Reduce Debt Increase Wealth

Financial Planning

May 01, 2022 MIsterchuck Season 3 Episode 111
Reduce Debt Increase Wealth
Financial Planning
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Show Notes Transcript

Take the time to look ahead in life, then plan for whatever is coming. This is what most people fail to do, failing to plan is planning to fail. 

 Article Link: By Alden Wicker


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Hello, I'm your host, Mr. Chuck, a retired accountant turn truck driver, I reduce my debt in a relatively short period of time, debt reduction, to achieve financial freedom takes commitment, confidence, determination. Financial Planning, take the time to look ahead in life, then plan for whatever is coming. This is what most people fail to do. Failing to plan is planning to fail. I'm not talking about planning for your retirement, he should have already done that. I'm not talking about what everybody tells you, you should be planning for retirement, saving up for your children's education, saving up for a down payment for a home, those type of things, that's not really what I'm referring to, which all those are good things to plan ahead for. But I'm gonna look at this in a little bit differently. I do have an article in my show notes from the them 50 Personal Finance tips that will change the way you think about money. I'll probably go through that later on in this episode. But what I'm talking about planning, I'm gonna start as, as if I'm a younger person, I'm in high school. Maybe a sophomore or junior in high school, and parents are bothering me, are you going to go to college? Are you gonna get a job, I'm thinking about, perhaps I'm not gonna go to college, or maybe I am going to go to college. So I'm looking ahead. I'm not sure what I'm going to do yet. But I need to prepare in case I decide to go to college, I need to take the proper courses in high school, so that I'm eligible and ready to start college once I graduate. And if I go the other route, maybe I'm thinking I want to work blue collar, maybe I want to learn a trade. So when I'm a junior, and high school, may I get a part time job working in that particular trade and start learning it. I looked ahead, I decided what my future might want to look like or be, and I'm taking steps to get me in that direction. I'm not waiting till the I graduated from high school and then decide, I think I'm gonna go to college. But I didn't take any pre college courses. So I can't really get in college without taking on extra courses, and spending much more money, but my parents are paying for it. So it really doesn't matter. That's not planning. Planning is looking forward. thinking maybe what you want to do in the future, and then take steps. So when the future arrives, you have everything in place to continue on your life. And the same thing goes once you get that first job, and you're working, you're living with your parents, you're working full time, you're making decent income. What are you going to do next? Well, most people want to get a place on their own. So you got to start looking and plan ahead, you need to save up some money. So you have the posit money for the first month last month rent, you have enough money to cover that, and maybe enough money to cover a couple more runs a month's worth of rent, plus utilities, and all those type of things. You don't wait until you move out and decide, oh, I don't have any money. I can't move out of my parents house. Because I didn't save any money. Because I bought a $75,000 automobile and I got a$12,000 a month car payment. And I'm just exaggerating these examples. Because I'm trying to make a point. When I was younger, I graduated from college. I was working full time I got a job not necessary in my career because jobs are tight. But I got a job. I was living with other people. So one of my first goals was to get a place out there on my own and get an apartment. And it took me a while to save up some money. I lived with a group of guys and then I lived with one person and then I eventually got my own one bedroom apartment. And then when I got there, I knew I had a year maybe two. I wanted to start saving up money to buy a home because I think Can at this point, I'm going to stay in this area. So instead of paying rent, be better off own in my own home. So what I had to do, I had a new car and I had a car payment. And I knew that I would not qualify for a mortgage, if I had other debt. So I made sure I kept my credit cards paid off. And I found a nice a used car, borrowed a little bit of money from my parents bought that used car, sold the car that I had with the car payment. Now I had a decent, reliable automobile that I had no loan on, I paid my parents back, and I start saving for a down payment for the first home. Cuz I knew looking forward what I want it. And I knew that if I had a car payment that may not have been achievable. So I took all the steps in order to solve the problems today, before tomorrow, because tomorrow, I will have was going to have a downpayment for my first home, and I want to buy that first home, on my own by myself with one income. And that's what I did. So knowing your situation, knowing what the future has, looks forward for you. And knowing where you want to go is important on your financial planning, not only saving for your retirement, which he should have been doing the whole time, not only saving for a wedding, maybe you got to get married, you got some wedding expenses, so you got to save up for that, then you need to say for having children and save up have extra money available to cover that cost. Because nothing is free in life. And definitely nothing is cheap in life. So you know where you're heading, what your future it wants to be. And you make your own future by planning today. And when I'm talking about financial planning, take care of your money, do all the right things, have a great credit score, and make yourself look good to the creditor. And I told all my friends, buy that home first. And once you have the home and you're in there for six months or a year, then buy that automobile that you want. Because it's going to be a lot easier to borrow money for an automobile