Christine, 47, and Thad, 57, make a combined annual income of $167,625. But despite their solid earnings, they’re buried in debt — to the tune of $339,000.
Each carries a six-figure loan, “which creates a toxic mix of frustration and complacency and even hopelessness,” said Ramit Sethi on an episode of I Will Teach You To Be Rich (1). “They’re also not married despite being together for over six years, largely because they’re afraid marriage would impact their debt payments.”
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Christine says she’s approaching her 50th birthday with nothing to show for it. The couple hasn’t been able to afford a house or take vacations. And they have nothing saved for retirement.
Sethi said they’re living in an “alternative financial reality,” but fixing two money habits could help lift them out of “dire danger.”
No. 1: Ignoring problems
Although Christine and Thad earn a decent living, their money mindsets clash. Christine feels she has to micromanage Thad’s spending since he tends to spend freely.
But Thad isn’t living for the moment — he’s ignoring his problems.
“Recently, a medical bill sat on our counter for $50 — sat there for, I don’t even know how long, two weeks or something until it got past due,” Christine told Sethi.
That kind of habit turned his $17,000 student loan into a $125,000 debt, thanks solely to interest compounding over 20 years of missed payments.
“Compound interest can work for you or it can work against you,” Sethi said. “In this case, it works against them, ballooning into something so overwhelming, they’ve basically just filed it away and they try not to think about it.”
Ignoring debt only makes it worse.
“The weight is so heavy that they just give up,” Sethi said. “They stop opening statements. They stop imagining what life could look like without that debt.”
Letting little problems snowball — whether it’s student loans, credit card balances, unpaid taxes, overdue bills — is a huge money mistake. Late fees, penalties and interest add up fast.
That doesn’t just derail your retirement goals — it can impact other areas of your life.
A study commissioned by AMFM Healthcare found that a “majority of Americans are grappling with mounting financial anxiety,” with 67% saying it strained personal relationships and nearly 60% reporting a decline in work performance (2). Housing costs, debt, healthcare expenses and retirement planning were major sources of stress for about three-quarters of respondents.
Money issues can impact relationships, too. One in three American couples view money as a source of conflict, according to an Ipsos poll conducted by BMO (3). Other studies have found it’s also a leading cause of divorce.
When one partner feels responsible for all the bills and budgeting while the other spends freely, resentment can build quickly. The “responsible” partner may feel overwhelmed, while the other feels judged or controlled. That tension doesn’t solve the financial problems — it only makes them worse.
Moving past the dynamic requires open, honest communication. Many experts recommend scheduling regular “money dates” to review budgets and goals together. Meeting with a financial planner or marriage counselor can also help couples find common ground.
Read more: I’m almost 50 and have nothing saved for retirement — what now? Don’t panic. These 6 easy steps can help you turn things around
No. 2: Splitting everything 50/50
Christine earns significantly less money than Thad, yet they still split rent and other expenses 50/50 instead of dividing them by income.
“Christine is paying 78% of her take-home pay to fixed costs while Thad is paying 50% towards fixed costs,” Sethi said. “Considering that Christine is making a lot less than Thad, she’s still paying 50% of their rent.”
After covering his fixed costs, Thad has about $2,820 left each month — roughly 49% of his take-home pay. But instead of using that for shared goals, he admits it goes toward drinking, partying and hanging out with friends.
“If I have money in my pocket, I’m spending it,” he told Sethi. “As long as I pay my rent and my food and the bills. I’m meeting my obligation in the relationship, then everything else is mine.”
That mindset isn’t unusual for people who grew up in poverty, Sethi said.
Thad grew up in an extremely poor household. His dad died at 30, as did so many of the men in his neighborhood, which struggled with drugs and violence. As a result, Thad never expected to live past the age of 30 himself.
“How could you possibly even think of planning for retirement when you don’t even believe you’ll make it there?” Sethi asked.
Christine, meanwhile, grew up with parents who lived beyond their means and racked up debt.
“It’s no surprise that she is caught in the same exact cycle today,” said Sethi. “And this is the unfortunate reality for millions of Americans.”
Should couples split the bills 50/50 or by income?
When one partner makes significantly more money than the other, a straight 50/50 split can create a power imbalance. The higher earner often has more control over spending decisions, while the lower earner may be forced to live beyond their means.
If 78% of your income goes toward housing and fixed costs, you’d probably look for a cheaper place to live.
Fair doesn’t necessarily mean equal. Couples can list all their expenses and split them proportionally by income. Each partner can deposit their share into a joint account to cover bills. That setup lets the lower-earning partner keep some money for other goals, like debt repayment or savings.
Those who merge finances also tend to be happier.
“When we surveyed people of varying relationship lengths, those who had merged accounts reported higher levels of communality within their marriage compared to people with separate accounts, or even those who partially merged their finances,” said Jenny Olson, assistant professor of marketing at the Indiana University Kelley School of Business, in a News at IU interview (5).
Building a shared budget that reflects both partners’ priorities — whether that’s saving for a home or retirement — can help couples get back on track financially. It’s also likely to strengthen their relationship along the way.
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Article sources
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I Will Teach You To Be Rich (1); PR Newswire (2); Ipsos (3); IDFA (4); Indiana University (5).
This article originally appeared on Moneywise.com under the title: This struggling couple makes $167K but owe $339K. Here are the 2 money fixes Ramit Sethi says could save their finances
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