Reduce Debt Increase Wealth

Deep Dive into Tracking

March 03, 2024 MIsterchuck Season 5 Episode 208
Reduce Debt Increase Wealth
Deep Dive into Tracking
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Show Notes Transcript

Knowing the basic for tracking will help when reviewing what method to use. Doing tracking manual on paper, using a spreadsheet on computer, or an app on computer and smartphone are all good solutions. First what is Personal finance and why it is important.

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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. Deep Dive Into tracking, knowing the basics for tracking will help when reviewing what method to use. Doing tracking manual on paper, using a spreadsheet on the computer, or an app on the computer and your smartphone are all good solutions. But first, what is personal finance? And why is it important? I have a link in my show notes from Investopedia. I feel it's important that we all get the same basic understanding of what is personal finance. In my mind, I kind of know what it is, does everybody think the same way I do most likely not. So let's all get on the same page here. Personal Finance is a term that covers managing your money as well as savings, investing, and compass budgeting, banking, insurance, mortgage investments, retirement taxes, and estate planning. That term often refers to the entire industry that provides financial services to individuals and households, and advise them about financial and investment opportunities. Financial Planners are only going to help you with your investing part of your personal finances. But you have you have insurance, so that your insurance agents gonna help you with that. You have loans and mortgages, you have taxes and state. And so your taxes your tax advisor, maybe estate would be an attorney to help you with your estate planning. And your estate planning only if you have more than a couple million bucks, and mortgages, how to get a mortgage, how much the cost of the mortgage, that's kind of gonna be helped from the real estate person that's helping you buy your first home, or your banker. So you're dealing with a lot of different people about the same subject. There's no one person that covers everything. There might be a financial planner to does it, but I've never found one, or I've never really looked for one because this is up to the individual household to take care of. So I always would consider financial finance is all the money coming into the household. And then all the money going out of the household, for whatever reason, whether you have a mortgage, or you're doing investments, or retirement savings, or taxes, or just paying your everyday bills, and insurance would be homeowners insurance, car insurance, life insurance, disability insurance, and insurance is designed to help your finances have something bad would happen so that you don't go bankrupt or completely broke because a one event insurance is there to protect you. Along with estate planning is there to protect you from the government and to save money to so that you or your heirs can get the most amount of money back without paying a whole bunch of taxes to the government, individual goals and desires and the plan to fulfill those needs. Within your financial constraints. Now that's important. We're all trying to do something and throughout our lives, whether it's buying the first home, paying off our college loans, saving for a children's education, saving for own retirement. Those are all goals, but we can only fulfill them with what we have. And what we have is our income coming in less daily or monthly living expenses that we need to pay in order to live a comfortable life or just basically live a life. And there's a few schools that schools that have courses on manage your money so it's important Learn how to manage your money through online articles, courses, podcasts or books. The core areas of managing personal finance include income, spending, savings, investing, and protection. So income is your work. Spending is things you pay for savings is what you can set aside. Investment is what happens after you save enough and protection and would be insurance, smart personal finance developed developing strategies that include budgeting and creating an emergency fund, paying off debt, using credit cards wisely, saving for retirement and much more. Being discipline is important. But it's also good to know when you shouldn't adhere to the guidelines, there's some gives and takes here, the more you get, the less you're gonna have. So the longer it would be to fulfill a particular goal. If you don't watch what you're paying for, or spending your money on, then saving for any particular goal is gonna be extended out and take a whole lot longer. So that's the importance of personal finance, you got to keep everything in your life and perspective, you have to realize how much money is coming in? How much is your normal monthly living expenses? And how much can you set aside? And how much can you set aside for each particular goal. So that is the nutshell of personal finance. And hopefully, we all now are on the same page. So this part of it is, of the personal finance is your income and your monthly spending, which also includes your banking, your credit cards, and things that you have to pay such as your protection, insurance, and savings for retirement or am whatever you're saving for. So it all kind of starts somewhere. And it all starts when you go out and you get a job and you start earning income. And you go to the bank and you set up a checking account, that's really the start of everybody's personal finance. And when they should start realizing they need to control it. If you're 16 years old, working a part time job, and you're living with your parents, and they pay for everything. And this is this money that you're going to have to do things that you want to do with, it's so important that you understand that you have an income. And now you may be liable for income taxes, state, federal