BBP REAL LIFE BUDGET | Living Paycheck to Paycheck + Debt

welcome to the budget mom youtube channel i'm kamiko love from thebudgetmom.com and today i'm back with another real life budget for this real life budget the person that we are going to be talking about wants to remain anonymous so we are using and calling her t that's what she would like to be called for this video another thing that we're doing differently for this real life budget is i'm not going to be putting tease information inside the budget calendar or the budget by paycheck workbook or in the budget by paycheck method [Music] t and her husband have a very different situation that we haven't covered before in a real life budget for a really long time they have lived under the lie that they make really good money therefore they can spend on anything that they want to living outside of what they make outside of their means which has caused some drastic financial troubles for them so in today's video i'm going to walk through my initial thoughts first and foremost and then we're going to talk about one of the biggest recommendations that i want to make for this couple that may seem drastic but it's necessary um we'll be going over my green light red light test and i'll get into that further in this video really what i want to talk about and show in this video is the initial steps on how to work through change and lifestyle change in your budgets and in your finances the things that are kind of red flags that stick up for you along your journey where you're where you're gonna have to decide on how you want to move forward and going over i think which is the most critical first important step anytime you are working with your finances for the first time so this is information about t and her husband they currently live in plains new york her why is her children she wants to show them there should not be any stress or worry when it comes to money and managing your finances i want to be a good example for them especially when it concerns finances i have a three-year-old and 19 year old i would work on this why first it's the first observation i make because there is stress and worry behind finances and financial management the way i approach this with my son is and my son is also my why is that i want to show him not only the good times but also the bad times i want to show him how to work through the times that are hard that are stressful so he can learn the skills to deal with those problems in his own life as he grows up but i also share with him the rewards of being good with money learning how to manage your money properly so it's not that we don't ever want our children to see stressful or worrisome times with our finances it's we want to give them the skills on how to deal with that in their own lives as they grow up as they become adults as they face those things head-on for themselves what is your personal story so this is a little bit more about their personal story although my husband and i make great salaries we have a lot of debt i'm a program manager and my husband is an hr manager i primarily handle the finances and my husband and i have different mindsets when it comes to our budget he believes that there will always be some kind of debt so why stress about it while i stress that these changes are temporary but some sort of change needs to happen i recently refinanced my student loan and car note to lower the monthly payments my credit has recently taken a major hit due to the increased debt balances my husband's student loan payments will begin when the extension is over i don't want our children to see us working hard and making good money but constantly being in debt i want to be able to show my husband that reaching our financial goals are possible and have him on board with me i think those are all great motivators for wanting to improve your financial situation so currently right now they make ten thousand nine hundred eight dollars every single month they're both paid semi-monthly and bi-weekly so the husband's pay is on the 10th and 24th wife is paid the 15th and the 30th now down here before we get down to my notes down here let's look at their expenses let's look at their fixed expenses first this is all their fixed expenses it came without all my highlighters so they have some pretty high expenses a personal loan minimum payment of 668 car insurance car insurance and car payments on two vehicles one car insurance bill the wife has one life insurance policy the husband has two life insurance policies jim cable internet landline for 276. mortgage here is the funny thing about their mortgage they currently live in a condo their mortgage on their condo is 619 but they have co-op maintenance and parking for set one thousand seven hundred and three dollars a month bringing their actual true housing expense for mortgage way up to what three over three thousand dollars they're investing a hundred dollars for the 529 they have minimum credit card payments pet insurance even with a three thousand dollar mortgage on a condo they're paying 237 for storage every month and we'll get back to all this gas and electricity chewy for their their dog toddler daycare is 1960 a month preschool daycare is 15.90 a month and we'll come back to this too here's the husband's other life insurance they pay 160 a month for a house cleaner and then there's that other car payment a month for 6 30. if you add up their their fixed and bill expenses it comes out to eleven thousand eight twenty one let's go over the red light green light test the red light green light test is taking their income which is currently at 10 0908 minus expenses now they do have variable expenses as well which we can see here but i'm not talking about variable expenses i'm talking about the necessity things they have to pay to live which is comes from their fixed and bill expense list the red light green light test is this taking your income minus your expenses if it's a negative you're in the red red light means stop if you take your income minus your expenses and you're green you're positive it's a green light means go green light meaning you're good to go to move forward in your financial process so that's just using their fixed expenses but some variable expenses they do need so we added in their variable expenses i put a question mark next to laundry because i'm like do they not have laundry in their in their condo so they don't they have to go to a laundromat every every month we'll talk about this question mark here in a minute gas eating out toiletries parking toll which is for work this is not for their house but for work um household amazon and groceries so their variables are at one thousand five four five we go back to our red light green light test so we added in their fixed expenses we added in those variable expenses they are at negative one six six two red red light means stop don't move any more now we have to ask ourselves the question is this a spending problem or is it an income problem since we're stopping here we're not moving any further in our financial process when i looked at this i said okay you know if it's a spending problem when you can literally cut