Adam’s Financial Blunder

How I got into a bad situation and the plan to get out

10/22/2023

Have you ever thought about how I got here? What have I been doing for the last 10 years? What do I have to show for all the time and effort? What have I learned? What are the positives and what are the negatives? How am I making $80K+ a year at 33 years old and still living paycheck to paycheck with no real sign of climbing out of debt for years? These are some of the questions I recently asked myself. 

About 3 weeks ago I was sitting in my apartment watching some Youtube videos and wishing I had the money to go to an event (Holly Ford Fest) to meet some people that I have been acquaintances with for some time and they would also like to meet me in person. But I just could not swing the money for a hotel for a weekend and the gas and food and tickets and all the things that would likely happen for a fun weekend (I estimated around $1200). I was also thinking about my recent Emergency Room visit for a Crohn’s Flare up I went through (I was diagnosed back in May of this year) and wondering how much out of pocket it is going to be. Could it be a couple hundred dollars since I have met my deductible or could it be $500 or $1000, AND I have a crown being done for my molar which was causing me pain. I had another Crown done a couple years ago and it was about $500 out of pocket. I had all of these thoughts in about 2 minutes. This caused me to start going down a bad rabbit hole mentally and I started to not freak out but definitely started to feel the dread and fear of a familiar past I had gotten out of only a few years before.

Back in 2020 I had roughly $20K in credit card and Personal loan debts. I was in an even worse spot financially. I was at around $60K a year and had maybe $20 a month left over if I was lucky and the only way I got out of that situation was an inheritance (which cost far more that I wanted to pay emotionally). When my Grandmother passed I received $75K and instantly paid off all the Credit Cards and loans. I was left with about $55K and put it into a brokerage account. I was thinking ok I can finally start to build a good, stable and secure financial future.

My original thought was to buy some single stocks and index funds. But THIS was 2020, meme coins and Diamond hands and SPACS were the sure way to take my $55K to $500K in the mere months to a year. Not to mention the height of Crypto gambling sites was near. My Ape brain couldn't resist and I went after it all at once and after about a year I was back to 0 in that account. I didn't get too much into crypto (other than gambling) and I went way too hard on SPACS. I ended up losing about 20K in value, But what about my remaining $30K? I lost some to dumb moves with crypto but mostly I was just living far beyond my means and gambling on the crypto sites. I was trying to stream and make it as a slot streamer and I was doing ok. After I did my taxes I was only down for the year about $500 after wagering over $500K. Really not bad considering. But I was left to think about what happened to $30K.

Of the missing $30K I did donate $3500 to St Jude but that still leaves another $26K+. Where did it go? The only thing I could think of was just bullshit spending. I did go on a couple trips, I bought all my favorite youtubers merch and entered all the giveaways, I didn't think twice about spending $50 for this or $200 on that. I saw my checking account in the $5K range so I was like this isn't much. It's ok I am making good money. Screw it, be happy I spent my entire adult life paycheck to paycheck. You deserve it. Get that new car, get that second car you don't need. You can easily afford the monthlies. 

In the past few weeks I have started to watch a Youtube channel called Caleb Hammer and he does a podcast style Financial Audit on random everyday people. I thought this was really interesting and entertaining. But after watching a few episodes and thinking wow how can people be so irresponsible I thought back to how I was feeling earlier, and that was what made me want to do an Audit on myself.

Now in September of 2023 I have finally done a Financial Audit on myself and it is insane to see how much was going out vs how much was coming in and just not having the discipline to not spend. Every month I was losing $300-500 on Crypto Slots. I was spending at least $1K in random bullshit and a few months prior I had sold my second car to lower my monthly payments but that still made me take out a personal loan due to it being worth far less than I bought it for since it was bought at the height of the inflated car market. That took me from $400 a month to $200 so that helps now but man it still hurts paying off $7000 for absolutely no reason other than I was an idiot.

Watching the Financial audits helped a lot with understanding what buckets I should set up for myself and also setting up a spreadsheet to track all my spending. The big stuff was obvious. Rent, Auto loan, food, personal loan. But it's the little stuff that can add up and most people forget about, like subscriptions. Every month I was paying over $150 in subscriptions. Random crap like youtuber merch or what I call shine’s (Random stuff that's only purpose is to make you feel good when you buy it) was over $500. This way of living was unsustainable. So I made my budget. Here are my buckets: Rent $1180 Renters Insurance $28, Car loan $720, Car Insurance $180, Fuel $400, Internet $30, Utilities - Gas/Electric (Water and trash included in rent) $160, Subscriptions (Phone/Gym/Digital Storage) $42, Food $400, Household/Cats $75, Medical $30, Personal Loan $202, Water (I live near flint the tap water is basically undrinkable) $20, Student Loans $125. All of this is what I currently have to pay to survive month to month. This is $3500 a month gone. That is 75% of my net average income after withholdings. That is way too freaking much. 

