Hello, I'm your host, Mr. Chuck, a retired accountant turn truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination, understanding basics of debt reduction, how to get started at reducing debt, and what are the basic things you need to do. Getting started with an overall plan is a must. Okay, if you've been listening to my episodes, you may be you know, maybe you don't know what my debt reduction plan is. You don't do this until you start tracking all your expenditures and your income from your credit cards, your checking account, and whatever you're using to pay for things. And then set up your monthly budget and keep it up to date. identify things that you can cut back on. And all those type of things, you got to have all that in place before you take the next step. So you have to understand tracking, budgeting, and you have to be willing to do it, he can't take any shortcuts. And my last episode, I talked some stories of what happened to people who tried just to overlook the debt and tried to forget about it, and it came back to bite him in the butt. So we don't want that to happen. So one of the very first things you need to do, to start down this debt reduction journey is to identify all the debt, everybody that you owe money to, and that includes your parents or relatives that loan your money, for whatever reason, only, you know, what caused you to get into this problem. So it's only gonna be up to you to solve the problem. And you can't solve the problem if you're not sure what the problem is. So let's identify what your debt is to start with. So you want to get it all out in front of you, all your credit card statements, all your loan statements, your student loan statements, and kind of categorize them, student loans in one pile, credit cards in another pile, mortgage on your home, your line of credit, and then another pile for your auto loans. So once we get that in front of you, you need to make a list, we need to know what everything is, it's right there in front of you, you have all the information available. Don't just think, Wow, if I just keep paying some extra $10 $20 a month, it's gonna go away over time. While it might be might be 20 years down the road, are you going to be a slave to your debt, or are you going to try to master your debt, less master your debt. And this is what you need to do, identify what it is. So make up a spreadsheet or less, you can do it on pencil and paper, I would do it on a spreadsheet if you got a computer, because then you can rearrange it any way you want by doing the sort command, and you'll be able to get some more useful data out of that. So let's list let's start with our credit cards. Because generally speaking credit cards has the highest rate of interest. And what you need to know is the name of the card to be available to identify who you owe the unpaid balance at the time you're getting started, the minimum payment, the due date of the payment and the interest rate, he needs to know those five things because we have to make the minimum payment on time every month. So that's why you need to know that you need to know the interest rate because down the road, we need to know how we're going to apply or money, which one we want to pay off first versus to which one we want to pay off last. So that's the reason for all that information. So it's who you owe to bounce due at the time that you're getting started. The due date, the minimum payment, the interest rate, I may not have said that in the same way that's generally what you need to have in front of you. So if you do a spreadsheet, he do a is your description and then put everything else across the columns and put the dollar amount and the very last one your balance you know how much you owe. And do that for all your credit cards, all your student loans, all your auto payments, all your mortgages on your house. And if you added up by category and subtotal it by category and get an idea. What's the total debt of your credit card? What's the total debt of your mortgage? What's the total debt of your auto loans? What's the total debt of your student loans, he can subtotal those and have a grand total at the bottom. That's why I like a spreadsheet because you can get so much information. And it's easy to do. If you don't have a spreadsheet app, you can get a free one, I believe Google has one it's free. There's some free ones out there. And for this purpose, they're going to work just fine. So how do we go about how can I prioritize repayment multiple debts, as the article I have from Equifax highlights, interest charges can make carrying multiple debts very expensive. So it's important to know how the prioritize your repayment efforts. Popular strategy for tracking multiple debt payments include prioritizing debts by an interest rate or balance size. Debt consolidation is another common option, I don't recommend debt consolidation, because you're just rearranging it, you're not really reducing your debt. It may come in handy, depending on what the case is, but I assuming that everybody has poor credit, average or below credit, so maybe the A Nellore loan is not an option for you. So that's why I don't talk about it. Once you decided how to prioritize your debt, you can take steps to update your budget and put your plan into action. Freeing up income in your budget may help you pay down debt more quickly. When they're saying free and up income. They're saying reduce your spending and others and don't be paying for things you no longer use no longer need no longer wants. Stay away from those never ending monthly payment deals. And if you can get rid of them, get rid of them. We're only you know what cause you to get in a situation and maybe you went to school, got a master's and