September 3, 2023 • 31 mins
Having and keep a budget up to date has benefits. Tracking will help in this process but putting the number in front to compare what happen is a big factor in getting personal finances in order.
Article Links:
https://www.investopedia.com/financial-edge/1109/6-reasons-why-you-need-a-budget.aspx By Amy Bell
https://www.incharge.org/financial-literacy/budgeting-saving/budgeting-benefits/ By Michael Knisley
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Charles McDonald (00:04):
Hello, I'm your host, Mr. Chuck, I retired
accountant turned truck driver,I reduce my debt in a relatively
short period of time. debtreduction to achieve financial
freedom takes commitment,confidence, determination.
(00:24):
Benefits of a control center.
Having and keeping a budget upto date has benefits. Tracking
will help in this process. Butputting the numbers and front to
compare what is happening is abig factor in getting personal
finances in order. Theimportance of making a budget is
(00:45):
a financial lesson that can't beover emphasized. When you first
go on your financial journey.
Following a budget can help youpractice basic money habits. I
have a link in my show notes totwo articles that I'm going to
refer to so if you're interestedin reading them, go to my my
(01:08):
show notes and click on thelinks. A budget is simply a good
spending plan that takes intoaccount estimated current and
future income and expenses for aspecific future time period.
Usually a year. Wow, that is nota happy absolutely a true
(01:31):
statement that's in the article.
Online, a change all ata budget for the time period is
usually one month. The numbersare not estimated. The numbers
are the most current numbersthat you have available. That's
the reason you're tracking. Youknow how much your take home pay
(01:54):
is every pay period for yourselfand or your spouse? Why would
you estimate that when you knowthe exact number, do not include
any pay raise, you might get sixmonths down the road, because
we're not looking a year ahead,we're looking at one month a
(02:15):
year is way too far. And that'swhere a budget never worked for
me in the past. Because I woulduse my current income, multiply
it by the number of pays and puta yearly amount in there, I
would look at my currentexpenses, multiply it by 12. And
(02:36):
put that in, I would guesstimatewhat my groceries would be, I
would guess a mate what mygasoline or car repairs might
be. And by the time I figured itout, it wasn't working nine
months later, because I'd neverpaid attention to it. Because he
don't even see any trendshappening. Because the numbers
(02:58):
are so big. That takes 910months before he's Oh Alma was
spending in his category, or amonth or spending in that
category. Because it's too farin advance. Gotta look at each
month by itself one monthlooking forward. And that's the
budget column. That's the amountof money that you're going to
(03:21):
say you're going to spend andthat particular month, it's
basically what your mortgagepayment would be. It's basically
what your rent would be. Inknow, you look at utilities, if
you want to get a better averagelook by three months added
together, divided by three, usean average, or six months, the
(03:42):
more you use, the better averageyou're gonna have, the closer
you gonna be to your actualamount. It's a fairy, not too
difficult. When we look at it inshorter periods, it's easier to
control, he can identify aproblem almost immediately, as
(04:03):
soon as that happens, you cantake control of it, and you can
get your finances under control.
That's why you're tracking thattracking is going to give you
the actual numbers you need toput into your control center or
(04:23):
your budget. I call it thecontrol center because that's
where the numbers are rightthere in front of you. You can
see by category, what you thinkyou should have spent the budget
amount and what you actually arespending your actual spending
for the mouth. Now from time totime, it may vary. If you can
(04:44):
justify the reason why you wantover your budget amount. That's
okay. Maybe you underestimatedthe budget amount. Maybe it was
that seasonal thing. Who are youbuy clothes for you children For
whatever reason, maybe they'regoing back to school, maybe it's
Christmas or holidays, whateverthe case, as long as you can
(05:08):
justify it, you're okay becauseit's your finances. And you can
spend your money however youwant. The The reason we're
tracking is one, so we knowwhere the money's gone. And the
reason we have a control centeris to see if we are going over
our projected amounts. That'sthe only thing it's doing is to
(05:33):
help you see what's going on bycategory in a nutshell, because
tracking is all in alphabeticorder. You may be you can look
down there and see oh, thatlooks like a large number. But
what's that compared to lastmonth? Was that it compared to
two months ago, you're not gonnaknow because it's just one
number. And it's one number, acumulative number from the time
(05:57):
you start it to the currentdate. That's why you do reports
by category for a time period,so that you can use that
information to put it in yourcontrol center. So it's easier
to look at fairly simple. Thereare applications out there, one
(06:18):
of them that's fairly good, Idon't use it, they don't pay me
for telling you is you need abudget, why an A B, it does
everything, and you can put yourmoney to work is what they're
calling it. By assigning themoney you have in your checking
account to go to a Pacificcategory, or expense. Maybe you
(06:42):
have rent coming up, you cansign money to your rent
category. So you know you haveenough money available to pay
your rent when it becomes due.
And same thing with utilitiesand all your other expenses.
