# You Have an Income Crisis

Allen has student loan debt from culinary school he wants to get rid of. The debt has risen from \$35,000 to \$80,000 due to a 19% interest rate. How does he tackle this debt?

QUESTION: Allen has student loan debt from culinary school he wants to get rid of. The debt has risen from \$35,000 to \$80,000 due to a 19% interest rate. How does he tackle this debt? Dave explains to Allen why he has an income problem—not a debt problem.

ANSWER: I always look at what I call the shovel-to-hole ratio. How big is your shovel to get out of the hole? That’s your income. How big is the hole? That’s the debt. You have a wife and kids and make \$30,000 a year. That’s not a great big shovel. It’s a fairly small one.

You’re in a pretty big hole. You’re going to be there a while, but you’re going to be there forever unless you start paying on this pretty aggressively.

Honestly, we’re going to have to come up with a game plan to get your income up. You need a bigger shovel to cover this big hole. I don’t know exactly what that is, but I think that’s where you’ve been struggling. The average household income in America is \$50,000. You’re considerably below that and you have an \$80,000 debt hanging over your head. I’m not trying to be depressing. I am trying to identify with you mathematically what you’re facing and why you’ve had trouble doing this.

I’m thinking you start to look at what kind of career track you’re on, what it is you’re going to read, and what class you’re going to take and pay cash for in order to engage in not just getting a job, but in getting a job that makes more money.

I’m going to encourage you to take steps so that three years from now, you make \$60,000 instead of \$30,000. You have to be very intentional about the career selection and the steps you take to get there. You can’t just let life happen to you, and it has been.