Reduce Debt Increase Wealth

Starting Control Center

October 01, 2023 MIsterchuck Season 4 Episode 185
Reduce Debt Increase Wealth
Starting Control Center
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Show Notes Transcript

Control Center is nothing more than a budget, this is the easy way to create and update the control center every week so knowing what happening in finance is current. Starting with the most simple budget for those who are struggling to pay down debt.

 Article Link: By Lauren Schwahn

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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. Starting control center control center is nothing more than a budget. This is the easy way to create an update to control center every week. So knowing what's happening in finances current, starting with the most simple budget for those who are struggling to pay down debt, I'm focusing on those people who have a big debt problem. And they hadn't done anything in the past. And you're working towards trying to get your debt under control. So you first thing you do is start tracking all everything you're doing through your checking account, your savings account, all your credit cards, at the bare minimum, you need to be doing that, and I talked about that in the last episode. So now we're gonna work on creating a budget or a control center. I call it a control center, because that's where you can see in real time, what's happening in your finances. And you can catch where you're spending too much money immediately, correct it before it gets out of control. So we start with tracking. And once you've got that done for at least 30 days, and if you went back and put in last 30 days or so worth of information from your check in and all your credit cards and your savings account. Or if you don't have a savings account, you need to set one up. Because by doing this simple budget, and having a control center, you're gonna free up some money that you can get that emergency funds started and get a build up to that minimum of $1,000. If you find this episode useful, he can subscribe to my channel by going to my show notes and click him on my subscription page. I also have links in there to the article I'm referring to and it's from the nerd wallet. And it's a free budget planner tips for getting started. I'm focusing on those people who have never ever done a budget in the past, or those people who had tried to do a budget and was not successful. So what is a budget planner, a budget planner is a tool such as a worksheet that you can use to design your budget. Assess successful budget planner helps you decide how to best spend your money while avoiding or reducing debt. And then a nerd wallet wallet, they recommend the 5030 20 budget if you don't know that is I'm not going to talk about it. They do in the article. I don't like it, because it's too general. And we need to be more specific. You need to look more into what you are doing. So if you've been tracking for at least 30 days, you need to go into your app and do a report by category for the 30 day rains. Hopefully it's from the beginning of the month to the end of the month. That's important because that's one complete monthly cycle of your spending. You have two categories. Generally speaking, you have income and you have expenses. Then when your expenses you have needs things you need to pay every month. Don't do a budget for a year. Don't do it first semi annual don't do it for a quarter. You do it for each monthly cycle. So you want to set up a spreadsheet where you have January through December and you can keep it separate for each month and save each month. So you can go back and look at what were these categories done last month, three months ago. Compare worry Are you today and you can see if you're making progress that way. So we do a 12 month each one by itself. The top of the A spreadsheet, you start with income and you put in all your income that you have. And if you get paid weekly, you need to have a slot there to put in your weekly payroll. And you do that for you and your significant other, if you have a part time business where you have regular income, also include that. Now your payroll is the amount of money you're depositing into your checking account, not the gross, that's after taxes, and after health insurance or an or any retirement plans you may be contributed to, we don't need to budget for those items, because they're already been paid. So no use doing double the work. That's the reason you start with the net. A hands on monthly budget planner isn't working. If you consider one of these budget apps, most of them sync with your financial accounts so they can track and categorize expenses for you keep in mind that some budgeting apps are free where others charge a monthly or annual fee. I say use a spreadsheet and do it manually and do not link anything to your bank accounts. The more you hands on you are in this process, the more you're going to be aware of what's going on in your finances, whether it's income, which most people have under control, because it's only one or two sources. But your spending is the important thing we're going to talk about, in another episode about a debt reduction plan or a debt management plan. And what you need to do in order to keep your debt under control to get it under control. And then the Keep it there. So and the nerd wallet, they have a budget planner here, it's free, you can print it out, they can use it as a guide, if you want to. And some guy guy got their income at the top and then they have needs rent mortgage insurance, property tax bills. Now if you have an escrow, and you have a mortgage and you're paying your insurance and your insurance through the escrow, you only need that one line, you don't need to account for any additional thanks. Now I grew my together by housing, the under housing, I include the mortgage payment, or your rent, all utilities, which includes your cell phone, if you want to include your internet service, you can include that there because it's connected with the home. That's