Welcome together, we're gonna explore our personal finances and figure out how to improve them. Whether you're just getting started in life on your finances, or you may already have a home and a car payment and you're struggling to get credit cards under control, or you're getting in a later start in life on saving for retirement, reduce debt increase wealth com is a podcast to educate those to improve personal finances, whether it's eliminating debt, or making smart investments. Mr. Chuck here, this episode on gone to talk about what is personal finance and why you need personal finance. I started this podcast with the intention of helping people figure out how to reduce their debt, most of the debt that people are struggling to pay off our credit cards. If you have a personal financial plan, when you start out in life, you're not going to run into the problems that people experienced today. So while I was trying to pondering what this episode was gonna be about, I came across YouTube, that where people were talking about how they lost all their money. course they never said how they gain all their money, but they were talking about how they lost their money. And it comes down to they didn't have a financial plan. They had no clue what to do when they came into a large sum of money. And they just spend it all they were spending way more than what they should have or they could have been set for life. They ended up speaking rug line because they spent all the money they had didn't save any didn't invest anything didn't plan ahead a just live for today and and then tomorrow they were struggling kind of be the gesta. This What? What does a financial plan look like? Well a financial plan as a comprehensive picture of your current finances, your financial goals and any strategies you set to achieve those goals. Good financial planning should include details about your cash flow, savings, debt, investments, insurance, and any other elements of your financial life. Well, that's in a nutshell that definition of what a financial plan should be and you could probably just google what's the financial plan look like and something to that effect. Federal come up. But what does that mean? We all know you go to work. So you have income. We all know you live somewhere and you got bills to pay. Well, that's your cash flow, money and money out. So what else do you do? Well, though, instead of all 100% of your money going out, you have savings. You have payment on debt. You have investments, which is once your savings are over a certain point, you can then invest money. You have insurance to help. We covered that in an early episode that insurance will help you from a catastrophe keep you from losing things help protect you from financial ruin when a event happens. So that that's what a financial plan or personal finances is really all about. Step one is to write down what your financial goals are. Have this in writing and have it in front of you. Remember in the past episodes I there's three accounts, everybody needs a checking account for the money and money out. That's your cash flow savings account, where you build up your emergency fund and a retirement account, your savings for retirement for mutual retirement goals. If you got those three accounts set up, and you're doing those three things. Generally speaking, you're going to be in fairly good shape and in excess of that, Okay, number two would be starting emerging fun. Number three, Three is pay down your debt or pay off debt. Number four is create a plan to invest. Number five, get the right insurance. Number six, create a plan for retirement, which I think that should be number four, instead of number six, plan for taxes which I have not talked about and create an estate plan. You get all that those things under control. You're not going to have too many worries in life, other than if you would get off your path and go down a different road and I know things in life change sometime between your age 25 and 55. You're going to fall off the path and maybe head down the wrong road. Be the best way to say it. I found an article from the simple dollar calm. I have a link in my show notes 60 simple rules of personal finance. Wow, that seemed like a lot. That's what I thought when I saw that 60 rules, man, but they're simple, but they're 60 we're gonna go over this. I'm not gonna read article if you want it to my show notes. I got the article there, but we're gonna go over the highlights. Number one, spend less than what you earn. This is how you prevent yourself from losing all your money. Always spend less money than what you earn. So if you spend less what you earn, what's going to happen to what you don't spend. It's going to go in your savings. What's your savings, your emergency fund simple number to keep everything as simple as possible. The more credit cards you have, the more chances you have for identity that more chances you have to miss a payment. If you miss a payment that's going to hurt your credit score. Don't ever let your future self take care of your current situation. Don't ever tell yourself that it's okay to make a bad spending decision right now. Because you're earning more money down the road. That's a giant mistake. One you're almost always regret for a long, long time. That's a lot of truth in that don't buy that new car today. If you can't afford it, wait till you can afford it. focus on building an emergency fund which I've always pushed. That's number one thing. Five, focus second on eliminate high interest debt in order to save as much money as possible. You got to be paying out the least amount as possible. So if you focus on eliminate high interest debt, credit cards, then you're going to be able to save more money every month and build up your emergency fund. Focus third on saving for retirement. Buy term life insurance to cover your dependence. And don't let the insurance salesman for you you don't need much life insurance unless you have dependents. Meaning people besides you whose well being directly rely on your income. If you had the pennant, your best term is to get a term life policy one that will pay out enough money to care for your dependents in the event of your early passing. I've covered that in a previous episode. Term Life is