It's a really good program, yougot to learn how to use it and
may take some time you need abudget is excellent. From what I
(07:04):
can tell they have all kinds ofYouTube videos there to help
you. That's all I have to sayabout that. Your budget is not
estimated future dollar amountsor current dollar amounts. And
it's not for a year. It's actualdollar amounts, or an actual
(07:26):
estimate of your dollar amountsan average of your actual
spending for that category. Fora period of one month, January,
February, March, you do eachmonth by itself. You can keep a
spreadsheet for a whole year. Soyou can go back in December,
(07:47):
what did I spend in this inJune, or January? What was my
electric bill and the winterversus the summer? So you can
look at it. It'll tell you it'llhave the information there.
Budgeting helps keep yourspending and check can make sure
that your savings are on trackfor the future. Definitely, it
can help you achieve your goalsbut you have to have goals. Many
(08:12):
of you that listen to thispodcast, your goal is to pay off
your credit cards, pay down highinterest debt first, and then
pay off next highest entersdebt, then maybe Car Loans then
maybe your mortgage. But why No,you're listening to this because
you have a debt problem. Atracking along with a budget can
(08:37):
help keep your spending undercontrol can help identify
problem areas and can help youachieve the goals of paying off
your debt and all goes together.
Your personal finances is notjust one piece here and there.
(08:58):
It is a combination of thingsthat you put together to work
together to help you achievewhat you want to achieve. A
budget helps you figure out yourlong term goals and work towards
them. If you just driftaimlessly through life cost you
no money at every shiny newobject that happens to catch
your eye. How will you ever saveup enough money to buy a car
(09:21):
have put down a down payment ona house that's keeping your
spending under control keeps youfrom overspending can make
retirement savings easier. Let'ssay you spend your money
responsibly following yourbudget to a tee and never carry
a credit card that debt beyondany due dates. In addition to
(09:42):
spending wisely. Budgeting canhelp make savings more
achievable because if you don'tspend it you are saving it. If
you keep it in your own pocketis called savings and if you
build up emergency fund doeskind of help you for those
(10:04):
unforeseen expenses that may popup from time to time as not if
they're gone too, as a matter ofwhen is gonna happen. Everything
wears out, cars break down,refrigerators, break down,
washing machines break down,whatever anything manmade is
gonna wear out over time, youneed to be prepared to pay for
(10:30):
these things as you go throughlife. And the less credit you
can use, the better off you'regonna be. And that goes for
savings, whether your savings upfor a down payment for a home, a
new car, your children'seducation, or your own
(10:50):
retirement, it doesn't matter.
Now, for those of you who have401k, and your, your retirement
is already coming out yourpaycheck, you don't have to
budget for it, because it'salready gone. We're online
budgeting the money that isdeposited into your checking
account, your net pay check, andwe already covered helps you
(11:13):
prepare for emergencies. And youcan reveal spending habits
definitely, if you say have aaccount for subscriptions, where
you put all your subscriptions,for your streaming for your gym
membership for whatever. And youset your budget to say $200 a
month. And then six monthslater, you're looking at it and
(11:36):
it's $300 a month, whatdo you do? The added more
subscriptions, why you'respending is out of control? Do
you need all those? Maybe beforeyou add one, you remove one, you
cancel one before you add a newone? It's common sense. Think
(11:56):
before you do it. And thatbrings me up something just
recently happened in my lifethat I'm like I like to share
with you. There are a couple ofpeople coming around door to
door on solar panels puttingsolar on your house, oh,
electric bills gone up 28%, it'sgoing to cost you a lot. And
(12:21):
you're going to be paying three$400 a month for electricity and
solar panels so much cheaper.
And you can save 63,000 a yearif you get solar panels not a
year over the life of the solarpanel of 25 years or 30 years, I
don't know. But these estimatesthey were telling me were based
(12:45):
on like the electric bills goingup four point something percent
a year. Well, it may do that andmay go up more than that or may
not go up that much. It's hardto say I don't care what's going
to happen in future might not bearound that far in the future
for it to really matter. What Icare about is today, the next
(13:07):
two or three years lookingforward, how much is gonna cost
me? How much am I paying forelectricity now? What's the
payback period? And how long dothese panels really last? And
how much electricity can theyproduce? Well, it sounded good.
(13:28):
And I thought maybe it might bea good idea. Then I started
looking into it. I looked up youknow, internet is a great thing
for information. And I looked uphow much solar turn is average
throughout the year there's myarea get I looked up and found a
website that told me by stateand city, how many the average
(13:52):
hours of solar you can get. Andit was four and three quarters
hours per day. That's averagethroughout the year, the summer
is gonna be a lot more thewinters could be a lot less, but
the average is four and threequarters per day. Will my panels
that I have up there that I wasplanning on getting what I would
(14:13):
get, would that and for threequarters hours produce enough
lecture electricity to offset myelectric bill. And yes, it
would. so I'm good there. That'snot too bad. That was something
that I was concerned about. Itlooks good. It looks like on the
average, I'm gonna be okay. I'llbe able to produce enough
(14:36):
electricity to offset my billCorsten the first guy was
telling me you build up thesecredits and then once a year, if
you have a credit, they they'llsend you a check. Well, that
sounds good. I did someresearch. And Ohio. Net metering
(14:57):
is what they call it, where themeter If you're using power off
the grid is going in onedirection, if you're putting
power on the grid is going theother direction. And when you're
putting power on there, you'regetting a credit. When you're
using it, you're being charged.
