Reduce Debt Increase Wealth.com welcome and Mr. Chuck here. To get started. I'd like to talk a little bit about myself. I'm a retired accountant 20 plus years being an accountant, doing mostly tax and small business accounting. I sold off my business and became a truck driver because basically I got tired of doing the same thing over and over again. But little did I know driving a truck was especially doing the same thing. The best part about being a truck driver, not only do I make a lot of money, I think that when I turn that key off, I'm done. Being an accountant doesn't work out so much like that. Over the years, I have struggled personally, with keeping my debt under control. There was many factors in this. Whether I was just graduated from college, I had nothing other than Then clothes on my back and a place to live with some fraternity brothers. I had a buy a car, I had to buy stuff, new clothes, suit, whatever, find a job and get started in life. Many of you experienced similar are the same thing. Well, this doesn't come cheaply either. So I had to borrow money to buy a car. I thought I needed a new car. So there was gas prices were up. So I bought a small little Ford Fiesta, I think it was that got great gas mileage, but it had a car payment. Start one of debt problems. Then I wanted to buy a house. Well, back in the 80s when Carter was president, I'm not knocking. I'm just saying savings interest rates you got on your savings were 17; 18% was great. I didn't have any savings. So I didn't help me any. Fortunately, mortgages were 11 to 14% I got lucky I hit a spot where I got a mortgage on my first home 12 and a quarter percent compared to today at under 3%. Well, the only thing you can do when you have to pay so much in interest is buy a lot less home, which is what I did. I bought what I could afford. So I had a car, I had a house. The house needed fixing up. I remodeled the kitchen, remodel the bathroom. I had a two car garage built out back extended at the driveway. And guess what? I had more debt. Some of it on credit cards, some of it on equity line of credit. Now, it just kept piling up. I got to the point when I was in my late 20s or maybe early 30s. I thought, is this worth it? I go to work every day. I get paid every other weeks I worked for the government, I pay all my bills, I have maybe enough money to buy groceries. At this time, even groceries if you bought exactly the same thing each week, it would go up 5, 10 bucks. Inflation was very high. I was like, falling farther and farther behind. Many of you are in the same situation. The only difference was the numbers. My first home was inexpensive compared to what you're paying today. My first car didn't cost all that much compared what we're paying today. It's just a number thing. It's a relative. So I start I need to get this under control. So I start working on my credit card debt. I didn't really know what I was doing. I just you know, I wasn't accounting accounting background from college. I thought well, I'll just, you know, keep track of everything. Keep My bank account reconciled, make sure I know what my how much money I got. When I get a little extra money, I'll apply it to whichever credit card has the highest interest rate try to get paid down as fast as possible. And it basically over time worked and I got my credit cards paid down, I got my, you know, I got enough pay down. I had equity in the house where I was able to value the house one up, and then after five years, I was able to sell it make a big profit. So I paid off all those loans, had a big enough downpayment to move up to a house I'm still in today, and that was 25,28 years ago. This house I've been 28 years ago will be paid off in full with all my debt and the next 12 months or less. I struggled until four years ago. I had three or four credit cards that the balance never got paid off. I had two car loans. I had equity lines. credit. I had my first mortgage. Fortunately, over the years, I kept making more and more money. I was able to refinance the house, shorten up the terms, pay more money and get it paid down. My monthly, you know, I had a 1200 dollar a month, first mortgage. And I finally refinance that when I got enough equity built up, I'm actually I got the loan pay down. I was able to refinance it to a 10 year loan $500 a month. If I have a bad week at work. I have enough money to pay my mortgage. So then I studied online. What's you know, the best way to pay down debt? How did you do it? Do this do that? And it's just like, they all have good ideas. They all are right. Everything I'm going to say in this podcast. I learned somewhere else. I just applied it all together, customized it. So it worked even better you got in debt over time. Just like eating and gaining weight, you gain weight over time. You're not gonna lose it overnight, you're not gonna lose it all. In two months or three months, it's gonna take you time. So if you got three or four credit cards with high balances, you got a car loan, maybe two car loans, maybe a mortgage, maybe a line of credit. You're not going to do it overnight. You're not going to do three easy tips, tricks, and get out debt fast. There is no getting out of debt fast. You'd be lucky to be out of debt, six to eight years. If you apply yourself. You don't have to struggle. You don't have to cut back too much. You just got to be smarter, where your money is gone. So to make that point Why do you need to pay off your debt? Well, a lot of you just want to be debt free. Maybe you want to pay your debt down so you can buy a second vacation home, maybe a cabin in the woods, maybe you want to buy that expensive boat you really don't need. Maybe you want to retire early. There's many, many ways reasons. People want to be debt free, financially secure a lot less conflict