I'm 29 Years Old With Nearly $1,000,000 In Debt!

[Music] Channing is with us in Washington DC hi Channing welcome to the Dave Ramsey show hi Dave thank you for having me sure what's up so I live in DC I just recently got married about three months ago congratulations thank you and my husband and I have really decided we need to be really focused on the same page about our finances we actually have our first class of financial piece this evening oh cool but together we have probably just under a million dollars in debt and we want to know how I get that free without filing bankruptcy okay how much of that is a mortgage the mortgage about 210 so you have $600,000 in what 335 is about in student loans we both have advanced degrees and then a lot the rest is really credit cards and personal loans so you have $300,000 of credit cards and personal loans we have about two three hundred thirty five thousand student loans and about one hundred thirty six thousand and credit cards 44,000 personal loans and thirty-five thousand car loans okay how old are you I am 29 okay so what in the world are you both on this or is this just one of you that's completely lost your mind well I have the majority of the student loans and he has a majority of the credit cards my credit card debt is about it's not great there's not a lot of time why does he at 29 years old run up a hundred grand in credit card debt well he's 32 but I think it's one of those things where just making really poor financial decisions thinking be able to pay it down as you go and it doesn't it doesn't happen okay so you both have advanced degrees what are your degrees in we do so I've a degree both of our advanced degrees no he has an MBA and I have an advanced degree in policy I work in the government and we actually both do now at this point actually okay so your household incomes what our household income is about two thirty is there recognition on both of your parts how absurd the situation is yes okay there is no I think we're both a bit scared and want to do anything we can to avoid okay great then I'm done I'm on your team I can skip that step okay good okay well you're scared and you should be you're disgusted and you should be yeah you're early in the early stages of being sick and tired and being sick and tired and you should be so here's the thing you you guys have been living at across the board from your education choices to your car purchases to your whatever you've been living at about 10x where you're gonna get to live for the next three years okay yep that's true well I'm getting ready to destroy your life as you know it because you're not your lifestyle is considerably above you're extremely good income and has been for a period of time and so you've gotten you used to spending like you're in Congress right this is going to be very emotional for y'all and you're gonna have to look at it through that lens and through a spiritual lens or you're not gonna make it you're gonna have to not care what anyone thinks including each other because you're not going to spend any money on anything ever for the next three years like you've been spending less pretentious got married but let's pretend you'd been doing this as a couple as you went along you've been making 210 spending 310 I'm getting ready to put you on 30 you're not gonna see the inside of a restaurant unless it's your extra job or you're waiting on some of the people you work with during the day okay this is how humbling this is going to be okay it's gonna crush a lot of crap in your soul that caused you to do this so the bad news is it's gonna be really rough the good news is it's gonna be great for you guys relationally spiritually and financially but you're not gonna make the financial unless you make the relation on the spiritual move because that I know that I know you guys cuz I was you guys this is exactly what I did it's exactly what I did in my twenties I bought and purchased a lifestyle that was 5 to 10 X what I had yeah and it was all because of crap inside of me that caused me to do that right and all of that has to be destroyed to fix it this isn't making any sense resistive brutal yeah it's it's making a lot of sense and it's brutal I mean I'm warning you what's coming ok this is not a math problem the math problem is the symptom the problem is what's going on inside are you guys so the great news is you're very smart people and if you will apply that intellect to solving this problem as if it were a policy problem or a business problem you can solve the problem but the lens by which the problem will be solved is through spiritual contentment godliness with contentment is great gain translation you're gonna pull up at a stoplight driving a piece-of-crap car next to people that have an income a 4th of years of the nicer or than yours right right and you're gonna you're not gonna care that's gonna be the cool part okay you're gonna reach the point you don't care what other people think and that might be a forger knee for you or him I don't know which one it is but some of you guys have been you been purchasing a lot of stuff for a lot of reasons that are going to change yep they have - yeah I have - because you're on a suicide mission right now amazing credit cards are actually bundled with one of those like that relief programs where we put a pot of money with them and then they negotiate on your behalf so we're not even we're not even paying on the bulk $24,000 of the credit cards right now you're gonna probably have to pull out of those out of that I don't know how quickly but the problem with those people is they don't follow through in the administrative layer are really really really pitiful they're incompetent and so you're gonna find they don't the concept of what they pitched you is not completely bad but you're gonna find their follow-through is it will make your bones chill so you're probably gonna pull back out of those but then we're just gonna list these debts smallest to largest what's the home worth what's the home life you know what is your home worth oh my home worth oh I think that let's see according to hello the home is worth about 300 thousand okay so you have a little bit of equity there but not enough not going to save you so I always sell the home as the last resort unless it's the problem and it's not the problem here okay ratio wise it's it's nothing compared to this other stuff I mean you have three hundred thirty thousand a student loan debt two hundred thousand on your house right it's not the problem you know and the credit cards are almost as much as a stinking house so it's not the problem so I don't I don't think we got to sell it you probably need to may need to sell a car not gonna rush to do that the big thing is is just this shock to the system of your all's lifestyle where you go from really living what we call in Tennessee high on the hog - you're gonna be living beans and rice rice and beans your friends are gonna think you've lost your mind and your mother's going to think you need counseling yeah and we actually are we live as my parents now after we got married they offered us to like say with them to help us you know with transitioning to new life which has definitely been helpful ranking on down in their house so I put my condo for rent when I got engaged cuz I knew I wanted to save money for the wedding before we got married so I had a renter in there the last year actually looking for another run to release ins in a month Oh we'll just sell it then I thought you lived in it no we don't live in it I'll just selling put the 90,000 on your dead snowball yeah okay you don't need it you're not gonna move in it don't know but you don't need no no we're never gonna live in it it was one of those that's yeah that was my first base okay yeah it's gone it's gone though you need the 90 grand to get a jump start on the rest of this so that just got rid of a third of your deal okay right so we're getting started but did you fill that out see I just pinched you if you feel the pinch Oh Dave's grabbing pinching me don't pinch me that yeah I'm gonna pinch the lifestyle out of you and it's gonna it's gonna change your life for the better it's gonna change who you are this process is it's gonna have to it's the way you get out you can do it though and I'll help you you call me if you need more help this is the Dave Ramsey show

