Hello, I'm your host, Mr. Chuck, I 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. Plan ahead using a budget. Once the budget is set and perfected, then it can be used to plan for a new loan, retirement investing or saving for that new home, paying for a wedding or thinking about another child or even another automobile. What do I mean about set and perfect it? Well, one, you got to be already have a budget set up and using it. Perfect, it just means that you got your monthly numbers, the bills that you pay every month, month in and month out, he got it fairly close, he got it down, maybe every month, he got exactly what you pay. Now there's gonna be some bills such as utilities, that's going to vary from season to season, such as electricity may go up in the summertime, when you're running air conditioning in the spring and fall, it can drop and a winter, it might be this a little bit lower than it would be in the summer. So you need to adjust for those types of fluctuations. You don't have to get it exactly to the penny, you just have to get as close. You got to think of a budget going and cycles. Whether you whether you think of it as a pay cycle, from paycheck to paycheck, and what you need to be paying in that cycle. Or if you think of it from month to month, what is the first bill that you pay every month, that would be the start of your next monthly billing cycle, or budgeting cycle. If you think in those terms, and you break it down into smaller segments, then it's gonna be easier for you to understand. Remember, know and stay on track with your budget. I have a link in my article. It's from the fiscal fit phoenix.com how to budget. And they have a different way of creating a budget on a spreadsheet. They're doing it in columns, and it's if you're interested, you need to take a look at it because it may be if you're struggling on keeping your budget, this may be a way different for you to do a budget and to stay focused on how to keep your budget under control. I offer a Excel spreadsheet, I now have it set it up for a 12 month period. It includes percentages, so and the total page. When you look at your housing, it gives you percentages of your net income gives you percentages of your transportation. And it helps you identify faster, where you may be overspend in money As long as you know what the percentages should be. Remember, your housing costs should be less than 43% of your income. Transportation is like 10 to 12, daily living five to eight, etc. Once you have that in, you can glance at the categories and see a percentage may be too high. He can then look at the detail and see where he may be overspending and then figure out where and how to cut back. Some of you may have already gotten your credit card debt under control and you think you don't need a budget. But you need a budget. Even if you have zero debt, you still need a budget to keep track of where your money is gone. Even if it's going 90% of its going into a savings account. Maybe you have too much money in that savings account and you can transfer some of it to the stock market or other investments so you can earn more. A budget is something you should always need and keep up. That way. You can see trends on what's going up in price. What may be no longer using that you can cancel subscriptions and things like that. Now when I'm talking about plan ahead using a budget, we got gotta remember, there are steps on how to get rid of debt. And the first step one is to stop creating new debt. And that's the hardest part of the whole system. Once you stop creating new debt, you got your budget under control, he can start paying off some credit cards, once the credit cards are gone, then you can focus on maybe automobile loans, line of credit, equity line of credits, and then your first mortgage should be paying off your debt. Based on the interest rate, pay off the highest interest rates first, and work your way down to the lowest interest rate, the budget that you create it, you've done a fairly good job on getting your debt under control. And now you may be thinking I don't need to do a budget. But yes, you do. And why? Because you're still living life, you're still making money, and you're still spending money. So you still need to keep track of how much is coming in, how much is going out, and where it's going. Maybe you paid off your credit cards, maybe you no longer use credit cards, you're paying everything for cash, but you still may be overspending in certain areas. So that will help you keep track of it. If you project your budget ahead, if you're doing a normal spreadsheet, you just would take your say September budget, once September is over. And well say you're in the middle of September, you take your September budget, you take your August budget and copy and paste it for October, November and December. So you're putting your numbers three months ahead. You put in in your income, three months ahead, so you can see what's gonna look like in the future, then you got to think Do I have anything that I pay once a year do in October, November or December? Do I have any quarterly expenses do in those three months? Do I have any birthdays or celebrations or anything coming up, or I need to spend more money than normal while we have Christmas and the holidays? You have Thanksgivings. So you need to adjust those months up some so