in the household. So I'm gonna read to you two articles. One is, if I wait till I'm in my 40s to start saving for retirement, what do I need to do? How much do I need to save? The other article is the reverse. It's what if I start savings from day one, when I first get my first job out of college? How early Can I retire? And what's the problem with that? Here's how much of your salary you need. To save for retirement if you start after age 45 this article I found in the USA Today, written by Christie Beiber. From the Motley Fool, deciding how much to save for retirement can be complicated. One common technique to simplify things is to invest a percentage of your income traditionary financial experts often recommend setting aside 10% of earnings for your later years. But thanks to late lengthening lifespans, and lower projected returns, it's usually better to aim for about 15 to 20% of income. Of course, this recommendation is for people who say throughout their careers, but not everyone does that. In fact, many people get a late start on their retirement savings and don't begin putting aside funds until they're in their mid 40s. If you delay until middle age to start savings, you obviously have far less Time for your money to grow. To compensate, you need to invest more in your retirement accounts. But how much more is required to end up a financially shucker senior. If you need to save a shocking amount if you start until your 40s what you need to save if you wait until 45 is going to be shaped by factors including your goals for retirement, and whether you have other sources of retirement income, such as a pension fund. In general, however, a survey from swab shows that you need to save a whopping 35% of your salary if you don't start putting retirement funds aside until 45. To understand why you have to save so much consider how you'd fare as a retiree. If you're earning the medium salary for workers 45 to 54, you'll have $54,028 in household income, according to the bureau Have labor statistics. If you get a 2% annual raise, you'll find final salary would be about $81,888. If you retire at 67, most experts recommend replacing around 80% of retirement income to maintain your standard of living in retirement. Assuming your Social Security benefits provide you with about 40% of that amount, you need an additional $32,755 in income from savings, you'll end up with about 993,000 saved assuming you kept up your 35% savings rate throughout the rest of your career and earn a 7% rate of return. Assuming withdrew somewhere around 3.5% of your retirement nest egg annually. You should have the funds you need plus a little bit extra. Fortunately, if your contribution rate blow fell below 35% in income, you end up with far too little For example, those who start saving when they're young can often get away with putting aside just 15% of their of annual income. If you start doing that at 45, you end up with just over 425,000. This would provide over only $14,875 in annual income, so you'll be far short of what you need. How can you increase your savings rate? If you wait to start investing for retirement until you're 45, you may have little choice but get read really aggressive about savings. Start by looking for big expenses to cut from your budget. This could mean switching to far less expensive car or a cheaper apartment or house. Increasing your income could also be necessary if you can't cut enough from your budget. If you can't negotiate raises at work. Picking up a side job could be your best bet. As you free up cash from cutting expenses or you earn more contribute the money directly to it. Tax advantaged retirement account, such as a 401k or an IRA. automate your account contributions to ensure your savings enough and increase those contributions every time you get a raise or find new ways to cut your costs until you get hit the central 35% savings rate don't jeopardize your retirement or waiting too long to save. Saving 30% 5% of your salary is really difficult. If you're still young, start saving now so you don't find yourself forced to sacrifice so much later on. Well, it may seem hard to find spare cash, it's a lot easier than if you delay. If you're already in your 40s try to work up a savings a significant percentage of income as soon as possible. So you're prepared for your later years. You still have some time and you can turn things around if you get serious about savings. Just a few notes about that are If you're in a 45 to 54 age range, your full retirement age or F ra as known by Sosa's Kirti won't be until you're 67. So he's retired anytime before that he can retire as early as 62. But you're going to get reduced benefits. And remember, he don't get Medicare until age 65. And if you retired too early, and your spouse never worked or worked very little, and her benefits gonna be based off your earnings, she's gonna get reduced benefits because her retirement date is the same as your retirement date. So now for the next article, is what what's gonna happen if you decide to I want to retire early, like when I'm 40 What do I have to do? And what's the consequences of doing that? Is it possible to retire by 40? Here's what would have to happen by Marie Backman. The Motley Fool. I get all my articles from the USA Today app. These days, a large number of working workers are exiting the workforce extremely early as early as age 40. In fact, retiring at 40 is far from easy, but it is possible. You just need to commit to that goal and make sure the sacrifice to get there is worth it. If your goal is to leave the workforce by age 40, you need to start saving for retirement The moment you start collecting a paycheck. You also need to house your savings strategically to avoid being penalized for tapir and essays prematurely. Here are the there are