I opened a business and am suddenly making over $400k in profit – should I pay off my cars and mortgage? Dave Ramsey weighs in

• Chris earns over $400K annually but accumulated nearly $500K in combined debts including $98K in car loans.

• Ramsey advised living on $100K per year instead of spending the full $400K to eliminate debt and build wealth.

• High income does not guarantee financial security without controlling lifestyle inflation and prioritizing debt elimination.

• If you’re thinking about retiring or know someone who is, there are three quick questions causing many Americans to realize they can retire earlier than expected. take 5 minutes to learn more here

When Chris from Hendersonville, Tennessee, called into The Dave Ramsey Show, he had what he described as a “good problem.” Newly married with a young daughter, Chris found himself making over $400,000 annually in his self-owned concrete business.

Despite this, he was “rich poor.” Chris and his wife had nearly $500,000 in combined debts, including their car loans and mortgage.

Let’s take a quick look at Ramsey’s recommendations for Chris’s situation, as well as some of our suggestions:

Chris admitted to being “redneck rich” in his first year of success, spending freely while accumulating two car loans totaling $98,000. Ramsey suggests that Chris uses his $60,000 in savings to pay off one of the car loans and then pay off the other within the month.

Eliminating consumer debt is foundational in Ramsey’s philosophy, freeing up cash flow and reducing financial stress.

Chris’s $405,000 home was financed with a 5/1 adjustable-rate mortgage (ARM) at 4.25%. Ramsey urged Chris to shift his mindset:

• Treat your income like a business: Ramsey suggested living off of $100,000 annually instead of spending all $400,000.

• Prepare for uncertainty: Chris expected his income to remain high. However, he acknowledged that a recession could halve it. It isn’t completely protected. Ramsey recommended that Chris pay down his mortgage as quickly as possible to keep some financial flexibility.

Ramsey didn’t just focus on debt elimination; he also painted a bigger picture. By living below his means and investing wisely, Chris could accumulate significant wealth over time. Ramsey said that he could easily have millions by the end of the story.

However, that requires financial discipline and a clear financial plan.

Lifestyle inflation is the end of the road for many with a high income. Chris admitted that he had spent money on just about everything. Ramsey highlighted this as a pivotal moment: instead of indulging in unnecessary purchases, Chris and his wife should redirect their income toward financial freedom.