This SAHM Has $103k Debt, Financed a Vending Machine

We're starting a vending machine business. At 25.6%? Yes. Oh my. A Toyota Tacoma with $7,700. Almost a 14% interest rate. Holy cow. I know. You also have a credit card here with about $5,500 on it. Do you have any money in savings right now? So no, we don't. Erica is a 39 year old stay at home mom living in San Antonio together with her partner. They make $130,000 per year yet have $103,000 worth of debt and $0 in savings. And she just purchased a vending machine at 25%. In this conversation, we'll uncover whether or not this family's debt payoff plan is set to go bust and why they haven't put any money aside in emergency savings. And we'll come up with a plan to help them financially stabilize. This is Millennial Budget Review. I'd love to start off with what seems to be the biggest financial struggle that you're experiencing? So for us, we purchased a new home last March and it had been kind of like 10 months of us trying to get into this specific home. And so last year kind of just threw us for a loop with all the new stuff coming up and everything. We initially tried to sell our other home and it was just bad timing. So we decided to just rent it. And so I feel like now we're kind of catching up from everything from last year. And so it just feels like once we kind of start catching up, stuff happens. And then we're just always a little bit behind the eight ball. The rental property or your previous home, is it currently being rented out? Yes. Okay. And are you making any kind of monthly profit on that? We do. So currently we make, I don't know, like $150 or something. But then come July, they've renewed their lease for another year. So then the rental will increase from $1485 to $16 a month. And so we'll be making a little bit more off of that. Okay. Well, that sounds like good news. Yes, it is. Anytime you're moving into a new property, there's a lot of expenses that goes along with that. So that's definitely understandable. And it's you, your husband, and how many kids do you have? We have two boys, two small boys. Okay. So family of four, and you guys live in the San Antonio area? Yeah. So it's outside of San Antonio, but pretty close. Great. Okay. So rental property, new house, and a combination of that plus debt is making you feel behind? So we're not behind. I know financially, we're pretty secure in our finances. I'm impatient, and I want to get it paid off as quick as possible. So in my mind, it's not going fast enough. Okay. Like the debt payoff, you mean, is not going fast enough? Yes, yes. Okay. Are you working on a specific debt right now? Yes. So right now, the order I have everything listed under debt is how we're really paying things off. The cruise will be paid off in July. That's when the final deadline is. And then we have the truck and the credit card, which are the next two, and then the personal loan and the vending machine. I know the Subaru and the student loans are going to take forever, but that's kind of the order. Yeah. Actually, let me go ahead and share screens here so we can take a look at your budget so we can see exactly how much debt we're talking about. So you have an upcoming cruise that's happening in October that you've already made payments towards, correct? Yes. We only have the $600 left. Okay. And you're not being charged any interest. That's just the amount that you owe? Yeah. By October. And then you have a Toyota Tacoma with $7,700, almost a 14% interest rate. Holy cow. I know. I know. It's bad. When did you purchase this? So we purchased it about a year, maybe not a year ago, probably in November of last year. Okay. So we're trying to get it paid off quickly. Yes. It's a very old truck. It's just kind of like if we're picking up stuff off Facebook Marketplace or like we need a hollow vending machine or something, it's really not used often. Okay. And so that was financed at, you've got a minimum payment of $260. Yes. But you actually put $910 towards it. Yes. Okay. We will talk about that because you also have a credit card here with about $5,500 on it. The minimum is $61, but you put close to $1,400 for the month to get that card. Yes. What was the reasoning behind that? I'm just trying to pay it off. And I know it doesn't have interest until the end of September. So I'm trying to get that paid off before the interest obviously. And I want to get the Tacoma paid off quickly too. So I'm kind of simultaneously like trying to pay both of those debts to get them cleared. Okay. And then you've got a personal loan of $5,000. The payments start in June? Yes. So this is a new loan that you took out? It is. Yeah. It was a kind of like a consolidation to pay off some other previous stuff. That's the remainder of our stuff from moving last year. Like all the expenses and stuff and kind of not remodeled, but things we did to the new house to get it ready to live in. So did you put it on a credit card initially and then you consolidated with the loan? Yeah. Yeah. Okay. Gotcha. All right. So we have that. And then I'm going to skip the vending machine, but the Subaru, you've got about 22,008.49% minimum. You're making minimums on that $440? Yes. And then your student loans, these are federal student loans? Yes. Okay. Okay. Back to the vending machine. Tell me about this. What is it? I