Reduce Debt Increase Wealth

Budgeting Tips

August 08, 2021 MisterChuck Season 2 Episode 73
Reduce Debt Increase Wealth
Budgeting Tips
Show Notes Transcript

Budgeting is not all that hard; it is easy after understanding the basic concept. It is a plan for your money nothing else. Failing to plan is planning to fail.
Budget Categories
1.Housing
2.Transportation
3.Food & Dinning
4.Entertainment
5.Cloths
6.Savings
Article Links:

https://mint.intuit.com/blog/budgeting/tips/

 https://bethebudget.com/budgeting-tips/

Charles McDonald:

Hello, I'm your host, Mr. Chuck, a retired accountant term truck driver, I reduce my debt in a relatively short period of time. debt reduction to achieve financial freedom takes commitment, confidence, determination. Are you overwhelmed by setting up a budget? Maybe you don't know how to get started or where to start. This episode is budgeting tips. But I'm gonna cover way more than just some tips on help you get a budget started and set up. Failing to budget is just like failing to plan is planning to fail. It's the same concept. Maybe you have a spending problem. Maybe you don't think you have a spending problem. But in reality, maybe you do. How do you find out, I'll try setting up a budget, allocate your money for your expenses that you know that you're gonna have, and allocate money for some things that you maybe want to do to have fun, I think that would be called entertainment. And set aside other monies for your savings. I've seen a few articles in the past week about how people became successful on either whether they were starting a business or saving up and retiring early. And they got all these tips. But the article really don't tell you what they did or how they did it, they give you just a basic thing. And the basic thing it was for the one article I saw is automate your savings. Set up your saving, so it's automatically transferred from your checking account into your savings account. And Another good tip, so that you don't dip into your savings on a monthly basis is to separate your savings from your main bank that you have your checking account. Now what I do, personally, is I have my checking account and savings account at my main bank. And once I had X amount of money, saved up to they never dipped into I transfer that money to a another bank. This case, because I was wanting to get a higher rate of interest, which is hard to do these days. But I set up myself a high yield savings account. Once I put it into that high yield savings account, it's there. I don't even think about it anymore. It's like it doesn't exist. And I get a higher rate of interest. Instead of getting 20 or 30 cents a quarter, I get seven to $8 a month. Because I got more in there. I when I was younger, I thought I was on a budget. And I did do things to help limit my savings. Like if I know I was gonna go out whether it was to dinner, or to meet people at a local bar on a Friday night, I would take cash and I'd only take the amount of money that I was willing to spend, in most cases could afford to spend. And once that money was gone, I was done, I would hang around for a little bit. And then I'd say goodbye to everybody and I disappear. I also avoided having people buy me drinks, because in the bar world. If somebody buys you a drink, you got to repay them back and buy them and you can really spend a lot of money in a hurry and only have one or two drinks. So I avoided that. And I asked people not to buy me drinks. And after a while they got used to it and there was no problem. And I always thought I had some type of budget. But in reality, what I was thinking was that I really didn't as I look back. And one of the main problems I had when I would have like software I use a checking account, check register type software, I'm not gonna name the name, and they had in there for a budget and they want you to put dollar amounts in what you're spending. I had no clue. I mean, I knew how much my mortgage was. I knew how much You know, I could go back and look at how much my groceries were, and I would add it up, stick a number in there, but it seemed like every month, and I got reports just said I want over my budget. Well, I went over my budget because I didn't have the proper amounts set up to start with. Because I didn't know how much I was really spending. I thought I did. But the reality of it was I didn't. So I quit using it. And I just, I really don't need that. And but I would get in debt, credit cards I'm referring to, and I would get maybe two $3,000 of credit card balances, I would never get paid off, then I would set myself up, I would like cut back on something or whatever. And I would concentrate on it. And maybe a year later I would be debt free again, debt free band, no credit card debt. I always had a mortgage. I always hated most of the time, I had a car payment for two, three years after I got a new use car. And I would pay it off thing, okay, now I got an extra $300 I should be able to get out of debt and never seem to happen. It always seems like something else jumped up, I had to pay for something came along that I didn't have the money