than it is borrow money mortgage for a home. Your home is your largest purchase, you got to make mostly most people in our lifetime. And it hasn't changed in the last 30 or 40 years. It's always been that way. And it always will be that way. So that's my jazz of financial planning. Now, financial tips that will change the way you think about money is the second part. And one of the things you need to do a few first things is create yourself a financial calendar. If you don't trust yourself to remember the pay your quarterly taxes or pull a credit report, set yourself up an appointment reminders for everything you need to do, even if it's paying a monthly bill. And you want to pay these things on time every month. So if you set up yourself in a counter with put the date and what is the due date when something's due on the counter. And you can then be able to at a glance, know, bills are due and when they're due, maybe not the dollar amount, but you'll have an idea of what bills are coming up. When you're going to get paid. Put your pay date on there. Put all your bills on there, put all your credit card payments on their dates. And you know, you'll have an idea. I can't I don't have any extra money this week. Because next week, I have a bunch of bills due so I got up scrimp and save this week, so I can pay all my bills on time. To check your interest rate. You got to know the interest rate on all your loans. Then if Which one do you pay off first, while you're going to pay off the one with the highest rate of interest, which saves accounts should you open? Well, it should be based on the interest rate, the one with the best interest rate. Why does a credit card debt give us such a headache while blaming on the compound interest rate. Bottom line here is paying attention to interest rates will help inform with debt or savings commitments you should focus on good point and track your net worth. The net worth is the difference between all your assets and everything you owe. Ie just look up the fair market value of everything you own, subtract out all the debt you owe, including student loans. And that should give you a number that your net worth. It could be negative, especially if you have a lot of student loan debt. And don't own a home or automobile or anything else. How the budget like a pro setup budget period. And this is the starting point for every other goal and your life. I've gone over how to do a budget. But if you're just getting started, you need to make up a budget. Amen, if you're living with your parents, you still have some expenses. Maybe you own a car. So you have a car, you have insurance on the car, you have maintenance and you have gasoline costs of operating an automobile, have a budget and know how much is going out and how much is coming in. Once you rent an apartment, now in your budget include rent, once you buy a home. Now you include your mortgage payment, your homeowners insurance, your real estate taxes and some maintenance. That's all it really is. It's a matter of plan, you looking and planning ahead. The more you know about where your money is going, and where it's coming from, the better off you're going to be. If you haven't trouble paying off debt, or maybe you're having trouble you have you got a couple credit cards and you overuse them. Because you bought a lot of things you want it that really didn't need. In order to get out of that habit, he need to consider an all cash diet. So that means you pay cash for everything. When I refer to cash, that's cash or using your debit card. So the money in from your paycheck is the only money you have available to pay the bills that are due in that time period to your next payday. And to buy food and entertainment and do everything else you do with your life and your life. Take a daily Money Minute, this comes straight from LearnVest founder and CEO, Alex Von Tobel. who swears by setting side one minute each day to check on her financial transactions. The 62nd Act helps identify a problems immediately keep track of gold process and set your spending tone for the rest of the day. So what she's saying is she's looking at her checking account, see how much money she already spent. If you're on all cash diet, that's easy to do, you look one place your checking account, how much money you have in there, the beginning of the day how much money you got now, maybe you need to slow down on some of your spending. Remind yourself by looking at your transactions. You're reminding yourself that you have other goals and other things you want to accomplish. And by doing that, you'll remind yourself maybe I should spend a little less and it's got a bunch of other stuff in here. I'm going through love yourself. Get money motivated. Hey, got stuff in here about the asking for a pay raise. negotiating your salaries like when you know, you can negotiate more than just your salary, your work hours official title attorney, paternity leave vacation time, which projects you work on and all the things that a future employer may be willing to negotiate. And when you negotiate your salary, get them to say how much they're gonna pay you first, then you can get them to go up. Even if it's more than what he was thinking. Pin them up and get them to go up a little bit. That's just you're better off. Don't ever cosign alone. That's how you keep that at bay. If you try to help out a family member and you cosign a loan, and they're not responsible, and they default on the loan, guess who gets to pay for you? Well, that's gonna hurt, your credit standing is gonna hurt your cash flow, everything involved. If you're a student going to college, make sure you fill out all the forms to receive grants and scholarships, go to your student loan officer, and find out if they're what you can fill out. If you don't know find out, it's called planning ahead. It's like, if you don't know something, you need to investigate and learn it. And then keep your monthly mortgage payment but below 28% of your monthly income. 