Reduce Debt Increase Wealth

Questions to Ask About Personal Finance

April 02, 2023 MIsterchuck Season 4 Episode 159
Reduce Debt Increase Wealth
Questions to Ask About Personal Finance
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Show Notes Transcript

Money is important in everyone’s life let us ask the tough questions about personal finance. Knowing the answers will help in the long run to manage finances and make life better.  That is what life about staying focus and ahead of finances.

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Charles McDonald:

Hello, I'm your host, Mr. Chuck, Iam 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. Questions to ask about personal finance, money is important in everyone's life. Let us ask the tough questions about personal finance, knowing the answers will help in the long run to manage finances, and to make life better. That's what life's about stay in focus and ahead of finances. I have links in my show notes to two articles. And you can refer to him if you wish, but I'm going to be going to him. And just a note. If you find this podcast helpful, and you would like to contribute, you can subscribe to it and pay a monthly fee if you wish. Or you can just do it one time, one month, go to reduce debt, increase and click on the subscription button. And you'll get the information from there. Remember, you can cancel at any time. So click a once way today and non subscribe and I'll get whatever the amount you selected. And I thank you in advance for doing so. The 10 answers to the most common questions about money, we all wonder about money. But how often do we actually ask we researched the best financial advice out there to bring you some clarity. How bad is it if I don't pay off my credit card every month? Well, your FICO score will hurt. You need a good credit score for many things like leasing a car or taking out a loan or renting an apartment or even renting a hotel room for one night. But a bad credit score can prevent you from doing those. Credit cards are useful in emergencies, when you may not have that cash flow to cover, say an unexpected car repair bill or an emergency flight home if you didn't pay down your credit card every month, don't beat yourself up. But don't let yourself off the hook either. This free spot is keeping your total balance at 30% or less, according to the credit utilization ratio. So what they're saying here, if you don't pay off your credit cards on a monthly basis, you don't want the bounds to be more than 30% of your available credit. Now we all know what happens when you get behind on debt. So that's kind of a question we all should have a realistic answer to our an already know. So what does a realistic budget look like? And this is 100% from me a realistic budget as a budget, will you pay all your monthly bills on time for your needs for housing, transportation, food, and some closing when necessary. Anything else than that is would be a once and you can control that spending? Pretty much. That's all I have to say about that. So if you're paying your bills on time, every month, and you're not struggling, that's your budget. And that's your realistic budget. And if you're including saving 10% or 20% of your income, you're doing pretty good. You got your budget nailed down. That's all you need to know. So how much debt is too much debt? Well, too much debt is the debt you cannot afford or debt to charge us a high rate of interest or debt that's making you struggle from month to month. That's too much debt. So if you have student loans, and yo a whole bunch of money, and it's helping in his hindering you from borrowing money for other things such as housing, or an automobile, he have too much debt. As simple as that. And again, your credit cards you want to be 30% or less of your available credit to keep a good credit score. So how much should I actually be spending on fun stuff. Again, that's gonna be how much debt you got. The less debt you have, the more you can spend on fun stuff largely depends on your lifestyle and your location. He should be allocating 10% for food costs. Once you determine a number, try to hold yourself to it. As for fun budgets, we come across many different pieces of advice. Reread that 30% can be dedicated to the things you want, but don't need. We also saw 10% Tallaght touted as fun magic number. Now they're talking about 10 and 30% of your net income. Look over your past years experience to see what you spent on fun nights out clothing, makeup getaway weekends, and build your fun budget with that in mind, but remember, going over your fund budget, once does that mean you failed and that your entire budget is that no just means you're gonna get in trouble. And it's just a matter of when that's your wants, he gotta keep your wants under control. So that you're able to pay for your needs on a regular basis without much strain is your wants is where you get into trouble. If you borrow too much money to pay for your once where are there, it's a motorcycle, a boat of sports car, a family vacation home somewhere out of town that he used a one week a year, you may be putting too much strain on your financial budget, and you may start to struggle some sooner than later. So you got to keep your fun stuff under control. And be reasonable. Don't overdo it. If you're setting aside 10 to 20% of your net income, plus your 401 K, you're doing pretty good. He can build up your savings account, he can maybe pay cash for some of your fun stuff. So you don't have to go into debt to do it. How do I get good health insurance, I don't work somewhere that provides it. If you're self employed, and