{"id":119056,"date":"2022-11-15T15:09:19","date_gmt":"2022-11-15T19:09:19","guid":{"rendered":"https:\/\/www.iwillteachyoutoberich.com\/?p=119056"},"modified":"2025-03-28T15:12:25","modified_gmt":"2025-03-28T19:12:25","slug":"069-chris-camilla","status":"publish","type":"post","link":"https:\/\/www.iwillteachyoutoberich.com\/069-chris-camilla\/","title":{"rendered":"Episode 69. \u201cWe make almost $300k per year but we can\u2019t afford our mortgage\u201d"},"content":{"rendered":"<p><iframe style=\"border-radius: 12px;\" src=\"https:\/\/open.spotify.com\/embed\/episode\/3LUq4m3kguXJf3DvPNM4A3?utm_source=generator\" width=\"100%\" height=\"352\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>Chris and Camilla are 33 and 31 and they make almost $300k collectively living in a high cost of living area. They recently bought a vacation home, like everyone on TikTok tells you to do.<\/p>\n<p>Surprise, surprise\u2014there\u2019s no fairytale ending here, no mounds of passive income, no soaring property values or slam dunk investments.<\/p>\n<p>They thought they\u2019d cash in on a hot market. But with the slow season approaching, they\u2019ve realized they\u2019re losing money. How should they handle it? And (gasp) what might other people say if they have to sell?<\/p>\n<p>This episode is reminiscent of another Canadian couple, Eric and Elena, from episodes 49 and 50, who also bought a house they realized they couldn\u2019t afford. But I think you\u2019ll find this one fascinating for the differences\u2014especially in the numbers.<\/p>\n<h2>Tools mentioned in this episode<\/h2>\n<ul>\n<li><a href=\"https:\/\/www.iwillteachyoutoberich.com\/l-money-made-easy\/\">Money Made Easy Mini Course<\/a><\/li>\n<li><a href=\"https:\/\/www.iwillteachyoutoberich.com\/landing-conscious-spending\/\">Conscious Spending Plan<\/a><\/li>\n<\/ul>\n<h2>Transcript<\/h2>\n<p><strong><u><a href=\"https:\/\/drive.google.com\/file\/d\/1HM30BGfhZKMa4d64c9C_aV0VRiQUi38Z\/view?usp=sharing\">Download the full transcript PDF<\/a><\/u><\/strong><\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:00:00] How many of your friends and family and the people around you talk about their house, housing costs, housing investments, etc.?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:00:06] Everybody. It\u2019s disgusting.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:00:08] It\u2019s a status thing. If you\u2019re not playing that game, then you\u2019re\u2013 what are you doing? Even if it\u2019s all fake.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:00:16] One of the things too leading up to this was one of our friends who we knew didn\u2019t make as much money as we did, they were able to buy a nicer home.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:00:28] Uh oh.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:00:29] Can\u2019t help but feel a little jealous, right?<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:00:32] When you bought at the peak, did you have a conversation that it might go down?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:00:37] Not in depth.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:00:39] It just all came crashing down together. It\u2019s affected all areas of our life. This is a constant state of anxiety every night.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:00:52] [Narration]<\/p>\n<p>Chris and Camila are 33 and 31, and collectively they make almost $300,000. They live in a high-cost-of-living area and they recently bought a vacation house like everyone on TikTok tells you to do so you can rent it out and make passive income. The only problem is they realized they\u2019re losing money. So how should they handle it? And what will other people say?<\/p>\n<p>This episode reminded me of another Canadian couple, Eric and Elena, in Episodes 49 and 50 who also bought a house they couldn\u2019t afford. But I think you\u2019ll find this episode fascinating for the differences, especially the numbers. I\u2019m Ramit Sethi, and this is I Will Teach You to Be Rich.<\/p>\n<p>[Interview]<\/p>\n<p>Let\u2019s just take it back. Who was the one who had the idea to buy the vacation home?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:01:47] That was me.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:01:48] Okay. Tell me what went through your head years ago when you were thinking about getting this vacation house.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:01:54] It\u2019s always been a bit of a dream for us to be able to do something like this. But to be honest, it was more of a spontaneous thing when we actually got down to it. I go down the rabbit hole sometimes and I get very passionate about things and going about with it.<\/p>\n<p>Once we got in a bit of a position where we were financially, I thought had the means to do it, I was on maternity leave at that time still, so I had time even though I was busy. Chris just started a new job that was paying a little bit more. And I just started daydreaming and looking at houses and working out numbers. And from there we started going to listings and it just snowballed from there.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:02:51] What was in your mind about why buying a vacation house would be a good decision for you?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:02:57] Well, I thought that it would be somewhere that we could take our girls to and build memories. And the way that we worked out the numbers was a little aggressive but we thought that it could pay for itself ultimately because we were renting it out. And it has so far. But we\u2019re heading into a different season now and we\u2019re stuck without a firm plan of how we\u2019re going to take care of the mortgage.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:03:32] Okay. When you say it was aggressive, tell me a little bit about that.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:03:37] We had never done this before. So we did research. We did competitive analysis based on what other rental homes were charging. And it was just going with that and then came up with a number in total for the year that we thought we would make. And so far it\u2019s been good because we got into that summer season, but now that we\u2019re heading into winter for the next little bit here, it\u2019s a little bit scary.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:04:07] Did you factor in winter in your analysis?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:04:11] We did. But I think there were just other costs that we didn\u2019t really factor in.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:04:21] Like what?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:04:24] Well, for example, the trips to get there and back. And then when we do that it does end up being a little bit of a vacation as well, of course. So there\u2019s what you would spend on vacation. And also just a phantom cost, I\u2019d say, of just how much work it takes mentally on top of everything else.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:04:47] Wait a minute. If you know the phrase \u201cphantom costs,\u201d that means you\u2019ve been listening to my stuff for a while, which I commend you for. So are you telling me that there were even more phantom costs than you had anticipated?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:05:01] Yes.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:05:03] [Narration]<\/p>\n<p>Phantom costs are the unexpected costs when you buy something. And I\u2019m obsessed with phantom costs because they profoundly affect how much money you have, but they\u2019re engineered to be invisible. And the craziest thing of all, people actually do not want to know about their own phantom costs.<\/p>\n<p>To me, it is so crazy that some people actually believe they made hundreds of thousands of dollars from selling their house, but if you show them and factor in those phantom costs, they actually lost $450,000. Of course, those same people will never hear this. They don\u2019t listen to podcasts like this. They refuse to have a conversation about how they may have not made the best financial decision. And this is why I love my job.<\/p>\n<p>I want to give you a simple example of phantom cost and how profoundly they can affect your finances. When I had a car payment, my monthly car payment was $350. But when I factored in parking, gas, insurance, maintenance, traffic tickets, registration, it added up to over $1,000 per month.<\/p>\n<p>Now, when I wrote this earlier, a lot of people left a million comments, \u201cOh my God, traffic tickets. Ramit, that\u2019s so bad, your parking tickets. I don\u2019t have parking tickets like that.\u201d Listen, the amount of parking tickets I got living in San Francisco was relatively modest.<\/p>\n<p>But you have to factor all of it in, even that annual registration, even gas when the price goes up and goes down. Now, the more expensive the purchase, the higher the phantom cost. Most people cannot believe that a car payment of $350 actually turned into $1,000 a month.<\/p>\n<p>And it\u2019s true, you may not have a $200 a month parking fee like I did, but you probably also don\u2019t drive a four-door Honda Accord like I did with essentially no maintenance costs. So we need to factor these things in.<\/p>\n<p>Now, let me talk about how phantom costs work with a house. This is going to blow your mind. For a house, a basic guideline is you should assume 1% of the purchase price every year for maintenance. That means for a $750,000 house assumes $7,500 per year in maintenance or $625 a month. Are you putting that much money aside in a sub-savings account? Of course not.<\/p>\n<p>Phantom costs are especially pernicious with a house because they\u2019re large and they\u2019re hidden. For example, your closing costs may be tens of thousands of dollars. Your taxes will likely go up. And what about those long-term phantom costs that remain dormant for years? They\u2019re hiding phantoms, but then they hit you.<\/p>\n<p>Think of a $25,000 roof repair that hits you 11 years after buying a house that actually costs you $2,272 a year or $189 a month. Again, nobody is putting money aside for repairs like this. My friend Carl Richards says, risk is what\u2019s left when you think you\u2019ve thought of everything.<\/p>\n<p>So if you\u2019re really conservative, you calculate out all these things. You would take the worst-case scenario, and even then you\u2019d add another 15% to account for all the things you forgot about. Again, nobody does this, but I\u2019m sharing this with you so you know what it would look like.<\/p>\n<p>Finally, if you\u2019re paying a financial adviser 1 to 2% per year AUM, that may be the biggest phantom cost of all. You\u2019re paying literally hundreds of thousands of dollars. You\u2019re getting worse performance than you could get with a simple Vanguard fund, and you don\u2019t even know it unless you\u2019ve read my book, I Will Teach You to Be Rich. Now that we have covered phantom costs, let\u2019s understand why Chris and Camila wanted to buy.