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According to the report, Americans carried more than $1 trillion in credit card debt as of the third quarter of this year. Federal Reserve Data. According to TransUnion, the average consumer’s unpaid balance exceeded $6,000 as of September.
But Ron and Christina have about $30,000 in credit card debt, the couple recently told Ramit Sethi, a self-made millionaire on Netflix’s Star Show. Podcast “I will teach you how to get rich”. Only their first names were used.
While that number may seem daunting to the average consumer, the couple doesn’t seem too concerned, even purchasing a $10,000 timeshare last year. But Sethi made it clear that there were larger economic issues at play.
“You two have been so calm about this credit card debt because you don’t understand what it means,” Sethi told them. “If we can’t pay off this debt soon, we’ll be stuck with it for five or 10 years.”
Tackling debt will be a challenge in itself. However, a lack of financial literacy creates habits that prevent Christina and Ron from achieving financial freedom and building wealth.
Here are the habits that have gotten couples into tough financial situations and how Sethi suggests they can break out of them.
When Seti asks Ron to describe his feelings about money in one word, he replies, “Scary.” Christina manages all of her couple’s budgeting and is the only person who monitors their account balances.
As a result, Ron never wanted to spend money and began letting Christina make all her own decisions, which caused a rift in their relationship, the couple said.
Ron considers himself a frugal person. He hates spending money on things like dinners at restaurants and the occasional vacation that Christina wants to plan. But Sethi explained that there is a difference between thrifting and cheap.
“If you’re a conscious spender, frugality only affects you,” Sethi says. “But if you’re cheap, that cheapness affects everyone around you.”
He helped Ron understand that they were earning enough to cover their necessities as well as fun things like eating out and traveling. But you need to manage your money properly.
Although Christina manages the couple’s finances, Sethi points out that she doesn’t always know what she’s doing.
“What I’m hearing is that neither of you know much about money, and that’s OK. You haven’t made any big mistakes yet,” Sethi said.
One reason they lack awareness is how their attitude toward money affects their spending. They also struggle to come up with a financial plan that is right for them.
“Money is never just a bunch of numbers on a page. It’s contextualized in your culture, upbringing, risk tolerance, and even your fundamental understanding of money,” Sethi says.
While talking with Seti, Ron realizes that much of his reluctance to spend money stems from his upbringing, as his father was afraid of spending money. Meanwhile, Christina experienced extreme poverty when she was growing up in the Philippines, so while she is proud of how far she has come, she also knows the importance of smart money management. Masu.
Sethi encouraged couples to learn about good financial habits together and discuss any financial concerns that may be getting in the way of long-term goals.
Christina and Ron’s timeshare purchase reflects a $10,000 mistake that could have been avoided had they better understood common money traps and how to weigh costs and benefits.
“Timeshares are a scam and are never a good financial decision,” Sethi said.
First of all, calculating the cost of a timeshare is “very complex,” even for a money pro like Sethi. He likened it to a casino in that the dealer always has an advantage.
“In most cases, it’s a better decision to simply spend the money on your own hotel or Airbnb, or rent someone else’s timeshare,” Sethi says. “There are a lot of desperate timeshare owners out there, so we know that these things are often obtained through theft.”
It’s unclear whether a couple can get out of a timeshare contract, and there are few options without losing out. But Sethi said that’s okay, it’s a learning opportunity.
“Sometimes you have to take losses on certain things,” Sethi said. He compared the situation to that of a couple he previously advised to sell a house they could not afford, even at a loss.
“You lose it now or you lose it over the next eight years and you’re going to fight every day,” he said.
Check out the full podcast episode here.
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