Intro

April: You’re listening to the Money Dad Podcast — practical financial and business conversation from a dad who knows money. I’m April Adams, and please welcome my dad, the Money Dad, Robert Adams.

Robert: Hey, April.

When an Unexpected Expense Hits

April: All right, so I have a question. I’m working on paying off my debt, but an expense has come up that I did not expect. What am I going to do about that?

Robert: Well, if you don’t have any money to take care of it and you have bad credit, then you’re in what I call an “oh crap” moment.

April: Oh no. But I still have to get out of my “oh crap” moment.

Robert: And that’s what we’re going to talk about today: how to get out of that “oh crap” moment.

You’ve got to have emergency savings, and that’s one of the goals you want to set and work toward. But before we get there, if you’ve taken our spreadsheet — or your own spreadsheet or app — and made a budget, the bad news is: it might show you’re in a negative cash flow position.

April: We don’t want to be there.

Robert: No, you don’t want to be there. But if you are there, let’s talk about that first. You absolutely can get out of it, but it takes discipline.

At the beginning of one of our episodes, we talked about how budgeting is almost directly comparable to dieting. If you know you need to diet and lose weight, it takes discipline. A lot of times when I’ve dieted, I got tired of not eating what I wanted, or eating the same things over and over, and I’d say, “The heck with this.” And guess what? It didn’t change my weight.

April: It usually gets worse.

Robert: It got worse, April. I became a fatter fat boy.

So, don’t panic when these things happen. Be methodical. Create a plan, and be disciplined enough to follow through so you can:

1. Get out of the negative

2. Start building an emergency fund for the things that are totally unexpected

Listener Tools & Community Help

Robert: A little sidebar: a friend of mine named Charlene has been talking to me about the podcast. She sent me a spreadsheet she uses that really helps her a lot. I’m cleaning up her personal info, but she wanted to share it, and it’s a very good tool.

We’ll keep adding helpful tools to the website. And if you’re a friend or listener who wants to send something in that might help others, we’re happy to look at it. That’s the whole purpose of this podcast.

April: Yeah, and each episode will have show notes, outlines, and things like that. If you have questions on how to use any of the tools, you can send that in on the website: TheMoneyDadPodcast.com.

What Is Negative Cash Flow?

Robert: Thank you, April. So let’s get really specific:

Negative cash flow is very simple — it means you are spending more money than you earn.

That just cannot continue. It will keep getting worse.

I’ve seen people do this:

• “Oh, I can’t pay this bill this month,” so they put the bill on a credit card and think, “Whew, I paid my electric bill.”

• Then next month, they’re focused on the next bill, but now they can’t pay the house payment. So they put that on the card.

They feel better because the bill got paid… but the credit card balance just keeps building and building and building.

If you don’t have the money to pay for the essentials — not the wants — you’re in a bad situation.

April: And more and more people are finding themselves in a bad situation. It’s not always because they’re out spending willy-nilly. A lot of it is the cost of living compared to what they’re making. Not everybody in debt is irresponsible. So as we go through this, we want to acknowledge that reality and still figure out what to do to combat it.

Robert: Exactly. As we go through these podcasts, we’re trying to get down to the situation where some people genuinely may not make enough money to cover the essentials, like you said.

But there are also folks who can make it work if they apply these principles. If you’re in a position where you can do better, these principles will help you do even better.

And if you’re in a place where you feel like there’s no hope, then we hope what we present gives you a way forward.

When You’re Short: Your Options

Robert: When you’re short, there are only a few ways to get more money:

1. Earn more

2. Sell something you already own

3. Borrow money (which is the option we want to avoid if possible)

4. Or you inherit it (and you shouldn’t be counting on that)

So really, your best options are:

• Earn more

• Sell something

People get emotionally attached to things — Grandma’s furniture, your dad’s tools, your mom’s china. And it’s hard to let go because of the emotional connection. But when you’re in a negative cash flow position, you may have to sell something.

Let me share a story.

Dad’s House & Letting Go

Robert: When my father was in assisted living, I used to pick him up every Sunday and take him back to his house. It got him out of the facility, he could watch TV, and just be in the place he loved — our little 800-square-foot house. But it was home.

One day, as we were leaving, he said, “Drive around to the back.” I drove around, he got out, stood there for a bit, just looking. Then he got back in the car and said, “Well, I think I’ve gotten all the use out of this place I’m ever going to need.”

I said, “What do you mean, Pop?”

He said, “I don’t need to come back here anymore. I’ve used it up.”

I said, “You don’t want to come back next Sunday?”

He said, “Nope. I’ve used it up.”

I asked, “What do you want me to do with it?” He said, “If I were you, I’d sell it. You live 70 miles away. You don’t need the responsibility of this house. Just get rid of it.”

