Control Center

Hello, I'm your host, Mr. Chuck, a 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. Control Center, what is a control center? And how how does it help reduce spending? How do you use tracking information to create an update control center? You're probably wondering what I'm talking about control center, what is that? That's the same as a budget I call the control center. The budget a control center, is because it's where you can control all your spending, your tracking is your lifeblood, because tracking keeps track of all the flows in and all the flows out of your personal finance out of your household. So like blood control center. So what is a budget? For those of you that prefer that I want to refer budget control center, back and forth, it's one and the same thing. A budget is a plan you write down to decide how you will spend your money each month. A budget helps you make sure you will have enough money every month without a budget in my run out of money before your next paycheck. A budget shows you how much money you make, how you spend your money. Why do I want a budget, a budget helps you decide what you must spend your money on. Maybe you can spend less money on some things and more on other things. helps get cakes get you in control of your money by identifying what you have to pay each month. And where you can save some money so he can have some extra money to do what you want to do. Try try to save money. Of course, you might need money for emergency you might also need to buy some thing more expensive, like a car saving money might help you buy a car, put a security deposit on apartment or pay for something else expensive, such as buying a home, how do I start a budget and this article, they're gonna have a different approach. And then what I say is do your tracking first, and we're going to cover my approach a little bit later on. But the generic approach is, is to start a budget by gathering your bills and pay stubs. Think about how you spend money besides paying your bills. For example, do you buy a coffee cup of coffee every day, after a month that coffee money could add up to an expense you might write down. When you have your bills and paste out, write down your expenses and expense is money you spent, write down how much money you make. This is called income, subtract your expenses from how much money you make. This article is consumer.gov. And is really, really a basic article. If the number is less than zero, you're spending more money than you make. Look for things and your budget you can change maybe something you do not need or a way to spend less. Again, I call it control center because you had identified a problem and now you're gonna get control of it. And what if I don't get paid every month? Well, then they say average it out. How can I use my budget? A budget is something you use every month a written budget will help you see where you spend money, see where you can say make a plan for how to spend and save your money. Why should I say money while you need an emergency fund saving small amounts of money right now might help you later. Everyone has expensive they do not expect expensive things. Sometimes we need to buy a car or vacation or home. Your goals maybe you want to pay for college classes. Maybe you need to visit family in another country. You can plan for these goals and save money. You might not have to use a credit card or borrow money to pay so you saved the day so you can afford to pay for something tomorrow. And that way you don't have to use credit. Basically what that article is trying to tell you. Then it gives you other examples for one month write down everything you spend small expenses like a cup of coffee can add up a lot of money. They liked that coffee thing. Pay for your credit card only if you can pay the full amount when the bills come down comes due. That way you do not pay interest on why You owe her saying use your credit card like cash. Now I know a lot of you already have a debt problem, because you didn't use your credit card like cash. And what I mean by that is, you don't charge something on a credit card unless you have the money to pay for it. Not six months from now, but bomb friday of every week. And you go into your credit card online account, and you pay it off every Friday, or at least pay it off every payday. So you don't want to overspend. Because if you're paying out off every payday, he might run out of money. And then you're going to use your credit cards more to get by until next payday. And you're getting yourself deeper into debt. So we want to try to avoid those things. How to make a budget, collect all your bills, stack them up, put them in order, and order by category, you got to categorize housing, transportation, food, clothing, entertainment, savings, and credit cards. Other expenses, like they're just saying food, gas, entertainment, clothes, school supplies, money for family on that plan expenses, like car repairs are medical bills. That's called an emergency fund, credit card bills. Bills, you pay the same every month like rent bills that might change every month, but you're still paying every month like utilities, bills, you pay once or twice a year, like car insurance, you might have bills that change every month, look at what you pay for the same month last year, you may need to $200 for your gas bear bill in January, but $30 in July, you want to go back over several months, four months, six months, add them all up, divide it get an average. And that's what you're gonna use in your budget, use an average over a period of time, if you got a year's worth of bills for the same