everything from your your expenses that you no longer need and if you're still in the red then it's an income problem so i went through everything in pink i want to cut completely cut out their gym for 70 dollars a month cable internet landline 276 a month it's not a necessity get rid of it i want to pause their 529 investment contributions for college savings for the child for 100 i want to pause that remember this is temporary pause that and i want to get rid of get rid of the house cleaner for 160 a month all right when i did that i got it down to 11215. then i went through and said okay everything in green is a necessity it's things we have to pay it's the things we're going to keep well when i did this we were still in the red red light so now i know it's no longer a spending issue we've cut everything that we can from their budget i even went through and cut out their variable expenses i cut out eating out all together for ninety dollars i cut out their um i lowered instead of a household amazon for 150 a month i'm giving them a miscellaneous category for 50. i even went through and cut and lowered where i could in their variable expenses i got it down from one five four five to thirteen fifty five even with cutting everything i could from my budget and my spending we're still in red red light means stop we're still halted we're still stopped so then we had to start looking at okay income here is my suggestion so currently the husband makes two thousand three hundred and fourteen dollars a month if we assume and say the husband stays home and watches the children we lose his income of the two three one four but we save three thousand five hundred and fifty dollars from day care which really means though even though we're losing his income we're saving one thousand two hundred and thirty six dollars just by making that one change husband staying home and watching the kids but watch the trickle effect that that happens when that happens if we go to their debt i'm going to look at their debt now they have some drastic debt they have a credit card to 11 000 with a 21 percent balance 42 000 on this credit card one at 18 percent these right here are high interest budget killers these are high interest cash flow killers right here and we're going to want to get rid of these but if we look at their car loans 25 000 at about 3 and 17 000 at two and a half percent if the husband stays home we can sell a car which car they want to sell if it were me i'd get rid of the most expensive one most expensive in cash flow terms this one's at 630 minimum payment every month this one's at 490. but this has higher interest they need to talk about which car they want to get rid of but i'd get rid of one of these cars all right so we just lost the car payment now let's say that they get rid of car number two they just save themselves another 630 dollars then if we look at their variable spending that also plays in a gas we only have one partner who's truly doing the most driving let's say probably cut 150 from gas every single month now i don't know who this parking toll is to that might also decrease as well but here's another thing that would also decrease their co-op maintenance parking for their condo right now are they paying for two parking spaces this would probably increase as well so when we look at the 1236 that we're saving as far as just looking at the husband income and the child daycare cost it's more than that that they would be saving by making other lifestyle changes because of that one change that we decided to make so this is their debt here they also have the mortgage 318 000 about 5 interest student loans this one is a private student loan seventy thousand at about three percent interest four hundred and eleven dollar minimum payment but look what's going to happen once this federal pause stops they're gonna start paying payments on 115 000 student loans for him where are we gonna get that money right now when we're sitting in the red we've done our red light green light test now do you remember how i showed you income minus expenses with the way that they showed me we are negative 162. 1662. we go from red light to green light by making the one switch of the husband staying home and cutting out the child care costs their income yes goes down to eight five nine four from 10 908 but their ins expenses drop drastically to 8117 giving us a green light positive of 477 left with it they can use towards building up an emergency savings which savings let's talk about that savings goals they have nothing saved for emergencies and she told us recently through emails she just had to put a car repair on her credit card continuing continuing adding to that black hole of high interest debt here's another thing and i put a big sad face next to it they are currently saving for car maintenance vacation and christmas i would say stop saving for vacation and christmas because we can't right now with the way that our budget and income is a month they could have but here's the thing they put it in savings and she said vacation and christmas are automatically withdrawn from our husband's checks vacation cannot be withdrawn until may 23rd 2023 christmas cannot be withdrawn until november now i don't know if they set their own restrictions for that saying hey we can't touch this until we go on vacation in may of 2023 we can't touch christmas until we start spending for it in november or if they put it into like something that's termed through their bank savings bond cd something like that never ever ever put sinking funds that you need at any time in something that is locked down your emergency fund sinking funds for planned holiday and events that are coming up sinking funds for necessary expenses like property taxes house insurance those things that money should be accessed freely with no restrictions i know a lot of people right now are talking about i bonds i bonds withdrawn within five years of depositing that money there's a penalty sure the savings interest rate right now you're earning on i bonds is great but it comes down to what are you using that savings asset for or that savings tool for if you put money into an eye bond or something that is termed meaning you can't access it until a certain specific time period and you need the money before then what happens we end up losing all of the growth that we the reason why we got these savings instruments in the first place because we got a penalty for withdrawing early never ever put money that you need to access at any given time or in a short period of time lock down that has to remain in liquid state and what i mean by liquid state is you should be able to have cash on hand assets liquefied put into cash within two days we set up these savings accounts for peace of mind and there's no peace of mind if you're sitting there waiting for it to turn so i didn't know if she set those restrictions for just herself saying hey we're not touching these until these deadlines or if it's actually a savings instrument that she used but she says it's automatically withdrawn from her husband's checks his paychecks makes me question that i don't know what type of instrument that they're using for