You have 5 blue nails in a column and 3 red nails in another column. You can attach a string between any red nail and blue nail. How many ways can we attach these strings such that every nail has at least 1 string attached to it?
For example, drawing all possible strings would work. Or connecting the first 3 blue with first 3 red, then connecting the last 2 blue to any red would work.
I approached this using Principle of Inclusion-Exclusion (if there is a simpler solution, let me know), but I am stuck. All I have is
$(2^5-1)^3$-something
$(2^5-1)^3$ is the number of non-empty subsets of blue nails for the red nails to connect to, cubed because 3 red nails. I don't know what to subtract from this though

To figure out what to subtract, figure out what you've counted that you don't want to count.
You've counted every configuration that uses all 3 red nails, but you've included configurations that don't use all the blue nails. So count those (e.g. the ones that use only four blue nails) and subtract them. Using the inclusion-exclusion principle, you can correctly account for the configurations that use 3 blue nails, etc.
Note that this will be easier if you do it in the other direction, with cases based on the number of red nails used.