Hello, I'm your host, Mr. Chuck, I retired accountant turned truck driver, I reduce my debt in a relatively short period of time, debt reduction, to achieve financial freedom takes commitment, confidence, determination. Manage debt, overwhelmed with debt can cause problems, many problems, taking control of money, and getting the debt under control will help everything in life, making it easier for daily living and long term goals. Take control of your money, do not let it control you. A few weeks ago, I was talking to somebody I met. And I told him I do a podcast about reduce that increase well, and I said, What do you talk about how long you've been doing it I said about two and a half years. And I do weekly 30 minute episode. And he wanted to know what I talk about because he said it's a simple solution, spend less than what you earn. If it was that easy, everybody could do it. But I can bet you he actually spent more than what he earned some time in his life. Because if he purchased a house, he got a mortgage, that house cost more than what he earned. He purchased that automobile, I can bet you an automobile probably cost him more than what he earned whether it's a yearly wage or monthly wage, he still spent more than what he earned. So there is times when debt is good. Debt for housing, for example, is a good long term investment, especially with the rates being so low, which is gonna probably not last too much longer. Also buying a automobile is not a good investment, because the value of the automobile goes down while your debt remains high. So, and house will appreciate in value, while a automobile will depreciate in value. So that when you use debt to purchase an asset that goes down in value, that is not a good investment. But we all need an automobile so we can one go to work or do everything we do in our lives. So an automobile is a need, not a want. Let's get on with manage debt. How you go about doing that. Before I get started, I have two links in my show notes that I'm referring to. I'm going to talk about what they say. And then I'm going to give you what my debt reduction plan would be or as far as that goes. A lot of things in these articles is a tip that is pretty much the same as what I'm would be recommending to do. If I come across that tip and an article that I disagree with. I will tell you I disagree with it, and I'll give you the reason for it. So let's get started. The first article is from consumer dot West Chester gov.com tips to reduce your debt. These are fairly basic taps and knees gonna be the same tips. Now if you google you know manage that. You're gonna find these all over the place the same basic tips, and one is develop a budget to track your expenses. My last episode I gave you what the benefits of having a budget and I gave you the but before you can do a budget you need to do some tracking. So let's say a budget can help you monitor how much you're earning and spending. And when you're spending money on being more aware of your income and expenses can help you eliminate or reduce unnecessary costs. unnecessary costs are once to don't take on more debt. I agree. Work towards paying down what you currently owe before adding any new debt. Avoid any unnecessary purchases Adding more debt by making unnecessary purchases, when you still have debt to repay, will make managing your debt more difficult. I agree three, pay your bills in full and on time. Paying your bills in full and on time will allow you to avoid high interest rate and late fees. If you're unable to make full payments, aim to pay more than the minimum do to avoid paying more in interest and fees. One of the number one thing here is you got to pay your bills when they're due on time. If you only make the minimum payment, that's good, because if you make the minimum payment, he won't be paying late fees was tacked on to your bill. If you have a utility company or a bill, such as electric gas or utility, and you can't pay it, contact the company and set up some type of payment plan. They will work with you there's no shame in doing that. He may have been temporarily you had a reduction in income. So you need to contact your creditors contact your providers and work out a payment plan with them. For check your bills carefully. When you receive your bills and statements, make sure they are accurate and your rate remains the same. If there are errors or your rate increase without any explanation, call your lender to fix accordingly. I think they're referring to all bills, but mostly credit card statements and any lenders statements on your say your mortgage or car loans, things like that. Because they're pretty good at putting on the statement, why you know the late fees and entrust whatever extra charges that they're gonna be tacking on. Five pay off high interest debts. First, though, I agree. If you have multiple bills to pay paying off debts with the highest interest rate, and fees first, will reduce the amount of money you owe in the long run, it may slow down your process, but in the long term, you'll pay a whole lot less, which will speed up your process, he just think it's gonna be slowed down. Six, reduce the number of credit cards you have. Consider having only a