mean, I know it's a vending machine, but what's it for? So it's a new business. My kids will both be in school starting September and I need something to do with myself because I can't stay home with the kids not here. So we're starting a vending machine business. I purchased the machine. I also have a location like locked in and ready to go. So that's just, I guess, my little side business. Okay. So did you have to take out a loan directly from the vending machine company for this or how did that work? Yes. Yes. Through the vending machine company, it's financed. Okay. At 25.6%? Yes. Oh my. I know. And $3,500 is what you owe? Did you do any kind of down payment on it? So I have $1,000 of money that I'm going to put towards that. It hasn't gone through as of when I submitted this. Okay. So you really owe $2,500? $2,500. Yeah. Okay. Well, that's better. Yeah. And then that payment starts in June of $120. Is the plan to make minimum payments on it? No. The plan is to get everything like the cruise, Tacoma, the Capital One, the personal and the vending machine paid off by November. That's my goal in my mind to have all those debts cleared before November of this year. The cruise, the Tacoma and the vending machine? And the Capital One. Yeah. And Capital One. Okay. So wait, one, two, three, $17,000 by November. That's the goal. So that's roughly $2,800 per month that you'd have to put towards those debts in order to pay it off. Yeah. All right. So her current living situation is clearly causing some financial chaos. They tried selling the old place. They couldn't. So now they're renting it out. Plus they're juggling the new mortgage. And I don't know about you, but whenever you move homes, there's just different stuff that you have to get to accommodate said new home. So you're buying new things. And I think that's adding to this feeling of her trying to feel like she needs to catch up. And Erica told me that she's working on a specific debt, but her money is telling me otherwise. She's actually made huge payments towards her truck and a credit card. Meaning the extra money is just being split in a million different directions right now, because there's actually different payments that she's making on top of the truck and the credit card. Plus the truck, I don't know if you caught this is that 14%, which tells me that her credit history and her credit score may not be good enough to actually get her a really good interest rate. And also she wants to clear all of this by November. She's got a cruise coming up and she wants to walk in there debt-free, but the real friction comes when she reveals that she has $0 in savings. How are you feeling about that? I mean, I feel good about it. Honestly, we have spare income that we've been putting to debt. I mean, I've been averaging putting about $3,000, $4,000 on debt every month. I can see that. Yeah. Yeah. So I don't really, I don't think it's going to be an issue unless something major like pops up in our life that we, you know, have to account for. That's what I wanted to talk about because when you had filled out your application, you said that you and your husband make about 130, take home is around 11K, which is fantastic. That's an amazing income to bring in per month. But when I was going through your actual budgeted items here, when we got to the savings, there's nothing in your emergency fund. Do you have any money in savings right now? So no, we don't, but so our situation's a little different. My husband is a veteran. And so basically our four walls, like our shelter and all of our electric and things like that are covered by what comes in from the VA. So like if my husband were to lose his job and we didn't have an income, all of our bills are essentially going to be covered with, you know, our rental income and what he gets from being a veteran. So we've kind of paused all savings in order to just like crush the debt. Well, you definitely have tenacity, that's for sure. I mean, $4,000 of a nearly 11K take home is an insane amount of money to put towards the debt. So I can absolutely get a sense that you're intense about this. You're motivated. The big red flag that I see out of this plan is that there is no margin for the unexpected. If a kid needed to go to urgent care, the car got a flat tire or some major car expense, in your mind, where would that money come from to address an unexpected expense? I mean, if something were to come up, we would obviously, so my husband gets paid weekly. So essentially we have, you know, $700, $800 every week, extra money to put towards debt. So I mean, if something were to come up, we would just not pay the debt that week, like not pay the additional payment on that week. Okay. Okay. So you're saying you would just kind of pause and pivot in the moment? Yeah. And that's where I think, I really truly think that an emergency fund savings, because even, I think you were saying you were kind of doing Dave Ramsey light. Yeah. Yeah. Like the diet Dave Ramsey. Yes. So even he would say, you know, living with the $0 in emergency savings would just be kind of a little bit reckless. You guys make enough money that it's okay that you can pivot so quickly. But my mind says if something major were to happen, I would want to have the cash ready to go and not have to pivot away from the debt payoff. So you