A finance expert gave a harsh reality check to a caller who hoped to retire at 58 despite having no savings and a pricey auto loan draining his wallet.
Scott from Baltimore, Maryland, learned the hard way that one bad purchase decision can undo years of financial discipline when he splurged on his dream ride, a Harley Davidson motorcycle.
On a recent episode of The Ramsey Show, Scott confessed to Dave Ramsey that hes struggling with a $20,000 auto loan for his bike, almost as much as his $25,000 mortgage for his home.
Thats weird, Ramsey said. You did so good on the house and so poorly on the motorcycle. That was a weak moment.
While many Americans face loans for essential vehicles, Scotts debt stems from a luxury purchase. As such, Ramsay advised him to sell the bike.
Im sure its a great bike but its gone. Its somebody elses great bike now, he said.
Finance expert Dave Ramsey gave a harsh reality check to a caller who hoped to retire at 58 despite having no savings and a pricey auto loan draining his wallet
Scott, who is bouncing back from a costly divorce eight years ago that wiped out his savings, faces a ticking clock to build his nest egg.
He now has just $25,000 left on his mortgage, putting him close to joining the 40 percent of Americans who are mortgage-free, according to Bloomberg.
Hes also managed to save $23,000 in cash as an emergency fund.
But despite his age and lack of savings, Ramsey sees a glimmer of hope for Scotts financial future.
Ramsey believes Scotts best asset is his career as a carpenter in the luxury real estate market.
The great news is, as a trim carpenter in high-end properties, you are in great demand. Youve always had more work than you could take, Ramsey said.
Ramsey laid out a potential roadmap for Scott. He suggested boosting income through more contracts and higher rates as a freelance contractor.
If Scott could save an extra $2,000 monthly, Ramsey estimated he could retire at 67 with $500,000 in retirement assets and a paid-off house.
Get you a game plan man, Ramsey urged.
On a recent episode of The Ramsey Show, Scott confessed to Dave Ramsey that hes struggling with a $20,000 auto loan for his bike - nearly as much as his $25,000 mortgage
Scotts predicament reflects a wider issue facing Americans, with many finding themselves crushed under the weight of hefty auto loans.
This comes as the auto loan crisis in America has reached staggering heights.
A 2021 study from Consumer Reports found that lenders are increasingly able to prey on the vulnerable, especially those with lower credit scores. Such loans earn them more on interest and they can ultimately repossess cars.
Auto loans are becoming a major source of strain for car-obsessed Americans and leaving an increasing number with runaway debt.
Aggregate auto loan debt reached a whopping $1.63 trillion during the second quarter of 2024, according to the Feds Household Debt and Credit Report.
This makes it the largest source of non-mortgage debt, surpassing both credit cards and student loans, as reported by Money Wise.
Ramsey suggested selling the bike - and taking extra jobs. If Scott could save an extra $2,000 monthly, Ramsey estimated he could retire at 67 with $500,000 in retirement assets and a paid-off house
Last year, auto debt in the US reached a record-high $1.6 trillion, which comes out to an average of more than $13,000 per household.
In February, the Federal Reserve released data showing that Americans were falling behind on car payments at the highest rate since 2010.
In recent years the cost of car ownership has soared. Not only are automakers charging more for new cars, used cars are getting more expensive as well.
In the two years after January 2020, used cars and trucks increased more than 50 percent in price, according to figures from the US Bureau of Labor Statistics.
Meanwhile, the cost of insurance is also on the up. In March it was one of the main drivers of inflation measured by the Consumer Price Index (CPI) - having risen 2.6 percent month-over-month.