Reduce Debt Increase Wealth

Tracking Debt

June 11, 2023 MIsterchuck Season 4 Episode 169
Reduce Debt Increase Wealth
Tracking Debt
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Show Notes Transcript

Debt problems this is the first place to start. Tracking debt the how and why to get debt under control. Tracking is more than just debt also includes income, and spending. 

Article Link: by Lauren Schwahn and Sean Pyles

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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. Tracking debt, debt problems, this is the first place to start tracking debt, the how and why to get debt under control. Tracking is more than just debt. And also includes tracking your income and spending, which I've talked about extensively in past episodes. I've had on tracking debt a long time ago, maybe a year ago, but I've hadn't covered it in detail in a while. So that's why we're gonna focus on tackle your debt with a debt tracker. I have a link in my show notes to that article. It's from the nerd And it helps you identify why and how to track debt, and what to keep track of, it's more than just knowing the debt you may owe. Maybe you know, you have three credit cards with an outstanding balance. Maybe you know, you have a mortgage and a line of credit and a car loan. But that's not enough. And in order to track your dad, in order to get your debt under control and reduce it, you have to know the details on all your debt. And what are the details. I have a link in my show notes to this article from the nerd wallet as I mentioned before, and it gives you the details of what you need to track. Now what is a debt tracker. It's a debt tracker is a system for monitoring debt. It can be a basic notebook, or a sophisticated tool such as an app, spreadsheet or calculator. Using a debt tracker can be key in paying off debt, I recommend you do it in a spreadsheet. I also recommend you do it along with your budget or your control center. But what do you need to keep track of one you know, you need to know who you owe the account names. These are the lenders whom you owe the money, you may pay off your credit card bills to Capital One for example, less than the account names ensure you have all your accounts accounted for and know who to contact about any issues. So the name, the name of the credit card, the name of the lender, whatever it may be account types, the Pacific types of debt you might include, and student loans, credit card or medical debt, you might need to handle different types in different ways. For example, forgiveness could be the best option for your student loans. While consolidation might be better for your credit card balances, balance for each account, make note of your remaining balance. This tells you how much you currently owe. And this is important. If you have no clue on how much you owe anybody you have, you will not be able to plan for your future, you have no idea of maybe how long it's gonna take you to pay off that debt. So you need to know the name, the current balance, the type, and the types you would categorize. You'd group your debt together by type. Like you put all your credit cards together in alphabetical order, then you would put your mortgage line of credit together you would put your student loans together. And that's just how you're gonna group them on your spreadsheet or your notebook or whatever you're using. And the next thing you need to know is interest rates. The interest rate is the percentage a lender charges you for the debt, carrying a larger balance or will cost you more and entrust. Seeing your interest rates can help you find your debt payoff path, especially if you want to use the Debt Avalanche, a method that targets the highest interest rates first. So as your group and things to gather by, say credit cards, then you if you want to put them in alphabetical order And then you might want to put them in order by the highest interest rate to the lowest interest rate. Maybe not even put them in alphabetical order, put them in order of high interest rate, the lowest interest rate, so that you need to know. So if you're setting up a spreadsheet, you would have the name, the type, I would then put the interest rate, the balance, the minimum payment, the due date, those are the things you need to know, he needs to know the due dates because you need to plan for when you gotta make her payment, he needs to know the minimum balance, because that's where you're gonna pay to try to get your debt under control using my plan, using your debt reduction plan. Remember, under the debt reduction plan, you make the minimum payment until you get your emergency fund built up. And then you build up more to your emergency fund, then you apply the Ekster above what you're needing your emergency fund to one of your debt. So the minimum payment is the lowest amount you're required to pay each month, usually based on a percentage of your balance or the terms of your loan, you'll pay down debt faster if you can manage to make more than the minimum payment. While that may be true, if you're struggling with all your debt, you don't have an emergency fund he need at first. So you need to make the minimum payment. Over time it will speed up. So it's so let's go over that. Again. If you're doing a spreadsheet, you need to group your debt. And if you don't know what your debt is, you're in a bigger problem than what you can ever imagine. You have to know what your dad is, he got to know who you owe, what type of debt you have the balances on each the interest rate, the minimum payment, and the due date. That's why you need to write it down or put it on some sort of a calendar or put it in a spreadsheet. If you do a spreadsheet, you can always sort it around by different criterias, the base on what you're wanting to solve, maybe you want to pay off the highest debt first. Okay, well, maybe you already have that done. Now, you just want to put it in alphabetic order. Or maybe you want to group it together by type. So you credit cards or they gather, and then your mortgages and then your car loans. So you can have types. So what I would do is set up a spreadsheet, Column A would be the name of the debt, Column B would be the type of the debt, Column C would be the interest rate, Column D would be your current balance. Column, f would be minimum payment, and Column G whatever we are, is the payment due dates. Now, the payment due dates, you don't need to include the year, you just need to put the day of the month that it's due. So if your payment is due on the 10th of the month, he has put in a tab. If it's due on the 15th you put in the 15th and it's that same day every month, so you ain't got one day you gotta put it in there. Then you put your information to work. Gathering information about your debt and including the different accounts, their balances and interest rate can help you figure out how to manage it and keep you on track. If you want to try the Debt Snowball Snowball Method, for example, where you pay off your smallest debt first, sorting your debt by their size, we'll show you where to start and getting your payment due dates in order to help you make sure you don't miss one. Which is important because if you pay late or miss a payment, you're gonna be charged penalties and you don't owe more. So it's a matter of keeping your finances under control and order knowing what's going on at all times. paying off debt as like a long term process and it can feel overwhelming. Whenever you're not sure how to manage your debt. Look over your tracker for references. Why tracking debt matters as easy to feel consumed by debt, especially if you have multiple sources. Using a tracker can help you regain control