Now, that little 800-square-foot house held a lot of memories. We grew up poor, but there were a lot of good memories there.

Then he looked at me very seriously and said:

“Any memory you’ve got in this house — good or bad — will be with you everywhere you go. You do not need this house to keep those memories.”

April: What great advice. And what freedom he gave you — not everyone has a family member who will say that.

Robert: Absolutely. And I don’t want to step on toes, because I know death is emotional. I’ve lost people too. We get attached to houses and stuff because of it.

He taught me another lesson once when I was a kid. We were walking across a graveyard after a funeral. We passed a headstone — I’ll just say “Mr. Smith.” He said, “Look down there and ask Mr. Smith what he’s doing. I bet I know what he’s going to tell you: he ain’t going to tell you nothing at all.”

That was his way of saying: life is for the living.

Once you’ve passed, you’ve passed. Don’t hold onto things just because “Mama would want this” or “Daddy would want that.” They’re not here. You have to take care of yourself and your current reality.

So when you’re in a negative situation, you might be surprised at what you have around the house that you can sell to:

• Generate money

• Pay off debt

• Get yourself into positive cash flow

First Steps Out of Negative Cash Flow

Robert: The first things you need to do if you’re in the negative — because we can’t build an emergency fund until we get out of the negative:

1. Stop denying that you’re negative.

2. Commit to a plan of recovery.

3. Don’t delay — kicking the can down the road will only make it worse.

We’ve talked about budgets:

• Create a detailed budget: list all income and all expenses.

• Prioritize essential expenses first:

  • Housing

  • Groceries

  • Utilities (electricity, water)

  • Transportation

I’m working with someone right now who is a good example.

They get about $2,500 a month and are 73 years old. After accounting for essentials, they had $43 left each month. That’s depressing.

On top of that, they had:

• A $500 car payment

• About $136 in car insurance

• Gas and maintenance costs

• Car taxes

By the time you add all that up, you’re around $700 a month going into the car.

My advice was: get rid of the car. Free up that $700 a month.

Some people might think, “Well, how will they get around?” That’s where things like Uber come in. Uber can be expensive, but:

• If you plan grocery trips once a week

• Doctor visits as needed

In a small town, those trips aren’t that far. Let’s say an Uber ride is $40 (depending on where you live). If you take two trips a week:

• 2 trips × $40 = $80/week

• $80 × 4 weeks ≈ $320/month

• Let’s even round up to $400/month

That’s still less than $700, and it’s a big difference when you only had $43 left before.

April: And the big advantage in that example is that this person is retired — they’re not commuting to work every day.

Robert: Exactly. They’re living on Social Security and can’t work. So in their situation, if they don’t make the hard decision to get rid of the car, things just won’t get better.

That’s the key:

Sometimes you are in a situation where you have no choice if you want to survive financially.

The Hidden Cost of Negative Cash Flow: Relationships

Robert: Let’s talk about what negative cash flow does to relationships.

What do people do when they’re short every month?

• They call a friend and ask for $20

• Another friend for $30

• A relative and say, “I can’t pay my electric bill — can you help?”

Sooner or later, every time the phone rings, your friends and family are thinking, “They’re asking for money again.”

Eventually:

• You don’t have friends anymore

• Your family doesn’t want to hear from you

That emotional toll is huge. It’s part of that bondage to debt we’ve talked about.

So to get out of the negative:

• You must cut discretionary spending

• You may have to cut rewards and extras for a season

If you’re in a severe negative situation, you can’t reward yourself yet. You have to embrace delayed gratification and trust the process. The extreme measures are temporary, not forever.

If you stick with the plan and principles, you’ll eventually get to a point where:

• You have money to save

• You can build that emergency fund

• You can enjoy some of those non-essentials again, from a stable place

Starting the Emergency Fund

April: I think we’ve beaten debt as far as we can today — unless any of you out there have questions. So let’s say we’ve climbed out of the red and now we have a little extra. How do we start that emergency fund? How much should we put in? And how do we go about it?

Robert: To get there — and we’ll kick this horse one more time — you’ve got to cut discretionary spending to free up money to save.

Focus on:

• Groceries

• Utilities

• Transportation

• Housing

Don’t focus on:

• Eating out

• Extra entertainment

• Unnecessary subscriptions

Get rid of what you can. You need that money to move forward so that when the bad times come, you have something in savings.

Step 1: Calculate Your Essentials

With Charlene’s spreadsheet, she has a section called Essentials — the things you must have.

• Calculate the monthly total of your essentials

• Not your entire budget, just essentials

Then aim for 3–6 months of those essentials as your emergency fund goal.

But to get started, you need a smaller first milestone.