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:09:09] [Interview]<\/p>\n<p>I guess, just the pride of having something like that as well.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:09:12] What\u2019s that?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:09:15] What do you mean?<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:09:16] What is the pride of having a house? I don\u2019t understand.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:09:21] I guess it\u2019s just like a sense of ownership like you have another property. It\u2019s a pretty big deal to have a property in this area that we live in.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:09:33] How do you know?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:09:34] Oh, well, for example, our primary residence that we live in, it\u2019s quite out there in the suburbs, but it increased by 30% in two years. So that\u2019s really partially also\u2013 I guess what didn\u2019t even cover that part. That\u2019s also partially how we got this place was we took out a loan from our primary residence because the value went up so much.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:10:00] I think it started as one decision that we were very much aligned on and it was the sense of capitalizing on the real estate sector in our area because it\u2019s just historically done well forever.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:10:19] What area is this?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:10:21] This is in Vancouver, Canada. So like Camila said, our primary residence actually went up 65% really in two years. And so it was this idea of like, okay, well, let\u2019s get another iron into fire here and try to maximize\u2013 get another property. That one\u2019s going to go up in value too.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:10:47] Wait a minute. Are you guys on TikTok?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:10:49] No.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:10:50] You don\u2019t follow any of these crackpots who tell you buy a house, then just buy 10 other houses, and then they pay your rent and you\u2019re a millionaire? You don\u2019t hear people like this?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:10:59] Nope.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:10:59] I know those people exist, but\u2013<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:11:02] You don\u2019t hear any of these people?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:11:05] We\u2019re too old for TikTok.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:11:07] [Narration]<\/p>\n<p>Oh, my God. All right, first of all, stop listening to these people. Second, I actually started a TikTok account. I\u2019m not very good yet, but where I shine is roasting these fools and showing how they only present real estate and whole life insurance as a surefire way to make millions overnight. You can follow me on TikTok @Ramit.Sethi. And do me a favor. Tag me with the worst advice you see so that I can eviscerate them.<\/p>\n<p>[Interview]<\/p>\n<p>How many of your friends and family and the people around you talk about their house, housing costs, housing investments, etc.?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:11:58] Everybody. It\u2019s disgusting.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:12:02] Yeah, okay, it\u2019s disgusting. What are we talking about right now?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:12:05] Yes, exactly. Oh.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:12:08] So you were like, \u201cIf you can\u2019t beat them, join them. We got to get a house.\u201d Okay.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:12:13] Pretty much.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:12:15] When you heard that kind of stuff going on around you, everyone talking about real estate, what did it make you feel?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:12:23] Like you need to be a part of it. For me at least it was it\u2019s a status thing. If you\u2019re not playing that game, then you\u2019re\u2013 what are you doing?<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:12:41] You\u2019re a loser.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:12:43] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:12:44] Where do you see that status reflected? For example, when can you tell that someone is impressed that the two of you own your place?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:12:54] I mean, I guess it\u2019s just like in little conversations with people.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:12:58] How does it go?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:13:03] I mean, especially when we bought that second property, you get a lot of people that are like, \u201cWow, so young, got that second property. Congrats. It\u2019s huge.\u201d<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:13:15] Beautiful. Well done.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:13:18] Yeah. So it\u2019s like this affirmation that like, yeah\u2013<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:13:23] We\u2019re winning.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:13:26] It\u2019s just little things. It\u2019s just people around you\u2013 friends, family, all the people that were trying to get this deal done, like the realtor.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:13:37] Congratulations. You gave me my commission.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:13:40] Yeah, it\u2019s around you.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:13:46] And did the same thing happen when you bought the vacation house?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:13:50] Yeah, for sure. Your family is proud of you showing off to their friends.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:13:58] What do they say? \u201cOur son, they have two properties,\u201d that kind of thing?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:14:03] Yeah, yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:14:05] \u201cOur daughter, they got a vacation house. They\u2019re going to have that for generational wealth.\u201d<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:14:13] Yeah, that\u2019s right. Yeah, because people know real estate is expensive here. It\u2019s a status thing, even if it\u2019s all fake.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:14:25] [Narration]<\/p>\n<p>Whenever someone says, \u201cI don\u2019t care what other people think,\u201d you have to treat it like a toddler babbling. You let them say their thing, blah, blah, blah, then you just ignore what they said because it was completely meaningless anyway and you carry on. Nobody thinks they\u2019re affected by the people around them. But of course, we are.<\/p>\n<p>Did you know when I ask people, \u201cWhat\u2019s your money dall?\u201d Most people say eating out or travel, but nobody has ever said status. Yet when I look at what we spend our money on, it\u2019s obvious that we all crave status in certain situations. This is why you\u2019re listening to this podcast on a certain phone. This is why you are wearing what the people around you are wearing and why you eat at certain restaurants and have that haircut and even talk the way you talk.<\/p>\n<p>I would rather people just get honest about why they\u2019re buying something rather than cover up all the real reasons with some logical nonsense. Truck owners, I\u2019m talking to you. People who buy a primary residence because it\u2019s a great investment, but you haven\u2019t ever run a buy versus rent calculation, I\u2019m also talking to you.<\/p>\n<p>By the way, if you\u2019re curious what I\u2019m talking about with the buy versus rent thing, go to iwt.com\/house, get my three-step guide to buying a house and learn how to run the numbers yourself.<\/p>\n<p>[Interview]<\/p>\n<p>How did you come up with the idea of taking a home equity line of credit?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:15:49] We didn\u2019t have the cash for setting aside for a down payment, so that was where we were going to get the down payment from.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:15:57] Any concerns about taking a HELOC?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:16:03] No, because we felt it was a pretty safe bet considering they only let you take\u2013 you can only mortgage as much or you can only go up to about 80% of what your home is currently worth.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:16:16] When did you buy your primary residence?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:16:19] 2019.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:16:20] Okay. And do you believe that real estate prices only go up?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:16:27] Here in Vancouver, yes.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:16:30] And you believed it in 2019. Do you believe it now?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:16:35] I think in short term, no, prices do fluctuate. They\u2019re going down right now. They were peaking when we bought this other property, unfortunately. But when you look at pricing over five, 10, 20 years, yeah, it feels like, historically speaking, they do go up consistently here.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:16:55] I have a question for you. I don\u2019t get a chance to talk to people who buy at the peak that often. So this is my own personal fantasy right now. When you bought at the peak, did you consider for a moment that you might be buying at a very, very high price?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:17:14] Yeah. But we just didn\u2019t think that that was the tail end of it. We just didn\u2019t think it was going to be going down as quick as it did.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:17:26] And so as you said, you were putting rose-colored glasses on. You thought it\u2019s going to keep going up, we\u2019ll make money. Did you have a conversation that it might go down?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:17:40] Not in depth.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:17:41] [Narration]<\/p>\n<p>God, I really have the greatest job in the world. I get to talk to people who bought at the peak, who never really thought about the price going down, and they\u2019re actually honest about it. I cannot say this enough. House prices do not only go up, they also go down. Rent does not only go up, it also goes down.<\/p>\n<p>On what universe, on what planet do I live where I have to actually say this? \u201cGuys, things don\u2019t only go up. They also come down.