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Sometimes, when you're in dire financial straits, your parents can bail you out. That's what happened to Rachel from Dallas, Texas, who recently called into The Ramsey Show (1) looking for advice.

Rachel's home flooded in 2023, so her parents helped out by loaning her an RV to live in. Since then, Rachel - along with her husband, toddler and two dogs - has been living in the RV on her parents' property. Doing so has allowed them to save some money and pay off debt.

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However, Rachel's parents need their aging RV back, so she's looking to buy her own - even though she still has $40,000 of debt. Ramsey Show hosts Jade Warshaw and Ken Coleman had some firm advice in that regard.

When debt payoff needs to be the focus

Rachel has been doing better financially while living in her parents' RV. She's saved a little and put a fair amount of money toward her debt.

But Rachel's parents are now retired and could use some extra money, so she wants to return their RV so they can sell it.

But Warshaw and Coleman warned her that doing so would require taking on more debt. Since she already has $40,000 in debt, they strongly advised against it.

"You should not stop paying down your debt to buy an RV," Coleman said on the call, point blank.

"You have no idea what the RV is going to cost, you only have $2,500 in savings ... and you're presenting to us as though you can't even afford to pay rent."

Rachel's take-home pay is $70,000 annually, and her husband earns $11 per hour in a job he has held for a short time. Warshaw ran the numbers and told Rachel she should spend a maximum of $1,250 per month on rent - warning that if they go beyond that, it will be hard to make progress on their debt.

Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you'll need a substantial stash of savings in retirement

Boost your income first

It's clear that Rachel's family is in a tough spot. However, many others are also carrying their fair share of debt.

According to Experian, (2) as of the third quarter of 2024, Americans collectively owed $17.57 trillion in total debt. And while the majority of that was mortgage debt, auto loan and credit card debt also rose on an annual basis.

If you're serious about paying off debt, try to boost your household's income - something Coleman suggested to Rachel. That might mean switching companies, roles or starting a side hustle.

You can also make your money work harder for you by investing in different types of assets. For instance, switching from a traditional savings account to one that pays higher interest on your balance can help you earn more on idle funds simply sitting in your account.

To get started, a high-yield account, such as a Wealthfront Cash Account , can be a great place to grow your funds, offering both competitive interest rates and easy access to your cash when you need it.

A Wealthfront Cash Account can provide a base variable APY of 3.75%, but Moneywise readers can get an exclusive 0.50% boost over their first three months for a total APY of 4.25% provided by program banks on your uninvested cash. That's over ten times the national deposit savings rate, according to the FDIC's September report.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, you can ensure your funds remain accessible at all times. Plus, Wealthfront Cash Account balances of up to $16 million are insured by the FDIC through program banks.

If you're more interested in ETFs and index funds, Acorns can help you squirrel away your spare change from everyday purchases into an investment opportunity.

Here's how it works: Once you link your debit/credit cards, Acorns will automatically round up every purchase to the nearest dollar, and invest the difference into a diversified portfolio of ETFs tuned to your risk tolerance.

So, by the time you've sipped your $4.50 latte, you've invested 50 cents in your future.

The best part? You can get a $20 bonus investment when you sign up with a recurring monthly deposit.

With that being said, as you start your investing journey, you shouldn't keep all your eggs in one basket.

Diversification is your friend, especially amid increasing economic uncertainty and market volatility. In addition to the usual investment tactics, you could consider adding relatively recession-resistant assets like real estate to your portfolio to ensure you're somewhat protected in the event of a market downturn.

For example, you can now invest in residential properties and vacation rentals across prime locations in the U.S. with as little as $100, thanks to crowdfunding platforms like Arrived .

Backed by world-class investors like Jeff Bezos, Arrived lets you invest in SEC-qualified investment properties, curated and vetted for their income and appreciation potential.

Plus, Arrived handles the day-to-day responsibilities of managing the property - so you can sit back and relax and become a landlord without any headaches.

You can earn returns in two ways by investing in Arrived. Any rental income generated by properties can be distributed as monthly dividend payments. Plus, at the end of the investment hold period, any property appreciation is distributed as capital gains to shareholders.

Pick a payment method - and stick to it

Once you're earning more money, you can total up your debts and create a strategy to pay them off.

The sooner you eliminate debt, the more money you can save on interest, and the more peace of mind you can gain. So it's worth making some sacrifices for a while to enjoy the freedom of being debt-free.

If you're trying to pay off multiple credit cards or high-interest personal loans at the same time - consolidating debt with a new personal loan and making one monthly payment at an ideally lower interest rate might be your best bet.

Credible is an online marketplace that allows you to compare personal loan rates and features from multiple lenders near you - all in one place.

The process is completely free , and won't impact your credit score. Simply answer a few simple questions, then Credible will automatically display rates offered by top lenders like SoFi, Discover, Upstart and more. You can then make a selection based on your requirements and preferences.

With rates starting at 6.49% APR - you could potentially save a ton in interest, depending on your situation.

What to read next

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines .

The Ramsey Show (1 ); Experian (2 )

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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