Case Study 1: You spent HOW much on that!?

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Breakdown

This week's newsletter is a bit different. I'm sharing the story of one of my first in-person clients who came to me feeling trapped by her finances. The answer might shock you! (Sorry, couldn't resist.) But seriously - her case perfectly demonstrates why taking a financial snapshot is such a powerful tool. Let's get into it...

Client Background

She worked a white-collar job bringing in $2,000 every two weeks after taxes, retirement, and insurance - real money she could count on. Her income had room to grow with overtime, she helped support a kid in college, and lived solo in an affordable apartment.

She was ticking all the right boxes: steady retirement contributions, minimal debt, and investing in her career through post-grad classes. So far, so good. Let's talk expenses.

Expenses

When we met for the first time I asked her to come up with a total list of expenses and their respective dates that they will hit her account (how many times is too many times to plug my financial snapshot post?) so we can get an idea of when the bank account will be getting squeezed.

In total she had:

• Rent: $1,6000/mo

• Food: ~$600/mo

• Streaming services: ~$65/mo

• Child's tuition assistance: $500/mo (only 6 months out of the year)

• Phone: ~$100/mo

• Etc. Bills: ~$150/mo

Income in we've got about $4,000.

Expenses out we've got about $3,015.

For a net inflow of cash of around $985.

She should've been banking $1,000+ monthly - not Lamborghini money, but far from the financial anxiety she described. Plus, with overtime, she often pulled in $3,000+ per check. So what gives?

The answer, dear readers, is that she was operating off of mental math when calculating one of her expenses: Food. She had a very good idea of how much she spent on groceries every week as she was big into meal prepping and did a great job of being responsible on that front. She also mentioned she would occasionally Doordash/UberEats dinner to her place of work on the weekends or when working extra long (overtime) shifts.

Since this was the only real variable expense for her (outside of electricity but +/- even $50/mo shouldn't have been too big of a deal) I had her go back through her account transactions to total up the actual amount she was spending on meal delivery and groceries over the last 6 months and we'd just take the average of it to help narrow down where that excess $985 was going.

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Oops

If it wasn't obvious by now, she was not, in fact, only spending $600/month on food. She estimated that groceries were about $550 of that $600 amount we had in the expenses, with about $50 dedicated to an occasional treat meal delivery.

She was spot on about her grocery expenses, however, she was actually averaging nearly $450/month on meal delivery ALONE. That's an "unexpected" +$400/mo expense that she never actually tracked over time. Now that excess $985 starts to feel a lot less excess, especially given that $450 was an average - it would also go higher!

That $985 was meant to be her 'joy money' - restaurants, clothes, movies, the fun stuff. Reality? She had closer to $500/month, or $250 per paycheck. Now the anxiety starts to make sense. In every other aspect of her life she was living well within her means, but the convenience factor of meal delivery is the reason they're multi-billion dollar operations - it adds up fast!

Wrap Up

In the end we found a way for her to continue to treat herself to that meal delivery - I voted for once a week, she initially said she would just never do it but eventually said she'd allow once per paycheck. Being financially responsible is all well and good but it's also important to balance that with allowing yourself to have some "unnecessary" comforts. We're all human and depriving yourself of "excess" joy for the sake of maximizing every aspect of your finances is a surefire way to burn yourself out.

Thanks for reading!

Jake

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Mandatory reminder

Hello friend, I’m thrilled to share my insights and findings with you. While I put a lot of effort into researching and presenting accurate information, it's always a good idea to double-check and verify anything you read online. Consider this newsletter a starting point, and don’t hesitate to do your own research to make informed decisions.

If you found this information useful, I’d greatly appreciate you sharing it with a friend or colleague who might find some benefit in it. Ideally we’d be learning this stuff before graduating high school, but some random person on the internet is the next best thing, right?