\u201d But for some reason, aka the NAR, using decades of propaganda to brainwash Americans, I have to remind you that house prices also go down.<\/p>\n<p>You must realize this when you\u2019re deciding whether it makes sense to buy or rent. And if you believe that, then you have to question the other advice you\u2019ve gotten over time, because much of it was likely misleading or just plain wrong.<\/p>\n<p>[Interview]<\/p>\n<p>It\u2019s kind of a complicated thing to take out this debt. Who is giving you advice? Were you asking for help from people? Talk me through that.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:18:50] Yeah. I mean, we had a mortgage specialist that we just kept going back to and asking questions to.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:18:57] What\u2019s a mortgage specialist? Is that the person who gives you the mortgage?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:19:03] Yeah, basically the salesperson for the bank.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:19:06] Oh, God. Lot of sheepish looks on this call right now for anyone who can\u2019t see it. What is the incentive for a mortgage specialist?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:19:17] Well, they get paid. They get paid off of what we have.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:19:24] [Narration]<\/p>\n<p>Let me share a few lessons of life for you all. First of all, there is more to Indian food than chicken tikka masala and garlic naan. Yes, yes, we know you love it, but there are other dishes you\u2019ve never even tried. Get an Indian friend. Go to an Indian restaurant. Prepare to have your mind blown.<\/p>\n<p>Second, if you bank with Wells Fargo or Bank of America, you are asking to be ripped off. It\u2019s just a matter of time. And third, you should not trust anyone when you\u2019re buying a house. Every single person involved in the transaction looks at you as prey.<\/p>\n<p>You are their next BMW payment. So no matter how nice they are and how they helped your mom buy her house in Dallas in 1983 and it\u2019s appreciated by double, and that\u2019s a really good return, right? It\u2019s not. You do not trust any of them.<\/p>\n<p>Part of life is really understanding people\u2019s incentives. A mortgage specialist wants you to take out the largest loan you can so they get paid the most. That\u2019s fine. Once we understand it, we know that they are coin-operated.<\/p>\n<p>And once you understand their job on this planet, you can deal with them because you know what motivates them. The problem is you guys cover up these incentives with all kinds of bullshit. \u201cOh, this guy Ted, he\u2019s really nice. He helped us get a better rate than the other guy.\u201d<\/p>\n<p>I don\u2019t care if Ted is nice. I don\u2019t care if a scorpion is nice either. His job on this earth is to sting me. So you ask, \u201cTed, How did you get me a better rate? What\u2019s the catch? How are you compensated differently than my old broker?\u201d Forget it. You know what? None of you were going to do this. Who cares? I\u2019m done with this. Go get ripped off by your buddy Chet if you want to.<\/p>\n<p>Camila goes on to explain that the interest rate has risen from 2% at the time they purchased their vacation home to about 4.5% now, which would add thousand dollars to their monthly mortgage bill. Could you afford a surprise extra $1,000 a month payment?<\/p>\n<p>[Interview]<\/p>\n<p>Did you consider that rates might go up when you were taking out the loan?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:21:35] Definitely. But I think we just chose to look at it with a glass-half-full type of attitude. It\u2019s a big bat.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:21:46] It wasn\u2019t big bat.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:21:47] Tell me more about this. This is very interesting to me because there are certain times where people will only look at what can go right. And then interestingly, the very same people in other parts of life will only look at what could go wrong. And I\u2019m fascinated by how situationally we change. So tell me about how you looked at this analysis with, as you put it, the glass half full.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:22:13] Similar to Camila, if this works out and we\u2019re able to keep this property, it would be great for creating memories with the family. If it was purely an investment, then we would have just gone with a long-term rental apartment turnkey that we don\u2019t even really care about.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:22:32] Hmm. Camila, you\u2019re agreeing over here?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:22:35] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:22:36] Okay. So the memories part of it. Did either of you grow up going to a vacation house?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:22:42] No.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:22:43] Where did this come from, then?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:22:47] I think that one of the things that we really value and enjoy in life is that and we didn\u2019t do a lot of that growing up when we were younger.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:23:05] How old are your children?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:23:07] Four and one and a half.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:23:09] Oh, okay. Congratulations.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:23:11] Thanks.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:23:12] Do you travel with them now?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:23:16] A lot of local travel. With COVID and all that, we haven\u2019t done too much flying out of the country. But yeah, we definitely love to go up just to some of the local destinations quite a bit.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:23:30] Okay. I get it. I get the idea that you could create memories. You have this beautiful place a little bit outside the city and you could go there repeatedly. I get it. And if everything fell into place and worked out correctly, the value of the property would go up, you could be renting it cashflow positive, you\u2019re essentially staying there for free, it all paints this beautiful picture. I get it.<\/p>\n<p>Listen, I love a good dream, but if the dream costs hundreds of thousands of dollars, I also love running the numbers so I can sleep at night. I want you to remember something. Not everything has to be positive ROI. Sometimes it\u2019s fine to buy something just because you want to or for non-financial reasons. But you\u2019ve got to run the numbers. And I get it, but you\u2019ve got to run the numbers.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:24:28] I guess the other thing I\u2019ll just add too is that we actually, considering you can call it our environment, our surroundings, our friends, and our family, we live in a pretty modest home, our primary residence. And out of our group of friends, we live in the most modest home. They have larger homes than us or in better neighborhoods or cities. One of the things, too, leading up to this was one of our friends who we knew didn\u2019t make as much money as we did, they were able to buy a nicer home.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:25:12] Oh, oh. This is the beginning of every financial disaster because\u2013 we all know this in the financial world\u2013 the worst thing in the world is finding out your friend who is stupider than you has more money. This is a classic story in the financial world. So you found this out and then what\u2019d you do?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:25:38] Oh, you can\u2019t help but feel a little jealous, right? Like, wow, they get to get that?<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:25:46] How did they do it? What do they know that we don\u2019t?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:25:48] How did they do it? We knew, though, that they obviously had a couple of years ahead of us. There were circumstances of why. We knew the whys. But just you can\u2019t help but compare.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:26:03] What did that feel like to you? Where did you feel that jealousy?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:26:07] Well, just, for example, being able to have a backyard for your kids. That\u2019s a pretty nice thing to have.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:26:17] It\u2019s like you\u2019re writing a real estate ad right now. You know what I mean? I want to have a backyard for the kids and the dog. When did you realize that it wasn\u2019t working out the way you thought it would?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:26:32] So we have a separate bank account where the funds for this property comes in and out of. And just looking at that account as the season ended and it was like, yeah, there\u2019s not enough cash in here to get us through the next busy season.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:26:51] How much was in it?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:26:54] Well, how much is it right now? It\u2019s probably around $6,500.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:26:58] How much should be in that account?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:27:03] So 3,500 times\u2013 what is it now? November, December, January, February, March. Times 5.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:27:12] 17,500.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:27:14] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:27:15] So it\u2019s over $10,000 shortfall.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:27:18] Yeah. It just all came crashing down together. It\u2019s affected all areas of our life. I\u2019m going through my own counseling for my anxiety. We\u2019re going through couples counseling together. There\u2019s just a lot of things. It\u2019s all of a sudden my whole like, where can we alleviate? What is one big thing here that\u2019s contributing to everything that\u2019s going on in our lives? So there wasn\u2019t a specific moment, but if you were to look at our lives now versus pre-property, yeah, I think there\u2019s a pretty big difference in our way of being on the inside.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:28:00] What\u2019s the difference? Can you paint the picture for us?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:28:05] Yeah. This is a constant state of anxiety every night once the kids are in bed.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:28:16] Yeah. I do remember the moment that at least you communicated it to me. And it was a couple of months ago we went for dinner and we were working through our finances over a glass of wine to make it a little bit more tolerable.