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. Plan for debt reduction, having a plan to reduce debt makes the process much easier. What is the plan? And where do you find a plan, I do have a link in my show notes to an article. But if you go online and Googled debt reduction plan, debt management plan debt elimination plans, mostly you're gonna find articles that's gonna refer you to counseling companies, or counselors that are looking for your business, he might find an article or two, that's going to give you some basic information, like the article I have on my link from the balance, basically is tinia. What to do a basic what to do, find out how much you owe, identify your debt. I've already talked about that. In the past, I talked about the last couple episodes how to not get into debt, and how to stay out of debt once you've achieved your debt reduction plan. But I have yet to tell you what a debt reduction plan is. Now, I've done this in many episodes in the past. But if you only go back three or four episodes I talked about, don't spend more than you make except for two exceptions. That's your housing and your transportation. If you're gonna buy a house that's not running, but buying, if you're gonna run a house, don't spend more than you make, because you couldn't afford it. And your automobile, your transportation, you got to finance those two things. If you do that, and then pay for everything and cash go on forward and save your money and pay as you go, you will not have a debt reduction problem, you won't have a debt problem, you will be manage your money efficiently enough that you will keep yourself out of trouble. But there's things that pop up that are unplanned for that maybe you have to charge on a credit card and you'll get behind and then you'll get another credit card, and you might get behind again, it's a never ending saga, you get into that debt cycle, it's very hard to break away from it. And the debt cycle is going to keep sucking you in. And if you go online, they're gonna say do a consolidation loan, that's not going to reduce your debt, you're just rearranging your debt, yes to the better lower rates of interest, etc. But if you don't get rid of those credit cards, you keep using them, you're gonna be back in a worse place. And within a year or two, it might take longer, but it's gonna keep getting worse as you go through your life. You never got out of that debt cycle, and you're still struggling. And as the deeper you go, the more of your income is going to be used to repay it, the less money you have available to do things you want to do in a for your monthly expenses. And then you start living paycheck to paycheck. And then you start struggling. And then if something bad happens, it gets even worse. I present all this gloom and doom because that's what happens and happened to me. I had no intention of going into debt on one credit card much less two or three and then a couple car loans and on and on at once. I just had some bad luck. And I every time I was getting close to paying one off or paying one down, then something would happen. Because I never had a plan. I just was willy nilly like most people do. I've just went through life. I was going to work I was making my money. Now I was trying to use the money. I had my checking account at that time to pay as much of my debt as possible. But I had no plan. You're never gonna be successful unless you have yourself a plan in you write it down and you stick to it. And the number one thing you got to do, quit using credit. Quit using your credit cards, period. Now if you've been listening and you're trying to get your monthly bills that you pay on the timely monthly manner and you're working towards it, you know in order to quit using credit you have to watch your spending and you can't be spending on things that you're not using that you're paying for, you know, subscriptions, and you just can't be wasting money he got, it's hard to make money. And it's harder to keep your own money, you got to be in the mindset, you want to hold on as much of your money as possible, and save as much as money as possible. So you quit using credit, because you're in debt, you're struggling to get out of debt. So every time you use that credit card, that's one step farther away from getting it paid off. Maybe it's 10 steps away, because it's just getting worse and worse. So quit using credit number to pay the minimum amount on all your debt period, by how do you pay it down, if you just paying the minimum amount? Well, you're gonna get to that. But you have to do that. The reason is, you want to free up as much money to pay your normal monthly bills, timely every month on time. So you can get that process started. If you're unable to do that, if you're already doing that, then you take the money that you're not spending and put it into a savings account, and we're going to call it an emergency fund. Why have an emergency fund? Well, because you never know when something bad could happen, an unforeseen expense could pop up at any time. If you don't plan ahead for it, what are you gonna do, you're gonna use your credit. And if you use your credit, you can get farther in debt, and you're not achieving your goal of reducing your debt, you need to have an emergency fund and start building one emergency fund is nothing but a savings account where you go to your bank. To start with, if you don't have a savings account, go to the same bank where you have your checking account, open up a savings account, the minimum might be $50 $10. I don't know, I think the last time I did it, a minimum for a savings account was $50. So I put in $50. And then you gradually build it up. Because our goal here is have a minimum of $1,000 in your emergency fund to get started. So what have we done? One we quit using credit to, we're making a minimum payment. Three, we started an emergency fund. And our goal now is to build it up to a minimum of $1,000. That minimum you're never gonna go below. And last, some