Reduce Debt Increase Wealth

Budgeting

May 22, 2022 MIsterchuck Season 3 Episode 114
Reduce Debt Increase Wealth
Budgeting
Show Notes Transcript

How to budget, the basics using the tracking software to get reports and grouping.  How to reduce overall spending on items. Review the budget to remove items not using or no longer needed.

 Article Links:

https://studentaid.gov/resources/prepare-for-college/students/budgeting

https://www.consumer.gov/articles/1002-making-budget#!what-to-do

How to contact Misterchuck , for questions, comments, requests use this email address. Reducedebtincreasewealth@gmai.com

Charles McDonald:

Hello, I'm your host, Mr. Chuck, I 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. Budgeting, how to budget the basic using tracking software to get reports and grouping how to reduce overall spending on items, and review the budget to remove items. Now no longer be in use or need it. This is what a budget is for. In my show notes, I have article links for two different articles. One is student aid.gov. Students budgeting, even though you're not a student, but if you're having a hard time focusing on how to set up a budget, in may be the basic article on to help you better understand what a budget is all about. And then consumer.gov making a budget. It's the basics. If you're having a hard time comprehending what I'm telling you, then these articles in my show notes will help you better understand what a budget is all about. And why should anybody create a budget a budget is a guide to help you on the path to reach financial goals. Budgeting keeps your finances under control shows when you need to make adjustments to your spending, reduce or increase and help you decide where your money goes instead of wondering where it all want. Where does all my money go? Is there a way to spend last? How do I hand on expected expenses? And can I put money into savings that helped me with some my bigger financial goals? This is the things the budget will answer for

Unknown:

you and how you create it.

Charles McDonald:

My last episode I talked about tracking and when you if you use an app to do your tracking. And that's important. Because if you do the tracking on all your spending, on your checking account, your savings account, what goes in and what goes out

Unknown:

on everything. And all your credit cards, then you have

Charles McDonald:

a detailed list of where your money is going and coming from by creating a report. So why do you need to create a separate item for a budget, most of these tracking apps that you're going to be using, even won't be able to compare last month to the current month. He can compare last year to current year. So if you're in June of 2022, you can compare it to June of 2021. But that report won't be there until we use the app or at least one year. So it's kind of useless. It may be helpful in the future. But for now, he want to create a budget using the same categories that's in your tracking app. So go in and do a report on your tracking app and you want to do it and total it up for the month. So we talked about this last episode, for the month of June becomes your budget dollar amounts for the month of July. Then your actual spending for July becomes your budgeted amounts for August. And it keeps through rolling on like that. And why are you doing that? Because every month you might reduce something every month, you might add an item that you didn't have before. Or you may reduce an item or you may reduce what you're spending on an item. So you'll get the updated amounts going forward. So it makes creating a budget easier. So we want to reduce all them categories down in to some basic categories to put in a budget and the first one would be income that's fairly simple. Your income, your spouse's income, dividend income, interest, income, whatever you may have rental income. So that's it. So put in the amount of money to come in your paycheck. If you get paid weekly. You should have four to five per month and Same with your spouse, if you get paid bi weekly, you will have two sometimes three n a month, depending on the month, he kept paid semi monthly, you have two a month and monthly you have one. So the income is fairly easy. Now we need to separate things down on the categories. And the first one we're going to concentrate on needs housing. Within your housing category, you want to include your mortgage payment or your rent, your real estate taxes, your homeowners insurance, or your rentals, insurance. Anything related to housing goes into the housing category that would include utilities, and part of the utilities nowadays, is internet service. So include your internet service, along with yo your elder utilities, gas, natural gas, electric, home phone, internet service, etc. I throw in my cell phones under the same category, you can put that somewhere else if you wish. But I just throw it in there because you know back in the day the phone was completed in the house and I never left the house. So I use that for the phone service is my logic. I don't know if it makes sense or not. But that's what I'm using. So that's

