Hello, I'm your host, Mr. Chuck, a retired accountant turn truck driver, reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence determination. Best Use of budget, what are the best ways to use a budget and what information can be attained? The best use of a budget is to help you identify your problems and your personal finances. Your monthly spending exceeds your income. You can't get out from underneath car payments they seem to drag on forever. And by the time you need a new car, you still have no money, you carry a credit card balance every month and you're unable to pay them off. You do not have an emergency fund, your rent keeps going up. A new baby brings unexpected costs. You owe the hospital for medical care, your student loan debt limits your financial abilities, you're not saving enough for retirement, and you feel overwhelmed by financial matters. Those are the 10 most common problems people face, he can get a link to an article on my show notes where I got that you also have items that turn out to be never ending payments. And you're living on borrowed money. And you buy a new car when you can't afford it because you're not really sure how much you can afford. And the same goes for your home. And you're using your home equity line of credit, like a piggy bank. Hence living on credit, living paycheck to paycheck. You're not investing in your retirement, but debt you do pay off you use and whatever savings you have, you don't have any plan of any kind. That's what a budget can help you solve. All those items I just mentioned, are some type of problem. For most people. This is not just you, as you're not alone. This is the average person out there working every day trying to make ends meet and never seems to have enough money. But what can you do? Your number one overall step is to have a plan. And the plan, if you have a lot of debt is to reduce that debt. But how are you going to do that? Well, we talked about tracking, you got to start tracking all the money coming in all the money going out. So it'd be your checking account, or your credit cards, whatever you use in to buy things with, you have to know what's going on. What is a budget gonna do for you? Well, once you get that tracking under control, I'm assuming you're using a computer and you have an app. whatever app you use is fine. But I'm gonna explain what a budget later on should look like and how it's laid out. So you have a generic idea of what you're looking at. The tracking gives you the information to put in the budget. The budget gives you information to solve those problems, to identify where your money is going. And to help you identify where you can cut back or what you can do away with. You're getting your life financial life under control instead of just winging it. You need to have a plan. If you want to own your own home or buy that car that you dreamed of driving, or have a family you have to have a plan to get you in a good place where you can do those things. And you can't just wing it because you've been winging it up to now and how are you doing? Do you have a million dollars in the bank? Do you have a nice home and a car you pay your bills every month? If you're living paycheck to paycheck the answer those probably not. And you probably don't have any type of emergency fund or savings account did your mother ever tell you save some money for a rainy day as not when it's gonna happen as not if it's gonna happen it's when it's gonna happen that on a plan for expense that's gonna cost you some money. It's just a matter of time in need to have some set aside so you have an overall plan and what you want to do in your life. Now We know he identified we have a debt problem, you have credit cards that you can't pay off, you have a hard time of paying your bills. So we have a debt problem. So you need to have a debt reduction plan. And the debt reduction plan says, quit using credit to make the minimum payment on all your credit loans and all your loans, make the minimum payment, have an emergency fund. And you want to build that emergency fund up to a minimum of $1,000. After that, you keep building it up above$1,000, say 4000, you leave a minimum of 1000 in there, you take the 3000, you apply it to one year debts, and you repeat the process over and over and over until your debt is paid off under control. Now you have a little bit more money to put in to your emergency fund. So we can build that up over time and have three to six months worth of your expenses in there to cover that unforeseen. Whether you get fired from your job, whether you get an accident and you can't work, whatever the case, you have a fallback, you have a plan B, that's what your emergency fund is set to do to help you plan for your future. So you're not stressing out when something bad happens, you're already stressed stressed out enough, when that happens, you don't need to add to that with your financial situation not be in an order. So what is the budget gonna do for you, we did the tracking, I'm gonna start out by giving you the basic layout, giving you a picture for say, I'm looking at a spreadsheet, column A, B, C, D, you know, left to right, your columns are going to be a is going to be description B is going to be your control center, your control dollar amount, or your budgeted amount, I like to use control my mouse, that's the mount of money you're trying to hit or stay under every month going forward. And it's going to be based on the last 30 days, whenever you start, you go back, whatever your current month, you go back to the previous month, you enter all that information into your tracking, you get all the way up to the current date, you go back you do a report from by category from the beginning of the previous month to the end. And that's your control numbers. That's the start we have to start someplace. So that's a as your description b is your control numbers. C is the actual amount and the current month that you spending. D is the difference, B minus C equals d. And then the next column E is percent of income your categories are and we're going to cover that a little bit more going from