Kim's $30k Debt & $2k Monthly Surplus: A Simple Plan for a Growing Family

Kim from Detroit called into The Ramsey Show last month with a simple question: how to afford a car for her growing family. The hosts were bowled over. She's expecting her sixth child, her kids range from 12 years old to a baby not quite one, and her family of eight lives in a two-bedroom house. The problem? They have no money.

The shock came from the details. Her husband earns about $75,000 a year, and Kim brings in roughly $2,400 a month from dog grooming. After covering their $1,450 mortgage and other necessities, they still have about $2,000 left over each month. Yet, they carry $30,000 in consumer debt, including credit cards that have gone to collections. When asked where the debt came from, Kim didn't sugarcoat it: "My husband spent it on garbage." The hosts were nearly speechless. "You guys are making enough money," co-host Ken Coleman said. "You guys are just being ridiculously careless."

The specific case that stunned them was their transportation. They currently lease a seven-seat vehicle through her husband's job for just $275 a month. But with eight people, they need more space. The hosts were firm: taking on more debt for a new car was not an option. "There is no expansion of the house for him," Coleman shut down the idea of renovating the basement. "He's going to a place called a coffee shop."

This isn't just a story about one family's spending habits. It's a snapshot of a national pressure cooker. The average cost to raise a child for 18 years is now nearly $300,000. More critically, annual child-related expenses have surged 35.7% nationwide since 2023. That's a brutal pace of inflation hitting families right where it hurts. When costs soar like that and income barely keeps pace, a simple, disciplined budget isn't just helpful-it's essential. For Kim, the path forward wasn't about finding more money, but about protecting the $2,000 they already have. The hosts advised saving and extending their current lease, then buying a used vehicle outright. In a world of rising costs, that kind of creativity is the only real safety net.

The Simple Math: Budgeting Your Way Out of Debt

The shock in Kim's story wasn't just about the debt-it was about the math. She has a solid monthly surplus, but it's being funneled into the wrong places. The first step to fixing that is simple: write down every single dollar. List all income, like her husband's $75,000 salary and her $2,400 a month from dog grooming. Then, write down every expense, from the $1,450 mortgage to groceries, utilities, and yes, even the $275 car lease. This isn't about judgment; it's about clarity. When you see the numbers laid out, the $2,000 surplus is undeniable. The problem is the $30,000 in debt, including credit cards that have gone to collections.

This is where Dave Ramsey's Baby Steps provide a clear, no-nonsense roadmap. The first rule is to attack debt before saving for the future. You can't build a nest egg while paying high interest on credit cards. The plan is to pay off all debt except the mortgage using the "debt snowball" method-start with the smallest balance, then roll that payment into the next, building momentum. For Kim, that means focusing every spare dollar on crushing that $30,000 balance. The hosts were right: taking on more debt for a new car is not an option. The goal is to get out of debt first.

Before that, though, there's a tiny safety net to build. Baby Step 1 is a $1,000 starter emergency fund. This is cash set aside for true surprises, like a broken-down car or a medical bill. It's not for vacations or new furniture. For Kim, using part of her surplus to build this fund first provides a buffer. It means she won't have to rely on credit cards for a minor emergency, which protects her debt payoff plan.

Once the debt is gone, the real power kicks in. That $2,000 monthly surplus, which was being used to pay interest, can now be directed toward future goals. The next step is to build a full emergency fund of three to six months of expenses. Then, she can start aggressively saving for a major purchase like a larger vehicle. The key is to calculate the total monthly cost of ownership-lease or loan payment, insurance, fuel, maintenance-and ensure it fits within the budget after the debt is paid off. In her case, that means buying a used car outright, not leasing, to avoid adding to the debt load. The math is straightforward: get rid of the debt first, then use the freed-up cash to build the future.

The Rising Tide: Why Costs Are Crushing Families

The real story behind Kim's $2,000 monthly surplus is a national one. It's not about a single family's poor choices; it's about a relentless economic tide that is making it harder than ever for any family to get ahead. The numbers tell the tale. Annual child-related expenses have surged 35.7% nationwide since 2023. That's a brutal pace of inflation hitting families right where it hurts. More critically, the burden on the family budget has exploded. Families now spend 22.6% of their income on child-related costs, a significant jump from just 19% a year ago. This is the core pressure cooker.

This surge is driven by soaring costs in the 'big three' categories: housing, transportation, and child care. Adjusted for inflation, rents are up more than 20%, and home prices have surged 65% over the past two decades, while inflation-adjusted median income has barely budged. That means a larger and larger slice of the family paycheck is going toward the roof over their heads and the wheels under their car. For Kim, that translates directly to a $1,450 mortgage and a need for a larger vehicle, both of which are becoming more expensive to own.

The average cost to raise a child for 18 years now sits at $297,674. That's not a distant future worry; it's the sum of today's rising bills. The LendingTree analysis shows the specific spikes: day care costs have jumped 51.8%, food costs are up 29.6%, and health insurance premiums have climbed 25%. These aren't minor adjustments; they are fundamental increases in the cost of living for families with kids.

Viewed another way, this is a story of squeezing more and more from a fixed pot of money. When the cost of essentials like housing and child care climbs faster than wages, there's simply less room for savings or discretionary spending. That's why Kim's $2,000 surplus, while substantial, is being consumed by debt. The system itself is making it harder to build a financial cushion. For families, budgeting isn't just helpful-it's the essential tool to navigate this rising tide. Without it, even a solid income can vanish into the gap between what you earn and what you must spend.

What to Watch: Catalysts and Common Pitfalls

The path from Kim's $2,000 surplus to a debt-free future is clear in theory, but execution is everything. Success hinges on watching a few key factors and avoiding common traps. The first catalyst is local cost control. Childcare and housing are the two biggest budget busters, and their costs vary wildly by location. In some states, the annual cost to raise a child is nearly $36,000, while in others it's under $17,000. A family budget can be derailed overnight by a sudden increase in local rents or a new daycare bill. The solution is vigilance: monitor these specific line items monthly, not just once a year.

The biggest pitfall is the "do it all at once" trap. It's tempting to start saving for college or retirement while still carrying high-interest debt. But that's like trying to build a house before laying the foundation. The Baby Steps framework exists for a reason. You must complete Baby Step 1: Save $1,000 for your starter emergency fund and then Baby Step 2: Pay off all debt (except the house) before moving on. Trying to save for the future while paying 20% interest on a credit card is a losing battle. The math simply doesn't work.

Accountability is the final piece. A budget is just a piece of paper unless you track spending. The best way to stay honest is to review your purchases daily or weekly. Apps can help, but a simple notebook works too. The goal is to catch overspending early, before it becomes a surprise at month-end. As the advice says, track expenses throughout the month to identify areas for improvement and adjust the budget as needed. This isn't about perfection; it's about awareness.

The bottom line is discipline. For Kim and families like hers, the $2,000 surplus is a gift, not a guarantee. It can be used to pay down debt, build a safety net, or fund a future car purchase. But it can also vanish into the gap between rising local costs and a static budget. By focusing on the right priorities-debt first, local costs second, and tracking every dollar-you turn that surplus into real financial security.