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Chapter 1: What is discussed at the start of this section?
Brought to you by the EveryDollar app. Start budgeting for free today. Normal is broke and common sense is weird, so we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union Studios, this is The Ramsey Show.
I'm Dave Ramsey, Dr. John Deloney, Ramsey personality, number one bestselling author, and host of the very popular Dr. John Deloney Show on Ramsey Networks. He's my co-host today. Open phones at 888-825-5225. Gabrielle or Gabriel is in Los Angeles. What's up?
Uh, hello Dave. Uh, hello John. Um, long time listener. Um, I'm 27 years old. I'm going to be 28 in November. Um, I just got a job as a buyer slash planner. Um, I'm making $65,000 a year before I was making a minimum wage, like $17 an hour. Um, I have two children. Um, I always hear you say before I had, I got a PhD in stupid, uh, when I was younger. Um,
I'm definitely trying to change my life around. I have about $60,000 in debt. And, yeah, I'm just trying to figure out how to navigate that. Both my children, I'm not with, you know, their mothers, so I'm having to pay, you know, about $1,100 a month in child support, which I have no problem with. I guess my issue right now is starting to make, you know, going from $17 an hour to $65.
I know it's not life-changing, but for me, it is kind of a big deal.
That is a big deal. Congratulations.
Thank you so much. Thank you so much. And it opened my eyes to maybe I can have a future for a long time. I guess I was in my head that life was over, essentially. So I guess now I'm having a brighter outlook, listening to you guys and hearing other people's stories. I feel like it's possible. I have an amazing girlfriend. She's going to graduate in a couple years with her SLP degree.
So I just want to plan our life. I want to get rid of all the debt that I have You know, I want to marry this woman. I want to provide a good future for my kids and for myself. And I guess, yeah, my question is just how do I attack it? Is it possible, you know, to even get a home one day and, you know, do all this? It just feels kind of suffocating right now because it's just me.
Sure. You're not suffocating. You're on a curve, man. You're excited. You got a thing called hope. It showed back up.
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Chapter 2: How can I manage my $60,000 debt while supporting my children?
I was a coach and a teacher. And so I could coach extra sports and make even more money. And I ended that year double, if not one and a half X, the amount of debt I started that year with. Because I finally got this job. I've been driving an old beat up car since high school all the way through college. I didn't say no to myself ever.
And the big trap you're going to be careful of is you finally have a paycheck and you're going to want to catch up on all the spending you haven't done over the past few years. If you will hold tight for 24 months, you can change everything in your life. Yeah. Just tear into the step. Tear into it. I feel that way, too. The only thing is, like, for example, I was of the same mindset.
Before I drove a 2005 Toyota Camry, it had, like, maybe 100... I got it for, like, $1,000 at an auction. It had maybe, like, 98,000 miles, so it was just preseason for the Camry. It's brand new, yeah. Yeah, exactly. But I did get into an accident a month into my new job, so a couple months ago, my car got totaled. So I... I wasn't listening to you guys as heavily.
This has been a couple weeks where I've been every day at work just listening to you guys all day. But I got a car because I work a bit far from where I live.
How much did you spend on this stupid car?
$17,000. Okay. That's not as bad as I thought you were going to say. No, no, no.
So that's in your list of $60,000. Now the first step of getting out of debt, honey, quit borrowing more money. So no more of that. You're done. If you keep that car, that's fine, but you're going to have to now say beans and rice, rice and beans, and the next time a little problem comes up, we don't solve it with debt. You suck it up, buttercup, and you push through.
You've got to lean into this now. Now's your time, and that's exactly what John's talking about. Totaling a $1,000 car does not constitute purchasing a $17,000 car. These things are not on the same page. This is your emotions got out of control. So when you total a $1,000 car, you buy another $1,000 car. That's what you normally do. But people don't. They do what you did, and that's a mistake.
So, all right, hang on. We're going to send you a copy of the Total Money Makeover book and get you going. Taj is in Baltimore. Hi, Taj. What's up? Hey, thank you for taking my call. Sure. How can we help?
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Chapter 3: What steps should I take to improve my financial situation?
What's your stupid payment?
I pay $500 a month. It's $500.
