Loading...
January 6, 2025 • 1hr 0min
56 Minutes of Money Wisdom for High-Earning Couples
My First Million
In this episode, Sam Parr interviews Ramit Sethi about managing money in relationships, particularly for high-earning couples in their 30s and 40s. They discuss everything from monthly money meetings to annual reviews, spending psychology, and how to align financial values between partners.
56 Minutes of Money Wisdom for High-Earning Couples
0:00
-0:00
Key Takeaways
- Monthly Money Meetings are essential for couples - should be 60 minutes covering appreciation, updates from each partner, joint updates, reviewing numbers, and open issues
- Four Money Types: Avoiders (most common), Optimizers (spreadsheet-focused), Worriers (constant anxiety), and Dreamers (always chasing the next big thing)
- Key Financial Benchmarks for high-earning couples ($500k+):
- Fixed costs: 50% or less of take-home pay
- Investing: 15-25% of take-home pay
- Savings: 5-10% of take-home pay
- Guilt-free spending: 20-35% of take-home pay
- No "Money Person" - Both partners should be equally involved in financial decisions and understanding
- Learning to Spend is as important a skill as learning to earn and manage money
Introduction
In this episode, Sam Parr interviews Ramit Sethi about managing money in relationships, particularly for high-earning couples in their 30s and 40s. They discuss everything from monthly money meetings to annual reviews, spending psychology, and how to align financial values between partners.
Topics Discussed
The Importance of Regular Money Meetings (00:00)
Ramit emphasizes that most couples only have four substantive money conversations in their entire relationship. This leads to disconnection and potential conflicts.
- 50% of couples don't know their household income
- Monthly meetings should include:
- Partner appreciation
- Individual updates on financial responsibilities
- Joint updates on shared goals
- Review of key numbers
- Discussion of open issues
- Meetings should end with expressions of love and appreciation to associate money discussions with positive feelings
The Four Money Types (05:25)
Ramit identifies four distinct money personalities that show up in relationships:
- Avoiders:
- Most common type
- Use conscious and unconscious techniques to avoid money discussions
- Often say things like "You're just better at money" or "I'm not good at math"
- Optimizers:
- Focus on spreadsheets and optimization
- Can become overly focused on costs and returns
- Risk becoming "boring and cheap"
- Worriers:
- Constant anxiety about money
- Often learned this behavior growing up
- Struggle to imagine life without financial worry
- Dreamers:
- Always believe success is just around the corner
- Prone to get-rich-quick schemes
- Often subsidized by partners
The Annual Rich Life Review (10:15)
Ramit describes his annual financial review process with his wife:
- Review of the Year:
- Look through photos to identify memorable moments
- Discuss both positive and challenging experiences
- Evaluate what worked and what didn't
- Planning Categories:
- Generous - How to give back
- Adventurous - New experiences to try
- Luxurious - High-end experiences
- Social - Connection with others
- Financial Review:
- Review of major expense categories
- Evaluation of spending patterns
- Planning for the next year
Monthly Money Meetings (23:00)
Regular monthly check-ins are crucial for maintaining financial alignment:
- Structure:
- 60-minute timeframe
- Seven-step process
- Focus on both numbers and emotional connection
- Key Components:
- Partner appreciation
- Individual updates
- Joint financial review
- Discussion of challenges
Avoiding the "Money Person" Trap (26:00)
Ramit strongly advises against having one partner handle all financial matters:
- Risks of Single Financial Manager:
- Creates vulnerability if one partner dies or becomes incapacitated
- Reduces financial literacy for the non-managing partner
- Can create power imbalances in the relationship
- Benefits of Shared Management:
- Better decision-making with two perspectives
- Increased financial security for both partners
- Stronger relationship connection
Financial Benchmarks for High-Earning Couples (31:09)
Ramit outlines specific financial allocation guidelines for couples earning $500k+:
- Fixed Costs: 50% or less of take-home pay
- Housing, utilities, groceries, debt payments
- Should decrease as percentage as income increases
- Investing: 15-25% of take-home pay
- Higher than standard recommendations due to income level
- Focus on long-term wealth building
- Savings: 5-10% of take-home pay
- Emergency fund
- Short-term goals
- Guilt-free Spending: 20-35% of take-home pay
- Discretionary expenses
- Personal interests and hobbies
Learning to Spend Meaningfully (35:03)
Ramit emphasizes the importance of developing spending skills:
- Common Challenges:
- Psychological barriers from upbringing
- Difficulty adjusting to higher income levels
- Fear of judgment or guilt
- Solutions:
- Start with small purchases
- Focus on personal interests and values
- Create separate accounts for guilt-free spending
Investments vs. Purchases (41:01)
Ramit discusses the importance of distinguishing between true investments and purchases:
- True Investments:
- Generate financial returns
- Have measurable outcomes
- Build long-term wealth
- Purchases:
- Personal consumption
- Lifestyle choices
- Should be acknowledged as expenses, not investments
Handling Partnership Disagreements (43:39)
Strategies for managing financial conflicts in relationships:
- Root Causes:
- Lack of shared vision
- Different money personalities
- Misaligned values
- Solutions:
- Develop shared rich life vision
- Create separate accounts for personal spending
- Focus on big picture rather than small purchases
Conclusion
The episode emphasizes that successful financial management in relationships requires regular communication, shared responsibility, and a balance between saving and meaningful spending. Couples should focus on developing both individual and joint financial skills while maintaining simplicity in their approach to money management.