those savings that's one thing that i do want to bring up lifestyle changes are needed when we have a debt picture like this we also need to burst the bubble up we make good money so therefore we can continue to live above our means harsh truths right now a little bit of hard love because this is turning into something that's going to be extremely painful to get out of it we're already at that limit 42 000 on a credit card at 18 interest i was just telling ryan when i was looking at this looks like my story i had seventeen thousand dollars on a discover one on or on a discover credit card with 17 interest and to me that was the hardest one of the hardest debts i had to pay off because in order to pay these off for instance let me give you an example or let me show you what's actually happening here this credit card number one with 42 000 worth of debt at 18 interest just to cover the interest payment is 640 that's just the interest that means every time she makes a 650 dollar payment only 10 dollars is going towards paying down the principal think about it this way 10 payments every single month while you're battling 42 000 getting that down it's really hard to make significant progress on a debt like this is it impossible absolutely not i did it but we have to look at our lifestyle and the lifestyle changes we need to make given our current income situation and what we have going on in our lives this husband staying home yes is it drastic absolutely scary heck yes but this is a fairly easy lifestyle change compared to other options and we go from red light to green light we're able to cover our expenses and our variable expenses and we're left with 477 at the end of the month to put towards things that are absolutely necessary at this point like a emergency fund so we're no longer paying off debt or wanting to pay off this debt but yet we continue to grow it that's the cycle of a black hole that just continues to eat you alive we need to get out of that cycle of relying on debt when things pop up in our lives that's why an emergency fund on a debt payoff journey is so critical and so massively important the number one rule when paying off debt is you don't want to accumulate new debt as you pay off old debt because then you're a hamster on a wheel going around and around and around and around ending up in the exact same place that you began with even though you just ran 180 000 miles so we need that emergency fund this will allow us to build it so that is my recommendation this is tease information and i do want to give some encouragement to t right now this what you're doing here is temporary and it's absolutely doable with like for instance just making that one lifestyle change it's absolutely doable do not get discouraged i want you to continue on your path to financial fulfillment sometimes when we see this in this way in an organized way we can we can actually see the big picture and the consequences of our spending and our debt it can get very discouraging like why even bother why even try to increase my income or make more money why even bother cutting out these smaller expenses when it's just a drop in the big bucket because that drop has ripple effects that then trickles into other expenses and other other things but i will tell you now we have to look at why you're in debt like this in the first place a big thing that i see is bursting that bubble of we make good money so therefore we can do this we have to address the underlying reasons why you're in this debt in the first place sure sometimes debt is out of our control sometimes we need to rely on debt because we're backed into a corner but we do have control to say i want to change this and here are the steps i'm going to take to start that journey so t you got this keep plugging along and i would love to know too an update if this is something that you and your husband decide to do so that is t and her husband's information and i know it's a lot they have a lot of debt with my number one recommendation of dad staying at home to save on child care costs it's kind of it seems counterintuitive where most of the time we say we need to cut back on our expenses we never really think about someone leaving their job and staying home to save money this is a unique case where their child care is extremely high they have a kindergartner and a toddler so that is my biggest recommendation with him being able to stay home they can then sell a vehicle which also saves them on the car payment and will reduce their gas expenses and they're parking their weird and strange enormously high parking situation that they have at their condo where they currently live so that's a really big lifestyle change but it's necessary because we have to go from that red light to that green light that i showed in the video if you do the red light green light test and you are in the red you have to ask yourself if it's an income problem or a spending problem in this case it's kind of both we have an income problem in the fact that the husband does not make enough to cover the child care costs alone just the child care costs but we also have this where they live kind of in this bubble of telling themselves we make good money therefore we can spend on what we choose even if it's outside of what we can truly afford so one of the first steps is getting yourself in an organized way we have these free worksheets in our free resource library if you want to use them to organize your finances so you can see the big picture where you can see the biggest problem areas of your financial situation right now if we wouldn't have compared their current situation even cutting back on expenses anywhere that we could to the husband staying home going from red light to green light may not have been as obvious it may not have been possibly something that we would have considered before so the first thing and the most important thing is doing that red light green light test seeing initially your starting point i know the starting point where you are right now might not be a number that you want to see you may not want to see the red light test but until you can face that reality head on you can't you can't address it you can't fix it you can't heal from it can't grow from it can't make progress from it the only ways we do that is by first awareness and organizing your finances in a way you can say this is exactly where i'm starting here are the issues at hand how do we move forward and fix it if you found this video helpful please like it and don't forget to subscribe welcome to the budget mom nope okay [Music] you

Channel: The Budget Mom

Views: 201,896

Keywords: budgeting tips, budgeting your money, budgeting 101, paycheck budget method, paycheck budget with me, paycheck budget tracker, paycheck budgeting, budget mom, the budget mom, money goals 2022, real life budget, debt free journey, budget with me biweekly, paycheck budgeting 2022, zero-based budget, bbp real life budget, how to budget, budget mom budget by paycheck workbook, budget by paycheck workbook setup, single mom, budget by paycheck, debt free, paycheck budget

Id: c9wR428H3yM

Length: 25min 58sec (1558 seconds)

Published: Sat Jun 11 2022