Money for Couples — ft. Ramit Sethi

25:57Literally, couples will go, ooh, that makes me uncomfortable. Anyway, see you tomorrow. So money itself is not that determinative when I actually think it really should be a very important consideration. How early? Third, fourth date, you're starting to just ask questions and you're listening. Again, those pivotal moments when you first, take a trip together, maybe when you go out to a nice restaurant together, certainly if and when you're planning to move in together, get married, kids, house, all those times are natural times that you should be having a series of conversations about money. By the way, I didn't take my own advice.

26:34I messed up. I waited too long. My wife was the one who had to bring it up with me. We were, I think, engaged. And she basically said, look, you already know all about my finances, but I don't know about yours. That's not fair. And she was right. So I got to admit, I violated my own rules on this and I should have done it earlier. I just want to get into some of the more logistical questions. You recommend joint bank accounts for couples. What does that look like and why do you recommend it? If I asked a couple, do you think you should live together? They would laugh at me. Of course I should.

27:11We're a couple. And yet we don't apply the same principle to our money. There's good research showing that combining your money produces better relationship outcomes, fewer fights, but more importantly, you're just a team. And truthfully, most couples, they're not particularly adept at managing the flows of money. So they have an orphan 401k here, an old IRA over there, and they're struggling. And what ends up happening is they do these very peculiar ways of managing money. So they get together, typically a little bit later in life nowadays. And so they have their own bank account, checking savings, whatever.

27:48And what they'll do instead of combining because it seems like a lot of work, one person will go, I'll take the rent. You take the car payment. And what ends up happening is total misalignment. Almost always mom will be paying way more for kid stuff, which is outrageous. It's totally ridiculous. There's no reason for that. Next, if one person starts making more money or less, they won't adjust their spending. And so you'll end up seeing people way out of whack. A much better way is to set your accounts up like this. All the money goes into a joint account. You pay your joint expenses, any investments you have, and then you each have a certain amount of money go to your own individual accounts.

28:29No questions asked. You want to spend it on golf, nails, guy's trip, girl's trip, whatever trip. It's yours. And your partner doesn't even have access to it. But importantly, it's your account. It's private, but it's not secret. each of you knows what's going on and you are unified with your accounts. And does that apply if there's a massive disparity in income? Like how do you split that up? Good question. I mean, say one person is earning all of the money and the other person, is it 50-50? How do you do it? It could be. I mean, all the money should go jointly first. It's all there. It's joint.

29:06And then you can decide for your individual money how you want to apportion that. Some people do it proportionally. for that individual no questions asked money. But there's a philosophy that I want every couple to remember. Our future is together. That's really important. If you truly internalize that, then you're making decisions together, your accounts are set up together, and you probably wanna be putting more money towards your joint guilt-free spending than your individual guilt-free spending. It's like when I think about my money with my wife. I'm an entrepreneur, I make money from my business, so is my wife.

29:41She does the same. And of course, we want to have our own money for our own personal expenditures. But our future is together. And when I get excited, I don't think about my individual stuff. I get excited about us taking trips, experiences, restaurants together. I love the philosophy of it. But just as an example, in my own relationship, I generate most of the income. I'll fix that. I'll fix that. I'm going to bring some equivalents to your relationship. Does your partner listen to this show? She doesn't usually. We'll see if she listens to this one. Okay. It's fine if she does. But one thing that I enjoy as the person who makes more of the money is getting the check.

30:33Like, you know, we go out for dinner, and I feel like it is a rewarding thing to put my card down and be like, Is that because you're a provider? Perhaps. Perhaps. But that's something that I feel like I deserve. If I'm making more of the money, I feel like I deserve the reward of the feeling of, I got the check. But if we were putting it all together and it's sort of just like, oh, it's a joint thing, then it sort of removes that reward that the quote-unquote provider gets from getting the check and buying things. So I'd love to get your reaction to my personal grade. I love this. I love this because what this really describes is how money is not just a series of decimal places and spreadsheets.