So when you get credits, youhave a credit. And you can use
that against future electricbills. But if you always have a
(15:21):
credit month in and month out,and you never use Power Off The
Grid, you get this bigger andbigger and bigger and bigger and
bigger credit, and they neverpay you for it, you only get the
credit, if you never used acredit, you're never gonna
recover that money back. So theonly way to recover your money
(15:41):
back is to basically switch offyour panels, disconnected from
the grid, use electricity untilyour credit gets close to zero,
and then put your panels backon. So why have the capability
of producing all that power, ifyou're not gonna get any money
out of it, that was somethingthat may be a little negative
(16:03):
sign ha, that's not too great.
No, I'm gonna have a $10 charge,because only part of the biller
don't go away as like a customercharge $10 a month, oh, the
credit would offset that everymonth. So my electric bill would
be zero, then I started lookingat it as an investment, I have
(16:27):
an amount of money it takes topurchase the solar panels,
because I don't want no 25 yearmore loan for solar panels. I
don't want a 10 year loan, theone company, if you got a 25
year loan, it was about 4%interest, but the cost of your
equipment was higher. If you gota 10 year loan, you had in mind
(16:50):
percent interest, but the costof your equipment was lower. I
never figured out thedifference, or the how much
lower I didn't even look at it.
Because it didn't make any senseto me. Because I look at it as
two functions. You're buyingequipment, and you're financing
equipment, just like when youbuy a car and finance a car. So
what is the financing have to dowith the cost of the equipment?
(17:14):
make no sense to me, I justthrew that out and thought
that's crazy. That would be thecash price. Anyway, the same
dollar amount, which is thelower amount, which is good. So
I thought, Okay, I have that inmy savings account, and I'm
getting 5.15% interest. If Ioffset a bill, what would that
(17:36):
rate of return be? So I lookedand figured out my average bill
was about 80 or $90 a month.
That's like 6%. So it's a littlebit more but not a whole lot,
how long it will take me the payoff those panels to break even
(17:58):
per se, you know how many yearsof getting $80 a month to get my
whole investment back to zero,almost 17 years, way too long.
I'm better off having the moneyin a savings account, earning
the 5% where I can get to it anduse it if I need it an emergency
(18:21):
fund per se. And if I need it,it's liquid, and I get it, if I
put it in solar panels on myroof is not liquid, I can't sell
those solar panels. If I do, I'mgoing to take a big loss as adds
value to the home. But for onlyfirst five or six years, then
after that the value adds tohome goes down because the
(18:44):
panels are getting older andmore inefficient and all them
thanks. So as a buyer, they wantnewer panels up on the home
before they buy the home, maybeI'll be able to recover part of
my costs on the sale of a homeand I'm not selling the house.
So that doesn't even come in andthey're hanging out if I sell
the house will be deceased, andmy wife will sell and she has no
(19:07):
clue. But beside and by then Imight get a third or 10% of my
money back from that investment.
So it's not a good thing. So I'mnot gonna do it before for it to
make sense. My utility rate mywhen I'm paying for electricity
has to double or my use has togo up quite a bit. I don't see
(19:32):
it using anymore. I spent mywhole life trying to minimize
the use of electricity. Becausethere's things I don't like to
pay. I don't like payingutilities and I don't like
paying taxes. So I try tominimize it whenever I can.
(19:53):
And I don't want to screw up mybudget and I don't want to get a
real big electric bill and thenall of a sudden my solar panels
quit working or whatever thecase is, and they have to buy it
off the grid and pay out themoney, and they'll just mess
everything up. So by doing myresearch and thinking that all
the different angles of thisinvestment I looked at as an
(20:17):
investment, it doesn't make anysense, the utility, my electric
rate is too low, I don't useenough, therefore is not a good
investment. And I'm not going toget solar panels. That's what
you need to do. Every timeyou're going to make a large
purchase, you need to do yourhomework, and you need to figure
(20:39):
out for yourself if it's worthit. Now buying a car, because
you need a car, buying a housebecause you need someplace to
live is a little bit different.
But you still have to take it atthe same approach. And take a
look at it. Now the reasons youshould budget. And why is it
important? Well, it can help youin budgeting and help you in
emergency because if you getyour spending under control, you
(21:02):
can build up your emergencyfund. And the bigger emergency
fund, the better off you can be,they can help you with your
retirement. If you're selfemployed, and you're gonna have
your own retirement plan, youhave to keep track not only of
your personal expenses, but yourbusiness expenses. And you have
(21:23):
to keep everything undercontrol. So you can pay for your
health insurance. So you can payfor your retirement plan,
because there's nobody elsegonna do it, but you got to take
care of yourself, it can helpfix bad spending habits, it can
identify where you're spendingmoney where he may not want to
be spending it, that could befixing a bad habit. savings is a
(21:46):
habit. Spending is a habit. Ifyou can get the bad habit of
spending too much out of yoursystem and get in the habit of
saving too much you can bebetter off, you can never save
too much. But you can spend toomuch. And it gives you control
(22:07):
your finances ensures that youcan buy what you can afford.
