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Welcome to Money Talk for Real, a podcast where we talk about making money, spending money, and everything in between. I'm Nick, and in this episode, I want to take a real world example from someone who sent me their money situation and kind of discuss it, dissect it, walk through it, etc. I'd like to hear from more of you. And if you want to submit your situation, you can do so on my website at money talkforreal.com. And you can actually go directly to the link, money talkforreal.com slash debt help. That's D E B T T. I'm sorry, D E B T H E L P. So money talkforreal.com slash D E B T H E L P. You can either send me a voicemail directly through the website or just fill out your information. Um, if you're looking for some money help and want me to talk about it, I'm glad to walk through it with you. So today I've kind of got a situation I think a lot of people are going to relate to. And this is someone making about $72,000 on year. So on paper, they're doing fine. But somehow they're still living paycheck to paycheck. They have no savings and they're actually adding to their debt every month. So the question obviously is where is the money going? And that's what I'm going to break down here. So here's a situation that got sent to me. Um, we're going to call him Jake. Uh, 29 years old. Jake mates about uh $72,000 a year. He's working full time. After taxes, he's bringing in roughly $4,400 per month. Here's where things start to get interesting. And that that is right, by the way. $72,000 a year is $6,000 a month. After taxes, $4,400. I have no question so far. But let's look at his monthly expenses. Rent, oh, rent is $1,650, $1,650. I feel like that's okay. That's pretty good. Car payment, $540. Car insurance, $180. Gas, $200. Groceries, $400. Eating out, $500. Subscriptions, $120. Miscellaneous spending, uh, he says just Amazon and random stuff, $600 a month, and credit card minimums are $250 a month, which that all right there puts him at about $4,440 a month, $4,440, which means he's actually in the negative every single month. And this is where people get frustrated. Jake, in my opinion, is not doing anything crazy. Um, he's not buying yachts, he's not going on luxury vacations every month, I don't think. This is all just normal life. And that's kind of where I'm gonna say that there's a problem. Jake doesn't have an income problem. He's making enough money to live off of. He's making $72,000 a year. I think that Jake has a lifestyle creep problem mixed with maybe just no structure. And let me explain. The $540 car payment. That's not insane. In fact, nowadays that might be lower than what the average person has, but that is heavy for his income. Um, $500 a month eating out. That doesn't surprise me. It's not shocking, but it's certainly killing him slowly. Um, in my opinion, the silent killer right here on this list is the $600 a month in quote random spending. He said miscellaneous and Amazon. Uh, what is random spending? Random spending, I you know, I don't know, but what I would say is that when you categorize random spending, that's probably not random. It's probably just stuff that you don't know how to categorize it. Nothing individually on this list is outrageous, but together, it's a death by a thousand cuts. Um, if you feel like that you're always broke, even though you make decent money, you may be like Jake. It's probably not one big mistake. It's probably just a bunch of small ones that you've convinced yourself are normal. And it's not normal. You're you're maybe doing some of the things I've talked about in previous episodes. Maybe you're keeping up with the Joneses. Maybe you're not preparing enough before you leave the house for the day. All right, so what would I actually tell Jake to do? And I hope I am telling you, Jake, if you're listening, here's the exact plan. First thing, you need to create some margin and you need to create it fast, obviously, because you're going in the hole every month. You're not spending on, you're not living on less than you're making. You're spending more than you're making. And I'm not talking about perfection, I'm just talking about some breathing room. So perfection would be the die hard answer. The obvious answer is the eating out, $500 a month. The obvious answer would be to go down to $0 a month. Make your food at home. But again, I'm not looking for perfection here. Let's just make some breathing room. Take your $500 a month on eating out and maybe get cut it down to $200 a month. $200 a month still gives you room and enjoyment of eating out every now and then, but you just saved $300 right there. Maybe the random spending, and again, we don't know what that is. If I knew more details, I may be able to get rid of that completely for you. But let's just say, for the sake of the conversation, that you're able to reduce the random spending from $600 a month down to $300 a month. You still got $300 to random spend. And again, the eating out, you were at $500, you still have $200 a month. I'm still giving you that. But going from $500 to $200 on eating out, and then going from $600 to $300 on quote random spending, that's $600 right there per month freed up immediately. Now let's talk about the car payment. This is this can be big. The $540 payment. Again, that's not crazy, but it's a little heavy for the amount that he's bringing home. And this is where some people can get emotional. There's emotional connections and ties to cars generally. Um, which by the way can also lead into people making it a necessity. They their emotions get the best of them and they say, Oh, I need a truck for work. And and I'm not saying you don't. You might need a truck for work, but not always. Or you say, Oh, I have two kids, I need a Tahoe. No, you don't. You need a car with a back seat in it for the two kids. You don't need a Tahoe. Anyways, if Jake, and I don't know what kind of car he has, I don't, excuse me, I don't know the details of that, but if he were to take his $540 car payment, trade in and down, trade down essentially to something with a $300 car payment, for example, that's