In this episode of the I Will Teach You To Be Rich podcast, host Ramit Sethi explores a listener's struggle with overwhelming debt and its impact on her relationship. Michelle, burdened by $263,000 in loans and credit card debt, has avoided open communication about finances with her partner Matt for years, straining their plans to marry and start a family.
Sethi delves into the origins of Michelle's troubled "money mindset," tracing it back to her parents' dynamics around finances. He provides practical guidance on rebuilding transparency, creating a debt repayment plan, and aligning financial goals as a couple through improved communication and, if needed, counseling. The episode offers insights into addressing deep-seated money issues impeding financial and relationship progress.
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Michelle faces a staggering $263,000 debt from student loans, credit cards, and personal loans. Her monthly debt payment of $2,542 consumes 99% of her fixed costs, leaving her in a precarious situation despite having a career and decent income. As Ramit Sethi notes, this massive "mountain" of debt has left Michelle feeling overwhelmed and undervalued for her hard work.
Michelle's debt strains her relationship with her partner Matt, delaying their plans to marry and start a family. Matt has expressed unwillingness to marry someone with over $230,000 debt and no plan to pay it off, though Michelle sees the debt as solely hers.
For 7 years, Michelle and Matt have failed to openly discuss finances. Michelle often avoids or hides debt information from Matt, who only recently learned the full extent through their Conscious Spending Plan. Matt tries not to push discussions to avoid arguments, while Michelle struggles in silence.
Sethi points out that Matt's tendency to be a "safe space" has inadvertently enabled Michelle's problematic financial behaviors. Matt acknowledges his mistake in not confronting her issues sooner.
Michelle's troubled relationship with money stems from her upbringing. Her father was the sole provider and exerted control through money, instilling feelings of unworthiness in Michelle. Her mother remained passive about finances.
Sethi notes Michelle has internalized negative beliefs like feeling unworthy and avoiding consequences, behaviors mirroring her parents'. Her avoidance of financial talks parallels the lack of open money discussions in her family.
To improve their financial partnership, Ramit advises:
1-Page Summary
Michelle is grappling with a significant financial burden that includes student loans, credit cards, and personal loans, which in total amounts to approximately $263,000.
Michelle’s monthly debt payment of $2,542 has become a massive expenditure, consuming most of her monthly fixed costs and leaving her in an unsustainable financial situation. Her overwhelming debt, which she describes as a "mountain," has left her feeling overwhelmed and without confidence, struggling to see a way to address or surmount her massive financial obligations. Despite having a professional career and making decent money, Michelle sees her large student loan debt—around $250,000 upon graduation—as something that has left her with nothing to show for her hard work.
The reality of Michelle’s debt not only impacts her sense of self-worth but also her relationship with her partner, Matt. It's a potential obstacle to their marriage, as Ramit Sethi points out that Matt h ...
Michelle's financial situation and debt
Michelle and Matt’s relationship faces significant challenges due to a lack of communication and transparency about finances, leading to discomfort, avoidance, and potential mistrust as they consider a future together.
Ramit Sethi observes that in their seven years together, Michelle and Matt have failed to have a real conversation about money. Michelle's inclination to hide her financial situation has resulted in Matt being unaware of the full extent of her debt. When trying to discuss finances or sneak a peek at Michelle's financial planner, Matt is told "Don't look," indicating a distinct lack of transparency.
Michelle, who is embarrassed by her finances, has not been forthcoming about her debts, despite the couple being together for so long. Consequently, Matt trusted Michelle to manage a consolidation loan responsibly but was never shown how the money was used. His shock at learning Michelle's debts and monthly expenses was evident when they filled out the Conscious Spending Plan together. This forced acknowledgment has brought the financial issues they face into stark relief.
Matt refrains from pressing financial discussions, aware that Michelle is uncomfortable with the topic, and seeks to maintain peace in their relationship. He admits to being an avoider and wanting to be a "safe space" for Michelle, which inadvertently has contributed to the stagnation of their financial handling. Michelle's avoidance of tough conversations, demonstrated by her not disclosing her withdrawal from Matt's safe, highlights their difficulties in addressing financial issues openly.
Michelle and Matt's communication and relationship regarding money
Michelle’s approach to money, which includes feelings of unworthiness and avoidant behavior, is deeply rooted in her family background and upbringing.
From the caller, Michelle learned the dynamics of financial control early on. Her father, the family's sole provider, wielded power over family finances, working long hours and using his role to demean his children by calling them “brokey” and highlighting their dependence on his money. He managed to instill a sentiment that his children would never appreciate his efforts towards achieving the "American dream," despite starting with very little. Her mother remained silent, perhaps out of her own sense of financial powerlessness. This form of control extended to Michelle’s father not discussing money or financial challenges openly, which is reflected in Michelle’s current reluctance to discuss financial matters with her partner, Matt.
Michelle’s father’s behavior had a significant impact, with her feeling stupid for not being more involved financially and letting herself accrue debt. Ramit Sethi identifies parallels between Michelle's financial behavior and that of her father's—both lack planning and methodical approaches to finances. Michelle’s memory of her father accusing her of forging his signature on loans contributes to her negative association with money.
Her sense of unworthiness is also seen in her people-pleasing tendencies. When her father behaved inappropriately, he would attempt to mitigate the situation by buying gifts. This set a precedent for material compensation, shaping Michelle's understanding of money as tied to power dynamics and control.
Michelle’s avoidance of financial realit ...
The impact of Michelle's family background on her money mindset
Ramit advises both Michelle and Matt to take proactive steps and engage in open communication to resolve their financial difficulties and build a stronger financial partnership.
Ramit emphasizes the need for Michelle to take control of her financial situation. He highlights that only she can make these changes for herself, and one of the first steps involves creating a concrete plan for paying off her debt. He discusses specific tangible actions she can take, such as eliminating unnecessary expenses, including dining out and Uber Eats, and suggests setting aside a budget for these activities. By making and executing a plan — rather than just thinking about it — she can move towards being debt-free.
Ramit also prompts Michelle to reflect on her self-descriptive language around money, noting the harshness of terms like "scarlet letter" and "worst enemy." He suggests that while Michelle judges herself negatively around finances, her partner Matt takes a more systematic approach devoid of emotional attachment.
Moreover, Ramit discusses the changes Michelle has already begun to implement, such as deleting food delivery apps and setting up auto-pay for her loans. She also has plans to allocate a portion of her paycheck to a future fund for her and Matt. These steps are part of her proactive approach to taking responsibility for her finances and planning for their collective future.
Ramit acknowledges Matt's confusion about the future and how their finances will be managed together. He recognizes Matt's concern about po ...
Ramit's guidance and strategies to help Michelle and Matt improve their financial partnership
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