to pay for and I had to borrow money on a credit card or whatever to pay for it because I never had an emergency fund, I never had a savings account was not enough money in it, where I could pay for those things, or I wasn't willing to take the money out of the savings account because maybe I had $300 in there. And that's not gonna pay it off. So as not gonna pay for what I need. So I just left it in there, and I just borrowed the whole thing on our credit card, I probably should have used a $300 first and borrowed the difference, and I would have reduced a little bit of my debt. And it might have helped. So that's the importance of a emergency fund. And an emergency fund should be something that's in your budget. If you go and look up budgeting tips are different budgets, you got all kinds you got zero base budget, which means that if you have $3,000 of income, you assign all that money to a category, and you don't you try not to exceed so that the end of the month, good $3,000 in $3,000 out. And that also includes putting money into your savings account, and to retirement accounts, paying all your credit cards via food, entertainment, all your necessities, necessities, mortgage, rent, utilities, everything, money in money out, every month comes to zero. If it doesn't come to zero and you got money leftover, well, that's more money to go in savings. If you have a shortage, ie it comes to a negative number. Well, you spent too much in one of your categories. So you need to adjust. It is something you need to look at every month is something you need to be aware of every month. And I didn't do that until I got decided that I wanted to be debt free before I hit retirement. And I got a program that set up a budget and it BAM it told you, it told you it tells you when you're going to come up short of money you need to put money back into your checking account it to me it doesn't prevent you from overspending that keeps you aware of what's going on, and how much money that you have and how much money you're gonna need. And that's worked for me. I paid off 133,000 some odd dollars and , three years, eigh months. So that includes my credit cards, my car loans, line of credit on my home, and m first mortgage, three years eight months, and I've been t ying to do that my whole life. And when I finally decided the wanted to get it done. One o the first things I did was to reate a budget. Now how much do you know to put in a budget unle s you are living with your p rents and you're just starti g your first job. You should e aware of what you're spen ing, he should know what your m rtgage is what your rent, renti g car payments, insurance p yments, he can go back and fi ure out an average of your foo , dining in dining out, dining in, but as to grocery sto e, dining out going to restaura ts, other forms of entertainme t you might be doing every obligation that you have, you should know. One, what it is, how much you need to pay, when you need to pay it. If it's a loan, the rate of interest, how much you borrowed initially, how much is the unpaid balance, you know, on the terms of how many months you borrowed the money for, and you need to know all that. And you can plug it in a spreadsheet. And know coming up on the counter, if you look forward. Okay, this is may 30. I got June coming up what's going to be due next week? Well, I got my mortgage do, I might have a car payment do, I may have some utilities do and utilities that could be scattered throughout the month. So it's hard to say, you know, you got to go and buy food. gotta buy gas for the car, maybe you're coming up when you need an oil change, or you need little extra there. It's just a matter of knowing what's due, how much do and when it's due. If you have all that figured out, putting it in some order. So that you can see how much is needed at a particular point in time or a particular day. You're way ahead of the game, he can project that forward, you're much better off, you can plan for what's coming up. So your auto insurance might be due every six months. So it's not a monthly expense. But the month that you owe it, you should know when that month is and how much you're going to have to pay. And you should have money set aside to cover it. Don't wait to last minute Oh, and next week, I get paid on Friday and my insurance is due on Thursday. I don't have a month and enough money to cover it. I don't have any savings. I don't have any emergency fund, I'm in trouble. Maybe I get away with paying at one day late. And the next time is three days late. And the next time it's a week late. You're going down the slippery slope there, I have a couple articles that I'd like to talk about. And that would be coming up next. To help you figure out how to do a budget. I've talked about budgeting endlessly. A seem to be a popular episode. So that's why I'm doing it again. Before you even do a budget, you have to realize that maybe you have a spending problem. You're overspending money, whether you're spending money online, or you going some out and entertainment too much. There's a category. There's something that you're doing