The couple, whose combined income is $192,528 a year and whose New Jersey home mortgage makes up the bulk of their debt, joined the podcast in the hopes that Sethi could teach them how David could retire early.
Here is their financial situation at the time of recording the podcast:
- assets: $524,000
- investment: $11,249
- savings: $63,752
- debt: $517,045
- Net worth: $80,956
Their debts include a $447,000 mortgage, as well as a $47,144 car loan and $22,900 in credit card debt.
Several warning signs left Sethi concerned that not only would the couple fall short of David's goal of retiring early, but they could face even greater financial turmoil if they didn't change their attitudes and habits about money.
Sethi told them: “You are making a lot of money, that A lot of money.”
Here are three financial mistakes that got David and Halima into the red, and Sethi's advice for getting out of it.
Both David and Halima weathered dire financial situations earlier in life, which is one of the reasons they are financially happy now: owning a home was a dream come true.
“It was instilled in me to buy a house,” Halima says, “like you have to get married and buy a house before you have kids. That's the American dream, that's why my parents came to America.” [to the U.S.]”
But Sethi said that's not a dream for everyone. When he asked Halima what comes next after the “house with the white picket fence,” neither she nor Sethi could answer.
“A lot of us are following somebody else's money story, but they don't finish it,” Sethi says. “Don't just follow someone else's idea.”
What David and Halima really wanted when they bought their home was safety and security, Sethi said, and he told them a home wasn't necessarily the only way to achieve that.
Their home, in particular, has become a money pit: They bought a “home that needed fixing” and spent thousands of dollars renovating it, accumulating nearly $23,000 in credit card debt. Sethi recommended they stop renovating as soon as possible and pay off the debt before starting another project.
Though they now have a steady income, part of their shaky financial footing stems from David's roughly two decades of trying various “get rich quick” schemes, as Sethi put it. Over the years, David has tried to make money through two different multi-level marketing companies, invested in cryptocurrency and tried to get a real estate license.
“I wanted to create a life where I could provide for my wife and children. [have] “It's not easy to say no. I want to give my children a better life than I had,” David said of his financial habits.
But as he learned the hard way, none of these were easy or sustainable ways to build wealth.
Although David now has a steady income, Sethi said, he still fell into financial traps, such as thinking a 0% APR balance transfer plan was the solution to his debt problems and buying a timeshare to save on vacations.
“David is chasing get-rich-quick schemes,” Sethi says. “He confuses wants with needs and basically buys things without understanding how they affect his bigger picture.”
He encouraged David, and the other podcast guests, to speak to a therapist who could help them unravel where these beliefs come from and get to the root of any issues. A professional could help them “understand why he has such an unrealistic relationship with money and how it manifests itself in so many different ways.”
One of the issues underlying the couple's financial woes is the fact that David has made all of their financial decisions alone because Halima lacks confidence in her own financial literacy.
Additionally, they both had a long-held belief that the “head of the household” should be the primary breadwinner, which led to David competing with them for pay. But that didn't work out well for either of them.
“Our lives are better now because we have each other,” David said, emphasizing the struggles they faced as individuals before they met, “but financially, we're back in a bind.”
Sethi urged Halima to take money seriously and be proactive in asking questions when she didn't understand a financial concept, and encouraged David to see her as a teammate, not a competitor.
“We motivate each other, set ambitious goals, [say]”'When we hit this number, let's do X,' is a really motivating thing,” Sethi says. “And then you can congratulate your partner and say, 'Wow, you did a great job. I love you. I feel safe with you.' That's how you become a team.”
Sethi pointed out that when two people compete and one wins, the other loses. “You don't want the other person to feel like they've lost,” Sethi said.
Check out the full podcast episode here.
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