You're Not Afraid, But You Should Be

finance

7th February 2024 | 00:03:13

You're Not Afraid, But You Should Be

You're Not Afraid, But You Should Be

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TLDR: Dylan, a 24-year-old earning $45,000 annually, seeks Dave Ramsey's advice on debt repayment. Despite having $8,000 in savings, Dylan allocates most of his $800 monthly surplus to his savings account rather than prioritizing debt repayment. Dave emphasizes the urgency of Dylan's situation, highlighting his significant debt and low savings. He urges Dylan to follow the Baby Step 2 plan, which involves directing all extra money towards eliminating debts, starting with the smallest. Dylan expresses reluctance due to his comfort with his current debt level, but Dave emphasizes the importance of addressing the situation promptly to avoid future financial struggles.
Dave Ramsey Show Transcript: A Call from Dylan on Debt and Savings
Host: Dave Ramsey
Caller: Dylan
Dave Ramsey: Dylan, welcome to the Dave Ramsey Show. What's going on?
Dylan: Hey Dave, I'm doing better than I deserve, man.
Dave Ramsey: How can I help?
Dylan: Well, I'll start by saying I've always been a saver. My parents are big savers. They followed your baby step plans years ago. They told me that when I was on my own, I should follow it, but, like I told the lady who answered my call, I'm pretty stubborn. I'm going to need you to tell me this, you know, "Dylan, you got to do this. Get it in my head." I'm very fortunate. I do very well. I have about $800 to $1,000 extra a month that I put towards my debts after minimum payments and everything. It's split among my savings account, a finance TV, a big TV, a car payment, and my student loans.
Dave Ramsey: Dylan, when was it you listened to your parents?
Dylan: How do you mean?
Dave Ramsey: When you took out a loan on a big-screen TV, I mean, I loved that TV. Not a smart decision, I know, but I want my TV, and I don't have any issue paying for it.
Dylan: Alright, you had an issue paying for it 'cause you couldn't. You put it on that loan.
Dave Ramsey: Yeah, alright. Well, yes, sir. So, you take about that $800,000 a month and you really do pad your savings. You're well past step one into step two, but it's a psychological thing. You love having a padded savings account. That's where most of it goes, okay? And then you take about the extra...
Dylan: Go ahead.
Dave Ramsey: I said, "Okay, go ahead. You're fine."
Dylan: Okay. Yeah, you have a plan. You have a system. And so how much is in savings right now?
Dave Ramsey: It's about eight grand.
Dylan: Okay. And how much debt do you have on the TV and the other stuff?
Dave Ramsey: The TV has about $2,100 on it, no interest. The car is at about $18,000, and the student loans total to about $23,000.
Dylan: Okay. And what's your household income?
Dave Ramsey: I make about $3,800 a month after taxes.
Dylan: How old are you?
Dave Ramsey: I'm going to be 24 on the sixth.
Dylan: Okay. And what do you want me to tell you?
Dave Ramsey: Well, baby step two, you know, you say I should take all that disposable income, and I should put it towards the small debt first, and then I should go to the next smallest and the next smallest. Right now, I take about the extra $800 that I have...
Dylan: I understand what you're doing. I understand what you're doing.
Dave Ramsey: What's your question?
Dylan: My question is should I take all that money and follow baby step two like you say and just knock the TV out? And why would I not tell you to do the system that I've told millions of people to do?
Dave Ramsey: Well, it's you know, I don't feel overwhelmed about my debt, and I...
Dave Ramsey: You should! How, like, you're 24 years old, you make $45,000 a year, and you're broke. You're deeply in debt. And somehow, you figured out that this is all okay. You ought to be very afraid. You'll weigh too much on your car, and you're stupid. But TVs, absolutely insanity. Yeah, you ought to be upset. I wish I could get you upset, and then you'd probably do something about it.
Dylan: Okay.
Dave Ramsey: So, you've got roughly $1,000 a month that you're putting toward debt. You've got $48,000 in debt. That means it's going to take you four years to get out of debt. That's if you don't buy anything else, you don't have any emergencies, you don't get married, you don't have any kids, you don't buy a house, you don't have a flat tire. I mean, you can't go four years without something coming up.
Dylan: Yeah.
Dave Ramsey: So, you need more money. You need a bigger shovel. And you got $8,000 in the bank. You need to take that $8,000 and put it on the TV. You need to take the $1,000 a month and put it on the TV. You need to get rid of that TV debt, man. And then, you need to take that $1,000 a month and put it on the car. And then, you need to take that $1,000 a month and put it on the student loans. And you need to live on rice and beans. And you need to get a part-time job. And you need to do whatever it takes to whip this thing into shape.
Dylan: Alright.
Dave Ramsey: Are you with me?
Dylan: Yeah.
Dave Ramsey: Okay. So, baby step two is to take all of your money and throw it at debt, smallest to largest, snowball style. And you need to do it now. You're never going to get ahead in life if you don't get serious about this.
Dylan: Yeah. I appreciate it, Dave. I really do.
Dave Ramsey: You're welcome. Good luck to you.
Dylan: Thank you.
Conclusion:
In this extended transcript, Dave Ramsey confronts Dylan, a 24-year-old caller who, despite having a seemingly good income, finds himself deeply in debt. Ramsey emphasizes the urgency of Dylan's situation and challenges his complacency. He stresses the importance of following the "baby step" plan, particularly step two, which involves aggressively paying off debts using the snowball method. Ramsey encourages Dylan to take decisive action, including utilizing his savings, getting a part-time job, and making lifestyle changes to accelerate his debt repayment. While Dylan initially expresses reluctance, Ramsey's tough love approach ultimately resonates with him, and he agrees to commit to the baby step plan. The interaction highlights the need for financial discipline, the importance of seeking professional advice when facing debt, and the transformative power of taking decisive action to regain control of one's financial situation.
##FAQ: Q1. What is Dylan's financial situation?
Dylan is 24 years old and makes $45,000 a year after taxes. He has about $8,000 in savings, $2,100 in debt on a TV, $18,000 in debt on a car, and $23,000 in student loans. He currently has extra money each month that he splits between his savings account, the TV bill, the car payment, and his student loans.
Q2. What is Dave Ramsey's advice to Dylan?
Dave Ramsey advises Dylan to follow his Baby Step 2 plan, which involves taking all of his extra money and putting it towards the smallest debt first, then the next smallest, and so on. This will help Dylan get out of debt faster and start building up his savings.
Q3. Why does Dylan hesitate to follow Dave Ramsey's advice?
Dylan hesitates to follow Dave Ramsey's advice because he does not feel overwhelmed by his debt and he likes having a padded savings account. He also enjoys having a big-screen TV and does not want to give it up.
Q4. Why does Dave Ramsey think Dylan should be upset about his financial situation?
Dave Ramsey believes Dylan should be upset about his financial situation because he is deeply in debt and has not taken steps to address it. Dave Ramsey believes that Dylan is making poor financial decisions and is not taking his financial future seriously.
Q5. What are the potential consequences of Dylan's financial decisions?
If Dylan continues to make poor financial decisions, he may face several negative consequences, including:
  • Being unable to save for retirement or other long-term goals
  • Having difficulty getting approved for loans or credit cards
  • Being forced to live paycheck-to-paycheck
  • Declaring bankruptcy

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7th February 2024

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