AN expert has advised a man to use three items to improve his economic standing within months.
The complicated situation came after spreading himself too thinly across at least 27 credit cards.
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Financial guru Dave Ramsey was stunned to hear about where the man, Mark, found himself after making a salary of $125,000 annually, according to what he explained during a recent call-in to The Dave Ramsey Show.
Not only did Mark live off a six-figure salary, but he was recently awarded a $70,000 bonus, bringing him up to around $200,000 for the year.
Still, he had debt across the credit cards and claimed there was virtually nothing in his checking or savings accounts after making minimum payments for each card almost every day of the month.
When asked about the outstanding debt total, Mark told Dave and co-host George Kamel that $12,000 was owed.
Given the salary and $70,000 bonus, Dave was confused.
“Okay, you made $200,000 with your bonus, what’d you do with it?” Dave asked.
Mark replied that he didn’t know before George inquired what the top charges on his bank statement would be if they were to review it.
While Mark first noted groceries and eating out, he admitted he had trouble buying some things in excess, including a riding lawn mower for $4,000.
Even with the lawn mower though, Dave noted there was a considerable amount of money left that somehow vanished.
STEP BY STEP
As a start, the financial expert insisted that Mark “chop up” all 27 credit cards to prevent more usage and an increase to the debt total.
“First thing we’re gonna do is stop the bleeding, no more use of the credit cards…that’s step one,” Dave explained.
Next, he told Mark there needed to be a “written, detailed budget” to eliminate any questions about where exactly all the money was going with the $125,000 salary.
“If it’s not on the budget, you don’t do it,” Dave added.
“You’re not eating out, you’re not traveling, you’re not doing anything, you don’t have any money — you’re a broke guy.”
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
Third and final, after bills are paid, food is on the table, and his family is taken care of, Dave said anything left Mark must toward the debt.
“The great news is, you could be out of credit card debt in just a couple of months,” the financial expert continued.
Again, the three-step approach from Dave was as follows:
- Cut up the credit cards
- Create a detailed budget
- Spend only on absolute necessities to live
PAY IT NOW
A recent study from Bankrate showed that around 48% of Americans carry credit card debt.
Many experts advise that credit card debt be paid down as quickly as possible.
Interest rates above 20% for some cards could leave cardholders paying considerably more than they borrowed down the road if only minimum payments are made.
The Ramsey Show also recently helped a 19-year-old with $115,000 in debt navigate their predicament while not being able to work “for another year.”
A “private sale” move was also advised by the radio series’ financial experts to help a single mother free herself of $200,000 in debt.