like your gas bill, add them all up divided by 12 and use the average some months you'll be over and so much you'll be under. But you'll be close in three to six, three or four to six months of those, you'll be close. How to use a budget. Okay, well, that's done with that article. Now, that is the consumer.gov website. We're talking about a budget, our control center, I think in the article they was having you do it at manually writing it down or doing it in a spreadsheet, he can use an app to do these things. There's a lot of good apps out there. But if you're really struggling with a lot of debt, you don't want to spend the money today, because$15 a month adds up over time. So we don't want to spend that right away, we want to try to get some of our debt under control first. So let's use a spreadsheet to do our budget for the first six months or so get a couple of those credit cards paid down and start making some progress. Before we start spending $15 a month for an app. That's my position here. I'm not saying they're anything good or bad about them. I'm the same we don't want to spend the money if we're struggling with a lot of debt. So we talked about tracking, I talked about my debt reduction plan, just as a reminder, quit using credit, make the minimum payment, build up an emergency fund, build it up to over to the maximum of say 4000, leave a minimum of 1000 in there, take the difference, the$3,000 and apply it to one of your debt. That's the debt reduction plan. Tracking is using an app where you put in all the transactions and from your checking account, your savings account and your credit cards. Hopefully, if you're doing step one, the debt reduction plan, you're no longer using your credit card. So you just need to update it with the payments you apply and maybe interest that gets posted to it. So it's gonna be a monthly thing, a couple of transactions. So that is not going to take a whole lot of time. your checking account is where all your money flows in and flows out of. If once you get your budget under control and you see your spending less than what you make, then you keep a minimum balance in your checking accounts. 300 500 600 a minimum balance that you never go below. That way you have a buffer there in that's come for help you quit paying bank fees, especially overdraft fees monthly balance, you know their monthly account fees that they charge you every month. If you're paying a monthly fee for your checking account, go to the bank, see if they have another plan where you don't have to pay anything. And I bet before you do that, it's your average balance up to 600 bucks and don't let it get below it, or $300 and don't let it get blood so they can see that, and then they'll put you in a checking account, that may be better for you, where you don't have to pay a monthly fee. And don't pay overdraft fees don't overdraft, because that's gonna charge, they're gonna charge you 35 bucks every time. And then if you have a reserve account that kicks in, they're going to charge you entrust, the bank makes a bundle of money off of you by you not taking care of your own money, the bank will benefit from you, because you're not doing your due diligence and doing what you need to do to keep your personal finances under control. They take advantage of you, the control center budget, the most places that you go was gonna say, gather up all your bills that you pay over the last month, start saving them keep your pay stubs, and you do that for a month or two, and then you write it down. But there is a formula for how you set up your check your your, your budget, the income goes at the top. So we have basically four to five columns going down. The one on your left, or column A is your description column. Column B would be your control center column or your budgeted amount column, the amount of money that you say that you're trying to achieve not to go over C is the actual amount in the current month, d is the difference between B and C. And then E would be a column you used to set up percentages. So you can see what percent of your income you're spending for housing, and all the different categories and all your different loans. Because that's going to help you stay keep your personal finances under control. So we got A through E, it's description, control amount, actual amount, the difference, so on, from top to bottom, we're gonna put our income at the top. And we're gonna if if you and your significant other both work, get paid weekly, you need 10 lines there because there could be up to five pays per month. If you get paid every week, depending how the month falls, some months you will need it some months you will need it. If you get paid twice a month, you need five or six lines just to make sure six because so two months a year you get paid three times. So it depends on how often you get paid on how many lines you have. But give yourself enough room space now. Give you some some external lines and then put your total and have your total income. That's your first step. And that's the easiest part of the whole budgeting process. So what numbers are you gonna use for your budget amount? Well, member when I start you out on tracking, I said, Go back 30 days go back to the start of the month, the previous month in which the month you're in. So if you're in the second of a month, you go back to previous month, and are all your transaction from the first of the previous month all the way to the current date, be your income, that's all your expenses. And that's kind of seem a like a lot of work. And it is at the beginning. But over time as you learn the app that you're using. You can set up