After a new job: Live like your income hasn’t changed

Published: September 11, 2019

Dave Ramsey

Dear Dave,
I’ll be graduating from college in December, and I’ll have a job waiting for me that pays $50,000 a year. This will bring our household income up to about $95,000. The problem is we’ve got $18,000 in student loan debt, $2,500 in credit card debt, and $4,000 to pay in medical bills. We’re living in an apartment right now, so how should we handle this income increase regarding our debt situation?
Mikayla

Dear Mikayla,
Congratulations on your decision to get control of your finances and your degree! If you two just keep living the way you have been, minus the debt, and put the rest toward the debt you’ve incurred, you could be debt-free in a year or so.

Remember, just because you’ve got a lot more money coming in doesn’t mean you should double your entertainment budget, take an expensive vacation, or run out and buy a new car. The first thing I’d recommend is sitting down together, and working out a written, monthly budget. Give every dollar a name and a job to do before the coming month begins.

Don’t forget the debt snowball, either! List all your debts from smallest to largest, and attack the smallest—that credit card debt—first with a vengeance, while making minimum payments on the medical bills and student loan debt. Once you’ve paid off the credit card debt, roll the money from that payment over and apply it, plus any other cash you can scrape together, toward the medical bills. Once the medical bills are out of the way, repeat the process and roll the payments over again targeting the student loan debt. At this point, you should have a bunch of cash to throw at those student loans each month until all that debt is off your backs once and for all.

I’m really proud of you two, Mikayla. If you’ll follow my plan from here on out, you’ll gain control of your money and be set to start saving and building real wealth!
—Dave

Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 16 million listeners each week on 600 radio stations and multiple digital platforms.