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. Advanced budgeting items, once the budgets in place and a few months has passed time to add items to help with your credit score and overall financial health, using percentages as a guideline, before I get started, in this episode, I do research every week to find new ways or new information that I can present to my listeners, I don't get paid by anybody to do anything, I don't get paid to promote any particular app or product. With that said, I came across some You Tube videos that I watched, and I learn new ways of looking at this process. And it's it was enlightening. This is an app that you can use to do your budget, your tracking everything, it appears to be very good app. My only problem with it is it's a bit pricey. He can do the annual fee of $99 a year, which I think was $8.75 a month, something like that. Or you can go month to month about or somewhere close to $15 a month, which I thought was kind of pricey. But it does a lot of the work for you. Basically, it's a big database, you put your check in your credit cards and all your data in there and all your assets and everything you own basically. And you run it through this particular app. And it allows you to set up your budget the way you want to do it. With that said, I've yet to talk about in the last few episodes about how your budget should be set up. But I'm going to leave that up to you because everybody is different. So the first thing you must do, if you follow in what I've done, I do a spreadsheet because I'm a former accountant, was I looked spreadsheet budgeting templates on Google. And you get tons and tons of them. Some I mean, you might have to pay for some of them are free you can download. So you would look for something that appeals to you something that you think you could use, they are pretty much basically the same thing and the little bit of a different format, your income is at the top, and then in that totals up, then you have your expenses or your spending listed down. The difference between the twos is a positive or negative number. Either you want Oh, you spent more than what you make. Or you spend less than what you make. If you spend more than what you make, you need to go through your spending and cut something out because you can't do that on a regular basis and not occur more debt. Remember, I'm talking trying to help you reduce your debt, eliminate your debt and get out of the cycle of living paycheck to paycheck. So if you find an app that you are like, then that is what you should go for. Now you still are doing your tracking. Tracking is looking back of what happened with your money. That in itself is going to be useful because you're collecting data of what's going on and your personal finance. But what are you going to do with that data because it's already too late to change anything. The only thing you can do is use that data to create your budget, which your budget II should think of looking forward. It's not what happened in the past, but it's what's gonna happen in the future. That's why I've always call it a control center. It controls your spending, it controls where your money's gonna go. And when the money's gonna go. If you're budget is not doing that for you, you're not thinking about this in the right process, you're tracking, which I call your lifeblood is only giving you historical information of what happened in the past, whether it was yesterday, last week, last month or six months ago, it's still in the past, your budget or your control center is gonna help you with your money. It's gonna help you direct your money to areas that needs to go first. And it's gonna help you see how much money you have at any particular moment. And what you're going to do with the money. On this other website I found and on his Taya, what the app is, it's you need a budget, why an A, B. So if you would Google, you need a budget.com, you will find this particular app, they do have a 34 day free trial. What I found with free trials is once you get into it, and you get some data in there, you're most likely going to sign up for it because you took all that time to put in all that information. So you're gonna end up paying for it. So before you do the free trial, watch through YouTube, learn how the app works. Get an idea what it looks like, see what it will do for you. Does it do tracking? Can I put my checking my savings and all my credit cards in there and all my loans in there? What kind of information can I get out of it? What kind of reports does it have? What can it do for my budgeting? How does the budgeting part of a work, there's a make sense to me, do I have to do a lot of thinking in order to get started, watch the videos because they have a lot of videos on how to use the app. So do that first, have a general idea what's going on. If you want to try the 34 day free trial, then go ahead. But beware, once you get a bunch of information in there, you're probably going to have to sign up for you're probably going to sign up for it. Now they have two version, they have an online web app, which gives you a whole bunch of reports. And then they have a mobile app, which you can put on your smartphone, take it with you so you can use it before you spend money. Because that's one of the takeaways I got from these YouTubes is your budget is gonna help you look and forward. Before you spend money. You need to look at your budget and that category. How much money do I have? Can I afford it? Or if I don't have enough money? Where can I make the money come from? Move it around a little bit, so that you can buy what you want at that particular time. So it's a fairly decent app. I just personally think it's a