Should I Start Paying Off Our Credit Cards?

Summary

Podcast Summary: The Ramsey Show Highlights - "Should I Start Paying Off Our Credit Cards?"

Release Date: January 14, 2025
Host: Ramsey Network
Duration: Under ten minutes

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Introduction

In this episode of The Ramsey Show Highlights, the host, Dave Ramsey, addresses a caller facing significant financial turmoil amidst a personal separation. The discussion delves into managing overwhelming credit card debt, navigating marital separation, and establishing financial stability during a crisis.

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Caller's Situation: Separation and Financial Strain

The episode begins with a concerned caller seeking advice on her mounting credit card debt amid a recent separation from her husband.

• Caller’s Background:

  • Separated for three months.
  • Two months ago, she and her husband ceased credit card payments, accumulating substantial debt.
  • Recently discovered that their credit card debts might soon enter collections.
  • Currently couch surfing with her cousin while seeking stable housing.

• Personal Circumstances:

  • The separation stemmed from the collapse of their joint construction business.
  • Issues included her husband’s anger and her own safety concerns due to past trauma.
  • Although they hold weekly finance meetings and hope for reconciliation, significant challenges remain.

Notable Quote:

Dave Ramsey [00:41]: "You're currently still separated?"

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Financial Breakdown: Debt and Credit Score Decline

As the conversation unfolds, the caller provides a detailed overview of her financial predicament.

• Employment Status:

  • Currently juggling three part-time jobs.
  • Recently offered a full-time position expected to increase her income from approximately $2,000 to $5,000–$6,000 monthly starting in January.

• Credit Situation:

  • Her credit score plummeted from 750 to 500, impeding her ability to secure rental housing.
  • Total Credit Card Debt: $42,000 shared with her husband.
  • Additional Debt: $30,000 owed to subcontractors due to the unsuccessful construction business.

Notable Quotes:

Caller [02:31]: "Well, the thing is, my credit just went from like 750 to 500, so I don't even think I can get a place."

Co-host [03:22]: "So how much credit card debt do you have?"

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Dave Ramsey's Strategic Advice: Prioritizing Stability

Dave Ramsey provides a structured approach to help the caller regain financial footing amidst her personal struggles.

1. Stabilize Housing and Basic Needs:

   • Emphasizes the immediate need to secure stable housing before addressing debts.
   • Suggests moving into a one-bedroom studio apartment to ensure safety and stability.

2. Manage Income Effectively:

   • Encourages the caller to leverage her upcoming full-time job to cover essential expenses like rent, utilities, and food.
   • Once basic needs are met, she can allocate remaining funds toward debt repayment.

3. Postpone Debt Payments Temporarily:

   • Recommends putting credit card payments on hold until there is clarity on her marital status.
   • Highlights that creditors often remain patient and may continue to pursue debt collection after a few months.

4. Addressing Marital Debt:

   • Advises that debt repayment plans should be contingent on whether the couple reconciles or proceeds with a divorce.
   • Suggests that any debt settlement should be formalized through a divorce decree to ensure accountability.

Notable Quotes:

Dave Ramsey [02:38]: "Oh, I think you can. You're making five grand a month? Yeah. And you need to... get some stability and then you've got five grand minus rent, minus electricity, minus food to work with towards your debt."

Dave Ramsey [06:03]: "You're broke and homeless and divorcing. We've got to fix some of those things before we worry about stupid credit card."

Dave Ramsey [07:35]: "Until you have an agreement one way or the other on this, you don't pay it because you're going to be the only one paying it."

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Future Steps: Building a Path Forward

The episode concludes with actionable steps for the caller to follow in order to mitigate her financial crisis.

1. Secure Stable Housing:

   • Move into a reliable living arrangement to eliminate the stress of homelessness.
   • Consider selling the unreliable car to reduce expenses, especially since transportation needs will be fulfilled in the new location.