where you're overspending more than what you should, and you're not taking care of the necessary expenses. Now I'm going to talk about how you set up a budget how to get one created. If you've never done one before, maybe you already have one but not sure if you're doing it right. Any budget is gonna work. A budget is a plan for your money. That's all it is. You don't have to be strict on what you're spending money on. The first step in any budget is knowing what obligations you're all ready committed to make payments on, such as your mortgage, a car loan, credit cards, the first thing you do is group together, I call them accounts, all your loan accounts. And you need to know what it is when it's due, how much is due and the rate of interest. So you have your mortgage, you have your car payment, maybe two car payments, maybe a boat loan, maybe a motorcycle, put those in order. And then after all those is your credit cards. And the reason you need to know how much you owe and the rate of interest is because that's gonna help you decide which one To pay off or now next, that your obligations the other obligations would be what you pay every month, which is referred to as a next fixed expense. Something you pay every month, no matter what for housing would be all your utilities, be internet connection, could be cable TV, home insurance, all those items. And then next would be transportation, a car payment, gasoline repairs and maintenance, tolls and fees. If you live somewhere, we had to pay tolls of fees on a regular basis, he should be able to figure out how much those are an average every month, if you don't know, go back through the last 30 to 60 days, add them all up divided by the numbers you have. And that's an average and use that for your budget. So we have home, shelter, transportation, food, which would be grocery stores and dining out. don't restrict yourself so much you can't enjoy life. The purpose of having a budget is knowing what you're spending, not to limit your spending at this point in time. Once you know how much you're spending, then you can make a decision. Am I dining out too much? Can I reduce that back so I can say more to help pay off whatever it is you're trying to do it to pay off your credit cards, pay off all your loans, or increase your savings or your retirement. It's either or thing, it could be both at the same time. Just a guideline at now for what you're doing. So we have housing, transportation, we got food, then last thing would be entertainment. And don't short yourself on food. Don't say I'm going to spend $100 a week on food at the grocery store when you're actually spending $175 a week. Because if you're hungry, your budgets not gonna last because you're gonna overspend on food, based on what you put in your budget, are you going to try to skim back and you might go a little hungry, and then you won't stick to your budget. I saw that an article, I have two articles in my show notes, you can refer to them. I'm going to cover some other tips later on. Right now, we're focusing in how to set up a budget, how to initially get a budget going. any thing else, you got to put money into savings. So if you have a 401k at work and is already taken out of your checking account before you get it, so we're looking at your income as your net pay for budgeting purposes, money that's actually getting deposited into your checking account. So your 401k contributions, you don't have to account for it because you're already doing it. But we need to include in your budget and savings, you need to put money in your savings. And you need to do that first. Because once you transfer that out of your checking account, it's not there, you're not going to spend it. It's a mental thing. So pay yourself first transfer money into your savings. Your savings should be your part of your budget. Increase in your emergency fund is part of your budget. savings for a vacation should be part of your budget. No matter what the dollar amount, it could be $25 a month, habit and your budget. Now month, the month your budgets gonna change. That's why I talk about projecting ahead and knowing what's coming up. Because some months you'll have some expenses that you don't have every month. For me, it would be homeowners insurance, which is once a year, my real estate taxes which is twice a year, my auto insurance which is twice a year. It's not every month, but I have it in my budget and I know when it's coming up and how much is gonna be due. That's the important thing of a budget. Failing to plan is planning to fail. A budget is a plan for your money. I'll be back in one moment was my final thoughts. If you listen to this podcast using an apple pie Cass app, please rate and review this podcast for all your non Apple users, you can download iTunes on a Windows machine and go to the upper left hand corner, select podcast, do a search, reduce that increase wealth, can then rate and reviewed the podcast and also follow the podcast. I appreciate any feedback that I may get. I have two articles that I talked about throughout the episode. The first one is from mint. And two it MetLife