Quickly Identify & Fix Your Beliefs

[00:30:32] Ramit: How come we spent so much time talking about 7-Eleven snacks but we’re over here with over $70,000 of credit card, a 69,000-dollar car loan?

[00:30:45] Michelle: I know. Yeah, I knew that was coming. I don’t even know why we got that car, to be honest. Because we did the math on it, and we couldn’t afford it. And then I don’t know what happened, and we– not that I don’t know what happened. I know what happened. 

[00:31:00] Ramit: What happened?

[00:31:01] Michelle: We still went for it because I was just being an enabler, and I said, yeah, it’s okay. We’ll figure out how to make it work.

[00:31:08] Ramit: And when you figure it out, who do you become in the relationship?

[00:31:13] Michelle: The hero.

[00:31:14] Ramit: Yeah. And by the way, what kind of car was it, Kevin?

[00:31:18] Kevin: I have a BMW. A lot of this was before I took that pay cut, but now that I have taken that pay cut, it’s so ridiculous, and I know I have to get out of it.

[00:31:32] Ramit: So how come you haven’t?

[00:31:33] Michelle: Because then we’ll take a loss. I mean, regardless.

[00:31:37] Kevin: Yeah. So the reason–

[00:31:39] Michelle: What was the worth of the car or whatever? You did the Kelly Blue.

[00:31:43] Kevin: Yeah. So the car’s valued at about 48,000, and 69 is what I owe on it. So I definitely would take a loss, but we haven’t taken the time to go in and figure out what our best option is, to be honest. The reason I stayed with them– so I had a BMW previously. Hers is a Mercedes. So we both have luxury vehicles that we both have no reason to be in.

[00:32:08] Ramit: You have a BMW and a Mercedes.

[00:32:11] Kevin: Yeah. That’s literally half of our income.

[00:32:14] Ramit: Mm-hmm. And those cars also take some pretty expensive gas, huh?

[00:32:18] Kevin: That is why I say I spend a lot of money on gas.

[00:32:23] Ramit: How come you got the cars? That’s what I’m curious about.

[00:32:26] Michelle: I don’t know. I’ve always had a luxury car since I was younger.

[00:32:29] Ramit: Oh, that’s a good reason to–

[00:32:31] Michelle: Well, because my dad always had a luxury car too. I don’t know, it just seemed like an asset that you had that. It made you feel good because you work so hard. You want to have a nice car.

[00:32:42] So I’ve always liked to have a nice car. This is getting into specifics, but I had a Lexus RX 500. It was paid off. It was great. It was fine. And one day, I don’t know what happened. We walked into a dealership, and we were looking at cars, and there was a really nice M series BMW.

[00:33:03] So I traded in my Lexus for the BMW that was on a lease. So then after that, we were having a baby. It was too small for the baby and everything, so that’s why I decided on the Mercedes. It was bigger.

[00:33:17] Ramit: Hold on, hold on. This is classic Americana in the worst ways. First of all, a luxury. How much were you making at the time where you had that Lexus?

[00:33:28] Michelle: Maybe 60,000, $70,000 a year.

[00:33:31] Ramit: Okay. Thank you. This is making my story even better. Making $70,000 a year, buying a Lexus. Basically, spending 100% of your salary on a car. Then you go, hey, this car’s paid off. I know what I’m going to do. I’m going to incur more payments.

[00:33:44] Michelle: It was the worst thing I ever did.

[00:33:46] Ramit: So you go in there. And then the minute you have a baby, what does every single parent in America do? We need a house and an SUV. Why? Because our little infant that can’t even move needs to around.

[00:34:00] Michelle: Right. Yeah, I know.

[00:34:01] Ramit: And so you go, you buy 1, 2, 3 things. Income goes down. One of you goes to school, one of you takes time back from work, etc. So you have these skyrocketing costs, lower income. Heavier costs with the baby. And now what happens? You’re trapped.

[00:34:18] Michelle: Stuck. Yeah.