Reduce Debt Increase Wealth

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December 17, 2023 MIsterchuck Season 4 Episode 196
Reduce Debt Increase Wealth
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Show Notes Transcript

What is tracking and what to use to make tracking easier.  Just taking a few minutes every week will help get debt under control.

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https://www.youtube.com/watch?v=XImly72tLw0
https://www.youtube.com/watch?v=300NkycLwiA

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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 in detail, what is tracking and what to use to make tracking easier, just taking a few minutes every week will help get that under control. Track tracking is nothing more than a recording of all your income, and all your expenses things that you buy or purchase throughout the week, month year, and includes everything. Back in the day, pre computers, before computers were in everybody's home. And before you had the internet and go online, a check had a check register, he would open up your checking account at a bank, they'll give you a little booklet, which was your check register or you will record your opening balance. All the checks you had wrote all your ATM withdrawals, all your deposits, and to a check register. Tracking is nothing more than a check register that is gone on to a computer. So the all the math happens automatically. You don't have to add in your deposit, you don't have to subtract out your deposits. There's no air there for making a mistake, because the computer does all the math for you. So that takes out the mistakes, which makes it a whole lot easier that when online banking came along, and you could just log into your checking account and see your balance. People quit doing the tracking, people quit keeping track of a check register, which was not so good of an eye, dear, but they thought they didn't need one. But here was the problem. If you mainly wrote a paper check and put it in the mail, you wrote it today. And it may not hit the bank for a week or two. And if you forgot you did it, you might spend that money again, because you thought you had more money in the bank. But that check was outstanding. And then all of a sudden hits the bank clears. Now you're out of money, you might have gone negative. So it was still important to keep a check register, that with tracking online with a an app, you can now include all your credit cards, all your loans, anything everything in your life, you can track what's going on in that particular item. And some porn to say that if you have a mortgage, you make a monthly payment, part of that payments going to be interest. Or that payment is going to be principal, if you have an escrow part of it's going to be your insurance and part of it, it's gonna be your real estate tax. You don't have to break all that out you can if you want but unless you know the exact way the mortgage company has computed the interest, you're probably gonna be off a little bit and maybe not a whole lot. But maybe it you're never going to be in complete balance with your unpaid principal for versus what, what you calculated versus what the mortgage company's done. That's why I just

Unknown:

post the payment. Here's the payment posted.

Charles McDonald:

He might want to break out the the mortgage in the insurance part of it, but not the principal and interest down the road. You can work on that later. You can make adjustments on the unpaid principal if you want but I'm getting sidetracked. The idea here is to keep track of everything where your money is coming from. If you're if you're married or have a significant other, you need to include the total household income and the total household expenditures. I'm gonna call it expenditures because that's what you're spending your money on to do it today and 2023 24 use an online app, you don't even have to download these apps anymore. And there's all kinds of them. I have a link in my show notes to a couple YouTube videos that give you idea on how to do things. One of them is he is automating all his payments. But don't do it until you have your debt under control, or at least know how much is going out every month, and build yourself up a buffer because of the timing issues of when your paycheck hits the bank versus when these payments are going to be made. If you automate it, it's just going to make the payment. And if you didn't have your income coming in, you could overdraw your bank accounts, you need to build up a buffer, but that's down the road. The apps, what apps should you use, generally speaking, the cheaper the better. If it's gone up, serve your purpose. Remember, your goal here is to reduce your debt. And if you keep paying out a lot of money or more money can afford to pay, you're gonna have a hard time reducing debt. Now remember, this is gonna help you get your finances under control. So it's okay to splurge at this point, to get something that you like and can work with, that's the most important that what should you be looking for one, it should be relatively inexpensive or free to eat should be able to use it on your main computer at home, where you can log in. Now, these are all online apps. So you log in with a password, you have your checking your credit cards, whatever information you put out there, I hadn't had any problem with being hacked or anything. But I do not automatically connect my bank accounts. That way, my bank account information is not you know, my account number and all that is not out there. Also, if it's automatically done, you're defeating the purpose of getting to know what's going on and your finances. And so if you manually enter the transactions, you'll have a better feel for where your money is coming from where your money is gone. If you're spending too much, maybe which category may mean, you just have a better idea of what's going on. You can enter these transaction once a week, he can keep the paper receipts, or you can go online to your checking account for taxes. And it's most important at the end of the year. But if you're a business, or if you doing things that are tax deductible, you need to record them when you pay them and not when they clear the bank. So if you paid your mortgage, while that's about it, if you made a charitable donation on December 30, that's when you record it, because it's a deduction. And that particular year, December 30 of it clears the bank January 10. If you don't want to use the January 10, eight, because that's the next year you want it in the current year's taxes that you made the payment. But it doesn't matter when it clears the bank, it's when you pay it is the important part

Unknown:

for income taxes. Keep that in mind.

