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Guys, are you ready for some money rehab?

Wall street has been completely upended by an unlikely player, GameStop mean and should.

I have a 401k because I don't do it. No, I know, girl, you think the.

Whole world revolves around you and your money.

Well, it doesn't charge for wasting our time. I will take a check like an old school show. You recognize her from anchoring on CNN, CNBC and Bloomberg. The only financial expert you don't need a dictionary to understand the cold lapins. Today we have a very special listener intervention with a mother and son duo, Mary and Sean. Mary had originally reached out to me with some questions on the best way for her son to use his savings to buy a car. And you're about to hear this question got a little bit more complicated between the time Mary sent the email and when we got on the zoom. Here's our conversation. Thank you so much and welcome to Money rehab.

Thank you. Happy to be here.

Tell me a little bit about what's going on.

I started saving up for a car or I had a seed, a little bit of money that I was planning on using. But I have student loans and back payment in some bills from months of rendering Covid. When should I spend that money on bills and when should I keep saving it? I guess is kind of where we were coming from.

Yeah. He also is really in need of transportation. He lives in a big city. He lives in New Orleans. He's trying to walk to his day job, walk to his night jobs. He's got music equipment, stuff that's not really. You can't do that. And he's been riding a bike, which is great, except that he's been hit by a car at least twice.

Oh, my God.

Maybe more than. He's not telling me twice that he had to call me because it resulted in needing medical care.

Dear God, Sean, what the heck is going on? It's playing in traffic.

No, it's just this is how people drive in, guess, you know.

Yeah, well, you're about to give your mom a heart attack, so we got.

To get this right. But having reliable transportation, I think, would be a big help to him. When he's telling me he's got, like, well, I can ride my bike. It's only 40 minutes one way, I'm hearing, well, that's an hour and a half. And I know how much I make in an hour and a half. That's a lot. And when he's having to pay for Ubers or whatever else, maybe buy friends around drinks because he used their car, maybe at some point we should just be working on getting him some transportation to save money in the long run and also to avoid getting hit by more cars.

Um, yes, please. So let me get this straight, Sean. It sounds like you've been really clobbered by the pandemic. All of us have. Can you tell me a little bit more about what happened during this difficult recently?

So just the pandemic was one thing, but Hurricane Ida as well was another huge setback. So really what happened was I had a stable day job working like three days a week. I had consistent gigs at night that were paying pretty well, and that was enough to get by. And then pandemic happened. I lost my job. I also lost all my gigs, too, because I was going to see live music. As things started coming back in certain ways, I kind of picked up new skills. I started getting into the video post production and broadcasting, like, live streaming of bands and music because I was just friends with bands that needed a way to play. So I kind of got into that. And now I have kind of as a third job, first being I'm a barista by day, musician at night, and then in all the time in between, I kind of edit videos or deal with clients that need live sessions for bands.

Well, it sounds like you pivoted amazingly with all of those challenges thrown your way.

Well, thanks. Yeah, it was hard, but it was kind of cool to learn a new skill. And now that I have it I started to kind of build. I got a little bit of savings. I kind of know what I'm doing. But as I'm traveling to places, showing up to studios and people's venues where they're performing, I kind of have a lot of very expensive theater that I can't be hauling on my back.

Right. So does that savings include an emergency fund?

So that's where Ida comes in. So I was evacuated for three weeks. During Ida, most of that money was gone, spent on that. Also huge energy bills, because energy is a terrible corporation. Yeah.

So, short answer. No, emergency fund.

Pretty much no. I used it.

Right. Well, that makes sense. I mean, listen, that's what emergency funds are for. A lot of times, people are scared to break in case of emergency, so to speak. And that is a legit one. A hurricane, a global pandemic. Definitely on the list of emergencies. Legit emergencies. So you were able to cobble together $2,000, it sounds like, around there?

Yeah. Sometimes more, a little bit, sometimes less, depending on if I was pulling some out to pay for bills.

And what are those bills right now? What are your living expenses for a month?

