According to data from Experian and the New York Federal Reserve Bank, the average debt per household in America will be $104,215 by mid-2024 – including mortgages. John from St. Louis, Missouri, has more than double that exclusively his mortgage.

In a recent episode of The Ramsey ShowJohn told the co-hosts that his total consumer debt was $240,500, spread across various credit cards, two car loans, a HELOC, a student loan, and a 401(k) loan.

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“You’ve never seen debt you didn’t like,” said Dave Ramsey. “You’re broke!”

To get this “monstrous” debt under control, Ramsey challenged John to make major lifestyle changes. But his hesitation highlights why so many American families struggle to get out of debt, even though they know it’s a problem.

There is no desire to abolish the family car

The couple’s debt binge was made possible by a relatively high pre-tax income of $151,600.

A solid income doesn’t guarantee financial stability. According to a recent PYMNTS report, nearly 48% of Americans earning more than $100,000 said they live paycheck to paycheck. In fact, more than a third (36%) of Americans earning more than $200,000 said the same.

This trend may be due to record levels of debt combined with increased interest rates. John’s problems are mainly related to servicing his “monstrous” debt load.

John’s car has an outstanding auto loan of $28,700, while his wife owes $21,000 on her car. Together, this amounts to about a fifth of the family’s total debt, which is why co-host Jade Warshaw recommends selling at least one of the cars to reduce the debt burden.

However, John did not want to give up the family car.

“I don’t really care if it’s the family car, you’re broke!” Ramsey said exasperatedly. “You’re starving if you’re making $150,000 a year. You can’t say it’s the family car. You can say everything’s on the table, we’re selling so much stuff the kids think they’re next.”

America’s stubborn car culture is reflected in auto loan data. At $1.63 trillion, outstanding auto loans represented the largest source of non-housing debt on household balance sheets at the end of the second quarter of 2024. Nearly one in four Americans who bought a new car in the second quarter of 2024 owed an average of $6,255 on the loan for their trade-in vehicle, according to Edmunds.

The story continues

Even if John overcomes the mental barrier and trades in his car, the rest of the family’s debt burden will be just as difficult to manage.

Read more: Car insurance premiums have risen to a staggering $2,150/year in the US – but you can be smarter. Here’s how you can save up to $820 per year in just a few minutes (100% free)

Cold turkey

Dave Ramsey compared John’s debt addiction to alcohol abuse. To overcome it, Ramsey said, the family would have to go “cold turkey,” by which he meant the abrupt withdrawal method used by some addicts.

“It’s OK not to use plastic in your house,” Ramsey said. “You have to stop overnight. If you’re trying to quit drinking, don’t walk around with a bottle in your back pocket.”

This addiction is so widespread that one group Community of Debtors Anonymousinspired by Alcoholics Anonymous, in 1968. Today the group organizes over 500 meetings in 15 countries worldwide.

Ramsey and Warshaw said abrupt withdrawal helped them both get out of enormous debt early in their careers.

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