June 9, 2024 • 28 mins
What is a control center and how does it help reduce spending. How to use tracking information to create and update control center.
Article Link:
5https://consumer.gov/managing-your-money/making-budget
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Charles McDonald (00:01):
Hello, I'm your host, Mr. Chuck, a 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.
Control Center, what is acontrol center? And how how does
(00:26):
it help reduce spending? How doyou use tracking information to
create an update control center?
You're probably wondering whatI'm talking about control
center, what is that? That's thesame as a budget I call the
control center. The budget acontrol center, is because it's
(00:46):
where you can control all yourspending, your tracking is your
lifeblood, because trackingkeeps track of all the flows in
and all the flows out of yourpersonal finance out of your
household. So like blood controlcenter. So what is a budget? For
(01:07):
those of you that prefer that Iwant to refer budget control
center, back and forth, it's oneand the same thing. A budget is
a plan you write down to decidehow you will spend your money
each month. A budget helps youmake sure you will have enough
money every month without abudget in my run out of money
(01:28):
before your next paycheck. Abudget shows you how much money
you make, how you spend yourmoney. Why do I want a budget, a
budget helps you decide what youmust spend your money on. Maybe
you can spend less money on somethings and more on other things.
helps get cakes get you incontrol of your money by
(01:50):
identifying what you have to payeach month. And where you can
save some money so he can havesome extra money to do what you
want to do. Try try to savemoney. Of course, you might need
money for emergency you mightalso need to buy some thing more
(02:10):
expensive, like a car savingmoney might help you buy a car,
put a security deposit onapartment or pay for something
else expensive, such as buying ahome, how do I start a budget
and this article, they're gonnahave a different approach. And
then what I say is do yourtracking first, and we're going
(02:35):
to cover my approach a littlebit later on. But the generic
approach is, is to start abudget by gathering your bills
and pay stubs. Think about howyou spend money besides paying
your bills. For example, do youbuy a coffee cup of coffee every
day, after a month that coffeemoney could add up to an expense
(02:55):
you might write down. When youhave your bills and paste out,
write down your expenses andexpense is money you spent,
write down how much money youmake. This is called income,
subtract your expenses from howmuch money you make. This
article is consumer.gov. And isreally, really a basic article.
(03:19):
If the number is less than zero,you're spending more money than
you make. Look for things andyour budget you can change maybe
something you do not need or away to spend less. Again, I call
it control center because youhad identified a problem and now
you're gonna get control of it.
(03:41):
And what if I don't get paidevery month? Well, then they say
average it out. How can I use mybudget? A budget is something
you use every month a writtenbudget will help you see where
you spend money, see where youcan say make a plan for how to
spend and save your money. Whyshould I say money while you
(04:01):
need an emergency fund savingsmall amounts of money right now
might help you later. Everyonehas expensive they do not expect
expensive things. Sometimes weneed to buy a car or vacation or
home. Your goals maybe you wantto pay for college classes.
Maybe you need to visit familyin another country. You can plan
(04:22):
for these goals and save money.
You might not have to use acredit card or borrow money to
pay so you saved the day so youcan afford to pay for something
tomorrow. And that way you don'thave to use credit. Basically
what that article is trying totell you. Then it gives you
other examples for one monthwrite down everything you spend
small expenses like a cup ofcoffee can add up a lot of
(04:45):
money. They liked that coffeething. Pay for your credit card
only if you can pay the fullamount when the bills come down
comes due. That way you do notpay interest on why You owe her
saying use your credit card likecash. Now I know a lot of you
already have a debt problem,because you didn't use your
(05:07):
credit card like cash. And whatI mean by that is, you don't
charge something on a creditcard unless you have the money
to pay for it. Not six monthsfrom now, but bomb friday of
every week. And you go into yourcredit card online account, and
you pay it off every Friday, orat least pay it off every
(05:29):
payday. So you don't want tooverspend. Because if you're
paying out off every payday, hemight run out of money. And then
you're going to use your creditcards more to get by until next
payday. And you're gettingyourself deeper into debt. So we
want to try to avoid thosethings. How to make a budget,
collect all your bills, stackthem up, put them in order, and
(05:52):
order by category, you got tocategorize housing,
transportation, food, clothing,entertainment, savings, and
credit cards. Other expenses,like they're just saying food,
gas, entertainment, clothes,school supplies, money for
family on that plan expenses,like car repairs are medical
bills. That's called anemergency fund, credit card
(06:14):
bills. Bills, you pay the sameevery month like rent bills that
might change every month, butyou're still paying every month
like utilities, bills, you payonce or twice a year, like car
insurance, you might have billsthat change every month, look at
what you pay for the same monthlast year, you may need to $200
for your gas bear bill inJanuary, but $30 in July, you
(06:38):
want to go back over severalmonths, four months, six months,
add them all up, divide it getan average. And that's what
you're gonna use in your budget,use an average over a period of
time, if you got a year's worthof bills for the same like your
gas bill, add them all updivided by 12 and use the
(06:59):
average some months you'll beover and so much you'll be
under. But you'll be close inthree to six, three or four to
six months of those, you'll beclose. How to use a budget.
