hesitation, primarily due to Athena's debt. The couple has evolved from a strict 50/50 split mindset to considering more equitable financial contributions, recognizing that equal doesn't always mean fair given their income disparity.
Athena's Scarcity Mindset and Guilt Around Spending Money
Despite their combined annual income of $100,000, Athena's religious upbringing continues to influence her spending habits. She views non-essential purchases as morally questionable and consistently chooses the cheapest options available. Ramit Sethi notes that while these feelings of guilt and shame might not disappear entirely, Athena can work toward handling them more calmly. Through therapy, she's working to untangle these deeply ingrained patterns that currently prevent her from experiencing financial freedom.
1-Page Summary
Additional Materials
Clarifications
- Ramit Sethi is a well-known personal finance advisor and author known for his practical advice on money management and investing. In this context, Sethi's observations likely involve suggesting strategies for Athena and Ari to improve their financial situation and align their goals as a couple. His advice may focus on addressing their differing mindsets towards money, combining finances effectively, and overcoming specific challenges like Athena's scarcity mindset and guilt around spending. Sethi's guidance could include practical steps, mindset shifts, and communication strategies to help the couple navigate their financial differences and work towards shared financial goals.
- "House poor" is a term used to describe a situation where a significant portion of a person's income is allocated towards homeownership costs, such as mortgage payments, property taxes, insurance, and maintenance, leaving little room for other expenses or savings. This can lead to financial strain, limited discretionary spending, and a feeling of being financially stretched thin due to the high costs associated with owning a home. It signifies a scenario where a person may have substantial assets tied up in their home but struggles to afford other aspects of life comfortably.
- Athena's religious background, which is not explicitly mentioned in the text, could potentially involve teachings or beliefs that emphasize frugality, modesty, or caution regarding material wealth. These teachings may have instilled in her a sense of guilt or unease around spending money on non-essential items. Such religious teachings could have influenced her to prioritize financial security and independence over indulgence or extravagance.
Counterarguments
- While Athena's scarcity mindset may be influenced by her upbringing, it's also possible that her financial habits are a rational response to her current financial situation, such as her debt, rather than just her upbringing.
- Ari's growth-oriented view of money, while generally positive, might overlook the potential risks of over-leveraging or investing without a sufficient emergency fund, which could be a valid concern for Athena.
- The tension around homeownership could be more complex than just differing perspectives; it might also involve practical considerations such as the current housing market, interest rates, and job security.
- Combining finances might simplify some aspects of a relationship, but it could also lead to a loss of financial autonomy or exacerbate existing tensions if not handled with clear communication and mutual understanding.
- The idea that equal contributions are not always fair could be expanded upon to consider that what is equitable may change over time as circumstances evolve, and continuous dialogue is necessary.
- Viewing non-essential purchases as morally questionable is a subjective belief and not inherently wrong; frugality can be a virtue and a valid lifestyle choice.
- Therapy is one approach to handling feelings of guilt and shame around spending, but it's not the only method; financial education, peer support, or self-help strategies might also be effective for some individuals.
- The notion of financial freedom is subjective, and what constitutes financial freedom can vary greatly from one person to another, suggesting that Athena's definition of financial freedom might be different from conventional interpretations.
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Differing Financial Mindsets and Beliefs Shaped by Upbringing
Athena's Conservative Upbringing Fosters a Scarcity Mindset and Spending Guilt, Hindering Her Financial Freedom
Athena's religious upbringing, which she compares to a cult, instilled in her a scarcity mindset regarding money. This mindset is apparent in her day-to-day life, from the ways she handles money and interacts with her partner about finances to her feelings of discomfort when making purchases. She is keenly aware of small savings, such as feeling grateful for buying lettuce at a discount, but this attention to frugality also leads to her discomfort with non-essential spending. Athena reveals that being brought up to believe that material wealth or possessions indicated a lack of love for God has caused her to think of wealth as suspect.
Athena's Thrifty Parents Taught Wealth Is Suspect, Causing Difficulty Spending On Non-essentials
Athena's parents were very thrifty, which affected her perception and handling of money. They taught her the importance of even small amounts, like $3, because that was their financial reality. Despite earning well, Athena feels she has no money due to the lack of a growing checking account and not owning a house, a mindset deeply rooted in her stringent family beliefs about money. She also finds difficulty in financial dependence and desires autonomy, indicating a guilt tied to spending or relying on others for funds.
