Married, Father of Two, Financial Crisis
Meet Ted. He’s 44-years-old and lives in Atlanta, Georgia. He graduated college in 1996 with a useless degree in accounting from Clemson. He bounced around jobs every 2-3 years that paid him around 50K a year until he settled into a manager position in 2010 where he now makes $70,000 a year salary. He’s got a wife and two young kids at home, so even though he’s making more than he ever has, he’s as broke as he’s ever been.
Let’s break down Ted’s finances:
His income is $70,000 and he gets paid twice a month. This means he gets 24 paychecks a year. This puts Greg’s monthly income at $5,833.33
Every month, however, he has deductions taken out…
Health Insurance for family: $810.87
Dental Insurance: $49.76
Federal Income Tax: $879.41
State Income Tax: $309.16
Social Security: $361.66
Medicare Tax: $84.58
This is a total of $2,495.44 taken out of each month before he ever sees a penny of his earnings. This is $29,945.28 taken out for the year. You can see that Ted doesn’t make $70,000, he “makes” only $40,054.72 because he only gets $3,337.89 deposited into his checking account each month.
Ted looks happy but his finances aren’t.
Here’s how Ted spends his money:
Ted and his wife foolishly bought a home in 2013. With a 4-year-old and a second baby on the way, he reasoned it was just “the American thing to do.” His mortgage is now $1,400.47 a month
Here’s Ted’s updated financial picture after this expense: $3,337.89 – $1440.47 = $1,897.02 left over.
Property taxes wipes out another $2,178 a year ($181.50 a month). Add in cable and internet ($116), trash pickup ($32), and utilities ($92) and you have a total of $421.50more in monthly expenses
Here’s Ted’s updated financial picture after his housing expenses: $1,897.02 – $421.50 = $1475.52 left over.
To get to his job in downtown Atlanta, Ted needs to have a car. His stay-at-home wife needs a car to get the two kids around, so they own a run-down 2001 Toyota Avalon and a newer 2014 Toyota RAV4 he splurged on soon after he got his house. While the Avalon is paid for, the RAV4 costs him $210 a month. Add in $140 insurance a month and $120 in gas, and suddenly he’s paying $440 a month on transportation expenses.
Here’s Ted’s updated financial picture after transportation expenses: $1475.52- $440 = $1,035.52 left over.
By appearances, it looks like Ted is doing financially ok.
He likes to go to the gym to keep his middle-aged body in shape, so his gym membership sets him back another $39. Their monthly cell phones bring another $111.34 out of his pocket, so add another $150.34 in monthly reoccurring expenses
Here’s Ted’s updated financial picture after accounting for all reoccurring monthly expenses: $1,035.52 – $150.34 = $885.18 left over.
You can see that Ted has just under $900 each month left to “spend” as he chooses once the monthly reoccurring expenses are paid for.
Can you live on $885 a month for a family of 4 to pay for food and drinks, clothes, recreation, sports, birthday gifts, doctor copays, repairs, unexpected expenses, furniture, travel, etc.?
Let’s look at what Ted did.
They shop at CostCo once a week and load up on groceries. They never splurge on Whole Foods. Eating out at restaurants isn’t an option but they do it generally once a month—at an all you can eat buffet. All in all, Ted manages to only spend about $600 a month on food, which is only $20 a day.
If a guy “making” $70,000 a year struggles this much, can you imagine how a guy “making” $40,000 a year with a couple of kids does it?
Many months Ted slips into credit card debt because he simply doesn’t earn enough money to live on.
Over the past 3 years he has racked up $4,500 of credit card debt, which has now ballooned into $180 a month in minimum credit card payments.
The reality is Ted is at a breaking point. His wife is now actively looking for work, although much of what she would earn would be off-set by childcare costs. Financial pundits will tell him he needs to sell his house immediately and buy a cheaper house (or even, gasp—rent!). What Ted isn’t hearing from anybody—expect for me—is that HE MUST INCREASE HIS INCOME.
I teach people like Ted how to become financially free, how to get off the $70,000 a year treadmill and find financial liberty. Ted is getting a free copy of my Millionaire Booklet and I want to give you a free copy as well.
Until you increase your income, there is no money to save folks!
P.S. Win up to $50,000 tonight for the Dodgers-Astros game 6, just guess the winning score—no strings attached. It’s all part of my million dollar social media giveaway this month. Make your pick HERE.
Grant Cardone is a New York Times bestselling author, the #1 sales trainer in the world, and an internationally renowned speaker on leadership, real estate investing, entrepreneurship, social media, and finance. His 5 privately held companies have annual revenues exceeding $100 million. Forbes named Mr. Cardone #1 of the “25 Marketing Influencers to Watch in 2017”. Grant’s straight-shooting viewpoints on the economy, the middle class, and business have made him a valuable resource for media seeking commentary and insights on real topics that matter. He regularly appears on Fox News, Fox Business, CNBC, and MSNBC, and writes for Forbes, Success Magazine, Business Insider, Entrepreneur.com, and the Huffington Post. He urges his followers and clients to make success their duty, responsibility, and obligation. He currently resides in South Florida with his wife and two daughters.