I Owe $40,000 On A $27,000 Car!

Katie shares her progress on Dave Ramsey's Baby Step 2, where she's aggressively paying off consumer debt. With a combined household income of $147,000 ($93,000 from her husband, $54,000 from her), she's working 25 extra hours weekly on overtime to send a $6,000 payment soon, halving their $12,000 in non-car debt, with the rest targeted for April. She's in "full gazelle mode," feeling the intensity and passion. But complications arise: she's 41, her husband's 45, and their nearly 15-year-old twins need cars soon for permits. Her car loan is $40,000 on a vehicle worth $27,000 (optimistically $33,000), leaving her $13,000 upside down. The core question is whether to keep the car—potentially paying it off in two years—or ditch it amid kids' driving needs and other pressures.

Debt and Vehicle Priorities

The hosts emphasize that the $40,000 car loan can't be kept due to limited priorities in Baby Step 2. Ramsey's guideline allows considering a car payment if payable in two years or less, but here it's not feasible with other demands. Household vehicle spending shouldn't exceed half of income—about $70,000 maximum for the family of four—since cars only depreciate. Her husband's 2020 Chevy is paid off, but adding cars for twins pushes limits.