Both Ryan and Michelle are in their early forties and appear to be quite well off. After all, it is not so surprising that there is almost a hundred thousand dollars net accruing to his exposed six-figure income, which earns him as the only breadwinner and boasts of almost one million dollars net worth; most would think they are okay. But underlying these positives, they are quite unable to cope with their everyday financial obligations. They are making use of their investment silos to pay up routine bills despite the illusion of abundance. As Ryan puts it, “It’s a sinking ship. It can’t continue this way.”
The couple’s financial situation then attracted the attention of self-made millionaire Ramit Sethi, who offered his help on his podcast ‘I Will Teach You to Be Rich’. There is a problem with the way they earn and spend; Sethi believes the couple is on the verge of a spending crisis—and more and more money is going out with very little coming in and very little available for saving.
Out-of-Control Spending: “Death by 1,000 Paper Cuts”
Michelle and Ryan admit that much of their financial stress stems from their spending habits, particularly their frequent purchases at Amazon and Target. What begins as small, seemingly harmless buys, like kids’ sunglasses or soccer gear, quickly adds up to nearly $2,000 a month. As Michelle aptly put it, their spending habits are like “death by 1,000 paper cuts.”
While cutting back on impulse purchases can help, Sethi argues the real issue is the absence of any clear system to manage their spending. When asked where they could cut costs, Michelle was skeptical that anything could be reduced, as she viewed most purchases as essential.
“This is what happens when spending gets out of control,” Sethi explained. “It becomes incredibly difficult to downsize because the human mind convinces you that everything you have accumulated is necessary.”
Sethi’s Advice: Gradual Cuts and Tough Choices
Sethi recommended Ryan and Michelle target big discretionary spending categories, like dining out and shopping at Target and gradually reduce these costs by 50% over six weeks. This would give them the breathing room they desperately need.
The challenge? Saying “no” to their children. Sethi noted that while difficult, it would ultimately help their kids develop a healthier relationship with money.
Over-Investing: “Right Now, We’re Screwed”
In reality, Ryan and Michelle both fall within the age bracket of early 40s and seem to be financially stable. After all, with the income frozen in bilateral negotiations and the only source of income for the family being his already uncovered six-figure salary, it does not come as a shock to many that he has about one hundred thousand dollars net. Most would assume they are doing alright since they boast close to a million dollars in assets alone. However, below these pluses lies, they seem to have difficulty meeting their monthly financial commitments. They are tapping their investment silos to settle normal bills despite the façade of plenty. Whoever calls it as it is stated, “It’s a sinking ship. It can’t go on like this.”
The struggles of the couple—earning money and seemingly spending it all—drew the attention of self-made millionaire Ramit Sethi, who willingly came to their aid in his podcast ‘I Will Teach You to Be Rich’. In this particular case, the issue was apparent in the way they earned and spent their incomes, Sethi argued; the couple was headed for a spending depression—a time when more money was going out than coming in and not enough was being set aside for savings.
Taking Control of Their Finances
The epiphany came to Ryan and Michelle when they understood that they were the ones who could turn the taps of their outgoings. Sethi reminded them that short-term slashes on investments would not affect their long-term financial objectives.
Shifting the way they spend money and changing some behaviors allowed him and her to overcome financial distress that was about to be experienced and overspending that was previously unavoidable.