another $240 a month saved. Again, the diehard answer would be get rid of the car payment and buy something that's a $1,000 beater car for cash. I'm not going that crazy with you. I'm just being realistic. Trade down. And it, yes, it's probably gonna be a vehicle with maybe a few more miles, maybe just a smaller vehicle, maybe not as luxury, a different brand, maybe something a few years older, but it's still gonna be a good car. $300 a month payment saves you $240 a month. Now we're talking about real progress here. We had the $600 we saved earlier, another $240 a month. Now we're at $840 a flipping month that we just saved. Okay. Right now, though, currently in Jake's situation, his money is just honestly disappearing. And he needs some sort of system. And what I what I think that would include would be fixed bills, meaning lock in your expenses right now. Clean up some of the stuff we've talked about, but then lock that in, meaning that even if Jake got a raise tomorrow, don't spend any more of your raise. Don't spend any more than you're spending right now. The next thing is to have spending categories. I don't like that, quote, miscellaneous. And again, I'm not picking on Jake. I'm not picking on anyone. And I don't know that Jake is even his real name, but you know who you are if you're listening. Um, but have spending categories. The necessities absolutely come first. The groceries, the rent, the, you know, the human survival, food, water, shelter, right? Car, I get that. Car insurance, you have to have that. There are some other stuff, but have spending categories so that you know exactly every month how much money is going into what category and what it is being used for. And then also, once that's done and you have this extra money, the leftover money needs to go somewhere intentional. Meaning that it doesn't just get, you know, well, that's what I had left in my checking account. No. It's okay for your checking account not to have hardly any money in it once your bills are paid, because that's what a checking account is for. It's for writing checks, which nowadays figuratively, it's used for paying things. Maybe your checking account only has 50 bucks in it or $10 in it. Let's be honest. That's okay. If your savings account has $10,000 in it, right? Make the leftover go somewhere intentional. If you have money left over at the end of the month, put it somewhere where at minimum in a savings account, but ideally investing, that might be a higher level conversation. But um, even if it's basic, there just needs to be some sort of structure instead of just wondering where the money went, or in this case, he knows he thinks he knows where it went, but it's just disappearing. Now, with that extra $600 to $800 that we just freed up in our conversation, that can go straight to debt. If there is some, and I'd have to look back at the list. I thought there was a little bit of debt there. Um, and and again, debt is, I mean, the car payment is debt, right? But uh credit cards, whatever it is, straight to the debt. Not some of it, not whatever's left. I would recommend all of it going to the debt. Now, I say all of it. You do need to have a little bit of an old crap fund, a little kitty, a little nest egg. And but that nest egg can be minimum, meaning like, I don't mean minimum like it needs to be $100, but it could be $2,000. Okay, so we're saving you $800 a month for the next three months as an example. Save every penny. Make your payments, but save every penny. After three months, you're gonna have $2,500 between $2,000 and $2,500. That's enough to get you by for now. Then all that eight all that $800, six to eight hundred dollars a month that we're freeing up here can go straight to the debt. And that's how you actually get out of debt. Right. So if Jake, hopefully he's listening and he follows this plan, if he follows this plan, he essentially goes from losing money every single month to having six to eight hundred dollars extra a month, which honestly is some people's full-time income. Not nowadays necessarily as common, but it is. And what that means is having that extra money means that your debt starts going down, which also means if your debt is going down, your stress is going down. And then what that lastly, the last point I'll make here is that means options start opening up and you start to be able to breathe and you start to be able to sleep better, and you start to have mental clarity, you start not to worry. It's a scary thing when you run out of money or you're on the verge of running out of money. So if you're listening, here's what I want you to take from this. You don't need to be perfect with money. I've talked about that before, but you do need to be intentional with your money. If you're not telling your money where to go, it will disappear every time. Okay, if you're listening to this and you're thinking, wow, that sounds like me, or I have a similar situation, or I'm in a funky situation, I want you to send me your situation. I want you to send your situation to me. I want to break it down just like this. You can stay completely anonymous. Just send me your income, your monthly expenses, the biggest problem, and I'll walk through it here on my podcast. When you go to my website, moneytalkforreal.com, you can click on a link at the top that says debt help. You can type all of your information in. I do require you to enter a name, your city, your age, and all that. But if you're not comfortable telling me, that's fine. Make it up. I won't know any different. It doesn't really matter. I'd just like to kind of get an understanding of the demographic. Um, ideally, I would like to play your voicemail on the podcast here, and there's a way that you can record that and send it to me directly on the website. Again, moneytalkforreal.com slash debt help. Moneytalkforreal.com slash D E B T H E L P. Okay, that's it for today. If this helped you, please share it with someone who's always wondering where their money went and um or or even have them send in their situation, right? Thanks for listening. I'll catch you on the next one. This is Money Talk for Real.