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:28:32] This is the most romantic story I\u2019ve ever heard, by the way. I never hear couples talking about this, and I wish they did what you did. Fantastic. Keep going.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:28:41] And that was the first moment that you had expressed that you were actually open to selling this property, which I know it is a big step for you because you\u2019re the one that was challenging me, \u201cBabe, stop thinking about the things that could go wrong and think about what could go right.\u201d<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:29:00] Wait, that sounds like a line I use. Did you take my line and use it for your own weird investment scheme, Camila?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:29:09] No, no.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:29:15] And yeah, I remember driving home from the restaurant thinking like, \u201cWow, okay, I feel like we can actually talk about this thing now.\u201d And I remember looking through the finances, and for sure, this house put us in a tough spot, but it\u2019s also just all the other costs in our life. Even though we make money, I don\u2019t think we were in a position to take on something like this when I already feel like our fixed costs are way too high.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:29:45] I just thought it was another phase in our relationship because we\u2019ve had many instances like this in our 10, 11 years of being together where I\u2019m the over optimistic, reassuring person, \u201cIt\u2019s going to be fine, it\u2019s going to work out.\u201d and he\u2019s a bit more risk-averse person. So I just thought this was one of those\u2013 because up until this point in our lives, it has.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:30:13] What are the other examples where you\u2019re the optimistic one and he\u2019s not?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:30:18] Even buying this property, our primary property. We barely had the down payment for that as well. But I know I was the one that was the reassuring person that said we got to just do it. It\u2019s going to be tight, but we\u2019ve always found a way to make more money and make it work and make it happen.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:30:45] Yeah. And I don\u2019t think we were expecting it to go up that much in value. When we first bought it, I remember thinking like, man, this is a little bit further out from the city. I hope it actually\u2013 it\u2019s good out here. And then with COVID, it just like there\u2019s a sense of FOMO in our market where anything that was listed was getting 10 different offers and everything was going way above listing price or asking price. So it was just like you could feel it in the city. People were just buying whatever they could buy.<\/p>\n<p>And so the prices just went through the roof over the course of 60 days. A place in our townhouse complex sold for 800,000. And then 35 days later, that same unit is going for $1,000,000. It was just insane. And so we felt really good about the decision we made like, \u201cHey, this is great. No index fund could have done this. And look at us. Thank God we made this decision.\u201d And so I think it was just like riding that feeling like okay\u2013<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:32:00] Sorry.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:32:01] No, go ahead.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:32:03] Or the other side of that, I remember just thinking now, too, was like\u2013 yeah, like what you said, capitalizing on that money that we were able to get. It\u2019s like, what if for some reason, we\u2013 because the other option was we sold our house for that much more and we had that extra cash. Then what would we have done with it? Would we have bought a bigger property than at that point with that extra cash? That was the other option that we were looking at as well.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:32:36] Out of curiosity, if you had sold at that time, how much would you have in the bank right now?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:32:46] We would have had about 400,000 to 420,000.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:32:53] How much do you have in the bank right now?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:32:57] Cash?<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:33:01] Mm-hmm.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:33:01] Maybe 12,000, 13,000.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:33:08] I don\u2019t usually find it useful to look back and wonder what if because, hindsight\u2019s 2020 and all that. But just from outlining the different options you could have taken, the different paths you could have chosen, what occurs to you?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:33:30] I mean, there was a very safe, comfortable avenue to go with, but we decided to go with what seems like the hardest, most high-risk option instead.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:33:45] And high risk gets you what?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:33:52] Well, you could win big, but you could also lose big.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:33:56] [Narration]<\/p>\n<p>Here\u2019s what I noticed from their experience. First, they\u2019re very candid, very self-perceptive. They\u2019re mostly honest about what they did and why they did it. I also noticed that there\u2019s a lot of hot emotions. I don\u2019t think they sound frenetic, but they definitely got carried away by all the hype surrounding real estate, particularly in their area.<\/p>\n<p>And you can hear this in the stories they tell about how everyone was talking about real estate, how proud people would be that they bought a second house, how jealous they might be of other people. And I remember what this is like because the same thing happened in Sacramento.<\/p>\n<p>Sacramento is one of those boomtowns like Phoenix, Vegas, etc., that go boom and it goes bust. And there\u2019s a variety of reasons that that happens there. I remember during the boom \u201906, \u201907, there would be developments in a neighborhood. People would be standing in line to put their names in a lottery. And if you won the lottery, you got the chance to buy the house.<\/p>\n<p>Just think about that. Think about how supply and demand are affected when somebody\u2019s selling something, in this case, the developer, makes you stand in line to put an offer down on a house. And you know what people said? They said this all the time. They would say, \u201cWell, we got to put an offer in now because it\u2019s going to go up by $50,000 next month. It\u2019s going up $50,000 every month.\u201d And then they would say, \u201cIf we don\u2019t get in now, we might get priced out.\u201d<\/p>\n<p>I want you to think about that. In what other part of life would you say that? Would you say that about peanut butter? No. And if peanut butter gets too expensive, what do you do? You don\u2019t use it or you find it cheaper alternative.<\/p>\n<p>But when it comes to housing, people narrow their vision. It\u2019s almost like they got punched and your field of vision starts to narrow. That\u2019s what they do with housing. They go, \u201cWell, Ramit, everybody needs to live somewhere. So we need to buy now. We don\u2019t want to get priced out.\u201d<\/p>\n<p>Very true. And everybody should have affordable housing. That\u2019s why I\u2019m such a proponent of building way more housing to increase supply, which brings prices down. But beside that, you have other alternatives. You could rent. They go, \u201cWhy would I rent?\u201d And this is where you can see that they\u2019ve gone down a funnel.<\/p>\n<p>If you believe that something\u2019s going up $50,000 a month, it would be foolish not to get on board. And this is exactly how ordinary Ma and Pa put a bid in for something they can\u2019t afford and then end up losing a ton of money because nothing goes up forever.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:36:49] [Interview]<\/p>\n<p>We\u2019ve talked to a realtor as well, and they still figure that we can get what we paid for. But of course, we would have hoped that it would have gone up already by now.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:36:59] Yeah.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:37:01] So it\u2019s just hard to say what the future looks like.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:37:06] Mm-hmm. When they tell you that, do they factor in how much you would take home?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:37:14] We ran numbers on that.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:37:16] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:37:17] Okay. What did it look like?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:37:20] We\u2019d be taking a pretty big hit even if we sell it for what we bought it for. When you factor in the cost we had of furnishing it and all those at the front end and now paying the fees for early termination of the mortgage as well as the realtor fees, that\u2019s about 40,000 there.<\/p>\n<p>And we had to pay GST. We had to pay a tax as if it was a new property when we bought it because they had done such extensive renovations that the government likes to collect another tax off the purchase of that. So we\u2019re probably going to lose that and that about 40 grand right there. So all in all, we could lose like 100,000.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:38:06] If we listed now and\u2013<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:38:09] If we sell it for what we bought it at, as far as the lowest price asking price, we\u2019d lose 100 grand.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:38:15] How much was the list price that you bought it for?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:38:19] 796.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:38:21] Okay. So you bought it for 800,000. And if you sold it for 800,000 right now, you would lose 100,000.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:38:31] Yep.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:38:34] Do you think people know this, that if they sell a house for the same price they bought it at, they can lose $100,000?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:38:46] No. I don\u2019t think so. You have to ask the right questions. You have to seek this information.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:38:54] It sucks. It really sucks. The one piece is dealing with all the emotional stuff with it because it was such a big deal, what it was made out to be. And then the other piece is the regret of, that\u2019s a lot of money. But then the other piece of that, too, is it is a lot of money, but we would rather just rather cut our losses now than wait this out. And it could get better. It still could, but we don\u2019t know that. That\u2019s scary.