top to bottom at the top you have your income, whether it's from wages, you get paid weekly, make sure you put five lines in there. Same way with your significant other, how often they get pay, always add an extra line, just in case because you never know. If you're self employed and we've got a combination of things, put a line for your income where it's coming from and identify it. Then when you get done with that, that's your total income. That's the easiest part of your budget. And we got to look back what what was the previous month and put those numbers in. Then we have your spending expenses, what you're paying outlay of money where your money is going which should include a savings account. So it's by categorize it by needs and then once needs our housing group everything related to the house and this category housing. So it'd be your mortgage real estate, insurance, repairs, utilities, all utilities, gas, electric water, sewer everything. Internet, cell phone, I put the phone with the home just will then the internet because the phone used to be permanently connected to the home. And that's the only place you could use it before there were cell phones. This leave it the same way of transportation which we list each maker for each individual car and for each individual car is the loan payment and insurance, fuel repairs, maintenance, repairs as major repairs. Maintenance is like oil changes, and stuff like that. Repairs for tires could be repairs, or either way, we're actually looking at what you spent, not what you think you're gonna spend. What did you spend that last 30 days. Do that for both all your vehicles that you drive on a regular basis that you have expenses for. Then we have food, all areas where you get your food, groceries, dining out delivery, grocery delivery, food delivery, however, you want to categorize all the different ways you get your food. And we have clothing, we have savings, which should be emergency fun, see complete your savings with your credit cards, any other debt that you pay, which generally speaking, our credit cards should be in a category by themselves because they're not related to the home or to the vehicle even though you may have charged something to repair the home that's beside the point. It's not connected to the home per se. So you can put savings and credit cards or personal loans in one category. After that would be entertainments, the hobbies, whatever else you can come across, and your particular life. Now, when you print out your report by category for the previous month, is going to be most likely in alphabetical order. So that's why I talked about going in to your application and using some type of code that you can come up with with one to 10 or A to D whatever. So that you can number them so that they print out together as a group. So you they're all together. And if you can group them together in the same order as your budget, it makes entering the numbers a lot easier. Growing doing a budget, each individual month, you do it too long of a period of time, it's useless, because by the time we figure out what's going wrong, it's gonna be too late, it's already happened, we want to solve the problem before happens. So we need to identify the problem first, which is the budget is going to do that for you. And then we're gonna solve the bar problem by taking some type of action. And that's what it's all about. Just looking at what's going on, and not doing anything, you're not going to solve your problem. So the first big thing, the budget when you're setting it up, when you got your numbers in there the first time and that previous month. If the E total your net income eat Deacon total eat sub account, like housing could be a total auto transportation is a total fee, each one of them they mentioned is a total, add all those totals up for your grand total, take the difference, grand total income less grand total income, if that's a negative number, the first thing that's told you is you're spending more than you make, how you're going to solve that can either increase your income, which is way hard to do. If you're working for somebody, you really don't have control of that. Maybe you can work a few more hours, but how many hours can you work? What can you do to make more income? That's one thing. But the easiest approach and with the faster resolve is where can I reduce my spending? Well, the first thing is make the minimum payment on all your debt. If you didn't do that the previous month, how much extra Did you pay? And then will that make that negative number become a positive number? That's gives you good information. And if it's still a negative number, how much negative is it in you're wondering, how can I spend more than I make? Well, you're using credit cards. That's how you using borrowed money to pay for living expenses. Living expenses is something that you buy in use before the first payment is due. It's gone. And then you had to buy it again. So you haven't paid for the first time and you reorder a replacement, food, groceries, gasoline, things like that. Utilities. You have to get this under control or own Never get your life under control, you will always have a financial mess. And the end result is you won't have what you want, you'll feel like you're working for the banker. And you're not going to be feel like you're working for yourself. And you limit yourself on what you can do in your life, you're gonna, you're gonna limit yourself, where if you're in a job you don't like, and you have all this debt and all these bills and you're living paycheck to paycheck, how can you afford to quit, he can't, you got to feel like you're stuck in that job. So by having this under control, gives you more choice throughout your life. 