cheaper. The younger you are the older you get to kind of get more expensive, that it's a whole lot cheaper. Then a whole life policy. So don't let your insurance salesman trick you and get a whole life policy. Remember, His goal is to get more commissions and a whole life policy is going to pay them a whole lot more commission. Good insurance agents should be working for you and not for themselves. So you need you know, car insurance, your home insurance, your life insurance, maybe a disability insurance. All these plans should be focused based on your age, your income, and your personal situation and that necessary, what's going to make the most money for the salesman or the insurance agent. Number eight, build a budget just for the process of building it right. A budget can be a useful tool in keeping your spending on track. And this you know, I've been preaching Build a budget, what's the best budget apps. And my simple approach is make a list of everything you already spending. And this is the exact same approach in this article, how they you do a budget correctly, you build a budget based on looking at your actual spending over the previous few months. Once you do that you look through is everything in there? Am I still using it? Can How can I reduce any of it and a good example would be your cable TV. If you're paying for your extra $10 or $20 a month for your local channels, go out Buy yourself an antenna a one time expense and do away with that $10 or $20 a month and reduce your cable bill. And it's a pain in the butt because switch back and forth but I do it all the time. I also stream all my TV so it's even less I don't know what I pay, it's fairly cheap $16 for me, maybe $18 a month for the wife because she's got Chinese channels. It's not a whole lot compared to what it could be. Number nine cut the fat from every one of your bills. That's what I've been telling you. If you listen to previous episodes I already talked about this. Every if it's not monthly, its yearly look over what you're paying for and try to reduce things you're not using. Number 10 know how much money you actually take home per hour you devote to work. Figure out how much he earned last year after taxes and then subtract that from all the cost of commuting, professional clothes, work related meals and other expenses you paid out of pocket. then figure out how many hours you work and clothes including those at home. Plus the hour she commuted and attendant others business meetings divide your after expense income by your total hours to get your true alleyway sets how much you actually sell an hour of your time for that's a new approach. I never thought I just looked at net pay you know after taxes and other deductions such as health insurance, but they're saying what's it cost you to commute? What's it cost you for clothes and meals you know eating lunch, you're gonna be surprised you're not making as much as you think you are. Number 11. use that as a comparison point for everything you buy. I find that true alleyways to be an incredible value. Valuable number. I use mine as a comparison for almost everything I buy. Let's say my true wage is $10 an hour. I'm looking to buy at $20 blu ray asked myself where owning this is worth two hours of my life when I could Just rent it. I think in a buying $1,000 television I asked myself is worth 100 hours of my life to have this model when I could have a lesser television instead, it's almost always encouraged me to ask what I'm really spending my life energy to achieve. So he's using his true hourly wage to justify whether or not he needs to buy something, especially large ticket items. And that's the same concept with the 30 day rule. If you're going to go out and buy $1,000 TV, wait 30 days, put the money into a savings account. And then after 30 days, do you still need that TV? Could you do could you get by on a lesser TV, something that costs less $1,000 TV today is would be pretty high end because you can get a really good big dv for around 500 or less. They're getting cheaper. So that may not be a good example number 12 and nor professional stock pickers. If you read you know, online different things and they say buy this, buy this, goodbye, goodbye. Don't pay any attention to that information professional economic forecast too, because they could be gloom and doom and not always right. You know your situation is different than everybody else's. You may be in a job that's recession proof. Or you may not be is your job, pandemic proof? Well, mine is because I never got out of work. I keep working truck driver. If you're a waiter or cook, and your restaurants close, it's not panoramic proof. Everybody's got to eat so it's definitely recession proof. Number 14 set big goals. keep reminding yourself of them. big goals would be like to buy a home for your first time homeowners. Or if you want to start a business, or if you want to retire early, those are examples of setting big goals and remind yourself of them. Now every financial plan, you got a set goals. Whether one of your goals is starting a business, if you know that type of business and you do research before you start that business, you work in that business type of business. You have experience. You have enough money to pay your personal bills for three or six months, plus enough money to set up the business and get started. Maybe you're ready to go. But that would be a big goal 15 This is a good concept I saw this earlier, rent unless your total monthly cost of homeownership as lower than renting. So if your total cost of home rent ownership, which be your mortgage, real estate tax, insurance and maintenance and utilities is less than renting, then you then you should buy a home. If it's more than renting, they're saying you should continue to rent. And if you decide to buy, go in a low end home or lesser expensive home, stay there 567 years and then sell it and move up to either a larger home or different neighborhood or whatever the case may be. That's what I did. I'm glad I did because I built up equity in my first home and I was able to use that for a bigger downpayment on my second home, which I'm still in. So that works out good as far as rent versus ownership. When you rent, you're never going to see your money back again. If