you're a professional, maybe your profession has some type of health plan for everybody where you can go together and get it. Or you have to go online to the I forget what they call it, that Obama Care setup, how soon they need to start saving for retirement. If you have a full time job and you're working and you're out on your own, that's doing you got to start saving for retirement, whether you're 1821 31. The sooner you get started, the better off you're gonna be because it's called compounding. And then it says here when not to start. There's always an exception, if you have high interest debt, focus on paying them down first, before getting sidetracked by thoughts on retirement. The same goes if you have no emergency savings, I say pull it to that you got to be putting some money aside for retirement at an early age and you never ever stop. Even if you get behind on paying off your debt. You need to follow my debt repayment plan debt reduction plan. He make the minimum payment. You build up your emergency fund. And you put a lump sum down on your when you're able to afford it. And they'll go away leaving Believe it or not how much money show I have an emergency fund a minimum of $1,000. And it says here three to six months of post tax income seems to be the consensus and financial financial circles. Six months is ideal. But given now they're saying income but I'm saying expenses. If you have six months worth of your expenses set aside that you can pay without worry because you have the money available. That's probably what your emergency funds should be. So how much is your rent, your utilities your food, your transportation, all those items? How much is that per month times six? How can I save enough to make a big trip once a year? Sounds they're saying set up a separate savings account for that trip I say just figure out how much the trip is going to cost divided by 52 weeks and put that money aside in your savings account amaray cut corners within my budget skipping the lattes packing lines is still not enough now what your expenses be too high for you income do some work to calculate your personal burn rate and adjust your spending so you're spending too much money still come in negative it's time to pay take a pay increase take a site make more money. So it's either cut spending or make more money. I'm moving in with my apartment. How do you divide up our finances moving in splitting and spend sounds like it'd be given a lot of peace of mind but it can end up being quite the opposite. Typically you don't share accounts if you're not legally tied to one another and one partner has much higher debt than the other. That's also a no no. But when it comes to rent and household expenses, it's blending everything equally seems to be like the ideal, but we all know, it's much more complicated relationships are. So don't hold yourself to standards based on what you think people should do. Come up with the rules that you're both comfortable with. Agree to them before you move in together, if you're not legally bound by marriage, and who makes the most money, who makes the least money, who works the most? Who works the lease all those things to be taken in consideration? 10 money questions to ask yourself so you can afford the life you want? Now, these are questions you're asking yourself, and these are the type of questions you should ask yourself once a year, what can I realistically do to improve my income level? You got to think to yourself, and this question, What can I do to improve my income? Do I get another job to change careers? Another job within the same career but a different employer? Do I maybe change careers go to a different career path? Or do I get a second job? A part time job? Or do I create a small business or something on my own? These are type of things you ask yourself on a regular basis, whether it's once a year, every six months, or every so often, you should be looking, what can I do to increase my income. Because you might be working somewhere where that company is struggling in name, your income might be going down, he might be unemployed. So you want to avoid that by changing jobs before that happens to what can I do to reverse bad credit and get my credit score back on track? That's pretty easy. Make sure you pay all your bills on time and the minimum amount and then build up your your emergency fund to a minimum of $1,000 so that you can reduce the need on using your credit cards. And then when you get a significant amount over 2500 to 3000, over your minimum, apply it to one of your debt. That's my debt reduction plan. Three, how much should I be saving for retirement as much as you possibly can afford if you have an employer plan that matches your contributions, you need to be contributing at least the maximum that they match. That's the starting point. If you can do more than that, increase it. If that's not enough, save more on your own on your own savings. And then they're going through some big thing here. Retirement is not one size fits all. He can use online calculators on how much you'll need to put away. This year you replace a portion your current income, but that time you hate your desired retirement age, how much you earn. What's in your planning for retirement you providing for someone else's? Well, spouse and children? At what age you want to retire. So the younger you want to retire, the more you gotta be putting in how long you expect your retirement to last, how many years you're going to live after you retire, or how many years you can be retired before you go back to work, or what you should be thinking about. For if I'm planning on having