October 6, 2024 • 32 mins
Create and maintain a budget by using tracking app reports. This is the easiest and most accurate way to do a budget.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Charles McDonald (00:03):
Chuck, hello, I'm your host. Mr. Chuck, a
retired accountant turned truckdriver. I reduced my debt in a
relatively short period of time.
Debt reduction to achievefinancial freedom takes
commitment, confidence,determination, budget Made
Simple, create and maintain abudget by using tracking app
(00:25):
reports. This is the easiest andmost accurate way to do a budget
and to maintain a budget beforewe get into the details on
setting up a budget. What is abudget? A budget is a plan you
write down to decide how youspend your money each month. A
(00:46):
budget helps you make sure youhave enough money every month.
Without a budget, you might runout of money before your next
paycheck. A budget shows you howmuch money you make, how much
money you spend. Why I do abudget? A budget helps you
decide what you must spend yourmoney on. If you can spend less
(01:08):
money on some things and moremoney on other things, how to
prioritize your spending, whereyour money needs to go first
before you spend it on one orfun stuff. For example, your
budget might show you spend $100on clothes every month. You
(01:32):
might decide you spend $50 onclothes you can use the rest of
the money to pay bills or savefor something else. Why should I
try to say money? You might needmoney for emergency you might
also need to buy something moreexpensive, like a car. Saving
money might help you buy a car,put a security deposit on an
(01:54):
apartment or pay for somethingexpensive. Okay, that is the
basics of a budget. A budgetgives you your information. It
tells you how much money youhave coming in and how much
money is going out. It helps youprioritize where your spending
needs to go, first, second,third. It just helps you in your
(02:19):
personal life and your personalfinancial life. So what do you
need to know in order to do abudget? To start a budget by
gathering your bills and paystubs, and this is where I say
you use your tracking app.
(02:40):
That's why you started doingtracking of everything going
through your checking account,your credit cards and everything
else. And if you've done thatfor a minimum of 30 days, you
have all the information youneed to get your first budget
started or to get your budgetupdated every in each month,
(03:05):
because this is a never endingprocess. You should be doing the
budget month in a month timeperiod. That's why you need a
month worth of information.
Every month is not going to beexactly the same. There might be
some bills you pay once aquarter, every three months.
There may be some bills you payonce a year, maybe twice a year.
(03:27):
So as you go through this foryour first year, you're always
going to be updating, changingand perfecting your budget
dollar amounts, and that's whatyou need to be aware of as you
go through this process, youshould be identifying things you
(03:47):
no longer use or need andcanceling or doing away with it.
Why are you paying for thosethings you no longer need?
Subscriptions? Most likely I'mtalking about, and it's gonna
help you see how much you'respending in each category, and
you can decide, is that too muchor not enough. Can you afford to
(04:10):
spend more in on entertainment,or do you need to cut, cut back
on entertainment so you can payyour housing, transportation,
food or other needs that youhave. Needs are thing that you
absolutely have to pay each andevery month. It's housing,
(04:31):
transportation, food, clothing,maybe some health insurance, and
should be some setting moneyaside for savings, savings for
setting up an emergency fund andbuilding up an emergency fund so
if something bad happens, youhave some money available to pay
for whatever it is. That way,you're not always relying on
(04:56):
that credit card and you're not.
Always going deeper into debt.
The goal here is to get yourpersonal finances under control,
to help you pay off your creditcards, to pay down your debt in
a orderly and timely manner. Sowhere you need to get started in
(05:17):
this article, I'm referring toit says, Write down your
expenses and expenses money youspend, write down how much money
you make. That's called income.
Subtract your expenses from themoney you make. So as you set up
a budget, your income is at thetop. If you're doing a
(05:38):
spreadsheet, this all should bein a spreadsheet, whether you're
doing it on a piece of paper ordoing it on a computer, I will
recommend a computer, becauseyou can sort it, you can
rearrange it once you get it inthere, and you can perfect it,
and it does all the math forYou, so there's no worries about
(06:00):
getting the math incorrect. Itdoes it for you, and you don't
have to worry about that. So atthe top, the headings going
across from left to right, thefirst column A should be
description and all of whatyou're doing. Column B should be
your budgeted amount or controlAmount column C should be the
(06:25):
actual. That's it. We're doingthis on a monthly basis. So the
control budget amount, orcontrol amount is what the
dollar amount that you set basedon the previous month. The
actual is the actual amount thatyou're spending in the current
month, then the difference isthe difference between the two,
(06:46):
and then the very right columnis a percentage. What percent of
this expense to your net incomeare you spending? Is it 50% of
your take home pay, or is it 5%that's going to be useful
information? As you build thisinformation up, and you get more
(07:09):
involved and more familiar withwhat going on in your personal
financial life, I assume thateverybody knows you got to pay
rent. You got maybe carpayments, you know, you get
utility payments. You know, youput gas in the car and you buy
food and you go out and havesome entertainment. How much
money do you have left? Are youstruggling paycheck to paycheck?
