Big Purchases

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. Big purchases, managing large costs purchases the basis of this episode, and auto or home the day will come when faced with these decisions, what to do and how to approach to challenge but not only in purchasing a new home or an automobile, less or a new automobile, but even a used automobile comes with big price tags. Also appliances for your home, big screen TV, stereo systems, all kinds of things come with a very large price tag, and how are you going to afford these items, especially if you don't want to use credit, if you have a debt problem, you need to put these large purchases on hold until you get your debt problem under control. That is the first thing we have to do. If you find yourself where you absolutely have to replace a car because yours broke down. And you can buy a good used car for the same price it's gonna cost you to fixed one. Well, then you got to bite the bullet borrow the money and go forward. But how do you prepare for these things as what this episode is gone to be about. Or the first thing is you got to be tracking all your income and expense, he needs to have a spending plan. a spending plan is nothing more than tracking everything you're doing and put your money to work. Give your money a job to do each and every month. Every time you get paid. What are you going to use that money for? Is it going to go or go towards your your mortgage or your rent may be your insurance is coming up in a month or so you want to save some for your automobile insurance, your homeowners insurance, your rentals, insurance, things like that. Or maybe you have a dental need coming up or you know this be you have to pay some money to the dentist because you need to get your teeth fixed. Anything like that we need to plan ahead for if you know is gonna happen sometime in the future, you need to start planning that sooner, the better. So if your car has 100,000 miles on it, and you want to drive it to has 200,000 miles, now's the time to start planning. What are you going to replace it with? How much money do you need for a down payment? How much can you afford for a monthly payment, all those things you should start thinking about way before you need to do it. Don't wait to the last minute, you may have appliances in your home. Right now I'm looking at remodeling my kitchen, I know is going to cost a bundle of money. I want all new cabinets, new appliances, the whole nine yards. But I found out recently that I need to upgrade my electric panel because if I get a new refrigerator new electric stove, it may draw more current than I currently have in the house. So things won't work right and then the wear out faster. So I'm in the process of planning on looking getting estimates on my upgraded my electric panel and then once that's completed then I'll get estimates on remodeling the kitchen and then I have been saving up for it. I have money set aside but I don't want to spend any more I have to then there's good time of year to do things when them not as busy and to try to hit those cycles so I can buy my appliances when they're on sale and a little bit marked down. I can maybe get a contractor in to do the job when his not so busy season and get a little bit better price. All those things you have to plan for. But if you have a debt problem, and you have a couple credit cards that are not paid off, the first thing you got to do is pay off all your credit cards. Then if you have two car payments you may be you want to pay off one of those cars payments, he had them under control the last debt you have, when you go out to look for a new loan to do a major project, or buy a new used automobile, I say buy a used automobile because buying a new one, it's two things are working against you, it's a higher price, it depreciates really quickly, and you're going to end up owing more money on the car than the value of it within six months or a year, I avoid that by buying a used car word the depreciations already happened, and I'm not paying for something that's gonna drop in value is gonna stay somewhat stable for a year or two, it's gonna stay have some value to it. So I don't go negative on my loan, going negative on your loan is what you bought, is worth less than what you owe for it. So you got to get your credit cards all paid off to zero, have them paid off for multiple months, not just one month or two months, but three months or six months. The second thing you need to do is build up your emergency fund, you need to have three to six months or of your expenses and your savings account, it doesn't have to be at your local bank, you can have a savings account at a online bank, where you have a high yield savings or a money market that's paying you a higher rate of interest. Right now I'm getting about five and a half percent interest per month on my money market account. So I kind of hate to take the money out of there. But I know I'm gonna have to cuz I'm making, you know, I'm getting pretty good return. Not a whole lot but pretty good return based on what I was getting. It's just put it that way. So get your debt under control, have a plan for that. And then plan for saving up money to build up your emergency fund. And then once you're happy with your emergency fund, three months to six months rains, depending on your situation, what industry you're in, that you get laid off on a regular basis, you pretty stable, all those kinds of things, are you planning to have a family in the near future when you before you make this big purchase, or shortly after you make this big purchase because we don't want to over stress our finances. So we have to make sure whatever we buy is in where we if you have to borrow money, then the loan payment is within our budget. And it's not gonna put a stress on our budget, even including things that hadn't happened yet, like having children or retiring. Or whatever the case may be. everybody's situation is a little bit different. I have two links, and my show notes. One is the nerd wallet, wallet. Best things to buy every month, and it goes month to month and it tells you what is on sale those particular months like appliances is in January or February. Clothing and bedding is in January. You got the three Memorial Day, Fourth of July Labor Day generally have sales. The TVs are good after the first the year around Superbowl time, January February. Cars if you're gonna buy a new car at the October, September, October November, because the new models are starting to come out and the dealer want to get rid of the older models if they have any. So that may not apply anymore. But generally in the fall is the time to buy a new vehicle or even look for a used vehicle because people will be trading things in. I tend to look at lease cars, because they usually lease a car for about three years now. They genuinely have a little bit more miles on them, but they're in fairly good condition and they're about three years old, and you can get a reasonable price on them. If there's a good selection available, you get a pretty good pick too. And then there's another article on my show notes house logic.com which gives you when to buy things for your home like the appliances, hot water heaters, things like that. It's just to give you an idea. When you plan in the head. You can pick the time when you want to buy things and Just don't do it on a whim, you need to plan ahead, save up some money, pay off your current debt, pay down your current