little pricey. But that's the price you gotta pay. If you're struggling to get out of debt, maybe you don't have the money to afford it right now. So you need to do things manually. First, save up some money, get some money set aside and then sign up for that app because it is a monthly expense. Or it's $100 $99 a year, which is a chunk of money when you're trying to pay off that he know you're living paycheck to paycheck. So that's what your budget can do for you. So as you set up your budget, you're gonna do a report by category from your tracking app. That is gonna give you your starting point of the numbers, the amount of money you need for your budget. Now for items such as fixed expenses, your mortgage, your rent, your utilities, even your groceries and gasoline for the car. You're gonna have a pretty good idea what those numbers are. So your mortgage payment never it's the same every month. Your utilities I set up on a budget with the utility companies. So I pay the same thing and only changes once a year. In fact, I noticed when I was looking at my budget that I never paid my natural gas bill for the house. Same thing happened a couple of months ago with my electric bill. But it was two separate things on my electric bill is set up as an automatic payment. But you set a daughter limit to it. And the my bill went way over that dollar limit because of the increased cost of electricity. And it didn't get paid, because it was over my dollar limit that I set five years ago. And then I didn't pay it for a month and didn't realize now I owe two months. So I had to catch up and make that pay. So I was thinking the same things happening with my natural gas bill. But in that case, I had a credit. So I didn't need the pay at this particular month, it was like $6 credit. But I went in and I recognized her I might have a problem. So I want it and only a few days after it was due, by the way. So I went in to my website for that in my gas natural gas company, and saw all I have a credit. There's no bill do good. So I went back into my budget, and I removed that pending payment that was due based on the program I was using. So that is how you use your budget, you're using your budget to look forward, you need to get in the habit of before Besley on your and once that you know how much money you have allocated for that particular category. And then before you spend any money, you check your budget dollar amount to see if you have enough money available to buy that one. So let's now I'm going to talk about how I would set up my budget, a course income at the top. And then we're talking about expenses. I've always said you want to put your needs first, housing, transportation, food, some clothing, clothing would be a small dollar amount. Under your housing, you include everything related to housing or your house, mortgage payment line of credit on the home. Home Improvements, all your utilities, including telephone and cell phone, and internet service, streaming services for the TV. And why do I include all that, because of partly one you could say it's entertainment. But two, it's most likely just related to the home, that you don't use it outside of the home, your main TV is there, and you're gonna watch it while you're home. That's why I included under housing, under transportation as your car loans, okay, also included under housing would be maintenance, and provements. Then we have transportation, which would be your automobile loans by a car, you might want to break this out by each individual car the owner, if you have more than one, your car payment, gasoline, oil change, maintenance tires, you want to keep the oil changes and tires, different from maintenance, because you know they're gonna happen sometime in the future. He just don't know how long is going to be tires might be two to three years or it might be six months depending on how much you drive. Oil Change could be every month, depending how many miles you drive, or it could be twice a year. But having that money categorized and set aside and leave it in your savings or checking account. So when a time comes you're not scrambling to find the money. That's the idea. Also, food beauty categories, groceries, dining out delivery, delivery is pretty big nowadays. So that's deliveries from restaurants or that could be deliveries from grocery store if you do that. You just got to remember if it's deliveries from grocery store, you might want to put little less and groceries and more and delivery. Just an idea here. Clothing you want might want to break it down by person in your household. But don't go into much detail. You don't need to know the cost of pants cost of shirts, cost of underwear. You don't need that kind of detail. Just maybe list all the people give them a $10 a month budget or so. Build it up over time and then you'll have enough when the time comes to buy some clothes. I never really did clothing because I only buy clothes when as needed. And I really stretch it, believe me, if you find this podcast helpful and like to contribute, I have a link in my show notes to contributions. Or you can go to reduce debt, increase wealth.com and click on the support button. I thank all those who have previously made contributions to this account. I'll be back in one moment with my final thoughts. If you're interested and learn in 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 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. Now the advanced items. Once you have your budget set up, you use your first 30 days or the most recent 30 days, the previous month, the month that you're not in that you just recently completed to start your budget, dollar amounts. And this is the starting point. If