How Do I Get Rid Of My $138,000 Mess!

Andre is calling hi Andre how are you hello sir I'm good thank you doing how can I help so my husband and I have about fifty two thousand dollars of debt in line of credit and visas and what is hindering us in paying any of that back is that we foolishly have two brand-new vehicles so I just want to know what my plan of attack is I get this debt paid off don't you what's your household income ninety seven thousand and what are you on the car the truck we owe thirty six thousand one hundred and eighty seven mm-hmm it's financed the Traverse is a lease it's a brand new lease about six months hooker on that car when you got it I actually don't know what the sticker of the Traverse was roughly fifty thousand yeah that's what I'm thinking okay so you have eighty six thousand dollars worth of car dad basically yeah and you make 97 yes yeah that's an issue is what kind of debt you said credit cards so the its student line of credit and a visa so three of the four line of credits and one is a visa not sure okay well here's um the math facts for us right the largest things that you and I buy price-wise that go down in value our cars yeah cars lose sixty to seventy percent of their value in the first four years that you own them when you buy a new car it's you know it's thirty thousand bucks it's gonna be worth ten eleven thousand bucks in four years okay and since it's the largest thing that is going the wrong way mathematically it is the biggest theft or one of the biggest thieves of our wealth building because it's going down a value and then add to that if we financed it so even if you paid cash four cars and had no debt on them you would not want to have too much tied up in cars because they go down in value now what is too much too much is a ratio okay it's a ratio of you know your income which is your wealth building tool in your case ninety seven thousand to the cars so what we have figured out and run numbers on is if you have vehicles paid for or not and this is anything with an engine in it added together cars trucks motorcycles see dues boats lawnmowers tractors whatever added together they all go down in value if they all added together equal more than half your annual income you have too much tied up in things that are going the wrong way for you to succeed mathematically and wealth building is that logical to you absolutely okay and so that's where you are not only if you God not only is this debt choking you to death but you have eighty six thousand dollars in cars and you should have no more than about forty five thousand dollars in cars okay so my dad has two vehicles that are both 2013's in good conditions that he is willing to sell us so they'll be used vehicles they're good enough what is my plan what do you sell them to you for he would sell it to us for probably 15 apiece okay that's $30,000 that's a move down really enough of a move down giving them a given the mess that you've got I'd put you in two or three thousand dollar cars okay each until you get your mess cleaned up and then if you want to move up in car with cash that's fine but you don't have $30,000 you know then so you know you can't you got to stop borrowing money to buy cars and you got to stop buying vehicles to total more than half your annual income and and that's not a Dave thing that's a math thing great and so if I were in your shoes is how I answer questions on this show I'm gonna use that set of material that set of content you and I just talked about that set of facts that we just talked about in order to make my decision if I'm in your shoes and that means I'm selling both of these cars and as soon as possible and I'm getting two three thousand dollar cars that I pay cash for and then I'm going to get out of debt and then I'm gonna build my emergency fund and then I'm gonna pay cash to move up in cars but that is all gonna take you three years okay that's what you know if you run the math out how quick can you pay off 50 to make a 97 if you don't have these cars great you know a year and a half and then you got to build up your emergency fund and then you got to save up to move up in cars so you're driving you're driving Junkers for between two and three years hoop Dee's in order to get your life back yeah because think about it if you hadn't no payments at all except a house payment it's a completely different place your chest yeah your chest isn't as tight your stomach's not in your throat your back doesn't hurt your neck isn't stiff when you go to bed and all of those things happen because of the amount of debt you guys have right now this is just not fun it's a bad place you're in and I'm sorry but that's exactly what I would do you're in a very radically bad situation and so the the the prescription the prescription or the antidote is radical because when you move from $86,000 in cars to $6,000 in cars your friends or your parents are gonna think you've lost your freakin mind but here's when you lost your mind when you bought these things but it really is a radical mess and so it's gonna require a radical solution to the problem so now here's what's interesting as we think about that I was with a guy that they goes you don't like me and I'm like who are you how do I know I don't like you how do you know I don't like you I don't know remember meeting you he said well I'm a new car dealer I'm not mad at new car dealers I bought two new cars last year I don't tell you not to buy a new car after you've got a net worth of a million dollars or more you can buy a new car if you want but pay cash for it and it needs to be the total of all your vehicle equals less than half your annual income and so I mean just think that through okay and so or you know it needs to be a small percentage of your net worth okay I've got a friend of mine that um just bought a four hundred and twenty five thousand dollar car now I'm from Antioch Tennessee that blows my freaking mind I can't get my head around that okay but he's worth a billion dollars he's a billionaire okay so let me give you the ratios a billionaire buying a four hundred and twenty five thousand dollar car is like a millionaire buying a four hundred and twenty five dollar car so in other words he could he could buy one a week and it probably wouldn't affect him mathematically now I understand emotionally and some of you think you have to be poor spiritually and it's hard for most of us to get our head around a car like that I I can sympathize with that I'm that guy too but when I understand that's the ratios I remember a few years ago there's a big stink Tiger Woods bought a house that was like I don't know there's like 170 million dollars or something that year he made a billion dollar income okay and when you back out the numbers it's like you know somebody making a hundred thousand dollars buying a seventeen thousand dollar house something it's it's it's so you it's about ratios because it is the room left for you to wiggle is the room left for you to be generous is there room left for you to be in by the way my friend who bought the four hundred and twenty five thousand dollar car this is worth a billion dollars gives away hundreds of millions of dollars a year hundreds of millions his income is ridiculous and so you know and yet he'll get criticized for having this car but for him it's like most of us buying a biscuit you know it doesn't show up so that's what you want you want your cars I mean if you want a zero-turn John Deere tractor to mow your grass width that's $12,000 I'm ok with that as long as you don't have $12,000 to your name and a hundred percent of your net worth is in a zero turn tractor which would make you stupid okay but if you've got two million dollars and you want a nice John Deere tractor to drive around your yard with get you one but pay cash for it and make sure it's a small percentage of your world that's how you look at this stuff it keeps you spiritually on balance financially on balance and generously on balance

Channel: The Dave Ramsey Show

Views: 216,384

Rating: 4.8596058 out of 5

Keywords: the dave ramsey show, budget money debt cash, real estate, insurance, how to make money, dave ramsey, save, credit card, compound interest, buying house, buy, snowball, car lease, leasing a car, car leasing, lease, new car, lease a car, car and consumer debt, debt, credit card debt, money, credit, loans

Id: 6C1LLBwHBug

Length: 9min 36sec (576 seconds)

Published: Tue Mar 26 2019