(07:32):
Are bills surprising you? Areyou coming up and the utility
bills doing you don't haveenough money to pay it, so you
put it off. Those are the thingswe're trying to control here,
and the more you can get yourpersonal finances under control,
the less of those type of thingsthat's gonna happen. You're
gonna know when your bills arecoming due, and you're gonna
(07:53):
know you have enough money topay them, and there's not gonna
be a struggle. And you're gonnaknow that, like I can put $20 a
month in my savings and set itaside and start the emergency
fund, no matter how small it is,you need to start doing it,
because the sooner you do it andthe more often you can do it,
(08:15):
the quicker it's gonna build up,and the better off you're gonna
be Now, if you've been followingmy podcast and you've been doing
your tracking for at least 30days, you go into your tracking
app and you do a report bycategory from the first day of
the previous month to The lastday of the previous month and
(08:40):
print out a report. If you didnot go in and rearrange and
organize your accounts, they'regoing to come out alpha,
alphabetically order,alphabetical order. So one of
the things you can do to startwith is print that off, and you
need to go line by line andidentify what category you're
(09:03):
going to put this in for yourbudget. Your budget is set up in
categories, and within thecategories you have the detail.
The detail is right there onthat report you're looking at
each line item, there is adetail for a particular
category. So let's start withhousing. The heading for housing
(09:26):
is housing. That's the mainaccount under that is a sub
account, and all the subaccounts are going to be your
mortgage payment, then you canhave a sub account called
utilities, and then a subaccount under Utilities to list
each individual utility companyyou pay, natural gas, electric,
(09:51):
cell phone, telephone, internet,water and. Or trash. HOA funds,
whatever you pay that youconsider utility. As you notice,
I put cell phone under housingand utilities. And the reason I
(10:11):
do that is because once upon atime, back in the olden days,
the phone was physicallyconnected to the house, and you
couldn't take it with you, so itwas part of your home utilities,
and I'm just leaving it in thatcategory. Cell phone should be
under your home housing andunder Utilities also, okay, we
(10:34):
have mortgage, we haveutilities, and then sub
accounts, all the details. Nowyour mortgage is going to be
your mortgage payment. If youhave an escrow with your
mortgage company, you're alsopaying the mortgage, you're
paying the insurance, and you'repaying the real estate taxes
every month, and then themortgage company sends that in
(10:59):
when it's due for you. So youjust need to have mortgage if
you don't have an escrow. Nowyou need to break that out
mortgage. That's just themortgage payment, real estate
taxes, home insurance, becauseyou're going to pay those things
yourself. You might havemaintenance. Maybe you can put a
(11:23):
category in there forrenovations. It's up to you, but
that's pretty much a mortgage,real estate, tax, insurance and
utilities and all the detail ofthe insurance, the utilities, is
your housing, yourtransportation is your auto a
you work on. That's yourtransportation is the main
(11:48):
heading. Then a subheading wouldbe, if you have two automobiles,
you have auto A, you can put themake a model, whatever. And then
under that auto A, you put thepayment the gas and repairs and
maintenance, which include oilchange, and you'd put auto B,
put the payment, you know, loanpayment, whatever the loan
(12:13):
company is, gasoline, repairsand maintenance, that would be
your transportation under foodis your general heading or your
main category, and then youwould have groceries, dining
out, delivery, however you getyour food. So you need to break
(12:33):
it out by how you get it. Go toa grocery store and buy it. You
go to a restaurant and eat out.
Or do you go to a restauranttake takeout? Maybe you can make
that takeout category. Or do youhave it delivered to you by
using a service? You can havethat delivery, food delivery. If
(12:55):
you have food delivery from thegroceries, you maybe break that
down. The reason you're going tobreak all these out by how
you're getting your food is, andyou want to look at each
category and how much you'respending in that category,
because there's a area here wecan save some money in the
future, but we got to break itdown so we can See where the
(13:18):
money is going. Then we havesavings or credit cards and
savings, this is where you listall your credit card payments,
each individual credit card thatyou owe and you pay you want to
put here and you want putsavings, because we want to
(13:39):
budget a number for how muchyou're going to set aside every
month for savings. At thebeginning, you leave that blank
because you don't know if you'vebeen paycheck to paycheck, you
probably think, well, I can'tsave nothing. I don't have any
money. But down the road, we'regoing to make it so you do have
(13:59):
some money, so that you can puta number there. So that's the
idea, and then you can haveanother coring that those are
all your needs that you have topay. Maybe there's another
category. Could be insurance,insurance for your home, goes in
home, or goes in housing.
Insurance for your automobilesgo each individual automobile
(14:22):
insurance for your health you'repaying through work. If you're
paying through work, you don'thave to worry about it because
it's already out of yourpaycheck. You've already paid
it. If you're paying insuranceon your own, then we need to
have an insurance category forhealth insurance, disability
(14:43):
insurance, whatever other typesof life insurance, what other
other types of insurance thatyou may have, that you think you
need then after that is youronce and then be entertained.
Payment, hobbies, whatever elseyou can think of. If you have
children, some of your needsmight be daycare. You need a
(15:07):
category for that. I don't know.