meant that Intuit that comm blog budgeting tips 18 budgeting tips to make money management easier. I refer to some of that I just didn't mention it. And then it gives you some basics on how to set up a budget and roles and things to do to help you achieve success and your budgeting. Remember, I do a budget based on what you already spend your money on. Unless you're living in your parent with your parents. Yes, graduated from college and just starting your first career job. You probably don't have a whole lot to worry about budgeting. But you need to do it anyway. Maybe you pay rent to your parents, maybe you buy food, he should set up a budget and know how much money is coming in, and how much money is going out. And the access should be in your savings account. If you already got a good start in life, you're married, couple children house, ours, then you can look back if you keep track of everything. Keep a check register. If you keep a check register online or through some app, you'll have the information you need to get started with your first budget. The second article is 50 budgeting tips. For every stage of life. It starts with the young people goes through your stages of life and ends up with retirements. So no matter what your age, there will be tips in this article to help you and it's be the budget.com budgeting tips. Be the budget comm budgeting tips and has some very good tips in there and things you should be doing for your budget. The number one tip that I can give you is to start a budget. If you do it on paper, I would prefer a spreadsheet being a retired accountant, I use spreadsheets on the computer, column A you put down your categories. I will start with housing, then and list all your expenses your pay related to housing, whether it's rent, mortgage payment, homeowners insurance, utilities, internet, you can throw in there because it's with the house. Some of that could be entertainment, but it could go with the house internet service. And then maybe under a different category, your cable subscriptions for TV, or your streaming for subscriptions, whatever you. The second major categories should be transportation, car payments, gas, repairs, maintenance, tolls, and fees. Any taxes you may use or Uber left, then we go food, which includes your groceries and dining out. Remember, don't skimp on your food. Don't try to save money on your food because if you end up hungry and you're not staying within your budget, he will quit doing it. I recommend add a little extra money on your food that don't mean to go out to dinner or out to eat every meal. I mean, keep it under control. If your goal is to pay down debt, then a budget will help you achieve that goal. And he got to look at the budget and where you're spending your money. decide what's important, what you have to pay for. And try to eliminate as much of things you're paying for that you don't need. Don't use, don't want, can cut back. A good example would be you got cable TV and you got streaming do one or the other but don't do both go as the cheapest alternative. Then you got your phone your Your cell phone, maybe you have a landline and a cell phone, well get rid of the landline because you don't need that. Your cell phone look for different providers call your provider find out they got some deal going on that could help you reduce your spending on that item on a monthly basis. If not look for new providers if you can. So it's important to know how much money is coming in how much money is going out. So that you can pair that month, the month, you got to do this every month. And so the first column is your categories. second column is your budgeted amount based on previous month's average, or previous month actual same every month. third column should be actually what you actually spent that month. And then maybe the difference. So you can see where you're overspending or underspending, so you can if you're on this spending category, he can reduce that budget down and put a little bit more in savings. If you're overspending, maybe you need to increase that category, or cut back on what your spending with that category would be such as dining out, don't dine out as much by little bit less at the grocery store if you're overspending. So it's gonna be up to you. And then once you get that formatted out, do all the math, get your formulas in there, copy and paste next to it and just keep doing that. So the next month, you had put in your for your budgeted amount would be the previous month's actual expenses. leave room for categories, because you might come up with a new one month or two down the road, you need to add it in there. Remember Christmas is in December, you don't have the budget Christmas all in the month of December. You can set money aside every month, 25 $50 a month, put it in your savings account and increase your emergency fund. So if you have $1,000 emergency fund, you need $1,000 more for Christmas. increase that up to 2000 and you'll have the money available to buy those Christmas gifts. You don't have to use credit cards because your number one objective is quit using credit