No matter how much you earn, spending too much money can land you in financial trouble.
Alyssa, of Naples, Florida, found herself in such a situation after reviewing her and her husband's combined financial situation. She works as a mental health therapist and he works in the construction industry. The couple earns $11,500 a month, for a total of $138,000 a year.
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Still, in recent episodes, ramsay shaw, Alissa said they only have $3,000 left in their savings account and are worried about their retirement and whether they will be able to have more children.
Ramsey noticed a problem with the couple's spending habits. “Your lifestyle is completely irrational,” he said. “Guys, I don’t know where this money is going.”
Unfortunately, more Americans are in a similar position.
live paycheck to paycheck
As of November 2023, 62% of Americans were living paycheck to paycheck, according to a new report from PYMNTS and LendingClub. A whopping 45% of struggling adults earn more than $100,000 a year.
To be fair, $100,000 isn't what it used to be. The recent rampant inflation has eroded even the purchasing power of America's upper class. However, poor lifestyle habits are also a problem that is forcing many people into financial difficulties.
Alyssa and her husband have combined student loans worth $140,000, car loans worth $60,000, and home loans worth $240,000. Their total debt is $440,000, more than three times her annual household income.
Alyssa realized that she could pay off her consumer debt faster if she set aside more money for car and student loan payments. But she thought her top priority should be to set aside her cash for emergencies and provide a safety net for her 9-year-old daughter.
“Fear… [is] We’re making sure we have enough,” she said. “I'm self-employed and he works in construction and other businesses, so I'm worried about the huge expenses.”
“Do you know what I'm worried about?” Ramsay replied. “I make $130,000 a year and I'm going bankrupt!” That's what I'm worried about. She said Alyssa needs to change her priorities and dramatically change her lifestyle.
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Dramatic change in lifestyle
According to Ramsey, “This is a time of … urgency.” Alyssa and her husband can address their debt by cutting back on their spending, even temporarily. He recommended selling your car and replacing it with a cheaper alternative to reduce the burden of your auto loan.
According to data from Experian, the average balance on a car loan in 2023 is $23,792, which means two loans on two cars would be about $47,584. Alyssa and her husband's combined car loans are only 26% higher than hers. Still, trading in your car for a cheaper alternative can certainly help.
But student loans are truly an outlier in a couple's personal finances. According to research from Experian, the average student loan in 2023 was just $38,787. Alyssa's husband's balance is slightly above average at her $40,000, but her balance is significantly higher at her $90,000.
To eliminate this debt, Ramsey recommended a complete lifestyle overhaul. “The more dramatically we change our lives, the faster things will turn around and we'll have more cash and be debt-free,” he said.
He estimated that Alyssa and her husband could save $40,000 to $50,000 a year by replacing their current car, taking fewer vacations and eating out less.
Alyssa said she has already canceled her cruise plans. “You're going to learn how to say 'no' a lot,” said co-host George Kamel, but the sacrifice will be worth it in the end. “You deserve freedom and not a stressful life.”
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