It's up to you to break out whatyour needs really are versus
what you once are. I don't wantto tell you, because it's
different for everybody. That'sjust the basic to get you
started. So at the top you'regoing to put your income, so you
(15:30):
got your general headings,description control, amount or
budget, amount, actualdifference, percentage. And then
you're going to put down ColumnA your description, income from
yourself. If you're have aspouse significant other, put
their income in. Now this is,would be from your work. If you
(15:54):
have a two jobs, both jobs, allyour income. If you have a hobby
that you occasionally hand alittle bit of income. Don't put
that in there. Don't worry aboutit. Now we'll put that as other
and you can plug that number inthat particular month, but if
(16:14):
it's small, say, less than 100bucks, less than $400 don't
worry about it. And you want tototal your income, and that's
your budget amount. And as youget paid throughout the month,
on the actual month, you plugthese numbers. You plugged in
what you got paid, and you keepa running total. So if you get
(16:35):
paid every week after week one,you put in your net pay after
week two, you add your secondnet pay. Week Three, you add
your third net pay, so it's thetotal of your all your pays
added together as you gothroughout the
month, your expenses, and thatshould be shown through your app
(16:58):
as you enter your paycheck inyour app, it should give you the
total amount when you print outthe report, because you're going
to do it from the first to thethird of the previous month. And
then once we get to the currentmonth, you're going to go from
the first of the current monthto the current date, usually, if
(17:20):
you get paid every week to thefirst pay period, and you're
going to put all those numbersin your budget under the actual
and then the next week, you'regoing to go from the first in
the month to the second payperiod date, and you're going to
update all those numbers becausethat report that You're getting
(17:40):
from your tracking app is givingyou the totals. You just got to
plug numbers, and then thespreadsheet on that you're doing
your budget on is going to doall the totaling and all the
math for you. It's going tofigure out the differences, you
know, when you set it up, you'regoing to take the difference,
it's, you know, B minus C.
You're going to total down yourtotal income. You're going to
(18:05):
total each category. You'regoing to total eat like you
don't have to total mortgagepayments with one number, but
your utilities, you want tosubtotal all utilities. So, you
know, one number, how much isall my utilities added up? You
can look and have one numberyou're looking at, and then you
(18:25):
can have total for totalhousing. So when you do your
formulas, be careful whichnumbers you're picking up. Don't
pick up all the individual oneson their utilities and then pick
up this the total, you know, thesum of all of them, because
they'll double it for you. Sojust be careful. And you go
(18:48):
down, and then at the verybottom of your budget
spreadsheet, you have totalexpenses. And then under that
you have income minus totalexpense and a number, if that
number is negative, and that'syour net, you know, net income,
net money saved or lost orspent, if that's a negative
(19:12):
number, that means you'respending more than what you
make. And that's what we'retrying to stop. You're trying to
solve that problem, and you'rethinking, how'd you do that?
Well, part of it could be thatyou had some money in your
checking account, and there wasa bill that was due this month
that you used money they alreadyhad, and then that same bill
(19:36):
came due again, and you paid ittwice in the same month, that's
a possibility. It could just bethat you are spending a lot on
your credit cards every monthand then making some payments on
those credit cards. That kind ofdoesn't also if you're doing my
(19:56):
debt reduction. Some plan. Youknow that the first thing going
to do is quit using credityou're going to quit using those
credit cards. So that's going togo away over time as you get
that under control. You knowthat you're going to make the
minimum payment on all yourcredit cards, and you know that
you're going to put money intoyour emergency fund, and you're
(20:20):
gonna have a minimum of 1000 inyour emergency fund, and you're
gonna build up to that to amaximum of 3000 or 4000 your
maximum. And then you're gonnatake the difference between the
maximum and the minimum, thesay, the 4000 and 1000 3000 and
you're going to apply that toone of your debts, or however
(20:45):
you want to start paying downyour debt, that's my debt
reduction plan. But in order todo that, you have to have your
budget. You have to be trackingeverything to do the budget, and
you have to be doing a budget.
They get your spending undercontrol, so you can build up
(21:06):
that emergency fund so you canapply the money to one of
Unknown (21:11):
those debts. It's all related this whole
Charles McDonald (21:15):
plan. This is a three step process. You got to
start tracking, you got to havea budget, and then you have to
have a debt reduction plan. Youhave to have a plan that you
follow each and every day so youknow what you're doing and why
you're doing it. So you're onceyou get your budget and you
(21:36):
know, so once you get throughthat first month, that budget
amount, the total that would beyour net income for the month.
That's the number you use to dothe percentage. What percent of
your net income are you spendingon housing? 35 to 40% is where
it should be. If you're at 60%that's why you're living
(22:00):
paycheck to paycheck, you'respending too much on your house.
You've already over committed tothat. If that's all on because
of the mortgage, real estate,tax insurance, as you have an
escrow, you're really hurting,really over committed to your
housing. So you have to cut backsomeplace else if you overspend
(22:22):
in one category, you have toadjust other categories because
you don't have the money tospend it like you want or or do
one in the past, this is thebasis of why you Want to track
all everything that's going inand out of your household. Have
(22:44):
a budget. Know everything thatyou pay, what you pay, how much
you pay, and when you pay it,and over time, you'll get all
this under control. As you dothis, you should be identifying
things you no longer need, wantor use and get rid of it, cut
back so that you can increasethat dollar amount you're
(23:07):
putting into your savings.
Because the more you can say,the faster, all the faster
you'll be able to pay off yourdebt. I'll be back in one moment
with my final thoughts are thearticles I refer to in my
episodes. Have a link in my shownotes. If you're interested in
checking out the software that Ipersonally use to get my data
(23:30):
control. It's in my show notesunder shop financial you need to
copy and paste the link andit'll take you to the website.
