Charles McDonald: 0:04

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 how to stay debt free. The basic rule of personal finance is simple, but most forget about them. These are the basic rules to remember and to put into use daily, there are some debts that cannot be avoided, and are necessary for everyday life. Knowing how to manage debt can help avoid getting deeper into debt. I tell people that I do a podcast about personal finance, and mainly how to get out of debt and stay out of debt. 90% of those people say it's a simple way you talk about, it's one thing you only have to do, don't spend more money than what you make well in the concept may be sample today that's almost impossible to do. That is helpful. So you want to try to remember that as you go down through the process of reducing your debt, or through the process of getting your finances in order and keeping your and finances in order, you really don't want to spend more money than what you make. That's one of the number one rule. The second rule is you need an emergency fund, which is nothing but a savings account that you set aside money in for those unforeseen expenses that may pop up in the future due to something happening. It's like in self insuring yourself for the unexpected. That's what an emergency fund does. That's rule number two. The third thing is what you gonna do with your money, you guys assume everybody goes to work, they earn money, the company ever pays them in cash, probably not so much anymore. But even the very worst they give you a paper check, what you do is that money, he go to a bank, you cash it, we induced the money, you're either gonna take the money with you, which then you have the problem of maybe overspending, or somebody even robbing you, and it's called theft. Or you can put the money in some place safe, such as a safety deposit box under your bed. But then that's kind of not helpful, because when you need money had to go there and get it and you got to plan ahead and all those kinds of things. So today is modern, you put your money in a federally insured bank, make sure you protect your money, wherever you put it, federally insured bank is going to guarantee your money up to like$250,000. Don't forget that. Don't just put in any old bank, which some of these online banks may not be federally insured. Or you may put your money into a money market that's not federally insured. So make sure you keep that under consideration. Protect your money at all times, no matter how you do it, then you got to keep yourself either get out of the debt spiral or sin or stay out of debt spiral. What's the debt spiral, that's when you use your credit to buy things that you can afford to buy today, because you're spending more money than what you make. And then you think you're gonna pay it off in a certain amount of time. But that never happened. So then you spend more money, you get deeper deeper in debt, then you may be, oh, I'm gonna do a consolidation, loan and refinance all my credit cards, and I'll get out of this debts. But you didn't eliminate the debt, you just changed the debt to the better I get that give you that much credit, but you still hadn't gotten out of debt. You keep on using those credit cards, and it just problem is worse. In order to break out of the debt spiral. You have to have an emergency fund. Here's what happens. Let's say you need to buy something, tools or whatever, for work clothes, whatever the case is, you put it on your credit card with the intention you're gonna pay off in 60 days. But in 45 days that something happens, your car breaks down. Now you have to use more credit in order to prepare the car so you can go to work.

Unknown: 4:53

He just got deeper into debt.

Charles McDonald: 4:55

He tried to get out. Something happened because he didn't have emergency funds, you had to use your credit. When you use your credit, it just gets worse. I hope you understand where I'm coming from on that. So the emergency fund is a important thing. Watch your spending, have an emergency funds,

Unknown: 5:19

stay out of debt, keep

Charles McDonald: 5:22

your high interest debt to a minimum. And that's generally credit cards, personal loans, payday loans, Pawn Shop loans, buy here, pay here, car loans, those type of things are gonna cost you a lot. And Andrus, and how do you plan for your money? You got to assign your money a job once you have it in your bank account. But how do you know what you how much you need in that checking account? How much? How do you know how much you can safely put in the savings account? Well, you have to know what your bills are. You got to know what your rent or mortgages, all your utilities, your gas, for your car, your food, and anything else that you spend money on. That is a need. Needs are things you need to live your life wants or things you want to have to make your life more interesting,

Unknown: 6:25

entertaining, or just better off.

