How Do I Stop Living Paycheck to Paycheck?

Summary

In this financial advice session, Crystal and her husband, with a steady income but living paycheck to paycheck, seek guidance on managing their finances better. The advisor emphasizes the importance of a detailed budget, suggesting they track their spending for three months to identify areas of overspending. They discuss common budget pitfalls, particularly in dining out and grocery shopping, and offer strategies like using cash envelopes and budgeting apps like EveryDollar to gain control over their finances. The session highlights the need for intentional spending and the impact of small, everyday expenses on long-term financial health.

Takeaways

• 💼 The couple in the script has no debt except for a car payment and mortgage, but struggles with living paycheck to paycheck.
• 🏠 Their annual income is approximately $72,000, with a house payment of $1,700 and a car payment of $210, which they pay an extra $90 on.
• 📋 The speaker suggests that the couple's main issue is a lack of organization with their finances, rather than a lack of income.
• 💰 The speaker emphasizes the importance of a detailed, written budget to help manage finances more effectively.
• 📉 The couple's take-home pay is $3,000 every two weeks, and after fixed payments, they should have $2,000 left for other expenses.
• 🤔 The speaker prompts the couple to question where their money is going, suggesting that they are not tracking their spending well.
• 🚗 The speaker advises to pay off the car loan faster by putting more than the minimum payment towards it.
• 🛒 The speaker identifies eating out and grocery shopping as common areas where people overspend without realizing it.
• 📊 The speaker recommends analyzing bank statements from the past three months to identify categories where money is being lost.
• 📝 The speaker suggests using a budgeting app like 'Every Dollar' to track and plan expenditures with more intentionality.
• 🍽 The speaker humorously points out that spending at restaurants is often more about entertainment than the actual cost of the food.

Q & A

What is the main issue Crystal and her husband are facing in their financial situation?

Crystal and her husband are struggling with a check-to-check lifestyle despite having no debt except for a car payment and a mortgage.

What is the annual income Crystal mentioned in the script?

Crystal's annual income is approximately $72,000.

What are the monthly payments for Crystal's house and car?

Crystal's monthly house payment is $1,700, and her car payment is around $300, although the actual payment is $210, as she pays extra.

What advice is given to Crystal regarding her car payment?

The advice given is to continue paying more than the minimum on the car payment to pay off the car loan faster.

What is the recommended first step to help Crystal and her husband manage their finances better?

The recommended first step is to create a detailed written budget to gain better control over their spending and to feel like they've given themselves a raise.

How often do Crystal and her husband get paid, and what is their approximate take-home pay per check?

They get paid twice a month, with an approximate take-home pay of $3,000 per check.

What is the common area where people tend to overspend according to the script?

People often overspend in areas such as eating out and grocery shopping, without realizing the true extent of their spending.

What tool is suggested for Crystal to use to help with budgeting?

The script suggests using the EveryDollar budgeting app to help Crystal and her husband manage their finances.

What is the typical behavior of people when they realize they are overspending in certain areas?

People often underestimate their spending, especially in areas like grocery shopping, and need to adjust their budgets to reflect the true amounts spent.

What are some tips given to help control grocery spending?

Tips include making a grocery list, only buying what's on the list, sticking to the set spending amount, and not going grocery shopping when hungry.

What is the significance of the statement 'you cannot manage money with a rearview mirror'?

This statement emphasizes the importance of proactive budgeting and planning for the future rather than just reacting to past spending.

Outlines

00:00

💰 Breaking the Paycheck-to-Paycheck Cycle

In this paragraph, Crystal discusses her financial situation with a financial advisor. She and her husband have no debt except for a car payment and a mortgage, yet they struggle to make ends meet. The advisor commends their lack of major debt issues but suggests that the real problem is a lack of organization with their finances. He emphasizes the importance of a detailed written budget, which can help them feel like they've gotten a raise by identifying unnecessary spending. The advisor also provides a step-by-step approach to budgeting, including analyzing past expenses and setting a plan for the future with their spouse's agreement.

05:01

🍽 The Hidden Cost of Eating Out

The second paragraph focuses on the common issue of overspending on eating out and groceries. The speaker shares anecdotes and advice on how to control this spending, including the suggestion to prepare meals at home to save money. The paragraph highlights the misconception people have about their grocery spending, often underestimating the actual amount. The speaker recommends over-funding the grocery budget initially when starting a new budgeting plan, as people tend to spend more than they realize. Tips for effective grocery shopping are also provided, such as making a list, sticking to it, and not shopping when hungry.

Keywords

💡Debt

Debt refers to an obligation that an individual or entity owes to another. In the video's context, the speaker mentions that the caller and her husband have no debt except for a car payment and mortgage. This sets the stage for the discussion on financial struggles despite having minimal debt, highlighting the importance of budgeting and financial management.

💡Budget

A budget is a financial plan that outlines expected income and expenses. The video emphasizes the importance of a detailed budget for financial control and organization. The speaker suggests that a written budget can make one feel like they've gotten a raise by helping to identify areas of unnecessary spending and to allocate funds more effectively.