Any questions, you can justcontact me through that
particular website. If you valuethis podcast and would like to
make a contribution, I had acontribution link in my show
(23:53):
notes. Also get whatever youfeel is appropriate for the
information I am providing. Ithank everyone for listening to
my podcast as an overview, yourbudget at the top shows all your
income by week, however you wantto set it up by individual. You
(24:15):
have a description, you haveyour control or budget amount,
and that's based on the previousmonth. You have your actual
amount, which is the currentmonth. You have the difference
between the two, which is aformula in there, and you have a
percent of your net income,which you have a formula in
(24:35):
there. So if you put all yourincome in there, when you total
the income, your budgeted amounttotal should be your net income
for the month. That's the numberyou use to create your for you
do the formula for yourpercentage, what percent of your
total housing is based on yournet income, even the. When you
(24:58):
go to borrow the money, the loanis based on your gross income,
then let's look at your netincome, because net income is
what you really have to workwith. They've already took the
money out for taxes, hopefullythey're all paid. They're
already took the money out,maybe for your health insurance,
maybe for your child support, orwhatever you have to pay those
(25:20):
things that's automaticallydeducted from your checking
account you're not have toaccount for and your budget.
We're only accounting for thosethings that you have to pay with
the money you have available,and that's your net income. So
what percent of that net incomeis your housing cost? What
(25:42):
percent of your net income isyour transportation? What
percent of your net income isyour food? Housing should be
around 25 to 35% transportation,15 to 20% food, five to 10%
you can look up thesepercentages, just go online and
(26:03):
do a search, and you can findpercent of income categories, of
budget, personal financecategories, percentages. Type in
something like to that line, andyou'll be able to find that I'm
just gonna review, since we'reat the budget and it's fresh in
your mind, we're as you go down,the first month is the previous
(26:28):
month for your control. Thenyour current month is for your
putting in your actual you do areport. Now, I mentioned this
before, but to get started, youdo report the previous month,
from the beginning of the monthto the end of the month. Then
once you're in the currentmonth, you go from the beginning
of the current month to thecurrent date. If you give if
(26:50):
you're going to do this by payperiod to pay period, if you get
paid weekly, then you need to dothis weekly. If you get paid
every other week, then you needto do it every other week. I
recommend you do it weekly. Picka date a time, like every
Saturday morning when you'redrinking your coffee, do that
(27:11):
report and update it. Now, Istarted to say earlier that when
you're looking at that report,you need to go through at the
beginning, because it's going tobe in alphabetical order and
category H for housing and outto the side somewhere, either to
the left or the right, whicheveryou prefer. Put an h for
(27:33):
housing, T for transportation, Ffor food, C for clothing, D for
debt, I for insurance, E forentertainment. And categorize
each and all these categories asyou go, because we need to set
up all these categories in theseparticular groups. So once you
(27:56):
go through there and put H'snext to everything, and you're
in housing, you're going to beputting it in under housing in
alphabetical order. Now,utilities should be used, should
be at the bottom, but the namethe utility companies may not,
you know, may start with an A,so it'd be the top, but you want
(28:17):
to put it under Utilities,because you want to subtotal all
your utilities. So you know onenumber. What's your total
utilities? All you know, gas,electric, food, not food, but
water and sewer, internet, cellphone, whatever you all these
things or utilities. You want toknow one number. You want to be
(28:41):
able to know one number. Butwhen you're setting up the
budget on a spreadsheet, you'regoing to put each one of those
in there individually, becausewe want to total them. We want
to know the total of yourutilities. So once you go
through that HHA, and then youput that on our housing, and
then you go throughtransportation, you put all
(29:01):
those in and check them off asyou go down the line. You put
that way, you know if you misssomething. And then when you get
done, you can look at your list,and if you get check marks by
every one of them, you knowthey're in order. You know that
you didn't miss anything. Nowkeep that for your sample for
the next time you do it so youknow, you know where you put
(29:24):
them, if you want to, you can gointo your app, your tracking
app, come up with this system sothat you can code those. So all
the ones that are coded H, yougo in and you somehow code them
H so they print out together, sothey're all together. And when
(29:47):
you go to enter them the nexttime, they're all going to be in
order for you. And that's goingto make it easier. So you need
to come up with some type ofcoding system that you. You can
do to put them in order by thecategories that you want them to
come out so it matches budget. Ihope that makes sense to you.
(30:10):
You can kind of not tell you,because I come up with ways to
do it, and then it's not thebest, and it doesn't always
work, and then I gotta re messwith it. You know, you know, all
the housing is h, and all t istransportation, and all food is
F. And so if you do h1, h2, h3,h4, and then put the name like,
(30:34):
under your category, like, sayit's a mortgage, mortgage
payment, or the mortgage companyis saying you can code at h1 and
then util, the first utility ish2 h3 but that's going to be
under Utilities, but we want toput them in some type of water,
so I'll leave that up to you.
That's just a generalrecommendation to make your life
(30:57):
doing your budget faster andeasier, and would be able to
look at the net result and haveuseful information. That's what
we're going for, and at thistime, that's all I have to say.
This is my last episode. Thereason is, I figured I covered
(31:18):
everything as much as I can. I'mgetting bored with doing the
same things over and over. Ijust think it's time to stop.
But my episodes are still gonnabe out there, probably for at
least a year. Thanks everybodyfor listening. If you want
anything different, send me anemail if you got the information
(31:41):
in my footnotes, my show notes,you can contact me if you want a
particular subject covered.
Maybe I'll do it. Maybe I won't.
