“Early 30’s, $75k student loan will be forgiven. How’s our spending?”

Today I’m going to analyze the Conscious Spending Plan for a couple who spends 52% of their take-home pay on their Fixed Costs. [Podcast Newsletter Header](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02s63qn9gW7lCdLW6lZ3pGVT04Kx5Hr0HmW287P5v78wB5vW82X11V6p2v7LW5VdPYd1B8MySW87vXNJ8G0G44W2w7pX-5kFXqdW1PQSpN31cT99W8jF83W7XbJlwW620LpL6Y-5YNW23dh0q3qGKcdW1z298j2LwkT2W41rNW92R2FfnW865fKv3z4HM3W425MNv6Vkc0yW1cTXw9800670W3GDtnY6vJBV5VF773g98RR1qW92B0Ml3SxlH2W8gNSgC2-QpxfW5Kjfhp65GNyVW8t84Kv6lW0jDW8vTmGS60XllvW6zMhkL2_0VTgN1D7sqfXsNMnf2zqSBY04) {NAME}, Today I’m going to analyze the Conscious Spending Plan for a couple who spends 52% of their take-home pay on their Fixed Costs. This is great — I usually recommend keeping it below 60%. The question is, what are they doing with that extra income? Let’s find out below… When it comes to my business, I want all my numbers in ONE place This newsletter’s sponsor, NetSuite, can help you do that. You can cut the cost of maintaining multiple systems because you’ve got one unified business management suite. NetSuite is the number one cloud financial system, bringing accounting, financial management, inventory, HR, into one platform — one source of truth. [Get a product tour here and learn about their flexible financing offer available through April 15th.](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02s63qn9gW7lCdLW6lZ3lPW92HfgP524tR2W4nVhQM5cXGv6W4m3lGn7f5nDDW5cpB6_86Nz39W8VbcZ36T8jpmW5s_sMJ2ztxlvTb6Kf7t9Mt3W2dsBYR1MkM5JN42KZJ8blQ66W8twq3D4pXR2pW3LQG773ftHJPW3fCS822HCN1zW5MwpZ_12BqW6Vn_gn17fQr3JW1hKLQ456wrhrW15tyJ55w0mm0W9gq-lC2zgGbyV4KDY-4-nyBtW5kj6Hd2B-F6kW1_45l823WRTDW5PPll025BYmFW1d-CCM3rRcvmW52mNKK2YHF_KW2Jbdg492gQc7f4xzjHs04) Check out this couple’s spending Here are a few details about the couple who sent me their [Conscious Spending Plan](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02rR3qn9gW6N1vHY6lZ3kKW5fK-154_b3_xW3qRcmH5R-dtZW6vz2Lj2wn-MpW6Pq9z04vtHbGN8sK6V7R63b0V5-VPc8dD-W8N7GghVhgYfLVN8Y_v5N-Fn5zW3n2hCr4jxjF-W1cXLSF2MSprqW4Qhxcz2sq4MBN7kCVLnT3sTwN8TmWHJGkRdkW4qN_025WYrXSW5CxK6b3dzvkzW6R2rqY6TnGgdVJHVJ571ZP6zW4BXdJ85k_1SxW31mysf6078drW2DzM4V1XcHg2W1qD_Ms5nDh_pW4R7Crv6418lgf26KCqR04) this week: - 28 and 32 years old, no kids, 1 dog - School counselor and school principal - Living in Philadelphia - $75,000 of our debt is student loan debt — we qualify for student loan forgiveness in about 3.5 years so we are making minimum payments on that Let’s take a look… NET WORTH Assets (current value of car, home, property, business) $470,000 Investments (include 401K, non retirement — all investments) $106,000 Savings $20,000 Debt (student loans, credit card debt, mortgage) $410,000 TOTAL NET WORTH $186,000 INCOME Gross monthly income (all income before taxes added up) $17,588 Net monthly income (how much you take home after taxes) $11,256 FIXED COSTS (50-60% of take home) 52% Rent / Mortgage $1,705 Homeowners insurance $100 Utilities (gas, water, electric, internet, cable, etc.) $275 Health Insurance $182 Auto Insurance $182 Car Payment / Transportation $700 Debt Payments (Student loans - 4 more years) $574 Groceries $700 Clothes $200 Dog (vet, walks, food) $400 Phone $40 Subscriptions (Netflix, gym membership, meal services, Amazon, etc.) $160 Miscellaneous (automatically adds 15% for things you forgot) $680 FIXED COSTS TOTAL $5,898 INVESTMENTS (10% of take home) 5% Vanguard ROTH IRA Partner 1 $200 Vanguard ROTH IRA Partner 2 $440 INVESTMENTS TOTAL $640 SAVINGS GOALS (5-10% of take home) 19% House Improvements $320 Island Wedding $600 Europe Trip $500 Long Term Emergency Fund $400 B new car $80 Wedding Gifts/Hotels for Friends $110 Triathlon Fund $100 SAVINGS TOTAL $2,110 GUILT-FREE SPENDING (20-35% of take home) 23% GUILT-FREE SPENDING TOTAL (Dining out, movies, anything you want!) $2,608 My thoughts - This is an interesting scenario. I especially like that they know their student loans will be forgiven soon so they’re paying the minimum. This makes sense — no reason to pay more towards loans that are going to be forgiven, anyway. - Let’s take a look at the numbers Net worth - Assets of $470,000. That’s their house. - Investments of $106,000. Wow! I haven’t yet looked at their income, but for a school counselor and principal, both around the age of 30, this is very impressive. - Savings at $20,000. Nice. The best predictor of your future behavior is your past behavior, and they’re demonstrating an ability to save and invest. - Debt is $410,000. $75,000 is student loan debt, which will be forgiven, and $300,000 of mortgage debt. - Overall a fairly strong position, especially for these positions and their age. Income - $211,000 gross income. Well...my assumptions about their income were off. I thought they made a lot less than they actually do. Am I out of touch about school counselors and principals? Or do they work in a private school?? Anyway, this is great! Fixed costs - At 52%, I have no comments. - This is something I want to emphasize: if you’re within the Conscious Spending Plan guidelines, I don’t have any comments about your individual choices. Why would I? Your Rich Life is yours. If you want to spend the majority of your fixed expenses on a car, or supplements, or subscriptions, be my guest! It’s your money and your choice. I just want you to hit your numbers. - That’s the focus of my overall system. I’m not going to judge you for how you spend your money. I’m not going to shame you. I just want you to treat the CSP like a puzzle and decide what changes you need to make to hit the big 4 percentages. - The only question I have is: At 52% fixed costs, since they’re below the recommended 60% limit, where are they spending the 8% difference? This tells me a lot about a couple’s priorities. Let’s see… Investments - Overall, this number is a little lower than I’d like to see. If I were ~30, making a high