From 24/7 Wall St. · Jake FitzGerald · · 1m
Dave Ramsey's Debt Math
Dave Ramsey warns $3,000 income can't pay off $23,000 credit card debt.
In brief
Dave Ramsey warns $3,000 income can't pay off $23,000 credit card debt. Dave Ramsey says a $3,000 monthly income can't pay off $23,000 credit card debt within a year. Originally reported by 24/7 Wall St..
Jared's Debt Problem
Jared has $23,000 credit card debt and earns $3,000 monthly.
“You don’t have an interest rate problem, you’ve got an income problem”
Ramsey's Warning
Even with zero interest, Jared would take 77 months to pay off $23,000.
“You don’t have an interest rate problem, you’ve got an income problem”
Real Interest Rate
At 21% APR, Jared's monthly interest is $406.
“At that rate, his balance produces about $406 of interest every month”
Balance Transfer Effect
A 0% transfer for 18 months leaves $18,290 after the promo ends.
“A 0% transfer for 18 months leaves $18,290 after the promo ends”
Payment Impact
A $600 payment reduces debt to $15,700 in 65 months.
“About $15,700 in interest over 65 months”
Ramsey's Rule
Ramsey climbed out of bankruptcy at 28 with a yellow pad list.
“I made a list of stuff on a yellow pad and the things at the top of the list were things that brought in money that week”
Key Takeaway
Your monthly surplus decides if debt ever dies.
“Your monthly surplus decides whether this debt ever dies”
Action Steps
Calculate interest, find true margin, make a yellow pad list.
“Calculate your monthly interest. Multiply each card balance by its APR, then divide by 12”
What to remember
Dave Ramsey says a $3,000 monthly income can't pay off $23,000 credit card debt within a year.