you got a lot of student loan debt. Maybe you just went on a spending spree or was unemployed, you lift off your credit cards, so you got a lot of credit card debt, maybe you were bought a home, and that put a strain on your budget and you got behind and other areas they use credit cards or whatever, to keep things up to date. But we got to stop doing that. Because if you're consuming a lot of debt that tells me one thing that you're spending more money than what's that you have coming in on pretty much a monthly basis. From student loans to credit cards, your debts can pile up fast learning to prioritize multiple payments is critical step towards financial security. Why is that important? And should tackle your debt head on by prioritizing your repayment efforts carrying debt can be very expensive. As more credit accounts includes a lot of interest charges expressed as a percentage interest is the price you pay to borrow money. Credit cards, for instance, can have rates as high up to 30%. Even low interest debts as a mortgage and federal student loans can be costly over a long period of time. Having multiple debts owed to different lenders can be also prolong your repayment process, which is typically cost you more in interest. So it's crucial to know how to prioritize your payment to better manage what you owe strategies, prioritizing by interest rate, basically, if you pay your highest interest loan first, and pay that off, and then the next highest over it's gonna be a slower process at the beginning. Because it's gonna take you longer, but you're gonna end up paying less interest. So the less interest you pay, the more principal it gets applied. So it's strategy of everything. It's gonna be actually faster but it's gonna seem slower. This repayment strategy sometimes called the Avalanche Method, prioritize your debts from highest rate to lowest first you pay off the balance, okay, we just talked about and then prioritize by balance size, which you put your debt in order by how much you owe, um, you pay off the lowest balance first so you feel like you're making some advancements in next lowest balance, and so on so forth. But that may not be the best solution. So we have to look at what's the interest rate, what's the balance and try to do a combination of both if you can, so that you want to pay one credit card off and leave it open, don't cancel it. So you have one with a zero balance. And the reason for that down the road, they might make you an offer, we can transfer some other debt onto that card, have zero rate of interest for 1218 months or whatever. And you can use that to your advantage. If you close the account that's gonna hurt your credit rating. And if your credit ratings already bad, you don't want to do that. Because you have less credit available based on your income payment. Identify organize your debts created update of balance, allocate your income according to your debt repayment plan. Finally, use your chosen method APPRISE ties in debt to help allocate your monthly earnings towards repayment. First, you need to cover your necessary expenses, including any required minimum payments for what you owe. Next, earmark a portion of the remaining funds for debt repayment. For example, if you adopted the Avalanche Method, your funds were primary or towards debt with the highest interest rate. Because there's any money left over in your budget, you can use it for savings and discretionary cost. So what they're saying is you create a budget to pay off all your needs first, your L, your minimum payments on all your other debt, all your utilities, all your food, all your gas, everything you have to pay for insurance for the car, whatever it is, you put that in your budget, and that gets paid first, if you have funds available, you apply that extra amount of money to a debt. This is where my strategy is different. I agree with everything until they say take the external money and apply it to debt. Because the first thing you need to do is have an emergency fund. And you need to have a minimum of $1,000 in emergency fund. If you're just getting started, that may take you three months or six months, because you've been out of control spending, and your minimum payments for all your credit cards and everything you owe may be very much and time you pay your mortgage and your utilities and your groceries and your gas and all your minimum payments. That could be 95% of your income, which won't leave you very much. So building that emergency fund could take three months, six months, nine months, they get the minimum 1000 Then you continue doing the same thing until you have your emergency fund up to $4,000. And then you take the excess over the minimum 3000 and ply it to one of the debts based on the method that you chose how to apply it. But the whole time you're building that up, you're making the minimum payments, you're not paying anything extra. And I know it seems like it will take a lot longer to pay down your debt. But what happens in the case where he uses all your available cash, apply it to one debt, and you come up short. You forgot about a bill that comes due quarterly or something happens. He got a flat tire you need new tires on your car. He have no funds available to pay for so what are you going to do? You're going to charge it on a credit card. Remember the rules for reducing debt. Quit using credit rule number one. Number two, make the minimum payments number three, set up an emergency fund. Number four, apply the excess over the emergency fund to a one of your debts, four steps and it repeats over and over and over. It's not that difficult. You have to be focused. You have to be dedicated to wanting to get your financial life under control. If you're not dedicated