I think a good initial target is your first $1,000.

That first $1,000:

• Gives you emotional momentum

• Covers many small emergencies (flat tire, minor car repair, medical co-pay, appliance breaking, etc.)

Step 2: Set Up a Separate Savings Account

Set up a separate savings account just for emergencies.

That account is sacred.

• It’s not for wants

• It’s not for vacations

• It’s not for “I saw something cool on Amazon”

It’s for:

• Job loss

• Car repairs

• Medical issues

• Essential, unexpected expenses

Choose an account that:

• Is easy to access when truly needed

• But not so easy that you casually dip into it

Most local banks pay almost no interest. There are online banks that are safe and pay better rates. The one I use right now pays around 3.75% and only requires a $1 minimum balance.

We’re not talking about:

• CDs (Certificates of Deposit)

• Stocks or bonds

Those can be good tools later, but not for your first emergency fund, where you need:

• Quick access

• No penalties

April: And I like a lot of the online savings accounts because there’s a tiny bit of friction. You can access the money, but you can’t just instantly swipe it like a debit card. We’ll link a few accounts we like on the website.

Robert: Exactly. You have to:

• Log in

• Think about it

• Make a conscious decision to move the money

That pause gives you time to ask, “Is this really an emergency, or do I just want something?”

Sometimes I’ll move extra money out of checking into savings just to make that money feel “off limits,” even though it’s technically still mine. It forces me to think before spending.

How to Fund the Emergency Account

Robert: Once you identify a little bit of margin — maybe $25 a week, maybe $50 — set it up to happen automatically.

• Automatic transfer after each paycheck

• Pay yourself first

If you can save $50 a week:

• That’s about $2,600 a year (plus interest)

If you can only do $25:

• That’s $2,600 over two years — still progress

• Plus a little interest along the way

The key is:

• Start small

• Be consistent

• Build the habit

Remember what we said before:

A thought becomes an action.
An action becomes a habit.
A habit shapes your character.
Your character guides your destiny.

It starts with the thought: “I am going to save something, even if it’s small.”

April: And one way to think about that money you set aside: think of it as your wage for all the unpaid work you do at home — being the chauffeur, the chef, the housekeeper, the emotional support department. You’re paying yourself for what you do.

Robert: Ooh, that was good. Did you get that from your daddy or come up with that on your own?

April: I just thought of it right now.

Robert: You broke my heart. You broke my heart. I don’t remember saying that! Let’s move on, April.

Extra Sources for Your Emergency Fund

Robert: So, how do we jump-start that fund?

• Holiday bonuses:
  If you get a year-end bonus, that’s a great way to start. You don’t have to spend the entire bonus on gifts or vacations. Love your family well and give them something, but put a chunk into your emergency fund.

• Tax refunds:
  A lot of folks at certain income levels get a tax refund. Don’t let it burn a hole in your pocket. Move it straight into your emergency savings.

April: If it’s burning a hole in your pocket, move it to savings where it’s at least harder to get to.

Robert: Exactly.

• Side income / extra work:
  Don’t be afraid of work. Don’t assume freebies or handouts will last forever.

When I was 19, I had to support:

• My father

• My mother

• Myself

• Two other people in the household

We would not have made it unless I made that choice. I found a job in a plywood plant that guaranteed me all the hours I wanted. I picked second shift so my entire life was:

Eat → Work → Sleep → Repeat

I wasn’t disciplined yet. I was scared to death. So I worked as much as I could.

Don’t be scared of work. Don’t be afraid to:

• Get a part-time job

• Pick up a side gig

• Sell some things you don’t truly need

If selling Grandma’s ring for $1,500 lets you pay off a debt and move from negative to positive cash flow, that might be the right decision — even if emotionally hard.

Using the Emergency Fund (and Rebuilding It)

Robert: Once you have this fund, use it only for true emergencies:

• Job loss

• Major medical bills

• Essential car repairs

• Critical home repairs

If you do have to use some of it, make it a priority to replenish it.

For some of you who aren’t in the negative anymore, set a bigger goal:

• First: $1,000

• Then: 3–6 months of essentials

• Long term: 12 months of expenses

Once you’re sitting on a year’s worth of expenses, then you can start:

• Investing in stocks and bonds

• Buying other properties

• Building wealth more aggressively

But it all starts with:

1. Getting out of the negative

2. Building an emergency buffer

3. Staying disciplined

Our goal is to help you get to a place where you have:

• A comfortable

• And peaceful
  financial life.

Outro

April: Thanks for listening to the Money Dad Podcast. Head on over to our website, TheMoneyDadPodcast.com, for more resources and to send in any questions that you might have.

Do your homework, and we’ll see you next time.