Dave Ramsey’s Bold Advice to a $200K Earner Carrying Debt

When it comes to paying off debt, there is no simple and guaranteed way that works for everyone. In other words, everyone has to figure out on their own how to pay off debt while still living week to week and not going hungry. 

A caller to the Dave Ramsey show is trying to navigate what should be a happy moment in their lives, but it feels like a burden. While the couple has a strong household income, they are a prime example of a couple needing to figure out their debt based on their personal situation. 

The Caller’s Situation 

From this caller dialing into Dave’s podcast show, we learn from this individual that the couple has a $200,000 household income and around $8,200 in total debt. Around $5,000 of this amount comes from credit card debt, of which they have been paying $1,000 monthly to pay down this debt. 

The good news is that they don’t have any other debt, as they have two paid-off vehicles. However, the caveat here is that they recently received a $3,200 medical bill after giving birth to their second child. 

Worrying about their “debt piling up,” it seems pretty clear this new medical debt is causing some anxiety for the couple who believed they were on their way to being debt-free, only to have this “setback” after giving birth. The good news is that because the caller recently made a $12,000 commission from his job, they have the money to pay everything off in one month. 

However, this would mean reducing their available cash, and without any kind of emergency fund and a newborn, they are concerned about being cash-poor. So, what should this couple do? 

Dave’s Bold Advice

Perhaps this couple just needed to hear it from a third party, and with Dave being an authority on personal finance, he was very blunt. In Dave’s view, $8,200 isn’t as huge a debt as this couple would have themselves believe, especially when you consider how much money other callers have in debt on Dave’s show. 

As a result, Dave says that the debt level is relatively small with this couple’s salary. It would be a much different conversation if the couple only had $30,000 in annual income, but this isn’t the case. Doing some quick math, Dave recognizes and reminds them that they are bringing in more than $10,000 per month after taxes. 

For this reason, Dave’s bold advice isn’t anything other than the most obvious advice out there, and just pay off the debt. Dave says, “see what it’s doing to you,” to continuously have this debt on your mind. His advice is, frankly speaking, is just pay it off and start over next month with building up an emergency fund, and then start worrying about stock market investing down the road. 

Create a Game Plan

This call is a strong reminder that even small debt levels can feel overwhelming, so it’s important to have a game plan that you can follow to get out from under debt as soon as possible. Dave’s advice to this couple? Create a written game plan that includes their budget and a detailed look at their spending habits. 

The bottom line for Dave is that paying off the credit card debt isn’t going to be all that useful if they just rack up more debt without curbing their spending habits. To nobody’s surprise, the fact is that by spending less, this couple can build up an emergency fund, which they absolutely need to have with a newborn in the home. 

Whether it’s through a spreadsheet or just on a piece of paper, Dave explains that this written budget is the first step this couple should take, and it will help them develop some necessary financial discipline. Dave’s other notable advice is for this couple to “tell your money what to do instead of wondering where it went,” which is exactly what a written game plan will accomplish.