Unknown:

your housing and my

Charles McDonald:

spreadsheet that I offer you can get I'll send you a template if you wish. And it's got 12 months, January through December. And it's got all this stuff or included. So you got your mortgage your rent your cable, your satellite electricity, internet, gas, natural gas or oil, real estate taxes, phone, home, rental insurance, water, sewer and trash, furnishing appliances, a don't really need to budget that. Unless you're just getting started. Maybe you should lawn and garden main supplies improvements and anything else that I couldn't think of would get pretty much includes everything. So if you have a big yard and you buy a lawn tractor, maybe you should include that in your budget. If you're going to buy a new one, or the gasoline you're going to be using for the lawn tractor. Or if you're going to have a garden, maybe your roto tiller and the gasoline to use that. And anything else you may span is under a housing. The next category, which is our needs is transportation. Automobile should include your payments, your insurance, fuel, repairs, license and registration. And anything else. If you have two automobiles, you should have a budget for two automobiles or three or four. Also in there as bus, taxi, train fare, Uber Lyft, anything like that, depending on where you live, you may not own an automobile, but you spend quite a bit on, you know, bus, taxi and train or Uber or Lyft services. So include that and transportation. My next category is credit card debt. We're all struggling to get out of debt. So you should list

Unknown:

your all your credit cards

Charles McDonald:

in this category, and you need to know the due date opening balance at the beginning of the month payments for that month, new charges ending balance interest rate, you need to know the end in that you need to know the due date because you want to know when you have to pay them you need to know the interest rate because you want to know which ones you should pay off first, the highest rate of interest should be first and then down to the lowest rate of interest. And the good part about using the spreadsheet you can highlight all your credit cards, then you can sort them either by interest rate or by the due date or you can maybe by the due date first and then the interest rate second, so you know what day of the month are due and then the rate of interest. I find this fairly helpful. You can also add other loans here that included anywhere else. So that would be personal loans, payday loans, student loans, would be considered under this credit card debt. My next category our daily living expenses, which would be groceries, personal supplies clothing cleaning, education, dining, eating out salon, barber pet food, and then anything else I couldn't think of or not

Unknown:

anywhere else.

Charles McDonald:

We are so far been concentrating on

Unknown:

the needs.

Charles McDonald:

Everything that you need is what you should have a budget for. And to begin with, we're using what we spend that first month you start tracking. And that's going to be our starting guide. From there forward, we can make changes, because now we know how much money we have coming in, and how much money we got going out. We're of course trying to reduce our debt, or whether it's credit cards, student loan, payday loans, whatever your problem is, we can now cut back on some of our spending, we can look at other ways to reduce spending. So we can say more than we have entertainment, it's not really a need. Some of it probably is because you need to have something to do. You don't need to cut everything out your life. But if you can focus on what you're doing, and maybe cut out things you no longer enjoy, then we can save a little bit of money. So that would be entertainment, which would be books, games, fun stuff, hobbies, media, outdoor recreation, sports, toys, gadget vacation travel, if you have a lot of credit card that vacation travel should not be that. Then we have miscellaneous which is anything else that I forgot to or don't put anything else, such as bank fees, postage gifts, giving charitable donation, religious donation, newspaper magazines, do and memberships. A lot of things you can cut out of your budget and not budget for. And that's how you can increase your savings. And then at the end, I have my checking account or my bank accounts, which is my checking savings in the same bank, and only have one savings account and that bank. But I for my spreadsheet, I have a broken out for emergency fund, auto repair, home improvements, the three categories that we're going to probably be spending the most money on. So if like home improvements, if you use your tax refund, for example, for new and home improvements, you can increase that by if you put five bucks a month, then you can have a little bit more auto repairs. But it's all in one savings. It's not three separate savings account. And then I have a high yield account for once I get my emergency fund funded, and if I got some extra money for car repairs that I got covered, or my home improvements are covered in any excess money in is really not access but money above that, I put into a high yield savings. So I can earn more interest nowadays is not as much as it should be, but it is what it is. So your goal would be to create a report from your application that you use for tracking. And you want to do that in such a way so that you have it categorized by these categories, housing, transportation, daily living, entertainment, miscellaneous