reoccurring entries, you can set up all kinds of stuff that makes it easier. When you start typing a name in, it's gonna pop up you select it is going to have the category selected. So you'll be consistent on where you're going. If you have a grocery store, you put your name in the grocery store, and it's going to come up groceries. Now if you buy gasoline at that same place, he needs to put the name of the grocery store and then fuel after it. And then you can select that and it could be auto fuel category. That's just a tip there to make things easier. So you're consistent on where the things are getting posted, which category. All these apps are pre set up as far as categories. You can go in and update them. Change them do whatever you want. I've talked about how to rearrange them. So they print out in the order of your control center or your budget. So that when you put set up in your control center, and you do, the weekly, or every two weeks update of your budget, that the printout, your report comes out similar or fairly close to wow, you have your control center setup, that makes life so much easier. And I'll make it so much faster. Now, in your tracking app, you're gonna do a report by category. And you're gonna start from the beginning of the current month, for at the very beginning, you're doing as from the previous month, from the beginning of the previous month, to the end of the previous month. Why, because those are the numbers you're going to use for your control numbers, or your budgeted amount. Notice that I didn't say you're cutting back anywhere yet, you're not doing anything, we first starting out and want to see where we are, and see how we have done in the past up to this point. Now, I would expect that you're probably gonna get some surprising information here. So don't be alarmed, it's just a matter of getting your finances under control. And this is the step that's gonna help you achieve that. So we're using the previous month for beginners, we put it in. And the first thing you want to notice when you put in your numbers and your income and all your expenses, your expenses by category, housing, transportation, they can be in any order you want. But the categories are housing, transportation, food, savings, and other debt, hobbies, clothes, whatever else you've set up, you put those numbers in, and he's going to total up your income, we're in your control your control center now, and you put in your income, and then you have in your spreadsheet and you have a total, which is going to automatically added up for you. You put in all your expenses. At the bottom you have a grand total expenses, and then you're gonna have a difference, did you spend more than what you make? And I'll tell you, if you have a big negative number at the bottom, that means you spend more money than what you make. And you're wondering how did I do do that you did that by using credit cards, he spent more and you didn't take into account that you still have a balance on your credit cards that you're not paying them off. Every week, or every two weeks or every pay day or every month, when I was really struggling with a lot of debt. Personally, I would night started using my credit cards, like cash, I made sure I had the money before I charged something, then I charged it, I got the product, I waited a couple days to make sure nothing was wrong, I didn't have to return it and all those things. And then I went in and I paid the balance off for at least the amount that I just purchased. Because I was trying to keep my credit balance from rising. So that's what I did. That's what you should do, you have to think that that credit card is cash in your pocket. And if you don't have the money, you cannot use that credit card. I'll be back in one moment with my final thoughts. If you're interested, and the software that I use personally, to reduce my debt, I have a link in my show notes, shop financial.com, copy and paste it. And it will take you to the website. If you are looking for any spreadsheets or other information that I talk about from time to time. I have links in my show notes. And I always have links to the articles I refer to and my show notes. Plus other things like the happy draft.org, which is a another organization that helps you with your debt. So feel free to go to my show notes and link and check out whatever I'm putting out there. I appreciate it very much. If you would like to make a contribution to help keep this alive, then I would gladly accept that, say my show notes. Thank you very much. Now let's get back to control. You got to update the actual column, every pay period and the use pay period because that's when you have more income you're gonna have to go in there to update your income. So let's update all your spending at the same time. while we're there, so that would be column C, and you're gonna do it. So the beginning of the month, you're going to either copy and paste the previous month's budget control center amount, or if it's changed quite a bit, and you'll know because your numbers will be way off, so maybe that all your categories, you stayed under the dollar amount. So instead of using the control center mount from the previous month, let's use the actual mount from the previous month, and copy and paste it over into your control center amount, because maybe you've made some adjustments to your spending, then you've updated things and it's flow through so now that those monthly expenses is going to be a little bit less. So let's use that for your control set. So we're slowly over time perfecting our numbers, and getting the close, you'll never be done doing