31:22It's much more like an art form. So right now, the way I'm visualizing it, we have a joint account, you and your partner, you each have your individual accounts. You earn more, fine. So when you go out to dinner, maybe you use the joint credit card and you go, hey, this is for us. Or maybe you go out to a super nice place and you happen to love really high-end restaurants. So you pay with your individual card because that's your gift. Maybe it's an anniversary. You can choose, but the important thing is you have a mental model. You're not just arbitrarily doing whatever and then fighting about it six weeks later.

31:58And your partner is aligned. Remember, the way you set up your accounts matters because right now, it seems like you're both earning. Maybe one day she's going to stop earning for whatever reason. Maybe you have a family. Maybe she gets sick. Maybe whatever reason. How are you going to handle that? The way you set your accounts up now, such as each of you gets individual guilt-free spending money is important because even if a person doesn't earn a cent, they should still be getting some of that money for themselves always. You've sold me. Scott. I'll talk a little bit about money and mating and continue our theme of Scott as a sexist.

32:34I coach my boys 14 and 17 as they're beginning to have dates that you should always pay. That if you're in the company of women and there's anything resembling a non-platonic friendship, the man always pays. My general thesis is that it's socially acceptable to split the check, and there's a lot of reasons why you should split the check. Women are doing really well. And when you split the check, you're much less likely to have sex with that woman. Your thoughts? First of all, I'm not going to ruin my career on this show, okay? I've come too far, Scott. 20 years in business, you're not going to do me in.

33:09I'm telling you right now. Come in. The water's fine. Come in. The water's fine, Ramit. Scott, I saw that CNN thing you had and it looked great. And then two days later, it was canceled. I said, not for me. Not for me. CNN Blue? Oh, dude, that was the fifth show I've had canceled. We're going to need a bigger boat if we're going to start all this shit. Anyways, go ahead. Listen, I think that what I love about what you're teaching your sons is to be generous. To me, that's the frame that I approach, which is generosity. And I think everybody needs to be a little bit more generous. Great way to put it.

33:47Great way to put it. I do think that there are dynamics. And I'll tell you, they're very hard to change regardless of earning ability. I spoke to a couple. They were both in their late 30s. She was a very successful entrepreneur making$200 ,000 per month. $200 ,000 per month. Very successful entrepreneur. and she had grown up with parents who taught her about money from the age of five. They talked about compound interest. They talked about investing, all of it from age five. Her boyfriend was a new entrepreneur. His parents never talked about money, never. I think he grew up pretty blue collar and he was making$2 ,000 a month.

34:30So she said, hey, I would like for you to pay for me sometimes. It makes me feel good if you pick up the check. And you know what he said? Great. I'd love to. And yet when they would go out and he would slide the check across the table and try to pay, she would slide it back and say, no, I want you to put that money in your Roth IRA. So here we have a mix of somebody saying one thing, doing another, and guess what their resolution was? In this case, I thought it was very unconventional, very creative. Once in a while before they went out, she would give him her credit card right before they went out.

35:04and so that night at dinner he would slide a credit card which happened to be hers across the table pick up the check and she felt taken care of now is it weird yeah that's pretty weird do i care no because every couple comes up with their own solution as long as it's fair as long as it's equitable fine she's making a hundred times what he's making per month she still wants to feel a certain way come up with your unusual arrangement make it happen stay with us

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36:49We're back with Prof. G Markets. Ramit, the average cost of a wedding in America is$35 ,000, I read recently, which I just cannot fathom. How much are you going to pay for yours? Do you know? Come on. Is that a serious question? Yeah, tell me. I really don't know. And I guess this is why I'm asking this question, because that seems, you know, way over the... I want to go above average, I'll tell you that much. I would like to pay more than average for my wedding. But not because I necessarily want to, but I think there's a feeling of, like, social pressure and romantic pressure around weddings that it's got to be awesome.