you've never done a budget, or if you've done a budget for six months, you need to look at the last 30 days, how much your original dollars that you budgeted for these categories, how much have they changed, if they're way out of whack, you need to update them to more current numbers. Because over time, you might have cut down your spending, you might have done away with something that then reduces that particular category, and you net and add anything else. So you're constantly every month every two months, reviewing your actual spending to your budget dollar amounts, and you should be updating those budget dollar amounts. Maybe you had some categories way too low, maybe you had some way too high. So you need to adjust for that. And over time, you'll get it down. So where you'll be fairly close every month in and month out once you got to that point. So your budget should be Column A going left to right, your description, your budget dollar amount, your actual dollar amount, the difference between the two, no b minus c. And then you want to call them for percentages, and then maybe another column for notes out to the right. And what should your household budget percentages be? There determine how you should be spending on each budget category can get confusing and depending on your income. If you break it down by percentages, it can be easier to know if you're overspending on one category. The percentages can also change depending on your financial goals. If you're trying to pay off that fast, you may need to reduce some of these categories in order to spend more towards your debt or to increase your emergency fund. And this post you will learn now this is I have a link in my show notes to this articles. So they you can look at these percentages because they're somewhat important. These are the general recommend budget percentages. Okay, the first thing you want to do is under housing. You want to know what percent of your gross income is your mortgage or all your mortgages. So your gross income is not what you're putting in your budget. The budget income that you're using is your take home pay or your net income. Your gross income is before taxes and a 401 K's any health insurance or any other child support whatever other deductions may be coming out. So you need up the top put gross income and put $1 amount for your monthly gross income. You can go back if you get the same pay. You can just look at it if you get paid four times. You know same pay to find the gross for One pay times for whatever it is, and apply that to how much percent is your loan to that gross income, you want to keep it under 43%, just for the loan on your home. Anything higher than that you're going to have trouble borrowing money, you might already ran into that problem. Generally speaking, it should be somewhere from 25 to 30%. Jess on the mortgage, then your utilities is another 5%. So if you do just the mortgage part, and then do the total that on your housing total, your subtotal your housing, and do a percent on that, you'll have a good idea. So if your mortgage is 30%, and you want to include utilities, your total should be somewhere around 35%. Insurance, another 5%. So you got to have insurance in there also. And improvements or whatever else you got to put in there should be one to 3%. So you're looking at roughly for the total category of housing, about 38 to 40%. You want to keep it under that transportation is 15 to 20%. Food, that 10 to 20%. All your insurance, now your transportation is just for the loan on the car, but you got gas and oil, you got your insurance. So you should have house insurance should be on our housing, car insurance should be on transportation, and then any other insurance should be in a category by itself. Health care three to 5%. Now that would be your out of pocket expenses. If you have insurance, and it's already being deducted from your pay don't include because you're not accounting for things already deducted. Because you're already paid for it. So this healthcare would only be for medicines or your co pays to the doctor those type of things, savings, five to 10%, debt five to 15%. Most likely, if you listening to this podcast, your debt is way higher than 15%. And your savings, probably zero, maybe not personal and entertainment is 10 to 15%. Remember, some of that entertainment is going to be included on your housing, because I put streaming in there, and cable TV, those type of things. So you might want to think about that a little bit. So that I got this article, my show notes, we can get these percentages. And then you can look at how you set up your budget. And put notes in there on the note section of what the percentages you're looking for it to be. And then you can then add a glance tell if you're overspending or underspending in certain areas, underspending is a good thing. overspending is a bad thing. But here's the bad news. If you're already have a mortgage, he already have car loans, fine and out. Now, these percentages are way too high, it's too late. There's not a whole lot you can do about it until you pay off the loan, or at least until you refinance the home. And now if you have a mortgage of less 3% or less, you don't want to refinance because the interest rates mortgage rates are much higher. So you don't want to refinance your home. And you don't really want to pay it off too early. You want to get all your other debt under control first, and then maybe your savings, for your retirement for your children's education, you know, other things taken care of before you start reducing that, that for your home, that should be one of the last things you do right before maybe five years before you retire. But that's just