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Millennial couple making $230,000 will ‘constantly feel poor' unless they change their habits, says money expert

Oleg Breslavtsev | Moment | Getty Images

Maddie, 29, and Paul, 33, live well in London.

Although Paul recently left his job, they're still earning $230,000 a year from Maddie's income, the couple tells self-made millionaire and money expert Ramit Sethi on a recent episode of his "I Will Teach You to be Rich" podcast. Their last names are not used.

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Maddie's high salary, along with some savvy money habits like regularly saving and investing, have helped them live comfortably even in a high-cost area like London. But they still stress about money, especially as they plan their wedding for next year.

Maddie oscillates between two mindsets when it comes to finances. One tells her, "'I'm going to live a bougie, great life. I work hard. I've made great money. I can do what I want, and we can travel a ton and have a great wedding, and all these things,'" she tells Sethi. "And then the other side, constantly feeling stressed and guilty about it."

Though Sethi encourages his listeners to keep a "guilt-free spending" category in their monthly budget, Maddie and Paul seem to be overdoing it. "You're actually setting yourself up to constantly feel poor relative to everyone else around you," Sethi says.

Spending on travel, shopping, means 'losing money every single month'

Going through their finances, Sethi found the couple has done relatively well at keeping their fixed costs in check. Their rent, groceries, car payment and other necessities come out to about 63% of their take home pay, even while Paul isn't working.

But a look at their discretionary spending showed that Maddie has good reason to feel anxious about their finances. The couple admitted they spend around $7,000 a month on travel and shopping. That brings their total spending above their monthly income. 

They've managed to stay out of debt thus far aside from a small auto loan, but with several friends' weddings as well as their own around the corner and their spending habits unchecked, Sethi worries they're on a path to destruction.

"I think you earn the right to feel okay about being in the red occasionally if you have a very large net worth," Sethi tells them. "But I think when we factor in the fact that you're losing money every single month, that you're planning to continue that for the foreseeable future ... that starts to be trickier."

Overdoing it on trips and social events because 'we want to keep up'

Maddie and Paul say they hesitate to change their lifestyle in order to rein in their spending and feel more comfortable about money. They know Paul getting a job will help improve the situation, but they don't want to rely so much on high incomes that they can never stop working.

Yes, Paul bringing in any income, especially a six-figure salary as he expects, would help, Sethi agrees. But the spending is the real problem.

"It's not actually normal for people making $230,000, which is a very good income, to be traveling eight times a year internationally, plus your own personal travel, plus Barry's Bootcamp, plus shopping and golf trips," Sethi says.

Maddie and Paul admit that a lot of their spending is prompted by pressure from their friends and culture.  "We hang out with people [for whom] money feels to be less of a concern due to their backgrounds," Maddie says. "There's definitely a sense like we need to keep up. Or not [that] we need to; we want to keep up."

"It's this compulsion to be at everything and live such a social life [that] just drains us," Paul adds.

'Your income is not commensurate with your vision'

Sethi presses Maddie and Paul about what they actually want out of life and what sacrifices they may be willing to make to get there.

Having a big wedding for themselves is important to Maddie and Paul, as is their financial security, they reply. They plan to have kids within the next several years and want to make sure they're setting themselves up for success in that phase of life.

Even if Paul gets the salary he expects at his next job, the couple would be wise to make some changes, Sethi says. "I love your vision for an even greater life. It's beautiful," he adds. "But your income is not commensurate with your vision, nor will it be."

The idea of "keeping up with the Joneses" and lifestyle creep are common pitfalls because humans are social animals, Sethi says. But Maddie and Paul need to acknowledge that their friends' lifestyle choices have nothing to do with their personal financial situations and goals.

"We're all part of a larger community that influences our spending," Sethi says. "The minute you start accepting that is the minute you can decide which societal influences you want to accept and which don't align with your rich life."

Paul and Maddie acknowledge they need to work on declining when their friends invite them to go on trips or to attend weddings that aren't a priority so they can put their money towards the things that are most important to them.

"We have to be more intentional and purposeful with our spending decisions, especially by getting more comfortable saying 'no' both to ourselves and to outside commitments," Paul says in his follow-up video. 

Check out the full podcast episode here.

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