few cards to manage your debt, make sure they have the lowest rates available, I agree, but do not cancel any credit cards. If you have five credit cards, there was an outstanding balance and you pay one of them off, do not cancel that card. But do not use that card. Maybe once every quarter once every six months, put a small charge on it and pay it off right away. That way you'll keep the card active. If you cancel a card or close that account, you're reducing the amount of your available credit and thus your credit score will get lower. So by reducing your debt, keeping that credit card but not using it will help your credit score overall. Seven look for the best interest rates when consolidating your debts. by attaining a debt consolidation loan from a bank or credit union, you're able to manage your debts more easily since you make only one payment to the bank or credit union, rather than several payments to all your current lenders. Often the bank or credit union may often lower your interest rate than the rates on the loans you owe. So shop around for the best rate before consolidating note of interest here. If you have a lot of credit card debt and a lot of debt period, you probably don't have a very good credit score. And with a poor credit score, you're not going to get a good rate and it's going to be difficult for you to get a consolidation loan. Also, when the lender gives you a consolidation loan, whether it's our credit union or your local bank, they may require you to close down some credit cards. In fact, they're gonna pay off those credit cards directly. They won't even give you the money and then they're gonna cancel that credit card. That's gonna hurt your credit score overall. That's a short term hurt, but in the long Long term, it could help you. I'm not against loan consolidations. But if you're just getting started with trying to reduce your debt that's down the road, you don't do that right away, because you're probably have a poor credit score. So try to get your debt and make multiple payments. All along. I'm going to talk about how my plan works. Later on. A contact your creditors about repayment plans, speak directly to the company in which you owe money, they may be willing to set up a repayment schedule that is more realistic for your budget and reduce monthly payments. I said that before. Nine, speak to credit counselors. If you're in a need help in developing your debt repayment plan, consider speaking with a credit counsel, be careful of counselors that claim that they can pay off all your debt quickly with one low fee, because it could be a scam. I say avoid them because you got to pay their fee first. So it's going to take you longer. But if you're really poor, and having all kinds of trouble, that could be an option, and 10 stay villages. Once you reduce their pay off your balance. Remember to guard against incurring debt again, consider phasing out credit cards, and using debit cards or cash is that? Well, yes, you use your debit card, and cash. The debit card is the same as your cash. Eat quit using your credit cards and keep them for an emergency. But again, do not close your credit cards. Keep them open with a zero bounce. Use them once a month or once a quarter or once every six months, so they don't close them on yet, which will keep them active. And that will help your credit score. My next article is from Wells fargo.com, which is basically a bank and a wonder tips for managing debt. Always pay on time. Well, of course, they're gonna say that because they're lending you the money. Payment History makes up 35% of your credit score. If you miss the payment, pay as soon as possible, it makes a difference. Credit reports will track if you are 3060 or 90 days late on payments. I agree. Monitor your credit regularly. Review your credit reports regularly to make sure they are accurate and look for areas where you can improve or to yours free at annual credit report.com. Eligible and then it goes on okay. Yes, you should at least check it once a year you get a free report once a year from the three credit agencies and if you go to annual credit report.com they'll have all that information there for you. Number three, pay more than a minimum always try to pay more than what's due. This helps pay down debt faster, save on interest expense and may improve your credit score. If you have a lot of debt and really struggling, I disagree with that, and my plan will address that issue. You would only pay the minimum on all your debt. I can't be more clear, and I have a reason for it, which we're going to cover a little bit later. So pay the minimum. Know your limits. While this is important. Being close to maxing out your credit limits may negatively impact your credit score. It's a good idea to keep your balance and on the revolving lines under 30% of your limit. If you keep it even lower than that, your credit score will be much better. Know your debt to income ratio DTI, lenders look at the amount of debt you owe compared to your monthly income when extending new credit. So it's a good idea to keep your debt to income ratio under 35%. Well, here's the key with having good credit. One, you have to have a lot of credit. And two, you can't