Unknown:

can't run out and credit cards I have which would be your credit card,

Charles McDonald:

he may have to look at your credit card statements every month to put in the opening balance and for the next month, your ending balance should always be your opening balance for the next month. Then your payments which would should be the minimum payment. And we're going to cover this one we talk about a debt reduction plan. So doing a budget can be fairly easy. If he took the first step to start tracking all your spending and tracking all your income. Now you just create a report by category and then you just go to a spreadsheet, set up a budget or you can use my template you can look at the different categories And you can just plug a number

Unknown:

shouldn't take you more than five. The first time,

Charles McDonald:

if you want to create your own budget, he wants to set it up so your incomes on top, then you have housing, transportation, and a logical order that kind of matches what the report that you printed out, you want to try to keep it in line with that report. So it's easy to update every month. That's how I create about budget. And it's easy, simple. So you're creating the budget, so he can have something to compare your current month's spending to. So if we start with last month's spending, and we know we're trying to say money, we're trying to reduce debt. By reducing debt, we need to maybe save a little bit more. So we can make additional payments towards that debt, then we can look at the current month. So when you're in your current month, you do a report once a week from the beginning of the month to the current date, and you plug that in your actual budget column. So your budget report should have a budget amount, actual amount, and difference very least, with the categories down the side. And that's your so you got four columns, categories, budget, actual difference. That's if you're going to set up your own spreadsheet, that's how you probably should do it. Or you can use my template. If you go to Facebook, and look up reduce debt increase wealth.com, you'll find a video where I explain how to use it. If you send me instant message giving me your email address, I will email you that template, so you don't have to go to the trouble

Unknown:

of creating one. And it's fairly

Charles McDonald:

easy to use. But I can say that because I set it up so I know how to use it. Budgeting can also help you avoid debt and improve your credit. When you stick to a budget you avoid spending more than you earn and you can avoid or reduce your credit card debt. If you have received student loans to help with the cost of college or career school, than a budget help you make the most of the money you borrowed and help you determine how long it would take to repay your debt, and how much it will cost if you want to borrow. Being able to pay what you owe on time each month will help a positive impact on your credit worthiness and your financial future. In other words, you pay your bills on time.

Unknown:

You don't over borrow, you save some money.

Charles McDonald:

Because as the federal government says only a third of the people can't afford to pay an emergency that costs $400 or more. So you can have an emergency fund. So if something comes up, your car breaks down, you get a toothache you get to go to the dentist or whatever it may be, you'll have the money available to pay for it without having to put it on a credit card. So what is a budget? We kind of talked about this, this is consumer.gov. A budget shows you how much money you make and how you spend your money. A budget helps you decide what you must spend your money on can spend less money on some things and more money on other things to help you categories for emergency expensive things and your goals. Most people who are living pay pay paycheck to paycheck, have no clue what their financial goals are, have no clue what their budget is. They have no savings for emergency. And they probably have a whole lot of credit card debt. If that sounds familiar, then you need to create yourself a budget and start seeing and tracking and knowing where your money is coming from and where it's too. One of the things you can do once you have a budget and it's clear picture in front of you and your new second month, you can spot things. Why am I paying for this subscription? I no longer use that. Why am I paying for gym membership? I never go to why am I paying for this book subscription for books that I got that I never even read and I end up donating them to the public library. So whatever it may be, go and cancel those items because you have too much debt. If you're trying you're struggling to pay off debt, then you need to get rid of things that you no longer need or no longer use. I'm not even talking about cutting back on your spending, I'm just talking about the obvious, don't spend money on stuff you don't use no longer. And then the second phase of the budget is reviewing everything that you actually need your cell phone, your utilities, your maybe insurance on your home in your car, look to see if you can get better plans for less money. Specially on cell phones, cell phone, they're always update. If you're paying for data on a monthly basis, you can get a plan where you pay a whole lot less, and you get unlimited data, you need to do that, and save some money. Even if you reduce your cost by 10 or $20 a month. And you do that for four or five different items, the money adds up, and you'll have a little bit extra to put away. And to help you reduce your debt.