This is the last weekly podcastthat I'm on to do on this
subject. You.
Chuck, hello, I'm your host. Mr. Chuck, a
retired accountant turned truckdriver. I reduced my debt in a
relatively short period of time.
Debt reduction to achievefinancial freedom takes
commitment, confidence,determination, budget Made
Simple, create and maintain abudget by using tracking app
(00:25):
reports. This is the easiest andmost accurate way to do a budget
and to maintain a budget beforewe get into the details on
setting up a budget. What is abudget? A budget is a plan you
write down to decide how youspend your money each month. A
(00:46):
budget helps you make sure youhave enough money every month.
Without a budget, you might runout of money before your next
paycheck. A budget shows you howmuch money you make, how much
money you spend. Why I do abudget? A budget helps you
decide what you must spend yourmoney on. If you can spend less
(01:08):
money on some things and moremoney on other things, how to
prioritize your spending, whereyour money needs to go first
before you spend it on one orfun stuff. For example, your
budget might show you spend $100on clothes every month. You
(01:32):
might decide you spend $50 onclothes you can use the rest of
the money to pay bills or savefor something else. Why should I
try to say money? You might needmoney for emergency you might
also need to buy something moreexpensive, like a car. Saving
money might help you buy a car,put a security deposit on an
(01:54):
apartment or pay for somethingexpensive. Okay, that is the
basics of a budget. A budgetgives you your information. It
tells you how much money youhave coming in and how much
money is going out. It helps youprioritize where your spending
needs to go, first, second,third. It just helps you in your
(02:19):
personal life and your personalfinancial life. So what do you
need to know in order to do abudget? To start a budget by
gathering your bills and paystubs, and this is where I say
you use your tracking app.
(02:40):
That's why you started doingtracking of everything going
through your checking account,your credit cards and everything
else. And if you've done thatfor a minimum of 30 days, you
have all the information youneed to get your first budget
started or to get your budgetupdated every in each month,
(03:05):
because this is a never endingprocess. You should be doing the
budget month in a month timeperiod. That's why you need a
month worth of information.
Every month is not going to beexactly the same. There might be
some bills you pay once aquarter, every three months.
There may be some bills you payonce a year, maybe twice a year.
(03:27):
So as you go through this foryour first year, you're always
going to be updating, changingand perfecting your budget
dollar amounts, and that's whatyou need to be aware of as you
go through this process, youshould be identifying things you
(03:47):
no longer use or need andcanceling or doing away with it.
Why are you paying for thosethings you no longer need?
Subscriptions? Most likely I'mtalking about, and it's gonna
help you see how much you'respending in each category, and
you can decide, is that too muchor not enough. Can you afford to
(04:10):
spend more in on entertainment,or do you need to cut, cut back
on entertainment so you can payyour housing, transportation,
food or other needs that youhave. Needs are thing that you
absolutely have to pay each andevery month. It's housing,
(04:31):
transportation, food, clothing,maybe some health insurance, and
should be some setting moneyaside for savings, savings for
setting up an emergency fund andbuilding up an emergency fund so
if something bad happens, youhave some money available to pay
for whatever it is. That way,you're not always relying on
(04:56):
that credit card and you're not.
Always going deeper into debt.
The goal here is to get yourpersonal finances under control,
to help you pay off your creditcards, to pay down your debt in
a orderly and timely manner. Sowhere you need to get started in
(05:17):
this article, I'm referring toit says, Write down your
expenses and expenses money youspend, write down how much money
you make. That's called income.
Subtract your expenses from themoney you make. So as you set up
a budget, your income is at thetop. If you're doing a
(05:38):
spreadsheet, this all should bein a spreadsheet, whether you're
doing it on a piece of paper ordoing it on a computer, I will
recommend a computer, becauseyou can sort it, you can
rearrange it once you get it inthere, and you can perfect it,
and it does all the math forYou, so there's no worries about
(06:00):
getting the math incorrect. Itdoes it for you, and you don't
have to worry about that. So atthe top, the headings going
across from left to right, thefirst column A should be
description and all of whatyou're doing. Column B should be
your budgeted amount or controlAmount column C should be the
(06:25):
actual. That's it. We're doingthis on a monthly basis. So the
control budget amount, orcontrol amount is what the
dollar amount that you set basedon the previous month. The
actual is the actual amount thatyou're spending in the current
month, then the difference isthe difference between the two,
(06:46):
and then the very right columnis a percentage. What percent of
this expense to your net incomeare you spending? Is it 50% of
your take home pay, or is it 5%that's going to be useful
information? As you build thisinformation up, and you get more
(07:09):
involved and more familiar withwhat going on in your personal
financial life, I assume thateverybody knows you got to pay
rent. You got maybe carpayments, you know, you get
utility payments. You know, youput gas in the car and you buy
food and you go out and havesome entertainment. How much
money do you have left? Are youstruggling paycheck to paycheck?