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:39:37] [Narration]<\/p>\n<p>Huge kudos to Chris and Camila for being so honest and sharing their mistake with everyone. Let me ask you. Would you be willing to go on a podcast and share your biggest financial mistake? I really, really appreciate the couples who come on here and open themselves up to me.<\/p>\n<p>I try to help them, but I think in many ways they\u2019re actually helping all of us by being honest with their money decisions. All of us have made bad financial mistakes. And these couples are doing a service by sharing what they did and why.<\/p>\n<p>Most people have never, ever considered that they can buy a house, sell it for the same price, and actually lose tens of thousands of dollars. It just doesn\u2019t make intuitive sense. And that is exactly why I named the term phantom costs. They\u2019re invisible, and it\u2019s highly possible that you think you made way, way more than you actually did.<\/p>\n<p>But guess what? Even if Chris and Camila lose $100,000, the realtor still gets paid, the mortgage specialist still gets paid, the bank still gets paid. You need to know this stuff. And when you face the cold, stark numbers like they are, suddenly you lose those visions of a backyard and kids playing by the pool.<\/p>\n<p>Those visions evaporate. Even worse, you start to ask yourself, could we have gotten the same thing for a few thousand dollars at a hotel or even rented an Airbnb ourselves? Was it worth it? This is why I insist, for the biggest purchase of your life, you must understand how the math works. I put together a guide on knowing if you\u2019re ready to buy a house, it\u2019s free. I\u2019m going to add it to the show notes.<\/p>\n<p>Let\u2019s see what we learn by running through Chris and Camila\u2019s numbers. Before I had them come on the show, I asked them to fill out a conscious spending plan which breaks down their spending into four categories\u2013 fixed costs, investing, saving, and guilt-free spending.<\/p>\n<p>You can get your own conscious spending plan and instructions for filling it out at iwt.com\/episode69. Now, normally I like to see fixed costs between 50 to 60% of take home, investing 5 to 10% minimum, savings 5 to 10% minimum, and guilt-free spending between 20 to 35%. Listen in.<\/p>\n<p>[Interview]<\/p>\n<p>So how much do you have in assets?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:42:17] About 1.74 million.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:42:21] And your investments?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:42:25] Down to just under $11,000.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:42:29] Your savings?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:42:32] About 13,000.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:42:34] Mm-hm. And how much debt do you owe?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:42:37] 1.48 million.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:42:39] All right. So your total net worth is about $280,000. How old are both of you?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:42:47] I am 31.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:42:48] 33.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:42:49] Okay. Chris is 33. Camila is 31. And your incomes? Let\u2019s go, Chris, then Camila.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:42:56] So my base salary is 135. And then my bonus, which is annual, is around 50,000.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:43:05] Okay, awesome. Camila, what\u2019s your income?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:43:09] 100,000 annual salary.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:43:12] Great. All right, so the two of you collectively make around 280, maybe a little higher gross. And you\u2019re in your early 30s. How do you feel about that?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:43:26] Pretty good, but also we are in Vancouver, so it\u2019s just making us live a comfortable life.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:43:36] Chris, how do you feel about it?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:43:38] Yeah, same. I think 10 years ago, I would have been thrilled to know that. But now actually making that money and seeing the quality of life we have, it\u2019s not all that impressive.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:43:52] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:43:56] I do want to say, listen, I live in high-cost-of-living cities, too. And I think for someone who doesn\u2019t, they\u2019re just like, \u201cFuck off. You make 280,000 a year. What are you talking about?\u201d And the fact is that is a lot of money. It is. And we\u2019ll look at your expenses. Some of the expenses you\u2019re spending might be considered luxuries, premium things, etc.<\/p>\n<p>But I do want to acknowledge that high-cost-of-living cities have expenses that are often extremely costly. I\u2019m talking about everything from the comparative price of a sandwich to child care. It is extremely expensive. Now, you don\u2019t have to have child care. That is a choice. Some people have the option to do a variety of things. But the fact of the matter is, living in some of these cities very, very expensive.<\/p>\n<p>The least interesting thing in my life is some dude living in a city with 480 people munching on his month-old pickle, having the avatar of a piece of cheese, and then listing off all the reasons he wouldn\u2019t ever live in New York City or LA or Vancouver. We get it, dude. You\u2019re scared of crime at the Santa Monica Farmer\u2019s Market.<\/p>\n<p>But at the same time, almost nobody living in these high-cost-of-living cities acknowledges that you\u2019re wealthy. 280k a year in your 30s, you are wealthy. So let\u2019s just get it out on the table. Let\u2019s be honest, then we can decide what to do. Can somebody tell me the percentage of your take home that your fixed costs represent? Just before you tell me that number, as a comparison, I like to see that number between 50 to 60% of your take home. What is your number of fixed costs?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:45:43] 84%.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:45:46] Oh, wow. Wow. Are you telling me that the conscious spending plan has automatically narrowed in on the problem here? That is so crazy. I wonder who came up with this conscious spending plan, which you can find on iwt.com\/podcast. All right. So let\u2019s take it from the top here. Your primary house mortgage costs you roughly $3,000 a month and your vacation home costs you $3,500 a month. Anybody find that interesting?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:46:20] Vacation home is more expensive than our primary home.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:46:23] Yeah. And again, the thinking there was, we\u2019re going to just print money and it\u2019s going to be profitable, etc., right?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:46:30] It\u2019s going to pay for itself.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:46:31] It\u2019s going to pay for itself. That\u2019s the favorite word of people on the Internet, \u201cIt\u2019s going to pay for itself. It cash flows.\u201d I go, \u201cDo you even know what that fucking word means, cash flow?\u201d They just throw it around. There are a few words that people throw around in the financial industry that almost like, I don\u2019t know, these Marvel comic people, but I can imagine there\u2019s some Marvel superstar who has some trick where they throw their hands up and it just blinds people. That\u2019s what this is. In the financial industry, these words blind people. Let me share passive income, cash flow. What else? Tax benefit. Fucking tax benefit. Radicalized anti-tax weirdos. What else? Anyone else have another one?<\/p>\n<p>[Narration]<\/p>\n<p>If you have a magic word that people use to blind others to reality in the financial world, go to my Instagram page and leave a comment there on today\u2019s episode. I want to get a list of all these phrases people use with money. Now listen to me talk about the season of life they\u2019re currently in. I think you might be surprised.<\/p>\n<p>[Interview]<\/p>\n<p>Overall, you\u2019re just in this phase of life. And one thing you\u2019ll never hear me do, I\u2019m not going to berate some two young parents who are like, I don\u2019t have a lot of time. I can\u2019t even imagine how difficult it is for you to do what you do with your kids. You really nailed it, Camila, when you said, \u201cThis is our season of life right now. It might be a little more expensive. It might be a little less time.\u201d But if you can have a long vision, you\u2019ll get through this part.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:48:17] It\u2019s a different thing every month. It\u2019s like, oh, kids are going to start a dance class. Okay, that\u2019s $100 a month extra. Oh, we got to buy a uniform. Oh, Halloween\u2019s coming up. Let\u2019s get costumes, birthdays, just random life stuff.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:48:33] Does it feel like it\u2019s one step forward, two steps back?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:48:36] Yes.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:48:42] Well, that\u2019s common in different parts of life. Having kids is very common. I think if you had more time and more room to breathe, the two of you would be able to zoom out and think further than the 50 feet that you\u2019re thinking ahead. Right now very much feels like you\u2019re driving in the fog. You can only see 50 feet ahead of you.<\/p>\n<p>And one of the things that I get to do with you is to help you see beyond that. If you had time and energy, you would be able to focus on what\u2019s going to happen every month for the next 12 months. There\u2019s a class that we\u2019re going to enroll in here, and there\u2019s a Halloween costume. Let\u2019s plan for it. Let\u2019s put a little money aside. What would that feel like versus what you\u2019re doing today?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:49:32] Oh, my God, it feel so good. Sense of relief and just confidence, the at-peace feeling like you just know there\u2019s a plan in place. Yeah, we\u2019ve just never done that. I feel that seems so far off at this point.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:49:54] [Narration]<\/p>\n<p>When people have young children, their savings rate drops. It\u2019s very predictable. And that\u2019s okay. There are seasons of life where you can\u2019t be this super-disciplined machine. When you have kids, most people are just trying to get by. And if they have to cut their savings rate by a few percentage points to make life easier, fine.