Okay, well, that's done withthat article. Now, that is the
consumer.gov website.
(07:22):
We're talking about a budget,our control center, I think in
the article they was having youdo it at manually writing it
down or doing it in aspreadsheet, he can use an app
to do these things. There's alot of good apps out there. But
if you're really struggling witha lot of debt, you don't want to
spend the money today, because$15 a month adds up over time.
(07:47):
So we don't want to spend thatright away, we want to try to
get some of our debt undercontrol first. So let's use a
spreadsheet to do our budget forthe first six months or so get a
couple of those credit cardspaid down and start making some
progress. Before we startspending $15 a month for an app.
(08:08):
That's my position here. I'm notsaying they're anything good or
bad about them. I'm the same wedon't want to spend the money if
we're struggling with a lot ofdebt. So we talked about
tracking, I talked about my debtreduction plan, just as a
reminder, quit using credit,make the minimum payment, build
(08:29):
up an emergency fund, build itup to over to the maximum of say
4000, leave a minimum of 1000 inthere, take the difference, the
$3,000 and apply it to one ofyour debt. That's the debt
reduction plan. Tracking isusing an app where you put in
(08:50):
all the transactions and fromyour checking account, your
savings account and your creditcards. Hopefully, if you're
doing step one, the debtreduction plan, you're no longer
using your credit card. So youjust need to update it with the
payments you apply and maybeinterest that gets posted to it.
(09:12):
So it's gonna be a monthlything, a couple of transactions.
So that is not going to take awhole lot of time. your checking
account is where all your moneyflows in and flows out of. If
once you get your budget undercontrol and you see your
spending less than what youmake, then you keep a minimum
(09:35):
balance in your checkingaccounts. 300 500 600 a minimum
balance that you never go below.
That way you have a buffer therein that's come for help you quit
paying bank fees, especiallyoverdraft fees monthly balance,
you know their monthly accountfees that they charge you every
(09:57):
month. If you're paying amonthly fee for your checking
account, go to the bank, see ifthey have another plan where you
don't have to pay anything. AndI bet before you do that, it's
your average balance up to 600bucks and don't let it get below
it, or $300 and don't let it getblood so they can see that, and
then they'll put you in achecking account, that may be
(10:20):
better for you, where you don'thave to pay a monthly fee. And
don't pay overdraft fees don'toverdraft, because that's gonna
charge, they're gonna charge you35 bucks every time. And then if
you have a reserve account thatkicks in, they're going to
charge you entrust, the bankmakes a bundle of money off of
(10:40):
you by you not taking care ofyour own money, the bank will
benefit from you, because you'renot doing your due diligence and
doing what you need to do tokeep your personal finances
under control. They takeadvantage of you, the control
center budget, the most placesthat you go was gonna say,
(11:06):
gather up all your bills thatyou pay over the last month,
start saving them keep your paystubs, and you do that for a
month or two, and then you writeit down. But there is a formula
for how you set up your checkyour your, your budget, the
income goes at the top. So wehave basically four to five
(11:30):
columns going down. The one onyour left, or column A is your
description column. Column Bwould be your control center
column or your budgeted amountcolumn, the amount of money that
you say that you're trying toachieve not to go over C is the
actual amount in the currentmonth, d is the difference
(11:56):
between B and C. And then Ewould be a column you used to
set up percentages. So you cansee what percent of your income
you're spending for housing, andall the different categories and
all your different loans.