tax benefits to funding a 401k or IRA and exchange. The IRS wants your money left alone until you're 59 and a half. That's fine for most retirees. But it's not going to work if your goal is to stop working by the time you turn 40. Therefore, think about where you put your money at traditional brokerage account may be your best bet because that way, you get to invest your money to grow it into a larger sum, but you also maintain complete flexibility over your savings. Now let's talk about how much you need to save and invest to make retirement by age 40 possible. First, you have to figure out how much income you need to pay your basic living costs on a yearly basis. You also need to figure out what you'll do with your time once you retire at such a young age, and how much it will cost. When you run these numbers. Keep in mind you need to pay for private health insurance, or otherwise run the risk that comes with not having coverage, a route that's certainly not recommended. It'll be years before Medicare eligibility kicks in. So factor that expense into your budget. Once you determine how much annual income you need, if you want to retire at four You have to save for it. For a regular retirement one that begins in your 60. Saving 15 to 20% of earnings may suffice. For a super early retirement, you may see save 50% of your income or more. But if you're willing to live well below your means throughout your working years, you can manage to sock away quite a large sum. In fact, let's assume you say and invest aggressively between the ages of 22 and 40. So much so that your portfolio delivers an average yearly 8% return on your money. That's just a touch blow the stock markets average. Here's what you stand to accumulate. Note that the figures below are slightly rounded upwards. Savings amount by month 2000 a month and 18 years. Average 8% return you should have 900,000 4000 a month 1.8 million 3000 a month. 1.35 million these not My pain and encouraging pitcher. But there's a couple things to keep in mind 900,000 may be a nice Sunday retire if you're leaving the workforce at age 65. But when you're tired at 40, it could end up being a surprisingly small sum. 1.8 million is a healthier son retired at 40. But doing so requires you to sock away 48,000 a year from your wages. So if you're not a high earner that may be not possible. his retirement age 40 worth the sacrifice clearly is possible to exit the workforce by the time your 40th birthday rolls around. But whether doing so is worth the sacrifice at hand is a different story. Say you do need 1.8 million to retire at 40 and live comfortably and you earn 100,000 a year to do so remain parting with more than half of your post tax salary. Remember, there are no tax breaks associated with a traditional brokerage account. That could mean never taken vacation. Spending little or no money on leisure, forcing yourself to live in a cramped studio apartment. Maybe you're willing to do those things to retire when you want to. And that's totally fine. But if you don't want to go to such a major extreme, consider a compromise. This could involve retiring a bit later in life, but an age is still considered early say 50 or 55. Or could mean switching careers at 40. So you're doing something that pays a lot less but brings you a lot more satisfication there are different options to play around with. So your takeaway here is that while returned by 40 is something that can be done. It may not be the best choice for you. My takeaway on the last article retiring early, first of all you need to have a financial planner. I'm going to say that outright. A trusted financial planner that's a fiduciary is not going to charge you every time he makes a trade who but charges you commission based on the value of your portfolio. second note, if you're going to retire at 40, the article states a good fact that if you put money in a 401k, or IRA or any type of reducing tax savings plan, you cannot take it out to 59 and a half. The article pretty much is saying, don't use those. I'm saying you need to divide up your investments. You need to have some of your money going into a deferred retirement account such as a 401k or an IRA, especially a 401k. If your employer is matching it, you gotta at least do the minimum match 2% 3% whatever it is, or you be given away free money that your employer is willing to pay you. Secondly, if you do have $1.8 million, and you retire at 40 You spent all that money in the next 20 years, because you went overboard for whatever reason. What are you going to do when you hit your 60s? So security's not going to cover it. Unless you have everything paid off, have zero debt, have your house everything and never need to buy anything. So security is not going to be enough. So by reducing your debt, at this particular case, if you start at 20, retire at 40, you cannot incur any debt whatsoever, period. I mean, it's pretty common sense. If you're going to start saving for retirement at 45. You need to have your debt paid down far enough where you can afford to put in 35% or more of your gross income to have a retirement money saved up. So whichever way you go It doesn't really matter. The less debt you have, the better off you're gonna be. So now, I'm gonna go over tip one, tip two, how to get out of debt, what my plan is and how it works. First thing you need and I stated earlier if you were listening and paying attention, I reconciled my bank statement. I knew exactly how much money I had in my checking account pretty much all the time. I knew what my expenses going forward was coming up. I knew my utility bills are going to be paid this pay period. I knew my car payment needs to be paid. I knew two or three credit cards need to be paid between pay period a and pay period be pretty simple. I'm looking forward, not