💡Steady Income

Steady income implies a reliable and regular flow of earnings. The caller mentions having a steady income, yet they struggle to make ends meet, which underscores the issue of financial management rather than income insufficiency and points to the need for better budgeting practices.

💡Check-to-Check

The phrase 'check-to-check' describes a situation where an individual lives paycheck to paycheck, barely making ends meet. It is used in the script to illustrate the caller's financial struggle despite having a steady income and minimal debt, indicating a lack of financial planning or overspending.

💡Take-Home Pay

Take-home pay refers to the net income an individual receives after taxes and other deductions have been made from their gross pay. In the script, the speaker calculates the caller's take-home pay to be $3,000, which is then used to discuss the remaining funds after essential expenses, emphasizing the need for a budget.

💡Groceries

Groceries are food and other household items purchased from a store. The video identifies grocery shopping as a common area where people overspend without realizing it. The speaker suggests that individuals often underestimate their grocery expenses, which can lead to budget overruns.

💡Restaurants

Restaurants are establishments where meals are prepared and served to customers. The script highlights eating out as a significant area of overspending. The speaker humorously notes that people 'eat their future' by spending too much on dining out, which can deplete savings meant for other financial goals.

💡EveryDollar

EveryDollar is a budgeting app mentioned in the video that helps users track their expenses and create a budget. The speaker recommends using the app as a tool to gain control over finances and to feel like giving oneself a raise by managing money more effectively.

💡Intentionality

Intentionality refers to the quality of being deliberate or on purpose. The speaker encourages intentional spending and budgeting to ensure that every dollar is accounted for and spent wisely. This concept is central to the video's message about taking control of one's finances.

💡Overfund

To overfund a budget category means to allocate more money to it than is typically spent. The speaker advises overfunding the grocery budget initially when starting to budget, as people often underestimate their spending in this area. This approach helps avoid breaking the budget and allows for adjustments in subsequent months.

💡Financial Peace

Financial peace is a state of being where one is free from financial stress and has control over their money. The video indirectly references the concept of financial peace as the ultimate goal of budgeting and financial management, suggesting that by following the advice given, individuals can achieve a more peaceful relationship with their finances.

Highlights

Crystal and her husband have no debt except for a car payment and mortgage.

They struggle with getting by check to check despite a steady income.

The family's annual income is approximately $72,000.

House payment is $1700 per month, and car payment is around $300 with extra payments made.

The actual car payment is $210 per month, with extra payments being a personal choice.

A detailed budget can make one feel like they've gotten a raise due to better financial organization.

Crystal's family gets paid twice a month, with a take-home pay of $3000.

After payments, they have $2000 left, which raises questions about where the money goes.

The need for a game plan and budget to understand and control spending.

The importance of analyzing bank statements to find where money is being spent excessively.

The recommendation to use EveryDollar.com's budgeting app for better financial management.

The common issue of underestimating spending, especially in areas like groceries and eating out.

The tendency for people to lie about their budget, particularly in the area of eating out.

The revelation that most money spent in restaurants is for entertainment rather than actual food cost.

Advice to be intentional with spending and to cut back in areas of excessive spending.

The suggestion to over fund the grocery budget initially to account for underestimated spending.

Tips for effective grocery shopping: make a list, stick to the list, and don't shop when hungry.

The impact of the pandemic on people's awareness of their spending habits due to increased time at home.

