Reduce Debt Increase Wealth

Start Over Reducing Debt

December 10, 2023 MIsterchuck Season 4 Episode 195
Reduce Debt Increase Wealth
Start Over Reducing Debt
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Show Notes Transcript

Perhaps have been trying to reduce debt but not have any success. Try starting over again this time doing thing the correct way and staying on track to reduce debt. This episode is overview of what is needed to get debt under control.  

 Article Links:

https://www.nerdwallet.com/article/finance/tracking-monthly-expenses
https://bettermoneyhabits.bankofamerica.com/en/saving-budgeting/creating-a-budget 

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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. Starting over reducing that, perhaps been trying to reduce that but not have any success, trying to start over again, this time doing the correct way, and staying on track to reduce debt. This episode is an overview what is needed to get debt under control? Well, the first step is knowing you have a problem, then the second step is trying to figure out a solution for that problem. This could be a task that most people have no idea how to accomplish. It's easy to get yourself into debt, with all the advertising by this by that credit cards that they have probably almost given to people at certain times throughout the years. And it's just so easy. If you have a job. And you work with irregular income is so easy to borrow money. Thus, that's where you start to get yourself into some type of problem. So if you find yourself with a lot of debt, and a lot of debt is going to vary with each individual or each couple, because it depends on what you think a lot is and how much income you have. Some people a lot might be $1,000. Other people a lot might be$10,000. So other people might be $100,000. So it all varies based on income levels. But people today in the United States are living paycheck to paycheck, it doesn't matter if you're making 50,000 a year 150,000 A year, or 250,000 year, people are still at any level income, spending more money than they were actually making and have available to pay for things. So I have two links on my show notes on articles, about the first step is to start tracking everything, all your income and all your expenses, then the second step is to build a budget, then the third step would be to have a debt reduction plan. and on we go. So the three basics. But before you get started, you have to have a reason why do you want to reduce your debt? Because you're having a hard time meeting know everything that you owe? Or maybe you just don't like to have high interest debt because it's this costing you a whole bunch of money. Or maybe you're planning for the future. One of the articles of one of the first thing is you got to set your goals. What are your goals? Well, if you have credit card debt, high interest debt, high interest debt is anything over 10%. Nowadays, he used to be anything over 6%. But as interest rates goes up, well, that limits gonna have to go up a new car loan is eight and three quarters percent. That's high, in my opinion, I use car loan is going to be 12%. That's high. credit card interest is 20%. That's ridiculous. So yeah, as you can see, the more interest you pay, the, the less your dollar goes to pay down everything else, the less money you're gonna have, because more of its gonna go and to pay on that debt. So how did you get yourself into this particular situation that you're in in the first place? Well, because you probably never tracked or took care of your personal finances. What's taken care of your personal finances, while knowing and keeping track of how much money you have coming in knowing what your monthly expenses are your monthly expenses that you pay every month no matter what. Sometimes the same amount, sometimes not the same amount, or referred to as fixed expense, your or your needs, and his things you need to pay. It's set and stone and you can't get out of it. If you're renting an apartment, you might have a year contract, to pay to stay in that apartment that he got to do that to fulfill the contract. If you have a mortgage on your home and you have a mortgage payment every month, and you have to pay real estate taxes, you got to pay insurance, Guy utilities, those are things you need in order to live along with food and transportation, to what I would classify as knees that everybody has to have. And you have to know how much you're spending how how you do that? Well, the first step is to track it. And when I say tracking, I'm saying you use an app, you have a computer. If you don't have a computer D and do it in pencil, and paper slot harder is not as good. But it can still be done. If you have a computer, maybe be able to have an app you download onto a smartphone, if that's all you have, or you can enter your data, how much is your income? Well, how often you get paid? What expenses do you pay, you know, you got rent, you got insurance, you got utilities, you got