Chapter 1: What is discussed at the start of this section?
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Normal is broke and common sense is weird, so we're here to help you transform your life from the Ramsey Network. In the Fairwinds Credit Union studio, this is the Ramsey Show, 888-825-5225 is the phone number. I'm Ken Coleman, joined by the incomparable George Campbell. No bomber jacket today, just a shacket, and he's looking as dapper as ever. We're ready to go. Let's start it off with Zay.
in Austin, Texas. Zae, how can we help?
Hi, I was just calling in, just want to say I love the show and I'm new to Ramsey, but I'm really throwing myself into, you know, everything that y'all teach. I've already completed Baby Step 1 and I just wanted some direction on how to get through Step 2.
Well, welcome aboard, Zae. Baptism by fire. Let's go. Proud of you. So what's the picture? Give us the financial picture in Baby Step 2. What are we working on?
We're working through about $53,000 in debt.
You said 53?
Yes, sir, 53,000. All right, break it down for us. It's going to be about $3,287 in buy now pay later debt, $785 in personal loan debt, $39,380 in car debt. And I have five credit cards, one with Kay Jewelers for $1,415. One with Navy Federal for $4,300, one with Capital One for $1,500, one with Discover for $1,250, and another one with Chase for $1,000.
And all those are maxed out, except for the card for the ring.
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Chapter 2: How can I effectively tackle $53,000 in debt?
Do you have it?
I think we ran out. You used the supply last week. A little indigestion on that one, that $800 a month car payment. Now, did you roll over negative equity? What happened here?
Yes, I rolled over negative equity. I had a Chevrolet, which I didn't know those, obviously all of them depreciate, but apparently those super depreciate. And the only reason I wanted a different car is because I commute to work an hour every day and the car that I had wasn't going to suit the drive gas mileage wise. So I got a 2025 Toyota Camry.
That's the only car that could get you an hour each way. That makes sense.
Yeah, I was trying to do. It was a joke.
You don't need a 2025 car to get you anywhere. OK, just say you wanted a brand new shiny car. Stop shouting. I'm just you're getting it was a test.
It was a test. All right. Let me ask a real quick question. What do you do for a living?
I'm a bank teller.
Okay. And I'm just asking, this is not the primary focus of your call, nor should it be our coaching, but I wonder if you could get a job in the near future doing bank telling or something similar for the same pay that doesn't require you to drive an hour each way.
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Chapter 3: What should I do with a $125,000 inheritance?
Well, currently, right now, I do work full-time. I make about $65 a year. But unfortunately, my check right now is being garnished due to the devil of the credit cards.
So you had a judgment against you from unpaid credit cards?
Correct, yes.
What other debts do you have?
I have outside of the car student loans, about 12K on that. And that's about it. Again, I'm still new on finding all of my debts and pulling credit reports and stuff like that. So those are like the two biggest ones that I have.
Okay. And you're married?
No, not currently.
Okay. Is the father in the picture? No.
Yes, he is. Is he supportive? He works part-time as well.
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Chapter 4: What are the risks of identity theft and how can I protect myself?
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All right.
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Chapter 5: What should I do if I have second thoughts about a debt-relief program?
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Today's question comes from Ryan in Montana. I've been following the baby steps for two years and it feels incredible to no longer be living paycheck to paycheck. I no longer use credit cards and want to close them as part of embracing a cash-only lifestyle. What is the wisest way to approach this? Do I close them all at once or is there a smarter, more gradual approach I should take?
If I close them all at once, are there any potential risks I should be aware of? Great question from Ryan. Very astute. Yes.
Chapter 6: How can I approach closing credit cards while managing my credit score?
I rarely use that word, but this feels like the time.
I was getting ready to compliment you on good usage there. Sometimes the words just come to me, Ken. It does.
So at the heart of the question is he wants to follow the plan. He's worried about essentially his credit score. That's really what's at risk here of the credit score going down as you close all these cards because your credit score is partially based on how many accounts you've had open, how long they've been open. And so when you close these, you hurt the credit score gods.
They're very upset that you've abandoned them. And they will punish you with a lower score temporarily. Now, it's not going to tank your credit. You're not going to have an issue like renting an apartment. But in the meantime, for a couple of months, it might dip a little bit. And then what will happen if you truly close all open accounts that have to do with debt?
You will have no credit score after about six to 12 months if you do it right.
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Chapter 7: What financial considerations should I keep in mind if I want to travel while paying off debt?
That's what happened to me. It's what's happened to several people out there, millions now, that have followed this plan that are credit invisible, as we call them. So your credit score becomes indeterminable, and then you just live your life. And renting a car, every rental car company has a debit card policy. When it comes to renting an apartment, they'll go, hey, are you a criminal?
Nope, great. You'll have to pay a little bit more in the deposit, but sure, you can rent from us. And even with a mortgage, I went through a process called manual underwriting to get a mortgage without a credit score. And it was all kind of a nothing burger, Ken. They kind of made it out to seem like you cannot live without a credit score. You can't live without a credit card.
And I realized very quickly it was a farce because they've never done it. Yeah. So there you go. Just go for it. I don't think you're going to regret it on the other side. And you've got to do it all in. That means closing all accounts that have to do with debt in order to actually have no credit score.
Yeah, absolutely. Good advice. Let's go to Jim next in Dallas, Texas. Jim, how can we help today?
Hey, guys. How are y'all? Good. What's going on? Hey, so I'm switching employers in two weeks. I got a better paying job. But a year ago, unfortunately, I took out a 401k loan. I've been paying on it, but I owe about $15,675 left on it. And I'm not sure what I should do about that because I don't have that money. And it's going to default, basically, if I don't pay it off within like 30 days.
Yeah, did you get the actual details in the fine print? Is it 30 days from today? You already put in your two weeks.
Yeah, it's from date of separation. So when I leave the company, 30 days later. Okay, so what day is that? I think it's like May 22nd.
May 22nd. So we've got a little over a month. How much can you save up in a given month? Is there a bonus from the employer? Is there anything like that?
No, no bonus. I'm putting about $6,000 away for the debt snowball right now. We're on baby step two, so I can ramp that up a little bit, but not enough to cover the gap. Do you have anything you could sell, or is there anything you could do as a side hustle?
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