So how do I move forward? Well after we take into account the monthly needs we are left with about $1200 on average every month. Traditionally we would attack the highest interest loan or highest payment. I have chosen to go after the highest payment. This month I do have my hospital bill that is coming due and my Dental Crown to pay for in total it will be at least $700 of my $1200 left over. Not to mention we are still paying off the extra crap we paid for on the Credit cards before. I always pay off my Statement balances so no interest. But my roughly $500 leftover is now going to pay off the cards. That leaves me with $0 left over.

For November I am not putting anything extra to my debt. I do have roughly 2K in savings but I want to get myself to the $3500 I need on a monthly basis as a one Month emergency fund. That puts us in December. I will be going after the Auto Loan first due to the fact the car is worth maybe 38K come springtime and I currently owe $44.5K. So with my normal payment of $720 If I add an additional $1K I will get the car down to about 37K by April and if I extend it to May it would be about $35K giving me ample time to get the best price I can for it. And anything over I get that I owe can then go to my Personal loan. Once I am out of the Auto loan I can then allocate that payment not to mention the car insurance making it roughly $2K a month on top of the $202 I can pay off the Personal loan by July. Then we are out of Consumer debt! 

But wait there's more! Did I mention that in 2018 I did my taxes by myself for the first time and I forgot to claim some stuff and I now owe the IRS about $3K. I didn't? Well you know now. I had a difficult and frank talk with my Mom and brother and we came up with a game plan for that. My Mother is doing very well and has agreed to loan me the $3K as soon as the IRS bill comes in. I got a CPA and had them help me verify the IRS claims for what I owed and they were asking for about $1K more than what should have been owed and for the last 6 Months. The IRS has been reviewing and will be getting back to me with a revised amount in the next month or so. So My mom agreed to loan me interest Free the amount I will owe the IRS and I will be paying her back after my Consumer debt is paid off. So that will put me at Mid August and she is paid back. 

I mentioned my Brother as he is going to be selling me his Car to help me out. I am not driving my Car over the winter as it is a V8 rear wheel drive and in Michigan it's not smart to drive. He is getting a newer vehicle and is going to “lend” me his old car for the time being and once my Mom is paid back I will be paying him for this car. We agreed on $4500 as the car is currently worth around $6K but with the used car market going to drop and with the miles on it now we agreed it's not going to be worth that once I buy it from him. So by October of next year I will have no Consumer debt, paid back the IRS/my Mom, and have a fully paid solid vehicle that will last me at least 3 more years. So 1 year from now I will then be saving at least 15K for an emergency fund, I will already be at $3500 so another 6 months and I will be at the best spot financially I have been at since I squandered my inheritance. 

So after 1.5 years I will be at about 50% needs and I can increase my investment percentage . I am going to go a bit hard for investments and go to 35%. Of the 35% I will be maxing out at Roth IRA, and saving for a down payment on a house. Once I have a solid 30K saved for a house I will then save another 10K for a new car and depending on interest rates I will follow the 20/3/8 (20% down, 3% interest, 8% of net income) rule the Money Guys suggest or just buy a good car for cash. After all that I will be able to do the full 35% to nothing but investing. The remaining 15% will be around $700 a month on average for fun. I am doubting I will be doing that much so whatever I don't spend will be going to a vacation fund. 

All of this is a plan for my current financial situation and that will be changing. I am looking for a part time job to help accelerate this timeline. Anything extra I can bring in can take months or even up to 6 months off this 1.5 year timeline depending on hours and wage.

I know some of you are looking at my new budget and are thinking “wow $400 a month on food what are you doing eating out every day?” No, I am not eating out. I have Crohn’s Disease and I have to follow a very strict and unfortunately expensive diet. I have been working out the cost per meal and I have brought my overall down to about $325 a month but that is not including stuff that I buy every other month like Protein powder and Collagen to help keep me full for longer and help with my health goals. So I have a slightly larger budget due to my Dietary restrictions and health goals. 

Also for a time my Car insurance will likely go up slightly as I will be putting coverage on the borrowed car and Would love to put storage insurance on my car but I have to keep a minimum of Comprehensive insurance on it even in storage due to my Lender. Only way out of it is to sell the car early. I have thought about this but I would need a minimum $10K personal loan to get rid of the car early. I think that would be a bad move as I would end up paying more than I need to. I feel this plan is solid and I will be having Caleb Hammer the man himself review my budget as I was just accepted to be on his show!

Thank you for Reading and leave a comment . If you want to read more let me know and I can do another post of how I got into the initial debt. I will be doing an update after Caleb's show to go over my experience and results. I am planning to do a monthly update here also. So please subscribe to get notifications as to when I post next.

P.S. After writing this I have had an idea spark up for a new story. So keep an eye out!