Charles McDonald: 0:04

Hello, I'm your host, Mr. Chuck, I retired accountant turn truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination. Budget from tracking categories. making and keeping a budget needs to be simple or it will not work. Here's a way to do a budget the easy and fast referring to using tracking app by printing out a report to develop the budget. Budgeting is to help identify problems and adjust to reach goals, not just to reduce spending and make life less enjoyable. Your tracking app is your lifeblood of your personal finances. That's where you put in everything you do regarding to your finances, your income, your spending, your credit card charges, your loan payments, everything you do is run in through this tracking app. annoying thing it is if you're not doing it on pencil and paper, which I don't really think too many people do that anymore. Or if you're not creating your own spreadsheet and doing it because you don't want to spend the money. Nowadays, the tracking app is a big database, doors, all your information, all the data that you put into it. And then you can create reports to get that data out of that app. So what's the purpose of doing all this tracking, and that's where most of your time is gonna be spent, is doing the entry into this tracking app of your income and all your spending. That's why I say do not automatically set it up to download from your bank account or from your credit cards, because you're gonna lose sight of everything going on, the purpose of your tracking is for you to be aware of what's going on in your personal financial life. So by manually entering all the transactions, you're going to be much more aware, if you're married have a significant other, maybe you can take turns, one of you could enter one week and the other one can enter the next week, that way, you're both involved in the process, you both then we'll know what's going on within your personal finances. And that will help you stay focused on reaching your goals. Maybe your goal is to pay off your debt. But what are you gonna do after you do all that, you're gonna have different goals, this is gonna go on the rest of your life until you're unable to do it, and then somebody else will have to do it for you. But this is a process that everybody should do that everybody needs to do their whole life, from the time they start working to the time they are no longer with us. So that's the tracking. The budget is your control center. The budget is where you take the information from your tracking app program, you create a report, and then you take that information, and you put it in some type of order. That is called a budget, or as I say, is called a control center. And why are you doing that? Well, in order to use the information you put in there, you need to sort it out and put it in some type of order that's easier to understand. So where you can apply some numbers to it some percentages, so you get a better idea. You can see where maybe you're spending money that you don't need to spend or maybe you're spending too much in this particular month versus the past month. Is this a way for you to easily identify problems as they occur, and then you can take steps to fix it. A budget is not meant to be there. Just to make your life miserable is not there just so that you cut out all your spending and you save 99% Of all the income you make. Well, if you want to do early retirement, maybe you're gonna do that, that sense on what your goals are. Maybe your goals would be to buy a home or maybe have a goal to buy a boat or something, something recreational, or a different type of car, maybe you want to collect cars or maybe build a bigger garage, whatever it is, the budget is there to help you save your money for a particular reason. And that reason is what we call a goal. So if you have different reasons, say you want to save money for your children's education, that's a goal. So you need and now look at your budget and see where you can maybe cut back here. So you can say more there. That's all it's about. It's a control center, it's help and designed for you to understand what's going on in your life. That's the reason you do a budget, I'm gonna start out genuinely just talking about how we're going to create the budget.

