I’m $126,000 in credit card debt – an expert said my ‘cycle’ is the problem but gave us a clear way out
A DAD-OF-THREE drowning in credit card debt has turned to the experts at Ramsey Solutions for help.
He was $126,000 in the red but was given a useful tip to help overhaul his financial future.
Tony from Rochester, New York called The Ramsey Show after his credit card debt had become almost unmanageable.
He had racked up $126,000 of debt after he was out of work for one year.
Although he was now making $100,000 in his new job, he could not chip away at the debt faster than the interest was accruing.
His total monthly minimum payments were $3,500.
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"It's gotten to a point where, after I pay my bills, and subscriptions, and things that I got going on, the amount of credit card debt I've got pretty much takes over the rest of the paycheck," he said.
Experts Jade Warshaw and Rachel Cruze listened with sympathy to Tony's struggles.
"I can hear it in your voice, Tony. That's hard, that's really hard,' said Rachel, who is the daughter of Dave Ramsey.
Tony's family of four had cut back to just one car, but he also owed $30,000 in payments on that.
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He was even considering selling his house, or using a debt consolidation service.
The financial pros told Tony that his wife, Inna, might need to get a job, even though she was already looking after their three children.
"I think there's room that you can work as well because right now, the most money that you can bring in is what's gonna break this cycle," said Jade.
"I always say, get a job until you get the job, because whatever you do is gonna help you guys out."
"Go drop the kids off and go work at a bakery," suggested Rachel.
Both Jade and Rachel also warned Tony against relying on debt consolidation services.
"Here's the deal, what's gonna fix this issue is you guys," said Rachel.
"It's not rearranging this credit card and trying to find a lower interest rate - that's not your problem.
Dave Ramsey's 7 Baby Steps
Dave Ramsey advises his followers to follow a seven-step plan to save for emergencies, pay off debt, and build wealth.
Step 1: Save $1,000 for your starter emergency fund.
Step 2: Pay off all debt (except the house) using the debt snowball.
Step 3: Save three to six months of expenses in a fully funded emergency fund.
Step 4: Invest 15% of your household income in retirement.
Step 5: Save for your children’s college fund.
Step 6: Pay off your home early.
Step 7: Build wealth and give.
"The problem is that you guys lived a cycle with your money that got you in this problem and this mess.
"But the beautiful thing is, yes, you're the ones who got yourselves in this mess, but you're the ones who are going to get yourselves out of it."
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See how one woman paid off $243,000 debt in 31 months thanks to Dave Ramsey's methods.
And find out how to make a 0% interest credit card work for you by using it responsibly.