Because that's going to help youstay keep your personal finances
(12:21):
under control. So we got Athrough E, it's description,
control amount, actual amount,the difference, so on, from top
to bottom, we're gonna put ourincome at the top. And we're
gonna if if you and yoursignificant other both work, get
paid weekly, you need 10 linesthere because there could be up
(12:46):
to five pays per month. If youget paid every week, depending
how the month falls, some monthsyou will need it some months you
will need it. If you get paidtwice a month, you need five or
six lines just to make sure sixbecause so two months a year you
get paid three times. So itdepends on how often you get
(13:06):
paid on how many lines you have.
But give yourself enough roomspace now. Give you some some
external lines and then put yourtotal and have your total
income. That's your first step.
And that's the easiest part ofthe whole budgeting process. So
what numbers are you gonna usefor your budget amount? Well,
(13:30):
member when I start you out ontracking, I said, Go back 30
days go back to the start of themonth, the previous month in
which the month you're in. So ifyou're in the second of a month,
you go back to previous month,and are all your transaction
from the first of the previousmonth all the way to the current
(13:51):
date, be your income, that's allyour expenses. And that's kind
of seem a like a lot of work.
And it is at the beginning. Butover time as you learn the app
that you're using. You can setup reoccurring entries, you can
set up all kinds of stuff thatmakes it easier. When you start
typing a name in, it's gonna popup you select it is going to
(14:12):
have the category selected. Soyou'll be consistent on where
you're going. If you have agrocery store, you put your name
in the grocery store, and it'sgoing to come up groceries. Now
if you buy gasoline at that sameplace, he needs to put the name
of the grocery store and thenfuel after it. And then you can
(14:33):
select that and it could be autofuel category. That's just a tip
there to make things easier. Soyou're consistent on where the
things are getting posted, whichcategory. All these apps are pre
set up as far as categories. Youcan go in and update them.
(14:57):
Change them do whatever youwant. I've talked about how to
rearrange them. So they printout in the order of your control
center or your budget. So thatwhen you put set up in your
control center, and you do, theweekly, or every two weeks
update of your budget, that theprintout, your report comes out
(15:20):
similar or fairly close to wow,you have your control center
setup, that makes life so mucheasier. And I'll make it so much
faster. Now, in your trackingapp, you're gonna do a report by
category.
(15:43):
And you're gonna start from thebeginning of the current month,
for at the very beginning,you're doing as from the
previous month, from thebeginning of the previous month,
to the end of the previousmonth. Why, because those are
the numbers you're going to usefor your control numbers, or
your budgeted amount. Noticethat I didn't say you're cutting
(16:06):
back anywhere yet, you're notdoing anything, we first
starting out and want to seewhere we are, and see how we
have done in the past up to thispoint. Now, I would expect that
you're probably gonna get somesurprising information here. So
don't be alarmed, it's just amatter of getting your finances
(16:29):
under control. And this is thestep that's gonna help you
achieve that. So we're using theprevious month for beginners, we
put it in. And the first thingyou want to notice when you put
in your numbers and your incomeand all your expenses, your
expenses by category, housing,transportation, they can be in
(16:50):
any order you want. But thecategories are housing,
transportation, food, savings,and other debt, hobbies,
clothes, whatever else you'veset up, you put those numbers
in, and he's going to total upyour income, we're in your
control your control center now,and you put in your income, and
(17:12):
then you have in yourspreadsheet and you have a
total, which is going toautomatically added up for you.
You put in all your expenses. Atthe bottom you have a grand
total expenses, and then you'regonna have a difference, did you
spend more than what you make?
And I'll tell you, if you have abig negative number at the
bottom, that means you spendmore money than what you make.
(17:35):
And you're wondering how did Ido do that you did that by using
credit cards, he spent more andyou didn't take into account
that you still have a balance onyour credit cards that you're
not paying them off. Every week,or every two weeks or every pay
day or every month, when I wasreally struggling with a lot of
(17:59):
debt. Personally, I would nightstarted using my credit cards,
like cash, I made sure I had themoney before I charged
something, then I charged it, Igot the product, I waited a
couple days to make sure nothingwas wrong, I didn't have to
return it and all those things.
