Paying “Stupid Tax”

Dear Dave,

 My husband broke a few ribs and his collarbone a couple of years ago when he flipped our ATV. He’s fine now, but we still have about $20,000 in medical bills because we were both between jobs and didn’t have medical coverage when the accident occurred. We also have two credit cards, one with a $1,000 balance and the other a $7,000 balance. We only have $200 a month we can put toward debt, so where should we start?

Sandy

Dear Sandy,

Not having health insurance at any time of your life is not smart, regardless of being between jobs or not. Ouch, what a mess! You didn’t tell me what you guys make, but I can tell you a few things.

Number one, you’re probably going to have to get your income up. You may have to take on a couple of part-time jobs or work some overtime. My grandmother used to say, “There’s a great place to go when you’re broke — to work!” If you only have $200 a month to put toward your debt, you’ve got to create some margin, and that may be on the income side of things.

The other thing I’ve found is this: Most people seem to be able to magically find money when they feel it’s a life or death situation. “Magically” means that you do a budget. You make a written game plan where every dollar has a name before the month begins. When you write down every dollar, and you and your husband sit down and agree on where every dollar is going to go, you’re going to have an ah-ha moment that feels like you got a raise. If you’re normal, you waste a bunch of money because you don’t budget and have a written plan. And normal pretty much sucks!

So, here’s the drill. Start living on a written budget, extra work, start working the debt snowball and pay off those debts from smallest to largest and don’t even think about a vacation or anything else that’s not necessity based until you clean up this mess. When you start living with a scorched earth idea — beans and rice, rice and beans — I’ll bet you’re going to find a lot more than $200 in your budget to put toward killing off this debt! 

—Dave

Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books. The Dave Ramsey Show is heard by more than 8.5 million listeners each week on more than 550 radio stations. Dave’s latest project, EveryDollar, provides a free online budget tool. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

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