that you have a better plan for what's coming. Once you get all that done, then you're ready to look at I need to buy a new car, I'm going to trade in my old car. Hopefully I can get enough to pay off the loan, I'm gonna buy a new car and the car I want cost me $50,000. I'm hoping to get $20,000 trade in, and I owe$15,000 on the car. So I'll have a $5,000 down for the new car. How much is the new loan. And if I put that amount of that monthly payment into my budget, at least the difference between what you're currently paying on the car you're going to get rid of, and the new car what this gonna cost. So for an example, you have a car that you get and get rid of, and you have a monthly payment of $350 a month, your new car is going to be $750 a month. So the increase is $400 more a month. So you want to put in another loan at $400 a month this see what that does to your budget? Is your savings going to be significantly reduced? Is anything else going to be reduced? Is the car going to be more efficient to use less gasoline? insurance? Most likely it's gonna go up. So you need to plug a number in for insurance. How much more is that going to cost you? And what's that going to do to your savings rate? Or what's that gonna do with your ability to accelerate the payoffs on your loans, the remaining loans that you still have that you're trying to pay down, maybe it would be better to wait six months before you do it. Maybe you can do it today. Maybe you should wait. But if you plan ahead with your budget, and you project your numbers forward, and you put the differences in your current budget get to see how it's gonna affect you. What's gonna happen Are you gonna get a pay raise within the next six months? What's your average pay raise, put that projection and think of everything that could happen, that will happen in the future. So that you can get a grasp on what that loans gonna do to your budget, which is generally would be your living expenses, and your lifestyle. So by planning ahead and stick into it, you can make a better informed decision on when to buy that automobile is now a good time, maybe I should wait till next year and buy a used one. There's all kinds of scenarios you could do to see how it could turn out. My next I'm going to talk about is this article, fitness. Physical Fitness, Phoenix comm a better way to budget. And that's what's coming up. Next. Before I get into this article, I'm going to do a quick review on how I recommend doing a budget, your budget should be, you look back to what you've been paying for the last month, last three months. If it's something you pay on the regular basis, and it's always the same amount, that's the dollar amount that you use, things like groceries, gasoline, entertainment, that varies every time that you make a purchase, you need to use an average and average over a one month period, or an average over two to three months period. And the idea here is your budget amount should be close to what you're actually gonna do as close as possible to what you're going to do. I always start this way. That way, you know what's going on. If you never started living life yet, and you're still living with your parents, and you don't have a job, and you're getting your very first job, and you're going to go out and rent an apartment. Now you can look at what your income is and how much he should spend for that first apartment, how much you should spend for that automobile, etc. But most people are already living life before they even start a budget. So I go back and look at the actual things and go back at least six months and put everything into that budget that you've paid for in the last six months, and group them together by category. groceries, you can use an average subscriptions use what you actually pay, maybe you have a monthly gym membership, maybe you have monthly prescriptions for streaming, maybe you have multiple streamings, maybe you're paying for cable TV, include it all that way you can see it in front of you. And you need to know what it is the name of it. The category when it's due, what day of the month Do you normally pay it. Same thing with credit cards, get all your credit cards items together and sort them out by either by name, I do it by interest rate, because you'll need to know the name of the credit card, the due date when your payment is due. The opening and closing balance is what I use in my spreadsheet and the rate of interest. And once you get it all together, you want to sort them by the highest interest rate first, because you want to pay off the highest interest rate first, and then work your way down. If you have one of those credit cards with a very low balance, and they can be paid off, pay that one off first. So you have a zero balance on it. And then you start paying off the highest rate of interest. Now to this article, a better way to budget starts out talking about most people don't do it right. Most people have problems with the budget because it's like a corporate way of doing it. The traditional way of budgeting doesn't work because 80% of budgets fail because people are tired of making sticking to a budget at some point in their life. And there's no shortage of helpful templates, which was what I got. Once you get it started, and then it's just a copy and paste from first month to the second month. And I'm talking about the