(18:21):
And then I went in and I paidthe balance off for at least the
amount that I just purchased.
Because I was trying to keep mycredit balance from rising. So
that's what I did. That's whatyou should do, you have to think
that that credit card is cash inyour pocket. And if you don't
have the money, you cannot usethat credit card. I'll be back
(18:45):
in one moment with my finalthoughts. If you're interested,
and the software that I usepersonally, to reduce my debt, I
have a link in my show notes,shop financial.com, copy and
paste it. And it will take youto the website. If you are
looking for any spreadsheets orother information that I talk
(19:06):
about from time to time. I havelinks in my show notes. And I
always have links to thearticles I refer to and my show
notes. Plus other things likethe happy draft.org, which is a
another organization that helpsyou with your debt. So feel free
to go to my show notes and linkand check out whatever I'm
(19:27):
putting out there. I appreciateit very much. If you would like
to make a contribution to helpkeep this alive, then I would
gladly accept that, say my shownotes. Thank you very much. Now
let's get back to control. Yougot to update the actual column,
every pay period and the use payperiod because that's when you
(19:51):
have more income you're gonnahave to go in there to update
your income. So let's update allyour spending at the same time.
while we're there, so that wouldbe column C, and you're gonna do
it. So the beginning of themonth, you're going to either
copy and paste the previousmonth's budget control center
amount, or if it's changed quitea bit, and you'll know because
(20:14):
your numbers will be way off, somaybe that all your categories,
you stayed under the dollaramount. So instead of using the
control center mount from theprevious month, let's use the
actual mount from the previousmonth, and copy and paste it
over into your control centeramount, because maybe you've
(20:36):
made some adjustments to yourspending, then you've updated
things and it's flow through sonow that those monthly expenses
is going to be a little bitless. So let's use that for your
control set. So we're slowlyover time perfecting our
numbers, and getting the close,you'll never be done doing that.
(20:58):
That goes on and on. Because yougot inflation, the price of gas
goes up and down, your insurancewill go up and down, you'll
change insurance policy to savesome money, you'll do away with
some entertainment, and thenyou'll get new entertainment.
And it's ever changing. So wewant to try to get your control
(21:20):
amount as accurate as possible.
So that we can always hit itclose to zero or not off by very
much has put it that way. Maybeyou go over $100 This month, or
and then you had three monthswhere you're 30 or $40, under so
(21:42):
you're kind of close, but notperfect, you'll never get a
perfect end to the net secondmonth. So we got a new control
amount. And what you gonna do isfrom your tracking, go from the
beginning of the month to thecurrent date. And you're going
to update all those numbers andsee how you're doing. Now there
might be some things like yourmortgage payment or car payment
(22:06):
that you paid, there'll beexactly it'll come to zero, the
difference will be zero, whichthat's what you're looking for.
Maybe you didn't pay all yourbills that month. So you're
gonna still be way under yourcontrol amount, which is good.
Does next time you do it thesecond pay period, beginning
(22:28):
among to the new current date,you update all your numbers. Now
on your income, you want to doit because you got one line for
every pay period. So the onlything you're updating is adding
another pay period and thedollar amount that you actually
made. Especially if your incomefluctuates week to week or paper
(22:49):
to paper, it was always the samethen you just enter the second
pay period, the same dollaramount and it's easy peasy. So
we update everything in again,we look at what's going on. Are
we over? Have we've gone overspent on any category and then
look at the detail. Why are youdid you overspend, maybe you had
(23:12):
some expense in that categorythat you only pay once a quarter
or semiannual once a year. Andthat's the case that's okay.
Maybe we need to analyze thoseyearly payments divided by 12
and put it in there. So we'll beunder for 11 months and then we
(23:33):
have one month will be over butthe net of the total is going to
be close to the same thing. It'sjust keeping you aware that you
have that particular expense. Soas we do that
the next column is percent toyour gross income. What percent
of your gross income is yourhousing category, your
(23:56):
transportation category, andwhat percent to your gross
income is your mortgage payment,your loan, your auto loan. Now
if you have an escrow includeyour insurance and real estate
taxes, that's fine. bed shouldgive you a number of how much of
(24:17):
your gross income that you'respending and gross income as
before taxes are deducted. Andbefore any retirement alimony or
anything like that is deductedas the gross amount of pay that
you make per pay period. Andwe're gonna look at that on a
monthly basis. So how much doyou get you make in a particular
(24:40):
month and take that and divideit by our expense. Come up with
a percentage your housing, whichshould include your insurance
and real estate taxes shouldprobably be around 35 to 40% or
less. Kitten under that isbetter your transportation Asian
(25:00):
eight to 12% of your food 10%.
