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Should You Pay Employees Based on Their Personal Debt? Ramsey Show Hosts Have Thoughts

MarketDash Editorial Team
3 hours ago
A San Diego business owner called The Ramsey Show wondering if he should factor an employee's messy personal finances into their salary. The hosts' answer was clear: market value matters, not debt loads.

Here's an uncomfortable question: If you know your employee is drowning in debt because they used to pay themselves $20,000 a month while skipping taxes, should that affect what you pay them now?

That's essentially what Joe from San Diego asked when he called into "The Ramsey Show." And the situation gets messier from there.

The Backstory Gets Complicated

Joe had acquired another person's book of business without paying a dime for it. The catch? He had to guarantee the previous owner six months of employment. That former owner had run his own business straight into the ground, paying himself and his fiancée somewhere between $15,000 and $20,000 monthly while racking up debt and ignoring tax bills.

"They didn't get the insurances they needed," Joe explained. "He owes back taxes for that business for the last three years."

Now this employee manages one of Joe's two branches, and Joe's trying to figure out the right number. He wants to be fair, sure, but he also wants to help wean the guy off what sounds like a pretty unsustainable lifestyle. There's friendship history here, plus the branch actually adds real value to Joe's company.

The Hosts Keep It Simple

Co-hosts George Kamel and Ken Coleman didn't mince words: personal debt has no place in compensation decisions.

"We never look at someone's personal finances to figure out how much we're going to pay them," Kamel said, describing how things work at Ramsey Solutions. "The only reason we do a budget in the interview process is to make sure that what we pay them is enough for them to live."

Coleman doubled down on the point. "Whether he has $500,000 in debt or nothing, it doesn't matter. It doesn't reflect what you pay him."

When pressed, Joe admitted that if he were hiring someone with comparable experience from the outside market, he'd offer $75,000 to $80,000, maybe stretching to $90,000 at the absolute top end.

"[That's] the max number that's not charitable," Joe said.

Where Charity Becomes Resentment

Coleman warned that paying above market rate out of sympathy backfires quickly. "You become resentful," he said. "And then this whole thing just becomes a nasty taste."

The advice was straightforward: treat this employee like any other hire. Pay fair market rate, build in performance-based incentives if you want, and if the employee gets resentful or acts entitled, be prepared to part ways.

Joe seemed to get it. "In all honesty, business numbers, I'd rather hire someone else, train them," he replied.

Coleman wrapped it up with the bigger lesson: "Gotta be careful in trying to be kind that we don't make bad business decisions on a personal decision."

It's a tough spot when friendship and business collide. But the Ramsey hosts' point stands: compensation should reflect the job and the market, not someone's past mistakes or current debt load. Mixing the two doesn't help anyone in the long run.

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Should You Pay Employees Based on Their Personal Debt? Ramsey Show Hosts Have Thoughts

MarketDash Editorial Team
3 hours ago
A San Diego business owner called The Ramsey Show wondering if he should factor an employee's messy personal finances into their salary. The hosts' answer was clear: market value matters, not debt loads.

Here's an uncomfortable question: If you know your employee is drowning in debt because they used to pay themselves $20,000 a month while skipping taxes, should that affect what you pay them now?

That's essentially what Joe from San Diego asked when he called into "The Ramsey Show." And the situation gets messier from there.

The Backstory Gets Complicated

Joe had acquired another person's book of business without paying a dime for it. The catch? He had to guarantee the previous owner six months of employment. That former owner had run his own business straight into the ground, paying himself and his fiancée somewhere between $15,000 and $20,000 monthly while racking up debt and ignoring tax bills.

"They didn't get the insurances they needed," Joe explained. "He owes back taxes for that business for the last three years."

Now this employee manages one of Joe's two branches, and Joe's trying to figure out the right number. He wants to be fair, sure, but he also wants to help wean the guy off what sounds like a pretty unsustainable lifestyle. There's friendship history here, plus the branch actually adds real value to Joe's company.

The Hosts Keep It Simple

Co-hosts George Kamel and Ken Coleman didn't mince words: personal debt has no place in compensation decisions.

"We never look at someone's personal finances to figure out how much we're going to pay them," Kamel said, describing how things work at Ramsey Solutions. "The only reason we do a budget in the interview process is to make sure that what we pay them is enough for them to live."

Coleman doubled down on the point. "Whether he has $500,000 in debt or nothing, it doesn't matter. It doesn't reflect what you pay him."

When pressed, Joe admitted that if he were hiring someone with comparable experience from the outside market, he'd offer $75,000 to $80,000, maybe stretching to $90,000 at the absolute top end.

"[That's] the max number that's not charitable," Joe said.

Where Charity Becomes Resentment

Coleman warned that paying above market rate out of sympathy backfires quickly. "You become resentful," he said. "And then this whole thing just becomes a nasty taste."

The advice was straightforward: treat this employee like any other hire. Pay fair market rate, build in performance-based incentives if you want, and if the employee gets resentful or acts entitled, be prepared to part ways.

Joe seemed to get it. "In all honesty, business numbers, I'd rather hire someone else, train them," he replied.

Coleman wrapped it up with the bigger lesson: "Gotta be careful in trying to be kind that we don't make bad business decisions on a personal decision."

It's a tough spot when friendship and business collide. But the Ramsey hosts' point stands: compensation should reflect the job and the market, not someone's past mistakes or current debt load. Mixing the two doesn't help anyone in the long run.