food, you got gas for a car, you maybe have a couple car payments, maybe child support, all those things are what you have to pay every month. And it's a need. And it's referred to as a fixed expense, you have to pay it, then you have once things you want to buy, but that don't actually need. So if you're struggling with that, you probably had a lot of purchases on once, and you are spending more money than wait you make for that time period. Whether it's that week or that month, no matter what you're looking at, you spend more money in order to do that you charged it on a credit card. And then you were maybe planning to pay it off over three months or four months, then something else came along, and you had to pay. So you had to use a credit card again, and you got a little bit deeper in debt. And that cycle keeps happening. And it's the debt cycle. And it's hard to get out of once you get into that routine. And the only way to get out of it is quit using your credit cards quit creating new debt. So you're tracking all your expenses, you got to quit creating new data. And then the next step is you have to create some type of budget. But if you're tracking your budgets done, you just don't know it. If you have a tracking app, and you categories, everything, and you've done it for at least the last 30 days, you have the information available now to create a budget. So now you can view what's really going on. Because the tracking well it's does everything in detail. Every transaction you do through your checking account, through every credit card that you use your savings, whatever you're using, wherever the money's coming from, that you're spending or paying for is tracked on that application, then you can create yourself a report by category. And now you have the information available to set up a budget. And why you want to do a budget well, because you take all those categories might be 30, or 40 of them, you condense it down into three or four or six or seven categories that you can look at a total number, and you can look at it on an ongoing basis, month to month a month. And you can see if one category is going up or down, or no a quarry is getting out of control. That is why you're using your budget for you're not saying I'm only gonna spend X amount of money for groceries, I'm gonna spend $300 a month for groceries. And then when I done that, I'm no longer gonna buy groceries we still have to eat. So what are you gonna do? So let's start your budget out, not where you want to be, but what it is today. Were you actually spending today by category? Can I group them together for your budget and to want a needs first, which is housing, transportation and food. And then once after that course a couple more needs, our debt payments, credit card debt payments, and savings. So you got housing, transportation, food, debt savings. Now that debt is debt that's not classified anywhere else. The debt for your home and the mortgage for your home goes to housing, the loans for your car goes to transportation, this would be credit card Dad personal loan debt, payday loan debt, any other debt does not associated with anything else that's not in and another category, then after that is your needs. If you're really struggling, you're living paycheck to paycheck, you're probably already cutting back a little bit. But unless you've done your tracking, and do a budget and have it in front of you, he really don't know exactly what's going on, he might have a general idea. But our goal here is to, let's see what's going on today. And then look at our categories. And where can we reduce our spending, because we're spending too much. And if you quit using your credit cards, you got to cut back on your spending, because you don't have the money to do it. So that's where all this comes into play. Now they two articles. One is supposed to be talking about tracking, but it goes right into a budget and the budget. The other one is talking about budgeting and doing a budget. But then they say you have to track. So I say you start your tracking process first, and do it for at least 30 days. Now we have the information, the past historical information to set up some type of budget. And the budget, I'm saying the setup is actual spending what you actually spent in that past 30 days. Now we're going to track it for the next 30 days. And see, maybe we can cut back somewhere and make sure we stay in. And the same limit guidelines that we're not jumping way high, one month and way low. The next month, we got our spending somewhat under control. But now it's a matter of once you get to that point, you can fine tune your spending, you can look for those things that you really don't need. Maybe it's a $10 item a month you're paying for that you can cancel, and no longer do. Maybe it's a $20, once a quarter, all those little things add up and it makes you broke, it makes you have to live paycheck to paycheck. The final step is to have yourself an emergency fund, or a savings account. And that's going to help you