And if any of these categoriesand you can Google these
percentages and see what otherexperts say, and come up with
some numbers, right, you know,printed off, write it down, have
it as your guidelines so you cansee how you're doing compared to
what the experts things youshould be doing or what the
(25:23):
average person is doing. So athelps you control your spending,
inhale, help identify where youmay have overspent in the past.
So if you have a loan, such as acar loan, and your
transportation is four or 5%,over what you think it should
be, then that means you may bebuying a too expensive car and
(25:47):
you finance too much. Or maybeyou get upside down on a car and
and you had to get an you got anew car and you're rolling the
loan over. So you're paying fortwo cars on one loan now. And
that got you, you know, over theamount. So we're ever category
that you overspent III have tomake adjustments someplace else.
(26:08):
Because you cannot spend morethan 100% of your income comes
down to that. So if you got 2%too much from transportation,
and your housing is pretty closeto where it should be. You gotta
cut back on your food? Or whatmakes up your food expense. Do
(26:28):
you have delivery? Do you goout? To eat a lot? Or do you
cook everything at home? So youneed to look to be more
efficient. You need to look atways to say insurance for
example, entertainment, how canyou cut back their do away with
cable TV and go 100% streaming Idid that years ago, no problems,
(26:51):
and I save quite a bit of money.
Your control center not only isgonna give you the numbers and
gave me an idea what's going on,it's gonna help you decide where
you need to cut back where youneed to get your spending under
control. Harder that should beyour savings and other debt,
(27:13):
which the other debt would becredit cards. Other debt is any
debt that can't be assigned toanother category. Your mortgage
is your housing, your car loansis transportation. I think he
got the point. They're sayingthat you should pay 10% of your
gross income, your income andyour savings and your credit
(27:34):
card. But if you're spending 40%of your income to pay your
minimum, mountain dew on yourcredit cards, you definitely
vote overspent in the past. Andeither you have a spending
problem or something happenedand you know what that would be?
So you need to get your financesunder control and start taking
(27:56):
control of your money so thatyou're not working for the money
that the money is working foryou and you'd be glad you did.
So
Hello, I'm your host, Mr. Chuck, a 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.
Control Center, what is acontrol center? And how how does
(00:26):
it help reduce spending? How doyou use tracking information to
create an update control center?
You're probably wondering whatI'm talking about control
center, what is that? That's thesame as a budget I call the
control center. The budget acontrol center, is because it's
(00:46):
where you can control all yourspending, your tracking is your
lifeblood, because trackingkeeps track of all the flows in
and all the flows out of yourpersonal finance out of your
household. So like blood controlcenter. So what is a budget? For
(01:07):
those of you that prefer that Iwant to refer budget control
center, back and forth, it's oneand the same thing. A budget is
a plan you write down to decidehow you will spend your money
each month. A budget helps youmake sure you will have enough
money every month without abudget in my run out of money
(01:28):
before your next paycheck. Abudget shows you how much money
you make, how you spend yourmoney. Why do I want a budget, a
budget helps you decide what youmust spend your money on. Maybe
you can spend less money on somethings and more on other things.
helps get cakes get you incontrol of your money by
(01:50):
identifying what you have to payeach month. And where you can
save some money so he can havesome extra money to do what you
want to do. Try try to savemoney. Of course, you might need
money for emergency you mightalso need to buy some thing more
(02:10):
expensive, like a car savingmoney might help you buy a car,
put a security deposit onapartment or pay for something
else expensive, such as buying ahome, how do I start a budget
and this article, they're gonnahave a different approach. And
then what I say is do yourtracking first, and we're going
(02:35):
to cover my approach a littlebit later on. But the generic
approach is, is to start abudget by gathering your bills
and pay stubs. Think about howyou spend money besides paying
your bills. For example, do youbuy a coffee cup of coffee every
day, after a month that coffeemoney could add up to an expense
(02:55):
you might write down. When youhave your bills and paste out,
write down your expenses andexpense is money you spent,
write down how much money youmake. This is called income,
subtract your expenses from howmuch money you make. This
article is consumer.gov. And isreally, really a basic article.