37:35It seems like a social norm that is pretty irresponsible, financially speaking. Yeah, and you'll notice when people talk about weddings, they always say the exact same thing. It only comes up once in life. Well, you know, I'd rather save the money on the wedding and buy a house. Hmm, I wonder, what a coincidence that the only time in people's life that they think long-term with their money happens to be their wedding, and then they talk about buying a house. Where do you think that came from? It's not just something that arbitrarily came up. It's the real estate industry that basically conflates growing up into buying a house.

38:16We could talk about why buying a house is not always the best investment. In fact, right now, it's often terrible. I'll tell you this, Ed. I wanted to have a huge wedding. I'm Indian. I love it. I love weddings. I think they stand for more than just one day. They're a chance to bring cultures together. I started saving for a wedding when I was in my 20s, before I ever met my wife. I knew that I would have a big wedding. I was enthusiastic about it. I set a savings goal, which I think all of us should do because it, whether it is a wedding, a car, a house, a trip, whatever. A lot of us often resist reality.

38:51We go, not me. I'm going to have a simple small wedding. Really, are you? Because the average numbers we know are quite high. And truthfully, when you start to have a wedding, you realize things are expensive. And it's not just you. It's your partner. It's your in-laws. It's so many other things. So we might as well accept reality and start to put money aside for it. Now, you can always choose to have a smaller wedding or a bigger wedding. That's up to you. But too many of us pretend as if we're just brand new to this planet and we don't know what's going to happen. Whereas big life events are quite predictable.

39:23I think that if you can afford it, you should never go into debt for a wedding. If you can afford it, and it is important to you, I'm all for spending money on a fantastic wedding. I did it. I could afford it. It was amazing. Some of the best money that I ever spent. I do think that when it comes to these big purchases, I treat it like our first project together. My wife and I, we actually had a really fun time. We're like, hey, we have the next year to plan this. Let's have fun. We then created a couple of values because you don't want to be spending the best on everything. So it's like, what are our two, three core values?

39:59And then you also need to be realistic because I have these sort of guidelines about how much you should add to the budget. And for weddings, you know, take the number you come up with and basically double it. That's your safe bet for how much you're going to spend. Take a vacation you're planning at 50%. That's about how much you're going to spend. Same thing for buying a house, take the house price, add 50%. That's when you're factoring in phantom costs. So if you do all these things and it's important to you, spend it as long as you can afford it. Let's just pivot to kids. What are some of the most common arguments that couples have when it comes to kids?

40:34Couples, they don't talk about money with kids. They see money. Remember how I said Americans have a love-hate relationship with money? When it comes to their kids, they think money is evil and it's something to protect their kids from. You know, wealthy people don't think like that. They talk about money all the time. Just like if you want your kids to build a healthy relationship with food, you talk about it. Oh, we're gonna eat tomatoes today because we ate green peppers yesterday. Same thing with money. Oh, we're going to go to the grocery store. This is how much we have. Can you help me make sure that we are sticking to the number that we have today?

41:06They talk about it all the time. When I speak to couples on my podcast, I'll ask them, what do you remember your family saying about money when you were growing up? And there's two answers and that's it. The first is they never talked about money. This is socioeconomic. It's also geographic. For example, in the Midwest, people don't talk about money. It's seen as something for adults. Second, there's a single phrase that many kids grew up with, and that is their family saying, we can't afford it. Now, that may have been true, although most people don't even know how to decide if they can afford something.

41:42But the fact is, if you hear that phrase over and over, one, 10, 1 ,000 times by the time you turn 18, you really start to believe that money is simply a source of restriction. So I speak to these multimillionaires a lot, and they still obsess over, can I afford these blueberries? I'm looking at how much they make in interest alone every day. Of course, they can afford any blueberry they want, but they heard we can't afford it over and over from their parents. And so parents, if you're listening, those have lasting consequences. A much better approach is to talk about kids from the time they're young.