35% is also good, but the lower you can keep your monthly mortgage payment, the better off you're gonna be, because that's gonna free up money to pay for other things. If you're struggling with federal student loan payments, investigate repayment options. It's called your lender. And that's where they offer graduate extended or income based plans. And there's a bunch of options. Don't wait for the government to say you don't need to pay them anymore, because that may never happen. And if you're wanting to, if you work for a government entity or a school teacher, and you think if you worked there 10 years, you get the rest of your student loans forgiven. Well, yes, that will can happen. But you got to make timely payments for the 10 year period. While you're making payments, they got to be timely. save for retirement, as soon you save, the more you're gonna have. It's nothing you know, it's called compounding. The more you save, the more you're gonna have, the longer years say, the more you have, the longer you save less you can save, the more you can have. And it's easier on your finances. If you wait till you're 60 years old, it's going to be tough on you finance, because you got to put 90% of the income into retirement plan in order to have enough money and five or 10 years to even come close to retiring. Make savings part of your monthly budget. As you know, it's called emergency fund how to prepare for rainy days case you get laid off or something bad happens. Keep your savings out of your checking account. So once you have significant funds in your checking account and all your bills or pay, take the excess I keep a minimum of $650 in my checking account. Once all my bills are paid, and I got more than that the excess over $650 is transferred to my savings account. That way I'm not tempted to spend it again. If it's there, I know it's there, I might spend it. Direct deposit that makes life easier I think about everybody's doing that nowadays. And there are far types of financial emergencies we see in wedding isn't one of them. Only dipped into your emergency savings account. If you lose your job or have a medical emergency, your car breaks down. You have an emergency home expense like a leaky roof, or you need to travel to a funeral. Otherwise, he can't afford it just say no. So whether they sent you lost your job, you can use your same your your emergency fund, there's a medical emergency, your car breaks down, you have an emergency home expense, leaky roof, hot water heater go out stuff like that. All you need to travel for a funeral, if you ever is not one of those categories, is not an emergency and just say no. Going to a wedding doesn't count. That's not an emergency, something you have control over. You can have too much saving. It's rare but possible. If you have more than six months savings in your emergency account, nine months if you're self employed, you have enough socked away for your short term financial goals, then start thinking about investing. Your retirement savings should not be in your savings account. It should be in a IRA or a 401k or whatever you have through work. How to approach pay attention to fees and that's all kinds of fees bank fees. If you're investing investing fees, and you need to rebounce your portfolio once a year. Once you have more than $20,000 invested, he should have a financial advisor that does it for you. And they were automatically rebounce your portfolio as needed. It could be more than once a year. So a be back in one moment was my final thoughts. If you listen to this podcast using an app, please rate and review. If you know anybody that might benefit from listening to reduce debt, increase Please refer them. And I would greatly appreciate it. Everything you do in life has some type of requirement. Whether you're planning on learning to drive to get your driver's license, what do you need to do? Well, first thing you gotta do is study for the test, then you got to go in and take the written test, then once you have the written test, then you have to get driving experience and get some time in a car. And how you do that, well either go to a driving school, and or with your parents, or maybe an older brother or sister, and you drive with them, and you get some driving time as rate, whatever requirements would be, then you got to go take the driving test. And once you pass the driving test, he then you got to go and pay for your driver's license. So everything you need has an action. So everything you should be planning for. I gave you some simple examples. But not only do you need to plan for the financial end of everything, you need also to plan on what needs to be done part of everything. So if you're planning a wedding, you know there's going to cost your money. So you should start saving money. Maybe you don't know how much yet. But the more you can save, the longer you start early start, the longer you can do it, the more you have, the better off you're gonna be. Because if you don't have the money to pay for it, you're gonna put it on a credit card, or you're gonna borrow money, and you're gonna create new debt, and you're gonna get yourself into trouble. It's just a matter of time before you start struggling to pay for it. Once you got the wedding, you start planning what needs to be done in the wedding. You need a place to get married, you need a place have a reception, you need somebody to cater it, you need to have bridesmaids, groomsmen, everything. And that takes a plan. And you got to plan it out. The ladies are good at the wedding. But you got to do the same thing. And everything that comes up in your life. No matter what it is you're shooting for buying a new home a first home. Well, you need a down payment. You need to figure out plan where you want to live, what type of house you'd like to live in, how much you willing to pay for the house, how much you can afford. It all comes down to planning both financial and non financial plans. The more you are ready for what's coming up in your life, the better off you're gonna be. In, the more financially sound you are, the better off you're gonna be. And you're gonna have a whole lot less problems. When you're planning ahead, know what's coming up, know what's gonna be done. Get the things done that you need to get done before the event happens. You gotta have a happy event. Now, whatever it may be, you'll be much better off and happy you did so