(03:19):
If the number is less than zero,you're spending more money than
you make. Look for things andyour budget you can change maybe
something you do not need or away to spend less. Again, I call
it control center because youhad identified a problem and now
you're gonna get control of it.
(03:41):
And what if I don't get paidevery month? Well, then they say
average it out. How can I use mybudget? A budget is something
you use every month a writtenbudget will help you see where
you spend money, see where youcan say make a plan for how to
spend and save your money. Whyshould I say money while you
(04:01):
need an emergency fund savingsmall amounts of money right now
might help you later. Everyonehas expensive they do not expect
expensive things. Sometimes weneed to buy a car or vacation or
home. Your goals maybe you wantto pay for college classes.
Maybe you need to visit familyin another country. You can plan
(04:22):
for these goals and save money.
You might not have to use acredit card or borrow money to
pay so you saved the day so youcan afford to pay for something
tomorrow. And that way you don'thave to use credit. Basically
what that article is trying totell you. Then it gives you
other examples for one monthwrite down everything you spend
small expenses like a cup ofcoffee can add up a lot of
(04:45):
money. They liked that coffeething. Pay for your credit card
only if you can pay the fullamount when the bills come down
comes due. That way you do notpay interest on why You owe her
saying use your credit card likecash. Now I know a lot of you
already have a debt problem,because you didn't use your
(05:07):
credit card like cash. And whatI mean by that is, you don't
charge something on a creditcard unless you have the money
to pay for it. Not six monthsfrom now, but bomb friday of
every week. And you go into yourcredit card online account, and
you pay it off every Friday, orat least pay it off every
(05:29):
payday. So you don't want tooverspend. Because if you're
paying out off every payday, hemight run out of money. And then
you're going to use your creditcards more to get by until next
payday. And you're gettingyourself deeper into debt. So we
want to try to avoid thosethings. How to make a budget,
collect all your bills, stackthem up, put them in order, and
(05:52):
order by category, you got tocategorize housing,
transportation, food, clothing,entertainment, savings, and
credit cards. Other expenses,like they're just saying food,
gas, entertainment, clothes,school supplies, money for
family on that plan expenses,like car repairs are medical
bills. That's called anemergency fund, credit card
(06:14):
bills. Bills, you pay the sameevery month like rent bills that
might change every month, butyou're still paying every month
like utilities, bills, you payonce or twice a year, like car
insurance, you might have billsthat change every month, look at
what you pay for the same monthlast year, you may need to $200
for your gas bear bill inJanuary, but $30 in July, you
(06:38):
want to go back over severalmonths, four months, six months,
add them all up, divide it getan average. And that's what
you're gonna use in your budget,use an average over a period of
time, if you got a year's worthof bills for the same like your
gas bill, add them all updivided by 12 and use the
(06:59):
average some months you'll beover and so much you'll be
under. But you'll be close inthree to six, three or four to
six months of those, you'll beclose. How to use a budget.
Okay, well, that's done withthat article. Now, that is the
consumer.gov website.
(07:22):
We're talking about a budget,our control center, I think in
the article they was having youdo it at manually writing it
down or doing it in aspreadsheet, he can use an app
to do these things. There's alot of good apps out there. But
if you're really struggling witha lot of debt, you don't want to
spend the money today, because$15 a month adds up over time.
(07:47):
So we don't want to spend thatright away, we want to try to
get some of our debt undercontrol first. So let's use a
spreadsheet to do our budget forthe first six months or so get a
couple of those credit cardspaid down and start making some
progress. Before we startspending $15 a month for an app.
