Chapter 1: What financial situation prompts the bankruptcy discussion?
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 Studio, this is The Ramsey Show. I'm George Camel, joined by Ramsey personality Jade Warshaw. And it's open phones at 888-825-5225. John is going to kick us off in Indianapolis.
What's going on, John? Hey, how you doing? My name is John. We got that part. I'm calling because I want it. I'm sorry. I want to know, should I file bankruptcy? And if not, how do I get out of debt? Wow. John, tell us what's got you feeling like bankruptcy is your only option. Tell us your debt. Tell us your income. So the debt that me and my wife is in is $30,000.
My income is close to $3,500 a month. My wife's income is close to $2,000 a month. She just now started back working. Okay. Good. So you're bringing in $5,500 a month? That's your take-home pay? Yes. Okay. Good. So is it possible, if you said she's just started back working, is it because she just had a baby? Yes, of course. Okay.
So I'm feeling like you might have been in a really, really tight season because she wasn't working and bringing in the money, and now she's back to working. So has there been a little bit more breathing room since she's been back working? Yes, it has. It really has. Okay, that's good.
So the good news is, you know, I was expecting you to say we have, you know, $290,000 of debt or $490,000, you know, but the $30,000, when I hear that, I go, oh, we can do that, George. This is a solvable math problem. Yeah. What kind of debt is the $30,000? Break it down for us. All right, so most of it is personal loans being brought up or being – gotten the time that she wasn't working.
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Chapter 2: How can I effectively pay off debt with limited income?
And also because I have two other children, I'm on child support. Okay. So the time when I have them, it was tough. I didn't want my kid that I have with my wife looking nice and, you know, being able to do nice things and with them not being able to. Of course. So there's more personal loans. My child support went up within a year. So I'm paying the $746 a month. Okay.
I took out another loan to pay a lawyer so I would be able to get visitation rights. How much did that cost? $4,500. Okay, so $4,500 on visitation. Is all the $30,000 personal loans and credit cards? Yes. No cars, no student loans? One vehicle, $18,000. Well, that's a big part of it. That's half. Is that on top of the $30,000 or is that part of it? Part of it. Okay. So 30 in total.
What's the car worth? The car is worth about $10,000. So you're $8,000 underwater on it? Yes. When was the last time you checked that? Was that private sale? Was that what the dealer will give you? Did you only go to one dealer? Tell us about your due diligence on that. So I checked that last night when I was looking at Credit Karma.
Okay, so what I want you to do, your homework is let's go on Kelley Blue Book and let's see what it would do if it was a private sale.
Chapter 3: What are the implications of financial control in relationships?
Because chances are you're going to get more for it than that for private sale. And I would be interested in knowing a little bit more about that to make the next decision. What I want to know from you, John, is you guys have a fine income, $5,500. Yeah, $746 goes to child support. That's fine. How much are you paying for rent?
or or mortgage if you if you own your home oh so my mortgage is 11.75 okay that's not bad um is there another big expense that we should know about that's eating your lunch uh no that's that's mainly it uh you know besides utilities and um and gas in my truck what's the total of all of your debt payments just make minimum payments what does that add up to for the month
For the car or the personal loan? So, and that's the thing, I haven't even been able to make a payment yet. Or, you know, I have, I just haven't done it. So maybe... Do you know what I think, John? I think that you would really benefit from a budget, a digital budget that you can put your income in at the top, the $5,500.
And then in the budget, you will list out everything that you spend money on. And every dollar, which is what I'm going to give you, the best budget out there, it's going to keep a running tabulation of how much money you can spend. So you'll put in, I make $5,500, me and my wife combined. And then you'll list everything out. Okay, here's what we spend on groceries. Here's what we spend on rent.
Here's what we spend on gas, utilities, everything for the month. And then after all of those things that are necessity for you to spend money on, then at the end, you're gonna see, okay, how much is left? Now with what's left, you've got a couple of choices, John.
You can say, okay, with the $2,300 that's left, we can either squander that on DoorDash and Takeout and Target and Amazon Prime, or we can take that extra money and we can use it to start knocking down this 30,000. But what happens is if you don't give that margin, that extra money, an assignment, it just poof. It just goes away, right, George? Exactly.
So if you can learn to live off, you know, let's say $4,000 out of the $5,500, if I said, hey, come hell or high water, you guys got to figure this out, could you make that work? Yes, yes, we can. Because guess what? That means you got $1,500 left over, which means you're debt-free in less than two years. Wow.
Bankruptcy at this point, it feels like my back is against the wall and this is a great shortcut get out of jail free card. But the truth is bankruptcy is going to, number one, implode your financial world for the next seven to 10 years on your record, which is going to hurt your ability to do pretty much anything.
And then on top of that, we didn't change the behavior that got John into this mess. And so the best way to get out of this is to avoid bankruptcy and just do the debt snowball method. And this is real clear. Just pay off the smallest balance first and ignore the interest rates. So what's your smallest balance debt right now? $400. Perfect. So next paycheck, you could knock that out.
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Chapter 4: How can I use 529 plans to manage debt?
But I'm going to tell you the emotional side, what's going to happen to you later this month when that check comes and you've paid the things like the rent and the utilities, you've gone and gotten groceries, you put gas in the car, you're going to see that money sitting there and you're going to see Olive Garden and you're going to want to go out to Olive Garden and there's going to be a movie that came out and you're going to want to go see the movie.
