A never-ending cycle?

Danielle Smith and her fam­ily thought they had fi­nally escaped the pay­check-to-pay­check cy­cle they had fallen into. They saved money dur­ing the pan­demic while they were stuck at home. They used stimu­lus checks to chip away at $20,000 in credit-card debt and enjoyed a re­prieve from monthly pay­ments on their $160,000 in student loans.

Lately, they have been hit with one un­ex­pected ex­pense af­ter another, from an out-of-pocket MRI to a bro­ken wa­ter heater. They also took trips with their four chil­dren that they had put off be­cause of Covid, in­clud­ing to Walt Dis­ney World, lo­cal mu­se­ums and the zoo. By 2022, their credit-card debt had dou­bled to nearly $40,000.

“It’s just a never-end­ing cy­cle of play­ing catch-up,” said Ms. Smith, 34, who to­gether with her hus­band has a house­hold in­come of roughly $80,000 a year in Lin­coln, Neb.

Wall Street Journal 2-27-23 “Americans in Their 30s Are Piling On Debt”

Before I begin my rant on the above ridiculousness, consider Lincoln, NE housing is 22% cheaper than the U.S average, while utilities are about 12% less pricey. When it comes to basic necessities such as food and clothing, groceries are around 1% less in Lincoln, NE than in the rest of the country, while clothing costs around 1% less. At the same time their household income is higher than the national median.

Let’s think about this.

  • Sure doesn’t seem college was a good investment. It didn’t help with financial education or common sense.
  • What did they do with the money generated from debt payment reprieve?
  • How and why did they accumulate $20,000 in credit card debt?
  • How can they rationalize vacations and doubling their debt to $40,000?
  • Why can’t they see what they are doing to their future?


  1. Diff’rent Strokes

    They are stimulating the economy. They and others like them have created thousands of post pandemic jobs. Also, they are in their thirties, their income will likely increase and expenses decrease as the kids move out.

    “Consumption smoothing is creating a balance between spending and saving during the different phases of our lives to achieve a higher overall standard of living.”

    I never contributed to my 457(k) until our youngest daughter married and moved out. My emergency fund was my credit card. Our one trip to Disneyland was also on the card. Catalina contributed to our overall standard of living. Memories.

    Hawaii was on the card also, but by that time we were able to pay in full st the end of the month. (No kids)

    The $160,000 college loan is the big problem in this story. K-12 is no longer sufficient. We need much better funding for higher education. It’s not “free”, it’s an investment in our future.


  2. Articles like this one often refer to expenses such as out of pocket costs for medical bills, repair or replacement of water heaters and furnaces, deductible costs for a new roof, repairs and eventual replacement of automobiles, and others as “unexpected”. I wish they would refer to these as “unpredictable but inevitable expenses”, for which some sort of escrow account should be funded. And it does not take a college degree or a course in financial planning to figure out the difference between needs and wants.


  3. $160,000 in student loans that has generated only $80,000 in salaries is straight from PT Barnum. Only they can take control of their situation and quit living in denial.
    My son, although not in the straights they are does not want to forego his leisure time for a period to knock out his debt of $50,000. He has a decent job although his spouse wants to play with clay at the retail art store part time making peanuts and supporting two dogs and vet bills. He has handyman skills that pay $75/hour and can be busy all weekends for the customers that want his services. But so far, he prefers his debt and free time. Okay.


  4. Sorry, Dave Ramsey is better than nothing, but, his regimented approach can be problematic. He actually encourages individuals to forego part of their compensation.

    I have met Mr. Ramsey and discussed his program in some depth – I even have an autographed book. Generally speaking, it is as good of a step by step process as any other for some Americans – those who are part of the “gig” economy, self-employed, or where their employer does not offer access to an employer-sponsored retirement savings plan. However, tens of millions of American workers have access to better alternatives to improve their financial wellness.

    Mr. Ramsey’s method focuses on “baby steps” – he says: “The way you eat an elephant is one bite at a time. Find something to do and do that with vigor until it is complete; then and only then do you move on to the next step. If you try to do everything at once, you will fail.”

