Financial Expert Ramit Sethi Helps Struggling Couple with Healthy Income
In a recent episode of his podcast “I Will Teach You To Be Rich,” financial expert Ramit Sethi spoke with a couple who, despite having a healthy income, were still struggling to make ends meet. The couple, Bebe and her husband Paul, described their income as “decent money for a middle-class family.” However, they found themselves stuck in a precarious financial situation that is all too common in the United States.
According to a December 2022 survey by PYMNTS and Lending Club, 66% of U.S. adults earning between $50,000 and $100,000 annually are living paycheck to paycheck. This statistic sheds light on the larger issue that Bebe and Paul are facing.
“We don’t understand where the money’s going. And in comparison to everyone else around us, and our peers, and our children’s friends, we are the poor people,” said Bebe.
The couple’s financial struggles stem from a series of unexpected challenges and bad habits. They had an unplanned pregnancy that led to the birth of their first son, Liam. This forced them to change their lifestyle and move closer to Paul’s mom for support. They later moved again to live with Bebe’s dad when he was diagnosed with cancer, and then with Paul’s dad who was also diagnosed with cancer.
Amidst these challenges, the couple found themselves maxing out their credit cards. Paul even resorted to taking out a high-interest payday loan, borrowing $750 and making $200 bi-weekly payments. Eventually, they spent $3,500 on this short-term loan alone.
Sethi acknowledged the couple’s struggles but also pointed out their reckless spending habits. Bebe described a $2,000 mattress purchase as “basic and midline,” despite having to use a line of credit to afford it. They also have multiple credit cards and frequently use “buy now, pay later” apps to shop.
To help Bebe and Paul recover from their financial hole, Sethi provided several recommendations. First, they need to reduce expensive debt by paying off credit card balances and avoiding high-interest short-term loans. Setting modest goals, like saving for a quick family trip, can also motivate them to save. They should eliminate recurring payments by canceling subscriptions and avoiding “buy now, pay later” schemes. Additionally, Sethi advises them to be honest with their children about their financial situation and make changes as a family. Lastly, Bebe should ask for a higher salary as Sethi believes she is underpaid and could potentially earn an additional $30,000.
Implementing these changes will require Bebe and Paul to plan and constrain their spending, eliminating impulsive and wasteful habits. These recommendations can not only help the couple but also other families living paycheck to paycheck.
It is important to note that the information provided in this article is for informational purposes only and should not be construed as financial advice.