you buy a home, you got about an 85 90% chance when you sell the home, you can get all your money back. Now there is a little bit of risk there. If you sell at the wrong time when the markets down, or if you're in the wrong locations, everything. You're not in a good location, you could not maybe not get your money back if you bought in too high risk everything you do in life. That's why being prepared and planning is key to everything you do. 16 by cars based on reliability and fuel efficiency. Oh, that makes sense. buy a car that's reliable, don't break down it's going to save your money. If it's fuel efficient, it's going to lower your gas bill. And now save your money. So you know, look around don't buy what you like. right away you know you don't need a muscle car as a donor horsepower motor that gets eight miles to a gallon when you have going to use it to commute be reasonable drive the speed limit, it gets your better fuel mileage and cost your money and tickets, save your money and tickets. air seal your home number 18. Once you rent a place or buy a home, make sure it's efficient so that your heats not going out the roof. So you want to make sure it's properly insulated in the roof and if you got good windows, you can always use a seal up with plastic. I did that in apartments to keep the air from flowing through and making a cold custom. The airflow in and out of your house if you got leaky Windows is gonna make it cold and hot. In the winter and hot in the summer, so the more you can control that, the better off you're going to be 19 builds strong relationship with your neighbor and neighbors pushing to borrow something from instead of going to the store and buying it. I eat a tool, I got a neighbor next door to me. his motto is why buy it if you can borrow it saves you a lot of money that way. Naturally, you can't borrow a lot more every time on a mow your yard. But a tool such as a hedge trimmer, he has electric hedge trimmer, borrow it a couple times a year that would be acceptable, or a chainsaw or something like that, that you don't use very often, that he may have maybe a louder. Number 20 requests rate reductions on your debt, especially credit card debts. We talked about that in a past yet. I don't know how feasible that is you You can try it. whether or not they'll do it for you is beside the point I would think they would probably prefer not to do it can always do a debt consolidation loan where you borrow money and then pay off all your credit card debt you get lower interest rate doesn't necessarily mean you're going to lower your total amount of dollars of debt. But if you can get your dollars a debt to a lower rate that's going to help you 21 don't necessarily say for your college, your children's college education. That's interesting. Many people worry about to children will pay for colleagues the thing that you can provide just as much help them with being completely financial sucker as they grow older, so they don't have to worry about you as a financial burden. If you do choose to help you can usually tap your retirement to help pay for education, to that's usually not the most fun then Sound idea, it is a possibility. It's never bad to save for college but you should have make other things a priority first. Maybe you can get grandma grandpa to help you with your college savings for the children. What they're saying here, if you are struggling to pay off credit card debt or other debt and you're behind, don't put money aside every month for your children's college education is a good chance they may never go to college. It's hard to say. Nowadays it might be better to send them to a technical school and learn a skill or trait on this and I'm not saying they shouldn't go to college. I'm just saying there's could be other things they could do may do better in life. Number 20 to teach your children about smart personal finance from the day one and be a good example. That's very important. More you children know about money and how it works and how to say, and you give them an allowance and they save part allowance and they can spend part of allowance that's gonna help them in the future from them getting too far in debt, especially on credit card debt. Number 23. Don't touch retirement, if at all possible. Yeah, once you put money into retirement, it doesn't exist until you're 59 and a half or fully retire. There are penalties if you took it out too early 24 invest most of your money in stocks, and hold on no matter what happens. Not sure how to invest your money unless your goal is a short term one less than 10 years until you empty it out. You should have most of your money in stocks because of the long term they tend to offer very good returns. The problem with stocks is they tend to be very volatile. And lots of short term jumps and falls in value, hold on and be patient. Better yet, just don't look at the value of your investment if they're if they're far down the road. So there's that they're talking about retirement invest in stocks, I say mutual funds are better. Mutual Funds invest in a group of stocks within a certain industry, let's say. So that's going to spread your risk out a little bit more. And this is where once you get to this point, you should have a financial advisor to make sure one yet you're diversified and into things that are doing good instead of bad. Because just putting your money in stock, there's a lot of company out there and a lot of different stocks to buy. There's over 20,000 different mutual funds, which ones are good, which ones are bad. That's what the financial advisors that's the first 24 60 simple things to do for your financial plan. The rest of its going to be next week because his episode got way too long. So I broke it down into two episodes. So get 25 through 16 gonna be next week's episode. That's the end of another episode. I hope you found it useful. And if you'd like to share this episode with your friends, please do so. I'm open for any suggestions for improvement, or for information that you'd like to talk about in future episodes. You can go to my Facebook page and leave me a message more than glad to comply. To find my Facebook page go to reduce debt, increase wealth com and click on the Facebook icon to go to my Facebook website.