Reduce Debt Increase Wealth

Tracking Finances

September 25, 2022 MIsterchuck Season 3 Episode 132
Reduce Debt Increase Wealth
Tracking Finances
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Show Notes Transcript

Tracking personal finances needs done on a weekly basis. Many do not keep track of anything and get behind on paying bills and do not knowing how much money in checking account. This is important for everyone to do and to stay ahead of bills coming due. 

 Article Links: By Michael R Lewis By Miriam Caldwell

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Charles McDonald:

Hello, I'm your host, Mr. Chuck, a 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. Tracking expenses. Tracking personal finances needs to be done on a weekly basis. Many do not keep track of anything and get behind on paying bills and do not know how much money's in checking account. This is important for everyone to do and stay ahead of bills coming due. I have a link in my show notes to an article keep track of your personal finances. And it gives you multiple ways on how to do it. How to keep track of your personal finances, staying on top of your personal finances can be challenging, tedious, and even discouraging. But for most people, this process is a necessity evil, spending more than you earn as a sure way to bury yourself in debt, and not being careful about precisely where your money is going can leave you struggling to pay for necessities like groceries. Fortunately, learning how to keep track of your personal finances is not difficult. But it does require a fair amount of time and discipline, following either of these methods below will help you down the path becoming better with your money. I'm not gonna really go through all that it's one how to do it manually and how to do it using an app, how to do it using a spreadsheet. So if you're interested in that, see my links in the show notes. So why should you track your expenses? First of all, what is it, it's nothing but keeping a check register, whether you do it manually on paper, or do it using an app, you put in all your income in there, and you record all your expenses. And while you're doing that you're gonna categorize your expenses, you got to think of your tracking as the motor of your personal finances. Income is your gasoline is the fuel to run your personal finances. And then they expenses are broken down and necessities. And once necessities is housing, transportation, food, clothing, the basic things you need in order to live. That is an important that you pay these expenses when they're due on time, in the full amount. So by tracking your spending, you'll know whether or not you have enough money, looking forward to pay your rent, or pay your mortgage or pay your car payment, or put gas in the car or to buy groceries or go out to a restaurant. And you'll know how much money you have. So if you're tracking is the motor of your personal finances, everything runs through the motor than you if you're sitting in the driver's seat, your budget becomes the control center, where you can view and look on what is going on in your personal finances. This episode is mainly gonna deal with the tracking how to do it, the easy way to do it, I use an app called count about it's about$9.95 a year. It's easy to use, and we're gonna talk about that coming up. You put in your checking account, your savings account, all your credit cards, and it keeps the check register and arrestor for all those things that you need to keep track of. It also has categories already set up. So it's important that you're consistent with your categories so that you if you're going to multiple different locations to buy groceries, three or four different stores. you categorize it as groceries, maybe it goes to five or six different restaurants. It's important that you categorize it that dining out once you get through a month or even two weeks for that go. You can set up reoccurring expenses, things that happen every month no matter what, and you can set that up. So it automatically comes up. When you log in, I'll give you a list of things that you should be paying should be aware of, that's going to be either already paid, and you need to enter it in your register, or gonna be coming due in the near future, and you can look at what your bounces a clerk grants, you know, how much is in your checking account, you know, by looking at your reoccurring expenses, what's coming up, so you have a good idea of how much money you need available to pay those expenses on time, if you don't do this at all. And when you come down to the grocery store, and you try to pay for your groceries with your through your checking account, using your debit card, you might come up short. And then what are you gonna do, you're gonna put it on a credit card, and then what are you gonna do, you're gonna forget to pay that credit card, or you're gonna pay it late, or you're gonna make the minimum payment. So you're gonna get behind on your credit cards fairly easy and quickly if you have no idea of what's going on and your personal finances. So that's the tracking is the key to doing that. I'm gonna talk later on how to use your tracking system to create a budget. So if you keep it in a notebook, or you keep it on paper, like we used to do in the olden days, then you would have to manually go through and add up the different categories. So you need to lease would be recommended to keep it in a spreadsheet. So now you can sort the spreadsheet by date. And by category, and you can get a he then you can subtotal your categories in