"We've Made a Lot of Bad Choices"

Brought to you by the EveryDollar app. Start budgeting for free today. My husband and I are both I.T. support, in the industry of I.T. support. Total income is around $200,000 a year, but I went into the EveryDollar app and put in our stuff for August, and it's showing us that we have more payments than we have income. Wow, how much debt do you guys have? Just under $325,000, not including the house. Wow. Student loans? What are the debts? About a third of it is my student loans. Okay, so will you list out your debts for us? There's a lot of them. You can give us the big chunks. Yeah, like credit card debt, car debt, personal loans. We have two cars, about $60,000 total. We've made a lot of bad choices. That's okay. We get talked into buying things. Okay, timeshare? That we could probably have put up. We got out of timeshares years ago. Okay. Who's talking you into this? Salespeople. Go figure. You need to stop talking to people. That would solve a lot of it. Okay, is a lot of credit card debt, Sam? Yeah, we do have credit card debt, but we also have some home improvement debt as well. The latest one was a roof that is insured for 50 years and is good for 100. Are you trying to sell me on a new roof? Oh, my God. You're leading with the features of this roof. What did it cost you? $50,000. Okay, I won't be around in 100 years, so I can care less about this warranty. Okay, it cost you $50,000 for a new roof, so we definitely got ripped there. That's an insane amount on a roof. We have new HVAC from three years ago. We have an attorney involved with that. You owe on that as well? We do owe on that, and the company that sold it to us oversold and didn't sell properly, and the thing isn't working. Sam, I'm going to be honest with you. So far, it sounds like your debt has been everyone else's problem. You were talked into it. I got scammed. I was told this. If you want to get out of this thing, the first step is to realize it's not all your fault, but it's your responsibility. Yes, no, we completely understand that. I want to know how you guys have been month to month now, because if you plugged in all your numbers and I go, gosh, we're in the red, how deep in the red are you? $800. Where has that been coming from the past couple of months? If the payments have been consistent, and you guys have been short $800, are you going deeper into debt, or do you have savings that you're taking from to cover that $800? No, we don't have savings. Because every time we try to start, something happens, and it gets drained. I just want to know how you've been living. So you're using the credit cards to cover any gaps? We don't have gas. We have two electric vehicles. No, I was saying to cover the gap of like the $800 that you need, you're using credit cards to fund that? Some of it, yes. I believe that's where all the credit card debt is ending up from. Has your husband looked at this stuff too? Have you guys sat down and looked at the budget together, or is this just you so far? Yeah. Both of us are tired of paycheck to paycheck. I get more anxiety over it than he does, but he does get frustrated. I'm glad you called, Sam, because we're going to be able to really just walk you down what we call the baby steps. In order to make this work, it's going to have to be a complete 180 of what you guys have been doing, how you guys have been making decisions, buying things, how you've not been budgeting. Everything you've been doing, you're pretty much going to just do the opposite. The fastest way to do it is that first step is $1,000, and you keep it in that high-yield savings account and don't touch it. Then you're going to be looking at a mountain of debt. As you list it out smallest to largest, and you said we have a lot of debt, so if it's multiple credit cards, multiple student loans, literally write them all individually out and actually look at it and say, okay, this is where all of our money is going. It's probably going to be pretty shocking. You may have already done that because you guys said you plugged in your income to every dollar. Then from there, you're going to have to figure out, okay, we're going to be working extra. We're going to be selling some stuff to get some cash in fast. We're going to cut our lifestyle. Instead of acting like you make $200, we're going to act like we make $80. We're going to live on nothing, nothing in order to get this margin up to start knocking out this debt. The great thing is, too, Sam, is as you guys start paying it off, paying off some of these debts, it's going to free up those monthly payments. It's going to cause you to have more and more margin as you go down the debt snowball to pay it off. As you're looking at it, it's going to be a bit. I would look at getting rid of these cars just to give you a quick win, especially if you're not underwater on them. If you can profit off of them and use that cash to buy yourself some cheap cars, $5,000 each, that's going to be your ticket out because then you've got $265 left. If you threw, let's say you take home $12,000, making $200,000, take home $12,000 a month, if you can throw $7,000 at the debt, you're done in three years. So that's the napkin math that we now have to reverse engineer and go, okay, we need to come up with $7,000 and live off five. And there's a good chance a thousand of that is in the car payments, right? So if you get rid of that, that's going to free up cash immediately. And then, yeah, looking at your lifestyle. But that's it. And Sam, what's wild is that this is so doable. And what's crazy, too, when we see people do this, especially as they are working their way out of debt. And when it's over a 24-month period, some people do it 18 to 24 months. But when you're looking at a three-year journey here, it's amazing the amount of people that get raises in this time. They find some side hustle. They get focused. They start working harder. They get the promotion. It's crazy. So your income is hopefully going to be increasing throughout this process, too, which is going to help bring extra margin. But it's going to feel like whiplash of how you guys have been functioning with money. But you know what? You want the opposite result. You're tired of where you are. And so that means there's going to have to be some changes. And it may be uncomfortable for a bit, but you're going to start to have this normalcy of what this looks like to have control of your money.