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Benzinga
Benzinga
Jeannine Mancini

24-Year-Old Used Client Deposits To Pay Off Debt —Now He's $260K Down And Dave Ramsey Warns, 'They're Going To Go Ballistic'

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When 24-year-old Matt called into "EntreLeadership" to speak with Dave Ramsey, he wasn't looking for a pep talk. He opened with brutal honesty: "I have $260,000 in super crappy debt," and admitted he spent client deposits to cover payroll and past mistakes. "Now I'm screwed," he said.

Matt owns a remodeling business pulling in $750,000 a year with six full-time employees. But the books? A disaster. He racked up $185,000 in debt with credit cards, merchant cash advances, and bank loans. Then there's another $72,000 in unpaid vendor bills.

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And the worst part? He used money from new clients to patch up the old mess.

"I made some super silly decisions and didn't have a lot of financial clarity when I took these deposits," he said. "A lot of those deposits went towards kind of cash flowing the business and making up for losses on past projects."

Translation: He started projects with no cash to actually finish them.

One client paid him $128,000 up front for a $256,000 home addition — and the money's long gone. "We used that to float the business for the past six months," Matt admitted. Ramsey didn't need to say it out loud, but he did anyway: "They're going to go ballistic at some point — and rightly so."

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And it gets worse. Another project came with a $45,000 cabinet bill. Matt said he fears the vendor might slap a mechanics lien on the client's house because he can't pay up.

Still, Matt hasn't thrown in the towel. In fact, he's clawing his way back by focusing on smaller jobs with faster turnarounds — the kind that pay quicker and hurt less if something goes sideways.

Ramsey's advice was blunt but actionable: "Go take a bunch of short-term projects. Prioritize where every dollar goes. You've got to start generating some cash."

Ramsey told him to avoid large jobs for now and stick to the "quick-turn ankle-biters." If Matt can pull off $500,000 to $800,000 in these smaller gigs over the next year — at a 40% margin — he could work his way out of the hole.

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That doesn't mean it'll be fun. "You're working for the mess you made," Ramsey said. "And you can clean it up, but you're going to pay for your sins by having no life for the next eight months."

Still, Ramsey thinks the business can make it — and maybe even thrive — if Matt stays focused, keeps job costs separate, and never touches deposit money until the job is finished.

Lesson learned? "Absolutely not doing that again," Matt said.

One more hard-earned win for experience. And a cautionary tale for every business owner who thinks a deposit is just free cash. It's not. Ask Matt.

Read Next: Over the last five years, the price of gold has increased by approximately 83% — Investors like Bill O’Reilly and Rudy Giuliani are using this platform to create customized gold IRAs to help shield their savings from inflation and economic turbulence. 

Image: Shutterstock

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