Again, that's a spending relatedthing. It can improve family
life. And it can reduce stress.
Because you know, what you owewhen you owe and how much you
owe and how much you have. Yougot your finances under control.
(22:33):
And you can take everything, andstride without any stress. I'll
be back in one moment with myfinal thoughts. If you're
interested in learning about anonline software that helped
myself get out of debt, it doestracking, budgeting, and keeps
(22:56):
track of all your assets and allyour debt. And even tells you
how much and when to transfermoney into your savings account.
And how much and when totransfer money to your debt and
which debts to pay off in order.
First. It's not cheap. It's aone time payment. But it will
definitely be an investment,something and yourself and an
(23:20):
investment in your personalfinancial life. If you're
interested, send me an email atreduce debt increase
wealth@gmail.com. And I'll sendyou the information about this
online software that workedgreat for me. As you notice, I
(23:41):
didn't mention how to do abudget, I didn't go to any of
the mechanics of how to preparea budget. I'm just talking about
why you need a budget. So let'sthink about if you have an app
such as why nab you need abudget, it's got all that set up
for you. It's got the trackingincluded, it's got budget
(24:05):
amounts, you just got to learnhow to use the app, and it will
do it for you. It's right there.
I recommend your if you're notgoing to pay the money for
something like that is to havethe cheapest tracking app you
can find. I use count about.comIt's less than $10 a year and
(24:32):
not only use it to track myspending and income. Basically
I'm using as a check registerfor my checking my savings, my
credit cards and some investmentaccounts but you don't even have
to do that. If you just do yourchecking, one savings and all
(24:53):
your credit cards and put in allthe details. Every time you
spend money Your time money goesin or out of any account, you
enter that in there, and you doa report by category. For a date
range, the beginning of themonth to the end of the month is
always a good choice. And usethat report to create a separate
(25:20):
budget, either on paper or on aspreadsheet. By Category, the
budget should look like the topto bottom income at the top with
a total expenses. Expensesshould be grouped needs first
names would be housing,transportation, food, savings,
(25:44):
insurance. I never mentionedthat before. But those are your
needs. And then once iseverything else. groceries,
clothing, hobbies, pet care,whatever else you may have, is
once and you got columns, whilethe first column we just have
(26:06):
that's your description. Thesecond column is your budgeted
amount. The third column is theactual amount you're spending
for that month. The fourthcolumn is the difference between
the two, a minus b or b minus c,whatever columns you use, it is
your difference. If thedifference is positive, that
(26:28):
means you've underspent. If itgoes negative, that means you
overspent. And then we have acolumn that we recently added,
call it allocated money. Howmuch money from your checking
account are you gonna use foreach of these different
(26:49):
categories? How much is forhousing, how much is gonna be
for transportation? Have you setaside money, have you give your
money a job, or assign it acategory before you spend it, so
that you know where you canspend your money. That's what
(27:10):
the allocated columns for. Now Ido not have that set up. And
anything I've ever done, it'ssomething new concept that I,
for me, anyway, that I'm justpassing on to my listeners to
try to use. But if you do thefirst four columns, description,
budget, actual difference foreach month, that's a start. If
(27:35):
you want to start signing moneyto different categories, you can
do that, add another column andstart doing it, you only add the
money to that column that youactually have, and your checking
account. And then when you pay abill, you got to take it out,
because you paid it. And thenwhen you add some more in later
(27:58):
in, you put it back in there. Soif you have rent of $800 a
month, you assign $800allocated, you pay your rent,
now your allocated amount goesback to zero. When you add up
the allocated column, it shouldequal the amount of money you
have in your checking account.
available cash to pay bills.
(28:23):
That's kind of how it works.
I've never done it. But that'syou. You need a budget, why and
a B, that's what that app can dofor you. I think it's a great
idea. Maybe it's worth the extramoney to pay for that app to do
that for you. But try doing iton your own. If you can't afford
(28:45):
to, I think it's $15 a month.
I'm not really sure. It's fairlyexpensive. Do a budget. Have a
control center, use yourtracking, tracking, use your
lifeline budget is your controlcenter.
Keep it up to date, update yourtracking every week, update your
(29:08):
budget for the actual dollaramount, every pay period. That
way you can see what's going onwhen you put those numbers in
the actual and you go negativethat means you overspent then
it's one or two things, you'respending too much money in that
category or two, you didn'tbudget enough. That's up to you
(29:29):
to decide and figure out overtime, you should get a close if
you can get it within $10 on allthe categories, your rent and
your mortgage payment and someof these things should be spot
on. month in and month out comesa zero, but then you're gonna
have categories utilities, food,gasoline, repairs, that will be
(29:54):
different. If you're if youdon't use up what you budgeted.
That's good. thing I saidInsurance insurance should be in
the category that it relates to.
And then any other insurancedoes not in any category such as
housing or transportation shouldbe in a category by itself, such
as health insurance, if you'repaying for yourself, such as
(30:18):
disability insurance or whateverother type of insurance there is
out there. Home Insurance shouldbe in housing, car insurance
should be in transportation, Ithink you get the idea and make
savings a need the need to savea money each and every month. If
you can put it in a budget andset aside every pay period.
