Reduce Debt Increase Wealth

Tracking Basic Plus

January 21, 2024 MIsterchuck Season 5 Episode 201
Reduce Debt Increase Wealth
Tracking Basic Plus
Reduce Debt Increase Wealth +
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Show Notes Transcript

What is tracking in personal finance, what to do tacking and what is needed to track personal finance. Going in depth to explain the basic tracking software. 

Articles Links:
 https://moneywise.com/managing-money/budgeting/best-personal-finance-software 

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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 plus, what is tracking and personal finances, what to do tracking and what is needed to track personal finances, going in depth to explain the basic tracking software, and what to look for when you're searching for something to help you with your personal finance tracking. But before I get started, I want to talk to why you want to do it. But if you're living paycheck to paycheck, and you're struggling to pay your bills, and not really sure what's coming up and do in the future, we kind of know but you're not positive. Maybe you don't know how much or when. And you don't really have a plan for anything with your money, you're in trouble. Whether or not you have a lot of debt, you could be in that same situation and have no debt. It's because you don't know where your money is gone. You don't know what's coming due. And you have a vague idea of how much money you make. I saw an article where it said of people making 100,000 Plus are living paycheck to paycheck. And the article was discussing the reason for that. One of the reasons is, as you make more money, this is what the article was saying, as you make the more money, you think you deserve better things. And better things generally speak and costs more, whether it's a more expensive automobile, a bigger home, designer clothes, going out to eat more often, whatever the case, you are inflation spending, as you make more money, you're spending a whole lot more because you have more to spend, and you're not considering the future, you have no real plans, you have no real goal set, maybe you think you have some goals set. But he'd never wrote it down. And never worked on trying to achieve that goal, no matter what it is, whether it's just buy a new automobile that you want a new sports car, or that designer dress or that whole designer wore wardrobe you want or the fancy cosmetics that you want to use, it doesn't really matter. If you have no plan for your money, it's gonna just go away, because you're gonna just buy whatever you want, whenever you want. And then when bills come due, you're gonna be struggling to figure out how to pay for them. I don't know if that sounds familiar to you. But then in a nutshell, that is part of the reason. The other part of the reason is people want to keep up with the Joneses. The other guy, your neighbor might have that new car, maybe they remodeled their kitchen, and you want to try to do the same thing. Don't worry about what other people are doing. That's their problem. You need to focus on yourself, and what money you have and what you can do with what you have. I have a link in my show notes for an article for money wise, and it's titled best personal finance software for 2023. I'm not saying it's the best or not the best. The reason I picked the article is because it has two of them in there that I like you need a budget, which kind of does your tracking and your budgeting and count out which kind of will definitely do your tracking. I do not use for my budget but that's my, the tracking software of choice. The one I use personally, both of them are in this article. You can read the article and find out which is best for you. There's other ones in there that I'm not gonna mention because I don't like them. Or I've never used them or combination of the both. So tracking is nothing More than making a list of all the expenses and all the income that goes through your personal finances, which includes your checking your saving, if you have one, all your credit cards in your loans. Now I know the loans like your automobile loans and your mortgage, hopefully the only direction is going is down and may be slow, you're making a timely payment, part of that payments going to entrust and part of that payment is going to principal, the newer the loan more of it's going to be interest and less of it's going to be principal, that's why it takes so long to pay them down. So really, the tracking of those items are not as important. But your checking account and your credit cards are important. You want to know how much money is flowing through your checking account? And where it's going? What expenses are you're paying for? How much is coming in? Which is your net pay what's deposited in your checking account? where it's going, when those bills are due? And how much are they? Same thing with your credit cards? What do you spy in with a credit card? Why are you using a credit card? How much are you making a payment, How much is that interest, they're charging you every month, it's gonna be a lot. I had a $600 balance on my credit card because I thought I'd wait another

Unknown:

two weeks to pay it off.

Charles McDonald:

