A couple making $200,000 a year recently called into “The Ramsey Show” with a simple but painful question: Why are we still broke?
Despite clearing $34,000 in credit card debt, bringing in a high combined income, and maintaining $9,000 in savings, the money never seems to last.
As Ryan, the husband, explained, “We should be able to be fine and live way better and, you know, at least have more money in the savings.”
Host George Kamel added, “That’s the American dream right there.”
He was responding to Ryan’s realization that even after paying off credit cards and expecting an extra $1,000 to $1,500 a month, the money “just disappeared into more spending, lifestyle, more.”
High Income, No Margin
Their situation is a classic case of lifestyle creep. With one paid-off credit card, a car loan nearing $11,000, two leased trucks, and loans taken against their 401(k)s, the couple’s debt remains significant.
They’ve been borrowing from retirement accounts to pay off other debts, thinking it would free up monthly cash.
“I took the loan out of my 401 to pay her card off. She took another loan out to pay the credit card off,” Ryan said.
“So once the credit card was paid off, I thought, well, man, we should be getting an extra $1,000 to $1,500 a month. And it just didn’t start equating to that.”
Instead of financial relief, the money vanished into everyday spending.
Ryan admitted they had no real budget in place, and only recently merged their finances after nearly two decades together.
Budgeting Comes Late
“Have you guys ever created a budget together?” Kamel asked.
“We’ve been together almost 20 years, and about maybe two, two and a half years ago, we just put our accounts together,” Ryan replied.
The lack of financial coordination has taken a toll.
While they thought they were managing by putting everyday purchases like gas and groceries on a credit card and paying it off weekly, the hosts saw it differently.
“You told me you’re not going to borrow money, but you’re okay temporarily borrowing someone else’s money with the promise of paying it back within the week,” Kamel said.
He challenged the couple to take a 30-day break from credit cards altogether.
“Most people go, ‘Oh my gosh, instead of the 2% cash back, I spent 10% less than I was spending.'”
Bad Advice from the Start
Making matters worse, much of the couple’s financial strategy was shaped by questionable guidance.
“My 401(k) guy said to do this,” Ryan explained.
“He said we should have everything going onto the credit card that we pay and then just pay that off.”
That drew a sharp rebuke from Dr. John Delony: “You gotta fire that guy before the day is over and get a new guy.”
Husband admitted he already had doubts. “I just told my wife that the other day… I’m just not right with what this guy is doing.”
Kamel zeroed in on the root issue. “You’ve been robbing Peter to pay Paul, playing whack-a-mole, taking out one debt to pay off the other debt.”
And when Ryan asked if the couple should keep more than $1,000 in savings due to their expenses, Kamel didn’t waver.
“The $1,000 does not change based on expenses or income. It’s a flat $1,000,” he said.
“If something did occur… you’d sell stuff. You’d work extra. You’d cut your lifestyle down to nothing.”
Hitting the Reset Button
Delony and Kamel advised the couple to pause all retirement contributions until their consumer debt is paid off.
While both spouses were still contributing to their 401(k)s, Kamel emphasized that trying to do too much at once had left them stuck.
“Right now you’re doing 17 things at once, and you’re not seeing progress on any of it,” he said.
Ryan said he’s fully on board with cutting debt and rebuilding their financial foundation. “I’m 100% committed. I’m tired of living the paycheck-to-paycheck life.”
Despite the heavy debt and poor financial advice, Kamel remained optimistic.
“This is a solvable problem. You make $200,000. There’s no reason to be this broke.”
And with a bit of discipline, they just might turn their situation around.