Reduce Debt Increase Wealth

Tracking Basics

July 30, 2023 MIsterchuck Season 4 Episode 176
Reduce Debt Increase Wealth
Tracking Basics
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Show Notes Transcript

Knowing the basics of personal finance, the tracking makes more sense. Everything will start to fall into place as to the importance for personal finance. Tracking of monies into and out of checking will start to full fill the five aspects of personal finance. Then creating a budget will be the control center to increase savings and achieving other goals.


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Charles McDonald:

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 basics, knowing the basics of personal finance, the tracking makes more sense. Everything will start to fall into place as to the importance for personal finance, tracking of monies into and out of checking will start to fulfill the five aspects of personal finances, then creating a budget will be the control center to increase savings and achieve other goals. Remember, what are the five aspects of personal finance, income spending, savings, investing protection. So when you're tracking what is tracking, tracking is nothing more than keeping a check register. If you don't know what a check register is, that's where you record, every deposit and every withdrawal and out of your checking account. Today, we're using apps or applications to help us do that the application does all the math, only thing you need to do is put in the date, who it's from or who it's to the dollar amount, select a category as about it, application will do the math, they will add or subtract it from your balance. There's many of them out there, I use one because it's easy to use, it's inexpensive, less than $10 a year and does the job. And you can customize the categories to whatever you want. And move them around, change it. And that kind of stuff is called count that's all one word at give it a shot or look for something else if you don't like it. Or if you want to see what else is out there. There's plenty of them out there, then your budget, I do a budget using a spreadsheet because then I can control it. And I don't do it in the same application. Because most of the tracking apps don't do a budget real good. Budgeting apps don't do tracking very well, from my experience. But there's some newer ones out there, that cost quite a bit of money about $15 A month or about$100 a year. But they're out there that if you're willing to spend some money, then go for it. Try to find one that does tracking and budgeting and basically concentrate on the budgeting side of it. And that you need a budget. That's an app that I've looked at, and I've never used it, I don't get paid. They're not my sponsor, I don't save any money from them. But it seems like it's a good app. For people who wanting to do a budget. For those who are struggling to get out of debt, or to say money or to keep their spending under control, it appears to be a pretty good app to help you that. Also tracking will help you know what your take home pay is that will remind you to pay yourself first, you will see how much your savings are. You can even put in the interest rate. You'll know how much money you have available to spend and you know how much money you have available to save. It will help you create a budget much easier. Tracking is the history of what happened in your personal finance. A budget is going to help you control the future today. And future is what the budget is going to help you control. And once you have your budget set up, you need to get in the habit of looking at your budget to see how much money is available to span for that category, based on what you budgeted for tracking is gonna help you set those numbers. But that's just the start that if you've never done this in the past, you got to do it now and start right away. What I recommend is get yourself an app go back to the beginning of the previous month. Figure out what your bank balance was 30 plus days ago enter that in as your starting balance and enter all the transaction for that particular month up to the current date that you're in, then you can do a report by category, from the beginning of the month to the end of the month, print it out, now you have your starting point for the dollars, you need to budget by category, your budget is almost done, you just need to open up a spreadsheet, put in your categories, put in your this would be the column for the budgeted amount, then you have a column for the actual amount. And the new thing for me is a column for the allocated amount. Right now we're going focus on the pass through tracking. So that would be your budgeted amount. And why am I using that, we got to start somewhere. And if you don't know how much you're paying for anything, because you've never tracked it, he might have a vague idea. But putting estimates in a budget is not gonna get you anywhere close to being successful. And it might even discourage you from continuing on with your tracking, or continuing on with your control center. Tracking is the lifeblood, it's what's there, you got to do it at least once a week, every couple of days, the more often you update it, the less time it's gonna take, the more you do it, the faster is gonna come. Because most of these apps will remember, when you type in the name of the grocery store you go to, it will pop up and I'll have the category, you got to be consistent on your category. So if you buy gasoline at your grocery store, and that it was for gasoline, make sure you change that category, maybe put the name of the grocery store dash fuel or gas, so that you can have another name set up with the proper category. So that's what tracking is all about. So how you get started, I have links in my show notes. And this one's from the nerd wallet. First thing to do is get all your statements together. And when I say statement, I'm talking about your credit card, your checking account, and whatever else you're putting in there to track. Now what you tracking what your accounts, it's going to be everything that your money flows into or through that you use to buy stuff, and that