city, whatever, wherever depending on where you live. So you have to kind of plan for that your federal and your state income tax are going to be automatic withhold, and maybe you city will be maybe a won't. But that doesn't mean you don't owe it. That doesn't mean you don't have to file a tax return. Now, maybe you will be included on your parents return, maybe you'll do your own return. And then you can't claim yourself because your parents are so right, they're 16 years old first job, you open a checking account, you have a more complicated life now. And it just rose from there. So the first thing you need to do once you have that checking account is record all your transactions, record your deposits, you add that to your balance, record, anything that you spend money on, subtract that from your balance. And that register should always be imbalanced, with your bank. Now, it used to be you got a bank statement once a month, and you had to reconcile to the bank. But now you can go online, look at your balance. And no. Okay, is my restaurant matching the bank balance? No, I actually have more in my roster, but the bank has less why? Well, because there's something on there, I'd forgot the record. So you'd find it in you put it in there and you adjust your mouth now do you match the bank? That's what tracking is all about? That is it at the very basic at this particular instance, he was doing it manually because the bank gave him a check register. I don't know if they do that anymore, but they used to. Now you can do it manually. You could have a notebook record, record everything you spend money on as you do it. But the problem with doing it manually is you may Know that your, that your tracking device or your check register matches the bank, maybe you put in what things were for you put a category in there. But it's not for you mainly go through there and add up each individual category is going to be time consuming, especially as you get more expenses in your life, as you maybe rent an apartment, got utilities, buy your own groceries, now you got a lot more transactions in there. So it's gonna be a lot more things you have to separate out and add up to get a total by category. So that's where you could take this and use a computer spreadsheet, where you take it and you just entered in a computer spreadsheet. Now you can sort it by category. Because your spreadsheet, you set up the date, description, category, dollar amount, now you can sort it by category and do totals by category within the spreadsheet. So that is the next step forward, that you can do manually computers spreadsheet, or you can get an app that's set up for you that's got categories in there, that will do all the math for you, you just got to enter it the first time, you can set it up as a recurring entry. So like your mortgage, or your rent payment, the first time you pay it, he can then save it as a recurring entry, where it pops up every month, the same date, the same dollar amount, and then the only thing I do is review it and hit enter. Same thing with all your utilities. So as you see, as you get more on a computer, using an application, it becomes more a lot easier. But we're getting more into our life. And we have a lot more transactions and the benefit of using an app, you can do reports, and one of the reports you can do is a report by category for a date range. So if then you can use that first to create your initial first budget, then you can use it to update your actual spending for a particular month. In that same budget. Once you got the tracking app down in the past, your categories are already set up. But most likely they're going to be in alphabetical order. So what I recommend is you edit your categories in a way so that when they print out, they print out in the same order as you're going to set up your budget. So that makes your budgeting process easier. You're probably wondering, well, if I have it tracking, why do I need to do a budget? Well, because tracking is only going to give you reports and a budget is going to show you what happened in the past, what's happening currently, what the differences were, you may be going over or under in a particular category. So you can look to see the reason for it. And maybe adjust your spending, so that you can keep everything under control where the tracking app is going, keeping track of what you're doing, but not necessarily very necessary. Letting you know that your shopping is increased by 50%. Now it's not gonna you just gonna see shopping and a total. You know, for that date range, you're just gonna be shopping and a total unless you know, from the last 30 days that you're shopping was $1,000 Less, you're not gonna really know that. But we're looking at down to where it's 50 or 100, or a couple $100 difference because we're really want to fine tune your personal finances. And tracking is only the start of doing that. So what do you want to look for? Well, you want to look for an application that you can enter everything in the categories are already set up with that should be most as easy to edit to categories that if you make a mistake it's doing generally when you make a mistake, he can either delete it and re enter it. Or you can add it and change the mistake to remove it's the wrong date, the wrong dollar amount, and you can update it and then save it and boom, it's done. So whenever you're using these apps, you don't worry about making mistakes because you can always fix them. But again, it's the same as doing a manual check register when You're entering things in your tracking app, you should compare it first to your check register. And your balance should match your bank balance. With online banking, that's easy to do now. And that's where people got themselves in trouble because they were relying on the online bank, for them to know how much was in their checking account. Well, maybe they could look there and say, Well, I have$1,000, in my checking, I can buy this item for $800, I got the money to pay for it. But what they're not considering is what bills