We Have $225,000 in Consumer Debt But Not Married

Brought to you by the EveryDollar app. Start budgeting for free today. Me and my fiancé just started Step 2 within the last month. We have a total of around $225,000 of consumer debt before a mortgage. And I had actually just got a new car like a month before, and then once I started the program, I'm like, that was a bad idea. So my question is, I have my vehicle. Yeah. My vehicle, I owe about $29,700. My fiancé actually has a lease, and he has a year left. And we also have his motorcycle that he owes about $13,500 on, and I think it's only worth about $9,500. So we have negative on all of them. We obviously have negative on mine since it's brand new. And his has about $7,000 or $8,000 in negatives since it's a lease, and we've only had it two years. So my question is, how would we go about telling them to get used ones with the negatives? And how would we go about that? I'm going to come out swinging here, but I'm going to tell you what I would tell my older sister if she was asking me the same question. I would tell you what I would tell my closest friends in the world, okay? And I only say this because I would not have a job if everyone's plans always worked out. So please don't refer to y'all's debt and what we owe until you are legally married and you have a process, a legal process for unwinding it. The number of times I've heard dating couples or cohabitating couples or even engaged couples start paying each other's debts off, and then they break up. And I know you're like, no, that would never be us. I'm just telling you over and over, untangling that nightmare or people saying, I paid off 20 grand of her whatever, and then she broke up with me. And there's no recourse for that. You get what I'm saying? And so what I would challenge you on is y'all run this plan, y'all are engaged, hopefully y'all are going to get married soon, but y'all run this program in parallel dealing with your own, what you make, what your life costs, what you owe, and handle it that way. And then the day he puts a ring on your finger and you want on his, now there's a way to legally separate this without it being a nightmare. It'll be a nightmare still, but you get what I'm saying? Yeah, I get what you're saying, but we've had our finances combined for a while now. I know, but that's not great. That puts you in a very vulnerable position. So how much money do you make every year? Well, just me or combined with us combined? Just tell me about you first. Just me, about $55,000. And if you had to take all of the debts that you have, what would they be? Oh, I'd have to add them all up. Well, we know his lease wouldn't be part of it and his motorcycle wouldn't be part of it. So you'd have the $29,000 car? We have an equity loan on our house together too. A what? We have an equity loan on our house. When you take your vehicle to the shop, you want to know it will get fixed, right? Christian Brothers Automotive's digital vehicle inspections give you confidence because you see exactly what their technicians see. And every repair is backed by their nice difference warranty, three years or 36,000 miles. Schedule your service today and get 10% off your visit at cbac.com slash Ramsey, or click the link in the description. 10% off up to a $250 value. We have an equity loan on our house. Oh boy. Whose name is the house in? It's in his, but I'm on the deed. But the mortgage is in his name? Yeah. Okay. Then it's his debt. You're in such a vulnerable position, Kristen. Oh man. So let's keep it 100 right here. So the truth is all the debts really in his name, except for the $29,000 car, which is yours. That's the truth. Those are the facts. I have some student loans and a few credit cards. Okay. Tell me about your student loan. Okay. Tell me your student loans, your credit card and your 401k loan amount. My student loans, I have about 28,000. Okay. My 401k loan, I have about 3,300. Ooh. Okay. Yeah. And then I have a couple of small credit cards I still need to pay off. What are those? 300, 375 for one, 900 for another, and then 2,200 on another one. Okay. So let's, for the purpose of this exercise, because I mean, if we were sitting right now at coffee talking face-to-face, I'd tell you the exact same thing. You do not need to put a dime of your money towards this person's debt. You need to focus on paying off your debt because that is the financially fair thing to do. And legally, it's the thing that serves you best in this situation. Okay. So you make $55,000 a year. Good on you. Let's list these debts from smallest to largest. That's what I do. I would start with the smallest one for 375. I'd make minimum payments on everything, but I'd throw all of your extra income towards that smallest debt. Doing that is called the debt snowball. That's how I paid off $460,000 with my husband. It definitely works. The problem that I see you running into is you guys probably have some sort of split where, you know, I don't know what it is. I'm guessing you pay part of the mortgage, which makes sense because you live there. But is there something else aside from housing expenses that you're giving him money for? No, we just combine everything. We just combine our income and we just pay the bills. How much does he make? We make a total of $135,000, about $80,000. Okay. He makes about $80,000. So the tough part is I want to help you as best as I can, but you called a show that really has a clear point of view on this. And our clear point of view is what John stated before. I'm not going to say it again, but that's the truth. And so I can't give you advice based off something I wouldn't do myself. I would not be a congruent human being if I did that. So I have to tell you what I would do, which is I'd separate my money and I'd say, we're not married. Our relationship isn't committed, therefore our money doesn't have to be committed. And it's no shade, but I have to protect myself to a certain degree. And I do it like that. So how would I go about with my vehicle then, with getting out of it and getting something cheaper? Did I go the route of getting a personal loan? No. I have an offer for like $2,500, so that puts me at $3,700 in negative. Okay. Yeah, I would do that. I would go down, if you can get a... I don't know, do you have any cash saved? No, just the emergency fund. How quickly could you get $3,700? How quickly could you save it? I'd say a couple of months. The offer might be gone by then. What you could do, you could go to the credit union or you could get a loan for the difference, and then you're going to need something to drive, right? So maybe I'd get a loan for the $3,700 plus maybe another $5,000. So $8,700 total. You're nicer. I was going to say $2,500. Yeah. I mean, you're looking for a beater is the point that John is making. This is just something to get you from point A to B. It's temporary, okay? So don't get hung up on the fact that you're driving a $3,000 car. It's just temporary. And then now you freed up your car note, right? So how much is your car note? About 513. So you freed up the 513. Of course, you're going to have to pay a little bit for the loan that you got from the credit union or for whatever, but mostly you've freed up most of that cash and that's going to go towards your debt snowball, paying off these credit cards as quickly as possible. Then next you'll move on to the 401k loan. Then next you'll move on to the student loans and do those smallest to largest as well. But the key is smallest to largest, and you're going to work extra hours. If you can pick up overtime in some way, if you can do a side hustle. Yeah, I have been. Perfect. Awesome. Most people do this in 18 months, right? That's the goal, 18 months or less. And they do that by getting very uncomfortable, doing things they've never done before, working jobs they've never worked before, selling things that they thought they loved, right? All of these things are part of it. Sell that motorcycle and take out a loan for the difference for that 4,000 bucks, right? Yeah, absolutely. And I would encourage him to do that. I would start working this plan and let him see all of the progress that you're making and him go, oh, that looks good. I want to do that too. And you have the ability to influence this person. You can't change a person, but you can't influence them with your behavior. And I think you have a really good opportunity to do that. Create your free every dollar budget today. The simplest way to budget for your life.