unforeseen expense comes along, your car breaks down it charge child has an accident, you have an accident, you get sick, something unforeseen, unplanned, comes along, that's when you use an emergency fund, and may not pay for 100%. But if it pays for 75% or 90%, that much closer to stand out of debt, to reduce your debt. We're working on that goal. Then when you do once you have your $1,000 The minimum and your savings account. While you keep building up this process at the beginning is going to be difficult. It's gonna be it might take you two months, three months before you could quit using all your credit cards and charge and stuff and getting paying cash for all your stuff. He might have to use your credit cards and charge a grocery bill or a gas fill up your gas tank. But you gradually gonna start to get away from that. And that might be probably the hardest part of this whole process. Just to getting that started. We already identified we had a problem. We already identified all what your debt is we got their debt in order. We know we have a mortgage, a couple car payments, three credit cards, personal loan, payday loan, we all got that identifier and we're working on it. Right now. You're just making a minimum payment on all that debt and you're trying to build up an emergency fund. And then when you get that $1,000 Each keep doing the same thing. You build it keep building your emergency fund until you have 3500 to$4,000 Somewhere in that range. Once you achieve that this could take you six months or nine months at the beginning, but it's going to speed up over time is slowly going to speed up. And then it's going to start speeding up faster and faster as we go. Once you have anywhere over $3,500, in your emergency fund, the reason we're building that up, is because of any time during this process, that you're building up that emergency fund, an unforeseen event happens, you just have that much more in your emergency fund to cover it, so you're less likely on a half to use credit. That's the reason I hope you follow that pretty precisely. Once you have let's say you have 3800 in there, it's the middle of the month, all your monthly bills are pretty much paid for, you have enough cash to pay for groceries for two more trips to the grocery store for the to the end of the month, maybe put gas on all your vehicles to the end of the month, you're sitting pretty good. And you're fairly confident you're doing well pick one of your debts, he shouldn't be starting on your high interest debt. First, what ever the highest rate of interest, whichever debt, generally speaking, it would be a credit card. But if you have a payday loan, it might be that if you have a personal loan, it could be that if you have one of those items, high rate of interest that has a smaller balance, that you be able to get close to being paid off, or even paid off, I'd be better do that one first, then after you get that first one paid off, if it's a credit card, do not cancel the card, you're gonna keep it because it's going to help your credit score. And maybe in the future, we might be able to use that card, again, to our advantage. So you get it paid down, you got one less debt. After that, you want to focus on the highest rate of interest, only what is I have that I'm paying the most interest on. And you see, cuz you're, now you got your savings account emergency fund was at 3800, it's now down to 1000. So you applied 2800, you did whatever you did, you're gonna start building that back up again, let's assume you paid something off, so you got one less debt, it's gonna come up a little bit faster, because that's one less minimum payment you're making, and might have been $55 a month, or could have been $35 a month. But that's that much more, that's gonna go into the savings account. So now we want to focus, start building it again. Now maybe if it took you nine months, the first time, it might be seven months the second time. So several months down the road. Now this all could be faster, it all depends on your income, your monthly expenses, how much debt you got building up, and you decided to go to the full 4000. So you had 3000 to apply. So you do that, it's some time later, you pick your highest rate of interest, and you apply it, maybe you paid off a third of it, maybe you paid off half of it, whatever, you paid it down by three grand. So that means that interest that you're paying is gonna significantly drop on that card or that loan, or that credit, whatever it is, and your minimum payments gonna go down. So you're just gonna make the minimum payment. So now you have even a little bit more money, that's gonna build up that savings account a little bit faster. And you keep doing this over over and over. You're watching your spending. You're paying for everything month to month. You're watching your spending, you're paying for everything month to month on a timely basis. You're building up your savings account, you're looking for things to cancel and do away with to get rid of so you don't have that expense here ongoing checking your cell phone service, your cable service, your internet service. Trying to get the best deals possible. You doing that all the time. You're consistently looking for ways does not spend money, ways to save money for the reason of paying down this debt. I'm not saying that you're gonna sacrifice maybe didn't cut back. If you were somebody that went out to dinner five times a week. Do it one So week, wherever you can say money either means you're gonna be able to build your emergency fund faster, which means you're gonna be better be able to pay off your debt sooner. And hopefully, you're gonna be building new habits, specially spending habits, you got to watch got to think, ask yourself before you buy anything that's cost more than $100. That's something you usually don't buy. That's a tool, a new computer, a new phone, smartphone, whatever it is, do you really need it? Can you get by without buying it for another year? Or two years? Can you? Is it