Charles McDonald: 0:04

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. Hardest part of reducing debt getting started reducing debt is the hardest part of this program. Why is that? Because first must recognize the problem and how to fix the problem. Second, is just finding ways to start and quit using debt. Why am I saying all this? Well, because I assume if you're listening to this podcast that you have, and you've already got past part one, you recognize that there may be there is a problem, that you have too much debt. So you're already it's already too late. You're already having problems who you wouldn't be looking for help or ways to get rid of your problem. So congratulations, you're past step one, you recognize you have a debt problem.

Unknown: 1:23

The second part is the hardest.

Charles McDonald: 1:28

Quit using debt. Why am I saying that? I'm saying that because if you have a problem, perhaps you have using your credit cards, or you're borrowing money, however it is you're doing it to pay for your needs. What are your needs, your needs are housing in everything related, the rent, the mortgage, and all the utilities for the home, food, and transportation. And if you're using credit to pay for any of that, you're having a problem, your debt is not gonna go away, because you're adding to it each and every month, maybe even every day. Most of us are using credit cards to pay for gasoline. And if you're not paying the credit cards and balance in full every month, you're just adding to the balance, because the oldest part of the balance is getting paid off first. So it may be on there, even though you charge it today, you make a payment tomorrow, that payment is being applied to the oldest balance that might have been out there for six months or a year. So it may be a year before you get enough paid off before you pay for today's gasoline purchases. So in my program, that's why the first thing you have to do is quit using credit, you got to quit using your credit cards, you got to quit borrowing money, you got to quit using the overdraft on your checking account, he gotta get your checking account above the zero balance. And it's got to remain there. In fact, you should always have a minimum balance in your checking account at all times. For me, I set my minimum balance at $600. Which means that I when I pay all my bills, I'm gonna have at least $600 remaining in my checking account. It hardly ever goes below that minimum amount that I've set up. If you're just getting started, you need to set the minimum bounce of your checking account to at least$100 or $300. And why am I saying that because one, you'd no longer want to use the overdraft protection on your checking account. Because the bank is charging you fees to do that you're paying for interest. He got to quit doing that. So let's start with your checking account. Let's get it up above a zero balance and get away above that so that you have enough money in your checking account to pay for all your needs each and every month without going negative. I can't make it any simpler than that. And why step two of my program well, it's not really a step wide that second thing you have to do is start making the minimum payments on on all your debt on all your credit cards. So if you're like a typical average person, you have two or three credit cards, maybe more, that you're carrying a balance on each and every month. And perhaps you're paying$25 Extra each month on every credit cards. Oh, that's $75 to$100, that you're paying extra? And what good has that done you? How long have you been doing that? Has this been going on? For six months or last six years, it's most likely been going on for a while more than a year prior to making the minimum balance? And why am I saying that? Because you want to free up money. So they get one, get your checking account above zero and keep them least a minimum of$100 or $300 in there, or it never goes below. And number two need to start your emergency fund. And why you need an emergency fund so that you can quit creating new debt. And something would happen, that's not in the normal monthly bills that you pay, it could be considered an emergency, your automobile breaks down and appliance breaks down needs replace in your home, an accident or somebody gets injured and you gotta go to hospital, you won't be able to have money to pay for at least part of that emergency so that you can quit creating new debt. This is the hardest part of the whole program. And once you get be on this, everything else becomes easier and easier. And everything else will eventually start speeding up over time. So how are we going to do this, I only can tell you what I did. And it was a struggle. And it probably took me the longest period of time to get out from under that. Because I was using credit cards to pay for my gasoline, I was using credit cards of some times to pay for maybe a utility, I would get a cash romance, or I would do something to pay for mine, something that was my needs. And it was a struggle, I was just going deeper and deeper. It doesn't matter why or how that came about. But I recognize that a never will get ahead in life, I will never have any money that I'm working for the banks, and not for myself until I got everything under control. So now I have a link in my show notes from money.us news.com easy ways to pay off debt. And believe me, there's nothing easy about anything that says 14 easy ways to pay off that. They they're just giving you 14 ways to pay off debt. And there's no particular order. That's why if you listen to my podcast, I gave you the order of how you got to approach this problem, I give you what you need to do, when you need to do it. And that ferry first thing you got to start doing is quit using credit, you got to quit using your credit card, you got to quit borrowing money, you got to quit everything. Even if you're considering doing a consolidation loan that may help you on the short term, but you're not getting rid of any debt, you're just rearranging your debt. Yes, you may be you're getting it at a lower rate of interest, that may be for a longer period of time. So before you even do that, because your maybe your credit score is not good enough to even get a decent personal loan to pay off those credit cards. And if you do, what that lender gonna do, they're gonna force you to pay off and cancel, those facts are gonna do a for you to cancel all those credit cards. And that will on the short