(08:08):
That's my position here. I'm notsaying they're anything good or
bad about them. I'm the same wedon't want to spend the money if
we're struggling with a lot ofdebt. So we talked about
tracking, I talked about my debtreduction plan, just as a
reminder, quit using credit,make the minimum payment, build
(08:29):
up an emergency fund, build itup to over to the maximum of say
4000, leave a minimum of 1000 inthere, take the difference, the
$3,000 and apply it to one ofyour debt. That's the debt
reduction plan. Tracking isusing an app where you put in
(08:50):
all the transactions and fromyour checking account, your
savings account and your creditcards. Hopefully, if you're
doing step one, the debtreduction plan, you're no longer
using your credit card. So youjust need to update it with the
payments you apply and maybeinterest that gets posted to it.
(09:12):
So it's gonna be a monthlything, a couple of transactions.
So that is not going to take awhole lot of time. your checking
account is where all your moneyflows in and flows out of. If
once you get your budget undercontrol and you see your
spending less than what youmake, then you keep a minimum
(09:35):
balance in your checkingaccounts. 300 500 600 a minimum
balance that you never go below.
That way you have a buffer therein that's come for help you quit
paying bank fees, especiallyoverdraft fees monthly balance,
you know their monthly accountfees that they charge you every
(09:57):
month. If you're paying amonthly fee for your checking
account, go to the bank, see ifthey have another plan where you
don't have to pay anything. AndI bet before you do that, it's
your average balance up to 600bucks and don't let it get below
it, or $300 and don't let it getblood so they can see that, and
then they'll put you in achecking account, that may be
(10:20):
better for you, where you don'thave to pay a monthly fee. And
don't pay overdraft fees don'toverdraft, because that's gonna
charge, they're gonna charge you35 bucks every time. And then if
you have a reserve account thatkicks in, they're going to
charge you entrust, the bankmakes a bundle of money off of
(10:40):
you by you not taking care ofyour own money, the bank will
benefit from you, because you'renot doing your due diligence and
doing what you need to do tokeep your personal finances
under control. They takeadvantage of you, the control
center budget, the most placesthat you go was gonna say,
(11:06):
gather up all your bills thatyou pay over the last month,
start saving them keep your paystubs, and you do that for a
month or two, and then you writeit down. But there is a formula
for how you set up your checkyour your, your budget, the
income goes at the top. So wehave basically four to five
(11:30):
columns going down. The one onyour left, or column A is your
description column. Column Bwould be your control center
column or your budgeted amountcolumn, the amount of money that
you say that you're trying toachieve not to go over C is the
actual amount in the currentmonth, d is the difference
(11:56):
between B and C. And then Ewould be a column you used to
set up percentages. So you cansee what percent of your income
you're spending for housing, andall the different categories and
all your different loans.
Because that's going to help youstay keep your personal finances
(12:21):
under control. So we got Athrough E, it's description,
control amount, actual amount,the difference, so on, from top
to bottom, we're gonna put ourincome at the top. And we're
gonna if if you and yoursignificant other both work, get
paid weekly, you need 10 linesthere because there could be up
(12:46):
to five pays per month. If youget paid every week, depending
how the month falls, some monthsyou will need it some months you
will need it. If you get paidtwice a month, you need five or
six lines just to make sure sixbecause so two months a year you
get paid three times. So itdepends on how often you get
(13:06):
paid on how many lines you have.
But give yourself enough roomspace now. Give you some some
external lines and then put yourtotal and have your total
income. That's your first step.
And that's the easiest part ofthe whole budgeting process. So
what numbers are you gonna usefor your budget amount? Well,
(13:30):
member when I start you out ontracking, I said, Go back 30
days go back to the start of themonth, the previous month in
which the month you're in. So ifyou're in the second of a month,
you go back to previous month,and are all your transaction
from the first of the previousmonth all the way to the current
(13:51):
date, be your income, that's allyour expenses. And that's kind
of seem a like a lot of work.
And it is at the beginning. Butover time as you learn the app
that you're using. You can setup reoccurring entries, you can
set up all kinds of stuff thatmakes it easier. When you start
typing a name in, it's gonna popup you select it is going to
(14:12):
have the category selected. Soyou'll be consistent on where
you're going. If you have agrocery store, you put your name
in the grocery store, and it'sgoing to come up groceries. Now
if you buy gasoline at that sameplace, he needs to put the name
of the grocery store and thenfuel after it. And then you can
(14:33):
select that and it could be autofuel category. That's just a tip
there to make things easier. Soyou're consistent on where the
things are getting posted, whichcategory. All these apps are pre
set up as far as categories. Youcan go in and update them.
