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Ask Dave

Too Much Car

Dave knows the problem - Eric and his wife have too much debt wrapped up in cars!

QUESTION: Eric and his wife have $70,000 in debt. They did some debt consolidation and owe $30,000 on their cars alone. They make $46,000 a year. They are not sure what the problem is, but Dave knows.

ANSWER: Almost half your debt is cars. You should never own cars that, combined, are worth more than half your annual income. Sell these cars and drive two beater cars until you clean this mess up. Don’t do any trade-ins because those will kill you. Then get on a beans and rice budget so you can attack the other $40,000 in debt that you have. It’s going to be a stinky two years. You can do it, but you have to be willing to sacrifice.