you have to pay back. So that would be your checking account, your savings account, at least one savings account, and all your credit cards. If you're doing a debt reduction plan, which we're going to talk about later, you still gotta track your credit cards, he shouldn't be using them, but you're gonna be bank and payments to them. So it's a good way to keep an eye on what your balance of your credit cards are, as you go through time. So you can make an informed decision on which one to pay off first or last or whatever the case would be. Then you want to categorize all your expenses and the NerdWallet is saying you got to group them by needs for me needs are housing, transportation and food, the NerdWallet it's also saying health care, but health care if you're paying for your health insurance, through work, you don't have to track that in your budget. Because we're working with your net take home pay, it's already been paid and taken care of. He don't need to budget for it. There are include in life insurance, childcare, and groceries and miscellaneous personal items. Also credit card payments, student loans, any loan payment you got. That was a need because you're required to make a monthly payment. And doesn't matter if you make the how much money you make. You still need to make that monthly payment no matter what then you have once which would be dining out alcohol movie, entertainment, memberships, gyms or clubs, travel, vacation, home decor, some clothing, our once need to group this by needs first in your budget and then one second, then the second half of your budget for your expenditures. I'm not saying you need to do away with them. I'm just saying that's how you should add up your budget. And if you find your budget is way out of whack, look closely at those items you classified as needs. And consider negotiating refinancing or downgrading, you can take money out of your wants to help cover some of your needs. Now, when I say housing that includes all the utilities, the taxes, insurance, maintenance, when I say transportation, that's the auto loans, gasoline, oil changes, maintenance. So it's pretty much gonna cover everything. Scan your spending for the past few months to get a sense of what you once are, and how much you tend to spend on them. Have each adult in your household do the same if you're creating a family budget, this exercise gives you a realistic baseline, he can use what you've learned to make small changes in your spending over time. So if you look back and see how much you're spending on a particular item, let's say coffee at a coffee shop, because you stop and get a coffee every morning. And maybe you should that's a want. So you should have that coffee shop as a separate line item in your budget. look back and see how much you're spending over a period of time. Maybe that's something you can cut back on get a smaller cup. Instead, the large, if you're getting a large, get a small one, save some money that way. Don't go one day a week, cut it out completely get your coffee at home, there's ways you can control your spending, he just got to think about it. If you pay off your credit cards in full each month, classify the expense according to what you buy groceries under needs, for example. However, if you maintain a balance and are accruing interest and fees, Lis payments beyond the minimum under debt repayment, okay, so if you pay off a credit card every month, and you get a zero balance, you want to when you make that payment to the credit card, classify it as shopping, or groceries or break it out into a couple categories. If you have a general idea what they are, if you have a running balance, they're saying anything, all your payments should be classified as debt repayment, but they're saying anything. Beyond the minimum, I'm saying all your payments, there's gonna be debt repayment, classification, and identify room for change as you track you ready to make adjustments. Alone, the big fix expense in your life, like the cost of housing vehicles and utilities can make significant impact on your budget. Beyond that, check out additional ways to save money that can give you some breathing room, cut out entertainment, cut back on entertainment, do away with cable TV, do streaming TV, check with your cell phone provider to see if you can get a a better rate for the same type of service. These are things you can do at least once a year. Anything that you're paying for and using cell phone is a good example. Every year check to see what new services your provider has, what new plans they have, he might be able to have the exactly the same thing for $10 less a month, and he can get it by making a phone call 1015 minutes on the phone, you're gonna save $120 a year, maybe more. He can also change services. If you're not paying for a phone, then you can change services whenever you feel like as your service should be month to month. Once you've honored the whatever contract you had to start with. If you find this episode helpful, and we'd like to make a contribution, you can go to the footnotes in my show notes and look for a subscription link. And it will take it to a place where you can make a contribution. Or you can go to reduce debt increase Click on the support button, and you're exactly the same place. Oh, I'd like to thank those who already made contributions in the past. 