Charles McDonald:

So if you're entering directly from your online checking account, or the online credit card accounts or whatever, keep in mind when did was that may What date did I make that payment, and that when it cleared, keep that in mind specially at the end of a month, or in the year. Now it's important for your budgeting purposes to assign it to the correct month, so you know when it was spent. So if you just keep signing it to the wrong month, you're not gonna get accurate detail what's going on over time they'll even itself out. But just to keep things consistent. You should record them when you made the expenditure not when it cleared the bank or the credit card, because it could be a couple of days delay. You want to look for an app where the categories are pretty much already set up. But you'd be able to edit them? Can you add your own categories? Can you update the names? Can you change the names on them? Can you change it in a way where you can reorganize how the order it comes out. So you can group things together for your budget, housing, transportation, food, savings, that that's not anywhere else. And then everything else, those are your needs. And then everything else is wants, what you need to pay every month, versus what you want to buy at any particular time. So if you can do that, it's, it's going to be decent, you be able to rearrange it, so that when you print out a report, they'll be easier for you to do your budget manually on a spreadsheet. And these YouTube videos, they're pretty much doing everything on a spreadsheet, there are apps that do it all. So if you're looking at an app, that's gonna do more for you, you still want to manually enter the transactions. And you still want to manually set up the budget. Because that way, you know more about what's going on in your finances. So if you are keeping the receipts, and then enter and the date from the receipts and the dollar amounts, remember to include your tip if you're going out to eat because sometimes the tip amount doesn't show up at the bank right away. But then a couple of days later, it'll update. I don't know why, but that's what my bank does, the initial charge comes through without a chip tip, then a day or two later, it will change. So I always use it from the receipt and I put the tip amount in, I won't be in balance until the bank updates the tip amount, which could be a day or two later. Also, you could have an app where you can put it maybe on your main computer where you log in and do your updating on a regular basis. Or you can have an you could have an app that you put on your smartphone. Or if you go out and do something you're spending money, you can enter that transaction as you do it. Or very quickly after you do it, it's a matter of getting used to doing it that way, you don't have to keep the receipt, he manually put it in on your smartphone, it's out there, it's entered. When you go in your computer at home and you log in, it's gonna be there. So you want the versatility of doing it both ways. The one I use which is called count about.com. They don't pay me on a promo promoting it or anything. But it's relatively it's less than$10 a year. It has an app on my smartphone, I can log in, it works just fine. Now the two are different. So you'd still need to use it on your computer at home. Because that's where you get your reports. The app doesn't do as much but it allows you to enter transactions and see your balances. So that's that's something you need to look for. Can you edit the categories? Does it have an app, we can enter on Mobley. And if you and your spouse both habit can to do it. Just so that it's flexible? Does it do everything? Now it might say it can do a budget. But how good is it some of them are better than others like to count about is great at tracking and doing that kind of stuff. But not so good on the budget side. But that's why I use a spreadsheet because I want to plug in the numbers so I can see what's going on. And I can keep it up to date, and I have a better feel for everything. And that's pretty much what everybody on YouTube that I watch says you want to manually update this stuff. You don't want it to make it automatic. Then there's other apps such as you need a budget, why an A B? That kind of does everything for you. From what I saw. They recommend that why NAB is good for paying off debt. But I think it's better than that. Because you can do your tracking in there. You can do your budgeting in there. You can assign your money place to do so like using the envelope system. So you don't overspend. Money comes in your checking account, and then you assign your money a job For an expenses coming up, and then you can get a forward look somewhat to see, do you have enough money to pay this month's rent, and next month rent, and this month, all this month's bills, and next month bills, it works fairly good. If you use something like that he need to learn in stages. Learn how to enter the transactions to do the tracking part, watch you to videos and learn how to use the software and gradually work your way into it. Use the tracking for a while and get comfortable. And then take the next steps learn about the budgeting portion of it. Learn about how to assign the money to it to categories and how to use it to your advantage. You do it in baby steps and do it in stages. And a won't be overwhelming. If you tried to do it all once. He is gonna be way more than you'll ever remember. So it will be overwhelming and you may not like it. But do it slowly and gradually work your way up. Everything I was going to talk about, as far as tracking goes, and you main reason is you want to manually do it so that you have a grasp on everything is going on, and you have a feel. And you can see in real time where your money is going. And if you're overspending in a category,

Unknown:

you can make adjustments.

