$900,000 In Debt and Don't Know Where To Start

Brought to you by the EveryDollar app. Start budgeting for free today. Me and my husband are in a big mess financially and we can't seem to get on the same page. I'll kind of run down some numbers for you. It's pretty bad. We have student loan debt for my student loan debt $52,000. We have federal tax debt $12,000. We have a mortgage $1.75. And then we have personal loans that total about $331,652. We have credit cards altogether that total $152,168. And then we have business loans that are $199,382. And business credit cards that are about $65,156. So we have a big mess. So you have a business that is failing. Yes, the business has been struggling in the past. Yeah, you're not making money and you've been financing it with all these loans. Correct. Having too many people in payroll and not having... You're not making a profit for whatever reason and you've been financing it for how long? How long has it been since you made a profit? Well, I mean, technically I did make a profit these last two years, but obviously I'm paying loans. So the interest is obviously the only part I can deduct, but cash flow, I don't have any cash. Yeah, but you've been using, I mean, you didn't use these credit cards, these business loans, these personal loans, these other credit cards, all to finance the purchase of the business. You've been operating it at a loss and feeding it. Yeah. How much money do you have to make where budgeting is just optional? If you chose C, watch this. She makes about $170, I make about $115. Hold on, did you go back after you paid off everything, borrow some more money? Oh yeah. Oh no, Carlos. We'd like to go here and there and get this Mercedes. Oh no, you went full South Beach. It's not just about how much you make, it's about having a plan for what you've got. So start budgeting with every dollar for free today. You've been operating it at a loss and feeding it. Yeah. So from my portion, yes, I've been feeding the business with the debt. And all of this debt was created by this business? No, no. My husband, he had an idea to pull money balance transfers off of his cards and his personal loans to put it in the stock market to invest. So the first year he made a lot of money. We had a big tax bill. The second year we had a lot that we owed and he never repaid those loans and credit cards that he pulled money off of. So his debt is about 360 of this, which is from him only lying to credit. He got a business loan and business credit cards. So does anybody around there work? Yeah. Like for a job to make money? My husband has a W2 job. What does he make? About $120 a year. Yeah. And what was the profit on your business that you paid taxes on last year? $57,000. Okay. Do y'all both agree that y'all have a mess? Yes. Do y'all both agree that you want it to go away? Yes. Okay. It's just a method of... So my husband got a bonus for about $12,000. And so since I've been listening to you, I was like, well, it would be to snowball, pay these debts, the smaller debts off to free up about $600 a month. He wants to pay on a personal loan that's for $40,000. And he wanted to put it towards that to get the balance down. But as soon as we were arguing about it, and then he called him and it went into collections. So now it's in collections because he hasn't been paying it and he didn't have enough money to pay it. So now he's still... So the money that he made on the stock trades, he put back into the stock market and lost it? Yes. So he was day trading? He never paid any of the... I know he didn't pay the taxes, but also you said he made a profit that caused taxation. That's where taxes come from. And then that profit, which meant he not only made the money back, so he borrowed 60,000 on a credit card or whatever, and they put it in the market. He got the 60,000 back plus money, didn't pay the taxes, and put all of that back into the market and then lost it. So the first year that he did that, which was in 2020, he did pay our tax bill. It was like 25,000, I think it was. Where's the money? Did he lose it or not? He had the money and he paid it in full that year. Now the money that he made in the stock market, where did it go? He put it back in the market and lost it, didn't he? Yes. Okay. That's all I want to know. You don't have any money is what I'm trying to establish. Yes, that's correct. None of the money that was made is there anymore. It's all gone. Okay. Do you own anything other than your home? He, his car, he doesn't have a loan on him. And then I have a vehicle that I don't have a loan on. Okay. So your business doesn't have any assets. Oh, it does. Sorry. It does. I have desks, computers, tables, laptops. What's your gross revenues on the business? 330 or 25. How many employees? Right now I'm down to one. I let them go. What do you do? What's your trade? What's your skill? I have a tax and accounting business. Couldn't you make more than 57 working for somebody else? I actually did. Um, the end of 24, I got a job, a full-time job, uh, making one 10. And then I got laid off in June and August. Okay. You need to go get another one. Yeah. Yeah. Cause you need the income to be able to, we need the income to be able to learn, lean into this. Okay. And then back to your original question, y'all are arguing about what to pay off first and so forth. Um, not counting your mortgage, you have a long road ahead of you. So the first thing we need to do is establish two principles before we begin to attack the debt. Principle number one is no more day trading. 97% of day traders over a three-year period of time lose money. So no more stupid schemes. Second principle is businesses that don't make a profit are a bad hobby. They're not a business. If it's not making a solid profit, if you work your full, your new full-time accounting job, and you can run 57,000 out of this thing on your own as a side hustle in profit, and you know, the difference in profit and grows, then keep it open. But if you can't make a profit, you do not borrow any more money to keep it open. You close it. Okay. You fed this thing enough and he's fed his craziness enough. Can I throw a third principle in Dave? Third principle, Shelley, is for this to work, you're going to need all the like synchronicity and momentum that y'all two can muster together. And so y'all are going to have to decide this is our debt. We both have done some dumb things. We've both done this and we're both going to attack this stuff together. You will never conquer this thing if he's responsible for paying off his and you try to pay off yours. Exactly. Then pull the mortgage out of the equation, list all of these debts individually, smallest to largest, and begin to pay them in that order after the $12,000 tax bill is paid. $12,000 tax bill is the first thing, and that should have been paid out of his bonus. If he's got that $40,000 bonus laying there, pay the IRS. You do not want the IRS. I mean, you're in tax and accounting. You know this. You don't want to owe the IRS money. It's not only expensive, but they have ridiculous power to screw up your life. List your debts smallest to largest. Now, if he's making $120,000, you're making $110,000, you're making another $50,000. We're up in the $200,000, $300,000 range now. We're living on nothing and we begin to attack this. Probably going to take you four or five years to clean up this mess, but it took you six or eight to make the mess. Create your free every dollar budget today. The simplest way to budget for your life.