income with low fixed costs, I would be piling money into my investments, knowing that a dollar today will turn into MUCH MORE later. - For example, if they continue on the path they’re on, they’ll have about $1,500,000 by the time they’re 65. [Compound interest calculator](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02sK3qn9gW8wLKSR6lZ3pmW2CYmth3zR4r1V3DJz-5sfx8xW9505Tb8J9gFXMLRlHXy7GSvW3FLc8l5mmg6hW7dmk7h1Gl8NMW41_Bq84ZKLsYW6C23N_9hLcNnW8qVmyK7gMMD6W5GmHrn4DYLGHN2MWBvjXwrv2W3k97rZ2178RGN90qTTZxXyJ3W8t8Jvr8dw3GGW7kGVn96lNXdWW3G-PPs1ynjzdW2yXbRx7t8tq5W9jnCvT3d_xKhW3J991r58zVVNW28C8hR1nd0GrW7ChxSW6XhPgKW16qmDJ5HmcSYM4NGGTkt60lW5fN9BN3RrdXdW3gp7bW7pwH6jW3BXLBt1XmD-HW6PdMVN8cWcrMW3hvwHK5nt_DSf28CRvn04) [This is the compound interest calculator I use](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02sK3qn9gW8wLKSR6lZ3mkW94420c2Fy75XW8-LcwJ8lky_lW7ky_sG3M_RzJW7Y-NnF6gqkLCW1wkj092g_B97W4Ps1LT491N60W4mDvgy4kZYJHW4-P-9C8YQC7tW12RScq3f_dmTW7GrdG16wp6VzW3Jry6V7DKc_GW4yg-Q41ywZsWW8JxQqN5rpPR7W8_3xTs268zJnV7QKcV3Qkx1WW4mW2jN4xltYHW8Tq3769c29szW3gLYKL71W1T1W8vGVDk5ZjxDJN2D264-w8RfjW5bRJJf7068cXW6vVFrn5nNqB3W3lBYnt68rGDwW8C95w818mC9rW6-FxTY3WFgxJW7jtxt-5-J0pNVdCZ0v2LxjHbMnpTxj48hZ4dwL2r604) - PLEASE don’t email me about how little that will be worth — that number is already inflation adjusted. - $1,500,000 with a paid-off house is nice, but with the flick of a switch, it could be dramatically more. For example, instead of investing $640/month (or $7,680/year), if they invested $1,000/month (or $12,000/year), they’d have $2,000,000. That’s $500,000 more. And they wouldn’t even notice the money being withdrawn. - Basically, when you have extra money — ESPECIALLY when you’re young — consider investing aggressively. That’s exactly what I did and it pays off. Savings - 19%? Wtf? - OK, so this is where their margin is going. They redirected the money from their low fixed costs here for things like an emergency fund (good), new car, wedding, trips, etc. Fine! - A couple things I notice: First, the savings number is disproportionately higher than investments. They’re living an awesome life — and I love seeing it — but if I could offer some feedback, I’d try to balance the savings and investments numbers a bit more. Maybe 12%, for example. That would let them live a Rich Life today and a richer life tomorrow. - Second, there’s a LOT of sub-savings goals. I recommend no more than 5. After that, it gets complicated and too diffuse. I always fight for simplicity in my finances. Guilt-free spending - At 23%, I have no feedback. Overall - Solid CSP. Yes, they have a high income, which is impressive. Even more impressive is that they know their loans will be forgiven, they know when, and they’re intentionally paying the minimums. - My feedback is minor: Increase the investments, drop the savings, and enjoy your Rich Life. Nice work. What was your biggest takeaway from this CSP? [Ramit Sethi Signature] P.S. New podcast: “We’re broke, but I