how to get out of debt: 6 tactics from real calls on The Ramsey Show

Jared is 28 and has about $23,000 of credit card debt, on the captions. he earns about $3,000 a month, and his costs, card minimums included, come to about $2,700, leaving roughly $300 a month extra. he called about the interest. the math on the call: $300 a month is $3,600 a year against $23,000. the verdict: "you don't have an interest rate problem. You've got an income problem."

the tactic: run the times-twelve test. take what you can really put toward the debt each month, multiply by twelve, and hold it against the balance. if payoff takes years, a lower rate barely matters, and "there is not a hack" that makes a small payment clear a big balance. the fix on the call was a bigger income through a career move and more hours: doubled, he would be out in about 8 months. the show's one-liner for all of it: "personal finance is 80% behavior."

try this week: write down every debt with its balance, then what you can pay toward it each month. multiply that by twelve. if the balance would take more than two years, list three ways to raise your income by next month before you shop for a lower rate.

Stephanie calls about $28,500 of debt, not counting the house, on the captions. the plan is to sell a rental property and clear it. the catch: about a month earlier they took a $14,500 personal loan, mostly to buy her husband a car, and last weekend he bought a mower for about $1,200. the line that named the episode: "this stupidity has to stop. Otherwise, you're going to bleed out."

the tactic: stop borrowing before you start paying. selling the rental only works, the hosts tell her, if the couple stops borrowing money and buying things they cannot afford. a windfall poured into a leaking bucket buys a few months, nothing more. then they send the couple to a kitchen-table talk: where do we want to be in two years?

try this week: declare a borrowing freeze: no new loans, no new financing, no buy now pay later, starting today. write it down, have both partners sign it if you share money, and name one thing you bought on payments that you could sell.

a couple in their late 30s has a little over $100,000 of credit card debt and a big sales commission about to wipe it out, on the captions. the question: how not to end up there again. Dave Ramsey answers with his own story: he thought he could always go get more money and out-earn his overspending. he could not. "You can never make enough to beat that."

the tactic: close the cards, open a budget. the prescription: "Chop every single one of them up and then close every one of the accounts when you pay them off." then the system: "you have to build processes and systems into your life that causes both of you to be accountable. And that starts with a basic budget." a debt-free couple in another episode shows why the cards go. after tracking a full year, one of them said: "I realized I was spending about 30% more just swiping."

try this week: cut up the card you use most tonight (keep paying it, and close the account once it hits zero). then write next month's budget before the month starts: income at the top, every bill and debt payment below it.

Harrison is 26, earns about $130,000 and wants to buy a house, on the captions. he also has a $12,000 student loan, a $17,000 car loan and more debt, plus about $35,000 saved. the order Dave gives him: $1,000 saved, then "pay off all your debts except your home, smallest to largest in that order". everything above the $1,000 (retirement accounts excluded) goes on the two smallest debts, and the pace is "knock this stuff out like your hair was on fire."

the tactic: run the snowball, and expect people to laugh. "Broke people will make fun of your wealth building plan," Dave warns. one thing the millionaires in Ramsey's study of 10,000 credit for their wealth, he says, is that they quit caring what other people thought. Rachel Cruze names the real enemy: "the ego hates this plan." restaurants, the car and the pricey apartment get cut for a while.

try this week: list every debt except the mortgage from smallest balance to largest, ignoring interest rates. pay the minimum on all of them and put every spare dollar on the smallest. when a friend asks why you skipped dinner out, say you are getting out of debt and leave it there.

Steve runs a deck business that grew from about $250,000 to around $440,000 in yearly sales, on the captions. then he borrowed $90,000 in short-term loans to scale it, went into the slow season and fell behind on the weekly payments. the first lesson on the call: "borrowing money to expand your business is a dumb idea." the second is about the exit he had lined up, a debt consolidation company. as the hosts describe it, these firms often stop paying your debts, let the loans default, then renegotiate, which in his case would hit his credit the way a chapter 13 bankruptcy would.

the tactic: work it off instead of borrowing out. the growth came from Steve, not from the loan, so the plan is Steve: book jobs, take deposits, throw everything at the $90,000 and "live on beans and rice" until it is gone. for next time: expand with profits, or do not expand.

try this week: if you are weighing a consolidation loan or a debt relief company, do not sign anything this week. write down the total you owe, then list every way to raise cash in the next 90 days (extra shifts, side jobs, selling things) and put that number next to it.

here Dave Ramsey is the guest, not the host, on the captions. asked why people who know what to do still do not do it, his answer is hope. if you do not believe saving will change anything, you spend the money, have a great weekend and feel anxious about money again by Monday. his rule is plain cause and effect: "you have to plant something if you want something to grow". he cites one study that, as he puts it, found 96% of whether people build wealth in a retirement plan comes down to whether they put money in at all.

the tactic: plant the corn, and let the $1,000 scare you. he agrees the $1,000 starter emergency fund is not enough. it was never meant to be: it is "more adequate than zero" and a little scary, so you hurry out of debt. the full 3 to 6 months of expenses comes after the debt is gone. and the budget is not optional: "no one accidentally wins at anything".

try this week: pick the one money task you keep putting off (opening the statements, adding up the total, moving the first $50 into savings) and do it before Sunday. then open a separate account for the $1,000 and start filling it.