A 61-year-old woman from Arkansas called The Ramsey Show hoping for clarity on how to invest in her 401(k) and still pay off her debt. But what started as a simple investigation quickly turned into a reality check, tractor and all.
The caller introduced herself as Teresa, a self-described “country girl” with no nest egg. “I don’t have any money saved for retirement,” she told the personal finance expert Dave Ramseythough she began following his Baby Steps plan and raised a $1,000 emergency fund.
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With six years to go until Social Security, Teresa wondered if it made sense to contribute to her employer’s 4% 401(k) match, despite the fact that she was still in debt.
She told Ramsey she makes about $67,000 a year but owes about $69,000, including $11,000 in student loans she’s been paying since 1999, $18,000 on a car, a $12,000 personal loan and $26,000 on a tractor.
The latter stopped Ramsey cold. – Why do you have a tractor? he asked.
“We are country people,” answered Teresa. Her husband, who is 75 and on Social Security, is in poor health and out of work. The tractor, she admitted, was more for clearing hunting plots on their seven acres, land that turned out to be worth as little as $500 an acre.
“Your $26,000 tractor for a $4,000 piece of land,” Ramsey replied. “Broken people don’t own $26,000 tractors.”
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Although Teresa defended the purchase as something she bought before discovering Ramsey’s methods, he didn’t let it slide. They told me to sell it, even if I had to borrow a few thousand to cover the difference. I am also selling a car. In his words, “You guys are in emergency mode, girl.”
Ramsey took it a step further, joking that Teresa needs to sell “everything you see” and that even the local deer should be excited. His message was clear: this was no time for feelings, toys or lifestyle luxuries. It’s time to push.
Then he laid out the bigger picture. If Teresa had aggressively attacked her debt, reduced surplus and freed up cash, there was still time to build a solid retirement. “When you retire, trade in a $26,000 tractor for $150,000,” Ramsey said. “You’re trading in an $18,000 car for another $100,000.”