to getting your financial life under control, that will never ever happen. I did I think what everybody does is what this article says pay off all your bills, apply your extra money to one of your debts until you get it paid off. Well that worked fine for me when my debts were smaller. And I got by but I was always getting behind because I didn't have a significant savings. And then something would happen flat tire car would break down that dental appointment doctor's appointments something would happen where I needed money that I I didn't have because I applied at all of my debt. And now I need to use that credit card to pay for something. And my debt, even though I was trying to reduce it was just growing again. So let's leave the balance the same, let's get that emergency fund build up, something would happen, he would have some money available. So you don't have to increase your credit, your debt, hopefully, you'd have enough to pay for everything. And if you don't, at least you didn't increase your debt as much. So you're starting to get things under control. And that's what this is all about, is getting control of your money, and you control the money and have night your money controlling you. So let's go over the basics. You have to track everything going through your checking account, and all your credit card accounts, no matter what, once you do that, that gives you your basis for creating your first monthly budget, that gives you several numbers that gives you what you're spending at that particular point in time. So now we can look forward and say, We don't want to spend any more than this. And if we can, let's reduce it down some. So we work on creating that first budget, we work on getting through that first monthly budget, keep it up to date, every week, we keep our tracking up to date, we could good reports were consistent on our categories. And we know we identify some things that we no longer use. So we went ahead and canceled them. And we also identify some areas like our cell phone, our streaming TV, or paying for cable TV. Look for ways to reduce your spending. That's the idea of all this, you're not going to get that debt paid down until you reduce your spending in other areas. So you can apply that money to paying off your debt course you can get another job and work a part time job. Or you can change jobs and make more money. If that's the case, do it. I commend you, if you that if that's an option of reducing your income. That's always another good way to go. But a combination of both is a better way. So if you can increase your income and reduce your spending, especially on nests, and necessary things your needs, if you can reduce your needs costs overall, such as getting a different plan for your cell phones doing away with cable TV, reduce your streaming to one or two streaming device services. So you don't want to be spending a lot of money on your TV or your entertainment you want. You don't want to be going out to dinner, at restaurants, every meal, he have to cut back, he got to look for ways to save money and every ticker category, and your housing and your food and your transportation. Everywhere you can cut back you need to cut back I'm not saying that you're gonna be doing without? I'm not saying that you're going to not go on vacations. But if that's the case, how bad do you want to get that that paid off, you can take vacation from work. But that don't mean you have to go out and spend $10,000 on some cruise, or some expensive vacation. You can stay home you can do cheaper alternatives to what you normally do. Look for ways to say money in every particular case. Ask yourself before you buy some Do I really need it? And why do I need it? Can I justify the costs? How long is gonna take me to pay it off? Can I pay cash for it? Or is it something that has to be financed as is going to increase my debt b I don't want to do it. I'm trying to reduce my debt at this time. Maybe I need to put that off until I get my credit cards paid off. Or some other point in time that you can measure whether we all your credit card debts is down to zero or your student loans are all paid off whatever the case, pick a point in time when a certain thing happens before you can make that major purchase or require some type of financing. And be back in one moment was my final thoughts. If you're interested, and the software that I use personally, 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 and 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, that's in my show notes. Thank you very much. So let's go over this, once again. You're just getting started. The filing decided, you have too much debt for whatever reason, and you want to do something about it, but you're not sure what to do. So the first thing you need to do is identify the problem, which is your debt. Get it out in front of you make a list. As I said before, the lenders name the balance at the time you get started. The minimum payment to due date in the interest rate, put it in spreadsheets, that way you can rearrange it and sort it any way you want. And now we identify we have this debt problem, what are you going to do about it? Well, the first thing is you got to take action, if you just say I'm gonna pay$10 Extra and all this, and someday I'll be have a paid off. Well, someday, maybe 25 years down the road, it's gonna hurt you the whole time. Maybe the last five years won't, but definitely is gonna prevent you from doing what you want to do. So let's tackle this problem. Now's the time to get your personal finances under control. So you got to do tracking. If you don't know what tracking is, guy have multiple episodes on tracking, track everything that goes through your checking account and all your