2. Optimize Income:

   • Transition to the full-time job in North Carolina, ensuring a steady income stream of $5,000–$6,000 monthly.
   • This financial boost will facilitate debt management and provide a foundation for rebuilding credit.

3. Debt Resolution Strategy:

   • After stabilizing her living situation, revisit the credit card debt to explore settlement options.
   • Potentially negotiate paying off the debt for a fraction of the owed amount, especially after a period of missed payments.

4. Marital and Financial Agreements:

   • Finalize the status of the marriage, whether through reconciliation or divorce.
   • Ensure that any debt repayment plans are included in legal agreements to protect both parties.

Notable Quotes:

Co-host [07:38]: "We're kind of in a storm mode and there's a lot of unknowns."

Dave Ramsey [07:51]: "Why refi Refinances delinquent private student loans for struggling borrowers. Learn more at yrefy.com Ramsay."

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Conclusion

In this episode, Dave Ramsey effectively addresses the complex interplay between personal turmoil and financial distress. By prioritizing essential needs and providing a clear, step-by-step plan, Ramsey offers hope and practical solutions for those navigating similar challenges. The emphasis on stabilizing one's immediate environment before tackling debts serves as a foundational strategy for regaining financial health amidst life's upheavals.

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For more insights and daily financial advice, tune into future episodes of The Ramsey Show Highlights delivered by the Ramsey Network.

Transcript

[Dave Ramsey]

Brought to you by Y Refi Refinance your defaulted private student loans [e-mail] Ramsey.

[Caller]

I need help with this credit card situation. That's a part of a bigger problem. But my husband and I separated about three months ago. Two months ago we stopped paying credit cards and I just found out that before they go into collections that we might want to start paying them again. We just owe so much. We just have been overwhelmed and have not had good advice. So that's why I called you.

[Dave Ramsey]

You're currently still separated?

[Caller]

Yes.

[Dave Ramsey]

Why?

[Caller]

Well, we were working together in his construction business and let's just say like everything came crashing down. His anger and my not feeling safe from like past trauma all happened at once. I moved out to my cousin's house and when I came back home, he had moved back to his home state. And we're talking, we're having weekly finance meetings and I believe God will restore our marriage, but we've got a lot to work through. A big part of it.

[Dave Ramsey]

He shut his construction business down and moved away.

[Caller]

While we were at the end of a really long project from Not Heaven.

[Dave Ramsey]

He shut his construction business down and moved away? Yeah. And how are you working?

[Caller]

I am now. Yes.

[Dave Ramsey]

What do you make?

[Caller]

Well, I'm working three part time jobs now. Just got offered a full time job. So right now I'm making like maybe 2,000amonth and I'll be making like five, five or six years in January.

[Dave Ramsey]

Good. Good for you. Okay, thank you. And. And so you're going to get your own place. You're currently living with your cousin, but you're gonna. Or is that right?

[Caller]

I'm kind of couch surfing.

[Dave Ramsey]

Yeah, but I mean, if you're making five grand a month, you're not anymore, right?

[Caller]

Well, the thing is, is my credit just went from like 750 to 500, so I don't even think I can get a place.

[Dave Ramsey]

Oh, I think you can.

[Caller]

Like a rental. You think so?

[Dave Ramsey]

Sure.

[Caller]

Okay.

[Dave Ramsey]

You're making five grand a month? Yeah. And you need to, you need to, you don't need to be homeless and divorcing and broke. We need to get some, you know, get a stabilized situation where you're safe and you have a home of some sort. A little one bedroom studio apartment. It doesn't have to be anything fancy, but get some stability and then you've got five grand minus rent, minus electricity, minus food to work with towards your debt. And now we've got a. Now we've got a thing we can project into the future. Does that make sense? Couch surfing doesn't project into the future. No, no, that's what I'm saying.

[Co-host]

So how much credit card debt do you have?

[Caller]

Let me look at my spreadsheet.

[Co-host]

And is your name on all the cards along with him?

[Caller]

Yep. 42,000.