Well, so it's kind of drastically changed because right now I moved into a friend's house who agreed to put me up, and so I'm kind of living rent free for a little bit until I can kind of get stuff together. But a big one was obviously transportation, because I was ubering to and from my job. Rent, obviously, and then utilities. And another one was a lot of the music stuff I do, the gear sometimes get damaged. Sometimes stuff happens to the electronics. You need to take it in and get fixed or routine repair. Those are kind of the four big ones.

So how much would you say you need to live on in a month? In a month?

Right now?

Yeah. Let's just start with right now. It sounds like the rent is going to increase in the future, as is the transportation. But for right now, what would you need to survive? Not to necessarily go get lots of rounds of drinks or whatever, but just to eat the basic stuff and take care of yourself.

Eat the basic stuff. I mean, including transportation to get to my job. If I'm ubering to my job four days a week, it's about $30 a day, which comes out to about $480 a month if I'm not borrowing a car to have been able to do sometimes, or I will uber into work and then get a ride home from a coworker sometimes. So that number is. That's the max that I would spend for food, I can live off 150 for a month. For a month? Yeah, I did it in college. I could do it again.

Okay, fair.

If I'm eating good, it's like 250.

Okay, listen, I've been on a brown rice and beans diet. I know what's up. Okay, so what's the tally now and then? Any other things you need for utilities bills? You said you have student loan payments that you are trying to chip away at.

So those student loans is about 960 and that's no frills.

Okay. And any insurances, like health insurance?

I guess that comes out to like night. We'll say about 1100 then total, maybe.

And when you get your own place, what approximately do you think the rent is going to be?

It depends. It could be anywhere. I'd say probably maybe around 750. And then plus utilities, that would be, I guess another 210. 1910 is what we're looking at.

And when you get your car, though, that will replace the Ubers, which I'm actually thinking is going to be less. If you have a car payment or, I don't know, we could talk about that. And my recommendations? My recommendations are to not have a payment. But if you did, whether it's a car note or a lease or whatever, those are probably going to be lower than what you're spending on Ubers right now.

Yeah, $480 is pretty steep for a.

Very steep, yeah. Okay, so what was the tally with the Ubers and the rent?

It's rounded up to like 2000. So 2000 total.

Okay, so where are we? Status quo with the Ubers and no rent.

Right around 1000.

Yeah, about 1200, yeah.

Got you. Okay. And what for you feels like a comfortable emergency fund? This is different for everyone. This is not a textbook thing. This is kind of like a how do you feel? Thing. So typically, I would say three to six months of savings in the bank is a good place to start during the pandemic, and especially for folks who have precarious jobs like musicians or models or real estate agents or whatever. I would suggest more like nine months to maybe even a year. But that's for folks who might have some trauma or will sleep better at night because they have more in the bank. What feels good to you?

I would say around, honestly, the three month mark, just because I do have a third of what I can make is a day job.

Yeah.

Something that's a little bit more steady, stable.

That makes sense. And you're 26, so you are able to do a lot of things that some other folks are not. And that's great. So that makes sense and you have all the earning potential. You have a lot of skills. Okay, so what is three times that amount? Is it 3005 or so?

Hundred, something like that, yeah, around there.

Okay, so let's say we want our goal to be an emergency fund of about 3500. What is our goal for the car situation? I think your mom said it was 5000.

Well, that was before the hurricane. Maybe some of the goals have changed and he had to pull whatever money he had to get out of town and survive and that was really the priority at the.

So totally understandable. What do you think you could get a used car at least four years or older in your area?

Been, I have been looking on Facebook, marketplace and sometimes Craigslist and it seems like it's maybe around 4000 5000. Honestly, for that much you can get a beater card just to get from point a to point b for 2000 3000. But in this area I wouldn't really trust some of those makes sense. They're a little older, a lot of.

Miles, maybe not worth it actually looking last night and it's a lot harder to find used cars at all down there. And I think that might be a knock on effect of the hurricane. Lots of people have their cars flooded, cars lost. The market is.

Yeah, it's between that and housing. The reason I'm staying in a friend's house right now is my lease was up and this is just the only place I could really go. A lot of people know different parishes outside of Orleans parish have kind of lost everything and needed places to go. New Orleans had electricity, period, and they found housing here. Same with cars. Unless you took your car out of town, you lost it. So people need new ones.