(30:41):
You'll be pretty good, muchbetter off and you can look at
your spending and try to keepyour spending under control. And
the more you reduce yourspending, the more you can put
into your savings, and you'll beglad you did. So
Hello, I'm your host, Mr. Chuck, I retired
accountant turned truck driver,I reduce my debt in a relatively
short period of time. debtreduction to achieve financial
freedom takes commitment,confidence, determination.
(00:24):
Benefits of a control center.
Having and keeping a budget upto date has benefits. Tracking
will help in this process. Butputting the numbers and front to
compare what is happening is abig factor in getting personal
finances in order. Theimportance of making a budget is
(00:45):
a financial lesson that can't beover emphasized. When you first
go on your financial journey.
Following a budget can help youpractice basic money habits. I
have a link in my show notes totwo articles that I'm going to
refer to so if you're interestedin reading them, go to my my
(01:08):
show notes and click on thelinks. A budget is simply a good
spending plan that takes intoaccount estimated current and
future income and expenses for aspecific future time period.
Usually a year. Wow, that is nota happy absolutely a true
(01:31):
statement that's in the article.
Online, a change all ata budget for the time period is
usually one month. The numbersare not estimated. The numbers
are the most current numbersthat you have available. That's
the reason you're tracking. Youknow how much your take home pay
(01:54):
is every pay period for yourselfand or your spouse? Why would
you estimate that when you knowthe exact number, do not include
any pay raise, you might get sixmonths down the road, because
we're not looking a year ahead,we're looking at one month a
(02:15):
year is way too far. And that'swhere a budget never worked for
me in the past. Because I woulduse my current income, multiply
it by the number of pays and puta yearly amount in there, I
would look at my currentexpenses, multiply it by 12. And
(02:36):
put that in, I would guesstimatewhat my groceries would be, I
would guess a mate what mygasoline or car repairs might
be. And by the time I figured itout, it wasn't working nine
months later, because I'd neverpaid attention to it. Because he
don't even see any trendshappening. Because the numbers
(02:58):
are so big. That takes 910months before he's Oh Alma was
spending in his category, or amonth or spending in that
category. Because it's too farin advance. Gotta look at each
month by itself one monthlooking forward. And that's the
budget column. That's the amountof money that you're going to
(03:21):
say you're going to spend andthat particular month, it's
basically what your mortgagepayment would be. It's basically
what your rent would be. Inknow, you look at utilities, if
you want to get a better averagelook by three months added
together, divided by three, usean average, or six months, the
(03:42):
more you use, the better averageyou're gonna have, the closer
you gonna be to your actualamount. It's a fairy, not too
difficult. When we look at it inshorter periods, it's easier to
control, he can identify aproblem almost immediately, as
(04:03):
soon as that happens, you cantake control of it, and you can
get your finances under control.
That's why you're tracking thattracking is going to give you
the actual numbers you need toput into your control center or
(04:23):
your budget. I call it thecontrol center because that's
where the numbers are rightthere in front of you. You can
see by category, what you thinkyou should have spent the budget
amount and what you actually arespending your actual spending
for the mouth. Now from time totime, it may vary. If you can
(04:44):
justify the reason why you wantover your budget amount. That's
okay. Maybe you underestimatedthe budget amount. Maybe it was
that seasonal thing. Who are youbuy clothes for you children For
whatever reason, maybe they'regoing back to school, maybe it's
Christmas or holidays, whateverthe case, as long as you can
(05:08):
justify it, you're okay becauseit's your finances. And you can
spend your money however youwant. The The reason we're
tracking is one, so we knowwhere the money's gone. And the
reason we have a control centeris to see if we are going over
our projected amounts. That'sthe only thing it's doing is to
(05:33):
help you see what's going on bycategory in a nutshell, because
tracking is all in alphabeticorder. You may be you can look
down there and see oh, thatlooks like a large number. But
what's that compared to lastmonth? Was that it compared to
two months ago, you're not gonnaknow because it's just one
number. And it's one number, acumulative number from the time
(05:57):
you start it to the currentdate. That's why you do reports
by category for a time period,so that you can use that
information to put it in yourcontrol center. So it's easier
to look at fairly simple. Thereare applications out there, one
(06:18):
of them that's fairly good, Idon't use it, they don't pay me
for telling you is you need abudget, why an A B, it does
everything, and you can put yourmoney to work is what they're
calling it. By assigning themoney you have in your checking
account to go to a Pacificcategory, or expense. Maybe you
(06:42):
have rent coming up, you cansign money to your rent
category. So you know you haveenough money available to pay
your rent when it becomes due.
And same thing with utilitiesand all your other expenses.
It's a really good program, yougot to learn how to use it and
may take some time you need abudget is excellent. From what I
(07:04):
can tell they have all kinds ofYouTube videos there to help
you. That's all I have to sayabout that. Your budget is not
estimated future dollar amountsor current dollar amounts. And
it's not for a year. It's actualdollar amounts, or an actual
(07:26):
estimate of your dollar amountsan average of your actual
spending for that category. Fora period of one month, January,
February, March, you do eachmonth by itself. You can keep a
spreadsheet for a whole year. Soyou can go back in December,
(07:47):
what did I spend in this inJune, or January? What was my
electric bill and the winterversus the summer? So you can
look at it. It'll tell you it'llhave the information there.