children, how can I ensure I have enough funds to take care of them on one income? When should I start saving for their schooling, a good exercise stashed away 10 to 50% of your income today, see how it feels. That's the percent of your income that will go towards your children for basic day to day expenses, not including schooling. If you feel you can manage on 85 to 90% of what comes in the door. That's a good indication you have room for kids are naturally when it comes for saving the school depends on how much support you want to provide them 100% of four years at a private institution 50% of four years at a public institution. Once you have a sense of what your priorities are, you'll be able to back into your savings goal. Add that savings goal to that 10 to 15% I spoke about earlier, and plan to live without that money. Is it doable? If so start saving as soon as possible. Pretty straightforward 15% of your income, put it away on top of your 10 or 15% You're already saving five. Well what happened my spouse passes away How can I plan for that? That's so much fun thing to think about planning, but it's pretty important to do so. When it comes to financial support your spouse provides your first step aside whether you feel dependent on your spouse's income, or if you own property or have kids together. So if life insurance makes sense, a life insurance policy can help you evaluate how much coverage is to attain to ensure that if your spouse passes away, he won't have to change your lifestyle. In other words, to be able to pay your mortgage and take care of your children the same way or now, monetarily speaking, six, When should I start investing money? And how do I know what to invest in? This question deserves that whole article and a half in itself. The long and short of this investing in a way for your money to grow over time, not overnight. Anything investing leads to a quick when you're thinking about it all wrong. Wall Street loves to portray investing more like gambling. But the fact the matter is, the sooner you start investing, the more successful you'll be. Because money grows with time you no need to be patient for it to work. As far what's invest in that'd be another Wall Street in the media portrays completely incorrect. They said make it seem like you're supposed to pick stocks and trade vaguely when the opposite is true, slow and steady wins the race. Have you ever heard of index funds, you're on the right track. Investing means to accomplish your financial goals. So technically, no one should tell you what to invest in, until they know what you're investing for goal setting is the first step and knowing what to invest in. To make it simple. If you have a retirement plan through work, and they're offering you some selections to invest in. That's what you invest in mutual funds, because of broad range, look up what a mutual fund is and understand what they are, and then buy mutual funds across the board. different industries, different segments? Seven, how can I save for house? What do I need to do? Speaking to my point above, the first step is to make a commit to homeownership as a financial goal. If you're in a relationship, you want to have this conversation with your significant other, the find the timeframe in which you accomplished buying a home, figure out where you want to live, and figure out what's the median or average selling point of houses in that area? And then figure out I need a minimum downpayment of 5%, or 10%. Well, you got to come up with that money first. How much can you afford to finance? Maybe you need a bigger down payment so you can borrow. So your monthly payment is more affordable? Are you gonna buy the house with two incomes or one income? If you're buying was two incomes? You think about having children? Can you pay for that on one income? And support the children in your spouse? These are all considerations you have to think about. And you should be doing this before you do it. I'm referring to he should be thinking about these things before you jump in and do it. Eight, how can I make a budget that still allows me to live the life I want? Are there any apps I can use? And yes, there's many apps you can use. I recommend you track all your income and spending and then you create yourself a budget, he can listen to past episodes right talk about this. This is what comes in just don't rely on on and get his app and it's going to tell me everything I need to know. Because that's not gonna happen. It's only as good as the information then. And if you don't put all the information in, you're gonna not get good information out. Nine, should I have a financial planner? Yes. How do I find one that's right for me, and it isn't gonna cost too much. If you have more than 10 or$20,000 invested in the stock market, or if you had 50 or$60,000, sitting in a savings account not doing anything, you need to find yourself a financial planner to help you make financial decisions on what to invest in. Now they evaluate you based on what you want to do. They look at what you're willing to take as risk, your age, how long and what your goals are and how much you trying to achieve, how much you can put in. They take all that in consideration and then they invest appropriately for that these things. So if you're young, it may be a more aggressive investment strategy. If you're middle of the road, it may be a more conservative if you're senior, a real conservative to preserve your capital. So it depends on your age, how much and what you got do and how long you have. But yes, you should have a financial planner, it should be a fiduciary, meaning they're an it for you and not