42:17Hey, come on over, help me push this button. Help me pay this bill. That helps us keep this roof over our head and keeps grapes in the fridge. Then as they get older, empower them, give them more responsibility. Have them go to the grocery store, have them plan a dinner out for the family. By the time they're 16, 17, they should have made at least one big financial decision for the family, buying a family car, taking a family trip, whatever it is, so that they understand taxes, trade-offs, and they're equipped to go out in the world. Interesting. I feel like, Scott, you kind of went the other way because I know your dad, at least, was very much in the we can't afford this and he was, I mean, from what you've described, he was not good about money with you, but then you kind of whipsawed in the other direction where you're all out on generosity.

43:00Do you feel like that's what happened with you, Scott? I mean, it's so much, I thought it was really interesting to me what you were saying about your wedding. it's just so there's just a lot of context around culture the relationship you have with parents how much money you have you know it's like a lot of these problems get solved with a lot of money i mean i hate to say that but if you don't it's easy to be generous when you have money right and my approach with my kids is they get a green light credit card they i want them to understand I talked to them very openly about how I make money, where we spend money.

43:38Because of my situation, I keep a lot of it private because I don't want them to feel too privileged or not appreciate money. But it's, I feel like a lot of it with kids, I'm curious if you think this is for me. It's like nature, it's nature versus nurture. I have one son who is going to boarding school. And before he goes back, I say, I'm going to take you out. And I want to buy you clothes. And we go to Sunspiel, which is this British brand. And I want to buy him a hoodie. And it's$225. He's like, no, I'm not buying that. I'm like, no, you're not buying it. I'm buying it for you. And he's like, no, I'm not letting you spend this money.

44:15He just won't let me spend money on him. It's actually frustrating. And my other, my fourth-year-old next one's like, I'll take two. And so whatever we're doing, it's just, I mean, it's kind of they come to you. And I don't know how those values have emerged, but I think a lot of it's just in the batter. But I want to, what you said before was really interesting, and that is about the house. There's kind of a rite of passage. The National Realtors Association has convinced us that part of the rite of passage to adulthood is buying a house. One of the most evil organizations out there, racist, historically racist, by the way, and corrupt.

44:53They are currently imploding, which I love watching happen. Anyone who doesn't know the history of the NAR should just search for National Association of Realtors Racism, and your eyes will be open to what they have done over generations. It's interesting. And I do agree with you that, and I think a lot of people are coming to the realization that when I bought a home, it was$285 ,000 in San Francisco. Now the average home is$2.1 million. It just, it doesn't make sense for not even a lot, but maybe even most young people. But the good news or the good thing about buying a house in my generation was that it was a means of forced savings and kind of getting your act together around building wealth because you had a tendency to make that mortgage payment.

45:36So it was sort of in some ways forced savings around an asset to that point. According to the case, Shiller's index had a decent chance of going up 4 % to 6 % a year. That's no longer the case in many regions, although it's region specific. what can and should replace the house as a means of starting to build wealth for a new couple automatic investing in the stock market the greatest builder of wealth in human history now i will say i'll acknowledge that it's hard to get people to set up investing it's not hard to invest i spend more time brushing my teeth than i spend fiddling with my investments so Once you get it set up, you can project how much you're going to have, the exact month and year you will be a millionaire, when you will make more from interest versus your income.

46:27But a lot of people have a lot of beliefs about money, and they're subtle. I call them invisible scripts. They're so deeply embedded in us that they are invisible even to us. One of them, for example, is when I get married, then I need to buy a house. Another one is that the stock market is gambling. That's not true. In fact, you can often project much more closely what's going to happen with the overall stock market than one geographically highly undiversified asset with high holding and transaction costs, aka a house. So, can you buy a house? You could. I could buy one right now. I don't. I rent.