term, short term being one the five years, it's gonna hurt your credit rating because you're gonna have less available credit. So in this article, they got 14 ways and they're not in any particular order. And really, if you just try to do one or two, you're not going to make any progress create a budget, they really don't tell you how to do it. They just saying you need to create a budget. Well I've created a budget for most people, they don't like that word. And I call a budget a control center. And I go through and explain the easy way to do it, and why you should do it, and how to do it, and how it can help you. And then you pay off your most expensive debt. First, you pay off your smallest debt, First, pay more than a minimum balance, take advantage of balance, transfer, stop your credit card spending, that should be number one. And they got down here way down. Use a debt repayment app. Now, here's a good thing, delete credit card information from online stores. And what they're saying is, wherever you go online to shop, if you save your credit card information, maybe is Amazon maybe it's Walmart, wherever an online store, go in and remove your credit card information. That way, you will avoid impulse buying, we can just click on something, buy it and it automatically does it for you. It will stop doing that. Sell unwanted gifts and household item, change your habit, increase your income with a side hustle, consider debt consolidation get help from a credit counseling agency. Avoid returning to bad habits when you reach your goal. Well, that's it in no particular order. I'm gonna say that I'm a do it yourselfer. I never use a credit counseling agency. I never really I did do some debt consolidation. But I've done it my way, I really didn't go out and get a personal loan to do it, because I didn't believe in it. So that's why you need to listen to my past episodes, because I go through all these items, I give you the order on how to pay off your debt went to do and when to do it. So the first step is quit creating new debt. So that is a struggle for everybody. You're not the only one, what are we gonna do? Well, the first thing you need to do is know where your money is going, how much money is coming in and where your money is going. That's called tracking. You can get an app, I use Count about.com. It's an online app, you don't have to download anything on your computer, you can access it from access it from any computer, and it's secure. Do not link any app to your bank accounts. Because if you link it, it's going to automatically update and you're not going to get the benefit of it, I recommend that you manually enter everything in to the app, you put your checking account in there, you put a savings account, if you have one, if you don't have one, you need to go to the same bank, that you have a checking account and set up a savings account, because that's going to be calm your emergency fund. And that's one of the steps, they're early steps on helping you quit using debt. You put in all your credit cards, and you then enter every transaction that happened for the last 30 days. So if you're doing this in March, say March 10, you go back to first of February, you enter your opening balance for your checking, you enter all your deposits, you enter all your payouts, all the checks, ATMs, withdrawals, whatever it is. And while you're doing that, you're categorizing every transaction. And it's important that you're consistent on categorizing every transaction so that you can get a good report later. Once you get through the 30 days when you start paying the same things again, it should automatically pop up and it will know what category that goes to. But be careful. If you got a grocery store that also sells gasoline. If you go there and buy groceries one time, and you go there and buy groceries the second time and maybe you buy gasoline he got to make sure you split out the difference between groceries because that's food and gasoline because that's for transportation. Just a note of interest there. So once you've done that for 30 plus days, you can create yourself a report by category that you use use to set up your budget or a control center. Your budget is basically grouping your categories together. And by needs first, housing, transportation, food, clothing, those are the four categories that I consider needs things you need. Now may be clothing is not a monthly expense, maybe it's something you can control and really cut back on. But trying to find housing, and transportation and food are the three major things you're gonna pay every month. So you need category set. Now under the housing, you also include all utilities for the house, all your subscriptions for your TV, your cable TV, your streaming, TVs, all those type of things. Under transportation would be your car, and also your mortgage payment and your rent payment, and home insurance, etc. Everything related to the house is housing, transportation, same thing, your auto loans, your gas, your repairs. Travel, if you got if you live in a city and you pay for public transportation that goes on your transportation, food would be groceries and dining out. This way, you can see where your money is going on a monthly basis, you can set a limit for yourself and tried to reduce your spending. At the beginning, you put everything in there, no matter what you put everything in these categories. And if you can't categories, call it miscellaneous. And you got to go back and look at it and pick a category. Or once is entertainment, hobbies and other things that you can get by on without paying for on a regular basis. The needs are the first are the ones are the first area we're gonna start cutting back. And then you look at your housing, you look at your transportation, where can you cut back? Can you lower the thermostat in the winter? So you pay less utilities? Can you lower this, increase the thermostat in the summer. So you pay less utilities, you figure out ways to start saving the money. And by tracking your spending and your income. And knowing where it's the one and putting it together in a group that's called a budget, which I call a control center. You can look at this same information every month and see what's going on. And if you have one category with increase from month a to month B and figure out why. Now maybe it's not a bad thing at one up, maybe it's something you can explain, but at least you know about it. And that's the important