On The Ramsey Show – Highlights YouTube channel in 2020, the American finance personality spoke to listener Fred who said he was “lost” with “nothing saved for retirement”. Fred, 72, lives with his retired wife and had not saved much in his pension fund.
He explained to Mr Ramsey that he has $6,000 (around £4,700) in his workplace pension and his employer does not match any of his contributions.
Fred and his wife owe around $270,000 (around £211,000) on their house and $11,000 (around £8,000) in credit card debt which is charging four percent interest.
Their annual income is $95,000 (around £74,500) and they have $2,300 (£1,800) in savings.
“I’m lost, I don’t know what to do,” Fred said.
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Mr Ramsey wanted to help. “The time is ticking,” he said.
He gave Fred an “exact path to follow,” to better his situation.
The finance guru suggested Fred follow his ‘Baby Steps’.
The first step is that anything over $1,000 (around £700) goes at debt, so he will use $1,000 from his savings towards his credit card debt.
The next thing is strict budgeting.
Mr Ramsey said he should stick to “strictly a beans and rice budget”.
He added: “You guys are not going out to eat and you’re not going on vacation. Beans and rice, rice and beans.
“We have a mess here and the clock is ticking, so fast we need to clean up that debt.”
He then suggested that after the debt clearance, they start building an emergency fund of three to six months worth of expenses.
As fast as they can, they will need to save $15,000 (around £11,000) within one year.
In one year he said they should be aiming for no debt but their house and $15,000 (around £11,000) in savings.
“That will feel much better already,” he said.
After a year, Mr Ramsey explained that the couple will need to start aggressively pouring into their pensions.
He suggested Fred will need to use his annual income for the next five years to try and get some legs under him. He will need to keep working.
Their house is worth $320,000 (around £251,000). Mr Ramsey warmed the couple may have to sell their home and downsize.
They can downsize to save money and clear the house debts.
He reinforced to Fred that their house needs to be paid for and they need a nest egg.
“Those are our steps,” he said.