[Co-host]

42,000. And what's the plan for you guys to pay this off since you're separated right now? Have you talked about that? Is it equal split payments or what?

[Caller]

Yeah, we're talking about it. And the talks has been like 50, 50. But the other major debt is owing subcontractors. And so that's where we've struggled. Like who do we pay first or how do we even like make a plan?

[Dave Ramsey]

So when he closed his in his construction company, he was not profitable. Well, if he didn't pay his subcontractors, honey, he wasn't making a profit.

[Caller]

Okay.

[Dave Ramsey]

Unless he has a pile of cash somewhere.

[Caller]

No.

[Dave Ramsey]

Okay, if he has no money and he still has bills outstanding, that means he lost money on the deal, right?

[Caller]

Right.

[Dave Ramsey]

Yeah.

[Co-host]

Did he just blow the money and never paid his. The crew?

[Dave Ramsey]

How much do you. How much does he owe? Subs.

[Caller]

He owes subs 30,000.

[Dave Ramsey]

All right, so here's what you need to do. Do you have a car payment also?

[Caller]

I do, but my car just. I owe five. It's worth five. The repair is seven. And where I'm considering moving. I can get everywhere around on a bike because it's warm enough all year. So I'm like, I might sell it.

[Dave Ramsey]

Wait a minute. Where would you move this warm if you have a $5,000 a month job starting next month?

[Caller]

So that's where I would be moving to, the job.

[Dave Ramsey]

Why would you consider. You are doing it. You don't have to consider moving. You're going.

[Caller]

Oh, thank you.

[Dave Ramsey]

No, I mean, you take the $5,000 job. Where is it?

[Caller]

North Carolina.

[Dave Ramsey]

Okay.

[Caller]

Coastal.

[Dave Ramsey]

Why would you not do this?

[Caller]

I am. I just. This weekend I visited. I just got the offer. Talking more details this week. I've just been.

[Dave Ramsey]

Yeah, okay. Yeah, it's not really considering. I mean, you're couch surfing, working three part time jobs. You have another option to move to North Carolina and have a $5,000 a month job. Yeah, you're going. You're broke. So you got to get your life back. You got to get control. You have. You have control of no variables right now. So this has got to be. The anxiety, the stress must be horrendous for you, honey.

[Caller]

Yeah.

[Dave Ramsey]

Okay, so here's what we're going to do. We're not going to worry about the subs and we're not going to worry about the credit cards. Right now you need to get moved and you need to get into an apartment. A little one bedroom studio of some kind. Something basic. And you need to figure out your transportation. When you've got food, shelter, clothing, transportation and utilities covered, then we can talk about how to settle these credit cards. But you don't need to start making payments on them. You're broke and homeless and divorcing. We've got to fix some of those things before we worry about stupid credit card. Okay, so just put those on the back shelf right now. They're not going anywhere. They'll definitely take money when you call them back six months from now or four months from now. Then you decide what's going you and your husband start talking and decide what's going to happen with the marriage. If there is a divorce, you'll have to split these bills up some way or another. I don't know what. And the divorce decree. The divorce judge will approve your all's plan or tell you what the real plan is if he doesn't like yours. And then you can go in and start working your way through this debt and you can probably settle it for pennies on the dollar. At that point, you're going to be six months behind. But you don't need to be paying these while he sits at his cousin's house doing nothing and while you're couch surfing. No, no. I wouldn't pay any of these bills until it's in an agreement of us getting back together or in an agreement of the divorce how the divorce is going to go down.

[Co-host]

We're kind of in a storm mode and there's a lot of unknowns.

[Dave Ramsey]

Until you have an agreement one way or the other on this, you don't pay it because you're going to be the only one paying it. He's not.

[Co-host]

Yeah, you're not going to make much progress trying to do this on your own in the midst of this storm.

[Dave Ramsey]

Exactly.

[Co-host]

So just pause until you got the next step.

[Dave Ramsey]

Why refi Refinances delinquent private student loans for struggling borrowers. Learn more at yrefy. Com Ramsay.