Money Rehab with Nicole Lapin - "I Can't Afford How Expensive Everything Is Now. How Do You Make It Work?" (Listener Intervention)

Episode Date: June 6, 2024

Even though the inflation situation is getting better, prices are still high everywhere. Today's Money Rehabber is making $25 an hour, has two kids, and is trying to figure out how to make her finances work. Nicole gives her advice on how to set up your financial life for success.

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To get started, visit bofa.com slash newprosmedia. That's B-O-F-A dot com slash N-E-W pros, P-R-O-S, media. Bofa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Well, here's some good news. Inflation is falling. At the time of this recording, inflation is at three point two2 percent which is way lower than it was in March of 2022 when it was at 6.5 percent but when you go to the grocery store these days everything feels way more expensive still and you think WTF is going on I thought inflation was down why am I still paying more that's because none of that nasty old inflation was erased. To do that, we would

actually need a deflationary period, which we haven't experienced since 2015 and before that, not since 2009. And yes, inflation has fallen, but it's also true that things are more expensive than they used to be. This can lead to people feeling like they are just living on that struggle bus and their stop never comes. That's the situation today's money rehabber finds herself in. Hey, Nicole, my name is Danielle. I'm a dental assistant. I've been doing that for about 24 years. I am making $25 an hour. I have a kid in college and a 16 year old boy. I just want to know how everybody is surviving. Groceries are expensive. Everything is just so expensive right now. And I'm just not making it on $25 an hour. I am looking for part-time jobs.

But at the same time, you can only work so many hours in a day before you're completely exhausted. I need help to try to figure out what to do. Danielle, thank you so much for calling in. I just want to give you the biggest hug. It is so hard out there. So for a moment, I just want you to try to put all of that aside and picture yourself 10 years from now. Your kids are out there on their own.

They are thriving. Maybe one of them has a kid of their own. Maybe one of them is making $200,000 a year. Maybe both. Whatever their best life is, they are living it. Now, picture yourself. What are you doing? Where are you living? What are you looking forward to? What are you doing for work? What kind of car do you drive? Trusting that your kids are fully taken care of, what do you want for yourself? Right now, Danielle, I know this is hard. People talk about babies being expensive,

but that's nothing compared to the cost of a high schooler. Babies don't need extracurricular activities. Babies don't need fancy sneakers and phones. But in 10 years, your baby will be 26. Your life and your expenses will be very different, and 10 years is no time at all. So in order to lift you out of the struggle today, we need to talk about what you want your life to look like in your abundant future. Do you have that vision in mind? Because right now, I need you to do something that feels super scary but actually will bring you some much-needed peace.

We are going to make a spending plan. A spending plan is my code for a budget because it just sounds better, right? And I'm going to walk you through every step of putting this together. First up, let's look at your balance sheet. This is like checking your weight and your height and your blood pressure and all of that at the doctor's office. It basically gives baseline information on your financial health. Here I want you to list your assets.

We start with your liquid assets. So that's anything you can access right now, like cash, your savings account, any money market accounts, then list your illiquid assets. That's the stuff you can't get the value out of as easily, like your car, a house, any retirement accounts. This part isn't so bad, is it? Look at all the stuff you own. Now, the not so fun part is the other side of this, your liabilities. That's the money you owe. Just like your assets, those break down into two categories as well, short and long term. Short is anything you owe and you need to pay off ASAP like a credit card. Long term is

anything you're going to be paying off for a while like a credit card. Long term is anything you're going to be paying off for a while like a mortgage, car loan, student loans. And there you go. This is your balance sheet. It lets you take a factual look at your assets and liabilities. Now, I know that even this step can pile on some complicated emotions. If your balance sheet doesn't look like what you want it to look like, you might feel guilt, you might feel shame. But I want you to try and tell those emotions to take several seats. These are just numbers on a page. Now that you know exactly what they are, you can work on making them look however you want, Danielle. The only money problem you can't fix is the one you don't admit you have.

