A COUPLE has sought the help of a financial expert after finding themselves with over $314,000 in debt this year.
Along with a mindset change, they were advised to take three crucial steps to instantly solve the money mishap.
A couple with hundreds of thousands in debt has sought help (stock image)[/caption]
Experts George Kamel (left) and Dr. John Delony (right) offered solutions[/caption]
It wasn’t the first time they were in debt and got out of it, according to what the caller, Emery, explained while speaking with The Dave Ramsey Show experts George Kamel and Dr. John Delony.
“We got out of $30,000 in debt ten years ago, but then started going down a slippery slope,” Emery said.
She quickly explained that the couple had three kids at home and owned two rental properties, with one already being on the market for sale.
The amount the couple owed on each home was about $170,000, but they were evaluated to be worth around $310,000 to $320,000.
Emery questioned what the family should do with the remaining profits after the properties were both sold, as they had gone into debt turning one of them into a furnished rental.
In total, she cited about $24,000 on a credit card, $31,000 on a car loan, and a primary mortgage for personal debt.
There were also business loans from her husband’s land-clearing business, which added up to about $170,000 and $90,000.
She also emphasized that despite the debt, the businesses made the couple a decent amount of money at $330,000 gross.
Still, that didn’t matter considering what they owed.
SNOWBALL FIRST
Kamel and Delony immediately agreed that selling the rental properties was a great first step to get out of the tough spot.
“If you sell both rentals you’ll walk away with maybe $240,000 profit?” Kamel asked.
Emery confirmed that to be the case, more around $200,000 after paying capital gains tax.
“What would I do with $200,000 — I would throw it at the consumer debt and business debt using the debt snowball,” Kamel advised.
The snowball method is fairly common, and means that the smallest debt would be paid off first while working on the other amounts with minimum payments.
What’s a good credit score?
FICO, the most widely known credit scoring system, and its rival VantageScore both use a range of 300-850 points.
Below we list what’s considered a good and bad credit score, according to both systems.
FICO
- Poor: 300-579
- Fair: 580-669
- Good: 670-739
- Very good: 740-799
- Exceptional: 800 or above
VantageScore
- Very poor: 300-499
- Poor: 500-600
- Fair: 601-660
- Good: 661-780
- Excellent: 781-850
STEP BY STEP
He also suggest the mindset switch, arguing that the couple had been a bit cavalier with their spending.
“I think you guys are stuck in a broke-person mindset of ‘how much down, how much per month,’” Kamel said.
Delony also emphasized to strike while the business was successful, paying off all the debt now as it might not always stay that way.
Kamel also added that they would be debt free in the next year if they attacked it the right way with the three-step plan and changed their mindset.
Sell the homes, pay down the initial debt with the profit using the snowball method, and then set aside $10,000 every month for the remainder and it’s gone.
The couple said they were 110% in on the method and would start right away.
It wouldn’t be the first time Americans with significant debt sought out help from The Dave Ramsey Show experts.
A woman with $185,000 in credit card debt alone was advised by Dave Ramsey himself to “wait” for a crucial action before paying it off.
Someone else was also given three steps to take after racking up $27,000 in debt across 12 different credit cards.
