A caller to The Ramsey Show shared a stunning financial situation: despite bringing in $12,000 a month after taxes, she and her husband have fallen into $700,000 of debt.
“We are drowning,” she told the hosts. “It all escalated within the last five years.”
The couple’s family grew quickly. They now have four kids aged five and under, plus the woman’s mother living with them.
“We have a 5-year-old, we have a 3-year-old, we have a 1-year-old, and a 4-months-old,” she explained. She was just finishing up maternity leave during the call.
Her income dropped drastically during maternity leave, going down to just 25% of her usual earnings, even though she holds two full-time jobs.
Meanwhile, expenses skyrocketed due to house repairs, old car breakdowns, rising property taxes, and daycare costs.
A Mountain of Debt
The family earns about $240,000 a year before taxes. After taxes, they bring in around $162,000. Still, they’ve accumulated over $300,000 in non-mortgage debt:
- $98,000 in credit card debt across 10 cards
- $28,000 personal loan
- $132,000 in student loans
- $43,000 in 401(k) loans
“We’ve been relying on credit cards,” she admitted.
They’re making minimum payments of about $3,000 a month, but the debt keeps growing.
In addition to this, they’re paying on two mortgages: $4,500 for their primary residence and $1,200 for a second property her husband owned before they married.
Selling Off Assets to Stay Afloat
They’re in the process of selling the second property, which still has $116,000 left on the mortgage. It’s listed at $380,000, which could provide much-needed relief.
“Nothing to be afraid of there,” said Ken Coleman, host of The Ramsey Show. “It may not get it all, but it’ll make a huge chunk.”
Where the Money Goes
Even with a six-figure income, they’re falling behind. After debt payments and mortgage obligations, their remaining income goes toward basic expenses like food, utilities, daycare, transportation, and some support to family abroad.
Private school for two of the children costs $1,300 a month, and daycare costs another $800. When asked about the school expense, she clarified, “That’s correct. It’s $1,300 a month.”
Tough Love and Budget Changes
Ramsey personality Rachel Cruze emphasized the need for immediate and significant changes.
“There have to be some changes, some significant changes, because if there’s not, you guys will keep in the cycle of where you’ve been,” she said.
“It’s not forever. But for the next two to three years, our lifestyle has to change.”
The hosts strongly advised pulling the children from private school, pointing out that it’s a luxury they can’t afford right now.
“Private school will always be there,” Coleman said. “They really don’t need it that much as much as you need $1,300 a month back in this thing called a budget.”
They also noted the couple isn’t consistently budgeting.
“You’re either going to get behind on bills, you’re going to get behind on a mortgage, you’re going to get behind on things. And I’m scared you’re going to get behind on the wrong items,” Cruze added.
To help them start turning things around, Ramsey’s team offered a free session with one of their coaches and access to EveryDollar, their budgeting tool, for a year.
Despite the overwhelming situation, the hosts were clear: there’s a way out, but it requires hard choices and a serious reset.