47:03I rent by choice. And I save a lot of money every single month doing that. I rent in high cost of living cities. and what I do, this is important for everybody to know, especially young people who feel so horrible renting because another invisible script in America is that renting is for losers. And if you're successful, then you buy a house. Totally wrong, totally incorrect. I'm trying to show people that. I rent by choice. I take the money that I ordinarily would have spent to own the place and I invest it. And I make way more with a higher quality of living. If something is broken, I send a text to the landlord.

47:42It's fixed the next day. And I can travel and have a flexible lifestyle. Now, that's not for everybody. But I want people to know you're not a loser if you rent. You have lots of options on building incredible amounts of wealth. But you do need to rethink the American dream that was sold to you by the corrupt NAR. And you need to really decide what is our rich life. What's my rich life and our rich life. And let's start using our money to live that. We asked, Ramit, some of our listeners, questions they'd want to ask you. One of the most common requests or common questions was whether they should get a prenup.

48:18So let's just get the official word from Ramit Sethi. Are prenups good or bad? They're good for the right people. Most people do not need a prenup, nor should they get one. If you come into a marriage with a high amount of assets, whether it be investments, you have a piece of property, a business, et cetera, then getting a prenup can make a lot of sense. I have a prenup, and it was one of the scariest conversations I ever had, where I talked to a lot of people before. And in my culture, I didn't know any people, certainly not any Indian people who had a prenup. And I thought, oh, that's just culturally not the way it works.

48:59Wrong. It turns out that most of my parents, friends, et cetera, when they got married, It was like most people. They did not accumulate a bunch of wealth early on in life. Most people don't. They accumulate money later in life. And so there's no reason for a prenup. In my case, I'd had a business for many, many years and I'd invested, et cetera. So I brought it up with my, I think, then girlfriend. And I said, look, there's something really important I want to discuss. You know me, you know how I spend my money. I'm not out there buying sports cars by virtue of having a business, a lot of luck and some hard work.

49:35I've managed to build this thing. And it's important to me that we discuss a prenup. And she was as receptive as I could have hoped. She was surprised. She said, well, I didn't expect that, but I'm willing to learn. And I love that because in America, we have this belief that a prenup is typically some asshole in the back of a chauffeured limousine wearing a top hat saying, fuck you and sign this thing. That's not how it works. That's a Richie Rich episode. So she had her own lawyer. I had my own lawyer. We started talking. It was good until it got really hard and like really hard. We were really not connecting.

50:14I felt resentful. She didn't feel listened to. And at one point she suggested we go see a therapist and talk about it. And I'm really glad we did that. That opened up a lot of conversations for us. So ultimately we signed it. I'll tell you that when people sign a prenup, they don't want to talk about it again. It was tough to go through. It's one of those things you're like, okay, we did it. We don't want to talk about it again. And I don't think we will ever have to. That is the best part of it. But a prenup really is planning at your best for what, in the unlikely case, you're at your worst.

50:47And so for those of you who are in a situation where you have a disproportionate amount of assets or something you want to premarital protect, it's premarital. Remember that. It's not what happens during the marriage. It's what happened before. signing a prenup can make sense. What were the main confrontations, if you don't mind me asking, among you and your wife? Like what caused that stress and anxiety? Okay, so I had been thinking about money pretty much every day of my life for 15, 20 years. It's my business is what I do. So for me, I was very comfortable talking about these numbers, certainly projecting out, compounding, all kinds of stuff, distributions.

51:25And my wife had not. So that was one. But then we got to the therapist's office, which by the way, if you're wondering, how does the guy who wrote, I will teach you to be rich, find a therapist? I literally went on Yelp at the time. And I was like, therapist near me. The closest one was three blocks away. We literally walked there and we just sat down at the first one we found. And she was actually great. She goes, how do you see money? She looks at me. I was like, easiest question I ever heard. I go growth. I could see the 4 % rule and my allocation. I could see it all. and then she turns to my now wife and she says, how about you?