your spreadsheet. So that when you go to do your budget, you know the category for that particular month, say the month of July, you know the total for that category. So you can set that category up in your budget. And you can put the total that you spent for the month of July, that your actual budget. And then for the month of August, you're going to use that as your budget. And then you're going to use the actual it's the second column over. And then you're going to do the difference in order to keep track of what's going on. That's this an overview of what's going on. If you use a spreadsheet, it's it's a little bit easier than doing it manually. But it's even easier if you use an app like count about because it will do all that you can create a report, print the report out and now you have the numbers total. And you can do all kinds of different things with an app that's got all that figured out for you. They're using a spreadsheet, but they got a program for you. So it makes life much easier. So how should you set up your categories? Well, your categories need to be set up by first your what are your needs, housing. So you have a category for housing, which should include your mortgage payment, your second line of credit if you have one, anything related to that home, all the utilities with natural gas, electric, water, sewer trash, I include internet service, and part of my housing, because it stays with the house. Your next category is transportation. So that should include all your car payments, the gas and oil that you put in there on a regular basis. Maintenance, insurance, housing should have insurance also. Anything related to transportation, whether if you get a public transportation paths that should be under transportation. So we've got these categories. And within each category, we got three or four categories. And within the categories we got the detail. The next would be food or food and dining. So that would be going to the grocery store that would be going to restaurants. I break mine out since I'm a truck driver, and I eat out when I'm on the road Should I call it dining work or work dining, so I got a category for that. So I know how much I'm spending when I'm out there on the road. The next need is clothes. So you set up a category for clothes, maybe for yourself, your spouse, and your children. And categories like that. I wouldn't go in too much detail as far as shoes, shirts, pants, socks, underwear, it doesn't really much matter, I would just do it by person. So that so we have our needs figured out. So we have housing, we have transportation, we have food, and we got clothing. Also, under housing, you should put lawn care, fertilization, stuff like that all goes on there housing, when we're looking at the different percentages, it's mostly related to the loan portion, how much is the loan versus your income. So when you're looking at housing, your housing loan mortgages should not be greater than 35% of your gross income. Your loans for your automobiles shouldn't be 15%, more than your gross income. So when we're talking about that, we're not talking about the whole category, we're only talk about the amount of money that you borrowed within that category. Then you have categories such as needs, which would be entertainment, hobbies, whatever else you can think of. I don't like to get too many different categories, you want to try to group them within, say, eight or nine different categories. That way you have less to look at when you set up your budget. So it keeps it simple. And you need to do this, at least every day, if you go out shopping, and it's in the fall, and you're doing shopping for your children's clothes for school, maybe you're buying clothes for work, maybe you're buying groceries, and you go out on a Friday or Saturday, you go five or six different places us buy a bunch of stuff, it should be entering this in your check roaster or however you paid for it. Whether you use a credit card or your checking account, or even your savings account, you should enter in those transactions as soon as you get home as soon as possible. If you don't do a lot of that, then do it every pay day, because every pay day, you got to put in that how much money was deposited in your checking account. So when you get that done, then look past the week and enter all the things you spend money on up to that day. And you can keep it up to date fairly easy. And it doesn't take a lot of time. If you do it once a month, it's going to take you much more time. And it would be harder to do. So another process of tracking is reconciling your records to the bank records. A lot of people don't do this anymore, the need to do it because you might have paid for something or bought something that's out still outstanding, meaning it hadn't shown up on the bank records yet. So let's say you have $1,000 deposit in your checking account, you go out you buy groceries of $300 like leaves your $700 you make a car payment of $400. So now you have $300 leftover you and you do some clothes of $250. So now you have $50 leftover, but one of those transactions may not have cleared your bank yet. So your bank may say you have $200 or $250 and if you spend more than what you have in your checking account, you're gonna get an overdraft fee, and you're gonna be paying the bank more fees than what you should be paying. So by doing your tracking, and knowing precisely how much money you have, at all times, you can avoid paying fees to the bank. I'll be back in one moment with my final thoughts. If you want to contact me To request my spreadsheet