(00:30:32) Ramit: Why did we spend so much time talking about 7-Eleven snacks but here we are with over $70,000 on a credit card, and a $69,000 car loan?
(00:30:45) Michelle: I know. Yes, I knew it was coming. I don’t even know why we got that car, to be honest. Because we did the math on it, and we couldn’t afford it. And then I don’t know what happened, and we don’t mean that I don’t know what happened. I know what happened.
(00:31:00) Ramit: What happened?
(00:31:01) Michelle: We’re still going for it because I was just an enabler, and I said, yeah, that’s okay. We’ll figure out how to make it work.
(00:31:08) Ramit: And when you find out, who will you become in the relationship?
(00:31:13) Michelle: The hero.
(00:31:14) Ramit: Yes. By the way, what kind of car was it, Kevin?
(00:31:18) Kevin: I have a BMW. A lot of this was before I took this pay cut, but now that I’ve taken this pay cut, it’s just so ridiculous, I know I have to get rid of it.
(00:31:32) Ramit: So why didn’t you do that?
(00:31:33) Michelle: Because then we’ll lose. I mean regardless.
(00:31:37) Kevin: Yes. So why-
(00:31:39) Michelle: How much was the car or whatever? I did Kelly Blue.
(00:31:43) Kevin: Yes. So the car is worth about 48,000, and 69 is the amount I owe on it. So I’ll definitely take the loss, but we didn’t take the time to go in and figure out what our best option was, to be honest. The reason I stay with them is because I previously owned a BMW. Hers is Mercedes. So, we both have luxury cars and have no reason to ride in them.
(00:32:08) Ramit: You have a BMW and a Mercedes.
(00:32:11) Kevin: Yes. This is literally half of our income.
(00:32:14) Ramit: Mm-hmm. And these cars also consume some expensive fuel, right?
(00:32:18) Kevin: That’s why I say I spend a lot of money on gas.
(00:32:23) Ramit: How did you get the cars? This is what makes me curious.
(00:32:26) Michelle: I don’t know. I’ve always owned a luxury car since I was younger.
(00:32:29) Ramit: Oh, that’s a good reason to-
(00:32:31) Michelle: Well, because my dad always had a luxury car too. I don’t know, it just seemed like an advantage to have that. He made you feel good because you worked hard. You want to have a nice car.
(00:32:42) So I’ve always loved having a nice car. This gets into details, but I had a Lexus RX 500. It was paid off. It was great. It was fine. And one day, I don’t know what happened. We walked into a dealership, we were looking at cars, and there was a really cool M-series BMW.
(00:33:03) So I traded in my Lexus for a BMW that was a rental. And then, we had a baby. It was too small for the kid and everything, which is why I decided to buy the Mercedes. It was bigger.
(00:33:17) Ramit: Wait, wait. This is classic Americana in the worst way. First of all, luxury. What was your income at the time you got the Lexus?
(00:33:28) Michelle: Maybe $60,000, $70,000 a year.
(00:33:31) Ramit: Okay. Thank you. This makes my story better. He earned $70,000 a year by buying a Lexus. Basically, spend 100% of your salary on a car. Then you go, hey, this car is paid for. I know what I will do. I will take more payments.
(00:33:44) Michelle: That was the worst thing I’ve ever done.
(00:33:46) Ramit: So go there. And the moment you have a child, what does every parent in America do? We need a house and an SUV. Why? Because our little baby who can’t move needs to move.
(00:34:00) Michelle: Right. Yes, I know.
(00:34:01) Ramit: So, you buy 1, 2, 3 things. Income decreases. One of you goes to school, one of you takes time off work, etc. So you have these very high costs, low income. Costs are heavier with a child. Now what happens? You are trapped.
(00:34:18) Michelle: Stuck. Yes.