budget budgeted dollar amounts don't guess on what you're going to pay Look back in your checking account, they've got to go online to your checking account and find out the actual dollar amounts you pay. If it's different every time you pay it, use an average. So the first thing you got to do is get organized was which one I'm talking about. Get a list of your reoccurring bills, the amount and the due dates, reoccurring bills are the bills that you pay every month. After that, then you want to list your non reoccurring expenses, and a monthly estimate for each, which is what I just told you. And that would be items such as groceries, gas for the car, maybe repairs, and maintenance on the car, things like that. Now, some of your reoccurring bills should and could include maybe music lessons for your children, maybe gym memberships, and stuff like that. Write down your current balance in your checking account as of today, then list the dates of your upcoming paychecks for the next three months. So what they're doing is projecting out your pay for the next three months, put down the dates of when you get paid. And they're doing all this and a column to create their new budget. So at the beginning, they have the the date of their paycheck, they have the paycheck, how much they have the current balance in the checking account, then they list all the reoccurring expenses that you pay every month, that's gonna fall between that pay period and the next pay period. And then under that they're putting in all the non reoccurring expenses, which would be your groceries or your gasoline or car, then they're taking the amount leftover, and are carrying it up to the next column, which is the next pay period. And they're doing the same thing over and over and over. And they're doing that out three months in advance. Also, even if you use this system, you got to keep thinking, What am I going to be paying from this paycheck to the next paycheck. And that's their cycle, they're doing the budget cycle base from pay period to pay period, the average person does a budget cycle based on month, January, February, February, the march except it's the same concept, instead of looking at a month at a time, they're looking at pay period, if you get paid every week, then they're looking at a weekly, if you get paid every two weeks, then they're looking at a two week period, they get paid twice a month, then they're looking at a 15 day period, and paid monthly than then work on a monthly. And then they say keep in mind is take your cash out once per pay period. So at the beginning when you get paid, and that's basically what I'm doing, I transfer money from my checking account every pay to a second checking account that I use as my cash account. Also keep in mind is if you don't know if your bills vary, and I've talked about this, or this earlier in this episode, it's seasonal, you have some bills that are gonna go higher, and certain times in the year and lower and other times a year. Electric is a good example. Natural gas is a good example. Your natural gas bill may be low from the spring into the fall, and then in the winner could be higher. And I even that out by setting up a budget plan with the utility so that once a year they review my account and they set my monthly payment. And then at the end of the year, they if I have overpaid, my next bill is just a way down. And they review that if I underpaid and then I owe them the difference between my monthly payment and the total balance. Sometimes it's 20 or$30 more than the monthly payment. Sometimes it's right on sometimes I'm overpaid. And then try not to add any expenses or spending once the month begins on how you do that. So just go down through this article and I can explain to you how to create the spreadsheet and how to do it. They got pictures. It doesn't look too awfully hard. And how to be successful is take out cash once a month from pay period to pay period for your day to day spending. overestimate your bills, if you don't know or if your bill fluctuate, always use the highest amount, set goals for your extra money. That should be building up an emergency fund first, and then building up a savings account. Once you have enough savings build up, then you should have a high yield savings account. Extend your budget for at least three months, you need to see this far out to really get a handle on what you're spending and the ebb and flows of your budget. Not every month has the same expenses. So budget and as far out will give you a clearer picture overall than just a month's worth of bills and paychecks. Also, you may have some items you only pay once a year, such as, say homeowners insurance. And maybe you have some items you only paid twice a year, such as real estate taxes my case, I pay him twice a year. Those are the months you need to include those items. And those are the months you need to be looking forward to and knowing what's coming up. So you have the money available to make the payments. So you don't have to take money out of your high yield savings account. Avoiding additional expenses or increase spending a month after the month has begun. We knows fences sometimes crop up by overestimate your expenses and an amount. For all known bills, your surprises should be minimal. And you find your are routinely going over the amounts you set are constantly up and