back. You're here. Getting out debt people saying you need A budget. And I agree with that. But my budget is looking forward, not backwards. Don't set a budget. I'm only gonna spend $500 a month and put the money in an envelope. Then when you spent $500 a month you're done. Mmm, that's, that's an arrears. You need to look forward in life. What's coming up? What do I need to pay? What's the minimum I can pay? And how much money I need? And do I have enough in my checking account? If you're paying bank fees for overdrawn? Bad check, bounced checks, whatever you want to call it. If you're paying those fees, you're wasting money. The second thing you need is a savings account. So, as you know, everybody tells you only pay the minimum amount on your debt. Make only the minimum payments What I did was I even set up a budget or monthly payment on my utilities where I pay the same amount for my gas for the home. My electric, I tried to keep everything simple, the same amount every month, I can plan for, if it's gonna be $10 in a summer $500 in a winner, that's too hard to plan for. I rather pay 50 $60 every month no matter what, it's just easier. So think about that. So, one, only pay the minimum on your debt to reconcile your bank account, know how much money you have at all times. Three, have a savings account and put money in there. So if you don't have a savings account, go to your bank, open a savings account. Most of them are $50 Minimum to get started. And note, the Federal ftca only allows you to take six redraws a month from savings. That shouldn't be a problem because we're hoping to put money in there and leave it in there. We're gonna take it out eventually. But we're not going to do it six or six more than six times a month, maybe two or three, but you should be good. Now, let's talk about reconciling the checking. You can go online now you know, I got my checking account online, I can go in I can look I know how much I got. How many other websites you go to how many credit card sites you go to, how many loans you go to, and you have automatic deduction coming out. automatic payment when it's due. I do that all the time. Car Loans. Okay, I'll pay that car loan every month I set it up, I forget about it. credit cards, set up minimum payment when it's due. Okay? Those numbers need to be deducted from your balance. If those numbers are common do and then next pay period range between your last paycheck and your next paycheck. So what you want to try to figure out, I got paid on Friday. I get paid next Friday or two weeks on a Friday. How much money I got last pay, what's everything and is going to come out. also include groceries, gas, going out to restaurants, whatever you do, and those numbers. So take your balance, subtract it all out. Make sure you have at least two $300 a month. minimum balance in your checking account, anything more than that? deposited in your savings. Pretty simple. But now you're gonna ask, well how much I know what my groceries gonna be, go back two or three times last two, three last time he went to the grocery store added up three numbers divided by three, that's an average good three or four times you went to the gas station, headed up divided by three or four, at your average, plug those numbers that's kind of get your clothes. That's why we have a minimum of two or $300 that we never want to go below your checking account. I recommend 300 you could go 500 just to be safe, maybe start at 500 at the beginning and then as you get more precise, you can reduce it down to 300 so that you can get more money in your savings. I know that savings don't pay anything. So I'm not too concerned about that. But our goal here is to build up the savings account. Because anybody you're listening to anybody else is gonna say you need an emergency fund. What's an emergency fund? Emergency Fund is something you have, in case something pops up you're not planning on such as you need new tires for the car, your car breaks down and needs to be repaired because you still got to go to work. So that would be money you say for emergency fund. financial experts say, three months, six months of your expenses, some of them say six months to a year of your income. Doesn't really matter. I say expenses because that's what you're gonna need to pay if something bad happens. Such as one one if you're married and your spouse get laid off, or your income drops for whatever reason, you'll have enough money to cover Without using credit, because you need to stop creating new credit. So let's go over this again, one, make minimum payments on all your credit cards and all your loans to reconcile your checking account, know exactly how much money you have three, project forward what you're going to be spending, any loans coming up between pay period to pay period, credit card payments, whatever, grocery bills, gas, Child Support, Child Care, whatever you're spending money on, projected forward, figure out how much you need to have at $300, add $500 to it. Anything in excess of that you still have leftover, put in your savings. Try to stick to those numbers and we're going forward Your first step goal would be to create an emergency fund, it might take it two or three months. But you're gonna get out of debt. This way. You're gonna always have an emergency fund handy. You're gonna not create any more new debt. And you're gonna knock down the debt that you do have. So with that said, I'm tending to do this podcast once a week to give you updates, tips, facts, whatever. And continue on with my plan on how to reduce debt, increase wealth, be financially shucker and retire or do whatever you want in life. So for now, goodbye and hope you come back. If you liked this podcast, please subscribe to it. Tell friends and family Goodbye Transcribed by https://otter.ai