spend $350/mo on clothes” (Part 2) In part two with Elizabeth and Jonathan, we continue unpacking their complicated personal backgrounds with money as they relate to current spending, investing, and saving habits. They’re stuck in a loop of debt and financial stress, but are they ready to make positive changes? [Check it out here.](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02sq3qn9gW7Y8-PT6lZ3l6W97YhPn6-TX1BW96MkCQ2V2zS_W2xsKcT27Q6qmW2V_6r674YYf2W3Y9BlX5Y13PyVY5x9P5Pys7_W5mYZYV3jrWW7W8933Vq2br-0_W8jd-2Z1GpJTqW2k-fX82vt8m7W16ljG23CS5hSN77YG8dmJdlzW7m5x6R5VxstWW15VxXQ6p8vYRVJKyQ84xCy6QVrPB0j2Pzmn6W1BcF-L906jSJW1D7fb36bfxgCW3lTlJs6lz3QyW91g6rK450PC4W8cz2d55dF1kWW579ytX8m1zjpW6-lpG29hrsjjW1Bfycz26pRS8N8lF7qbtLSq7W4sXVYT3yb6Mqf55QGb004) [Podcast-Were broke but I spend $350mo on clothes](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02sq3qn9gW7Y8-PT6lZ3kwW78jGLP3xccBzW5wXc491FkLNXW3Z3byN6GpFH-W5Lljf15fqwSPW3nFTXM7-nLl2W4P12W-7Kq8KQW2v6bg25lGf71N7HsXwnhJLRmW4YD3Mg5-5m-0W1tNqkp8-wSzDW4347b92_DhktW7FpKzc7G6wQdW78PycR4B-JSyW320VHW9ljB2rN4_BnxK4FSYcW5KKkwD7kHYdtW8KLyFk5hsW7sW4X03hD2zzH7BW7Kzt9y8JdLSLW7t2zM54t5tWjW626zcJ83XVdlW8DBnPB7dshcBW48NqkD3BDb9TW7PtY6_5wNV-YVTbD3C3gmjZ7W6BCqB96z_dCjdBKJ4-04) [Programs →](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02sq3qn9gW7Y8-PT6lZ3plM4-wcpkQLbgMH29CwJ5dNYW5DFdFX9hBvlzW51lYmZ5rMdfSV1QpZg1ldZChW36F9kV47HqrLW66R-Mb1tv6VKW6xV_Rj3y-kx4W5xCpk79lszLVW93JTS322qCxjW7q2fBG6rrbWqW1CF_M33rn3z_N49qSwqGrC-7V9T_9z1CTW5jW36HlvK5TpNXVW4jY-RT8mkHc4W8Mj0Lm2xgVKrW7BLzDg3zX0yRW4rD48M52rt3KW2Gym-Q3cpcNCW6H0h3x96GhyjW6QCzk-6sr4dkW6Jy4sn6b6cz3VVZtDf64HV5vW1RH3T28qc5pgW425QRf7TFm09f7JkWT404) [Podcast →](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02sq3qn9gW7Y8-PT6lZ3lcW5DcJVP19hzX2W156k5710DD__W3K5_0m41QWv_N3VYLfdM1t2kW4cCtlS2QgkP8W8p0D-q74pZSvVY6htH7gR7HCW6RQ0Kj2rZBghW55GNnb8HJFdCW5gbD4p99nH30W4rKggz7KMfNwW58VkZb5q28rtN1h5srGvvSzMW8-b_GP2Tk8QqW101kYN1lxKP9W5Lq0Qw8fdlBsW2vQsV86VFL3sW5KB8m26dTKY2Vgk1KN4pY3ZzW5hwX9G72c4_bW6nBmZJ4Gh_77W76Q9H53x__jXW2k9jps4qpJksW7YlK7c5Jw2dJW94QtFB8k-phjW4QRrQq8VXyM9dJY09v04) [Netflix Show →](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02sq3qn9gW7Y8-PT6lZ3p0W6sHNxK7Q_PM4W617lWB8Bhp-1W7ZnFQV7_sf_xW6r4FT43S8ncdW35S3L5644tZ7W9cVCGF3f3g-gW2FVbZy792l7RW8Dr8t_42nhZzW8tl7WN7QQTVnW4J2BkV1zdvKBW3N2xLd7YD5z7W829FwM2KfxZxW7pvpwj2pVjgYW95J326268pRmW8GhMWK2RkDLpW56j-4L15MzDwW1B1LP428CbDDW23T-8t1XR5JtW6d1FNQ9bt1ZwW6J7p8P6VMB4wW2X1zG_5Zz_fPW3px_QX2qcBqzW6_h8P_1bGbtkW5L7W6b5nvFlXW6D6b_S40qdmpW2-z2kV5w83dXf1SF07K04) [Books →](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02sq3qn9gW7Y8-PT6lZ3q1N3696HpQ4hbBW5TGLrW7D3ptCW11M0HP3dT71tN7CYFDQgTWhjW957_cT3XPLnxW3htFF67Wh-_YW93rFx73kdJX2Vn1J7z77G1LCW1-pkJ36LrcDHW7kNcLr3sQdQ9W4DS_Wx8Y3QYjW5J-QXb4nRrLYW1VrJ0S89fJZnN7GYvvf-XTY8W5XVlH_7f75XVW3t7SG12GQr9JW3zqfDc31XVx7VLzRDT6mGPW_W7ZWdLM3wwSR3W8Q3vxf1XczkbV6nDQq2dPWxRW3PYwyr4XcQMZW26XQ1P1vr9MfW3Z6yWl6KSNzRW1WYXyd6NrPDyW3lqzS72sWWCMf4JWYmK04) [Website →](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02s63qn9gW7lCdLW6lZ3n9W4csxYr1GFwtfW7Q6KS04FBJ9dN4mfvl1q7CvkW8l_lgp39hXt-W4xP10G3C_H-XW2tYrZp8yj_HPW5nqGWQ25vb8NW5x7NXr4vV902N7bQT7HyDz-LW80402z8PLJm4W6B1cfl3bWw38W8zlxjm6q5tJ9W3rphFl7Dd1KyW7TnKMl1nr_nGW73k2xG13BkY1W18yGJB5w2QlGW2WWnL57Yxxt7W715xFp4T9_wBVPtTdr2_n32PW3PDM0l39dXCbW83Wkf33pVJ2qW2BpZ542CYMX0W1Pl03k7yPsKKN66bYtFkb44bd504DP04) [Instagram](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02s63qn9gW7lCdLW6lZ3m-W2ByNQf4nn_pPW84CW7m6dVtxPW8ZV53115_xCLW5GRg1l5qVm_ZW1Zm0Q-5CY9x1W7tGtxs1h56yFW3V02jN1Z8gfwW11lbSq182_wbW5PZC_38zLvZZW1G75j03HnW9WW1b2Zy87CxMh_W8dS8RT1n4mcxW8-1gZW5GHP4lW7DQSmL8knGCCW2j41J_5-2ysMVyLxQG6H31RsW8k6XyK6BfbPfW6Lm9H833Jj1SW6xpf_h7_5Bt6W5sDxcm8dnFFRW8cfcB-5NL-MqVgFnnq74kg9rVwlYbf4bVPsdW3Y15vp4drmkMf4HDrh204) [LinkedIn](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02s63qn9gW7lCdLW6lZ3q2W5kP1hm6_Nsz8N6xWv2__-BMsW46BQFQ6jDvd0W25Skg087c5bfW7Ctvwx3m68vpW70Pvnd6sRw_VW84Lcq760qTvpW5_1nbm5h_TkyW5Kg1Z61cWm3vN6nrRPkDVDWrW46_CwV4HYgnXN2kPG73Q9lcfN2jX3Q-d6q89W2hQ69W2Dy_wRW8qPKx92fk9gYW1V7_yR7ycsByVMvPvl49-3g-W7dptlG14DNyFN89vq_7m2FSyW1g2CHR89q6JcW8ZlZpd2mpXd0W1nmcqf4HNSb8W1yng9c2gNQZSN1FY7y7N-l20f9hfs9Y04) [Twitter](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02s63qn9gW7lCdLW6lZ3ndW2rt16_3T9DGvN7N4c3DXCNwHW55bgld5jQdLzW8M_41V3BVqTcW4HN1Lr2DGt98W3ThV9g77c4YqW3_3hdN5BllfsW4qxT8n73FHPvW1n_TX35hFtZWN5mcvDL90GHlW10dRv-2tbckjW4zknBK1vf2SdW6lV22j8SzpLmVjDdwd8J2YlVW3xZDrn5VYCb3W5vNY9L3sQz8cW5-gyV-8hH4wtM65K84cW2HGN5xr8hnkLV3HW5w-5xr82P4v1W1tfpDq4C6t5PW6Gb8s46lvHWXW6w1Gb14zTwJPW80cB5V33Pcj6f8trt2s04) [YouTube](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02s63qn9gW7lCdLW6lZ3ntVJ9j4q8sHSChW7py1yn5l2fmSN935hJp4-fGqW18KHcs6zN0BNW6HfktS466YbtW295yqL95_kdbW695rCh5RDMTXW3NWp5f1vD8z7W2mGM371GnRdPW41N_C-1r-VCnW2D1xMG3y_V1TW8xqrLL4JCrysW28mMY723gryXN9fzqczqsM7BW1-MD4Y56XG8BW503Vgv7rBsCRW8TPFzV5ZQqmVW1FWvmX206T2XW8sdxd23-BTCZW5qQysK6yMtxTW4LFz7W2-GVlQW5qn6dp7GH1PwW5RwlPh10Yp0DW67fwCX3Mp8XXf43L2Jl04) Was this forwarded to you? [Sign up here.](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02s63qn9gW7lCdLW6lZ3m2W5KM_Gh20lLQdW4lrGYf2-2XQNW5G4QXr46ql3TN4KdfxgyWyXDW25XB8K7g_0mdW8mlLvd8sPr7DW6Sxznb4MJ8T7V2Cpq57mJkfGW6ZQ9Kn6_SkYrW7wLGJt5cWC5XW2Pp0yV4d8LvkN7NCmwZ4MG3qW7N0Vkn3Dth_HW4MSdV_6X4g36W9cz4Rj4gtHc6N7vrfjqrFmjxW3Nl5Cs5nzXBhW5FSrYD3cDQdFW5cR3nn2dLT8QW62SlCq5mWFD0W17TXr379nwM0W31nc-S5G99gDW3nF0wq7Y8ytbW2_6tDg8SZcNLf52pQL204) [Unsubscribe here]( [Manage preferences]( I Will Teach You To Be Rich 548 Market Street #89946 San Francisco, CA 94104-5401 [20th Anniversary Badge](113/d586LZ04/VVTHbJ8_Pr9QW3qGt4618BHfxW3cF4jk5czz50N6Q02s63qn9gW7lCdLW6lZ3p-W2DJ7cV6KpHkfN6J3gby3HLnTW226bFt29F9GWW5GWSJG51z_mfW2jHJNq2LPFYMW6dp61Y4KryfLW4Y8jkZ3r35y8W3P1TNc6TKvmpW4nwKvr44G1F5W1FyJ0x6c6ybnW9fc_LV4fQjZjN8HsrzCFFLwbVZFwfd2cRx5KW5DmNMx4-KNDNW8g-PYr5bzBcVW2KXt_J9j22CmW6-0ckq1n2bWJW4HPYZN5HvJqwW89LQhz8KmQ3PW5rM-lD3Cf1djW5Pvb4r8-Z41HW7C0z7f1K3N2CW8tTHwb64g8RmN5SD2WqXQCG8f9lSDXg04)