Charles McDonald: 6:28

We are at this point, your focus on your needs, housing, transportation, food, and then savings as a need. Because you need that emergency fund. So in case something would happen in a future, you have some money, so you don't have to use more credit and go deeper into debt. Hanging on get back to don't spend more than you make. But you have to go through your life thinking that most of the time you get so much money a month from work, how much it costs you for your rent, your utilities, your food, every month, II got to know that those items need to be paid on time, because in order to keep yourself out of debt, he have to have a good credit report. And the better your credit grading is, the cheaper your insurances, the easier it is to get loans, the ones you need, not necessarily the one you want. And we're gonna get back to that. So it all fits together. You return your money, you put it someplace safe, you then plan on how you're going to use the money, or even assign your money a job. That's what you need a budget, the Y NAB app calls it they assign money to a particular job, whether it's to pay rent, a utilities, pay some insurance, pay your grocery bill, whatever the case, you're setting that money, giving it a job. So you don't spend it on something else that you don't need. That may be something you want. And maybe you see that big balance in that checking account. Because you just got paid, and you forgot, the next week I got rent do. That's half the money that's in there. I gotta pay my utilities that same some of them that week, I got insurance payment coming up. Most of the money is already gone to be used up. If you pay your bills on time, and you don't have it today to get that want that you may want to have you even you think well I'll put it on this credit card. And then that the end of the month, I have extra money, and I'll pay that credit card down or off. That type of thinking is where you get yourself into trouble. Because now you're spending more money than what you make. Credit cards make that very easy to do. You gotta separate your motions before you buy anything specially if it costs more than a couple $100 You got to do your research. Do you really got to think Do you really want it? Do you really need it? Have you gotten by your whole life without having it? Why do you need it now and think about it. Don't just spend your money here and there. I mean, you're not in the grocery store walking up to the cash register and buying a pack of gum or a candy bar. The things get expensive really quick. So you need to plan ahead, separate your emotions from your finances, and plan everything and advance. Keep your high interest debt under control. All, put your savings first. So you have that emergency fund, and save for the things that you want. Now, how do you spend less money than what you make? If you want to buy a home, it's gonna cost you 200 300,000 teaser, just fictitious numbers I'm throwing out there. But you have to maybe work 15 years to save up enough money to buy well hung costs today, 15 years from now, the homes gonna cost more. So now you got to wait a little bit longer. So you never really get a chance to buy that home. And the same thing with an automobile, they, they're expensive, you cannot afford to not work. So you need a car to go to work. But if a car cost$20,000, and you make zero money, that's a lot of money. And then if you get a job, or you make 17,000 A year after taxes, it's gonna take you three years to have enough money to pay cash for

Unknown: 11:07

a car. Well, that would be nice for transportation, and housing. Living, not spending more than you make

Charles McDonald: 11:20

is we're gonna look at it in a different light. Yes, you're gonna spend more that particular moment to attain those type of needs, housing and transportation. But we're going to also look at how much it cost me on a per month basis. That's why whenever you're buying a car, they don't tell you the total price of the car, they tell you what your monthly payment is. And the monthly payment is 200. Or I can afford$200. But whether or not tying is a car is 12,000. And you're paying $6,000 in interest. So maybe it's not such a good deal. So maybe buying that car is not a such a good deal, because you're getting that with a loan at the high rate of interest. So now you have to look at, I always ask what's the cost of the car? How much is the interest on the loan? How long is the loan, I want to know more than just the monthly payment? Well, that's the end result. And for me to determine how much I can afford, but I still want to look at it and every angle I possibly can, maybe I can get a better loan deal. So I can buy a little bit more expensive car that's a little bit better, and get a cheaper loan

Unknown: 12:45

and pay the same amount.