credit cards at the very minimum. After you get that done for at least 30 days or go back 30 days and catch up. That's your starting point. For your control center your control budget dollar amounts. As you notice, you hadn't cut back anywhere yet. We're just what happened in the last 30 days. Now let's make that our control numbers and see if we can at least match it or keep under that. And our monthly budget. If you don't know how to do a budget, I have multiple episodes on about budgeting. And the process of doing your monthly budget look for items you're paying for that you no longer use no longer one no longer need. And cancel them. Specially the subscriptions that you have to pay every month, whether it's a gym subscription, or maybe at three prescriptions on anti virus for your computers, counsel to make sure the one that you keep is the most current and the one that you're actually using on your computers. And you were looking for things that we're wasting money on, because that's how you got yourself and this problem. So let's look for things that you're wasting money on. And then we have to take some money once we start to get things under control and put it in a savings account and refer to it as your emergency fund. And your mergency fund needs to be a minimum of $1,000. Then once you have a build up to $1,000, you keep doing the same thing. You're making them. Start with our debt reduction plan. For your quit using credit, you're paying everything from your money that comes in through your checking account from your wages, you're paying for all your needs, all the minimum payments, needs utilities, all your mortgage payments, all your minimum payments on all your debt, plus all your utility bills plus all your food and gas for the car and maintenance for the car. And you're paying that through your checking account. You're no longer using credit to buy things no matter what it is it into that point in time might take you six months, it could take you longer, how bad a shape are you really in. The longer it takes you the worse shape you're in. If it takes you two weeks or a couple pays. You're doing all right. I mean, you're not. You may be you're starting down the road of beginning problems, but you caught it soon enough. But if it takes you six months, maybe nine months or a year, you've been having this problem for quite had a while and it should have been under control a while, go, maybe a year ago, so you wouldn't have been in this situation. And we keep a plan. Now we look at their debt, and we want to figure out which one we're going to pay off first, are we going to pay off the one with the lowest balance? First, I recommend at the very beginning, pay off one with the lowest balance, don't cancel the card, keep it because down the row, they may offer you a balance transfer from another card, where you have zero interest, which can save you some money, so don't cancel it. When we quit using credit, or making the minimum payments on all of our debt, we build up our emergency fund, we build it up, over up to 4000 the amount and access over a minimum which is 1000, we can use that to apply it to debt. The reason we're doing that, while we're building it up, your emergency fund is just getting bigger. So something would happen if you have $3,000 in your emergency fund, have something will happen like you need car tires for your car, you have the money available, you're not increasing debt, you're quit using credit, remember, you're not gonna be able to charge it on a credit card, you want to pay cash, and don't put on a credit card and saying I'm gonna pay it off that you know that amount, at the end of the month, when my bills to transfer the money to a checking account, use your debit card and pay for it, don't even put it on a credit card. That's the idea here. And we just keep repeating this process until we get the first one paid off. And then we after that, we want to start working on highest interest first, pay that one off in May, if it has the highest balance it gonna take you a while. But over the long term, it's gonna save you money because you're gonna pay it off sooner, which means you got to pay less interest, which means you're going to apply more to principal, which then you're gonna have less debt, he just keep doing this over and over. This is the basic of your plan. And you have to understand it, you have to be dedicated, you have to want to do it, he needs to look for ways to reduce your spending everywhere else. Or if you can increase your income, that's even better. If you can do both, that's the best way to go. And over time, you'll get your debt under control. And the more you get paid off the first one, that's going to be a long process, the second one's gonna be a long process, the fifth one's going to be a little bit faster as you go, it's gonna speed up, because you're going to have more available money to put into your emergency fund, your emergency fund is going to build up faster, when that builds up faster, you can apply it to debt, your debts gonna get paid down faster, I recommend that you make the minimum payment first, before you apply your excess amount of money. So if the credit card that you want to make the extra amount of money on, if the minimum payment is due next week, you can pay it a week ahead, make the minimum payment first how your checking account once that shows that's been paid and you don't have to make another payment, apply your excess money over your minimum to that debt at that point in time. And now it'll be all applied to principal which will offset and pay down your balance much faster. So that is stay focus. You got to be committed and you got to be dedicated, and keep doing these things and you'll be glad you did. So