Philly man earns over $126K but struggles with $25K debt as Ramsey Show urges him to cut spending and budget

If you’re pulling in six figures and still feel like you’re drowning in bills, you’re not alone. One caller to The Ramsey Show makes $126,000 a year and still thought bankruptcy might be his only way out.

But as hosts George Kamel and Jade Warshaw asked more questions, the real issue came into focus: Peter from Philadelphia didn’t actually know how much he owed, had no budget and had little idea where his money was going.

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After reviewing his accounts, he realized the balance wasn’t $25,000. It was closer to $59,000 once forgotten credit cards, a pension loan and old bills were added in.

That’s still a serious amount of debt, but Kamel and Warshaw both pointed out that he earns enough to pay that off. What he needs is a plan (1).

The first step was helping him see the full picture. As Warshaw put it, once everything is written down, “at least it’s not the boogeyman and all the unknowns.” A budget is simply reality on paper, and for most people, that alone brings relief.

Kamel agreed.

“Once you do this budget, you’re going to figure out your main expenses,” he said (2). “Here’s like food, utilities, housing, transportation, insurance, and minimum debt payments. Anything beyond that, you’re going to get real judicious and cut out.”

Peter admitted that takeout food was eating up more of his income than expected. For many households, dining out is one of the easiest places to overspend.

“Eating out; that’s got to go,” Kamel told him, adding that cutting excess spending may not be fun, but it works faster than bankruptcy and costs less than letting interest build.

Peter had mentioned bankruptcy early in the call, but the hosts strongly advised against it. With his income, it would do more harm to his financial future than good.

“You are the answer,” Jade told him. “Debt is not a shortcut. It’s not the answer.”

Debt is common in the United States. Americans now carry an average of $105,056 in total debt across mortgages, student loans, vehicles, credit cards and personal loans, according to Experian data cited by CNBC (3). Millennials currently hold the highest average balance of $371,864, while Gen Xers lead the way when mortgages are excluded.