then midway through the month, increase the month. Remember, you're trying to be realistic about your spending. Guess what they're trying to say here is you need to guesstimate in advance everything you're going to be spending for the month. That's why I say look back at your check register, look, go online to your checking account. Look back the last 30 days, write down everything you're paying and make sure it's part of your budget, go back two months do the same thing. He didn't find anything new, go back three months, do the same thing. Did you find anything new. Over time, you're gonna have that perfected over time, you're gonna know that your groceries, you're spending $475 a month. And that's, you know,$480 one month 465, another month, 470 another month, but that falls in that range, and you'll be close. That's the idea we're trying to get across. We're trying to get as close as possible to your actual amount that you're already spending to set up that budget. And then projected budget forward. So you know what's going on. When you project a Ford, is there anything that you're going to be paying in the upcoming months that you didn't pay in in the current month, if you're not sure, if you're looking at October, November, December, go back your checking account, look at what you paid for an October, November December a year ago. If it's a yearly subscription, it's gonna show up, and we'll give you an idea unless you cancelled it, it's gonna show up. Maybe it's something you're no longer using. Maybe you can go in and cancel it before they take the money out of your checking account. Maybe you can save money by doing that. And this is the better way to do a budget. And to keep track is you need to think that there's running in cycles, whether you do it from paycheck to paycheck, which is a start and a good way to do it. Or whether you do it once a month. You build the budget, the actual dollar amounts are build up in your budget as they occur throughout the month. So you already have the totals for the month and your budget. You already know what's going to happen, then the actual amounts as you spent and pay those bills, you put in the actual amounts. And then that's going to tell you if you're on track with your budget, how close your budget estimates are to the actual money you're spending by the end of the month. You should be your actual spending should be less than your budgeted amount, and that's a good thing and you're achieved your budget and you perfected it. And do that month in and month out. Even if you get those credit cards paid off. You still have other debt you need to be looking at. You still need to have a budget Even if you're retired, you need a budget because your income may to drop down drastically. You can plan ahead for when you retire, you can plan ahead for that new car payment that may be coming out that you know, you're going to have to replace your car. How much is that mot long gonna be? How much more than paying insurance? Can you handle it based on your income that you have today, I don't think that your income is going to go up until it goes up. I'll be back. And one moment was my final thoughts. If you listen to this podcast, reduce that increase Well, on an Apple device. Scroll through all the episodes towards the bottom. And you can select write a review, and leave your comments. And you can rate this podcast, I appreciate all feedback. And I thank you for your time in doing so. Planning ahead with your budget is important. No matter what source of your incomes coming from, you got to think of your budget and a cycle from pay period to pay period or whenever your incomes coming in to the next time your incomes coming in. If you plan well enough, and know how much to expect, that's gonna be going out. And even if you have your credit cards under control, and even if you have no loans, you still own the to have a budget, you should be using the budget. Why? So that you can look ahead, plan for the future and avoid a crisis instead of reacting to a crisis. When that happens, you could plan and avoid the crisis altogether. If you would like a half like Excel spreadsheet, go to Facebook and do a search, reduce debt increase well go to instant messenger send me a message, given me your email address. And I will email you the file for Excel. For my my budgeting spreadsheet. It includes the date of when you should be paying things include percentages on your totals to help you identify where you may be over spend the money, as long as you know what the percentages should be, which you can learn over time and helps you stay track up is for a full 12 months. So you can copy and paste your budget dollar amounts once you got them set to three, four months in advance. And then add the items that you're gonna pay in those months that you normally don't pay. And you will have a better idea of how much money you're gonna need. Going forward in time. This will help you make a better decision on if you can afford another car, afford a new car, whether you trade one in or not, and how that's gonna affect your future budget. And then you'll know and make a better decision in decision might be instead of buying a new car, maybe you should buy a used car cuz you can get it at a at a better price. Whatever your decision, it's made in advance and you're going to be better off for doing that.