<\/p>\n<p>The important thing is to acknowledge that and to make a plan. And it might go something like this, \u201cFor the next two years, we\u2019re going to cut our monthly savings from $500 a month to $200 a month. And we\u2019re going to spend that $300 a month on other expenses. It might be hiring a babysitter, maybe it might be things we can\u2019t even predict right now. And we know that this won\u2019t last forever. But this change is going to help us get through the next couple of years. And after that, we will return to our normal savings rate.\u201d<\/p>\n<p>[Interview]<\/p>\n<p>Let\u2019s discuss what we can discuss now, which is that every month you\u2019re spending more than you make and it\u2019s likely to get worse. Would we agree?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:51:07] Yes.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:51:10] It\u2019s going to get worse because you have winter coming. What else?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:51:16] That feels like the big one. It\u2019s a big ticket item. With winter coming, we\u2019re not going to collect as much and come from the rental.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:51:24] What about the non-financial part? What\u2019s going to get worse about that?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:51:31] Just the stress.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:51:33] Yeah, it\u2019s no fun.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:51:36] We don\u2019t have a lot of capacity for any more stress in our life, so\u2013<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:51:42] We\u2019re not going to get any less busier either.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:51:51] Boy, that\u2019s a really great point you just made. Sometimes our future selves, we eat perfectly, we work out every day, we\u2019re perfect parents and friends and sons and daughters and all that. But I think what you just said, Camila, is right on the money. The best predictor of our future selves is our current self.<\/p>\n<p>But let\u2019s give ourselves a little bit of grace that you\u2019re not terrible people. It\u2019s a really hard time, right? I don\u2019t run marathons, but I would imagine mile 20 to 24, oh, wow, that must be really hard. But you know that you\u2019re going to get through it if you can keep putting one step in front of the other. But what else? Camila, why are you stressed out? Why are you spending all this money on food? Why do you both feel so tired?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:52:45] Because we\u2019re dealing with too many things on our plate. And one of them is the vacation home.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:52:51] Very good. It\u2019s not often that I talk to some couple and one of the issues they have is like a blaring red light and we can instantly identify it and we can just chop it off. It seems pretty obvious to me that this vacation house is a problem. You\u2019re losing money. It\u2019s not really living up to the story you told yourself that it was going to be passive and print money and whatever. So what is stopping you from immediately selling this? What\u2019s going through your mind?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:53:31] It\u2019s just the loss of funds. You heard the number. That\u2019s $100,000 that if we did sell it now and got that number, that\u2019s a big chunk of money that we\u2019re for sure going to lose versus there\u2019s a chance of us salvaging that still, if the market picked up again and we worked really hard to get rentals for winter. Just it\u2019s a bunch of them. If there\u2019s a will, there\u2019s a way. I would need to spend time in pulling together another marketing strategy or just coming up with a business plan like again.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:54:09] Are you selling this on Airbnb?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:54:11] Yes.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:54:15] All right. Are you aware of what\u2019s going on with Airbnb and all the owners who are not getting any rentals anymore?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:54:20] No.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:54:21] Okay. How do I know more about Airbnbs than you do?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:54:25] When do I have time to read on things because this is very current? Oh, my goodness.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:54:29] Okay, so you don\u2019t have time to read the Airbnb forums and stuff like that, but you\u2019re going to come up with a magical marketing strategy for the winter.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:54:40] Apparently, now I feel very dumb.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:54:43] You don\u2019t have to feel dumb. Not everybody keeps totally current. This is my business. And I love to hear what\u2019s going on with the real estate market. I love it when it\u2019s going up. I definitely love it when it\u2019s going down and I want to know what\u2019s going on.<\/p>\n<p>So maybe not everyone\u2019s like that, but you do have an Airbnb that\u2019s costing you thousands of dollars every month. It\u2019s definitely a problem that you\u2019re not aware of what\u2019s going on in the market. And I think it\u2019s possible, although it might be optimistic thinking to believe that some magical marketing strategy will fill up this Airbnb at the rates you need. But I also think that what we\u2019re seeing is this dynamic play out of Camila comes up with, if we just try harder, we can make it work. Do you see that trend playing out here? She\u2019s nodding here.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:55:44] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:55:46] But is there a different way to make big financial decisions in a relationship besides one person is optimistic and says we should do this because it\u2019ll work out in the end and the other person says, I don\u2019t know. All right, fine. I\u2019ll do it because I want you to be happy.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:56:03] You could probably take a bit more of an objective outlook on something. Just really run the numbers and compare these numbers. Is this aligned with where we want to be? Where do we want to be in five years, 10 years?<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:56:16] You\u2019re telling me that you\u2019re suggesting for the biggest purchases of your life you should actually run the numbers? Hold on a second. This is blowing my mind. Camila, what do you think?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:56:31] I remember running the numbers, but I don\u2019t remember\u2013 and correct me if I\u2019m wrong, Chris, but I don\u2019t remember you taking a crack at it on your own, too. And I don\u2019t want to say that to call you out, but I did my own version of running the numbers and then you looked at it and you gave feedback as well. But I don\u2019t recall you taking a crack at it in the same way that I did.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:57:11] Yeah. I mean, I think that\u2019s because I didn\u2019t want to really do this. When we talked about running the numbers in hindsight, looking at this, we looked at monthly operating costs type of numbers, like how much could we get from rent, how much are the monthly utilities, mortgage? But I think what we missed was like, what does this look like in four years, five years, six years? What are we trying to get out of this thing instead of can we survive on a monthly basis if we do this?<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:57:48] Well. Do you see any similarities with what you\u2019re doing right now and how you made this decision to buy a vacation house?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:57:54] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:57:55] What do you see?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:57:57] There\u2019s no long-term planning.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:58:00] Yeah. No vision. You\u2019re living month to month and you\u2019re looking 50 feet ahead, and you\u2019ve been doing it for so long that now that\u2019s all you know. But I am also saying it\u2019s not that surprising that you feel behind and busy. And objectively speaking, you\u2019re losing money every single month. That\u2019s a problem. So you tell me, what would you like to do?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:58:27] Just have a better plan. I just feel like we\u2019ve gone so far in one direction and we\u2019ve got this mess. I feel like the mess needs to be cleaned up even if it means that we come out of it with some very expensive lessons that we\u2019ve had to learn. But just to have simplicity, almost in like here\u2019s what we do, is what we spend money on, just have a plan and really think about how like\u2013 we\u2019re doing this for a purpose because in five years, we want to have X or we want to be in X position, I feel like there\u2019s some cleanup that needs to be done.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[00:59:18] It almost seems too good to be true. But I want that. The simplicity, I desire that.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:59:29] The more advanced I\u2019ve become with money, the more I\u2019ve had to fight for simplicity. And I would imagine that you both intuitively understand this as parents. The more children you have and the older they get, you have to fight for simplicity. Otherwise, you\u2019ll just have a bunch of stuff in your house, endless amounts of stuff. You\u2019re both nodding.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[00:59:53] Mm-hmm.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[00:59:55] So you get it. The same is true of parenting. The same is true of money. I have a million different things I could do. Some of it could be all these weird investment options. Some of it could be as simple as let me open up an Amazon credit card because I would get $800 cashback over the next year. That sounds like a lot of money.<\/p>\n<p>But when I think about all the stuff I would have to do to maintain that, and what if I forget the number, and what if I lose the card and all the stuff I go, \u201cIs it worth it for me? No.\u201d So I have to fight for simplicity, sometimes turning down free money.<\/p>\n<p>And I think when I look at the way you set your money up is so complicated that you can\u2019t even put all the expenses on this spreadsheet. And it\u2019s so complicated that the way you talk about it has no joy. It\u2019s just stress. And I don\u2019t want that for you.<\/p>\n<p>I want you to actually feel really good about money. I want when you go to sushi that the two of you are like, \u201cHey, we can get steak tonight. We already planned for it. Let\u2019s not worry about it because our investments are being handled. Even our debt is being paid off and we can still live a rich life today.