I Bought A Business and Now I'm Living Paycheck-to-Paycheck

This transcript features a conversation with a 28-year-old man named Austin who has accumulated approximately $375,000 in debt. The majority of this debt includes a $120,000 mortgage and a $190,000 to $200,000 SBA loan for his full-time business. He is a small distributor for a snack company, delivering to big-box grocery stores. Austin explains that he purchased the business from the previous owner, who was reportedly making about $15,000 a week in sales and taking home around $2,200. However, after Austin acquired the business, the stores underwent "resets," which reduced his product presence and sales. Currently, on a good week, he makes $10,000 to $12,000 in sales, but his take-home pay is significantly less, around $1,500 to $1,800 per week. The large SBA loan payment of $3,000 per month is identified as a major drain on his profits. He also has about $60,000 in consumer debt, including $30,000 on credit cards (primarily his wife's, with about $20,000 for general expenses and $2,000 on his own card) and $8,000 for a new HVAC system installed last year. Adding to the financial strain, Austin is the sole income earner in a household with "three and a half children." His oldest stepson is 19 and self-sufficient but lives with them, hence the "half child" designation. His wife does not currently work. The conversation highlights the precariousness of Austin's situation, being a single-income household reliant on a 100% commission-based business. They currently have a $1,000 emergency fund and $600 in cash given by family to cover gas for his truck. His monthly expenses include a $1,250 mortgage, meaning the mortgage and the SBA loan alone consume a significant portion of his income. Austin sees a potential upside in his business with a couple of new grocery store accounts opening in June, which he estimates could bring in an additional $2,000 per week in sales. However, the timeline for this potential increase is still two months away. Regarding his wife's potential to contribute financially, they have discussed her finding work once their youngest child, who is three, starts school, which is estimated to be in about two years, unless they opt for preschool. An additional $1,000 per month would be life-changing for them. Austin's father, who is in a similar business for a different company, has offered to pay him an additional $1,000 to $1,600 per month for working with him on Wednesdays. This is feasible because many of Austin's large contract accounts have their receiving departments closed on Wednesdays, while his father's smaller, cash-based stops are often open. This additional income is seen as very helpful. The advice given emphasizes the need for extreme changes and a concrete plan. The suggestion is made for Austin and his wife to sit down and establish timelines and contingency plans. They are urged to set benchmarks for business progress and consider serious conversations about exiting the business if significant improvements aren't seen by a certain point. The possibility of selling the business is raised, though Austin admits he is "upside down" on the loan, owing more than its estimated market value. Even so, coming up with the difference to sell might be worth it to escape the current situation. A critical piece of advice is to "cut up the credit cards tonight," particularly the ones used for the business and personal expenses, as they are a significant leak in their finances. They are advised to adopt a very frugal lifestyle, like shopping at Aldi and focusing on basic foods like beans and rice, until they can get out of debt. The analogy of "plugging the leak" is used to stress the immediate need to stop incurring new debt. The hosts acknowledge that these changes will be difficult and require creativity, but they are essential for getting out of their current financial mess. The conversation concludes with a strong emphasis on creating a budget using EveryDollar and implementing these drastic measures.