Athena grew up in an environment where material wealth was considered an indicator that one may not be saved, and religious teachings about debt have influenced her approach to money immensely. She recalls Bible verses about debt and how they’ve shaped her financial outlook, sometimes causing her to suppress her desires.
Ari's Upper-Middle-Class Upbringing Encouraged a Growth-Oriented View of Money, Focusing On Saving and Investing For the Future
Ari, on the other hand, had an upper-middle-class upbringing where both parents worked hard and saving money was a significant lesson imparted to him. He acknowledges that this focus on saving and the influence of the checking account number have profoundly impacted his approach to marriage and fina ...
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Differing Financial Mindsets and Beliefs Shaped by Upbringing
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Counterarguments
- While Athena's upbringing instilled a scarcity mindset, it's possible that this mindset could also lead to prudent financial management and avoiding unnecessary debt.
- Feeling discomfort with non-essential spending isn't inherently negative; it could reflect a thoughtful approach to consumption and a focus on long-term financial goals.
- The belief that wealth is suspect may encourage Athena to seek fulfillment outside of material possessions, which can be a positive lifestyle choice.
- Athena's association of material wealth with a lack of love for God could be reinterpreted as a call to balance material pursuits with spiritual or ethical considerations.
- Religious teachings about debt might make Athena more cautious about financial commitments, which can be beneficial in managing financial risks.
- Ari's growth-oriented view of money, while generally positive, might overlook the value of enjoying the present and could lead to excessive frugality or workaholism.
- Emphasizing saving and investing for the future is wise, but it should be balanced with the need to invest in one's current quality of life and well-being.
- The desire for homeownership, influenced by Ari's upbringing, mig ...
Actionables
- You can explore your financial beliefs by journaling to uncover how your upbringing influences your current views on money. Start by writing down your earliest money-related memories and the emotions associated with them. Reflect on how these experiences may have shaped your attitudes towards spending, saving, and wealth. For example, if you remember feeling guilty for asking for a toy as a child, consider how this guilt may affect your willingness to treat yourself now.
- Create a "comfort spending" challenge to gently push your boundaries on non-essential purchases. Set aside a small, affordable amount of money each month specifically for something that brings you joy but isn't strictly necessary. This could be as simple as buying a new book, trying out a hobby class, or enjoying a meal out. The goal is to practice spending on enjoyment without guilt and to observe how it makes you feel.
- Develop a personalized investment plan ...
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Tension Around the Goal Of Buying a House
A caller named Ari and his wife Athena face a common dilemma of modern couples: the tension between the dream of homeownership and the financial implications it carries. While a house represents security, success, and the setting for a future family, there's conflict over the potential sacrifice of lifestyle and financial freedom.
House Signifies Freedom, Privacy, and the Ability to Start a Family For Ari, a Long-Held Dream
Ari views a house as a symbol of freedom, privacy, and the ideal environment for raising a family. He feels that not owning a house by the age of 40 would be akin to admitting a mistake or failure. He longs for the space to indulge his passion for hands-on work, such as fixing things—a hobby that is constrained while living in an apartment. To Ari, a house also represents a significant investment for the future.
Both Ari and Athena agree that acquiring a house signifies a necessary change in how they view and handle money as a team. However, Ari worries that not achieving homeownership would be seen as a failure, particularly against the backdrop of a traditional mindset that equates manhood with providing a home. This sentiment is deeply rooted in past notions where a decent salary could realistically translate into buying a house.
Ari Worries That Not Owning a House By 40 Feels Like a Mistake
Ari’s concern about the milestone of owning a house by 40 is palpable. He feels that reaching this age without a house might indicate he's made a significant error in his life's financial management.
Athena Fears Becoming "House Poor" and Losing Discretionary Spending By Buying a House
Athena, on the other hand, fears the financial strain that homeownership might bring, coining the term "house poor" to describe the scenario where owning a home compromises their ability to enjoy other aspects of life such as travel and family. She's invested in Ari's dream of buying a house but is equally cognizant of their shared desire to travel and the freedom to afford everyday pleasures like socks and throw pillows without micromanaging their budget.
Athena Fears Homeownership Costs Will Hinder Finances and Goals Like Travel and Family
Athena is acutely aware that the costs of owning a house extend far beyond the initial purchase price. She voices her concern that they may not be able to afford a house, children, and their d ...