    All true.

    Here is the step by step process he has been recommending for more than the past 10 years:
    – Set up a budget,
    – Get current with all your creditors,
    – Create an emergency fund,
    – Pay off all debt (except a house) using the “debt snowball” (pay off accounts with smaller balances first) or “debt avalanche” (pay off accounts with the highest interest rates first),
    – Finish the emergency fund – put 3 to 6 months of expenses in savings
    – Invest 15% of our household income into Roth IRAs and pre-tax retirement plans
    – Save for your children’s college education using tax-advantaged plans like 529s
    – Pay off the house early
    – Build wealth and give

    This is all sequential. He “commands” you to focus on each step, complete each before moving on, no diversion, no exceptions.

    Here is but one example, again quoting Mr. Ramsey: ” (an individual) wanted to know if he should stop his 401k contributions to get his Debt Snowball moving. He really didn’t want to stop contributing, especially the first 3 percent because his company matches that 100 percent. I am a math nerd, and I know the 100 percent match is sweet, but I have seen something more powerful – focused intensity. If you are going to be gazelle-intense and do everything in your power to become deft-free very quickly, then stop your retirement plan contributions, even if your company matches them. The power of focus and quick wins is more important in the long term … than is the match.”

    However, for workers who have access to an employer-sponsored retirement savings plan, like a 401(k) or a 403(b), the plan may offer a design that allows them to address steps 2, 3, 4, and 5 all at once by leveraging the 401(k) plan and its liquidity provisions. In doing so, they need not forego the tax preferences and employer financial support. I have recommended that action in my 31+ years as a plan sponsor (and specifically confirmed that they should always take advantage of any employer financial support before any other step – including creating a budget, building emergency savings, etc.)

    It is foolish to encourage individuals to forego leveraging the tax preferences and employer financial support only available through their tax-qualified, employer-sponsored, 401(k) or 403(b) plan. Today, more and more employers offer a financial wellness program. Where they do, none would endorse any process that would encourage workers to participate in financial wellness if it meant crowding out participation in the retirement savings plan.

    Keep or pitch.


    1. I would agree to always keep the company match on a 401K. However, if someone is paying 29% interest on their credit cards, the compounding and ROR on a 401K may not be enough to enjoy retirement if you are still paying off that debt after you retire. You have to or have someone do the math for you. Owing a $20K credit card debt vs $200K require two different approaches.


  5. They used stimu­lus checks to chip away at $20,000 in credit-card debt so that they could double the debt? I agree that these people need Dave Ramsey to tell them how stupid they are. Am I supposed to feel sorry for them being in debt when they went to Walt Disney World as a family of 6? It is people like this that make me insist that they pay their student loans back even if they have to work into their 90s.


  6. Richard, I read the first paragraph and thought you were sending out a “feel good” type of story.  Things seemed to be moving in the right direction only to have the main characters snatch defeat from the jaws of victory.  The MRI and Water heater are an unexpected expense we can empathize with, but then the other shoe drops – Disney World and adding $20k additional credit card debt??  REALLY? The student loans seem very excessive, but my experience is that schools really don’t teach personal finance at the High school level nor college.  I did take an investments class in college that I greatly enjoyed.  In my case, I had my Life insurance agent point me down the path for personal financial prosperity right as I finished college.  Although he just pointed me in the direction, I had the personal wherewithal to head in that direction, read and learn all I could, and make personal spending decisions which made me a Humble Dollar acolyte.   At some point, we must accept that people like in your story don’t bother looking at their long term future to realize what they are doing to their futures.  WHY?  You and I will never be able to fathom their decision making.  Its like you once wrote – NOT going to Disney won’t kill your kids, but it looks like it wiped out that couples future.


  7. This couple needs someone like Dave Ramsey who rants against credit cards and emphasizes strict control of spending.
    They obviously don’t have a clue as to how to deal with month to month living without borrowing more. Even living in a lower cost area won’t keep someone from going broke.

    Liked by 1 person

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