Unknown:

It's not a quick and easy process

Charles McDonald:

is gonna be time consuming. But once you do it, you get the hang of it, it's gonna be a slow process. So the more you know about where your money is gone, the better off you're gonna be. I'll be back in one moment with my final thoughts. If you listen to this podcast on an app, find rate and review and rate and review reduce debt increase Well, if you know anybody that could benefit from listening to this podcast, please refer them to reduce that crease wealth.com. You can find it on Facebook or any other app where you listen to pod. If you think he can get away without creating the budget, and just using a tracking app, you could be wrong. Maybe it can, maybe it can, but I find using a budget and freezing the dollar amount. And then using the two reports from your tracking app to create reports on a weekly basis, so you know your actual spending and put it in an update all the little categories. So you can compare how much they spend last month, how much am I spending this month? Reduced it why I'm increasing it by ask yourself those questions you need to be reviewing your spending at all times as you go through the current month. That's the only way you bank get your spending under control. There are two types of people spenders and savers. If you're a saver, you're probably not listen to this podcast, because you don't have a lot of debt. Because you have a big savings account and you have an emergency fund set up. If you're a spender, you probably are in debt. And you got way more debt he probably can handle. But you got yourself there you get yourself out. Unless there was an event that happened that created put you into this problem, such as being unemployed for a long period of time, maybe you're taking a job where you're making a lot less money. Now your budget is out of whack because you're spending way too much on housing because your income is way down. housing, transportation, food, clothing, your needs. Anything else other than that would be considered a want. And that's where you can cut back a little bit. I'm not saying you do away with everything you enjoy doing. Maybe you have hobbies you enjoy doing that cost you some money. Maybe you're in sports that cost you some money. I'm not saying you have to do away with some of that. You only need to know how much it's costing you. And where you can save a little even if you save $5 a month, or $10 a month. Over time that adds up. Maybe you have five or six different categories that you can reduce by five or $10 a month. Now we're talking 50 $60 It's simple. You don't have to be a nitpicker you don't have to be a scrooge. You don't have to scrounge is a matter of controlling and once you have have control of your spending, it becomes easier. And once you start getting out of debt, why can't get better. So my next up was so on to have a debt reduction plan, I'm going to tell you how you do what to do to get out of debt. Over time, your step one was tracking, step two is creating a budget. Step three is your debt reduction plan. He can do this all at the same time. He I have to break it out, to talk about to keep it simple. But at the same time you're craving a budget, at the time you're putting money and tracking, you can be thinking, do I really need that? Can I cut back on this, can I cancel this and no longer pay for it while you're actually entering tracking numbers. Or maybe you went out to dinner. And there was a month where you had a lot of birthday parties, so you spent a lot of money dining out, which is that normal or not, maybe it's not normal, it's just that particular month. So you adjust your budget for it. And you write yourself a no. So you know, it's just a matter of getting your life under control. As concerning your finances. That's all it's all about getting your finances under control, and match your lifestyle. When setting up your budget, make sure you break the same name categories, as you have in your tracking application. And that makes it much easier to update later on. My tracking application I use is count about. And they have things in alphabetical order, and has bills and utilities. And then down below it has housing where you have your mortgage payment, and homeowners insurance like that. The bills utilities would be under B for bills, housing is h. So it'd be two different categories that you merge together for your budget. And you can compare the current month through the previous month and a report. I don't recommend doing that because if you update something it can change on you. And it's nice to have it set in stone and a budget so you can see it easily. Even if you print out the report and have it there. I feel it's not the same. If you have to enter again somewhere else. You mode, you're more likely know more about it and you'd be more aware of your

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spending