Good God. Okay. So let's talk about selling that lease car back and getting out of that lease and getting you a beater.
Right. So right now my current payoff amount is $19,000, and it's worth about... 16.5? Yeah. And I was listening to your show recently, and I know that you could potentially go to a creditor to get a loan to pay it off. I'm not sure how that would work, being as though I'm upside down right now.
Well, you'd have to borrow $4,000 to pay the difference and sell the car. Because you're in the hole. You're upside down. So you've got a $4,000 personal loan. That's better than a $16,000 or $17,000 loan or whatever the thing is here. $19,000. And then get you a beater. Because you've got to move out and stand on your own at 24 years old making $56,000 in Baltimore.
You need to run those numbers. Go look at one-bedroom apartments or two-bedroom apartments with a roommate. How are we going to do this? And it's not going to be driving that car. Hey, George Camel here. Listen, if you've had your phone two or three years, your phone can now be unlocked.
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Chapter 4: What are the consequences of borrowing money to pay off debt?
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So if you have a pile of debt and no money and life kicks you in the side of the head, now you've got a real mess. And bouncing back is hard emotionally, psychologically, John, financially. And if you have an emergency fund of $20,000 and no debt except your home, and life kicks you in the side of the head, you're emotionally in a different place to bounce back because you don't feel unsafe.
You don't feel vulnerable, like I'm about to be homeless. My check is getting ready to be garnished. This divorce set me back. This illness in our family set us back. This job loss set us back. Name your tragedy. Name your poison. But it's coming. That thing is coming. Every time.
And there's, you know, being ready for it financially by being out of debt and having an emergency fund, you know, when there's an emergency, hello, it does help. It doesn't keep the problem from being there. It doesn't keep the, depending on the extent of the tragedy, the extent of the event, how bad it was. But even then...
People recover at different speeds from a nasty divorce, a job loss that was devastating, a... A death in the family. A death in the family, a whatever. I mean, those are the three things that come to mind. But, you know, so my husband died. My wife died. We lost a child. We...
You know, my company, you know, I was making serious money, and they just walked in one day in corporate America, and they just cut my head off, just fired me. I didn't see it coming. Or my husband of 23 years walked in and said he had a girlfriend, and we're done. And I haven't worked in the workplace in, you know, 12 years, and so I don't know what I'm going to do now.
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Chapter 5: How should I manage a significant inheritance with my fiancé?
And so I just go ahead and pay the taxes right then. Yeah. And so there's a case to be made to move the whole three million this year to Roth. And just bite that bullet. It's one ugly tax payment and you'll never make one again.
Chapter 6: What steps should I take if I'm in debt and my partner isn't supportive?
On that. On that money. Yeah. If you keep putting money in 401k, you got to change that to Roth as well and go with that. Your match is never in Roth.
Chapter 7: Is it wise to take out a loan to pay off existing debts?
And so you got to convert it to Roth at the end of the year every year. That's what I do. But yeah. Wow. Well done, brother.
Chapter 8: How can I navigate financial decisions after a relationship breakdown?
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Today's question comes from Sierra in Mississippi. Sierra writes, I've been engaged for three years, but after finding out last weekend that my fiance cheated on me, I called off the wedding. He had talked me into financing our $8,000 wedding rings and now refuses to help pay them off. The debt is in my name.
Would it be smart to get another loan to pay off these rings if the current interest is really high? I have four kids to support, so every cent that comes into my account matters. I just want to move forward. How do I do it? Honestly, Sierra, here's what I would do. You did a big, hard, scary thing by saying I'm worth more getting married to somebody who's not going to cheat on me.
So I'm not doing this. Good for you. Yeah, exactly. Good for you. Smart girl. The next sentence, he talked me into financing our $8,000 wedding rings. I would stop right there and I'd reframe this as I chose to finance our $8,000 wedding rings. Take full ownership of every action you took. And then that reframes this whole thing. I made a big decision that I'm worth more than this.
And that big decision also came with a financial cost because I chose to finance expensive, expensive wedding rings. And I'm going to be in charge of dealing with what comes next. And I get, man, you got four kids. It's just brutal. It's brutal. But getting another loan to cover up another, it's just, you're just going to compound this issue. I would. Number one, we're going to sell the rings.
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