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. and 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 worked great for me. What are the other benefits of tracking? As I said before tracking is what happened in the past, it gives you guidance, as a starting point to set up a budget. Another benefit of tracking is you have a pretty good idea of the balance amount of money that you have in your checking account at all times. You also know how much money you owe on each credit card all the time. If you keep everything up to date, it only takes a few minutes every week, if you do it weekly, a few minutes, maybe five to 10 minutes, if you do a lot of transactions is gonna take a lot more a lot more time, then you might want to keep receipts, and enter them and your checking account or your credit card or whatever it is, as you go, every couple of days, I was in the habit of keeping receipts, stick them in my wallet, every couple days, I'd pull them out and I would enter EM my tracking app, I've kind of got away from that because I do a lot less spending. And I set up a second checking account that I transfer money into once a week that I don't have to keep track of because I track that once a week transfer and classified it as shopping, because that's what 99% of the money I'm using is gonna be for buying something when I'm out and about when I'm buying gasoline, it's a big dollar purchase, I'm using my debit card. If I'm buying groceries, the same thing, I'm using my main checking debit card, that's one of the ways I've done it to reduce the amount of transactions I have to enter and keep track of is that a good thing? I don't know. The more control you have on your finances, the more aware of what's II know what's going on, the better off you're gonna be. If you are a person that has an overspending problems, by tracking your spending, you'll become more aware of where your money is going. So if you ever asked yourself, I got paid four days ago, Where's all my money? If you're tracking, you could look back the last four days since your last paycheck and see where your money went. You paid rent, you paid some utilities, you put gas in the car, you went to the grocery store, you went out and had some entertainment, you know where your money went, because it took track kept track of it. That's the idea. And the more you do it, the better you'll get the easier becomes the more aware of what you know what's going on in your personal finance, they'll be more aware that you where you're wasting money. If that's the case, you become more aware of how to reduce some spending cut back somewhere where you might be spending too much and free up some money to pay off that debt. And the more debt you get paid down, the better off you're gonna be because then you have more money in your savings, which means you'll have a bigger emergency fund. And then eventually, you'll start having more money to invest. So you have the five aspects, income spending, savings, investing, protection, you got four of them covered. Eventually, just by tracking the protection is insurance, and you can budget for that. And because when you buy a home your lender is gonna require you to have maybe mortgage insurance and homeowners insurance. When you buy a car and get a loan on it. Your lender is gonna require you to have automobile Your insurance, and you got your license, you're required to have on bills. So that's going to be a given. What other insurance protection can you do? Well, you have life insurance, if you have a family and children, and you're the main income earner, you got if you something that happened to you, you need to be able to replace your income for your spouse and children. If you are injured but are not deceased, then you need some insurance to replace your income because your are unable to work. That's disability income. We have short term yet long term. That's the basics of what you need. As far as protection, I got to keep a fine line balance on insurance, it's good when you need it. But if you're struggling and living paycheck to paycheck, you probably have a hard time making those payments. Also tracking. Once you've done it for a 12 month period, you can go back and you know was once in a while type bills, you can see what they are. Maybe because my homeowners insurance, I pay once a year, my real estate taxes I pay twice a year, my car insurance, I pay twice a year. And it's March and September, for an car insurance is January and June for real estate taxes. It's September for homeowners insurance, I know the stuff because of track. Over time, I may not know the exact dollar amount, I have a vague idea, I have a general number, I got to close within 20 or $30. You don't have to know he needs to know what your net take home pay is. If your net take home pay is $300 a week, you only have $300 a week to spend. If your take home pay is $1,500 a week, then you have $1,500 to spend. But you don't need to spend it all on that same week. If you're able to allocate your money to other expenses that are coming up due and the next week, two weeks or three weeks, and you're put and you're holding that money back to pay it for three weeks in the future. You've got your finances under control, and you're doing fairly good. As I said before, there's you need an app or not you need an app, you need a budget, that is an application at $15 A month or $100 a year. It's a decent application for a budget, and also does tracking. I don't know how much or what it does. But it does enough. In order to do the budget, its main focus is to get you to set up a budget, set up your categories, allocate money to a category and help you control your spending and help you spend where you need to spend the money and save some more for future purchases. The less debt you have, the better off you're gonna be. We all need some debt, housing, and auto and transportation is probably two debts. At a minimum you should have having three or four credit cards charged up to the max limit is that you don't need having a lot of student loan debt is debt that you might have incurred, and increase your income sometime in the future. But did that really do it for you. And don't rely on the government to come along and do away with the student loan debt. Because as you can see, that's not happening. And if they do it, there'll be a real strict guideline and requirements. And if you haven't made timely monthly payments for the last five years or 10 years, you're probably not gonna get that relief from your student loans. That's my personal opinion. Start your tracking today. Get those categories. Try to keep the categories as minimal as possible. But make sure you include everything that's happening in your life. If you get an application, you do not have to use all the categories in there. It's only a guideline for you. And if you don't like the name of one, you can change the name you can add it to categories list. You can change it around, make it work for you, and you'll be glad you did so