could still cover an unexpected expense and make your debt payments at the same time because you have your safety net. Right now there's no safety net with all the expenses that you have. And so that to me seemed to be the biggest priority and the biggest financial foundation piece that's missing. Okay. For you, when I was looking at your fixed expenses between your regular mortgage, the rental property and all of your utilities, insurance premiums, that sort of thing, this all adds up to about $4,600 for the month. So a starter emergency fund equal to two to three months of basic living expenses would be between 10 and $13,000 for you. Yeah. So I would love to see $10,000 just in the bank. I think if you can put $4,000 towards debt in a month, you'd have your starter emergency fund built to 10K in about two and a half months. Yeah. I think that's worth protecting your piece over. How are you feeling about that? You're like, but no, I'm good. Did you drain the debt? Yeah. The debt is just the thing. I want it gone. My goal is before we step on that cruise ship, we just have a majority of it just done and don't have to think about it. With the intent that nothing unexpected will happen in between now and then. Yes. So that's the thing. We just can't predict the future. I see that you are working really hard at this goal. The plan is a little bit fragile though, without that safety net. Okay. I don't know if you caught this, but she's not really absorbing my advice here. I think she's totally okay with sprinting towards this debt-free goal line without having any kind of safety net behind her. But when we first started the interview, she said that she was still trying to catch up from moving last year. And that stuff's been happening. And that's a signal that your money wasn't prepared to handle those things where the extra savings really could have saved the day for her. Plus, if she had a starter emergency fund, she wouldn't have to pause and pivot in the moment for an unexpected expense. If she would just focus her energy for the next 10 weeks on building that starter emergency fund, and then park that money into an account that's actually earning you interest, which is why today's sponsor is CIT Bank. Hold on guys. Somebody's being really loud outside. Hold on. Your money needs a better parking spot. No, seriously. If your savings is just sitting somewhere, it might be worth learning whether or not there's a better place to park it. One thing I've learned is that a high yield savings account helps your money grow interest while you're saving for future goals. That's why I've been looking into CIT Bank's Platinum Savings Account. 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Whereas if we were able to put minimums on one of these and go all in on a specific debt, we could pay that off very, very fast. Can I mess around with this? Yes. Okay. So if I could take an extra $600 and let's say, like, put this to $2,000, yeah, then we would definitely have this paid off by August. Or we continue going with the Tacoma. I just don't know if you can realistically continue to split your payments like this and pay off both of them. But let me actually, let me hold on. I want to pause this real quick. Okay. So if we were to take a look at your debts, because I just wanted to go ahead and see how this payment plan, the way that you're working right now, is that truly going to work out for you? So right now, based off of what you had in your budget, you had about $4,000 that you were actually able to put towards debt. So I'm including that as your monthly payment for everything that we see here, the cruise, the cars, the loans, and the credit cards. So you said you wanted to pay off the cruise, the Tacoma, and the Capital One card all before November. Wait, was there another one too? Yes. Cruise, Tacoma, Capital One, and either the vending machine or the personal loan. I would like to have another one knocked off before then. I just want to see if a custom, if we did a custom situation here, and let me make sure the date is correct. Okay. So with the custom plan of paying off, let's say we do the cruise first, done. That's done this month if you want to. I think you will be done this month. Tacoma could be done in three months' time. Actually, let me do this because I'm going to redo this so that the calculator actually applies the payment towards June. So cruise is done this month. Tacoma gets done in August. Capital One gets done in October, and then vending machine gets done in November. The personal loan would follow up closely after that. If you were to put an extra, this is based on an extra $2,600 a month, which would still leave some margin for you to put money aside in savings. If you continued on this path of just doing the $2,600 or close to that, you're debt-free in two years and five months, including the student loans. Yeah, that's the goal. My only caution though is I don't want you to run on these thin margins that it becomes to the point where you're exhausted or you're feeling stretched. And if something were to happen, we want to have a backup plan for that. And I would hate for you to reach for a credit card if something major were to happen. You have the extra cash and that could float you in the moment. The preparation though, I think could be a huge benefit for