A young engaged couple “constantly feel poor” despite having an impressive income of US$235,000 (AUD$396,000) along with an exorbitant net worth.
Paul, 33, and Maddie, 29, moved from the US to London and are living on one income.
Paul quit his job and left Maddie in charge of supporting them financially, but that left her anxious and stressed.
Joining money expert Ramit Sethi on his podcast ‘I Will Teach You To Be Rich’, the couple admitted they have been spending US$7,000 (AUD$10,464) a month to fund travel, shopping and their engagement.
But this means they now spend more than they earn each month – that’s the core of the problem.
Maddie takes home $19,583 a month, and the couple spends 63 percent of that on living expenses, such as rent, food, subscriptions and other miscellaneous items.
They have no debt apart from a small loan, have US$27,000 (AU$40,361) in savings and invest US$1,000 (AU$1,494) a month. Paul said he has US$627,000 (AU$937,275) invested and a net worth of US$649,000 (AU$970,162).
However, Maddie said she is torn between two different mindsets when it comes to money.
Paul, 33, and Maddie, 29, moved from the US to London and are living on one salary – and are still able to go on regular holidays. But the problem is their spending habits (file image)
“I think I’m going to live a luxurious life and live it up. I work hard. I’ve made a lot of money. I can do what I want, we can travel a lot and have a wonderful wedding and all that stuff,” she said in the podcast episode.
“And then the other side, constantly feeling stressed and guilty about it.”
She added: “I think I have a scarcity mentality – I feel like anything can be taken away from us at any time and we almost need to hoard money.”
“I know all about compound interest and long-term investing, but for some reason there’s a mental gap between what I understand and how I feel emotionally. I’m scared.”
But Paul doesn’t feel the same way about finances: he’s optimistic about the future and says that when he thinks about money, he thinks about what it can do for them.
The couple currently live in London and admitted they have been spending US$7,000 (AUD$10,464) a month to fund travel, shopping and their engagement (file image)
Now that the couple relies solely on Maddie’s income, she has a “constant fear of being laid off,” which she describes as a “recurring nightmare.”
“I feel a lot of pressure because I’m the only one generating income,” she said.
Paul was a corporate lawyer, so the couple was surrounded by “immense financial stability.” He quit because it wasn’t an exciting job, he worked “100 hours a week” and wanted to pursue something more creative.
Now, even though Paul is unemployed, Maddie helps him by micromanaging him and wants him to find a job soon.
Maddie admitted that she has an unhealthy relationship with money and feels stressed when she goes shopping or orders another appetizer at restaurants.
The couple also acknowledged that they need to work on turning down social invitations to save money for their future if they want to have children (file image)
“I think you earn the right to feel good about being in the red occasionally if you have a very large net worth,” Ramit said.
“But I think when you factor in the fact that you’re losing money every single month and you plan to continue doing that for the foreseeable future… it starts to get more complicated.”
Paul estimates he will earn between US$150,000 (AUD$224,228) and US$250,000 (AUD$373,714) once he finds a job.
But Ramit said the problem is spending habits.
“It’s not really normal for people who make $230,000, which is a very nice income, to travel eight times a year internationally, plus their own personal travel, plus Barry’s Bootcamp, plus shopping trips and golf trips,” he said.
The couple agreed that their spending habits and lifestyle are based on the pressure they feel from social occasions and culture.
“We hang out with people for whom money isn’t as much of a concern because of their background. We definitely feel like we have to keep up. Or not, we want to keep up,” Maddie said.
Paul added: “It’s this compulsion to be in everything and live a social life that just drains us.”
The couple plans to get married and have children in the next few years, so they want to make sure they succeed.
But Ramit said things will have to change to help make this vision a reality so they can support themselves and their future children.
Maddie talks about the “lifestyle escalation” and how if they earn more, she wants to spend more, something Ramit agrees with.
The couple also acknowledged that they need to work on turning down social invitations in order to save money for their future.