\u201d Camila, tell me what\u2019s going through your mind right now.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:01:14] Yeah, I think it\u2019s just when you say, \u201cFight for simplicity,\u201d that just resonates so much.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:01:43] Do you want to do it together?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:01:46] Mm-hmm.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:01:49] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:01:51] All right. Anything else on your mind, Camila? You look like you\u2019re very deep in thought. I want to hear what you\u2019re thinking.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:01:58] No, just that was it. Ultimately, again, I feel like I\u2019m a preacher here. That\u2019s my new word that I\u2019m going after is just at peace. It\u2019s like you\u2019re right. Everything that you just said, our money is so complicated. We can\u2019t even organize our expenses. I don\u2019t want it to be like that. Even if it does mean there\u2019s $100,000 of debt that we\u2019re trying to pay down, it seems counterintuitive, but if that is going to simplify a bunch of things, it\u2019s weird that I get how that works, even though it sucks. Does that make sense?<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:02:53] Yeah, everything you said makes perfect sense. Sometimes in order to go forward, you have to take a couple of steps back. The thing that also stands out to me, which I don\u2019t think you both have reckoned with, is that you have high incomes. And so even though you may have made a financial mistake, a high income solves a lot of financial problems. You two are so young that you have a long life ahead of you. And I think we can make some changes that will really enable you to thrive.<\/p>\n<p>[Narration]<\/p>\n<p>Isn\u2019t it fascinating that the big houses, the cars, the sushi, the vacations, all these things are what get glorified as things that should be our end goal? But when I mentioned simplicity, Camila started crying. If you had to describe what a rich life is for you in a single word, what would it be?<\/p>\n<p>[Interview]<\/p>\n<p>Now back to Chris and Camila. Open up the conscious spending plan. Let\u2019s look at it together and you two can come up with a plan. I\u2019ll advise on what you want to do. So I see both of you are in there. All right. So look at it and tell me what your options are.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:04:20] Removing the vacation home is one.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:04:24] I think we\u2019re both ready to take that step.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:04:26] I\u2019m ready to take that step.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:04:28] Okay. Do it and let\u2019s see what happens. What I want you to do is remove it and look at that 84%. See what happens to the number. Can you tell me what was the before number in your fixed cost and what\u2019s the after number?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:04:45] 84 to 76.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:04:48] Okay. So you went from 84% fixed costs to 76%. What do you think about that?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:05:01] It\u2019s a good start.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:05:03] It\u2019s a good start. I agree. I say we give everybody a round of applause so far. All right, I\u2019ll take the win. It\u2019s going in the right direction, at least. Still a little high. Talk to me about your other options.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:05:19] Child care is one that\u2019s going to get affected once in December and then once next September.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:05:30] So play that out for me. What\u2019s going to happen in September?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:05:33] So in December, it\u2019s going to drop to 2,360 because of a new government credit.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:05:44] And how is that going to change your fixed cost number?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:05:48] So we\u2019re down to 69%.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:05:53] Whoa. That\u2019s pretty good. All right. And then what about the rest?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:05:56] I imagine that goes down to about 1,800.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:06:00] Let\u2019s say 1,800 to be fixed.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:06:02] So 65% now.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:06:07] That\u2019s pretty good. We\u2019re within striking distance. Although it\u2019s going to take a while for you to get there. What else? Keep going.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:06:16] I don\u2019t really see anything else.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:06:17] We spend a lot of money on food and online shopping and\u2013<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:06:23] Really? Online shopping. How much could that be cut down by?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:06:31] Pretty conservatively, probably 200 to 300 a month.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:06:35] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:06:36] Which one is it? 200 or 300?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:06:38] Call it 200 because that\u2019s more conservative.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:06:40] Make the change. I like it. I like being conservative. Very good. I don\u2019t want you to go from 60 miles an hour to zero overnight. I like being conservative. Slow. Gradual. Well, what are we at right now in fixed cost?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:06:51] 63%.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:06:53] That feels pretty amazing to me. Can we do another round of applause, please because you went from 84 to 63? Wow. Test. Test.<\/p>\n<p>[Narration]<\/p>\n<p>This is such a great example of the IWT process at work. We could have jumped right into the conscious spending plan, but if we did that, it would just be some guy berating them and telling them all the areas of life they should stop spending money on. So instead, we spent a lot of time digging into why they\u2019re in this current situation and how they see money, and even what their vision of a rich life is. And now that we\u2019re getting to the numbers, everything is so much easier. They can literally change their lives in 10 minutes.<\/p>\n<p>[Interview]<\/p>\n<p>Let\u2019s look at your guilt-free spending, which is just called everything else. Holy shit. Am I reading this right? It\u2019s 5,000 a month?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:07:47] We\u2019re actually spending closer to like 6,600 a month on this category.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:07:53] So this seems like an opportunity that has a lot of places you could cut. Would you agree?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:07:58] Yes.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:07:59] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:07:59] Like what? Sushi.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:08:02] Yeah, the amount of times we do take out.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:08:06] How are you going to do that so it\u2019s not just a wish, but it\u2019s actually going to be something that you follow through on? Who\u2019s meal prepping?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:08:15] No one right now.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:08:16] Well, let\u2019s make a decision. Who\u2019s going to meal prep and when is it going to happen?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:08:25] We\u2019re laughing because no one wants to commit to this right now.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:08:29] Well, I know you\u2019ve been living in the fog for so long that when I\u2019m asking you to actually make a plan for something ahead, it\u2019s really hard to think like that. So come up with a way that both of you feel good about it.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:08:44] If we actually do it together, I would do it. I just can\u2019t do it by myself.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:08:53] I do feel like that\u2019s the only way it\u2019s going to work is if we\u2019re doing this together.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:08:59] When?<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:09:01] I mean, I feel like Sunday\u2013<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:09:02] When the kids go to bed.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:09:03] Sunday\u2019s probably\u2013 man, it\u2019s hard. This is hard for me.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:09:11] It\u2019s supposed to be hard.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:09:14] It\u2019ll be at night at some point.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:09:16] What day?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:09:17] Yeah, that\u2019s a good question. Well, if we do Sunday, we just have to commit. It\u2019s like a no-fly zone for any plans whatsoever for other people, which I\u2019m okay with. It becomes just a family ritual that we do meal prep on Sundays.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:09:32] That is correct.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:09:33] It screws us over for the weekend. We\u2019re only available other nights of the week.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:09:40] Yep. Now, you could adapt it. You could say, \u201cOh, we can join you after 8PM, whatever, but the time for this is sacred for the two of you because you can see that if you don\u2019t create a time that\u2019s on your calendar and both of you honor it that it trickles into every other part of the week and it all starts to add up into you losing money every single month.<\/p>\n<p>[Narration]<\/p>\n<p>It\u2019s funny, we have a couple who make 280,000 a year. They have over $1,000,000 in real estate. And here we are talking about who buys the cereal. But I want you to notice what\u2019s going on here. We spent a lot of time on the vision, the big picture.<\/p>\n<p>Now, to make this a reality, we have to get into the absolute tiniest details, including what time they\u2019re going to get their groceries every Sunday. Behavior change is this beautiful combination of high, low. It\u2019s big picture and excruciatingly small details. And I am infinitely patient at this point because I know we\u2019re at the cusp of a huge breakthrough.