a good idea. The second category would be transportation. And then under transportation would be you can break it down by auto. If you have two autos each one separately, you can have the loan, you can then have maintenance, gasoline maintenance would be oil change, stuff like that. Maintenance, oil change, gasoline, and any major repairs you might have coming up you can budget for for future by replacing your tires, and insurance. He always include the loan and the insurance that's related to that item in that particular budget category. And then we have food which would be groceries dining out deliveries, you want to break those out separately, because that way you can see if you're spending too much money in a particular area, such as dining out, or such as having food, prepared food from restaurants delivered to your home, which I never do, because it's pretty expensive. We're focusing on trying to reduce our spending and keeping our spending under control. After that, we have savings which is a need because you need emergency fund and you need to set money aside to pay or apply to your debt later on. Once you have a significant amount of money. And then we have debt, which needs to be paid every month. And then any other insurance you might have that's not in any other category, such as life insurance, disability insurance, whatever type insurance you have, then you can put that there. Everything else would be a once your clothing, entertainment. He can even have a want for dining out if you don't do it. that often you can say we go out and go out once a month or once a couple times a month, you can make that a want and that necessary and need under food. So once you have that set up setting up your spreadsheet, CZ, you got Column A or the first column would be a description of everything that we just talked about. Column B, or the second column is where you put in the past history of what you spent in those categories. And that's why you printed out the report by category for the last 30 days. The third column is the actual spending you're doing and the current month you're looking at, then you have the fourth column would be the difference between your budget and your actual that way you can see at a glance, if you've gone over the budget, or getting close to the budget, or how much more you have left to go for that particular month. And then the very last column would be money that you allocate, this is something fairly new, I've learned this and the new Need A Budget app, I don't use it, they don't pay for me, and I'm not promoting, and I'm just telling you where I've learned this. And what that does is all the money that is deposited into your checking account, you're gonna give it a job, you're gonna assign a lot of money that's going to be used to pay a certain need, whether it's applied part of it to your mortgage, let's say you get paid weekly, your mortgage do once a month, so you put, you know, 120 5% of your mortgage in there every pay. So when your mortgage comes due, you know, you have the money in your checking account, to pay for that expense. At the top of that column, where the income would be, you'd put in your current bank balance at the bottom, you just do the math, every month, all the money you assign, you take your bank balance, you subtract everything out that you're assigned, and then the bottom should come to zero. If it's a positive number, that's money that you have left in your checking account. So if you want to keep, say, a $300 balance in your checking account, you don't assign that last $300, you leave it in your checking account, so you never overdraw your checking account. So those are tips and tricks that you do to make your finances easier. It's not all that difficult. The next step, once you have all that setup is copy and paste it 12 times before you put any numbers. And if any, you could put formulas in there. So that you don't have to put them in later. But you copy and paste it 12 times. So you can go six cross and then down and six as what I prefer to go all the way out to June, and then you go back on January and you put July out to December. That way, he can move around fairly easy, you know about where the months are, you can just scroll around. And when you get to June, that's done, you can go back all the way to the left, go down a little bit, you know, scroll go down a little bit. And you're right there at July. Now, we have it set up. The first step is taken that first 30 days information because that's basically he may be have a little more than that. But let us assume you got 30 days plus a week, you go back, you do the report for that first month or the first 30 day period. And that's the amount of money you're going to assign to your budget column. Granted, some of these categories may be little overstated, because you're cutting back your spending. But that's what happened. These are actual numbers, which are important because it gives you closer to real time of what's happening and your budget. And that tells you how things are going at that point in time. And we're working on our first month. So we're not going to expect it to be perfect because this is a process that you're going to be tuned in up over time as you reduce your spending spending and cut out for the things you don't need that you've been paying for. And you maybe negotiate some new terms Like on your cell phone or your internet bill to get lower certain costs on your service, those numbers are on a change, which then would increase the amount of money that you should be putting in your savings if everything goes good. So that's our starting point. Now we're the first pay per, I'm assuming you're getting paid weekly. Even every two weeks doesn't much matter. But your first pay and the new month, you do another report by category, from the beginning of the current month, to the current date. Now you do that after you update everything. So your tracking information is all up to date. I always did it on payday began, I enter my payroll, I put in all the bills, all the spending have done, it's up to