All right, so let's keep going and make the spending plan. First, list all the money you have coming in from earned income, from your paycheck to child support to investments that pay out dividends. Whatever money is coming in, write that down in monthly amounts. Now, list all of the money that is going out. Start with the easy stuff. How much do you spend on expenses that stay the same every month? Rent, utilities, insurance, your phone bill, kids, extracurriculars, stuff like that. For bills that vary like an electric bill, take a look at the last three months and use the biggest number. Now let's capture the bigger financial picture by tallying up the less consistent expenses.

For this part, you can tackle it in a few different ways, but I'd recommend going through your credit card statement, your debit card statements line by line and using those statements to determine what other spending categories like grocery shopping, travel, eating out your pet, new clothes, holiday shopping, whatever you have going on. And even though this takes some time, I'd recommend going through a few different bank statements to get an accurate picture of what a standard month looks like for you, Danielle. The big thing here to identify is all of the places your money is going. You don't want to

have three random trips to Sephora going unaccounted for because you don't have a category for makeup. And again, no judgment. Act like these are somebody else's bills and you're just being nosy. Pretend like you're doing research maybe for a crime podcast called The Mystery of the Missing Money. And if you won't let a stranger say it about your best friend, Danielle, please don't say it about yourself. Here's the final step. Add up all of your income and your expenses and compare the two. Are you able to cover your expenses with your income or is the grand sum of your expenses larger than your income? Essentials, food, housing, transportation, stuff like that should be about 70% of your overall spending plan. Of that 75%, half or 35%

of the whole shebang should be housing. 15% of your overall spending plan should go to your emergency fund, your end game, your retirement accounts, future Danielle, and the last 15% of your overall spending plan should go to your emergency fund, your end game, your retirement accounts, future Danielle. And the last 15% of your overall spending plan should be for fun, the extras. And commit to that 15% for fun. Just like you have to put money in that retirement account, set money aside for fun and don't feel guilty about spending that fun money. It may take a few months of moving things around to get to this point, but you can do it. And once you do it, you will feel so much

better. Having a spending plan is so freeing because it is a plan in the chaos. You might consider other streams of income to boost where you're currently at, but you don't mention any massive debt. And it is possible that with a very clear spending plan and a little discipline, you might be able to feel some relief right away. As for side hustles, consider everything you're good at and everything you love. Write it all down on a list. Write down every single talent you have, even the crazy ones. Because while you're writing down all of the weird things you do with your tongue, you might remember that you got the highest score ever recorded on your licensing exam, and maybe you want to tutor dental hygiene

students? I don't know. Maybe you love to garden, and you want to start growing lavender and rosemary and thyme or however the sun goes to dry and sell and bundle on Facebook Marketplace. You get after it, Danielle. If you don't want to monetize your hobbies, and I totally get that, some things are just hobbies, look up Upwork or Fiverr for quick ways to pick up some extra transcription work. If you have some extra cash sitting around that's not doing anything, like an emergency fund, you can put that to work for you by investing in a CD ladder, for example, that's consistently creating returns for you. If you have a car, you can consider renting it on Turo. That's a car sharing app. Because right now, you can't work all the time. So figure out how much money you actually need by creating a spending

plan that will help you dial in how much you need to make. It is possible that you don't need to make as much money as you think you do simply as a result of committing to that spending plan. Danielle, I know this stuff is hard and it can feel awful. I get it. I have been there. But you're reaching out for help. And I promise you that if you confront these money issues head on, you will see progress and you will be in a better place. You can get your financial situation under control and you can take back your life. Remember that you in 10 years I had you picture at the beginning of this? She's real. She can be your future. This is just one step on the path to becoming that woman.

You get your spending plan right and you will be building for that future. For today's tip, you can take straight to the bank. Remember, when you're budgeting, we're aiming for balance here, which doesn't mean cutting out every single little purchase that brings you joy. If that fancy coffee drink makes your life better, please don't cut it out. A latte a day isn't why you're in financial trouble. In life, in relationships, it's the little things that matter. With finances, it's the big stuff. relationships, it's the little things that matter. With finances, it's the big stuff. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin.

Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.