Budgeting helps keep yourspending and check can make sure
that your savings are on trackfor the future. Definitely, it
can help you achieve your goalsbut you have to have goals. Many
(08:12):
of you that listen to thispodcast, your goal is to pay off
your credit cards, pay down highinterest debt first, and then
pay off next highest entersdebt, then maybe Car Loans then
maybe your mortgage. But why No,you're listening to this because
you have a debt problem. Atracking along with a budget can
(08:37):
help keep your spending undercontrol can help identify
problem areas and can help youachieve the goals of paying off
your debt and all goes together.
Your personal finances is notjust one piece here and there.
(08:58):
It is a combination of thingsthat you put together to work
together to help you achievewhat you want to achieve. A
budget helps you figure out yourlong term goals and work towards
them. If you just driftaimlessly through life cost you
no money at every shiny newobject that happens to catch
your eye. How will you ever saveup enough money to buy a car
(09:21):
have put down a down payment ona house that's keeping your
spending under control keeps youfrom overspending can make
retirement savings easier. Let'ssay you spend your money
responsibly following yourbudget to a tee and never carry
a credit card that debt beyondany due dates. In addition to
(09:42):
spending wisely. Budgeting canhelp make savings more
achievable because if you don'tspend it you are saving it. If
you keep it in your own pocketis called savings and if you
build up emergency fund doeskind of help you for those
(10:04):
unforeseen expenses that may popup from time to time as not if
they're gone too, as a matter ofwhen is gonna happen. Everything
wears out, cars break down,refrigerators, break down,
washing machines break down,whatever anything manmade is
gonna wear out over time, youneed to be prepared to pay for
(10:30):
these things as you go throughlife. And the less credit you
can use, the better off you'regonna be. And that goes for
savings, whether your savings upfor a down payment for a home, a
new car, your children'seducation, or your own
(10:50):
retirement, it doesn't matter.
Now, for those of you who have401k, and your, your retirement
is already coming out yourpaycheck, you don't have to
budget for it, because it'salready gone. We're online
budgeting the money that isdeposited into your checking
account, your net pay check, andwe already covered helps you
(11:13):
prepare for emergencies. And youcan reveal spending habits
definitely, if you say have aaccount for subscriptions, where
you put all your subscriptions,for your streaming for your gym
membership for whatever. And youset your budget to say $200 a
month. And then six monthslater, you're looking at it and
(11:36):
it's $300 a month, whatdo you do? The added more
subscriptions, why you'respending is out of control? Do
you need all those? Maybe beforeyou add one, you remove one, you
cancel one before you add a newone? It's common sense. Think
(11:56):
before you do it. And thatbrings me up something just
recently happened in my lifethat I'm like I like to share
with you. There are a couple ofpeople coming around door to
door on solar panels puttingsolar on your house, oh,
electric bills gone up 28%, it'sgoing to cost you a lot. And
(12:21):
you're going to be paying three$400 a month for electricity and
solar panels so much cheaper.
And you can save 63,000 a yearif you get solar panels not a
year over the life of the solarpanel of 25 years or 30 years, I
don't know. But these estimatesthey were telling me were based
(12:45):
on like the electric bills goingup four point something percent
a year. Well, it may do that andmay go up more than that or may
not go up that much. It's hardto say I don't care what's going
to happen in future might not bearound that far in the future
for it to really matter. What Icare about is today, the next
(13:07):
two or three years lookingforward, how much is gonna cost
me? How much am I paying forelectricity now? What's the
payback period? And how long dothese panels really last? And
how much electricity can theyproduce? Well, it sounded good.
(13:28):
And I thought maybe it might bea good idea. Then I started
looking into it. I looked up youknow, internet is a great thing
for information. And I looked uphow much solar turn is average
throughout the year there's myarea get I looked up and found a
website that told me by stateand city, how many the average
(13:52):
hours of solar you can get. Andit was four and three quarters
hours per day. That's averagethroughout the year, the summer
is gonna be a lot more thewinters could be a lot less, but
the average is four and threequarters per day. Will my panels
that I have up there that I wasplanning on getting what I would
(14:13):
get, would that and for threequarters hours produce enough
lecture electricity to offset myelectric bill. And yes, it
would. so I'm good there. That'snot too bad. That was something
that I was concerned about. Itlooks good. It looks like on the
average, I'm gonna be okay. I'llbe able to produce enough
(14:36):
electricity to offset my billCorsten the first guy was
telling me you build up thesecredits and then once a year, if
you have a credit, they they'llsend you a check. Well, that
sounds good. I did someresearch. And Ohio. Net metering
(14:57):
is what they call it, where themeter If you're using power off
the grid is going in onedirection, if you're putting
power on the grid is going theother direction. And when you're
putting power on there, you'regetting a credit. When you're
using it, you're being charged.