Charles McDonald: 12:48

So you have to plan ahead, you have to do your research. Same thing for a home, there is no way you're gonna save up enough money to buy a home and pay cash. So we have to finance it. And generally speaking, it's 30 years and 30 years is a fairly long time. Now granted, you can refinance, if the interest rate goes down, you can refinances but that comes with some costs. And you can't do it right away, you have to wait a few years until you get some equity in your home. And that's another place people get into trouble. They then refinance, take out the equity, take out the extra cash pay off some credit cards. So now they just refinanced her credit cards to a 30 year loan. Granted, it's a lower rate of interest, but you're gonna be paying it for a longer period of time. So it may be you're gonna be paying more, and then they continue to use their credit cards. So they never saw their problem. They just extended the problem. These are the type of thinking you have to do you know how much you make per year, you know how much your take home is every pay, you can figure out how much your take home pay is every month, what have you already paid for your health insurance may already be paid for, because they took it out of your check before they paid you and your employer is paying part of it. Your retirement may already be partly covered because you're putting money in a 401 K. And that is a place where people lose money because they got so much that they think they cannot afford to put money in a retirement account through work. They're Miss missing out on the match, and they're not getting any more out of debt is missed opportunity on long term investments. So you got to put the money in a 401 K, you got to figure out other ways to pay off your debt with what the remaining amount of money is, I recommend match up to the least the amount that your employer is gonna be willing to match. If you put in 3%, and a match 3%, that's the same as you put in 6%. In by yourself, take advantage of your employers match, it's a benefit, take advantage of it. And when we're looking at loans, as far as debt goes, your mortgage should be the lowest rate of interest that you can get on any particular type of loan. Because your home is the security collateral for the loan, if you default on the loan, they key out of the house and they sell the house, you get whatever accessor is probably not if it's too soon, you probably don't get anything if it's within the first five years or maybe even longer, depending on what the markets doing a car similar, but they could repossess the car, and you can still owe money on it when they sell it because the value of the car goes down a lot faster than what you owe on the loan. So that's why I always looked at buying used cars, because I paid less form. When you pay less form, you borrow less, you borrow less, you can pay it off faster, even if you get a five year loan. So that monthly payment is down there. So you can control it. So that you know that you can make that monthly payment every month for five years. But there's gonna be months where you can pay double or triple that will pay extra when you have it. But you have the option of not having to pay it. That's how I look at these things. Assign your money. Keep your money in a place that's safe and federally insured before making any purchases over$100 or $200. Do your research, ask yourself, do you really need it? Can I get by without it? Why do I need it now, and I never had it before, things like that. Just don't rush into spending money. Stop and think about it, how's it gonna affect your checking account, housing and affect your ability to pay your bills, the next 30 days going forward, you only have so much coming in. Don't worry about the things you cannot control. You control how much money's coming in. And you're going to control how much money is going out or what you're spending, and you control what you're spending it on. And part of that goal should be the keep the money coming in, he should want to keep as much as possible in your own pocket bank account as possible. And that's where don't spend more than you make keeps coming into play. So when we say that we are meaning your what's your monthly housing costs, it cannot exceed more than you make. And fact that cannot exceed more than about 35% of what you make. If you want to have a car, food and everything else. Your transportation should not cost more than 15% of what you bring home. Your food should be around five to 10% maybe even less. It ways you say money is you go to cheapest route that grocery stores cheaper than a fancy restaurant. A fast food restaurant is cheaper than a fancy restaurant but cost more than that grocery store. The more things are done for you, the more things are going to cost. Do it yourself if you don't know how to do something like repairing some minor plumbing changing the faucet on in your bathroom. YouTube videos are out there watching you to videoing, go to a big box store, buy a new faucet tag, do a one off, say a bunch of bad words, drink some beer, get a new one on problem solve. You saved the cost of waiting on the plumber to show up and his $300 to show up and $100 an hour while I'm there and he's going to charge him a minimum of $400 just to do it. Then he's gonna mark up the cost of the faucet. Why pay all that when you can do it yourself. There's a lot of things around your house your apartment. Now if you have a apartment, your landlords problem. But there's a lot of things you can do. That's a lot cheaper if you do it yourself than having somebody come and do it for you. Don't spend more than you make. Know where your money is going. Have an emergency fund. Set aside money for a rainy day, make sure your money is safe in a federally insured bank. plan before you spend one last tip before my break. If you have problems, overspending, get yourself a prepaid debit card, put in a set amount of money, you can get a card for groceries in get card for gasoline, you can get a card for whatever, figuring out how much your average spending is. And you put that much on that cart. And you only use it for that thing. groceries, car gasoline, now on gasoline, give yourself a little extra because the price goes up and down all the time, mostly up. So you need to add little extra in there. Once it gets down to where you can no longer pay for something, you know no longer can buy that you're spending is now it's just like using cash. Once you spend all your cash, you're done, you got no more money. And you have to get by without buying any more of that particular item. Whether it's groceries, dining out, car, gasoline, whatever the case would be. Whatever you set these things up for your way for you to control your spending. If that is a problem for you. 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. So let's review what you need to do to keep your personal finances under control. So you don't get into a debt problem. Don't spend more than you make, which also includes your monthly payment for your rent, mortgage, your living and transportation. Don't get sucked in to buying more things you can afford. Because they might say it's $85 a month. So $125 a month. Well, that may be affordable. Maybe you can afford it for how long? For five years, two years 10 year, you need to have more information before you make any decision. Because a lot of those little per month bills will get you in trouble. Also, don't spend more than you make general rule with an exception on your mortgage, your rent, your transportation, and anything else you got to think ahead. You got a plan. You have to put your money to work. You give your money a job, what Bill are they gonna pay for me in the future, have an emergency fund a savings account, so something unexpected comes up. You have some money available to pay at least part of it. So you don't have to use your credit or credit cards to pay for that bill that may appear out of nowhere. Keep your money safe. No matter what you do. Keep your money safe. You worked hard to earn it Don't give it away in a bank needs to be federally insured. Whoever you invest with needs to be federally insured or have a fiduciary relationship, meaning they put your interest is the best interest. They're not doing it just to make a commission to earn an income like stockbrokers do. Keep your money safe. Emergency Fund And don't spend too much. Think Before You Buy, have a plan, have a budget tracking, fairly simple I didn't mention that earlier. But if you track all the money coming in going in and out of your checking and credit cards, you'll be aware of what's going on in your life, your financial life, you'll have more something to work with. You have a knowledge. I know my monthly bills are around $2,800 a month, I make 4000 a month, I have a little extra. Some of that goes into savings. Some of that's going in for my vacation, some of it, whatever the case, you have a plan and stick to it. Have a plan and stick to it. Don't spend too much have an emergency fund. Pay yourself first have your savings. Think Before You Buy don't overspend, beware of these lenders beware of credit card companies, because they'll suck you in saying, well if you buy this we're gonna give you 1% Back 2% Back. Okay, you spend $1,000 You only get a cashback of 1%. That's not going to pay the$1,000 it's not really worth it. Think Be Smart with your finances. Stay out of the debt cycle. Keep yourself debt free. Don't go with high interest debt. And you'll have a much happier, better financial life.