52:00And my wife said, safety. I looked at her like, what? What's that? That word had no connection for me with money because I don't see it that way. I've been earning money since I was 14 years old but it really opened up both of our eyes to how we were speaking a different language and so I was going in there hot talking about spreadsheets and compounding and this is more money than we've ever talked about together. But what I should have done was really start off by saying, when you think of money, what comes to mind? What are your greatest hopes or your greatest fears? If we are really successful together, where will we go?

52:40What can we do together? And then, hey, let's talk about what if things go wrong? What are some ways things might go wrong? I might get hit by a bus. We might get separated. Something horrible might happen. Let's talk about it. Let's shine a light on this instead of letting it lurk in the shadows. and then and only then would we have gotten to the numbers. That same principle applies when you talk about money with your partner now. Doesn't have to be a prenup. When you're planning the rest of your year, you're starting off with your dreams, your hopes, what went right, what do you wanna change next year?

53:09When you're looking at your monthly money meeting and you're using the script in my book, the actual agenda that my wife and I use, you're not starting with the numbers, you're always starting with a compliment. So we're starting with feelings. I know a lot of guys especially listening to this, oh my God, feelings. Only feeling I need is the V lookup that I use in my spreadsheet. Get a life. Feelings first, then numbers. Trust me, your life will be a lot better and you will be more connected over money when you are starting with how you both feel about it. Ramit Sethi is the New York Times bestselling author of The Personal Finance Guide, I Will Teach You To Be Rich.

53:43He also hosts a podcast by the same name, as well as a Netflix show, How To Get Rich. His latest book, Money For Couples, is available now. Wow. Ramit, we love, I think that's the second time we've had you on. We love having you on. We always learn a lot. Appreciate your time and good luck with the book tour. Thanks, Ramit. Thanks, guys.

54:08Algebra of wealth. The U.S. stock market is closed today in observance of a national day of mourning for President Jimmy Carter. So for this episode, we wanted to highlight his 1979 speech, where he identified what he called, quote, a crisis of confidence. In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. human identity is no longer defined by what one does, but by what one owns. Feels truer than ever. What are your thoughts on that speech, Scott, and the legacy of Jimmy Carter?

54:59Well, incredibly prescient. He identified what we call the idolatry of money. You basically saw it happening. And just moving to his legacy, I think one of the reasons he's gotten so much attention is just the contrast in one president leaving this earth and one president re-emerging in the White House and the contrast between the values of those two people. And Jimmy Carter was not a great president. He redefined what it meant to be a great ex-president, but he wasn't an effective president. He had good values. But what I love about Jimmy Carter or President Carter is the role model he is for young men.

55:34And that is, I can't imagine, you know, when your career is just upward and to the right like that, and then you lose, you're not reelected, that's a pretty devastating disappointment, right? And that could kind of mark the rest of your life and you could be pretty depressed. And he decided, no, I'm going to start building homes for low-income people. I'm going to teach Sunday school. I mean, he just, he showed that after, you know, even after a disappointing loss, you know, that commitment to public service, that commitment to generosity, that commitment to others is still so important. And, you know, we're writing this book on masculinity.

56:16People constantly ask, what are some role models? And I think of James Earl Carter as a fantastic role model for young men. He was born into, you know, fairly middle-class life, decided to serve his country, was a submariner on a nuclear submarine, did graduate work in nuclear physics, ran for governor, ran as an outsider, obviously became president, was married for 77 years to his college sweetheart or high school sweetheart, Rosalyn, taught Sunday school, was an entrepreneur, took over his father's peanut form. You know, just a very decent man and a nice role model in terms of patriotism, fidelity to his wife, service, character.

57:06A really nice role model for young men and stands in stark contrast, I believe, to what are not great role models for young men in our, you know, amongst some of our key elected representatives. So, you know, rest in peace, James Earl Carter, dead at the age of 100. That is a life well lived.

57:49Monday.

58:20In love, love, love, love