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Tension Around the Goal Of Buying a House
Additional Materials
Clarifications
- "House poor" is a term used to describe a situation where a person spends a significant portion of their income on homeownership costs, leaving them with limited funds for other expenses or activities. This can lead to financial strain and impact one's ability to enjoy a comfortable lifestyle or save for other goals. Essentially, being "house poor" means that a large portion of one's financial resources is tied up in maintaining a home, potentially limiting discretionary spending on things like travel, entertainment, or savings.
- Ramit Sethi is a well-known personal finance advisor and author known for his practical advice on managing money, investing, and achieving financial goals. In this context, Sethi's perspective emphasizes the significant financial commitment and lifestyle adjustments required when prioritizing homeownership as a goal, particularly in terms of long-term financial planning and discretionary spending. His insights underscore the importance of aligning financial decisions with personal values and goals to ensure a balanced approach to achieving financial security and fulfilling aspirations.
- The financial implications of homeownership include not just the initial purchase price but also ongoing costs like maintenance, repairs, property taxes, insurance, and possibly homeowner association fees. Additionally, homeowners may need to budget for unexpected expenses that can arise, such as major repairs or renovations. Homeownership can tie up a significant portion of one's income for mortgage payments and related expenses, potentially impacting discretionary spending and long-term financial goals. It's esse ...
Counterarguments
- Owning a house does not necessarily equate to freedom; for some, it can mean being tied to a mortgage and maintenance responsibilities.
- The idea that not owning a house by a certain age is a failure is a societal construct, not an absolute truth.
- A house can be a significant investment, but it can also be a financial burden if not managed properly.
- The fear of being "house poor" is valid, but there are strategies to mitigate this risk, such as buying within one's means and having a solid emergency fund.
- Travel and family goals can sometimes be more enriching than homeownership, and prioritizing them is a legitimate choice.
- Adjusting a savings plan for a house fund can be stressful, but it can also be an opportunity to reassess financial priorities and find creative ways to save.
- A money mindset focused on scrimping can be changed with financial education and a shift in p ...
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Combining Finances and Aligning Goals As a Couple
Couples like Athena and Ari face challenges when it comes to managing their finances. Ramit Sethi, a financial expert, offers insights into their situation and the broader implications for couples with combined finances.
Athena and Ari's Separate Finances Create Complexity and Lack Transparency
Athena and Ari's approach to finances has led to a separation of assets in their conscious spending plan. Ramit Sethi observes their unusual "his and hers and theirs" financial model, pointing out the complexity and lack of transparency that maintaining separate finances can create. He suggests that combining finances could remove the wedge caused by separate finances and simplify the relationship.
Athena and Ari have discussed managing living expenses and how to handle their incomes early in their relationship. The conversation indicates that keeping separate finances complicates financial planning. Ari is specifically concerned about combining finances now because he feels that paying off Athena's debt would deplete his savings and reduce their collective resources. Athena expresses a desire to combine finances to streamline discussions but acknowledges financial independence as an advantage of their current arrangement. Despite the benefits of combining finances, both Athena and Ari exhibit hesitation primarily due to Athena's debt.
The Couple Explored "Fair" Financial Contributions, Recognizing 50/50 May Not Be Equitable
The conversation about fairness in financial contributions is a delicate one for Athena and Ari. Ari took nine to twelve months to shift from a strict 50/50 mindset to considering a more equitable approach. Athena consistently challenges Ari's financial perspectives in a healthy way. It seems they've acknowledged that a 50/50 split may not be the fairest ...
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Combining Finances and Aligning Goals As a Couple
Additional Materials
Counterarguments
- While combining finances might simplify some aspects of the relationship, it could also introduce new complexities, such as disagreements over spending priorities and investment strategies.
- Financial independence can be maintained even with combined finances through the use of personal allowances or separate discretionary funds.
- A strict 50/50 split, while not always equitable, can be a clear and straightforward method that avoids the potential for conflict over what is "fair," especially if both parties agree to it.
- Ari's concern about depleting his savings to pay off Athena's debt could be valid, as it might impact their ability to handle future financial emergencies or opportunities.
- Combining finances does not necessarily ensure alignment on goals; it requires ongoing communication and may sometimes highlight differences in financial priorities.
- The idea that combining finances simplifies money management is not universally true; for some couples, keeping finances separate can lead to clearer boundaries and less conflict.