I didn't want to short my checking account I could have but I didn't cost me$10 in interest on a 500 or $600 balance for about three weeks. That is way too much. And that was the lowest interest credit card I have, it's like roughly around 14% You can really get yourself in financial trouble when that interest starts piling up. And it's hard to pay off a credit card, and you find yourself trapped into a debt cycle. And that's probably the most number one reason why people were living paycheck to paycheck, they're struggling to make those credit card payments. And then they come up short during the month and they use their credit card some more to pie groceries or put gas in the car or whatever the case would be the makeup for their shortage. And that balance just keeps growing. And it's hard to get out of that cycle. And that's referred to as a debt cycle. So your first step, once you realize you have a problem, the first step is really realizing you have a problem with your finances, whether it's too much credit card debt, too much debt in general, or just spending too much money and with zero debt, whatever the case, everybody's situation is gonna be a little bit different. So but you got to realize that whatever you're doing is something is missing. And that's something that's missing is keeping track of everything I took, kept track of most of my most of my life. Since I graduated from college, I always had a minimum, a check register. Now, I didn't keep track all the detail of my credit cards usually only had one, maybe two credit cards, but I really never tracked it, I tried not to use them, treat them as cash, but then something would happen. And I would have to use the credit to pay for new tires or whatever the case was. And I just got myself in trouble. And then my approach was I pay $200 Extra on that credit card till it's paid off. And I did that then I'd come up short somewhere else and cut back on my spending of from food or whatever I could. And I would almost be debt free as far as paying off that credit card. And something else would happen. And I'd have to use it again. So it was a cycle. I would kind of get out maybe I would pay it off for a few months, and I would be fine. And then I would go on to spending splurges for whatever reason. And because I thought, well, I need new clothes, I gotta buy a bunch of clothes. I'll pay it off in a couple months, and then something would break and I had to replace it and I got farther in and it took me forever to get out of debt. Because while all that was happening, my income was never going up. My income was going up slow, but my debt was rising fast. And that's think that's what happens with everybody else. So you need to track everything. So what are you looking for tracking today. And 2024 is basically an app that you can use to put your Personal Finance information into. So you want to find something that's gonna be flexible, something that when you get them and download them, they're pretty much gonna be set up with all a list of categories. But can you edit those categories? Can you switch them around? Can you rename them, that's kind of a something you want to do, because you want to make it something that's easy for you to use that you can identify with. The I call, housing, housing, well, you might call it house, or home, or living space, or whatever the case are on food as food, you might call a groceries dining out delivery. To me food is food. And I have one category, and I put them all on one, transportation. So you want to be able to work with the categories added on rearrange them, rename them so that they come out when you print them in a certain order. So that when you do your monthly budget, which I highly recommend doing it on a spreadsheet separate from your tracking, unless you have an app that kind of built in and can do it count about kinda does budgeting, I don't like it, it doesn't work very good. I only use it for the tracking portion. Now you need a budget, why an A B? works much better, but it's a little more expensive. And if you read the article, there was no phone or email contact, that's a con and there's not a one stop shop for all things financial, I'm not really sure what that means. It's about budgeting that goes beyond the mechanics of budgeting, and it says it's a low cost. It's about $15 a month, I think, if you use count about and knowing and use it for your tracking, is gonna cost you$10 a year, big difference in price. And it does really good in what I just said of what you can do, you can do all that, and probably a whole lot more. I only learn to use things to the point that I'm gonna use it, and I don't bother going any farther. I'd like you need a budget or why NAB because they have a lot of YouTube videos on how to use it. And you can watch videos and learn how to use it. And pretty much will do everything you need to do it could do your tracking, you can put all that in and that's your starting point. Put in your date, Id I do not recommend connecting to your bank. Coz if you manually input things you didn't have more aware of what's going on. If it's automated, if you automate it too much, you're not aware of what's going on, it may take you a longer period of time before you realize why I'm spending way too much on Dining Out. If you manually enter in it, you'll know that right away because you're entering it. And you go a week and you enter it five times, you know, you know five times a week, or whatever the case, if it's automated and comes in and just scan through it, he may not realize that right away. But that's your starting point. So whatever software you go with your starting point is start with the tracking part and put your data in there. And you want to be consistent on how you enter your data. And the big thing to watch out for is like grocery store, a go to a grocery store to buy food, which is groceries. You can also go to the same grocery store and buy gas for your car. So you need to make sure you categorize them properly. gas for the car should be transportation fuel, whatever hand groceries should be under food to different categories. He got to be careful on that type of concept. Don't get in to so much detail that you're breaking out grocery as food, toiletries, cleaning supplies. Don't do that to clump it all together into one over two A long period of time, it really doesn't matter. If you want to put memos in your notes. So you can see where I spent an extra $50. This week at the grocery store one or what I bought, if you put notes in your memo, you'll know us by cleaning, supply some toiletries, shampoo, shampoo, whatever the case, whatever notes you put in there, you can glance at and have an idea of what what happened. So that's what you need to do. And the reason you're doing it manually is so that you know what's going into your checking account income, and you know what's coming out. And over a period of time, you'll know, okay, my rents due on this day, the month my electric bills aren't usually due this day of the month, my natural gas bills do this, my trash is due quarterly and it's usually due then my insurance is due monthly, and it's due this day of the month, you'll get to know that and then over a longer period of time, you'll know your start to remember the numbers. I know my car insurance is $50 a month. Now these are just fictitious numbers blaming my rent, he should know that. I mean, that should be something you should know off the top of your head or your mortgage payment. And if you have more than one mortgage payment, he should know all of them pretty much and when they are due. And why is that helpful? It's helpful because if you know when things are