(07:32):
Are bills surprising you? Areyou coming up and the utility
bills doing you don't haveenough money to pay it, so you
put it off. Those are the thingswe're trying to control here,
and the more you can get yourpersonal finances under control,
the less of those type of thingsthat's gonna happen. You're
gonna know when your bills arecoming due, and you're gonna
(07:53):
know you have enough money topay them, and there's not gonna
be a struggle. And you're gonnaknow that, like I can put $20 a
month in my savings and set itaside and start the emergency
fund, no matter how small it is,you need to start doing it,
because the sooner you do it andthe more often you can do it,
(08:15):
the quicker it's gonna build up,and the better off you're gonna
be Now, if you've been followingmy podcast and you've been doing
your tracking for at least 30days, you go into your tracking
app and you do a report bycategory from the first day of
the previous month to The lastday of the previous month and
(08:40):
print out a report. If you didnot go in and rearrange and
organize your accounts, they'regoing to come out alpha,
alphabetically order,alphabetical order. So one of
the things you can do to startwith is print that off, and you
need to go line by line andidentify what category you're
(09:03):
going to put this in for yourbudget. Your budget is set up in
categories, and within thecategories you have the detail.
The detail is right there onthat report you're looking at
each line item, there is adetail for a particular
category. So let's start withhousing. The heading for housing
(09:26):
is housing. That's the mainaccount under that is a sub
account, and all the subaccounts are going to be your
mortgage payment, then you canhave a sub account called
utilities, and then a subaccount under Utilities to list
each individual utility companyyou pay, natural gas, electric,
(09:51):
cell phone, telephone, internet,water and. Or trash. HOA funds,
whatever you pay that youconsider utility. As you notice,
I put cell phone under housingand utilities. And the reason I
(10:11):
do that is because once upon atime, back in the olden days,
the phone was physicallyconnected to the house, and you
couldn't take it with you, so itwas part of your home utilities,
and I'm just leaving it in thatcategory. Cell phone should be
under your home housing andunder Utilities also, okay, we
(10:34):
have mortgage, we haveutilities, and then sub
accounts, all the details. Nowyour mortgage is going to be
your mortgage payment. If youhave an escrow with your
mortgage company, you're alsopaying the mortgage, you're
paying the insurance, and you'repaying the real estate taxes
every month, and then themortgage company sends that in
(10:59):
when it's due for you. So youjust need to have mortgage if
you don't have an escrow. Nowyou need to break that out
mortgage. That's just themortgage payment, real estate
taxes, home insurance, becauseyou're going to pay those things
yourself. You might havemaintenance. Maybe you can put a
(11:23):
category in there forrenovations. It's up to you, but
that's pretty much a mortgage,real estate, tax, insurance and
utilities and all the detail ofthe insurance, the utilities, is
your housing, yourtransportation is your auto a
you work on. That's yourtransportation is the main
(11:48):
heading. Then a subheading wouldbe, if you have two automobiles,
you have auto A, you can put themake a model, whatever. And then
under that auto A, you put thepayment the gas and repairs and
maintenance, which include oilchange, and you'd put auto B,
put the payment, you know, loanpayment, whatever the loan
(12:13):
company is, gasoline, repairsand maintenance, that would be
your transportation under foodis your general heading or your
main category, and then youwould have groceries, dining
out, delivery, however you getyour food. So you need to break
(12:33):
it out by how you get it. Go toa grocery store and buy it. You
go to a restaurant and eat out.
Or do you go to a restauranttake takeout? Maybe you can make
that takeout category. Or do youhave it delivered to you by
using a service? You can havethat delivery, food delivery. If
(12:55):
you have food delivery from thegroceries, you maybe break that
down. The reason you're going tobreak all these out by how
you're getting your food is, andyou want to look at each
category and how much you'respending in that category,
because there's a area here wecan save some money in the
future, but we got to break itdown so we can See where the
(13:18):
money is going. Then we havesavings or credit cards and
savings, this is where you listall your credit card payments,
each individual credit card thatyou owe and you pay you want to
put here and you want putsavings, because we want to
(13:39):
budget a number for how muchyou're going to set aside every
month for savings. At thebeginning, you leave that blank
because you don't know if you'vebeen paycheck to paycheck, you
probably think, well, I can'tsave nothing. I don't have any
money. But down the road, we'regoing to make it so you do have
(13:59):
some money, so that you can puta number there. So that's the
idea, and then you can haveanother coring that those are
all your needs that you have topay. Maybe there's another
category. Could be insurance,insurance for your home, goes in
home, or goes in housing.
Insurance for your automobilesgo each individual automobile
(14:22):
insurance for your health you'repaying through work. If you're
paying through work, you don'thave to worry about it because
it's already out of yourpaycheck. You've already paid
it. If you're paying insuranceon your own, then we need to
have an insurance category forhealth insurance, disability
(14:43):
insurance, whatever other typesof life insurance, what other
other types of insurance thatyou may have, that you think you
need then after that is youronce and then be entertained.
Payment, hobbies, whatever elseyou can think of. If you have
children, some of your needsmight be daycare. You need a
(15:07):
category for that. I don't know.
