Dave Ramsey is at it again: more opinionated and brash, if you can believe it, than a Philly guy.
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“Dave from Philadelphia” told the finance guru on a recent Ramsey Show episode that he was “barely making it” on the family income of $180,000. He was unsure whether to save more, or take out a loan to make ends meet. While he’ll see the number rise once his wife finishes medical school (she currently makes $70K as a resident), the family of four has debts and payments to wrangle.
As per his trademark style, Ramsey voted for another choice.
“Option ‘C,’ work more,” he told him, adding: “Can you explain to me why you can’t get by with income at $180,000?” he asked. “I’m going to be as nice as I can, Dave. You guys have lost your minds.”
The (expense) monster under the kids’ beds
Forced to dig deeper, Dave from Philadelphia revealed some eyebrow-raising kiddo expenses: at least $50,000 in daycare tuition for two, with before- and after-school care and paying a nanny in the summer months.
Maybe you’re thinking what Ramsey said: “Are they going to Harvard? What the crap!”
The man admitted it was a pretty fancy school — especially given that his kids were still pre-school age. In fact, the average cost of child care in Pennsylvania remains just above $17,000 per child, slightly more in the suburbs, according to child care website TOOTRiS.
“We’re going to take out student loans for the four-year-old,” Ramsey teased. “That’s what we’re coming down to.”
Budgeting for cost-effective child care is even more critical considering the expenses many Americans can’t readily escape: gas, insurance, groceries and utilities, for starters. Budgets can play a crucial role in bringing things under control — especially if you start by tallying your last three months of spending. What’s costing the most? What are the non-negotiables? Where can painless, sensible cuts be made?
Read more: Can you pay bills with a credit card?
What about Ramsey’s ‘Option C’?
As Ramsey suggested, income from added work can countervail the dollar figure of a loan. Ramsey stays away from loans in general, so taking on a side hustle or even a part-time job while you create an emergency fund can turn the numbers in your favor.
These days, a side hustle can be as simple as renting out your shed as storage — which could net you around $160 for a 10’x10′ unit in Philly, according to RentCafe. Or if you have a parking space you don’t use, you could rent it out for around $300 per month, according to WhereiPark. Pull off those two moves and that’s $5,500-plus over the year right there.
When to consider a loan
Dave from Philadelphia clearly needed a reality check on his children’s “Harvard” child care costs. Yet his wife has zero med school debt, meaning that their $180,000 income has relatively little financial drag — and represents more than twice the $71,000 made by the average American household as of 2021, according to the United States Census Bureau.
Would a combination of cost cutting and a smaller loan make sense for the time being, then? Perhaps — but only if you start by avoiding high-interest credit cards as the source. If it’s a personal loan you have in mind, shop around. Banks and other loaning agencies want your business, so make them compete to give you the best rate.
Of course, married people who sit down with a neutral party — in this case, a professional financial adviser — will get a much clearer picture in terms of separating needs from wants and waste. After all, no one wants to stay stuck in financial pre-school.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