So when you get credits, youhave a credit. And you can use
that against future electricbills. But if you always have a
(15:21):
credit month in and month out,and you never use Power Off The
Grid, you get this bigger andbigger and bigger and bigger and
bigger credit, and they neverpay you for it, you only get the
credit, if you never used acredit, you're never gonna
recover that money back. So theonly way to recover your money
(15:41):
back is to basically switch offyour panels, disconnected from
the grid, use electricity untilyour credit gets close to zero,
and then put your panels backon. So why have the capability
of producing all that power, ifyou're not gonna get any money
out of it, that was somethingthat may be a little negative
(16:03):
sign ha, that's not too great.
No, I'm gonna have a $10 charge,because only part of the biller
don't go away as like a customercharge $10 a month, oh, the
credit would offset that everymonth. So my electric bill would
be zero, then I started lookingat it as an investment, I have
(16:27):
an amount of money it takes topurchase the solar panels,
because I don't want no 25 yearmore loan for solar panels. I
don't want a 10 year loan, theone company, if you got a 25
year loan, it was about 4%interest, but the cost of your
equipment was higher. If you gota 10 year loan, you had in mind
(16:50):
percent interest, but the costof your equipment was lower. I
never figured out thedifference, or the how much
lower I didn't even look at it.
Because it didn't make any senseto me. Because I look at it as
two functions. You're buyingequipment, and you're financing
equipment, just like when youbuy a car and finance a car. So
what is the financing have to dowith the cost of the equipment?
(17:14):
make no sense to me, I justthrew that out and thought
that's crazy. That would be thecash price. Anyway, the same
dollar amount, which is thelower amount, which is good. So
I thought, Okay, I have that inmy savings account, and I'm
getting 5.15% interest. If Ioffset a bill, what would that
(17:36):
rate of return be? So I lookedand figured out my average bill
was about 80 or $90 a month.
That's like 6%. So it's a littlebit more but not a whole lot,
how long it will take me the payoff those panels to break even
(17:58):
per se, you know how many yearsof getting $80 a month to get my
whole investment back to zero,almost 17 years, way too long.
I'm better off having the moneyin a savings account, earning
the 5% where I can get to it anduse it if I need it an emergency
(18:21):
fund per se. And if I need it,it's liquid, and I get it, if I
put it in solar panels on myroof is not liquid, I can't sell
those solar panels. If I do, I'mgoing to take a big loss as adds
value to the home. But for onlyfirst five or six years, then
after that the value adds tohome goes down because the
(18:44):
panels are getting older andmore inefficient and all them
thanks. So as a buyer, they wantnewer panels up on the home
before they buy the home, maybeI'll be able to recover part of
my costs on the sale of a homeand I'm not selling the house.
So that doesn't even come in andthey're hanging out if I sell
the house will be deceased, andmy wife will sell and she has no
(19:07):
clue. But beside and by then Imight get a third or 10% of my
money back from that investment.
So it's not a good thing. So I'mnot gonna do it before for it to
make sense. My utility rate mywhen I'm paying for electricity
has to double or my use has togo up quite a bit. I don't see
(19:32):
it using anymore. I spent mywhole life trying to minimize
the use of electricity. Becausethere's things I don't like to
pay. I don't like payingutilities and I don't like
paying taxes. So I try tominimize it whenever I can.
(19:53):
And I don't want to screw up mybudget and I don't want to get a
real big electric bill and thenall of a sudden my solar panels
quit working or whatever thecase is, and they have to buy it
off the grid and pay out themoney, and they'll just mess
everything up. So by doing myresearch and thinking that all
the different angles of thisinvestment I looked at as an
(20:17):
investment, it doesn't make anysense, the utility, my electric
rate is too low, I don't useenough, therefore is not a good
investment. And I'm not going toget solar panels. That's what
you need to do. Every timeyou're going to make a large
purchase, you need to do yourhomework, and you need to figure
(20:39):
out for yourself if it's worthit. Now buying a car, because
you need a car, buying a housebecause you need someplace to
live is a little bit different.
But you still have to take it atthe same approach. And take a
look at it. Now the reasons youshould budget. And why is it
important? Well, it can help youin budgeting and help you in
emergency because if you getyour spending under control, you
(21:02):
can build up your emergencyfund. And the bigger emergency
fund, the better off you can be,they can help you with your
retirement. If you're selfemployed, and you're gonna have
your own retirement plan, youhave to keep track not only of
your personal expenses, but yourbusiness expenses. And you have
(21:23):
to keep everything undercontrol. So you can pay for your
health insurance. So you can payfor your retirement plan,
because there's nobody elsegonna do it, but you got to take
care of yourself, it can helpfix bad spending habits, it can
identify where you're spendingmoney where he may not want to
be spending it, that could befixing a bad habit. savings is a
(21:46):
habit. Spending is a habit. Ifyou can get the bad habit of
spending too much out of yoursystem and get in the habit of
saving too much you can bebetter off, you can never save
too much. But you can spend toomuch. And it gives you control
(22:07):
your finances ensures that youcan buy what you can afford.
Again, that's a spending relatedthing. It can improve family
life. And it can reduce stress.
Because you know, what you owewhen you owe and how much you
owe and how much you have. Yougot your finances under control.
