I Racked Up $123,000 of Debt In One Year

The speaker is on baby step number two and is looking for guidance on how to implement it when her budget only allows for minimum payments. She is told that something needs to change, either her income needs to increase, or her expenses need to decrease, or she needs to sell assets with debt. She reveals she has accumulated $123,000 in debt in the last year due to a series of bad decisions. This includes a $40,000 Home Equity Line of Credit (HELOC) taken out to renovate a rental property, and a $28,000 loan on a 2023 vehicle she purchased. Her household income has recently changed, as she lost her dad, her job, and separated from her husband within the last six months. Her current income is around $75,000. She was married for 15 years, and the separation will end in divorce. She had been attending individual counseling for five months but stopped four months ago when she lost her job because she could no longer afford it. In the divorce, she will keep the rental property, which she moved into last month, while her husband kept their marital home. Regarding the division of assets and debts, she will take her car and its associated debt, and the rental house with its payments. Her husband will keep his car and its payments. This means the $123,000 in debt is entirely hers. The HELOC is on the house she moved into, not the house she moved out of. The mortgage on this property is $155,000, and with the $40,000 HELOC, the total owed is $195,000. The house is valued at $275,000. In addition to the $40,000 HELOC and the $28,000 car debt, she has $54,000 in consumer credit card debt. Of this, $20,000 was accumulated prior to her recent financial struggles, and $15,000 was spent on a "dream vacation" before her family split up. Before her job loss, she was making $80,000-$85,000, and her husband makes $110,000. She has three children aged 19, 17, and 14. She is told that despite the emotional turmoil she's experienced, the financial reality is that she makes $75,000 a year, has a $28,000 car, and a house she can't afford, along with a car she can't afford. She argues she could afford the house and car if not for the credit card debt, but this is dismissed. The car is deemed "stupid," as was the vacation. She acknowledges they were bad decisions made before she knew her situation would change. She is told she cannot defend these purchases. The car, for which she owes $28,000 but is only worth $27,000, is a major issue. She is advised to come up with $1,000 to sell it, and then buy a $2,000 car. The car payment is $653, which is "killing" her budget. She is told that her recent heartbreaks led her to give herself permission to make poor financial decisions, such as going on vacation, buying a new car, and accumulating credit card debt. She needs to "undo as much of that as we can undo." She currently has three jobs. Her main income source is negotiating leases, bringing in about $42,000. Her secondary income is from selling residential real estate, earning about $25,000. She has been doing real estate for eight years and is advised to get "good at it now" and aim to make $150,000-$200,000 a year by selling many more houses. She currently specializes in first-time homebuyers but is told she needs to specialize in "money" and sell as many houses as possible. She's been doing real estate part-time and is encouraged to go "all in." She questions how to find the extra hours given her 8-to-4 day job and a new bartending job on Fridays. She is advised to drop the bartending job and focus on real estate, and to leave her $40,000-a-year day job as quickly as possible to increase her income. She needs to change her thinking about the decisions that led her to this point and acknowledge they were bad decisions made during a difficult time, rather than trying to justify them. The car is highlighted as a symbol of these poor choices and she is urged to get rid of it. She is encouraged to connect with top real estate performers, learn from them, and join a team to significantly increase her income. This is presented as a "fresh start" with grace and mercy. The plan for her finances is to prioritize: first, food; second, lights and water; third, the two house payments; and fourth, the car payment to get rid of the car. Until these are paid, credit cards are not to be paid at all, as she is "broke" and doesn't need credit.