Unknown: 5:58

If you've been tracking, and your tracking app

Charles McDonald: 6:02

for at least 30 days, probably longer, because I always say start the month before and enter all your transactions in from your checking your savings, your credit cards, whatever the cases may be all the way up to the current date, then you go back to the first month that you have completely done the first 30 days. And you want to create every port from the first of that month to the end of that month. By Category. And printed out most likely is gonna give in you want totals by category, you don't want you don't necessarily need the detail at this point, what we're trying to do is get some numbers, where you've actually spent money by as particular category. So we can start setting up a budget. And that's the purpose of it. You rarely hear me say, cut out spending, the only time I talk about cut out spending where reduce spending or find better ways is so that you can reduce your spending in areas that's not needed. And put the money towards paying down your debt to increase in your emergency fund. And then eventually paying down paying off debt, you only earn so much money per week, per month per year, you have to stay within that living amount if you exceed it, and that means you're borrowing money to pay for it. And that costs more. And the more you borrow, the less cash you're gonna have available to pay for things that you need and want currently, because you have to pay for those things. You need it or want it in the past. So let's try to keep your finances in the here and now in the current situation. That's what tracking and budgeting in a nutshell is about I have a article on my show notes by My gr dot app blog. Five reasons why your budget is failing fall just one solution to fix it. So five reasons why you perfectly chalked up budget might be failing along with their solution. So you chalked up your perfect budget you're happy with your finances will finally be sorted and you'll be able to track all your expenses. But everything goes down the drain, when you see that your budget is failing or not working out for you. Does that sound like something you're struggling with are used to having a hard time keeping up with your budget, we get it. So what this article is about is what is a budget and why you fail. That's why when I say set up a budget, you're basing it on your 30 days, those first 30 days that you put in your tracking app. And then after that you're making an adjustment based on the last 30 days of your spending and your income because things change over time. And as you identify areas that you're paying for stuff that you no longer need. And you cut it out and you're saving a little bit of money there. Then you can make adjustments through your budget and soon you got it pretty close every month, month in and month out. Your budgeted amount is pretty much equal to your actual amount and you're right on track. You're saving money you're reaching your goals you're paying off that and everything's going good. But that anywhere in that that I say you quit spending money that you no longer go out to movies or you don't go out to eat. I don't I don't say that. I On this saying, you control it yourself. Your budget is based on your spending based on your goals based on what you want to achieve with the amount of income that you are earning. That's all it is. You don't have to cut everything back in, just go from home to work. Pack your lunch, go home, don't ever do nothing. Set your thermostat in the wintertime at 50 degrees and set your thermostat Never turn your AC on in the summertime no matter how hot it again, so you can save. I'm not saying that. You can do all those things if you want. But you don't have to. By controlling your spending, getting your debt paid off and pay down and control your spending and saving up some money and buying the things you want. When you have the money to pay for it, you'll be much better off. So problem one is an unrealistic budget. One of the main reasons for budget failures is the ANA realistic approach, like setting impossible objectives, restricted spending or overspending, starting with zero budget, limited outgoings etc. This approach leads you to abandon your budget eventually when you don't see the required results. solution be realistic. reconsider your goals and the timeframe you set for yourself. Try to find out the reasons for any inconsistencies and work out the solutions. Find out the best budgeting method that works for you read about, they're telling you to read about the 5030 20 rule. That's pretty vague way to budget so I don't really go for that

Unknown: 11:55

problem too.

Charles McDonald: 11:56

You don't know why it's not working. Sometimes things do not work out as planned. Picture this you have joined a gym to reduce your weight but after a week's time your weight remains the same. You don't know why high intensity workouts are not acting in your favor. Either you're ignoring your diet plan or you're overeating. You got to bounce between the two your diet as well as physical workouts. Similarly, you have all the necessary adjustments and set up a budget to control your expenses. But within no time you realize it isn't working for you. Due to unknown reason your budget system keeps failing solution you're never going to find out unless you work on it. Ask yourself why where and what causes the failure. Sit with the budget for some time, break down the number of some of the possible causes could be overspending on credit cards, unsettled bills, too many loans or your expenses and more than your earnings. rework your budget once you find out the root cause problem three, you're not aware of spending patterns. Are you a shopaholic Holic who loves to spend money on buying luxury items or beauty treatments, people often spend more than what they earn and end up being broke at the end of the month. spending tons of money keeps them happy content or fulfills their esteem needs. They don't have a clue on how to put a hold on those spending habits. If you're one of them, this behavior might be doing more harm than good to you and your budget solution. Make a note every time you spend whether you're in your phone or your diary. Avoid buying unnecessary items or postpone the purchases for some time. You can also prioritize your needs and wants and make decisions accordingly. Set up but credit card limit make purchases through discount deals or coupons, or retail shops. This way you can save some money and limit your expenses. No room for family members. Okay, you're the one who's managing the finances. Uh hum. doing quite well in sorting out family expenses, but your partner has some other plans. They don't follow a budget neither your children. This might lead to wasted effort and time, let alone the disappointment that comes along with budget failure. Solution. Involve your partner, friend, friends and family in your budgeting ideas. Make them aware of expenses, make them realize the importance of controlling expenses, categories, each and every member of the family as a spender and saver. Work out on a spreadsheet and note down all the cash inflows and outflows. Okay, you can do all of that in your app. No set objective. If you think you're doing well, nothing. Yes. yourself. What's the need to say? You're taking a huge risk. Life is unpredictable. You never know what might happen the next moment, but if out of nowhere comes a medical emergency arises or a financial crunch becomes up You're going to suffer if you don't manage your money well, solution you need a budget and a plan for everything, be it own in a house, a luxury car, an international trip or medical emergency, set some monthly or yearly targets and achieve your goals one by one. And vest the surplus amounts to gain good returns, practice SMART goals techniques to specific, measurable, attainable, realistic and timely, your efforts will surely pay off if you stick to the basic. Finding an appropriate budget method might seem like an impossible task, what works for someone else does not work out for you. And it can be frustrating in the beginning. However, over time as simple, by yet flexible budget can help you play with your money safely. Adopt a budgeting tool to make your life better, happier and more productive. Okay,