(22:33):
And you can take everything, andstride without any stress. I'll
be back in one moment with myfinal thoughts. If you're
interested in learning about anonline software that helped
myself get out of debt, it doestracking, budgeting, and keeps
(22:56):
track of all your assets and allyour debt. And even tells you
how much and when to transfermoney into your savings account.
And how much and when totransfer money to your debt and
which debts to pay off in order.
First. It's not cheap. It's aone time payment. But it will
definitely be an investment,something and yourself and an
(23:20):
investment in your personalfinancial life. If you're
interested, send me an email atreduce debt increase
wealth@gmail.com. And I'll sendyou the information about this
online software that workedgreat for me. As you notice, I
(23:41):
didn't mention how to do abudget, I didn't go to any of
the mechanics of how to preparea budget. I'm just talking about
why you need a budget. So let'sthink about if you have an app
such as why nab you need abudget, it's got all that set up
for you. It's got the trackingincluded, it's got budget
(24:05):
amounts, you just got to learnhow to use the app, and it will
do it for you. It's right there.
I recommend your if you're notgoing to pay the money for
something like that is to havethe cheapest tracking app you
can find. I use count about.comIt's less than $10 a year and
(24:32):
not only use it to track myspending and income. Basically
I'm using as a check registerfor my checking my savings, my
credit cards and some investmentaccounts but you don't even have
to do that. If you just do yourchecking, one savings and all
(24:53):
your credit cards and put in allthe details. Every time you
spend money Your time money goesin or out of any account, you
enter that in there, and you doa report by category. For a date
range, the beginning of themonth to the end of the month is
always a good choice. And usethat report to create a separate
(25:20):
budget, either on paper or on aspreadsheet. By Category, the
budget should look like the topto bottom income at the top with
a total expenses. Expensesshould be grouped needs first
names would be housing,transportation, food, savings,
(25:44):
insurance. I never mentionedthat before. But those are your
needs. And then once iseverything else. groceries,
clothing, hobbies, pet care,whatever else you may have, is
once and you got columns, whilethe first column we just have
(26:06):
that's your description. Thesecond column is your budgeted
amount. The third column is theactual amount you're spending
for that month. The fourthcolumn is the difference between
the two, a minus b or b minus c,whatever columns you use, it is
your difference. If thedifference is positive, that
(26:28):
means you've underspent. If itgoes negative, that means you
overspent. And then we have acolumn that we recently added,
call it allocated money. Howmuch money from your checking
account are you gonna use foreach of these different
(26:49):
categories? How much is forhousing, how much is gonna be
for transportation? Have you setaside money, have you give your
money a job, or assign it acategory before you spend it, so
that you know where you canspend your money. That's what
(27:10):
the allocated columns for. Now Ido not have that set up. And
anything I've ever done, it'ssomething new concept that I,
for me, anyway, that I'm justpassing on to my listeners to
try to use. But if you do thefirst four columns, description,
budget, actual difference foreach month, that's a start. If
(27:35):
you want to start signing moneyto different categories, you can
do that, add another column andstart doing it, you only add the
money to that column that youactually have, and your checking
account. And then when you pay abill, you got to take it out,
because you paid it. And thenwhen you add some more in later
(27:58):
in, you put it back in there. Soif you have rent of $800 a
month, you assign $800allocated, you pay your rent,
now your allocated amount goesback to zero. When you add up
the allocated column, it shouldequal the amount of money you
have in your checking account.
available cash to pay bills.
(28:23):
That's kind of how it works.
I've never done it. But that'syou. You need a budget, why and
a B, that's what that app can dofor you. I think it's a great
idea. Maybe it's worth the extramoney to pay for that app to do
that for you. But try doing iton your own. If you can't afford
(28:45):
to, I think it's $15 a month.
I'm not really sure. It's fairlyexpensive. Do a budget. Have a
control center, use yourtracking, tracking, use your
lifeline budget is your controlcenter.
Keep it up to date, update yourtracking every week, update your
(29:08):
budget for the actual dollaramount, every pay period. That
way you can see what's going onwhen you put those numbers in
the actual and you go negativethat means you overspent then
it's one or two things, you'respending too much money in that
category or two, you didn'tbudget enough. That's up to you
(29:29):
to decide and figure out overtime, you should get a close if
you can get it within $10 on allthe categories, your rent and
your mortgage payment and someof these things should be spot
on. month in and month out comesa zero, but then you're gonna
have categories utilities, food,gasoline, repairs, that will be
(29:54):
different. If you're if youdon't use up what you budgeted.
That's good. thing I saidInsurance insurance should be in
the category that it relates to.
And then any other insurancedoes not in any category such as
housing or transportation shouldbe in a category by itself, such
as health insurance, if you'repaying for yourself, such as
(30:18):
disability insurance or whateverother type of insurance there is
out there. Home Insurance shouldbe in housing, car insurance
should be in transportation, Ithink you get the idea and make
savings a need the need to savea money each and every month. If
you can put it in a budget andset aside every pay period.
(30:41):
You'll be pretty good, muchbetter off and you can look at
your spending and try to keepyour spending under control. And
the more you reduce yourspending, the more you can put
into your savings, and you'll beglad you did. So
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