Colorado residents are carrying the heaviest per-person debt loads in the country, but shedding those burdens and building wealth is possible one baby step at a time, according to a team from Ramsey Solutions that visited the state earlier this month.
“For all of human history, people have used ‘You owe me’ as a way to control groups of people, and now it’s just the way we do life. It’s crazy,” said John Delony, a mental health expert with Ramsey Solutions in Nashville.
Delony and co-hosts Ken Coleman and Jade Warshaw came to the to field questions from a local audience and dispense advice on debt and savings strategies.
Their visit was part of a multi-city road tour that fielded questions live rather than via phone calls. Much of their effort was spent trying to resolve financial disputes between couples.
Clifton and Cheryl Wiggins of Johnstown created a blended family with nine children when they married two years ago. Cheryl, however, was not happy staying in the home where Clifton’s ex-wife once held sway. She wanted a fresh start.
But Clifton had more practical considerations in mind. Homes large enough for a family of 11 aren’t easy to find or afford. His plan of action was to wait a few more years until two of the older kids moved out, allowing for more options without uprooting the family.
“You are bringing data to a feelings fight,” Delony said. Coleman worked the math and figured out they could afford a larger home payment.
The trio urged Clifton to understand what his wife was saying, not just listen. And then they questioned what Dave would advise in this situation.
Dave Ramsey is known for his tough-love, some might say brutal, approach to eliminating debt through “baby steps.”
The first step is to create a starter emergency fund of $1,000 to handle unexpected expenses. The second step involves listing all debts, besides the mortgage, from smallest to largest, and tackling the smallest one first.
Other debts are put on minimum payments, and any extra money in the budget is thrown at that targeted debt. Work side hustles, sell unnecessary items, avoid all extras, especially eating out, Ramsey urges.
In one of his more controversial recommendations, he advises temporarily stopping all retirement contributions. If a newer vehicle is dragging down the budget, sell it and drive a “beater” until the debts are gone.
Ramsey recommends “plastic surgery” — cutting up credit cards. Every dollar must be assigned a use before the month begins. Once the first debt is eliminated, that payment amount is rolled over to the next smallest debt, and so on.
Once debts are paid off, the focus shifts to building up an emergency fund with enough to cover 3 to 6 months of living expenses. Later steps include setting aside 15% of income for retirement in tax-advantaged accounts, then saving for children’s college expenses, followed by paying off the home mortgage.
Another couple, with the equivalent of a graduate degree in the baby steps, came forward with a different question. They had managed to save $5 million for retirement.
The husband wanted a splurge on a new Corvette costing around $130,000. The wife felt it was a bad move and would threaten their financial security.
Per Federal Reserve estimates, they rank in the top 0.1% of all households for retirement savings. Delony, with a doctorate in counseling, probed to try to understand what made the wife anxious.
The three ruled in favor of buying the Corvette.
The Ramsey method doesn’t advocate savings for savings’ sake, but as a path to peace of mind and financial freedom, which is celebrated in a “debt-free scream.” The final baby step is to build wealth, to enjoy life, and to “give outrageously.”
For Warshaw, her moment of reckoning came during the Great Financial Crisis. She and her husband were carrying debts that left them feeling vulnerable and exposed. When she heard Dave Ramsey on the radio, she initially resented his advice.
But rather than whining or trying to poke holes in his approach, they decided to listen to it, and it transformed their lives.
“It starts with those simple actions of I don’t borrow money anymore, and I am now a person who budgets my money, and now I’m a person who pays off debt,” she said.
The U.S. is the wealthiest nation in the world, yet many Americans are stressed out by their finances, according to a .
Eight in 10 with debt say their obligations have caused them to delay or avoid major milestones, such as saving for retirement or buying a home. And 46% say debt worries have impacted their day-to-day lives, with 42% worried they will carry debts to their grave.
“When a human body understands it doesn’t have agency, that it is not in the driver’s seat of its own life, it will respond in any number of ways — anxiety, depression — it will just slow everything down,” Delony said.
Ramsey Solutions, which conducts its own survey called the State of Personal Finance, found that nearly half of respondents in the first quarter reported a negative impact on their mental health from their personal finances.
Around 36% of adults said the stress was so severe it had triggered an anxiety attack, which rose to about half for Gen Z respondents.
Nearly 85% of those surveyed agreed that “there is an affordability crisis in America,” with 55% saying that the crisis had personally impacted their ability to buy a house. A similar share said they couldn’t get ahead financially, which is up from 44% five years earlier.
And anxiety is leading to paralysis. So many decisions, from living independently to marrying and having children, to buying a home, are getting pushed back.
The National Association of Realtors puts the average age of a first-time homebuyer in the U.S. at 40. In the 1990s through the early 2000s, it was 32.
“If I can’t see a way to do it, then I just delay everything. I don’t do anything,” Coleman said.
Those delays can cost young adults future wealth, such as in home equity. But when it comes to avoiding excessive debt, delaying can be the right choice.
Delony said the path to becoming debt-free is hard, but so is living with debts that rob peace of mind and restrict financial freedom.
“Since both paths are hard — choose the hard that’s going to get you to the place you want to be,” he said.
The Lakewood episode will be made available on May 12. It will be one of the last ones with Coleman as co-host. He left the Ramsey organization for another job opportunity.