thing is to know what's going on. And your personal finances. You know what all your dad is, you got everything down in front of you. You're aware of what's due, when it's due, and how much due and how much money you have to pay for it. So if you're struggling, and it seems like you're never getting ahead, and it seems like you're paying, you're working for the banks, you definitely have too much debt. How do you get there? Well, that's only up to you to determine. But the main thing is, how to get out from it. And how to stay away from that is the important thing. Because if you reduce your debt, you're gonna increase your wealth over time. If you do nothing else, you're gonna be much better off because the less debt you have, the more savings you're gonna have. The more savings, the more investments, your wealth to kind of grow, and over time is gonna grow larger and larger. So the hardest part is one, recognizing you have a problem. And then the really hard part that could take it two or three or longer months to get out from under is quit using debt, especially if you're using it to pay for your needs. Once you identified everything you need to look at what you can do without maybe you're paying $150 a month for cable TV, and you only watching it a few hours a week maybe only on a Saturday or a Sunday or on a weekend. You need to cut that out. You need to cut back on Everything you don't absolutely need, cut your spending back as far as possible. And this is the first step of reducing your debt. So remember, you're only paying the minimum amount on your debt, and you're cutting back all your spending the maximize your income as much as possible, you're putting in that extra money that you're not paying on that debt into your savings account. And you're building that up to a first achievement is $1,000. And once you have$1,000, in that savings account, you just keep adding to it until you have 2500 to $3,000 above the $1,000. Because if $1,000 is going to be the minimum, you have your checking account, that's never goes below 100 or$300, you'll always have a minimum. So you're not paying the bank overdraft fees, you're not paying them interest on the overdraft that you use. Because you're no longer using it, you got your credit cards, you're paying them all on time, even though it's the minimum balance, you're paying them timely. So you're not paying late payment fees and added to your problem. It's all important, everything's paid on time, and that you have the money available to do it. So once you make all your payments, okay, one of the other parts of your budget is listening, all your credit card debt, or debt that's not in a housing transportation category. Because you need to group that together, you can arrange them by the lowest balance to highest balance, you can arrange them from the highest interest rate to the lowest interest rate, whatever you want to do. If you're somebody that needs to have achieved something, then you put the lowest balance to highest balance, you pay off the lowest bounce to not cancel that card, you keep that card open, and then you work on the next one, and then you work on the next one. And you're making progress forever, you have those cards that you're paying off, that's one more minimum balance that you don't have to pay. So that's more money, that's going to go into your savings account, which means that your savings account is going to grow faster, which means you're going to pay off your debt faster. So it starts out slow, it takes you a while to get going. And this is the hardest part that you must overcome, you got to look at how what you're doing with your spending, you got to cut back to the bare bones, maybe sell things you no longer need or use and create some extra income and apply it to your savings account your emergency fund, and then eventually, you're going to apply it to your debt. Be back in one moment with my final thoughts. If you're interested in learning about an online software that helped myself get out of debt, it does tracking, budgeting, and keeps track of all your assets and all your debt. And even tells you how much and when to transfer money into your savings account. And how much and when to transfer money to your debt and which debts to pay off and order. First. It's not cheap. It's a one time payment. But it will definitely be an investment something and yourself and an investment and your personal financial life. If you're interested, send me an email at reduce debt increase wealth@gmail.com. And I'll send you the information about this online software that worked great for me. So why is quit using debt the hardest part? Because you're used to buying whatever you want, whenever you want. And you had no control over your spending. You just have whether it was an impulse spending, or whether it was your Getting Started out in life. You don't have much any need to buy things maybe you're in your first apartment. So you need some furniture, you need some kitchen appliances, and you maybe get your first job and you have to have different set of clothes and you just got behind because you had to spend money upfront. Well, that's fine. Everybody goes through that. But you need to plan ahead more, we need to take control over your spending. And once you have control on your spending, and you save some money, and then you start investing, and here's a tip there earlier in life, the younger you are, when you start saving money, and start investing the money, whether it's in a savings account, a high yield savings account, a money market fund, and then eventually maybe into the stock market, and mutual funds, and you spread your risk around. The younger you start doing that. The more money you're gonna earn by not working, your money is gonna work for you. If you keep getting farther and deeper into debt, the money is working against you. You're trying to pay, you gotta pay for the use of that money. And that's what you need to avoid throughout your life at times is a requirement when you want to buy a home. Yes, you have to borrow the money to do that. When you want to buy your first car or your second car or your third car. Yes, you need to borrow money to do it. But there's ways to keep it under control. Don't live beyond your means. Don't try to keep up with the Joneses or your neighbors or whoever it is. You're trying to outdo live your life. Keep your life under control, save money, invest money, and you're much better off and glad you did. So