Ramit Sethi on Why Splitting Bills 50/50 May Be Financially Toxic For Some Couples — Even with Six-Figure Incomes

Christine, 47, and Thad, 57, have been together for over six years. Despite having a combined income of $167,625 (£125,378) annually, the couple has $339,000 (£253,561) in debt, zero assets, and a meagre savings of $2,612 (£1,953).

Thad's $17,000 (£12,715) student loan has ballooned up to $125,000 (£93,496), while Christine has $180,000 (£134,634) in outstanding student loan debt, which she believes is impossible to pay off in this lifetime. Together, Thad and Christine have nearly $250,000 (£186,992) in student loans.

When Ramit Sethi, millionaire author and the host of Netflix's 'How To Get Rich' show, interviewed them on his YouTube podcast, he learned that Christine sees herself as the only one in the relationship who worries about money.

She expressed her frustration that despite trying her best every day to pay down her debt and get her finances in order, she still has to micromanage Thad's finances. 'I'm a worrier and he's an avoider. I worry about our finances, our lack of retirement accounts, and our lack of savings.'

'We don't really have a fight about money because I'm just managing it all,' Christine added. However, Thad believes that the main issue is the lack of clear communication and trust.

Sethi said that Christine jumping in to solve the problem is part of the problem. He implied that when people feel they are out of control, they might try to control the smallest things to have a sense of control.

Splitting Bills 50/50 Despite Unequal Incomes

The couple started splitting the bill equally when they moved in together. Since Christine earns less than Thad, a 50/50 bill split results in very high fixed costs for her; 78% to be exact. Meanwhile, Thad's fixed costs hovered at 50% of his monthly income.

Interestingly, Christine's guilt-free spending was 17% while Thad's was a whopping 49%. It means that Thad is spending almost half of his take-home pay on guilt-free spending like food, clothes, cigars, and partying.

Sethi highlighted that Christine is making a lot less than Thad, but still paying 50% of the monthly costs is a major problem. The author also shared that the couple might be delaying marriage because it could affect their debt payments; the six-figure loans create a toxic mix of frustration and complacency.

Thad grew up very poor. 'The relationship between my money and how I was taught and raised formed the habits I have now,' Thad stated. 'I don't value it much [money], it comes, it goes. I waste it. I spend it. I drop it.'

Furthermore, at one point, Thad did not expect to live past 30 in a neighbourhood that lacked family structure and was hit hard by a drug epidemic. If he continues on the path he is currently on, Thad said he will end up homeless under a bridge, still trying to do standup comedy at the age of 70. Sethi understood that it would have been difficult to think about retirement when a person did not even imagine living past 30.

Even Christine's parent racked up debt while she was growing up. Sethi believes she is also caught in the same cycle at present.

Future Plans, Roadmap to Higher Savings

The couple plans to move into a lower-cost area once Thad's 14-year-old daughter is out of high school. Christine still thinks they won't be able to afford a car or vacations; it is going to be a cramped life moving forward, she said.

While curating a plan to bring down the couple's combined fixed costs of 61%, Sethi saw they spent $207 (£154) on monthly subscriptions, which he insisted should completely go away. The couple also considered dropping their monthly cable bill of $235 (£175). These two moves brought down their fixed costs to 56% from 61%.

The couple is left with $4,000 (£2,991) monthly to do as they wish, and Sethi recommended they use more than half of it to put into retirement accounts and personal savings. He also calculated that if the couple grow their existing $136,496 (£102,094) investments with $1,500 (£1,121) monthly contributions at a 7% rate of return, they would have a wealth of $776,466 (£580,771) after 13 years. It means they could safely withdraw $31,000 (£23,187) annually, which is not enough but will supplement their social security incomes.

Overall, Sethi suggested that they should try to increase their income levels while following the financial plans he created for them to increase their chances of living more comfortably in their retirement years.