me as whatever you want to do, and everybody is different. So if you're using percentages within your budget, it's gonna be definitely helpful. And the quicker you can identify a problem, the better off you're going to be in the long term because you can fix it. A budget looking forward to what I didn't talk about. What I wanted to talk about, is you only budget the dollars you currently have in your checking In the Account, the only thing on a budget the money you have. So when you're setting up your budget on a spreadsheet, you need to put the number of weeks, if you get paid weekly, every month, you need to have the total number of weeks up there where you can enter your net pay. Same for your spouse, then when you get paid, the first pay, you have X amount of money, well, maybe you have a mortgage of $1,500. And maybe your one week's pay is $1,000 take home, so you don't have enough to pay your whole mortgage. So that's why you got to look forward. And you got to allocate some of that money from the previous pay to your mortgage category. So that when comes due, the next pay, you have enough to cover it. So if you get weekly between you and your significant other, say 2000 A week is in your checking account, add it to your checking account every week, then you need to allocate $2,000, to what you're gonna pay. So you have to know how much it's due, and when it's due, and he should then put it in some type of order by date, so you can allocate the money. This is where the why not, you need a budget.com app works good. Because you can only allocate the money that you have, and no more and you can put it into your different categories, as needed. And you can see, do you have enough in there to pay it when it comes due? Yes, if everything is gonna be paid on time, then you're getting ahead, you can see it. And that's what I liked about that particular app. Okay, enough about that, how are you going to do that in your spreadsheet? Well, you can do it by when you put the description in, put in your like your mortgage payment, put the dollar amount of the monthly mortgage payment, put the date of the month, the day of the month is due. So it's due on the fifth and it's $1,500, mortgage$1,500, the fifth, utilities$80, tap, you know, gas, electric, etc. Put that in your description. Now on your budgeted amount, column, you're gonna put the total and the total in that is due every month, so that you know how much you need. On your actual, when you allocate the money to be paid towards that expenditure. That item, you're just going to put in how much you allocated for the actual for that particular pay cycle. Then once you get it up to full, fully allocated, then you can make the payment when it's due. Instead of doing a traditional spreadsheet budget, we have description, budget, actual difference percentages, notes in there, put in another column. So you have description, budgeted amount, the amount your target, allocated, actual difference, now your allocated is not gonna have anything to do with the difference. Your allocated is the amount of money you set aside to pay towards that particular item. So if your mortgage, if you put $150 or$500 per pay, previous three pays towards it. You might have$1,500 there when the due on the fifth, but when you pay it, that's when it becomes the actual number. The allocate it is only setting aside the money for you. So you don't spend it. It's like you took it out of your checking account and you're not gonna spend it. That's why and you do that for all your categories. So when you're looking at the previous month, you might have allocated all the money to pay for you, your mortgage, your your utilities, your car payments, your student loans, you know, he might already have money allocated there. Okay, so when you go into the next month, the current month that you're currently in, he might want to copy all those numbers from the previous month, and paste, but only the ones, the items that have not been paid. So if you've allocated the money, and you paid it, it goes, the allocation goes back to zero. I hope that makes sense. And before you spend money in any category, you need to consult your budget, because we're using it to look forward, how much money do I have available, if you're putting all your money to work, and you allocate it your paycheck to pay for things that are coming up, you may have a lot less money available to spend than what you think. Now, once you got your needs, those are things you cannot remove the money you allocated from, then you have your wants. That's where you can maybe move stuff around from category to category, maybe there's a sale on something that you want it, it's a good sale. So you want to buy it the didn't have enough money allocated yet. But you have another category that you set aside, where you can transfer the money and Category B to A. So you'd have enough so you're not going over budget on anything. You got your spending under control, you know what's going on, and your financial life, and it makes life more easier. So I want you to give this a try, is see if you can do a manual spreadsheet. You have your description, your budget, your allocated, your actual your difference, your percentages, and then your notes. The percentages is only based on your actual spending related to your gross income. And the difference is only the between the budget and the actual, what you actually paid. allocated amount is this think of it as money that you set aside to pay that bill at some time in the future. The longer you can keep that money in your checking account, the better off you're gonna be, and you fit out of that trap of living paycheck to paycheck, and you'll be glad you did so