Channel: The Dave Ramsey Show

Views: 2,484,751

Rating: 4.7883759 out of 5

Keywords: I'm 29 Years Old With Nearly $1, 000, 000 In Debt!, how to pay off debt, debt, dave ramsey, money, pay off debt, how to pay down debt, personal finance, how to pay debt, budget, debt payoff, paying off debt, debt free, how to start paying off debt, budgeting, debt snowball, financial education, paying down debt, pay down debt, credit, how to

Id: rMk7CKwJ8OM

Length: 9min 31sec (571 seconds)

Published: Mon Sep 17 2018

Reddit Comments

[u/SsurebreC]

TL;DW:

• Title is slightly misleading: this is for a married couple: a 29 year old woman and a 32 year old husband
• Secondly, the total is $760k which breaks down as:
  • $335k in student loans, likely undergrad and grad for 2 people with majority being hers
  • $210k in mortgage
  • $136k in credit cards, mostly his
  • $44k in personal loans
  • $35k in car loans
• He has a degree in MBA and advanced degree in policy (i.e. government) for both
• Assets:
  • Combined income: $230k though they live in DC (i.e. higher cost of living)
  • Home is worth: $300k so $90k equity
  • Live with parents, condo is up for rent
• Advice is to sell the condo to remove $90k from the debt and then severely cut your lifestyle (i.e. perhaps sell one of the cars, never eat out, etc).

My comment:

After selling the condo, they will remove $210k in mortgage and likely either put the $90k towards the CC's (due to very high interest) or just close out personal loans and car loans with money left over. A lot depends on what they're paying and to me, the interest on the CC's is likely going to eat everything. If they sell one of the cars, that's going to severely cut that payment. Student loans are a long-term payment and I'd dump the CC's over student loans since you do get a tax break on student loan interest. They could go the snowball method to pay off the car loan/loans and personal loans but I don't know the terms. For instance, the personal loans could be from their parents which are generous and they can wait on those while dump the money to kill the likely 9-29% interest they're charged with credit cards.

So if they sell the car and let's say they break even (i.e. no profit), then their situation would be:

• Total: $442.5k vs. $760k
  • 335k in student loans
  • $0 mortgage
  • $46k in credit cards
  • $44k in personal loans
  • $17.5k in cars (presuming the cars are of same value and they just dump one of the loans)

Since they freed up a lot in credit card available credit, they can do mutual balance transfers which temporarily caps their interest rate from 9-29% to 3% balance transfer fee. It'll at least give them a break from interest accrual where if they were spending maybe 15% in interest (which is $6,900/year), they now pay $1,380, saving them $5,520 for the year.

Since their housing is free and they make $230k, they should be able to pay the credit cards before the promotional rate expires in 12 months. They should even have enough to squash personal loans and car loan in about 6 months but presuming they're a bit slow to cut spending, in about 18 months their situation will be:

• $335k in student loans minus what they've paid the last 18 months. Let's figure $300k (with payments but accrued interest).
• $0 in mortgage
• $0 in credit cards
• $0 in personal loans
• $0 in car loans

Now they can tackle the student loans which will take 3-5 years to pay off but they'd go from $760k in debt to $300k in debt in about 18 months with vast majority of it being selling the condo for $300k. It can be done and solving the debt is a math problems but the key is how the debt was accrued in the first place.

For instance, the mortgage was an investment but they need to kill off the debt first. The student loans were an investment which is paying off due to their high income. The rest, like credit cards, is a weight that they need to remove. You do that by creating a budget first and dumping everything you don't need right now. It'll hurt and it might even offend their high-spending friends (birthdays and holidays will be terrible).

If they filed bankruptcy, this would not have helped them very much. Student loans don't get discharged and that's almost half of their total debt plus their credit would be shot for 10 years.

EDIT: made some edits

[u/mcfuddlebutt]

Jebus. I don't know if they went through actual numbers but the minimum payment on $136,000 in credit cards is AT LEAST $3,000 per month (2.25%), interest on that debt alone is probably in the ballpark of $1,700 per month

Those 3 years are going to fly by

[u/ydoesittastelikethat]

How do you get out of debt? Don't spend more than you make, slum it and pay everything off as soon as possible.

[u/yeash95]

I feel bad when i spend over $100 dollars on amazon.... yikes

[u/ShipMaker]

advanced degree in government policy and spending far more than they earn. How fitting.

[u/fridgey22]

This has given me a cold sweat. I thought my four figure credy card debt was stupid, but $100k+!?? I dont know how these people get up in the morning. Thats absurd.

[u/PMmeYourNoodz]

https://vimeo.com/41152287

[u/itsanrnotau]

if your household income is 230k what the fuck are they getting a credit card for nevermind being 130k in the hole. It shows you can spend 300k going to school and still come out stupid

[u/brettmjohnson]

She really buried the lead with the "I own a condo, but don't live there."