It's up to you to break out whatyour needs really are versus
what you once are. I don't wantto tell you, because it's
different for everybody. That'sjust the basic to get you
started. So at the top you'regoing to put your income, so you
(15:30):
got your general headings,description control, amount or
budget, amount, actualdifference, percentage. And then
you're going to put down ColumnA your description, income from
yourself. If you're have aspouse significant other, put
their income in. Now this is,would be from your work. If you
(15:54):
have a two jobs, both jobs, allyour income. If you have a hobby
that you occasionally hand alittle bit of income. Don't put
that in there. Don't worry aboutit. Now we'll put that as other
and you can plug that number inthat particular month, but if
(16:14):
it's small, say, less than 100bucks, less than $400 don't
worry about it. And you want tototal your income, and that's
your budget amount. And as youget paid throughout the month,
on the actual month, you plugthese numbers. You plugged in
what you got paid, and you keepa running total. So if you get
(16:35):
paid every week after week one,you put in your net pay after
week two, you add your secondnet pay. Week Three, you add
your third net pay, so it's thetotal of your all your pays
added together as you gothroughout the
month, your expenses, and thatshould be shown through your app
(16:58):
as you enter your paycheck inyour app, it should give you the
total amount when you print outthe report, because you're going
to do it from the first to thethird of the previous month. And
then once we get to the currentmonth, you're going to go from
the first of the current monthto the current date, usually, if
(17:20):
you get paid every week to thefirst pay period, and you're
going to put all those numbersin your budget under the actual
and then the next week, you'regoing to go from the first in
the month to the second payperiod date, and you're going to
update all those numbers becausethat report that You're getting
(17:40):
from your tracking app is givingyou the totals. You just got to
plug numbers, and then thespreadsheet on that you're doing
your budget on is going to doall the totaling and all the
math for you. It's going tofigure out the differences, you
know, when you set it up, you'regoing to take the difference,
it's, you know, B minus C.
You're going to total down yourtotal income. You're going to
(18:05):
total each category. You'regoing to total eat like you
don't have to total mortgagepayments with one number, but
your utilities, you want tosubtotal all utilities. So, you
know, one number, how much isall my utilities added up? You
can look and have one numberyou're looking at, and then you
(18:25):
can have total for totalhousing. So when you do your
formulas, be careful whichnumbers you're picking up. Don't
pick up all the individual oneson their utilities and then pick
up this the total, you know, thesum of all of them, because
they'll double it for you. Sojust be careful. And you go
(18:48):
down, and then at the verybottom of your budget
spreadsheet, you have totalexpenses. And then under that
you have income minus totalexpense and a number, if that
number is negative, and that'syour net, you know, net income,
net money saved or lost orspent, if that's a negative
(19:12):
number, that means you'respending more than what you
make. And that's what we'retrying to stop. You're trying to
solve that problem, and you'rethinking, how'd you do that?
Well, part of it could be thatyou had some money in your
checking account, and there wasa bill that was due this month
that you used money they alreadyhad, and then that same bill
(19:36):
came due again, and you paid ittwice in the same month, that's
a possibility. It could just bethat you are spending a lot on
your credit cards every monthand then making some payments on
those credit cards. That kind ofdoesn't also if you're doing my
(19:56):
debt reduction. Some plan. Youknow that the first thing going
to do is quit using credityou're going to quit using those
credit cards. So that's going togo away over time as you get
that under control. You knowthat you're going to make the
minimum payment on all yourcredit cards, and you know that
you're going to put money intoyour emergency fund, and you're
(20:20):
gonna have a minimum of 1000 inyour emergency fund, and you're
gonna build up to that to amaximum of 3000 or 4000 your
maximum. And then you're gonnatake the difference between the
maximum and the minimum, thesay, the 4000 and 1000 3000 and
you're going to apply that toone of your debts, or however
(20:45):
you want to start paying downyour debt, that's my debt
reduction plan. But in order todo that, you have to have your
budget. You have to be trackingeverything to do the budget, and
you have to be doing a budget.
They get your spending undercontrol, so you can build up
(21:06):
that emergency fund so you canapply the money to one of
Unknown (21:11):
those debts. It's all related this whole
Charles McDonald (21:15):
plan. This is a three step process. You got to
start tracking, you got to havea budget, and then you have to
have a debt reduction plan. Youhave to have a plan that you
follow each and every day so youknow what you're doing and why
you're doing it. So you're onceyou get your budget and you
(21:36):
know, so once you get throughthat first month, that budget
amount, the total that would beyour net income for the month.
That's the number you use to dothe percentage. What percent of
your net income are you spendingon housing? 35 to 40% is where
it should be. If you're at 60%that's why you're living
(22:00):
paycheck to paycheck, you'respending too much on your house.
You've already over committed tothat. If that's all on because
of the mortgage, real estate,tax insurance, as you have an
escrow, you're really hurting,really over committed to your
housing. So you have to cut backsomeplace else if you overspend
(22:22):
in one category, you have toadjust other categories because
you don't have the money tospend it like you want or or do
one in the past, this is thebasis of why you Want to track
all everything that's going inand out of your household. Have
(22:44):
a budget. Know everything thatyou pay, what you pay, how much
you pay, and when you pay it,and over time, you'll get all
this under control. As you dothis, you should be identifying
things you no longer need, wantor use and get rid of it, cut
back so that you can increasethat dollar amount you're
(23:07):
putting into your savings.
Because the more you can say,the faster, all the faster
you'll be able to pay off yourdebt. I'll be back in one moment
with my final thoughts are thearticles I refer to in my
episodes. Have a link in my shownotes. If you're interested in
checking out the software that Ipersonally use to get my data
(23:30):
control. It's in my show notesunder shop financial you need to
copy and paste the link andit'll take you to the website.