Charles McDonald:

But before you do all that you need to know why are you doing this, you're doing it because you're trying to meet a particular goal. And this particular case, he may be trying to pay off credit card debt, maybe you're trying to pay off debt, so you have more money to put aside for something else. Getting too much debt is just as simple as your spending more than what you make in the current particular period. And you're using credit to do that, you got to stop doing that. And by tracking your spending, you're gonna get a handle on why you may be overspending, he might be seeing a category where you're spending most of your money, and you now you know where the money is going. You can adjust and make changes to help reduce that spending. So you can increase your savings, and then increase savings is going to pay off your debt sooner. I know that doesn't make a whole lot of sense. But believe me, it works very well. 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 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 worked great for me in one of my YouTube videos. That guy is talking about automating your payments, and he have been doing it for a long time. You need to watch the YouTube channel to learn how he done it. And he recommends building up a one month bumper before you start doing it. So if you're trying to pay off your debt, before you start automating any payments of your monthly reoccurring bills, the start there, you need to know one how much they are on a monthly basis and two are you're always gonna have enough money at the time your bills are due to cover them. So it's the timing of when you receive your income in your checking account versus when you're gonna pay the bill. If you're automate them and you set it up on the payment date. The payment date can change by a day or two depending if it falls on a Friday. A Saturday, Sunday, you know, for Saturday and Sunday and might move to Monday and Saturday might move back to Friday. And if you don't have a paycheck coming in that week, he could be overdrawn. So you need to have a buffer buffer in your checking account. To cover these timing things. As I referred to him, what he recommended was automate all your monthly needs, the bills, you need to pay every month, your rent, or your mortgage payment, your car payment, all your utilities, I do that, because I was missing them every once in a while. And that's bad on your credit score. So what I did was I go to each particular vendor, say the utility company for the electric the gas, water and sewer, everything that can do online on their site, I set it up as an auto pay on their site, because then I can check the due date and the due date, say it's the 10th, while on the 10th, it's gonna start the transaction. And that's a timely payment, because my person on paying is doing it. But it may not clear my bank for a day or 2am, I not clear my bank to look love with her 12 Because of the day at false, and is still considered timely payment. So that's how I particularly do it. If you do it from your bank, and you say it's the 10th of the month and the 10 falls on a Saturday or a Sunday, the bank may not process it to Monday, and then who you're trying to pay may say, oh, you're a day late, and they're gonna charge you a fee. That's why I do it the other way around. At first I didn't, then I got charged some of these late fees. And I say, well, we'll just do it the other way. And I haven't had any problems since. So there's a little tip there. So before you automate, especially if your paycheck to paycheck, and you have a lot of debt, you don't want to automate this stuff until you get your debt under control, pay down some good build up a buffer in your checking account, have at least a minimum of $600 is what I kept in my checking account at all times no matter what. So if I didn't have $600, nothing got paid, I would have to manually go in and pay it. So I knew I had enough to cover that particular bill. That way, you're not going to overdraw your checking account and get charged all those bank fees. We're trying to minimize wasting money and paying bank fees is a waste of money. He also automated his investments where he was putting money into an investment on a monthly basis. And he was just automated to transfer the money. And he said he started small at first. And but he gradually increased, you need to watch the video to understand what he is doing and why he's doing it. I'm just relaying is one way to make timely payments and all your monthly bills as Donna made them, they got to make sure you always have enough money in your checking account to cover those bills down the road. And his recommendation was a one month buffer. So if you have $1,800 A month in expenses, that gets paid every month, you need to have $3,600 A month $3,600 in your checking account before you start automating these payments. Seems like a lot. But it makes sense. That way, you're not going to overdraw because of timing. Or if it's a big one. And you just want to make sure that you're paying it whether three days early or one day late, or whatever the case is that you always have enough to cover it, then you do that manually. So if you just look at the different apps, there's apps out there that you can download to your smartphone that are free. And you can use them free. Some of them have a free trial that you can use them. The deal with the free trials is they get you in long enough you put in a lot of information. You may be like it or you don't that you spent so much time putting in information. You don't want to do that again. So then you just start paying for it. And then you're kind of on something that maybe you'd like or don't like. So beware of those type of things. Just a note, I believe the mint which is a popular app is going to be shut down and intuit the owner of it is is gonna force you to move to some other app that that's not meant. So it could work differently, better or worse, I don't know. But just a note about that. Don't even look at it, because it's not going to be around that much longer. And just one final note, you're probably wondering if you start to tracking, he only, maybe you only want to do it until you get your debt under control. Maybe you just want to do it until you get your credit cards paid off. But you're thinking all wrong. He just have to continue doing it for the rest of your life, or until somebody else takes it over from you. And what's the reason is, well, maybe today your goal is to pay off your credit card debt. When sad happened, what's your new goal? Maybe to upgrade to a new home or buy a new car, or save more money for your children's education or save more money for your retirement? This is gonna be an ongoing process. And if you hadn't done it in the past, and you got yourself in trouble, that's reason why you're in got yourself in trouble. You don't know what's going on in your personal finance. So you have to always know for the rest of your life, what's going on in your personal finances.