use it. You can only use a small portion of it to keep your credit rate ratio or your credit score up. If you have a loan or credit card with that you can borrow $10,000 And you max it out to $10,000 You're going to have a poor car To score, if you have three credit cards with$10,000, and you only have$1,000 balance on each individual one of those, for a total of 3000 1000 a nice car, you're gonna have a great credit score. So you need a lot of credit, and you can't use it. That's how you get a good credit score. I know it seems stupid, but that's the way it is. You got to make timely payments, you can keep your bills all paid on time, you have to have a lot of credit, and you can't use it. Take on new debt only when needed. Apply for an open new credit counts only if you need them. Having too many accounts with balances may lower your credit score, and will become difficult to manage. qualify for lower rates. See if you qualify for lower rates on your current debt, especially if your credit has improved, or if interest rate has dropped since you originally applied. I think they're talking about fixed loans or, or other maybe a variable rate loan. Maybe when you applied for a particular loan, you had a poor credit score because you had a lot of debt. And now you got your debt under control, but you still had this loan out there. I think most of the time, they want you to refinance that loan to give you a better rate. But they might do an adjustment to that loan, which would be better because you're not starting over again. Think before closing accounts. Closing credit card accounts may lower your available credit could hurt your credit score in the short term. Consider keeping accounts open if they have a good payment history and a low or zero balance. Okay, that's a good point. If you have a credit card with a good history, you definitely don't want to close that. If you have a credit card with a horrible history, maybe you should consider closing it because it only be as short term negative effect on your credit score. Build an emergency fund, that's the last thing they come up in the other article didn't even talk about it. Having funds set aside in a savings account may help you avoid using credit cards for unexpected expenses or an emergency. Well, we're going to talk about that. Next coming up. If you want to contact me to request my spreadsheet for the budget, or leave a comment or ask a question, you can send it using my email, reduce debt, increase well@gmail.com reduce debt increase wealth is all together no spaces. If you'd like to ask a question, quick question in the subject. If you'd like to request my monthly budget, put that spreadsheet in the subject matter if you want to leave a response of any kind is put a comment in the subject manner. I will get back to you as soon as possible. Okay, now we went over the basic tips that you can find anywhere online. Here's my debt management plan or debt reduction plan. The first thing you have to do is quit creating new debt. Quit using all your credit cards, quit borrowing money at includes a debt consolidation loan. The second thing you need to do is set up an emergency fund a savings account as all it is where you put money in so that you have money available to cover an emergency whether it's your auto break down, or a child getting injured, or whatever. It's money available to help pay towards that emergency. An emergency is not going out to dinner once a month. And emergency is not making a monthly auto payment. An emergency is something that is unexpected and doesn't happen on any regular basis. How much you need, you need to get started with a minimum of $500 that I recommend a minimum of $1,000 and then we're gonna build that up over time. The third thing you do is pay the minimum payment on all your debt. Don't make any additional payments to any debt. Until you get that emergency fund up to $1,000. No ands ifs or buts, you have to do that first. Now, how do you know which debt to pay off first or whatever the order, but you have to get your everything under control, you got to start tracking all your spending. I talk about tracking in episodes, you got to track everything going through your checking account, you got to track everything going through all your credit cards. And if you were, if you quit using credit cards, that tracking is going to be easy, because the only thing you have to track is a minimum monthly payment. Maybe a little interest, they charge it. But the interest should get paid off with that minimum monthly payment. If not, they're really screwing you over. So once you get your tracking under control, you know where your money has gone, he didn't do a budget, he can do a report because you're tracking you should be using some type of online account, you can generate reports, print them off, do a budget on a spreadsheet, do a budget separate than from that tracking software. And the reason you want to do that is because you can control it more on your own, like this Craner report and look at it, it's not gonna do any good. But if you got to enter numbers in, you can put in some percentages, you can create your own categories, and you can be consistent. So do a budget. Once you got