An 18-year-old recently called into “The Ramsey Show,” hoping that Dave Ramsey, the financial expert, could give him some advice. However, the best change can often require big sacrifices, and not everyone is comfortable with making those moves.
The caller attempted to justify how he ended up with high debt and beat down suggestions, but Ramsey didn’t fold. In fact, he got more upfront as the call continued.
“Your situation sucks beyond belief,” Ramsey stated in the middle of the call.
The call indicates how bad financial decisions can quickly snowball. Recovering from these types of setbacks requires taking responsibility and making hard decisions.
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The 18-year-old quickly told Ramsey that he expects to have anywhere from $100,000 to $125,000 in student debt by the time he graduates college. While many people have to take out loans to afford college, some of the caller’s debt was avoidable.
He currently owns a $41,000 car, which comes to a $1,000 monthly loan payment. Meanwhile, the 18-year-old makes $1,500 to $2,000 per month in retail plus his side business. He also has no money saved.
Ramsey urged the caller to sell the $41,000 car, but there were two obstacles. First, selling the car will result in negative equity. The trade-in value is only $27,000, which falls short of the loan’s balance. However, the 18-year-old also said that there is a lien on the car, so he can’t sell it even if he wants to.
Ramsey suggested putting $10,000 on the credit card to get up to date on equity and get out of the lien. He then suggested buying a $2,000 car, resulting in a small amount of credit card debt compared to the much larger amount on the auto loan.
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Although Ramsey offered a path out of the auto loan, which involved using a credit card, the caller explained that he couldn’t take that route. It turns out the 18-year-old only has $3,500 in available credit. Ramsey suggested talking with the bank and requesting a note that can cover the difference.
The caller then expressed confusion about getting a replacement car, given the monthly loan payments he expected to make. However, Ramsey said nothing about a loan and only wanted the caller to buy a $2,000 car.
The caller also didn’t want to entertain the suggestion of making the campus work without a car for two months just to get himself in a better financial position. Then, Ramsey had enough.
“We keep throwing suggestions out, and the only answer you’ve got is that it doesn’t work,” he stated.
Ramsey proceeds to tell the 18-year-old that his life the way he has it set up does not work. He also said that the caller’s financial habits are extremely problematic and require a change.
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Ramsey told the caller that he has to make uncomfortable decisions now to avoid harder times in the future. He said that the 18-year-old’s situation will get worse if he continues to accept his situation and make excuses instead of going through a complete transformation.
“You may need to quit school,” Ramsey declared while suggesting the caller has to put in 80-90 hour workweeks to get his finances under control. He can always opt for a gap year and return to college when he is in a better financial position.
Ramsey also explained that while he feels bad about the caller’s dad leaving the family, it doesn’t permit the caller to make bad financial decisions and attempt to justify them.
The college student also initially mentioned that he downgraded a $70,000 car to a $41,000 car. While this may look like a good financial decision on the surface, Ramsey shot down that assertion. The 18-year-old has no business owning that type of car if the monthly loan payment is $1,000 and he makes $2,000 on a really good month. All of this debt doesn’t even factor in the student loans.
Excuses may garner sympathy, but your net worth is your net worth. Your bank account doesn’t care what excuses you provide if you don’t have enough money for a down payment or another significant purchase. Taking control of the situation and having a desire to improve your finances can lead to a major financial transformation.
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This article Dave Ramsey Tells An 18-Year-Old With A 6-Figure Debt To Take A Year Off College To Make Money: ‘Your Situation Sucks Beyond Belief’ originally appeared on Benzinga.com
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