236. “She spent $5K behind my back. How can I trust her?”

Alex and Jackie face a precarious financial situation despite their seemingly substantial household income of $91,968 per year. They are located in North Dakota and have a family of four young children.

Couple's Unstable Finances Despite $91,000 Gross Income

The couple's finances show instability and a lack of proactive management. With a gross annual income of $91,968, they find themselves entrapped by fixed costs and uncontrolled spending, particularly on their children's needs and activities.

Couple's $189k Net Worth Strained By 87% Income on Fixed Costs

Alex and Jackie’s precarious financial standing is heavily strained by fixed expenses, which consume 87% of their income. This level of expenditure leaves very little room for savings, investments, or guilt-free spending. With a net worth of $189,000, they are at risk as their savings are depleting each month due to spending more than their budget. They have $16,000 in savings, but this amount is threatening to diminish rapidly without immediate changes to their financial habits.

Savings at Risk, Could Deplete In Months Without Changes

The couple grapples with a savings rate that is decreasing each month. Just a few months prior, their savings stood at $35,000; however, after purchasing a house and enduring a period with no income due to a job resignation for mental health reasons, their savings have shrunk significantly. They’re close to running out of money and could find themselves in financial trouble within a matter of months if they do not make significant changes. Alex even expresses worry that their savings would deplete quickly if their financial behavior does not change.

Caller #1, Alex, admits that their spending consistently surpasses their budget, leading to a monthly savings depletion. The couple does not hold fast to spending limits and fails to assign proper attention to savings or organization plans. Ramit Sethi, a financial expert, highlights that the couple harbors the belief that a higher income of $150,000 would solve their problems. Sethi rejects this notion, stressing that without improvements in their financial habits, the couple would likely continue to scale up their mistakes.

Their ...

Caller #1, Alex, and Caller #2, Jackie, share their individual approaches to budgeting and money management, reflecting a common struggle between structure and spontaneity.

Alex's Flawed Budgeting: Complex Expense Tracking Spreadsheet

Alex meticulously tracks every expense in an elaborate spreadsheet, which contains numerous numbers, categories, and uses color-coding to indicate different types of expenses. Since 2016, Alex has been editing the budget three to four times a week, dedicating about an hour each session. Despite this effort, the couple continues to overspend, and they never actually meet the monthly budget, illustrating its ineffectiveness. The tracking system, which involved texting each other amounts spent, was terminated for being archaic. Ramit Sethi criticizes this approach, highlighting that it creates an overwhelming feeling without actually controlling expenditures. Alex blames Jackie for the overspending and feels that his role as the financial taskmaster has contributed to an environment of mistrust within their relationship.

This Approach Worsened the Couple's Finances, Causing Tension and Mistrust

Despite efforts like meal planning to control grocery overspending, results are not achieved, suggesting a broken system. Sethi points out the lack of strategy, highlighting random items and events that accumulate, especially given their good income. Alex admits his spreadsheet approach has not improved their financial behavior and hesitates to fully trust Jackie with money.

Jackie's Intuitive, Faith-Driven Approach to Money Includes Making Large Purchases Without Consulting Alex

Jackie manages money differently, assuming that Alex is the tracker and in charge. This sometimes leads to her forgetting to communicate about her purchases. She admits to overspending and being oblivious to the budget. In 2024, Jackie's decision to invest $15,000 in a photography business course without discussing it with Alex created significant strain, causing them to incur debt and a loss of trust withi ...

A Christian couple's faith significantly impacts their financial decisions and behavior, particularly through the practice of tithing which has become a complex aspect of their monetary stability.

Christian Couple's Faith Shapes Money Views and Behaviors

Tithing 10% of Income Drains Resources

The Christian couple in question, Caller #1 (Alex) and Caller #2 (possibly Jackie), abide by the religious practice of tithing, dedicating 10% of their income to their church. Alex mentions that tithing is mandatory for them, ingrained through upbringing and tradition. This commitment to tithing has been unwavering despite their financial situations, leading to a strain on their resources. They have never missed their monthly tithing, believing firmly that it is the right thing to do and trusting that they will be provided for.

Couple Struggles to Balance Religion and Finances

The couple's faith doesn't just dictate their tithing practices but also influences their overall outlook on finances. Caller #2 recalls a heart-to-heart with God, acknowledging the care and love they've received, which has been supplemented by instances they describe as miracles. One such instance involves receiving an unexpected $1,000 in an envelope from someone at church, and another is a car accident that resulted in a $1,200 payout. They perceive these events as divine support, confirming their financial decisions.

However, this reliance on faith and divine intervention poses a significant conflict with their financial stability. Jackie suggests that they felt divine support after closing down a photography business, which wasn't perceived as their path. Additionally, the couple struggles with the idea of cutting their tithing, an act that seems imperative to them despite its impact on their financial circumstances. Ramit Sethi, interacting with the couple, notes their failure to meet their tithing goals and discusses the need to reduce guilt-free sp ...

Ramit Sethi assists a couple in rethinking their approach to finances, guiding them to establish a practical spending plan and urging them to address their financial habits to prevent problems.

Ramit Advises the Couple to Create a Practical Spending Plan Instead Of Complex Budgeting or Faith-Based Approaches

Ramit emphasizes the importance of getting specific in planning and eschewing overly complex budgeting systems or purely faith-based approaches to financial decision-making. He introduces the concept of a conscious spending plan (CSP), which focuses on proactively planning future spending rather than retrospectively examining past expenses.

Reduce Tithing to Free Funds For Savings and Debt

Sethi stresses the importance of putting systems in place to free up finances. He recommends managing spending down to specific numbers, suggesting substantial revisions to various categories such as groceries and subscriptions. Importantly, he addresses the couple’s 10% tithing practice, suggesting a temporary reduction to $50 per month to alleviate financial distress. By reallocating these funds, they could increase their savings rate and contribute to debt repayment. Moreover, he advises on setting clear spending thresholds and the possibility of incrementally increasing tithing as their financial situation improves.

Ramit Stresses the Couple's Partnership, Shared Responsibilities, and Open Money Communication to Build a Financial Future

Guides Couple to Make Specific Financial Changes

Ramit underscores the imperative of shared responsibility and open communication in financial matters. He encourages the couple to talk about major expenditures and to meet regularly to discuss their financial plan. By integrating both partners in the management of their expenses and defining areas of financial responsibility, they can collaboratively build a stable financial future.

Sethi highlights the need for actionable changes, focusing less on the minute details and more on pivotal numbers that guide their overall financial health. This includes revisiting their tithing commitment, incorporating a willingness to flexibly think about tithing without cutting it entirely. Sethi also stresses that open discussions about their feelings towards financial ...