debt, if you have auto loans in your mortgage, make sure all your bills are timely, so you have a good credit rating. Because if you have a good credit rating, you get you better insurance and law at a lower price, you can get a loan at a better rate of interest. For the terms that you're looking for. If you're interested in the software that I use to pay off my debt, you can go to my show notes at the very bottom, shop financial there have a link in there for that particular software, you can copy and paste it upper left hand corner should say mainland and Chuck. And you'd be right the correct place. I'll be back in one moment with my final thoughts. If you're interested in learning about an online software that help 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 that increase wealth@gmail.com. And I'll send you the information about this online software that worked great for me. For those of you looking to buy a new home, or your first home, one of the first things you need to do is pay off as much debt as you can. So you have no credit card debt. Don't close those credit cards, because that's good for your credit rating. Keep a zero balance, start saving for a down payment. Thank you, you need to have at least 5% Down 10% Down. So once you have 10,000 that means you can borrow 100,000, that's 10% of 100,000. Once you have 20,000 Now you can borrow 200,000. What can you afford to buy for a $200,000 home what's in your area. Depending on where you live that downpayment needs may be a little bit bigger, even if you qualify for a VA or whatever loan and they don't require a bigger downpayment. Save up as much money as possible. Figure on putting at least 10% down. And if you don't use it, you can use it to buy appliances, or other things for the house. When you move in. Maybe you need to do some painting and some minor repairs. You'll need some cash to do that. Paints not free. He can't get anything done for free anymore. But if you ever could, but you need to have money saved up to cover that. If you gonna borrow say $150,000? How's that gonna affect your budget? What's the monthly payment gonna be? What's your real estate taxes gonna be? What's your homeowners check was an insurance agent saying on a buy a house that$200,000 home? What will my insurance run me a year? What's the real estate taxes? You can ask a realtor? What's the average real estate taxes in this general area? What's the and divide those numbers by 12 and that's gonna be your monthly payment. It's gonna be your mortgage payment, it's gonna be 112 of your insurance and 112 of your real estate, you'll probably have to put a little bit extra at the beginning. Because you're gonna have depending when things are due, you might have to pay a bunch of extra, you cannot have enough money saved up before you go into this purchase. No matter how you use it. It will get eaten away by something that's fair warning. Same thing with an automobile tried to have a bigger downpayment then you want to use maybe you're gonna buy a$20,000 car but what's the sales tax on that? Do you want to finance the sales tax for five years, maybe have enough for a 5% down and pay the sales tax, whatever that works out to that way you keep your budget out the loan amount to smallest minimum monthly payment as possible, you're better off borrowing money for a little bit longer with a smaller payment and then making extra payments on it and pay it off early. In case something bad would happen. If something if you would lose your job, are you gonna have enough money to pay the monthly payment for two or three months, plus your insurance and everything else you have to cover? I know unemployment benefits don't pay a whole lot. So you need to have money set aside, do not eat into your emergency fund for the down payments, set that aside, and have I need 15,000 In my emergency fund, that's a fake number that jets just a number I put one out there. Now come me for three months, I spent about 5000 a month, covering three months. Now I need 15,000 I need total 30,000. Before I go shopping for the new automobile, if I go shopping for a new home, he might need 100,000 emergency fund plus your down payment plus closing costs plus whatever else either on a nail your whip, everything adds up. You cannot have too much money set aside for any of these large purchases. Same thing if you're gonna buy a new TV, if it's a$3,000. TV, you don't borrow money to do it. Wait until you have enough. If you plan far enough ahead, you can have the appropriate amount of money available in your savings when those TVs go on sale. So you can go in, maybe you charge it on your credit card, but you're gonna pay that credit card off right away, you're gonna next Friday, you have the cash, you're gonna pay it off. So you're not carrying any balance on a credit card, not even for 30 days. That is pretty much how you want to handle any large cost purchase that may come up. Hopefully, you'll have your debt under control before that happens. You know, you want to have your credit cards paid off, you wanna be down to no more than one car payment. He wants to just have your one mortgage may be a line of credit, with a small amount. Got to keep these things under control, or you'll be working paycheck to paycheck. And the only thing you gotta be doing is paying off everybody you owe paying utilities, buying groceries and putting gas in the car so you can go to work. Is that the type of life you want to live? If it is fine, go ahead. But that's not the type of life most people want. They don't want to be struggling paycheck to paycheck, what happens is their paycheck drops 50%. And now you can't cover these loans that you agreed to do. It's just a matter of keeping your spending under control. The more control you have on your own finances, the better off you're gonna be. Plan ahead. How's the gun? A big ticket item? If you borrow money? How's it gonna affect your current budget? And what's gonna happen? Do you have to cut back somewhere else do you have to do away with all your streaming platforms, maybe you can't do your NFL ticket or NBA ticket or whatever it is you enjoy watching. You might have to do away with something money don't grow on trees. I hate to say that if it did everybody B have a lot of money. And then of course, everything costs so much more. That's about it. I mean, this is a short episode, but I think it's very important. If something is coming up that you know you're gonna have to buy in the future, whether it's a next three months, six months, a year or two years, you need to start planning for it sooner, the better plan for today. Even if you just set aside $5 and pay$10 of pay and then gradually increase that get up so that you're putting $100 $200 of pay$400 $600 A month aside from now you know, you can afford that payment because you've already taken out money out of your budget and you put it in your savings and then you use that money as a down payment to get that more get loan payment down as low as possible. Especially the higher rate of interest, the bigger your payments gonna be The bigger down payment you're gonna need to be able to afford the exact same thing. I wish everybody good luck. Stay tuned, keep at it, don't give up. You can do it. paying off debt is not hard. And once you get that under control, manage your finances going forward. That way you're not back in the same boat that you are today. You can avoid those things. You'll have a much happier life and you'll be glad you did. So