Unknown:

eventually quit using your credit. And we're

Charles McDonald:

not going to go into detail in the next episode on a talk in detail about tracking. I'm going to talk in a detail about your budget, I'm going to talk in detail about a debt reduction plan. And I'll put all this information together so that you can see how one affects the other. And when you do, the third step is going to help you make the first step much easier. But you have to start somewhere. And the first thing where place you need to start is realizing you have a problem and realizing you need to come up with a solution to solve the problem. That's what people do. That's what scientists do. That's what mathematicians do. They identify a problem. And then they came up with a solution to solve the problem. We're doing the same thing here. The problem is, you're spending too much money, you have too much debt. What caused it, you spend more than you make, and you use in your credit cards? How do you solve it, you quit using your credit cards and you reduce your spending and everything else is God just to get help you focus on where your money is coming from and where your money is going. Now you might think you know where your money is coming from from work. Well, that's true. But do you have other income, interest income, dividend income, your spouse were part time job, a hobby, you make a little bit of money, all those things count he wants to take into your whole life not just one part of your life. If you're interested and checking out the software that I personally use to reduce my debt. I have a link in my show notes at the bottom shop financial, he can copy and paste it and it will take you to the website. I'll be back in one moment with my final thoughts. If you're interested and 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. Need 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 worked great for me. If you're still listening to this, you may be thinking, I've done everything this guy has been telling me, I've tracked my stuff, maybe I don't keep it up all the time, I've tried a budget, it doesn't work. I don't know what's going on, I still have this credit card problem, I don't use my credit cards, because I've maxed out on three or four of them. My credit is really bad, I can't get any new ones. So I'm not really using any but I'm still living paycheck to paycheck, well, you really have a big problem, whether you want to realize it or not. And maybe you've done this, but you haven't been accurate enough, or you haven't been diligent enough, you have to be committed to wanting to reduce your debt. If you're not committed, it's not gonna happen. You have to be focused on it. And you have to think, in a way to get you to that point, you always have to ask yourself, Do I really need to buy this? Do I really need this? Is it worth the money? Is it too much? Can I buy it somewhere else cheaper? Those are the things he got to keep running crossed your brain, every time you're looking at a purchase of say $50 or more, unless it's something you need on a regular basis, such as food, gasoline for the automobiles, utilities, for the house, the heat or cool the house. Things that you need on a regular basis, I'm talking about once, maybe you have a hobby that you're spending two or $300 a month on and don't really realize it, start tracking your spending. And if you put those on there a hobby category, whatever your hobby is, slash hobby, hobby, slash, whatever your hobby is, and see how much money you're really spending on a weekly monthly basis, you might be surprised, you're probably spending way more than what you think you are, you know that tool that you thought you need that cost $400. That was it's a one time expense, but I really need it that you use three times. Maybe you didn't need it. Well, that got charged on their credit card, and now you're making $50 a month payment on our credit card has gone take eight or nine months, because you got to pay all that interest pay, you've done that multiple times. So the numbers keep growing, and you got deeper and deeper into debt. Whatever the reason, it doesn't matter at this point. Now you miss need to focus on, get your spending under control, limit your spending where you can look for things you can do away with that you may be paying for on a monthly basis, or maybe quarterly or whatever. Do away with some of that stuff. Do away look for other ways to do the same task at a cheaper price. Or if not for zero. You can exercise for free outside by yourself. You don't have to pay for a gym membership. It's just what we get used to doing. And you get used to working out in a controlled environments that are going out and running in the rain, where it's kind of dangerous because could be slippery or whatever the case are in the heat. You know, that's life. That's where we exist in real life, not in a controlled environment. Why are you working out in a controlled environment and paying for it while they got the equipment? Well, that's true. But do you really need that? How often do you use it? These are the type of things you need to ask yourself before you spend the money. You need to set yourself some goals and you have to be committed to accomplishing these goals. Whether your goal is to pay off all your credit cards, or your goal is to pay off all your high interest debt and your high interest debt is anything over 10% Or maybe just become debt free. Or maybe just increase your savings for you too. children's education, or maybe increase your savings for your retirement, because you want to retire at age 55 instead of 65. While it takes money to do that, and if you don't start saving now, you'll never have enough money to afford to retire at 55 unless you win the lottery or have a very successful business of some sort. So unless that's happening, you're not going to be in the place you need to be. And if that is happening, you're probably not listening to this podcast, or probably already successful, already doing the right things, because that's how they got to where they are today is by doing all the right things at the right time. And a little luck here and there will make you somewhat successful. This is a short because it's intended to be an overview, I'm not going into any detail, I pretty much covered everything I was gonna cover. So stay tuned, I'm gonna talk about tracking, and then how that relate goes right into doing a budget. And then that goes right into having a debt reduction plan. And that just goes into your long term goals and saving for the future, what you do and you get your debt paid down. That is where I'm headed in the next few weeks, episodes. So this sit tight, listen, learn, go back through some of my older episodes, because I talk about the same thing over and over again. I tried to get different light on these things that come from different viewpoints if I can, but I you know, it gets kind of same thing over and over, and I get kind of bored. So I like to look at it in different ways as much as possible. So that's where we're heading. And I'll stay tuned to next week's episode.