- The concept of fairness in financial contributions is subjective and can vary greatly between couples, depending on their values and circumstances.
- Athena's consistent challenging of Ari's financial perspectives, while healthy for discussion, could also lead to te ...
Actionables
- You can create a "financial roadmap" with your partner to visualize your combined future finances. Start by drawing a timeline of your financial goals and milestones, such as paying off debt or saving for a house. This visual tool can help both of you see how combining finances could work towards these shared objectives, making the concept more tangible and less abstract.
- Develop a "fairness calculator" spreadsheet that factors in income disparity and personal debts to determine equitable contributions to shared expenses. Input each partner's income and debt levels, and use a formula to calculate what percentage of shared expenses each should cover. This personalized tool can help you move beyond a rigid 50/50 split and find a balance that feels fair to both parties.
- Experiment ...
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Athena's Scarcity Mindset and Guilt Around Spending Money
Athena grapples with a scarcity mindset and guilt surrounding her spending habits. Despite having the financial flexibility, she views non-essential spending as morally questionable, and her guilt over spending prevents her from experiencing financial freedom, which perpetuates her scarcity mindset.
Athena Views Non-essential Spending As Morally Questionable and Greedy
Athena always opts for the cheapest options due to a moralistic view of money. She has difficulty in allowing herself to purchase non-essentials like coffee, feeling that such spending requires permission. Caller #2, presumably Athena, has an ingrained perspective that suggests non-essential purchases like new socks are unnecessary and better replaced by repairing what one already has. The notion of doing "something good" by choosing the cheapest option suggests underlying feelings of moral judgment around spending—that wanting anything for oneself is greedy.
Athena Hesitates to Spend On Upgrades or Experiences That Would Satisfy Her and Ari, Fearing Irresponsibility or Letting Ari Down
Athena scrutinizes prices and consistently goes for the cheapest items despite their collective annual income of $100,000, which could easily afford a more expensive meal. Her upbringing, particularly the experience with her mother borrowing money from her children, affects her current relationship with money, leading her not to rely on Ari financially. Athena does not communicate explicit financial implications of Ari's desire for a house because she doesn't want to make him feel bad, indicating a mindset that may cause her to choose cheaper options to avoid financial strain.
Athena spends a significant amount of time each week finding ways to save money on small items. She admits that their current financial strategy limits possibilities for activities such as scuba diving, which they haven't done for eight years. She desires to be generous and treat friends to experiences like a $45 brunch but is unsure if she can afford to do so because of the financial implications on saving for a house. She worries that spending money on such experiences could conflict with the financial contribution expected for their shared goal of homeownership.
Athena's Guilt Over Spending Prevents Financial Freedom, Pe ...
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Athena's Scarcity Mindset and Guilt Around Spending Money
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Counterarguments
- Viewing non-essential spending as morally questionable may be a subjective perspective; others might argue that ethical consumption and spending on oneself can coexist.
- The belief that wanting anything for oneself is greedy could be challenged by the idea that self-care and personal enjoyment are important aspects of a balanced life.
- The hesitation to spend on upgrades or experiences might overlook the potential long-term value and happiness these expenditures can bring, which could outweigh the immediate cost.
- Spending a significant amount of time finding ways to save on small items might not be the most efficient use of time if the savings are minimal compared to the time invested.
- The concept of financial freedom is subjective; some might argue that being cautious with spending is a form of financial freedom in itself, as it can lead to long-term security.
- Describing a conservative approach to money as a "survival mechanism" might not acknowledge the positive aspects of such an approach, like stability and risk aversion.
- The desire to move beyond a restrictive mindset doesn't necessarily mean that one shoul ...
Actionables
- You can create a "guilt-free" spending category in your budget to encourage responsible indulgence. Allocate a small, fixed percentage of your income each month to this category, allowing you to spend on non-essentials or experiences without feeling irresponsible. For example, if you enjoy gourmet coffee, this fund could be used to treat yourself to a specialty drink once a week, reinforcing the idea that pleasure and financial responsibility can coexist.
- Develop a "shared joy" savings plan with a partner or friend to strengthen your financial and emotional bonds. Set up a joint savings account where both of you contribute a small amount regularly for a shared goal, like a vacation or a concert. This practice can help you associate spending with positive, relationship-building experiences rather than guilt, and it ensures that both parties are invested in the decision-making process.
- Experiment with a "spend to save" challenge for a month where you focus o ...
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