Unknown: 15:57

you've got your tracking under control. Now, you've done it for at least 30 or more days.

Charles McDonald: 16:05

So what the next step is you print out report by category. And it's most likely going to come out in alphabetical order. When you do a budget, you want to put your income at the top first, you list your income. And we're we're looking at a one month period here. So you list your income for the month every time you get paid. So if you get paid weekly, it's down there, you got four pays, and the month. So you'd have four lines for your income. And your spouse, you do the same thing. If you get paid less than weekly, then whatever the number of times you get paid for that particular month, you total that up and that your total income, then you have expenses. I prefer to group expenses by needs first, then wants second needs is housing, transportation, food savings, I put savings in there because you need to have an emergency fund to get started. So you need to have a place to live. He need transportation to get back and forth to work and go to grocery store and do whatever you want. You need food to survive. And you need savings for your emergency fund in case something bad could happen. After that, everything is a once. Now when I say housing that includes your mortgage or rent, all the utilities, cellphone, internet, cable TV streaming services. When I say transportation, that's your car payments, gas and oil

Unknown: 17:55

maintenance. Even washes if you

Charles McDonald: 17:59

get your if you wash your car on often enough basis, everything related to your car. If you have more than one car, then you would separate car a car B so that you would know how much you're spending on each individual car. Food would be categories, grocery, dining out delivery, however you want to do it, but that's probably the pretty much the main thing, going to the grocery store, going out to eat and having food delivered. And then he might even have clothing, which would be a smaller amount. But you might want to throw it in there. Because maybe you buy new

Unknown: 18:41

clothes every two, three months for work, or play or whatever.