Yeah. And I'm assuming that insurance is pretty hefty in that area as well because of stuff like that.

Yeah, definitely. You can get baseline insurance that's like $100 a month, but really doesn't cover anything. So there's not really a point to that. It's just your street legal? Definitely. Right now I'm living in a better neighborhood than I used to. So it would be less than it would be if I were living, say, like my old house in the upper 9th ward or in the tremendous area.

Okay. All right. So should we say that $4,000 is a good goal for a car? Yeah. Okay. And then what about a good goal for housing when it comes to getting the security deposit and the upfront costs that you're going to need to move?

When I've moved in town before, it's usually ended up being around $2,300 just with if it's like my last place was $750 a month. Okay, deposit and first month rents, plus getting the u haul, getting if you need just new kitchen rags or trash can for the bathroom or whatever, little things like that.

Yeah, because your mom is not going to allow you to not have a trash can in the bathroom. Neither will any lady you date. So I agree. Hold on to your wallets, boys and girls. Money rehab will be right back. As a small business owner myself, or as I like to call it, a.

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Did you know that even if you have a 401K for retirement, you can still have an IRA? Robinhood has the only IRA that gives you a 3% boost on every dollar you contribute when you subscribe to Robinhood Gold. But get this now through April 30, Robinhood is even boosting every single dollar you transfer in from other retirement accounts with a 3% match. That's right, no cap on the 3% match. Robinhood Gold gets you the most for your retirement thanks to their IRA. With a 3% match, the offer is good through April 30. Get started@robinhood.com. Boost subscription fees apply and now for some legal info. Claim as of Q one 2024, validated by radius Global Market Research. Investing involves risk including loss limitations. Apply to iras and 401 ks. 3% match requires Robinhood gold for one year from the date of the first 3% match. Must keep Robinhood IRA for five years. The 3% matching on transfers is subject to specific terms and conditions. Robinhood ira available to us customers in good standing. Robinhood Financial, LLC.

Member, CIPIC a registered broker dealer now for some more money. Rehab. Okay, so it sounds like we have three main goals right now. First is to replenish an emergency fund of about 3502nd is to save for a used car for about 4003rd is to save for your own place with the upfront moving costs and security deposit at about 2300. Did I cover that all? And right now you have 2000 in the bank?

Right now I have none of that in the bank because I spent. That was my emergency fund for. I see, yeah. It ended up being my savings, then turned emergency fund.

I see. Okay. All right, so with these three savings goals, do you know about subsavings accounts?

Do not.

Mary, do you know about.

Yeah, yeah.

Okay. What do you know about them?

It's a way to have a couple different savings accounts that you're saving for a specific purpose, a defined goal. If you want to save for a car, you want to save like your Christmas, your holiday fund.

Yes. Mary, back here. Yes, absolutely. You're crushing it. Okay, so my suggestion for these three savings goals for you, Sean, is to set up these three sub savings accounts. So one, literally, it's another account that you get to label within your bank account. So you could say car fund, you could say emergency fund or. Oh, shit, Mary. Sorry about.

She's good.

Okay, cool. You could call it whatever you want. I have a broken iPhone fund as a subservience account because I inevitably break my iPhone, Miss Butterfinger. So I automatically deposit money in there so when I do, I don't freak out. And then the third one is for your new pad, like whatever you want to call it that's going to keep you motivated to do it. I would set it up that way. Do you have a checking account or a savings account right now?

Yeah, both.

And how does your money go into those accounts?

So my one account is just my one back home in Indiana that I just have always as a know, I have it. You know, it feels weird to get rid of it. And then my current one is.

That's the bank account I opened for him when I think he was like four years old. Or.

I had that when I was four. So is there any money in there?

I usually don't put anything in there just because I can't.

Yeah, my name is still on it and it makes it easier if I need to just get money to them. I can run into the bank and make a deposit.

Okay. So we're pretending like that doesn't exist in this scenario, right? Whatever's in there?

Yes. That's not really the one. I use as much.

Kind of the last ditch fund, like when he has to evacuate or something and he needs money.

I see.

That's always there.

