A young couple recently sought financial advice from Dave Ramsey on The Ramsey Show, expressing their concerns about being financially ready to start a family. With a combined income of $110,000 and $65,000 in student loan debt, they were unsure if they could afford to have a baby. However, the couple received a surprising green light from Ramsey, largely due to the impending forgiveness of $45,000 through the Public Service Loan Forgiveness program.
The couple’s financial situation was further analyzed, revealing that staying a two-income household was crucial for their financial stability. Dropping to a single income of $55,000 would make their $2,200 mortgage unmanageable. Co-host Jade Warshaw recommended creating a budget to model both dual- and single-income scenarios, taking into account real daycare costs and other expenses associated with having a baby.
One key takeaway from the discussion was the importance of working with a fiduciary financial advisor. Unlike many financial professionals who may be motivated by sales commissions, fiduciaries are legally required to prioritize their clients’ best interests. Ramsey’s team recommended using Advisor.com’s free matching tool to connect with vetted fiduciaries from top national firms in under three minutes.
The conversation with Dave Ramsey highlighted the couple’s current ability to afford a baby on their $110,000 income, factoring in their mortgage and impending student loan forgiveness. However, the risk of one spouse leaving the workforce before the debt is cleared was also emphasized, as it could drastically reduce their income while maintaining fixed expenses like the mortgage.
To better prepare for the financial impact of having a baby, the couple was advised to draft a post-baby budget, considering additional expenses like childcare, diapers, and healthcare costs, as well as potential savings from reduced discretionary spending. This exercise would provide a clearer picture of their financial readiness for starting a family.
In conclusion, the couple’s financial situation highlighted the importance of careful planning and budgeting when considering major life changes like starting a family. By seeking guidance from a fiduciary advisor and creating a realistic post-baby budget, the couple can make informed decisions that align with their long-term financial goals.
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