Charles McDonald: 18:48

Or when your children go back to school or what the case that's when our got my new clothes. Then after that you got your once. So as you go through this, you'll notice that the report you're printing out is not gonna match up your budget, dollar amounts. So you'll be skipping all over the place trying to fill in your budget amount, because you will have housing transportation, you have your once first or your needs first, then your wants. And the budget category report is in alphabetic order. I got around that by coding my categories in my tracking app, so that they would print out the same order or at least closer to the same order as my budget. I used a b c, a one a two a three. E can do whatever you want. But that's just an idea. And you can go in your tracking app and you can go in your categories and you can add it. Now understanding the other process is As housing is the parent account, everything within housing is a sub account, and never post anything directly to the parent account at all goes to a sub account, then it all totals into the parent account. I hope that makes sense. So when you go in to put them in the order that you want them ABC or 123, or whatever you're gonna do, you do that with the parent account. And then you also do that with the sub accounts. And then they all kind of come out together, grouped together in the order that your budget is. So you're making everything easier. It's a little bit of effort and your tracking app. But your tracking app is nothing but a big database. And if they do it for you, I pay less than$10 a year, count about that calm, they don't pay me to promote it, I just promote it. Because I like the app, it's easy to use. You can it's flexible, you can update the categories, you can print out this report. And it makes life so much easier. That's why I use it. That's why you should use the having a budget is not meant to restrict your spending. It's only meant to be your control center, to for you to review and determine on your own whether or not you're wasting your money by paying for this or paying for that. It's also a way for you to identify, I'm spending too much money, where can I cut back, I can do away with this, I can cut back on that. Or I can call my cellphone provider and see if they have a better plan others cheaper price, it's there as a tool to help you. And if your goal is to pay off your debt to help you reduce your debt. If you find this podcast useful, and you'd like to make a contribution, then my show notes, I have a subscription page link. That'll take you to where you can do that. Or you can go to my website, reduce debt, increase wealth.com, click on the support button, and you end up in the same place. I like to thank everybody who has already done that. 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 wealth@gmail.com. And I'll send you the information about this online software that works great for me, a budget is not there to restrict your spending. A budget is there to help you control your spending so that you can reach whatever goals you have. Now your needs I stated are housing, transportation and food, maybe some clothing and savings. After that you have your wants which is basically some of your goals. What you want to do with your life, you need to have money to do that, no matter what it is. So you need your wants would be some of your goals. Whether that is saving for your children's education, or saving for a vacation or saving to buy that new car you always want it or buy a home or a vacation place, whatever that your wants and that your goals. Some of the things that cost more is gonna take longer for you to achieve. So summer your goals that you set up should be short term within three to six months, mid term, six months to a year maybe a little longer. And then long term, two years or longer of where you might have to save up some your money now See your emergency fund. If you're working on paying off debt, you need a minimum of $1,000. So but what are you going to use that emergency fund for? In the past, I've always said, an unexpected expense that pops up, say, as an injury and you got a medical bill, or your car breaks down or appliance at home breaks down, then you can use an emergency fund. But you can categorize that emergency fund, and to what you normally pay your needs, for example. So as your emergency fund increases, now, at the beginning, it's going to be 1000 bucks, dollars, because you're working on paying off some debt, when you get your credit card debt paid down. Now you can increase that emergency fund, save $500, maybe even double to$2,000. Because remember, on your debt reduction plan, quit using credit, make the minimum payment, have an emergency fund of a minimum of $1,000. save up your money and over that amount and then apply it to your debt, I say that you save up over more than a couple 1000. So if you have $1,000, minimum, you want to have at least three to 4000 in your savings account, before you apply money to some debt. That way you're have a larger emergency fund for a longer period of time, so something would happen, you can cover it without credit using credit. I know it seems like it's gonna take a long time to pay down debt, but it speeds up over time at the beginning is gonna be a slow process. But as you start paying down that debt, you're gonna have to get the one credit card paid off, you have a little bit more extra money than minimum payment that you repay. And that's going to be into your savings, so your savings gonna grow a little bit faster, and then the next one is gonna be faster than the next one's paid off, and it's faster. So the less amount of debt you have, the faster your savings has gone to increase. And the quicker your debts gonna get paid off. It's a process and it's gonna take you a while. But the budget is there to help you. So maybe one of your goals to pay off all your credit cards. So that's a goal that you're setting the money aside for. Maybe you have one a goal of having at least three months worth of expenses. Okay? How much is that? Well, if you set up a another tab on your budget spreadsheet, another page called savings, emergency fund, and then rent or mortgage payment, and list all utilities, and then transportation list your car payment, and all your car expenses. And then food, then list out groceries and just like you have in your budget, you have the targeted dollar amount is gonna be a column. That's what you're trying to save up to. And then you have actual savings column. So your savings column, if you have$1,000, that's the total of that$1,000 How much of that is applied to your mortgage payment may be all of it, because your mortgage payments 1500. So then when your emergency fund becomes 1500, now you have 1500 set aside to cover one month's mortgage, and you keep doing that until you have all those categories covered. You have now you have one month worth of emergency fund savings. And then you do it again. You double what now you have two months, then you triple it. Now you have three months of emergency fund savings set aside in my those categories to use for those things if needed down the road. I hope that makes sense. You'll be glad you did this. You'd be glad to be debt free. A just gotta stay at it and be determined to match and make these goals and don't think of budget as a bad thing. Think of it as your control center, where it's gonna help you reach your goals. And when that debts paid down. You it's gonna help you You buy the things you want without having to endure more debt or at least he can do it by getting

Unknown: 30:11

a whole lot less debt