Ramsey Show hosts urge young woman whose mom racked up $186K of debt in her name to embrace a ‘paradigm shift’

Thanks to her credit being wiped, Jessica is debt-free. She doesn’t even have the option to apply for a credit card to get into more debt, “so see that as a blessing,” said Cruze.

While Jessica has a full-time job as a debt collector and makes $19 an hour, Cruze suggests she look for a side gig (or a higher-paying job) to earn some extra money each month that she could put toward a vehicle.

If she made an extra $2,000 a month, for example, she could save enough to pay cash for a $5,000 to $7,500 secondhand vehicle in a matter of months — no credit card required.

In a survey by Forbes Advisor, 58% of respondents said card payments are “their prime facilitator of higher spending,” which is “a reflection of the ease and perhaps the less tangible nature of using cards over cash, which seems to loosen the psychological purse strings.”

And more than half (52%) of respondents are “more likely to make an impulse purchase when paying with a card compared to just 24% with cash.”

“Society tells us you have to have a credit card to survive, you can’t go to college without student loans and you’ll always have a car payment. These are straight-up myths,” according to a blog by Ramsey Solutions.

On the other hand, living debt-free means “not buying anything unless you can pay cash.”

Cruze says to start by coming up with a detailed budget and knowing exactly how much you’ll need for basic necessities such as food, shelter, utilities and transportation. Everything else can go toward saving up for your biggest needs — in Jessica’s case, that would be a car and her last semester of college.

“As you track your spending, you’ll see red flags and how quickly you get to the point where you’re spending more than you earn,” according to the Credit Counselling Society, which recommends using cash instead of cards.

“Cash-only diets are a great wake-up call to your spending because you physically see the money exchange and feel the drain on your wallet.”

If you have multiple credit cards, consider consolidating your debt onto one card (the one with the lowest interest rate or best terms) and cancel any cards you don’t need. You’ll also want to build up an emergency fund so you won’t have to rely on your credit card if you suddenly need money for an emergency.

While Jessica is “blessed” without a credit card, those looking to get out of debt can use techniques such as the snowball or avalanche method to whittle away high-interest debt.

Most likely, it will also involve increasing your income (working overtime, looking for a higher-paying job or taking on a side gig) while reducing your expenditures (cutting back on anything unnecessary, such as takeout, travel and entertainment).

To realize even greater savings, you could also look at ways to simplify or downsize. For example, is your rent eating up most of your income each month? If that’s the case, it may be time to look at finding a smaller place, getting a roommate or moving to a less expensive neighborhood (though you’ll also have to factor in the cost of moving).

“Don’t be leaning on the credit industry to get you out,” Cruze advised Jessica. In other words, getting a credit card isn’t going to solve her issues; it will only serve to get her into debt.

And, advised Coleman, “don’t get married at the advice of a financial advisor so you can get a car.”

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.