date, my checking account has been reconciled. I know everything is correct. So I got good information. And now you can go ahead and put in the needs once that as you go. And this might take a little bit longer at the beginning, because you may not have a category setup for it. But you can scan through that report and find out the different needs or wants. And your wants is everything that you do not have to pay for every month. And that would I don't know, hobbies, buying something on your credit card like I bought a grill that is a want and not necessary and need. And that's just some examples. Now, if you have children, and you have to take them to a new take them to daycare, that would be a need. And that should be included up on your needs under food before savings, because you need to pay for it every week, as you go throughout the month. And you need to know how much money to set aside. So now we're in the first pay period, you do a new report from the beginning of the month through the current date, everything's up to date, and you put those numbers and the actual column. And once you have that done the spreadsheets gonna do the math as you go. And you can see how you're doing a you paid your rent or your mortgage. So that comes to zero, you paid some of utility. So you still have some leftover because there's other utilities you paid low later in the month, and you made your car payment, maybe, but he paid you bought some gas, maybe had an oil change done. So that might come out to zero for your maintenance. If you have a little bit left over and your budget, that's a good thing, that means you didn't spend it and you still have the money in your checking account. And you can then at a later date, as that builds up, you can maybe transfer some of it out if you don't think you need it right away, and put it in your savings account and build up that emergency fund. So our goal here is to track our spending so we can try to keep it under control, and to build up our emergency fund. And that's a never ending process. Even if you get all your debt paid off like I have, you still need to do this. So you can know how much extra money I'm calling extra money that you don't have a sign that you can put in to your savings account and make the money work for you. That's the goal here. Once you got that done, you can just look at it and you can see how you're doing. Maybe you had your groceries set at from the previous month that was $800. And maybe you've already spent in the first week 400 You're halfway through? Is that normal? If you look at some of your expenses, you got to think to yourself, am I spending more than I have in the past? Or did I have to buy things I normally don't buy when I go to the grocery store, like paper towels, you know things that add up cost money shampoo, you know, everything you buy at a grocery store is considered groceries, whether it's shampoo, show, laundry detergent, whatever it is. I just keep it simple and put it under groceries. Once you've done that and you thought you so everything seems to be alright, I know the reason why that was $400 I bought some extra meat because you're gonna have a cook Gotta have some friends over whatever the case, I'm not telling you to stop living your life on this town, you need to be aware of where your money is going. Now, let's look at the allocation column, you look at your bank balance, and you put in your current bank balance at the top, where would be the income area. Now, you say you have $1,000, I'm just keeping it simple. And you know, your rent just got paid. So that should be zero. What other expenses, though, are you needing to pay in the current month, and that's where you're gonna assign your money. And you can use the previous month or the your budget Toller amount, in order to use that as a guide to allocate your money or just assign your money to that category. So if you get utilities coming up, and you only pay 10% of them, you need to allocate the rest than the 90%. There, so the money will be available when it comes up, maybe you only made one car payment, and you have to carpet, you need to allocate your car payment. So this is the first time you're doing it. So he go through there. And whatever money you're not allocating, you can allocate some to that mortgage for the following month coming up, maybe 10%, or 20%, or 25%. Because we were trying to get ahead, if you're been living paycheck to paycheck, and you've been struggling to pay off your debt, this will help you, you're starting to get ahead. And once you got all that done, did you leave a little bit left that's not allocated, say $300. So you don't overdraw your checking account? Because paying those bank fees is gonna kill your budget, you don't want to pay any more fees than you absolutely have to. And if you have a monthly bank fee. Why is that? Because you don't keep enough money in there. Have you been overdrawn? And have you been using the do they have a credit that they loan you the money? If they do you want to pay that off? We're working here to reduce our expenses. Once you got that done, you're set, you wait to the next pay period, you keep your tracking up to date. You don't overspend anywhere, you're looking for ways to reduce your spending. Maybe you identified your entertainment category, and it was $300. And you looked at the detail. And you found Well, we have this cable TV service plus we have the streaming service, do away with the cable service. The reason I say that is because you're paying for Internet, and two, and that's going to be a set amount every month. And what are you using it for? Are you just using it to go line online and maybe do some shopping or look up something or whatever, you need to maximize that service. And streaming does that for you. And streaming those same channels is a whole lot cheaper than paying for cable TV. And I want one step farther, I bought a digital antenna hooked up to my TV. So I don't pay for local channels because I get them free over the air. Now, if you live out in the middle of nowhere, and you can't do that I understand. But if you're in a city or close to a city and you can get free TV, absolutely do that. I watch that all the time, I don't have any problems. And then pick one streaming service that gives you everything that your cable TV was providing. Maybe not pay for the premium channels, the HBO show times the Disney all those kinds of things, or maybe only have one of those, because we're looking at reducing your spending. 