due, you're gonna know how much money you need to have in your checking account. And you got to know that you can't splurge on spending before you need to make those payments. And you can then budget your money a quarterly yn A B calls that given your money a job, I think other financial Pfizer says the same thing. Give your money a job, your sign your money, a job to a category. And then when you pay it up tells you that it works great. And it's a good thing to know. The more you know what happens in the past, and that happens on a regular basis, the more you're going to know what's coming up in the future. I know that sounds crazy, once you know what's going on in the past, and most of budgeting is looking back what happened. But we want to take this to look at what's going to happen in the future. And what can I do to make that happen easier for me. So I don't come up short. So I make all my timely payments, and everybody is paid on time and I pay all my bills, and I got a little bit of money in my savings account. And I'm not struggling to get out of debt and I build up my emergency fund. So something bad happened, I don't have to use a whole lot of credit to get through that particular problem. That's we're trying to get to in our personal finance life. And if you're not there yet, you're probably struggling. And if you're struggling, the reason is, do you have too much debt, or the reason is, you're not planning far enough in advance. Or the reason is you're spending more than what you make. I know that's a short term thing. Whenever you spend more than your make, you have to make up for by using credit. And the more credit to use, the farther behind you're gonna get. And it cost you a lot of money to use credit. And if you don't believe me, just go back through one of your credit cards that you've carried a balance on for the last year, add up all the interest you paid. And then think what could you have done with that same amount of money, and that money could have been in your savings account instead. And that's where you need to get your mindset. And we need to focus on what's going on today in our personal finances. So now we can plan for tomorrow. 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, 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 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. I was listening, I believe this was on the news the other night. And this topic is gonna be why you do a budget, but I like to bring it up. Now. They were saying that the average person United States the average, I'm not sure if that single couple of whatever makes around 70 1400 something dollars, and that the average mortgage is 408,003 $400, somewhere in that range, which results in roughly 41% of your income. The first problem I have when I saw that is if you're only averaging 78,000 a year, why are you buying a $400,000? Home? That's problem one, Problem two, if it's 41% of your income, how you borrow the money to buy it, the limit is 40 to 43%. And the lenders are not going to give you the money because you cannot afford it. So why would they give you the money at 41%, I'm saying that you probably have, if you fall into the average, and you buy an average cost home, and you got the average income, I'm saying you're gonna have a difficult time finding somebody to lend you the money. And if you find somebody to lend you money, you're gonna be paying one or two or 3% more in mortgage interest, then somebody else because you're gonna be a higher risk of the fall, because you're gonna be strapped for money, because you're buying a home you cannot afford. And why do I say that? Because when you look at budgeting numbers, and what the experts that's not me, this, the financial experts this tidy this, say that if you have 40 to 43% of your income, that's gross pay, by the way, not take home, and you got to pay taxes, and you got to pay maybe your retirement or health care that you will not get financing, you'd be struggling, that's the top limit. The amount of money you should use, your current income to pay for housing should not exceed 35%. So if you're doing the averages, you're buying a home you can afford by 6%. So what are you going to cut out? If you don't have any car payments? Do Yes, that's going to help but how that mortgage is 30 years? How long can you go before you need to buy a car and you go long enough until you get a couple pay raises and then buy a car? What else are you gonna do that way with a 400,000 Our home is proudly I'm gonna say, a nice size home 25 3000 square foot and maybe depending where you live, I mean, California might be a 760 square foot home, I don't know, it's all relative to where you live, the larger the home, the more is gonna cost you to heat and cool it and to maintain it, your taxes are gonna be more your real estate taxes I'm referring to everything costs more, your God to be struggling, and you're gonna not be able to get by and over time unless you get significant increase in pay, which could happen depending on your profession, you're gonna be struggling for for 1015 years. And what happens when you struggle with money you made if you're married or have a significant other, you're gonna have relationship problems, as Jess is gonna flow through and you want to have a better, healthier life before you buy a home. He got to know your numbers, how much you make, what your expenses are, how much downpayment how long it took you to get that downpayment. Did it take you five years to save that downpayment or it take you 12 months, when's your last pay raise? And when's your next pay raise, if any? Are you working in a job where you get laid off for four to six weeks every year? Because you might not have a paycheck that's four to six weeks. That's a month and a half, that's almost two months of payments, can you save up enough money to have that available, so when you're not working, you can pay for, still make your payments. If you know what you can afford before you buy your home, you're gonna be better off. And if you buy what you can afford, you're not going to be struggling paycheck to paycheck is what I did. I saved up some money, I bought what I could afford, I fixed it up, I lived there five years, that one up in value, I sold it for a lot more than what I paid for almost double, I believe I had more bigger down payment for the home I'm currently in. I put that down. And then I kind of struggled because my income dropped and we went up and then it dropped in one up. I was I made it affordable for the amount of money I was making at the time, I bought the home. And I was able to always achieve that. And I did that because I knew my numbers. I knew my monthly income. I knew what my expenses were gonna be. I knew how much my insurance my real estate taxes and I just knew what was expected. I was able to save up the money when I was making more money and set it aside. So I had it when I was making less money. And I had these bills come in do. It's called planning, planning for your future is ongoing, and it never stops. Even if you pay off all your credit card debt, you still have to keep doing these things. And that's why we get into next episode is keeping a budget. He do a budget every month. And you that's not set up to tell you to quit spending but you can use it for that purpose. You can use it to identify things where you're spending too much money, and you can look for ways to reduce your spending. But it's more here to let you know what's going on and knowing the future and what's coming due. So that you always have the money in your checking account to pay your bills timely when they come due. And that's what personal finance is all about.