Americans owe more than $1 trillion in credit card debt as of the third quarter of this year, according to Federal Reserve data. The average consumer’s outstanding balance breached $6,000 as of September, according to TransUnion.

Ron and Cristina, however, have around $30,000 in credit card debt, the couple recently told self-made millionaire Ramit Sethi on the Netflix star’s “I Will Teach You to be Rich” podcast. Only their first names were used.

That number may seem daunting to the average consumer, but the couple didn’t seem too worried about it — they even bought a $10,000 timeshare last year. But Sethi revealed their larger financial issues at play.

“The two of you were so calm about this credit card debt, and it’s because you don’t understand the implications of this debt,” Sethi told them. “If you can’t pay this debt off quickly, it will stay with you for five, 10 years.”

Tackling the debt will be a challenge in and of itself. But a lack of financial literacy has led to habits that are holding Cristina and Ron back from achieving financial freedom and building wealth.

Here are the habits that got the couple into a tough financial situation, and how Sethi suggests getting out.

Habit No. 1: Avoiding money conversations altogether

When Sethi asked Ron to describe his feelings toward money in a single word, he said “afraid.” Cristina handles all of the couple’s budgeting and is the only one who keeps an eye on their account balances.

As a result, the couple said, Ron never wants to spend money and leaves it up to Cristina to decide everything on her own, which has caused rifts in their relationship.

Ron considers himself frugal. He is loath to spend money on things like dinner at a restaurant or the occasional vacation Cristina wants to plan. But Sethi explained that there’s a difference between being frugal and being cheap.

“If you are a conscious spender … your frugality only affects you,” Sethi said. “But if you’re cheap, your cheapness affects everyone around you.”

He helped Ron realize that they earn enough income to cover their necessities plus some of the more fun things, like dining out and traveling. But they need to properly manage their money.

Habit No. 2: Managing money through trial and error

Although Cristina manages the couple’s finances, she doesn’t always understand what she’s doing, Sethi pointed out.

“What I’m hearing is that both of you are not exactly savvy with money, and that’s OK — you haven’t made huge mistakes yet,” Sethi said.

Part of where they lack awareness is around how their attitudes about money affect their spending. They have also struggled to figure out a financial plan that works for them. 

“Money is never simply a series of numbers on a page — it’s contextualized within your culture, your upbringing, your risk tolerance, even your basic understanding of money,” Sethi said.

In talking with Sethi, Ron realized a lot of his hesitancy to spend money comes from his upbringing, since his father was afraid to spend money. Cristina, on the other hand, experienced severe poverty while growing up in the Philippines, so she’s proud of how far she’s come, but also knows the importance of smart money management.

Sethi encouraged the couple to learn together about good financial habits and discuss any money attitudes that could be getting in the way of their long-term goals.

Habit No. 3: Falling for money traps

Cristina and Ron’s timeshare purchase reflects a $10,000 mistake that could have been avoided with a better understanding of common money traps and how to weigh costs against benefits.

“Timeshares are a scam. They are never financially a good decision,” Sethi said. 

For starters, even for a money pro like Sethi, the math on timeshare costs is “extremely complicated.” He compared them to casinos in that the dealer always has the advantage.

“It is almost always a better decision to simply spend money on your own hotel or Airbnb, or even rent someone else’s timeshare,” Sethi said. “You can tell because there are so many desperate timeshare owners you can often get these things for a steal.”

It’s not clear whether the couple will be able to get out of the timeshare contract, leaving them with few options where they don’t take a loss. But Sethi said that’s OK — it’s a learning opportunity.

“Sometimes you have to take a loss on certain things,” Sethi said. He compared the situation to that of a couple he previously advised to sell a house they couldn’t afford, even if they would take a loss. 

“You either lose it now or you’re gonna lose it over the next eight years and fight every day of your life,” he said.

Check out the full podcast episode here.

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Ramit Sethi on why controlling your own money can be harmful

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