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. It 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 in 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. Okay, I'm calling this simple because I don't want you to put in a lot of detail for your wants, I want you to group them up in big categories. Shopping would be good shopping, general merchandise shopping, have another sub account with the hobbies. Keep it simple, because right now, we want to focus on what our needs are. And we want to focus on what those dollar amounts are. So that we can determine later on down the road, leave yourself some space, when you do your spreadsheet, leave four or five rows in there at the bottom. So you can put in more categories if you wish. But we're need to focus on what you absolutely have to pay every month, and how much of your take home pay that's eaten up anything after that is what you could use for needs. After you put a set amount into your savings. That's the goal here, we're trying to build up your emergency fund a minimum of$1,000, then we're trying to build it up to lease $4,000. So that every few months, whether it takes you six months to do that, or six weeks to do that, then we can use that $3,000 At the amount of money over the first 1000 that we're going to keep in there at all times as for your emergency to pay down your debt. If you listen to my debt reduction plan, I've talked about this in detail. So that's the focus right now, we want to keep this budget as simple as possible. Not too many categories. We have the categories on our needs housing. And that would be the main name, housing, then sub accounts under housing would be mortgage, real estate taxes, insurance, repairs, utilities would be a subcategory. And then under Utilities, you'd put each individual tech, utility, water and sewer and natural gas or electric, whatever, you have trash. And then that totals up into your utilities, you got one number there, and then all those totaled up into your housing. So you got one total there. So when you collapse all those down, you got one number, or if you're looking at a budget in the spreadsheet, you'll have all the numbers out fairly easy, so that they can match up with the report that you're getting from your app. I took my app that I use for tracking, and I rearranged it to match my budget. That makes life so much easier when you're trying to put the money in there. Your budget, your actual spending in your budget spreadsheet once a week. And I did that by either ABC, a for housing, B for transportation, C for food, D for savings, E for insurance, F for childcare, it can do it that way. And then when the report comes out, they'll come out by ABCD. So you that's the free you put a dash and then housing been dash transportation. So it comes out a B, it comes out and in that order, so that if your order from your report is close to the order of your simple budget, and makes it much easier to enter the numbers every week. It's easy to do. I've done it, it's not that difficult. Once you understand how the app works, and you never post money into the heading account housing, transportation, food, savings, credit debt, you always put it into the sub account that's underneath of it. That way it all totals up and you got a nice, good report. Now the allocation column. The first time you do it is fairly easy. Then the next week you do it, you may have paid some of those bills. What you do is When you update your balance in your checking account, you have to go down when you pay your utility, what you got paid that particular pay period of time would be the amount of money that you take out of the allocation, because it's no longer in your checking account. So you got to look at that, before you update the bank balance at the top, you go down through there, and you take out all your new dollar amounts that you paid from the allocation, this can be kind of confusing, and it may be a little bit time consuming, but it's a good tool to keep you from spending more than what's in your checking account. And then once you have what you paid out of those dollar amounts, then you can put in your new bank balance, and then you can go in and reallocate or if you want to, you could probably just zero mo out, put in your new bank balance, reallocate again, leave$300 in your checking account, that might be the easiest way to do it. If you know that you allocated money, say to your mortgage, and you didn't pay any of it, you can leave that dollar amount in there, because it's gonna, you're gonna put right back in, you might increase it, you might allocate a little bit more than next pay period. So whatever works for you, would be the way to do it, there's always going to be a time delay, you're gonna assign money to a category that you're not going to use in that pay period. So you need to leave that amount of money in there. And then you might want to increase it a little bit, you might want to decrease it, you can move this allocated money around to meet the bills that you want, that came up that you wasn't expecting to pay. Or say that your groceries, you had budgeted $800 And you're at$1,100 now, so you can allocate some of that money to groceries from somewhere else, hopefully not from savings. So that's how you get a better control on your money. If you do this, and you keep it up to date, every pay period along with your tracking. You're gonna get your finances under control. You're gonna know where your money's gone, you'll be able to see it you'll be able to spot trends, where you may have started overspending and then realize it for whatever reason, and you can fix it right away before becomes a problem.