Transcripts

crystal's in anchorage hey crystal how

are you

hi good thanks so much for taking my

call sure what's up

um currently my husband and i are have

no debt except for

a little bit of a car payment and our

mortgage

uh we've got a steady income but we kind

of struggle

just getting by check to check and

wondering what is the best way to

kind of get out of that rut what's your

income

oh about six

uh about 72 000 a year okay how much

your house payment

1700. how much car payment

um about i do about 300

a month on it you would do what's your

car

payment you have a payment amount yeah

i i do about 300 a month on it i

i go a little bit extra okay but i mean

your car payment is actually if you

don't do

what's the actual payment 210. okay

that's what i'm asking

all right good okay so that's okay

because you're

the extra is a choice you know and

that's not a bad choice because we're

going to get your

car paid off that's going to be

something we're going to do here in a

minute but but uh we're going to put a

lot more than 300 on it but

um anyway all right so

you're not giving me any numbers here

that are

causing my brain to explode like you've

got major problems which means

that you're probably like most people

including me

when i first started this uh in that

by not having really good organization

with my money and

every detail out laid out it

the chaos eats these dollars for

breakfast

and so a written budget a detailed

budget

will make you feel like you've gotten a

raise because i'll give you an example

if you what how often you guys get paid

twice a month yeah okay so a take-home

pay check is how much

three thousand dollars okay so we got

six

thousand dollars minus house payment

minus car payment

is three is that that's two thousand

dollars yeah

yeah so i got four thousand dollars left

cause that feels kind of weird doesn't

it it does

like right this second you're asking

yourself i know i got water and

i know i got i got i know i've got

electricity and i know i've got food

uh and i know i got some insurance i got

to buy here and there uh but you're

starting to ask yourself where the flips

is money going and that's

kind of what i'm asking yeah so yeah you

got to get on a game plan and when you

get on a budget you are going to feel

like you got a raise

and crystal i'm going to tell you as i

started off on dave's plan

uh some almost 16 years ago that is

exactly what

was the thing that was the awakening for

me i was doing too much stupid in

grocery stores and in restaurants

and so getting down to the root of it

you taking a look get some bank

statements out go back and look at the

last three months and find out that

category where you're bleeding money

and it could be online shopping it could

be grocery stores it could be eating out

whatever it is you're going to do an

analysis you're going to see it but you

cannot manage money with a rear view

mirror

right you can't wait let's over and then

go wow that doesn't work

you have to tell it what to do before it

leaves

on paper on purpose before the month

begins

every single month and in agreement with

your spouse so they don't do something

else that's exactly right and i was just

going to say

with that when you find that trouble

spot go to the cash envelopes

on it i'm telling you having the budget

like dave's talking about beforehand and

then having the cash

i'm telling it's going to give you more

control and like dave said it's going to

feel like you gave yourself a raise

because guess what you did yeah jump on

every dollar

and start using the it's free to use

just every dollar.com download the app

and start using that budgeting app with

you and your husband and you

to start working on that tonight you're

going to feel like you got a raise

there's a reason you're leaving losing

you know

there's just no intentionality behind

the dollars and no one does by the way

you're not like you're not like horrible

nobody does that all right

you have sat down with people for many

many years what is the typical the area

of the budget that people

are absolutely lying about what is it

the one where you go this

isn't real eating out eating out yeah i

would agree i'd say eating out of the

grocery store

because with the stores we have now they

think they spend less at the grocery

store yeah they know they spend it a lot

at restaurants but when they find out

what they really spend they go oh my god

yep yeah yeah i remember i was sitting

in a financial peace group

leading small group one time years and

years ago and uh you know we're kind of

going around talking about the lesson

that night and we're like okay why

aren't why have you not been able to

fund retirement where it was an

investment lesson

one of the questions we're just talking

about you know why why didn't you feel

like you've been able to do retirement

and there's an old country boy sitting

in the thing and he goes

yeah we looked at it spending 1200

a month in restaurants i know where our

retirement's been going we've been

eating it

about died laughing but he's telling the

truth i've been eating it

that's it that i'm telling you that's

what a lot of people do with it

they eat they they eat their future yeah

and that's scary and you know what

that's something we can control because

what couldn't we

just tell you i love restaurants yeah a

lot of my

i've got good friends you and i have

good friends personal friends that we

share

they're world-class chefs that own

restaurants we go to their place

i love that kind of stuff i'm not

against restaurants but from a

budgeting standpoint when you're calling

me and saying i'm broke i have no money

i will tell you that ninety percent of

what you spend in the restaurant

the money is spent on entertainment ten

percent is your actual food cost

yeah so go home and make make some make

some makes

make some white beans and cornbread well

and and i'm going to tell you this even

throughout all this situation with the

pandemic of people being at home more

you know utilizing that found out what

they were spending they really did

because people were like what we've got

where about all this money where this

money come from that's right and it's

all it was you're not going all the time

all the time so be intentional be smart

and and again

starting to set some things cut it back

a little bit crystal you're not

different in that regard i don't know if

it's food that you're spending it on but

you will discover it

when you go back and look at the

statements like chris suggested and when

you start writing it down and try to

make it behave

hint for everyone is starting their new

budget this month

whatever you think you're spending at

the grocery store

you're wrong it's more than that

i agree and so if you think you're

spending 500

you better put 750 in there because

you're gonna find

that it's more you've you've been lying

to yourself so long

that you know i really do do that i've

had these people tell me these

ridiculous numbers we make it on fifty

dollars a month no you don't

you can't even no this is absolutely

ridiculous so

you know but but because here's the

thing that is a category that if you

under fund it you will go back and

either break your budget

or you'll have to go back and correct

your budget in the middle of the month

as you're learning how to budget your

first couple of months

if you'll go ahead and over fund it you

don't feel like you failed

you can always cut your food budget back

in future months that's a good call

for the first two to three months you're

doing your budget when you've never done

one in years

over fund your grocery store

budget because your category because

you're always

everyone spends more than they think

they're going they do

and you people that are super nerds and

you do the coupons and you've got all

these apps on your phone and all this

stuff

you still spend more than you think you

have because we

there's something about denial at the

grocery store that we didn't we're in

denial about what we spent no that's a

good point and at the reset event if you

haven't watched that you need to go

check it out

i gave three tips which is make a

grocery list

only buy what's on the list and stick to

the dollar amount you said you're going

to spend i'll give you a fourth one

don't go grocery shopping when you're

hungry

truth big truth as if i have ever done

anything yes but there you go those

burritos i bought from sam's weren't

that good when i got him home well you

bought two

270 yeah i know i was hungry dave i was

real hungry