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 the length of 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 on 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 go out a heads up that say my show notes, thank you very much, a little more about how the mechanics of the budgets gonna work. You have your previous your control numbers, then you got to update your tracking on a regular basis. And every week, when you put in your income, update all your expenditures, you need to update your budget, and you put that in the actual amount. So you do a report from the beginning of your current month to the current day, then the next time you do it the beginning of the current month to the new current day, you're always adding to that dollar amount. So you want to do that and you want to do it and compare it to the previous month. That will tell you if you're spending more than the previous month or if you're spending less, if you get through the current month all the way through. And the difference is a positive number. That means you spent less than your control. So you're doing better, that don't stop there. That is a good start. But maybe you're not maybe some categories, just bet more some categories, you might have spent less. So you want to update your control number or column B, if you feel that it's ever changing, such as your transportation, your price of gasoline, your groceries, the price of groceries, you know those numbers go up and down on a regular basis. So you want to do an average. So you take the previous month, add the current month divided by two, now you have an average update. Your column B is your control numbers with your new average. Over time, you'll come closer and closer to what you're going to be doing on a regular basis. You things like your loan payments should always be the same. Your credit cards could go up or down. Depending if you charge more or paid more down, could go down. They should like your mortgage for your loan for your house should be the same your car loan should be the same. So that some of those numbers may be owing get updated. When you do something like Pay him down, pay them off refinance, buy a new car, so they won't be updated as much. But the things that are variable things like groceries, entertainment, gas, maintenance, all those things change over time. So you're striving to fine and average and over a six month period, you're gonna have a better average and you're going to pick up some of those expenses that you pay on less than a monthly he needs to include insurance payments that are paid quarterly, or semi annually or annually. He needs to include some expenses are paid semi annual, in my case is real estate taxes. my case my insurance is due twice a year. So you over time you're gonna pay make up everything you're paying for it. And you need to always be asking yourself, Do I really need this? Am I paying too much? Can I get a better price? Good? Can I get new estimates on things? Can I do away with it like subscriptions is a good category that you can cut back on. Look for those monthly payments you make on subscriptions that are never ending. And you want to cut as many of those out of your life as possible. Because they're costing a lot of money, maybe you're paying for something you're no longer use, get rid of it. That's what a budget will do for you. It will help you identify where you're spending money, where you may not need to be spending money any longer. And help you achieve your plan whether it's to pay off a credit card, multiple credit cards, multiple debt, get completely debt free. As your debt is going down, your emergency funds should be going up, and your minimum balance should be increasing. Every time you pay something off, you should increase your minimum balance a little bit more, we're starting out with 1000 You pay off credit card a will make a 1200. pay off credit card B make it 1500 pay off credit card, see, make it 1700 18 Pick a number and have a plan, write all this down and tried to stick to it. When you achieve a goal. Check it off. So you know you're moving forward, write your plans down, listed out what you're trying to achieve. set it in motion, stick to it, check off the ones that you've completed. And you see you're making progress. And over time before you know it, you'll have your debt under control. You'll have your personal finances under control, though, you'll have a larger emergency fund. And you'll have a lot less stress in your life. It doesn't matter how much you make. Everybody, whether you're making 20,000 a year, or 300,000 a year, everybody needs to do the same saying having our plan. stick into it. Keeping things up to date, review, review review. Think about don't make any major purchases without consulting your budget. How much can you afford? If you're gonna use some savings to make a down payment? How much of that savings is gonna go away? You're reducing your emergency fund and you really don't want to do that. Everything you have to take in consideration. Plug a number in of what you think your new mortgage is gonna be. What's that? Do to your budget? Put that in your control numbers? What's that do to your budget? Does it make it a negative again, put in the new amount and take off the old one? Or put the increased difference? And that's what I would do? And what's that gonna do. But if you increase the mortgage, I'm assuming you're getting newer, better, bigger, older, home, you're changing something or moving in a different neighborhood. Other things are going to increase to real estate taxes could be more utilities could be more if you're a bigger home, your association dues could be more if you have that. take everything into consideration before you make a major leap. So you want to make sure you really understand what is gonna happen in your life before you make that change, and don't make it if you can't afford it. The same thing goes with buying new automobiles. I personally will only buy a used automobile because I can buy and more car for less money. Let somebody else take a hit on that depreciation. I will buy them used and I keep them a long time. So my cost per year is fairly small. As far as the purchase price goes. Start out with a plan. Once you have that in writing, start with your tracking and then setting up your budget. Review your budget. Keep the budget up to date. You always review and stick to your plan. Check off things that you completed and keep moving forward. You'll be glad you did so