for the budget, or leave a comment or ask a question, he can send it using my email, reduce debt, increase reduce debt, increase wealth is all together no spaces. If you'd like to ask a question, put question in the subject. If you'd like to request my monthly budget, put Brett 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. So why is it important to track? Well, keeping track of your expenses is gonna help you stick to your budget, it's gonna set you up for success. Remember, tracking is the engine of your personal finances. It's the income coming in, that you're using to pay for all your bills that are in there, first, your needs, and then your once. If you keep your spending on your needs down, and keep it under control, it'll be on time and you'll save fees not paid to the bank. It also helps you stick to a budget. That also helps you create a budget much easier. Because if you're tracking using an app, you already got the categories, you can get a report, but it's easier to do it on a spreadsheet and create yourself a budget where you can look at it. And you can then identify where you may be spending money to. That's getting you in trouble. Maybe you have a hobby that you think you're going to turn into a business and perhaps you're spending way too much money too fast on buying machinery and equipment, or materials. For that particular hobby, it may be years before you're good enough at that particular hobby before you could turn it into a business. So take it slow. If you know that you don't have the funds available, you won't be using credit cards to buy things that you can't afford to pay for at this time. Maybe you can buy it over time, save up your money, pay cash for it. Also, you need to create an emergency fund. An emergency fund is basically a savings account, where you set site a money aside so that you have it in case something bad happens, something bad like your car break down, maybe your appliance in your home breaks, something needs repaired or replace. They you have the money available. So you don't have to put it on a credit card tracking also help you identify your spending habits. Maybe you're in a habit of getting three lattes a day, or at the coffee shop. Do you need three of them? Do you need to be spending $15 a day? Can you reduce that down. So it helps you stay on track, and will help you meet whatever financial objectives you have. What are your goals? Maybe your goal now is to pay off your debt. Maybe your goal now is to increase your emergency savings. Maybe you have a goal of buying a new car. And if you keep track of your spending, and you know you have extra cash, you can set it aside so that when time comes to buy a new car, you have more money to put down. So you finance last. The payment is smaller, everything's more manageable. You can do it with pen and paper. He can make it easier with an app or software. He can use a spreadsheet if you know how to set up a spreadsheet. And you need to work together as a couple if you're married. You both need to know what's due, when it's due, and how much is due. And that includes all your credit card payments. It keeps going even when you overspend you keep tracking your expenses that you overspent in a few categories. And that can help you identify a potential problem. Or maybe you when you set up your budget was a month where that spending was lower. So you need to figure out averages, what's the average you spent on electric for your home every month? What's the average for natural gas? How much is your trash bill, were you we know your mortgage should always be the same every month. How you break bad spending habits? Well, the first thing you need to do is get your finances under control. So now you can see what's going on, you can see that you maybe have a bad spending habit. And you can get rid of those credit cards, put them aside, don't cancel them, but quit using them. And if you know that you have $300 in your checking account, and it's three days before payday, you know, you have $300, they can only spend. So my suggestion would be on spent $200. Right? To say that extra $100. And then when you get paid to transfer it into your savings account and increase your emergency fund, expenses you can control. It's basically everything your heating and cooling, you can adjust your thermostat, so you cool less heat less your internet bill, your cable bill, if you're still paying for cable TV, that should be in an entertainment. And that's a want not a need. can reduce that by getting rid of it and start streaming your TVs. If you don't stream, your TV shows you're missing out on an easy way to reduce your spending and an easy way to increase your savings. So remember, tracking is the motor of your personal finances. Because the income coming in is gonna drive what you can and cannot do. If you have income that steady, it's always the same. It's more much easier if your income varies month to month. Because maybe you're on a commission base, and one month you may make three times you did the month before. Don't use don't live on credit cards to pay your bills because you'll never get out from under him. It's difficult. So you want to do is put money aside when your income is really high. Put aside in the emergency fund. So when your income is really low, you have the money to pay for your needs. And then you got to be careful about your once. So tracking is the motor, the engine that controls all of your personal finances. So start tracking today. Know what you owe, who you owe, how much you owe, and when you owe it, and you'll be glad you did. So