<\/p>\n<p>[Interview]<\/p>\n<p>My proposal is build your plan for at least six days a week. That would be my recommendation. And then at least on your seventh day, you have something to look forward to, etc. But I would not just give yourself two days because two days often turns into three days and now you\u2019re basically back where you are right now. So my suggestion would be like a big meal prep Sunday and then a mini meal prep Thursday. But that\u2019s up to you.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:11:24] Yeah.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:11:25] 2 hours. Let\u2019s be conservative. How\u2019s the food getting to your place?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:11:33] Yeah. I mean, we played around with grocery delivery or those actual meal kits.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:11:40] Don\u2019t do the meal kits. You guys can\u2019t afford that. What else?<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:11:44] Grocery delivery.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:11:45] Okay, you want\u2013<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:11:46] Costco.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:11:48] Which one? Guys, can we just make some decisions? I hate this indecision. It\u2019s driving me insane. What did we say 10 minutes ago? Fight for simplicity. We can\u2019t even pick where we\u2019re getting the groceries from.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:12:01] I would say, let\u2019s go to the grocery store. Let\u2019s go to Costco. Let\u2019s buy them where it\u2019s cheaper.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:12:09] Okay. What time are you going to Costco on Sundays? It got really quiet.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:12:15] Sunday morning.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:12:18] Sunday morning.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:12:18] Sunday morning with the kids go, or one of us goes and the other one stays.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:12:25] Yeah, we\u2019re on with that. Sunday morning.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:12:29] Can you guys just tell me what\u2019s the decision? No, we\u2019re not going to play around with it. You guys, come on. You make $300,000 a year. Just tell me what your plan is.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:12:38] Sunday morning, we\u2019re all going together.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:12:41] All right, So you do the Costco thing. Great. I mean, you guys just want a meal prep right then you come home, you just do it, or you want to wait till night?<\/p>\n<p>[Narration]<\/p>\n<p>The reason I\u2019m pushing them for clarity on the details is that if they don\u2019t get crystal clear on how they\u2019re going to implement this, the entire plan will fall apart. You all know what I mean. Think of the last time you decided to do something new. Maybe it was start a fitness journey or learn a new language. That is the time where you\u2019re at your most vulnerable because your body and your mind will do anything to bring you back to a place of comfort.<\/p>\n<p>\u201cOops, I forgot I don\u2019t have a clean gym shirt. I guess that means I can\u2019t work out today.\u201d Wrong. You can work out wearing a normal cotton shirt. But more importantly, what we want to do here is walk through every single step of what you\u2019re likely to encounter so you can visualize success and also any potential barriers.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:13:49] Well, Chris isn\u2019t going to like this, but we could do it when the kids snap.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:13:57] Yeah. I mean, look, it\u2019s got to be done like\u2013 I think what\u2019s important is thinking about this. It\u2019s not just about like we need to eat better. We\u2019re doing this for a reason. From the financial aspect, it gives it a purpose. So that helps fight the want for convenience.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:14:20] If you\u2019re going to go at this with excitement with me.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:14:26] I think she\u2019s going to be excited.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:14:29] I have to say, I think you both seem pretty enthusiastic just to share my perspective. I do notice it\u2019s fun going through this exercise because it really tells me a lot about how you make decisions. For example, you both are totally in tune with the other, like, \u201cOh, we have to do it around when they nap or like what a family calls on Sunday.\u201d You know what\u2019s going on in each other\u2019s lives, which is beautiful.<\/p>\n<p>At the same time, you both kick the can down the road. You\u2019re like, \u201cWe\u2019ll have to figure that out.\u201d I\u2019m like, \u201cLet\u2019s just figure it out right now.\u201d And I notice a lack of decisive actions and that\u2019s what will trap you. I want you to start investing money every month. You\u2019re going to have to start paying off some debt, probably.<\/p>\n<p>And every month you check in with each other. Okay, we may have debt. How are we tracking? We know that it\u2019s supposed to be paid off in this many months or years. How are we tracking? How are our investments doing? Each month you\u2019re building up a little buffer. You\u2019re also paying down any debt that you may have. And most importantly, you have a future.<\/p>\n<p>You can see this is when we\u2019re going to be zero. This is when we\u2019re going to have $1,000,000. You can create these milestones and you can know the exact month and year. That\u2019s how you do it. How would that feel to be able to do that? Camila first then Chris.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:15:47] Really exciting. Just to come up with a plan like that and just actually see it, I think we would actually be energized to stick to a plan.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:16:04] Yeah. Chris.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:16:07] Just to get out of the fog. It just give that confidence and peace of mind and purpose to everything that we do so that when you sacrifice you feel like it\u2019s actually for something.<\/p>\n<p><strong>Camila:<\/strong><strong>\u00a0<\/strong>[01:16:22] Yeah. I agree.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:16:25] Okay, great. So you\u2019ve got a plan. Sounds like in the next 5 to 10 days, you\u2019re going to assign things, milestones, come up with a decision. Sounds good to me. Great.<\/p>\n<p><strong>Chris:<\/strong><strong>\u00a0<\/strong>[01:16:36] I\u2019m okay with it especially if we know it\u2019s by design, then that changes everything.<\/p>\n<p><strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:16:43] That\u2019s exactly right. What a great comment. Great comment, Chris. We are willing to take on situations that might even be unthinkable to other people if we know that we chose it and if we know that there may be a light at the end of the tunnel. Right now, there\u2019s just not. But with these changes, oh, my gosh, you wouldn\u2019t believe how much the two of you can handle together knowing that you have chosen this path and you\u2019re in control.<\/p>\n<p>[Narration]<\/p>\n<p>It is such a joy to hear my lessons really sink in like this. And we went on to run the investment calculator and with some back-of-the-napkin math, it was apparent that they could have an easy $3 million by the time they turn 60, and we tweaked them and that number turned into $6 million. This is what\u2019s at stake for Chris and Camila. We are talking millions and millions of dollars.<\/p>\n<p>Now, we didn\u2019t spend much time on their investments because they aren\u2019t adding to them with this vacation house weighing them down. But it was important that I show them this calculation as one of the final pieces here, that they may have to make uncomfortable decisions in the short term. But there\u2019s a much bigger, rich life vision that they are working towards.<\/p>\n<p>After our call, Chris and Camila sent me follow-up messages. You can read the full follow-ups at iwt.com\/followups. But here\u2019s what Chris said, \u201cTop lesson for us was to have a clear why behind our decision making. Meal prepping on a Sunday when all we want to do is relax is hard, but it\u2019s only hard because it\u2019s being viewed as a burden and a shitty task that needs doing.<\/p>\n<p>\u201cI\u2019m changing my mindset to something more like, \u2018We are meal prepping today because we want to pay ourselves more via investing and saving, ultimately to become millionaires, retire young and do whatever we want.&#8217;\u201d You can read the full letters at iwt.com\/followups. And thank you for listening to I Will Teach You to Be Rich.<br \/>\n<strong>Ramit Sethi:<\/strong><strong>\u00a0<\/strong>[01:19:03] Thanks for listening to I Will Teach You to Be Rich. I\u2019m Ramit Sethi. Please follow the show on Apple, Spotify, or wherever you listen to podcasts. If you haven\u2019t read, I Will Teach You to Be Rich, my book, pick up a copy. You can get it at any bookstore or any library, and it will show you the specific tactics for how to build the I Will Teach You to Be Rich system into your personal finances.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Chris and Camilla are 33 and 31 and they make almost $300k collectively living in a high cost of living area. They recently bought a vacation home, like everyone on TikTok tells you to do. Surprise, surprise\u2014there\u2019s no fairytale ending here, no mounds of passive income, no soaring property values or slam dunk investments. They [&hellip;]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","om_disable_all_campaigns":false,"_lmt_disableupdate":"","_lmt_disable":"","_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[290],"class_list":["post-119056","post","type-post","status-publish","format-standard","hentry","category-podcast-episodes"],"acf":[],"aioseo_notices":[],"modified_by":"Vika DD.NYC\u00ae","_links":{"self":[{"href":"https:\/\/www.iwillteachyoutoberich.com\/wp-json\/wp\/v2\/posts\/119056","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.iwillteachyoutoberich.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.iwillteachyoutoberich.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.iwillteachyoutoberich.com\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.iwillteachyoutoberich.com\/wp-json\/wp\/v2\/comments?post=119056"}],"version-history":[{"count":0,"href":"https:\/\/www.iwillteachyoutoberich.com\/wp-json\/wp\/v2\/posts\/119056\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.iwillteachyoutoberich.com\/wp-json\/wp\/v2\/media?parent=119056"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.iwillteachyoutoberich.com\/wp-json\/wp\/v2\/categories?post=119056"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}