all that under control, you'll have all your statements from all your debts, or from all your loans, all your credit cards, you want to put them in order by interest rate, what is the one that you pay the highest rate of interest, you can do this in a spreadsheet. And in a spreadsheet, you put the description, the due date, the minimum payment amount, and the current balance and the rate of interest. Put them in a spreadsheet in any particular order. You highlight them all, you go and do a sort sorts and you sort them. You highlight all those fields. For all the loans, you have credit cards, whatever, highlight the whole thing to a sort, and you want to sort it by the highest interest rate first, and then by name, you might have multiple credit cards with the exact same interest rate. So put them in alphabetical order by name, highest rate, by name. And why you're gonna do all that one, because you need to know who you are, how much you owe, how much you had to pay every month, and what your interest rate. And you also if you look at your statements every month, you'll see what the fees, additional fees, you may be paying, because you may be making late payments, or whatever the case would be overdrawn balance, things like that. You want to avoid all those things, because you don't want to pay any more than what you have to end by paying additional fees no matter what it is. And paying that high rate of interest, you're gonna take forever to get that paid off. So let's get your life under control. Get your and your credit card and all your loans under control. Once you have all that done, and you make the minimum payment, and you have$1,000 in your emergency fund, you keep doing the same thing. And you keep putting the available money that you hadn't spent for the particular month and to your savings account. And once you have that savings account or emergency fund, build up to $3,000 which is $2,000 more than what your emergency fund needs to be. Then you take one of those credit cards now for the very first time. Take the one with the lowest balance or do you have any credit cards there that that $2,000 will bring it to a zero balance or bring it close to a zero balance or just bring it down because you want to achieve that you know that you achieved something. So if you get one almost paid off or paid off Do you want to do that one first, but then after that initial one, you want to apply your payments to the highest rate of interest first, and then work your way down. Because the sooner you can get that balance lower down, the less enters you gonna pay, the less interest you pay, the faster the principal will be paid off. And the sooner you will have your debt all paid off. And under control. And the beginning, it's a slow process, you got to stay very vigilant, like the tip says, You got to stay focused, and you got to apply yourself, and you have to look at your budget, you need to cut out excess spending, maybe you got into this problem, because you have a spending problem. By tracking your expenses. And having a budget, he can identify where you're spending too much money, and you can reduce it down, he can try to control your spending a little bit. I'm not saying you're going to struggle through life and do without the sand, you're focusing on, get your debt paid down, paid off, under control, whatever your focus is, if that's your focus, then we need to take a look at the spending and try to keep your spending under control. I'll be back in one moment with my final thoughts. I always felt like I was working for the mortgage company, the banks and credit card companies. So don't let that manage you need to manage your own debt. And by quit using that, quit creating new debt. Having an emergency fund, increase your savings have money available to make those unexpected expenses that may pop up, track your spending, have a budget so you know where your money is going. Make the minimum payments on all your debt. And then once you have a larger amount and your savings, because that's gonna be your emergency fund the whole time it's in there you may be you might have an extra two or 3000 in there. And right before you get ready to pay off a credit card or pay a credit card down. You might have an emergency you might somebody might get injured, there might be an accident, and you might need that money. So it will help you. And it will help you to quit creating new debt or at least reduce the amount of debt that you have to borrow in the future. And then once you have that money in there and you have a bill up past your emergency fund dollar amount, then use it to play off some credit card debt, highest interest rate first, and then work your way down from there. No matter why you want to get that free. No matter what the reason, whether you're getting close to retirement, whether you want to get your debt under control because you want to start a business or do some other venture or just enjoyed life. You'd be better off with less debt. We all need some debt for a mortgage automobile payment, but we all don't need a lot of debt, like five credit cards max to the limit. By managing your debt. You will have a happier, less stressful life and you'll be glad you did.