you guys. But so far, based on the $2,600 initial extra payment, you can knock out pretty much all your in a year's time. Inside of your budget, when I was scrolling through your transactions, things looked good. I mean, they looked good. When I went over to the actual transactions where you were inputting every single expense, I loved that you took an average of how much you were spending on some of the big stuff. I love that you have a category for dumb. I know. I mean, because I know those are just our areas where we tend to overspend or spend a majority of our money. So I try to audit those so I know if we're getting too off the rails with things. Yeah. Yeah. For a family of four, you're averaging 800, 900 bucks for groceries. Makes sense. Food and drink is a bit high, but I wouldn't make it the villain in your budget. Yeah. That's something that you can absolutely rein in. Looks like home improvement got you this past month with additional things you probably needed to repair around your home. I get it. I totally get it. Yeah. Yeah. Yeah. Amazon purchases like here, the little household things, the things for the kids, it adds up, right? So all of this, you've got about $2,000, $2,800, let's see, about $2,500 per month between food and home improvement and the shopping subscription type stuff. Yeah. How are you feeling about those expenses? Is that something you want to work on? Amazon, absolutely. I would love to just never order from Amazon again. I feel like it's such a slippery slope that you can just get everything so quickly. Food and drinks, I actually don't mind that it's a little higher. My husband and I think it's really important to take our kids to restaurants and things so they learn how to behave and be good at restaurants. So we like to do family dates, we call them, where we go out maybe once a month or something to a nicer sit down place. We could definitely stop with McDonald's for lunch and the little fast food things we do. So we could cut down on that. And then those are just dumb things. Subscriptions, I actually went in after looking at this and canceled some of them because that's, I don't know, that's a little high for me every month to have. And some of them, we don't use that often. So we're just paying to not really use them. I love that. I love it. Little things add up. So I agree with you. I did see a lot of instant noodles food expenses, which is easy to do when you have little ones. I can understand that having two little ones, five and under myself, and it's just so easy to be like, all right, Chick-fil-A for lunch for everybody. So that is something that you could either designate specific days where you're like, Fridays are our family dinner dates. Saturday, we're doing a convenience food takeaway type deal. And then that's it. During the week, we're going to keep it simple. We're going to have stocked sandwich supplies in our refrigerator for PB&Js or whatever, and then make that kind of the convenience that you go to. I find when I have fast mac and cheese in the pantry, it's easier for me to justify, okay, I can spend the extra 10 minutes to just make this at home and call it a day instead of reaching for the convenience of All right. So she could knock out so many debts on her list. She basically has everything knocked out except for student loans. So long as she's making between 26 to $2,800 in extra monthly payments. The only thing is I worry about the sustainability of this plan, but if the income is stable or continues to increases and she's actively diligently checking her budget, she could actually pull this off. And if you're trying to build better budget behavior, like the rest of us, then you'll definitely want to like this video and subscribe for more budget reviews, just like this one. So even with intense debt focus, bigger financial decisions are actually pulling her back. I saw contradictory spending patterns inside of her budget. So she wants to pay off a credit card to avoid high interest debt. Yet she financed a vending machine at 25%. Now keep in mind that vending machine, she only owes about $3,500 on it. This is something that she could have easily cashflowed within six weeks and been able to finance her business without taking on any debt. And another thing that stuck out to me is she has no idea when she'll be able to break even on this business investment or even know what the monthly profit numbers are going to look like. And that's an issue. With the vending machine, going back to this 25% interest, when are you expecting to break even on this deal? I mean, I'm not exactly sure. I mean, I know we're going to get that vending machine paid off well before. I plan on paying more than the minimum on them. But yeah, I don't have a break even date really. Okay. Do you know how much you are expected to profit each month? I don't know the exact numbers, no. But based on kind of the location of the vending machine and all the different factors, I'm guessing between like two and 500 a month. And then of course, you have to take out the sales taxes and all that kind of stuff since it's food items. So yeah, that would be my range that I'm guessing. And then are you stocking it? Yes. Yeah. Okay. So cost of stocking it with the snacks, deduct that as an expense, deduct the sales tax taken out of that, and then you're expecting