and estimate when you'll be debt free. Sorting out when it's due when it's a Smart Step Four towards prioritizing debt. Finding the right strategy to handle it and making payments on time and tracker let you watch your hard work. pay off, you might want to put in their your, you know, your beginning balance and then your current balance. So you might want to set your spreadsheet up in this order the name, the type, beginning balance, beginning balance as of the time that you're setting up this tracking system, or when you start getting your debt under control. So that's your beginning balance. current balance is the balance they are in this particular month. So if you started six months ago, and you made six payments, your current balance should be less than the beginning balance. That way, you can see how much you are decreasing what you owed, the interest rate, the minimum payment, then the due dates, the current balance, you update as you make a payment on the ongoing time. It's this a little extra work, but it's gonna help you see how much progress you made on that particular credit card, or that particular debt that you're you're interested in at that time. So it's important. Now let's get back to tracking. This is tracking your debt only. But tracking is a much bigger and more important process and your personal finances, tracking your income as it comes in. And your spending as your money goes out is very important. Because that is the life blood of your personal finances. And once you've done the tracking of your checking account, your your credit cards, anything that you use to purchase money or items with you need to track. The common ones are your checking account and credit cards. Whether or not you make any charges that month doesn't matter. You might have made a payment, you got a track that that's the apps you can use. Like the one I use is Count It's good for doing the tracking on your checking account and your credit cards and keeping control of knowing where you are at all times how much money you have, when things are made come and do because you can set up your reoccurring payments, and they'll pop up a few days before they're due. So you know what's going on and you hopefully won't miss a payment on anything. Tracking your debt is a little bit different. While you can identify and have the balance of your credit cards and everything you may owe on there, it doesn't tell you the interest rate, there's no way you placed in there, the put the interest rate, there's no place in there to put in that type of debt, you just gotta have to know it may be in the memo, you could put it. But there's nowhere to put the interest rate, there's no word to put the minimum payment, there's nowhere to put the due dates of payment due dates. So while it works good for tracking your income and your spending and all your credit card spending or purchases. It's not good as a detail for keeping track of the debt that you may have. That's why I say do it in a spreadsheet, or you can manually do it in a notebook. But a spreadsheet, you can update it, it does the math for you. And it's much faster. And you can sort things around and you don't have to rewrite it is just, to me a better way to go. But I'm an accountant. I've used spreadsheets, I've learned sprout how to do spreadsheets, basically my working career. While I'm not that great Adam, I can get what I need done and get the math done fairly quickly and easily. So that's what I recommend that you should do is use a spreadsheet. If you don't have a spreadsheet on your computer, then maybe use a notebook or do it on paper, paper, pencil and paper. Because this be able to look at one place at a glance and knowing what you owe what that you have. How much you owe. He can mean even totaled up at the bottom for a grand total she have a good idea of what your starting balances were and your current balance. It is today, you know six months eight months later, so you can see the progress that you may be made. aching. If you find this podcast useful or beneficial, and you'd like to make a contribution, you can go to my contribution page in the link in my show notes, or go to reduce debt, increase, click on support the end up at the same place. Any amount you contribute is appreciated. Thank you. 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 an 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 e mail at reduced debt increase And I'll send you the information about this online software that worked great for me. Perhaps you're thinking you don't really want to know how much debt you owe, you know, you have problems. You know, you owe debt, maybe you don't know exactly how much and you're trying to avoid it. Because you really don't want to know, the sooner you're faced this problem. The sooner that you write it down, get it in front of you know, what's going on as far as what your debt is concerned, know who you owe, how much you owe the interest rate on the loan, the minimum balance and the due date. Those are things you should know, because how are you going to make a timely payment? How are you going to know if you're trying to pay off your debt, what order you should go, if you use the Avalanche Method, which where you pay off the highest interest rate. First, you need to know which debt you owe and what the interest rate is. If you're gonna do the snowball method, or you pay off the lowest balance first, then you got to know how much you owe all your debts, we know which one to pay off first, is simple. The sooner your faces, the sooner you're going to get your debt under control, and getting your debt under control and be in minimum amount of debt, it's gonna free up more money for you. So in the long term, you're gonna have more money to do things down the road, the less debt you have. So if he keep your debt under control, you can earn less money and live a better life, you can make decisions without worrying about how you're going to pay for things, you're gonna know, okay, I only have my mortgage, and it's $800 a month. So I can change jobs. And I don't have to worry about as making as much money, because I only owe $100, I have two cars that are paid off. I don't need a new car for two years. So I can get by for a while without buying a new car, you have your life under control and in front of you, you can make decisions without the worry of the financial burden that may be involved, you maybe can change careers because you're in the career you don't like or maybe you're in a career that became a dead end. And before you get laid off, you can quit and get another job in start a different career and not have to worry about how you're going to pay your bills. Because your debt is under control. You have minimum debt. Now there's some debt that we have that you cannot avoid. And that would be a mortgage and if you're buying your home and maybe a car if you want to buy a newer car. Other than that the than any other debt is really based on once and if you really want can control your debt, you need to control your wants, because that will control your spending. And the less spending you do, the less debt you will ultimately have in the long run. So if you can save up money before you buy something so When you do buy it, you borrow less for a shorter period of time, you pay less interest. So it's gonna cost you a lot less money. The more debt you have, the worst credit score you have, the more entrust you're going to be required to pay when you can least afford it. So by keeping all your debt under control at all times, is key to a happy life. Believe me, I know. But in order to do that, you need to track your income and you need to keep track of your spending. And that's then coming up in the next episode.