do in the next pipe between the next pay period. And if you have your rent due, or your couple utilities do, or you'd have to go to grocery store or fill up your car, with gasoline, you may not have enough money to do all that. So it's also the budgeting process is going to help you plan for things coming up, then a tracking is not necessarily gonna do that. So that's where people get themselves in trouble. And those who don't manage their personal finances. And that part of the managing your personal finances is, if you have two credit cards, do you pay them off, managing how you use your credit is just as important on managing how you use the money in your checking account, you have to use a credit card just like it's cash. And if you're gonna use it, you need to know you have the money to pay it off within the next week or two weeks. Because again, on a checking on a credit card account, you can go online, you can make a weekly payment, he can make a payment whenever you want. It doesn't just have to be once a month, but you can make a payment whenever you want. And we're gonna talk more about that when I get to my debt reduction plan, which is going to be after my budget deep dive, or the control center, as I call it. What to look for when tracking at Wells, categories, gonna be easy to use, and has a menu that you can just look at and get a basic understanding, you're gonna add accounts, which will be a checking, savings and credit cards. That is the bare minimum that you should be using a form. You don't have to put your mortgage in there, you don't have to put in your individual car payments at this point, if you don't want to, we're just wanting to know how much money is coming into the checking account? And what are we spending the money going out? Where is it going? Same thing with a credit card? What are we buying with the credit card? And how often are we making payments and what is our balance. And a tracking app will give you that information, pretty much in real time at a glance. Okay, there's also applications out there that do more than just the tracking feature. They all kind of think they do more than that. Some of them are really good for tracking is like the Count, the one I use and it's less than $10 a month. They don't sponsor me at all, they don't give me any money for saying that just says that's what I use. I like it. I can edit the categories, it's very flexible. And it's inexpensive to use. Or you can use an app similar to you need a budget, why and a B, it does tracking, and it does budgeting, and they have their own terms for things. But it's a fairly decent app, as far as I know, but it's gonna cost you a monthly fee. I think it's around 14 $15 a month. But as a monthly fee, most of these personal finance app that does tracking in the budget part of it, it's gonna have a monthly fee. So it's all what you can afford to spend. If you have tons of debt, and you're living paycheck to paycheck, and you're not paying one bills, you can pay another bill and you're swapping them around every month, you need to say the least expensive way as possible. So find yourself an app that you like, that doesn't cost a whole lot and do your budget manually on a spreadsheet, and you manually enter all your transactions and the app. Do not link it to your checking account or your credit cards account. The purpose of this tracking is so that you know where your money is going and why where you're spending Your Money, if you automatically update it, you're gonna lose track of everything just like before. And you're not going to be aware of how much you're really spending from day today. That's the important part of tracking. Knowing when your income comes in, and when your book bills are due, is all about tracking your personal finance. 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. 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 And I'll send you the information about this online software that worked great for me. Okay, let's talk is select yourself a budgeting app, or a tracking app, you've entered some transactions in there, what I recommend, once you start the first time, don't connect to your bank statement, I know you might I can connect and import the last 30 days. Again, that defeats the purpose of why you're doing it. And the reason I'm doing it is to have a better understanding of what's going on in your personal finances. You download the app, you open it up, maybe you're in a trial period, the first thing you want to do is go back to at least a week. But I go back to the start of the previous model. Because I want to get a 30 days at about every 30 days, there's a cycle in your personal finance, where you're gonna pay the bills over and over and over. So like your rents do, then your utilities do whatever else may be due. And then a 30 day period gives you a good idea what you're spending on groceries, what your gasoline for your vehicles and things like that. Now, it may not include everything you pay throughout the year, because you could have some bills that are due quarterly may have some bills due semi annually, you may have some subscriptions that do yearly. So depending on the month, may not catch everything that you need to catch. But this is a starting point where you start with your bank balance, you go online to your bank, you go back 30 days, kind of see what the balance is, plug in the number for your opening balance. Again, don't worry if it's not absolutely right, because you can always change it. That's the beauty of these apps. And then enter everything that's happened from that balance to present date. If you paid this bill, pay this bill, pay that bill made a deposit, pay this bill, pay that bill, you know and you'll get a good cycle of a 30 day period. Now if you're in the second month or the second week, or the third week of your current month, you want to enter all the way down to your current date, at very least if you're just not sure if you're gonna get this program, put in 30 days, I know it's work, it probably should take 1520 minutes. As