to still be net two to $500 in profit? No, not net. So I'm assuming maybe 500 and then we're taking- Minus all that. Got it. Yeah, yeah, yeah. So I mean, a few hundred dollars. It's not like a get rich type of thing. It's more of a mental for me to have something to do. Yeah, yeah. I think it's definitely something like a good side hustle, make a chunk of change and have a little fun with it. The thing that gets me is the 25% interest that starts accruing when you actually were trying to avoid a high interest with the Capital One card and then this one here is immediate. So that's where some things weren't really aligning because you were putting extra money towards Capital One to avoid the interest, but then it's almost like you're trying to outrun the debt, but then there's more debt coming in. Yes. So they kind of stacked up on top of each other. Yeah. Yeah. I mean, that's absolutely true. I guess my goal with the vending machine was knowing that it's not going to be a long term thing. I mean, like the payments are not going to be a long term thing. We fully intend on paying more than the minimum monthly payment. So this isn't like a loan that I'm going to have for two years. Yeah, yeah. You're going to pay it off pretty quickly. So it's to be seen. I would love to follow up with you again in six months to see how it's going and seeing if you're making a little bit of money on it. The biggest takeaway for me is it seems like there are a lot of goals. They're really great goals. They're just all competing as a priority. So I would love to see you really focus in your efforts into one debt or ideally it would be building up your savings is what I would recommend. But focusing in on one specific goal, because I think you're going to make a ton of progress that way, which means it's like you've got to focus in on the 20 percent and strip away the 80. So that means you've got to let go of one of these debts and make minimums on it temporarily. Temporarily. I know. Yeah. But my goodness, we looked at your debt reduction calculator and it was showing, let me go back to that. We're talking about in one month you get your cruise paid off, in three months the Tacoma, in five months Capital One. Yeah. I think that could work. Yeah, I'm hoping. I mean, we're really, my husband and I have the same goals and we're on the same page. So when we get focused on something, we're really just like we're in it. I love it. I love to hear that. It was so good to talk with you and learn more about how you're crushing debt. Take it one goal at a time. Okay. Yeah, I know. And that's, I feel like that's the hardest part for me because I'm so just like I'm focused, we're doing it. Like I want to get it all done right now. The biggest issue here is urgency with too many goals competing for money coupled with financial decisions like financing a vending machine at 25 percent. And that makes things feel very chaotic. She has a lot of really good goals. She wants to be debt free. She wants to buy land. She wants to see growth from her rental property. She wants to actually make memories with her kids. All of these are good things, but when they're competing for money and resources all at the same time, it can get very overwhelming. The coaching point that I want to make is simple, but difficult. She needs to pick one thing at a time, build that starter fund safety net and stop making your money compete for all these same dreams at the same time. So here's Erica's order of priority. Number one, in my opinion, she needs to have that 10 K starter emergency fund. I think things would just go so much more smoothly for her if she didn't have any of these unexpected things or stuff that's happening. She's literally doing like a free solo climb, like the guy in the movie where he's climbing Yosemite El Capitan without any kind of ropes or safety harnesses. That's what she's doing with her debt free plan. Having no safety net is risky. It's really, really risky. And maybe she'll be able to pay off the debt by the time she gets to the end of this year and have no unexpected expenses, but I wouldn't count on it. Number two, she needs to select one debt and go all in. First, she can pay off the cruise very easily. She has $600 left on it. Then she can pay off the Toyota Tacoma. 14% interest on a car loan is just absolutely crazy. She has an emotional reaction to the amount of debt on that truck. And realistically she could get this paid off in just a few months time. Then she can go in on the capital one card and get that paid off. She's got big chunky payments going towards the debt, which is really helping her. So I think she could really see a lot of momentum by the end of this year. And number three, I'm calling this slower decision-making. She needs to slow down her financial decision-making so she can carefully plan and prepare for each thing that she's going after. So things like the vending machine with careful preparation could have actually been cashflowed instead of financed and thoughtful financial decisions builds better budget behavior. And that's what we're all after. Am I right? I'd love to feature your story in the next episode, fill out the application form below. I'll fill out your budget and give you the exact financial guidance you need. Thanks for watching. And I'll catch you in the next one.