Ava and her husband, who live in Charleston, South Carolina, are $200,000 in debt after he refinanced the house — and then used most of that money for day-trading.
“It’s all gone now,” Ava said when she called into The Ramsey Show, seeking advice on how to get out of debt while getting her husband on board to “better manage his day-trading.”
While Ava said she doesn’t really understand “all the trading stuff,” Dave Ramsey said she does, in fact, understand: “He turned $200,000 into zero.”
“Worst magic trick ever,” added cohost George Kamel.
Here’s the “radical” change Ramsey says is in order.
Around the time they got married three years ago, Ava’s husband started dabbling in day-trading and “got excited about his returns.” So he refinanced the house — turning it into a 15-year mortgage with $4,000 monthly payments — and got $200,000 back.
He then proceeded to lose the $200,000 while day-trading.
“So he mortgaged the house in order to gamble,” Kamel said.
“Everything was going well and then it crashed,” Ava said. But this was no “crash,” according to Ramsey.
Day-trading has a fairly predictable track record, with reaserch showing that 97% of day traders lose money if they persist over time. And less than 1% are actually profitable.
“Very few individuals are able to consistently profit over time, and those that do are extremely experienced and sophisticated — not beginners,” according to Current Market Valuation, which also states that only 1% to 3% of day traders “are able to consistently outperform the stock market.”
Current Market Valuation goes further to say that day-trading “is a scam — it is a get-rich-quick dream being sold to you by webinar-hucksters.”
So if Ava’s husband’s game plan is to day-trade his way out of debt, the odds are (greatly) stacked against him.
Ava says she’s tried to talk to her husband about it, but he’s still day-trading “all day, every day.”
While they still owe an extra $200,000 on their house, her husband now wants to put it on the market and buy another house (which Ramsey tells Ava explicitly not to do).
Her husband doesn’t have an income (other than “day-trading”) and Ava stopped working as a cardiac nurse about six months ago when they had their second child. At this point, she doesn’t even know how they’re paying their bills.
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This is a scenario that Ramsey says he can’t help with. “There is no Ramsey technique for continuing to lose $200K regularly and turning that into a wealth plan,” he said. What they need is a “reset” in their marriage.
“There’s only one way your family survives — is if this man stops doing this,” Ramsey said.
After all, a budget and debt repayment plan isn’t going to help if her husband continues to gamble their money away.
Ramsey said she should call a family meeting and tell him she’s scared, they’re broke and he needs to get a real job and start supporting his family — and that they’re not buying another house.
“You’re letting a drunk drive the car right now,” Kamel said. “He has an addiction. It’s going to bankrupt the family and you need to take over.”
While day-trading and gambling differ “in that day traders use analytical skills to make informed decisions, while gamblers gamble for fun, knowing that luck, not strategy, decides the outcome,” day-trading can become addiction, according to Avenues Recovery, a community-based drug and alcohol rehabilitation center with locations across the U.S. This addiction arises from the “intense and fast-paced nature” of day-trading.
And these days, there are plenty of day-trading platforms and mobile apps to choose from, meaning “people with little skill are taking part in day-trading.”
Signs that someone might have a day-trading addiction include exhibiting “a fixation, preoccupation and compulsion to engage in buying and selling assets to the extent that this process addiction detrimentally affects their daily lives,” according to Avenues Recovery.
If Ava’s husband can’t stop himself from day-trading, he may need to seek out professional addiction counseling.
Whatever the case, it’s going to require some “really radical changes,” Ramsey said. And they’ll want to start making these changes before their house is in foreclosure and the sheriff’s department “starts showing up at the door.”
“He’s got to care more about his family than his gambling addiction,” Kamel said. “That’s the only hope this relationship and this future has.”
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