worth your while? Do you really want to spend them money? These are things you always got to be asking yourself, you got to be looking for ways to reduce your spending, thus increase your savings, thus increasing the rate of paying off your debt at all effects each other, I could just say, make more money, and then pay off your debt faster. Well, that's true. But that's hard for a lot of people to do. If you can do that. Basically, when I did, I changed jobs got a better job, and then more money. And that really helped a lot. I paid off it was about $130,000. In three years and eight months, it was three or four credit cards, two or three car loans. My line of credit on my home and my first mortgage, I had some of that somewhat under control, before I got serious and start really doing this plan. But it was this plan that propelled me much faster, and got everything under control, gave me some focus, quit using credit, make the minimum payment, get your savings accounts build up to a minimum of $1,000. He builds it up until you have three to 4000 apply it to one debt only pay off that debt repeat over and over. And as you pay him off, it speeds up towards the end, I was applying three and $4,000 to my mortgage, like every other month. Like every month, towards the end, I was making my monthly payment. Two weeks later, I was putting an extra three grand on it. And that really goes quick, especially when you didn't have much left on the balance. 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 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 reduced that increase wealth@gmail.com. And I'll send you the information about this online software that worked great for me. Before you get this gone, II got to be tracking your spending in annual income. And you need to have your control center or do a monthly budget. I call it a control center. And you update it every pay cycle every week. If you're paid weekly. Every time you get paid, you got to make sure it's updated. Because it's there to help you identify a potential upcoming problem. If you can catch the problem before it happens, you can minimize it. If you're doing tracking, you need to update it on a regular basis. If you go to the grocery store in a gas in the car and pay a few bills every Saturday, then you update it every Saturday. If you go out on Wednesday and do some spending, update it have your tracking software up to date at all times. That way you know how much is in your checking account. How much you have on your credit card courses. If you're doing the debt reduction plan, you shouldn't be using those credit cards. But you have an idea how much money is available to pay for upcoming expenses. It's looking ahead and planning for the future. And this gonna help you get rid of your debt. And this article from the balances debt elimination tips, you get, I get almost to the end of the article before it says, make sure you have an emergency fund in place before diverting all extra funds to debt repayment, that's at the end of the article. And that was step three, quit using credit, make the minimum payment, create emergency fund, step three. And they're telling you make sure you have an emergency fund in place before diverting all extra funds to the debt repayment. At the end of the article, it's an extra tip, and it should be part of your plan. As you pay off accounts start to pay towards other debt. Well, that's kind of some common sense. If you pay it one off how you're gonna not start paying towards the other member, you quit using credit. So once you get paid off, it should stay at zero, it shouldn't have any more payments applied to it. Keep an eye on your credit score as you begin paying down debt. While yes, you want to know watching your credit score increase can be an excellent motivation. Yes, if you pay off some credit cards and you don't close them or cancel on your credit rating will come up a little bit. As the less debt you have, your income to debt ratio is gonna be improved, thus your credit score is gonna improve if your income changes during your debt repayment plan. Be sure to reevaluate your budget. That's common sense to me. So what are you going to do if your income goes up? Most likely your rent or mortgage payment and change your car payment probably never change or what you eat that changing, your utilities are not going to change because you have more income, put it in your emergency fund, and you're gonna increase the emergency fund faster, then you're gonna pay off your debt quicker. After your debts paid off, continue to utilize your budget to help keep yourself out of debt. If you don't stop doing once your debts paid off, let's say that you're just at first saying I want to pay off my credit cards. Well, that's fine. That's your first goal. Once you get that done, would you have other debt? Well, I like to get my cars paid off, or at least pay down. So when I trade a man, I won't have to refinance the unpaid part into my new loan. Because a lot of people do that. And that that's a no, no, you don't ever want to do that. Okay, once you get that goal done, well, maybe I need to pay down my mortgage, I have this low rate of interest, it's relatively cheap money. And I'm paying 3% on a 30 year loan that is pretty good. Well, this ply a little extra, so I don't have to pay this for 30 years. So maybe if I retire a little bit early, I'll be able to pay it off maybe a year or two sooner, whatever it may be, I just want to pay off my line of credit. Okay, do that. Maybe I just want to give a little more equity build up my home. So if I would sell the house and move out have more money to put down on my next place? Yes, when those things are good. Whether or not you pay it off, it's up to you depending on your your rate of interest, how long you have left on the loan, what your income situation may be. It all varies by individual. I can't tell you what to do. Keep the high interest rate, credit, under control and out of your life. And you'd be much happier you did so