Nov 12, 2024
According to a study by Northwestern Mutual, more than a third (36%) of Americans say financial uncertainty keeps them up at night at least monthly. Rachel from Eugene, Oregon is probably losing even more sleep because of a financial situation radio host Dave Ramsey described as “terrifying.”
Calling in for advice on “The Ramsey Show,” Rachel said her husband’s business is tanking and the couple have a little over $90,000 in business and personal debt, including a truck and trailer they owe money on. They also still owe $175,000 on their home. The couple have three children with another one on the way, and just $25 left in their checking account.
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“He should have been out of business six months ago, cause it wasn’t working then,” said Ramsey, explaining that business owners tend to “call it” and give up on a failing venture too late.
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Unfortunately, many small business owners like Rachel’s husband find themselves in similar situations every year.
Stabilizing finances is a top priority
Rachel said her husband has signed up to become an apprentice electrician with the hope that it will be a new career for him. However, Ramsey pointed out the role won’t pay enough for the couple to meet all their expenses.
Long-term planning while the family faces a financial crisis is “like thinking of a new boat when yours is sinking,” co-host Dr. John Delony explained. “The first job is to get to shore.”
According to Dave Ramsey, “getting to shore” in this case involves taking up multiple jobs. He said, “So I want him to go get three jobs in construction and Walmart box slinging. I want him starting right now.”
He also advised selling the trailer and added that once the family has money coming in, the first thing they spend it on should be groceries and utilities, followed by the mortgage and then the truck payments.
He said, "I've been right where you are, I remember what it feels like to be so scared you can't breathe."
Millions of Americans take on multiple jobs and freelance work to make ends meet. As of October 2024, nearly 5.1% of the workforce had more than one job, according to the Fed. Meanwhile, 54% of working Americans surveyed by MarketWatch Guides said they’ve taken on side hustles for extra income in the past year.
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Selling assets is another potential solution for those in financial distress. Selling their vehicles, used clothes and furniture could give the couple some financial runway while Rachel’s husband looks for new jobs to boost income. Many consumers, facing unsustainable debt or job loss, turn to platforms like eBay or Facebook Marketplace to offload personal belongings and raise cash quickly.
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Small businesses on the edge
Rachel didn’t explain the size and age of her husband’s business but her description indicates that he’s a solopreneur in the construction business.
Nearly 30% of startup non-employer businesses said their financial situation was “poor” and just 25% were operating at a profit at the end of 2021, according to the Federal Reserve’s Small Business Credit Survey conducted in 2022.
Seventy-nine percent of these small business owners used personal funds to deal with financial struggles in the business. For many small business owners, their personal and professional lives are inseparably linked.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