that. That goes on and on. Because you got inflation, the price of gas goes up and down, your insurance will go up and down, you'll change insurance policy to save some money, you'll do away with some entertainment, and then you'll get new entertainment. And it's ever changing. So we want to try to get your control amount as accurate as possible. So that we can always hit it close to zero or not off by very much has put it that way. Maybe you go over $100 This month, or and then you had three months where you're 30 or $40, under so you're kind of close, but not perfect, you'll never get a perfect end to the net second month. So we got a new control amount. And what you gonna do is from your tracking, go from the beginning of the month to the current date. And you're going to update all those numbers and see how you're doing. Now there might be some things like your mortgage payment or car payment that you paid, there'll be exactly it'll come to zero, the difference will be zero, which that's what you're looking for. Maybe you didn't pay all your bills that month. So you're gonna still be way under your control amount, which is good. Does next time you do it the second pay period, beginning among to the new current date, you update all your numbers. Now on your income, you want to do it because you got one line for every pay period. So the only thing you're updating is adding another pay period and the dollar amount that you actually made. Especially if your income fluctuates week to week or paper to paper, it was always the same then you just enter the second pay period, the same dollar amount and it's easy peasy. So we update everything in again, we look at what's going on. Are we over? Have we've gone over spent on any category and then look at the detail. Why are you did you overspend, maybe you had some expense in that category that you only pay once a quarter or semiannual once a year. And that's the case that's okay. Maybe we need to analyze those yearly payments divided by 12 and put it in there. So we'll be under for 11 months and then we have one month will be over but the net of the total is going to be close to the same thing. It's just keeping you aware that you have that particular expense. So as we do that the next column is percent to your gross income. What percent of your gross income is your housing category, your transportation category, and what percent to your gross income is your mortgage payment, your loan, your auto loan. Now if you have an escrow include your insurance and real estate taxes, that's fine. bed should give you a number of how much of your gross income that you're spending and gross income as before taxes are deducted. And before any retirement alimony or anything like that is deducted as the gross amount of pay that you make per pay period. And we're gonna look at that on a monthly basis. So how much do you get you make in a particular month and take that and divide it by our expense. Come up with a percentage your housing, which should include your insurance and real estate taxes should probably be around 35 to 40% or less. Kitten under that is better your transportation Asian eight to 12% of your food 10%. And if any of these categories and you can Google these percentages and see what other experts say, and come up with some numbers, right, you know, printed off, write it down, have it as your guidelines so you can see how you're doing compared to what the experts things you should be doing or what the average person is doing. So at helps you control your spending, inhale, help identify where you may have overspent in the past. So if you have a loan, such as a car loan, and your transportation is four or 5%, over what you think it should be, then that means you may be buying a too expensive car and you finance too much. Or maybe you get upside down on a car and and you had to get an you got a new car and you're rolling the loan over. So you're paying for two cars on one loan now. And that got you, you know, over the amount. So we're ever category that you overspent III have to make adjustments someplace else. Because you cannot spend more than 100% of your income comes down to that. So if you got 2% too much from transportation, and your housing is pretty close to where it should be. You gotta cut back on your food? Or what makes up your food expense. Do you have delivery? Do you go out? To eat a lot? Or do you cook everything at home? So you need to look to be more efficient. You need to look at ways to say insurance for example, entertainment, how can you cut back their do away with cable TV and go 100% streaming I did that years ago, no problems, and I save quite a bit of money. Your control center not only is gonna give you the numbers and gave me an idea what's going on, it's gonna help you decide where you need to cut back where you need to get your spending under control. Harder that should be your savings and other debt, which the other debt would be credit cards. Other debt is any debt that can't be assigned to another category. Your mortgage is your housing, your car loans is transportation. I think he got the point. They're saying that you should pay 10% of your gross income, your income and your savings and your credit card. But if you're spending 40% of your income to pay your minimum, mountain dew on your credit cards, you definitely vote overspent in the past. And either you have a spending problem or something happened and you know what that would be? So you need to get your finances under control and start taking control of your money so that you're not working for the money that the money is working for you and you'd be glad you did. So