And the kids want to go and you've got them and you want to impress them. You want to show them your love. The boys want to have drinks. The boys want to go have drinks. That's what's going to happen. And then you're going to go to yourself. You're going to say, well, I work hard for this money. Shouldn't I get to spend it the way I want to spend it? Can't I start this next week?
Can't I start it next month? Well, my wife. Right. And it's going to all the excuses and all the emotions are going to start setting in. Am I wrong? No, you're definitely right. Right. So now that we've shed light on it, now that we've told you this is coming, your awareness will be heightened and you'll say, man, it's happening. That thing that George and Jay told me about is happening.
I have a choice to make. I am at a crossroads. Critical, John, because the time is going to pass anyway. And you can look up in two years and like George said, you can be completely debt free. or you can let your emotions control you and you can look up two years and you can be calling us back in the exact same situation. You're going to knock this out real fast, John. My guess, 18 months.
If you and your wife get on that budget and hang on the line, Christian's going to pick up. We're going to gift you every dollar to make it super easy. Download the app, get on the same page, list income and expenses, and then make a plan to create as much margin as possible to get out of debt as quickly as possible.
This show is sponsored by BetterHelp. All right, this time of year can be tough. So I want you to make sure you check on your friends and your loved ones and even reconnect with people you haven't talked to in a while. I recently called one of my childhood friends and we had an amazing catch up conversation. We laughed hard and we talked about the struggles we've been having. It was fantastic.
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Chapter 5: What strategies can we use to manage our savings during a pregnancy?
It's free money, like in essence. But when you factor in your time and your emotion and your choice in the matter, that also has a cost in this equation. And we want to not leave that out. Do you guys have savings right now? We are really following the Ramsey plan, so we diminished our savings down to the $1,000.
But my husband, with me being pregnant, he's getting a little bit more cautious, so we're kind of doing Ramsey-ish as a compromise. Well, we'll tell you. Let me give you permission to be Ramsey-ish and go just stork mode is what we call it.
Chapter 6: How can we approach financial decisions when planning a move?
So it's okay to pause the debt snowball right now and just stack up cash because we just don't know what's going to happen until baby and mom are home safe. So when is baby due? That's true. June of 26. Okay, awesome.
Yeah, I mean, there could be a great scenario where you guys just stack up a bunch of cash and then you're good, the insurance paid most of it, and now we hit play on the baby steps and we have a big pile of cash to throw at these debts. That's true.
So I think that would give you some peace of mind during an already pretty stressful time where you're working multiple jobs, pregnant, trying to handle all of this $100,000 of debt. It's okay for it to not be at, you know, breakneck pace. Okay. Yeah. Thank you.
Chapter 7: What impact does emotional stress have on financial decisions?
I just needed that extra reassurance that everyone tells me to slow down, but I'm just like in that mentality of life is on fire. We need to go while we're young. Go, go, go. Well, it serves you well when it comes to the debt-free journey. That's right. That stress can take a toll on you and the baby. So I'm just looking out for your health as well during this time.
The baby steps, it's a great framework, but life is going to happen. It's okay to hit pause for a moment when you want to be intentional and make sure that you're also protecting your family. So thank you for the call.
Chapter 8: How can we rebuild trust in a financially controlling relationship?
Thank you for your service, especially coming on the heels of Veterans Day. So this is The Ramsey Show. Times are tight, and one of the easiest ways to save more money right now is to stop overpaying for your phone plan. Boost Mobile gives you one low monthly price, just $25 a month for unlimited talk, text, and data. And that price never goes up.
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You can take a quick quiz to check your progress and receive a personalized plan made just for you. Simply head to the show notes and click on the link titled, Are You On Track With The Baby Steps? and complete the quiz. Aaron is in Charlotte, North Carolina. What's going on, Aaron? Hey, George. Hey.
My wife and I are kind of batting around the idea of moving back to Raleigh, North Carolina from... small town in South Carolina, just about two hours south, and just kind of curious how we balance the desires.
So, you know, we got married in October of 21, moved down here in May of 22, and, you know, wanted to be closer to my wife's family with us being newlyweds and wanting to have kids, and we've had some issues with infertility. But, you know, just kind of curious. I really... have been the one that wants to push to go back to that area. I've been just feeling a bit stir-crazy.
And we're in Baby Step 7. Our income is about $173,000. So just kind of curious what your thoughts are on balancing those desires between my wife wanting to be close to her family versus wanting to be in person for work and just a little bit more to do. and getting back into our old gyms and routines and things of that nature. So it's not a financial conundrum.
It's a quality of life for you guys. Yeah. Quality of life. And it sort of feels like a financial piece because, you know, going from no mortgage to, you know, maybe renting for a year until our house sells and buying a more expensive house in that area. Um, So it becomes a little bit of a concern. We've been debt-free fully with the house and everything since last September.
So it's a little bit of both. So what's the house worth? Right around $360,000 to $370,000. Okay, and what would the house cost in the new area? In Raleigh, maybe $450,000 on the low end up to $600,000. Okay, do you guys have any money saved? Something $450,000 to $500,000. Yeah, around $30,000. Okay, and then what's the urgency around this? We want to make this happen in two months or two years?
Yeah, so we've been talking about it. Actually, the new job that I took is based out of that area, but they let me stay remote because we had some uncertainty about wanting to move. That's convenient. We were actually supposed to move back in May, but they let me stay remote. So are you stir-crazy meaning I want to be in an office? And would that solve this if we got you an office?
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