A Georgia teenager called into a recent “The Ramsey Show” with a warning tale about his first car purchase, and how quickly costs can spiral out of control.
Beto, a 17-year-old from Atlanta, told hosts Rachel Cruze and Jade Warshaw that he works full-time at a mixed martial arts gym, making about $850 every two weeks. He recently bought a 2012 Honda Accord from a friend for $8,000, agreeing to make payments of $400 per month. But he didn't expect insurance to be such a hit.
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Insurance Shock, Tax Surprise, and Repairs
“The part that’s getting me is the insurance,” Beto said. “My insurance for just liability a month because of my age is about $700.”
In addition to his car payments and insurance, Beto had to pay a one-time $700 title tax when transferring ownership to his mom’s name. He also needs to complete about $350 in repairs before he can get the car tagged.
The costs have stacked up quickly. “The finances that came with the car kind of are kicking me in the ass,” he said.
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Cruze and Warshaw were empathetic but didn't sugarcoat the lesson. They initially asked if Beto could undo the deal. Since the title has already been transferred, he's stuck with it.
“I’m kind of glad you’re getting a taste of it at $8,000 for a stupid car loan versus a $40,000 business loan that you’re probably going to want to do when you’re 25,” Cruze told him.
A Better Job On The Way
Beto said he's set to start a new job at an orthopedic clinic in two weeks that will pay $20 an hour, 40 hours a week. He also wants to keep training at the gym but said the new hours conflict with his current schedule.
Warshaw suggested picking up a side hustle like DoorDash (NASDAQ:DASH) or Instacart (NASDAQ:CART) in the meantime. “And then, you just work out at the place you like working out at,” she said.
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Thinking About Starting A Business
Beto asked for advice on launching a car detailing business and said he has $1,000 in savings. Cruze advised doing research first, like figuring out equipment costs, how much others are making, and what it would take to get started.
“You may find out, ‘Oh my gosh, this is pretty incredible. I only have to put $500 in and I’m making thousands a month,'” she said. But she also warned he might realize it would take thousands to get going.
Despite the financial mess, Cruze told Beto his work ethic was impressive and saw potential in his future.
“You’re a smart, hardworking guy and I think you’re going to do fantastic,” she said.
The big takeaway? Cruze urged him to avoid debt altogether. “Debt will always set you up in the negative—financially, emotionally, your stress, everything.”
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