Okay, so it's like a super emergency fund, basically, yeah. All right, so the one you have where you are, that's a single account, it sounds like. It's not a joint account, is a checking account. And your money from the coffee shop goes there. Automatic or direct deposit?

Yeah, it's a direct deposit.

Okay.

But it direct deposits to my savings account there. So I have a checking out of savings.

It direct deposits to your savings account. And then what happens to it?

And then I will usually whenever I'm at the bank, I'll transfer it over. That's a logistical. I just need to tell my boss to get a different routing number.

Okay, let's do that. Cool, great. But what you need to do, you still have to do stuff at the bank because you're going to want to ask them to set up three subsavings accounts for you. And we're going to have to come up with a plan for what the automation is going to be. So you can actually set up a plan where some of your paycheck goes into your checking account and then automatically a portion of that goes into each of the accounts. So you can set this up beforehand, which makes it foolproof. Not that I'm suggesting you're a fool, but it helps all of us not touch it. Right. It really focuses you toward your goals. Naming it sounds silly, but actually psychologically, people are more likely and more motivated to reach those goals if they see what they're saving for. And so it doesn't feel like some dark abyss of some random account. And then you're never going to see it. So can we start with what? So how much do you bring in from the coffee shop? And then how much would you say the music gigs and the other gigs are bringing in right now?

So it's been varying a lot. So before Ida, it was usually about, say, 1800 a month, 2000 a month from just the coffee shop. And with gigs on top of that, it really fluctuates because due to different Covid restrictions based on bars, I lost a lot of work for recording live bands and some gigs. But I have some gigs coming up. It's like, say 2500, maybe it was about 1800 from the coffee shop, then the rest was like scrapping up gigs. Yeah, but now at post Ida, my paycheck has been kind of cut in half because we're not really getting as much foot traffic. It's a job based mostly on tips.

Got you. Right now it's about tip your barista. Folks, please. We're all about that on this show. Okay, so approximately what are you bringing in from the coffee shop right now?

Right now.

Okay. And that sounds like what you need to live on.

Yeah.

So the tricky part is that you don't know in the beginning of the month how to actually set that up. And I don't want to leave you with too little in your checking account so that you overdraft. Do not get overdraft protection. Don't sign up for that. Bad news. If you don't have money, you shouldn't be able to buy whatever you're trying to buy. I digress. So I don't want to have a percentage go and then you not have money because the rest is a big question mark. So would you feel comfortable for now, taking about 5% of the steady paycheck and putting that automatically into the subsavings accounts? Because typically, I try to suggest about 15% of your take home pay goes to your end game. So whatever your end game is for you, Sean, that is a car, a place, and an emergency fund. So you have three goals. And so easy math, I would just put 5% in each of those. Would that be an okay place to start?

Yeah. That looks like it's like maybe around $50. That's doable for each? Yeah.

Mom, what do you think about this?

I think that sounds great. I think it sounds like a good way for him. We'd like to find a way to help him, and we want to make it so it's useful for him, but also so that it's like getting him somewhere. We don't want to make him feel like he's beholden to us or give him help in a way that it's like us saying, well, we want to help you do this. If that's not helpful to him, does that make sense?

Well, does it make sense to you, Sean? What is helpful for you? Your mom just wants to be helpful. I love Mary. I would like to be adopted by. So she's awesome.

I love my mom. Know, my mom says to do something, and my first reaction is, no, I'm not going to do that. Mom said to do it like this, which ended up being helpful. I didn't want to do it. Thanks, mom.

How much fun are we having, though?

So, yeah, I just need to listen to her.

For today's tip, you can take straight to the bank if you're a parent looking to help your kid out with a purchase, opt for a system where you can encourage good money habits. Instead of just venmoing a contribution, set up a system like Mary where you only make your contribution after your kid meets a certain savings goal. That way, you're helping them out in two ways. You're giving your kid a little financial.

Help while also sneaking in some positive.

Reinforcement for those good money habits. Money rehab is a production of iHeartRadio. I'm your host, Nicole Lapin. Our producers are Morgan Lavoie and Mike Costcarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and mimsy. Huge thanks to OG money rehab team. Michelle lands for her development work, Catherine law for her production and writing magic, and Brandon Dickert for his editing, engineering, and sound design. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.