Despite having $3 million in assets, the couple's financial situation is hindered by their $40,000 in credit card debt due to poor financial management, according to a money expert.

High earners can still accumulate significant credit card debt if they do not control their spending habits.

Jason and Megan, both in their 40s and 30s respectively, make a combined $256,000 annually and possess approximately $3 million in assets, including their home, a second property, and $900,000 in investments. Despite their financial success, they have accrued $40,000 in credit card debt, which they disclosed to Ramit Sethi during a recent episode of his "Money for Couples" podcast. Their last names were not mentioned.

Although the couple's high income and available assets have kept them financially stable, their impending baby will increase their expenses and decrease their income as Megan takes maternity leave.

They could eliminate their credit card debt quickly by utilizing their savings and investments, but if they don't address the root cause of their debt, they may repeat the same mistakes, as their conversation with Sethi revealed.

The couple's debt accumulation was due to emergencies such as a flood, a car accident, and other unforeseen expenses, which led them to max out their credit cards. However, Sethi considers this approach to be poor financial management.

"A couple earning $256,000 annually should not face the problem of 'no space on a card,'" he stated.

Here's how Sethi recommended they proceed.

'Don't leave it up to romance'

Sethi advised Jason and Megan to manage their home finances like a business, a recommendation he has made to other couples on his show. To make decisions about grocery shopping and vacation expenses, the couple should establish standard operating procedures.

"A McDonald's franchise requires a clearly defined set of rules, as Sethi stated."

Jason has been responsible for financial accounts and decision-making, while Megan has been in charge of groceries and home upkeep. As a result, Megan must seek Jason's approval or use one of his cards to make purchases.

Sethi pointed out that while Jason wasn't excessively strict with Megan's spending, it still created an unequal dynamic in their relationship.

"Sethi believes that the way their partners are discussing their accounts will negatively impact their future prospects. He questions why anyone would want to rely on their partner for financial support and the constant need to have such conversations."

Jason and Megan have contrasting views on money management. While Jason is fixated on maximizing his finances, Megan tends to steer clear of the subject, making it challenging for them to agree.

"I believe that everything will turn out fine," Megan stated. "I am confident that I will never be in a difficult situation without a car or a place to stay."

Sethi advised the couple to merge their finances to streamline their budget and future plans, and to establish their shared financial objectives.

By implementing a standard operating procedure with rules, such as allocating cash windfalls towards credit card debt or discussing purchases over a certain price, they can reduce financial stress and achieve a more balanced financial dynamic within their household.

"Sethi advised against leaving your SOP to chance and instead wrote it down. He emphasized that it's crucial not to rely on romance or casual conversations to discuss financial matters. Instead, he suggested being direct and specific when asking for financial assistance, avoiding phrases like "let's talk about it" or "babe, can you give me money for Formula 409?""

Check out the full episode here.

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