you go what you want to do is how easy is it we enter a transaction How do you set up a recurring entry? Can you just click on that entry and then select recurring entry and then set that up, then the next month. So when it's due automatically pops up and you just approve it. If it's that easy, you can set up your recurring entries the first time you enter Um, now you don't have to do as much work the next time. So you're making your life easier as you go through the learning process. The big thing one to be sure that you do is consistently assign the same vendors to the same category, like groceries so your growth in the name of your grocery store should always be gross. Trees, the name where you get your gas should be always gasoline for auto. So you need to be consistent on how you're assigned. But beware, if you buy gasoline at your grocery store, make sure you identify that as my case would be Kroger, and I have a category, Kroger fuel, as far as the name goes, and it assigns it to auto fuel category. And if I just put in Kroger and puts it to groceries, so you have to be careful if you buy different things at the same place. But if you go into the grocery store, and you're buying shampoo or cleaning supplies, don't break that, that gives away too much detail, it's gonna be too time consuming. And eventually you won't be consistent. So there's no need to do that list is want cleaning supplies and some soaps and whatever, as groceries and you're gonna be fine. Over time, it doesn't kind of much matter. Once you get that done in you look at your category lists, it's most likely gonna be an alphabetic order. At this point, we should be thinking, how am I going to set up my budget? Anywhere you go and learn about budget, most likely, they're gonna talk about needs, things you need to pay. And once things you want to buy, needs always come first, within a budget at the very top of a budget is gonna be your income. So your income is somewhat straight for theory in order your spouse at work, or whatever the case would be self employed, or maybe a little bit of both, and side hustles, and whatever. So the income is not going to be too bad. But on your spending part, or your expenses, we want to categorize needs and needs would be housing, transportation, food, debt, that's not anywhere else. savings. That's the ferry basic. Sorry, if you can go through your category list and group them together by those categories and make a category I call it housing, and that's your master account, per se. And under housing, which you don't post directly to that account, then under housing would be mortgage line of credit, utilities would be under there and then under, and that would be a sub master. And then under the utilities, you'd have each individual utilities, so that you like your gas, your electric, your water and sewer your trash within total up into one number. If you don't understand what I'm saying, or understand what I'm doing, just go in there and start looking at it. And it will kind of tell you, Well, you know what the main one would be and what the ones you post to are like sub accounts, and the sub accounts total, then to the main account and domain it now so you get a better overview. And what I did was why a one was housing or a was housing, B is transportation. So every name would be a dash housing, a dash utilities, you know, I would the number the A all the A's like a would be the head a one would be utilities. And then I would just sub number them come up with whatever works for you. That way when you go to enter it, if you were looking for you can type a one and it might pop you right to that place where you're going. Maybe not maybe just typed out the whole thing and you'd be better off. But you get the point. So we're now we're going through the category list and we're gonna range it now housing is everything related to house. So being your mortgages that's related the house all your utilities, which includes the internet service and your cell phone. You can also include a couple subscriptions to TV because that's pretty much connect to your house I know you can go and other devices and take it with you. But list this right now assume that it assigned to your house. Then your transportation, your car loans, your gas, your repairs, everything you know your registration license plates, all related to auto or transportation. Food would be groceries dining in dining out, carry out delivery, things like that savings with 12 months for your savings account and your emergency fund. And then debt or credit card debt. This is basically debt that's not assigned to transportation or housing. So it's not your mortgage. Because your mortgage would be with housing, it's not your car loans, because your car loans with your transportation. So it'd be mostly credit card debt, student loan debt, personal loans, things like that would be under debt, then that's a need because you need to pay it not because you want to pay it is because you need to pay it. And then other entertainment, entertainment, it could be your cable TV, instead of housing, you can have it under entertainment. But that's more a once. It's not necessarily have to have it but it's a one and maybe hobbies, clothing. We have insurance, there's some insurance that's a need for housing and your cars. But like life insurance, disability insurance, that's kind of a bordered on protection. And I kind of put that into the one category because I want protection. But I don't really need it all the time, depending on my financial condition. at the particular time, I think you get a basic understanding of what's going on. So if you can add it and make your categories line up closer to your budget, you got yourself a good app, if it's easy for you to use, easy to update, easy to correct when you make mistakes. Then you got yourself a good app. If it's inexpensive. If it's five bucks a month, 10 bucks a year, whatever the case is, then that's something you should either stick with and you're set to go for the next step of your personal finance journey.