Any questions, you can justcontact me through that
particular website. If you valuethis podcast and would like to
make a contribution, I had acontribution link in my show
(23:53):
notes. Also get whatever youfeel is appropriate for the
information I am providing. Ithank everyone for listening to
my podcast as an overview, yourbudget at the top shows all your
income by week, however you wantto set it up by individual. You
(24:15):
have a description, you haveyour control or budget amount,
and that's based on the previousmonth. You have your actual
amount, which is the currentmonth. You have the difference
between the two, which is aformula in there, and you have a
percent of your net income,which you have a formula in
(24:35):
there. So if you put all yourincome in there, when you total
the income, your budgeted amounttotal should be your net income
for the month. That's the numberyou use to create your for you
do the formula for yourpercentage, what percent of your
total housing is based on yournet income, even the. When you
(24:58):
go to borrow the money, the loanis based on your gross income,
then let's look at your netincome, because net income is
what you really have to workwith. They've already took the
money out for taxes, hopefullythey're all paid. They're
already took the money out,maybe for your health insurance,
maybe for your child support, orwhatever you have to pay those
(25:20):
things that's automaticallydeducted from your checking
account you're not have toaccount for and your budget.
We're only accounting for thosethings that you have to pay with
the money you have available,and that's your net income. So
what percent of that net incomeis your housing cost? What
(25:42):
percent of your net income isyour transportation? What
percent of your net income isyour food? Housing should be
around 25 to 35% transportation,15 to 20% food, five to 10%
you can look up thesepercentages, just go online and
(26:03):
do a search, and you can findpercent of income categories, of
budget, personal financecategories, percentages. Type in
something like to that line, andyou'll be able to find that I'm
just gonna review, since we'reat the budget and it's fresh in
your mind, we're as you go down,the first month is the previous
(26:28):
month for your control. Thenyour current month is for your
putting in your actual you do areport. Now, I mentioned this
before, but to get started, youdo report the previous month,
from the beginning of the monthto the end of the month. Then
once you're in the currentmonth, you go from the beginning
of the current month to thecurrent date. If you give if
(26:50):
you're going to do this by payperiod to pay period, if you get
paid weekly, then you need to dothis weekly. If you get paid
every other week, then you needto do it every other week. I
recommend you do it weekly. Picka date a time, like every
Saturday morning when you'redrinking your coffee, do that
(27:11):
report and update it. Now, Istarted to say earlier that when
you're looking at that report,you need to go through at the
beginning, because it's going tobe in alphabetical order and
category H for housing and outto the side somewhere, either to
the left or the right, whicheveryou prefer. Put an h for
(27:33):
housing, T for transportation, Ffor food, C for clothing, D for
debt, I for insurance, E forentertainment. And categorize
each and all these categories asyou go, because we need to set
up all these categories in theseparticular groups. So once you
(27:56):
go through there and put H'snext to everything, and you're
in housing, you're going to beputting it in under housing in
alphabetical order. Now,utilities should be used, should
be at the bottom, but the namethe utility companies may not,
you know, may start with an A,so it'd be the top, but you want
(28:17):
to put it under Utilities,because you want to subtotal all
your utilities. So you know onenumber. What's your total
utilities? All you know, gas,electric, food, not food, but
water and sewer, internet, cellphone, whatever you all these
things or utilities. You want toknow one number. You want to be
(28:41):
able to know one number. Butwhen you're setting up the
budget on a spreadsheet, you'regoing to put each one of those
in there individually, becausewe want to total them. We want
to know the total of yourutilities. So once you go
through that HHA, and then youput that on our housing, and
then you go throughtransportation, you put all
(29:01):
those in and check them off asyou go down the line. You put
that way, you know if you misssomething. And then when you get
done, you can look at your list,and if you get check marks by
every one of them, you knowthey're in order. You know that
you didn't miss anything. Nowkeep that for your sample for
the next time you do it so youknow, you know where you put
(29:24):
them, if you want to, you can gointo your app, your tracking
app, come up with this system sothat you can code those. So all
the ones that are coded H, yougo in and you somehow code them
H so they print out together, sothey're all together. And when
(29:47):
you go to enter them the nexttime, they're all going to be in
order for you. And that's goingto make it easier. So you need
to come up with some type ofcoding system that you. You can
do to put them in order by thecategories that you want them to
come out so it matches budget. Ihope that makes sense to you.
(30:10):
You can kind of not tell you,because I come up with ways to
do it, and then it's not thebest, and it doesn't always
work, and then I gotta re messwith it. You know, you know, all
the housing is h, and all t istransportation, and all food is
F. And so if you do h1, h2, h3,h4, and then put the name like,
(30:34):
under your category, like, sayit's a mortgage, mortgage
payment, or the mortgage companyis saying you can code at h1 and
then util, the first utility ish2 h3 but that's going to be
under Utilities, but we want toput them in some type of water,
so I'll leave that up to you.
That's just a generalrecommendation to make your life
(30:57):
doing your budget faster andeasier, and would be able to
look at the net result and haveuseful information. That's what
we're going for, and at thistime, that's all I have to say.
This is my last episode. Thereason is, I figured I covered
(31:18):
everything as much as I can. I'mgetting bored with doing the
same things over and over. Ijust think it's time to stop.
But my episodes are still gonnabe out there, probably for at
least a year. Thanks everybodyfor listening. If you want
anything different, send me anemail if you got the information
(31:41):
in my footnotes, my show notes,you can contact me if you want a
particular subject covered.
Maybe I'll do it. Maybe I won't.
This is the last weekly podcastthat I'm on to do on this
subject. You.
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