themselves. A stockbroker is not a financial planner. They're just somebody that wants to sell you stock and investments, mostly stock 10 Do I have enough for an emergency fund? How much should I keep in the fund, your emergency funds should be no more than three months worth of your spec, fixed expenses. Most professional Greil, say six to 12. But we think that's crazy for four reasons. your emergency fund is supposed to be your first line of defense, not only not only your line of defense, we're at a time that occurs, we're able to reset our incomes pretty quickly. We have many other financial priorities, wait until we saved up six months and cash has wasted precious time that could have been better used helping us achieve other financial goals. Okay, this you probably want to read later on, on my show notes, I have a link to that in my show notes. It's gonna be up to you. If you are trying to get out of debt, and you're trying to save up money for retirement, then you probably should have a minimum of $1,000 in your emergency fund. As your debt comes down, your emergency fund should grow until you have at least three months of your expenses covered. Meaning if he gets fired tomorrow, you can pay all your bills for three months. And you'll have all your needs covered your housing, your transportation, your food, he can go without buying some clothes for a few months. If that's makes you nervous that three months is not long enough. Or if you know your career takes longer than three months to find a new employer, then you need to have more in your emergency fund based on your particular situation. I'll 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 in 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 in your personal financial life. If you're interested, send me an email at reduce debt increase And I'll send you the information about this online software that works great for me. We all seem to get comfortable in life, we get settled into a job doing the same thing in day in and day out. We buy a home, we get settled in there, we pay our expenses. Maybe we have one or two credit cards together control from time to time. So we're struggling to keep them credit cards pay down. Maybe we have to buy a car or something. And emergencies happen and we have to charge some more money. That's life. But what should you be asking yourself, reviewing your life on a regular basis is not going to hurt nothing. And you do it in your own brain? Navy, if you're married, you can talk to your spouse about some of the things that you think could be a problem. So if you're struggling with some debt, which most people listening this podcast probably are. You need to be asking yourself, well, how often? Do I need to change jobs? Where do I need to change jobs? Or need to find a new career? Or maybe get a part time job to earn more money? That's something you should be asking yourself on a regular basis. You should be looking at where your money is going and ask yourself, am I paying too much for these services? Can I get my cell phone with the same service for a cheaper price? A less per month plan somewhere? Maybe my streaming services can I get it somewhere else where I get the same amount of service features for less monthly fees that costs for prices up lot of these services have been going down over time, because again, more and more customers, so they reduce their monthly fees. But if you're locked into a plan, your plan never changes unless you change it. So anything that you got to plan on, you should be looking to see if you can get the same amount of service for a lesser price. That's how you reduce your spending. That's how you keep everything under control. You bought a new automobile and you got a new loan payment that was only $25 more a month in payment. But now, it seems to be putting a lot of stress on your budget.$25 a month is not that much. But if you go through all your plans, and you can minimize where you're spending money, and you set your thermostat, either back or up, depending on heating or cooling, to reduce the amount of utilities you're using, you can make up for that extra $25. So you're back in the same place. You were before you bought that automobile, and got that new love. Whatever you do, you need to review things on a regular basis. Maybe you are paying for a subscription for TV streaming service that you barely use, and it's a duplication of something else you have. Maybe you can do away with it and save that money that you're paying out on a monthly basis for that service, or a semi month or whatever it is. There's always ways to cut back on spending. There's always ways you can save money, but I'm not talking about where you're like have absolutely nothing, where you just pay your rent and your utilities and your car payment, put gas in the car and you buy food and you don't have any fun. You don't have any little extra entertainment at home or away. That should be part of your budget. We should allocate some money to do those things you enjoy doing that keep it under control. Don't overdo it. And that's what everything about life is. Whether you're gaining weight, you're overeating. So don't over eat. If you get yourself injured a lot because you're exercising. Maybe you're over exercising, so you cut back a little bit. Unless you're a professional athlete or bodybuilder, I don't know. But you don't want to overdo anything no matter what it is. Whether it's eating, exercising, taking vitamins, don't overdo vitamins because your body just passes it through and they won't do you any good. Those type of things. Keep everything in moderation, and you'll be glad you did. So