(14:57):
Change them do whatever youwant. I've talked about how to
rearrange them. So they printout in the order of your control
center or your budget. So thatwhen you put set up in your
control center, and you do, theweekly, or every two weeks
update of your budget, that theprintout, your report comes out
(15:20):
similar or fairly close to wow,you have your control center
setup, that makes life so mucheasier. And I'll make it so much
faster. Now, in your trackingapp, you're gonna do a report by
category.
(15:43):
And you're gonna start from thebeginning of the current month,
for at the very beginning,you're doing as from the
previous month, from thebeginning of the previous month,
to the end of the previousmonth. Why, because those are
the numbers you're going to usefor your control numbers, or
your budgeted amount. Noticethat I didn't say you're cutting
(16:06):
back anywhere yet, you're notdoing anything, we first
starting out and want to seewhere we are, and see how we
have done in the past up to thispoint. Now, I would expect that
you're probably gonna get somesurprising information here. So
don't be alarmed, it's just amatter of getting your finances
(16:29):
under control. And this is thestep that's gonna help you
achieve that. So we're using theprevious month for beginners, we
put it in. And the first thingyou want to notice when you put
in your numbers and your incomeand all your expenses, your
expenses by category, housing,transportation, they can be in
(16:50):
any order you want. But thecategories are housing,
transportation, food, savings,and other debt, hobbies,
clothes, whatever else you'veset up, you put those numbers
in, and he's going to total upyour income, we're in your
control your control center now,and you put in your income, and
(17:12):
then you have in yourspreadsheet and you have a
total, which is going toautomatically added up for you.
You put in all your expenses. Atthe bottom you have a grand
total expenses, and then you'regonna have a difference, did you
spend more than what you make?
And I'll tell you, if you have abig negative number at the
bottom, that means you spendmore money than what you make.
(17:35):
And you're wondering how did Ido do that you did that by using
credit cards, he spent more andyou didn't take into account
that you still have a balance onyour credit cards that you're
not paying them off. Every week,or every two weeks or every pay
day or every month, when I wasreally struggling with a lot of
(17:59):
debt. Personally, I would nightstarted using my credit cards,
like cash, I made sure I had themoney before I charged
something, then I charged it, Igot the product, I waited a
couple days to make sure nothingwas wrong, I didn't have to
return it and all those things.
(18:21):
And then I went in and I paidthe balance off for at least the
amount that I just purchased.
Because I was trying to keep mycredit balance from rising. So
that's what I did. That's whatyou should do, you have to think
that that credit card is cash inyour pocket. And if you don't
have the money, you cannot usethat credit card. I'll be back
(18:45):
in one moment with my finalthoughts. If you're interested,
and the software that I usepersonally, to reduce my debt, I
have a link in my show notes,shop financial.com, copy and
paste it. And it will take youto the website. If you are
looking for any spreadsheets orother information that I talk
(19:06):
about from time to time. I havelinks in my show notes. And I
always have links to thearticles I refer to and my show
notes. Plus other things likethe happy draft.org, which is a
another organization that helpsyou with your debt. So feel free
to go to my show notes and linkand check out whatever I'm
(19:27):
putting out there. I appreciateit very much. If you would like
to make a contribution to helpkeep this alive, then I would
gladly accept that, say my shownotes. Thank you very much. Now
let's get back to control. Yougot to update the actual column,
every pay period and the use payperiod because that's when you
(19:51):
have more income you're gonnahave to go in there to update
your income. So let's update allyour spending at the same time.
while we're there, so that wouldbe column C, and you're gonna do
it. So the beginning of themonth, you're going to either
copy and paste the previousmonth's budget control center
amount, or if it's changed quitea bit, and you'll know because
(20:14):
your numbers will be way off, somaybe that all your categories,
you stayed under the dollaramount. So instead of using the
control center mount from theprevious month, let's use the
actual mount from the previousmonth, and copy and paste it
over into your control centeramount, because maybe you've
(20:36):
made some adjustments to yourspending, then you've updated
things and it's flow through sonow that those monthly expenses
is going to be a little bitless. So let's use that for your
control set. So we're slowlyover time perfecting our
numbers, and getting the close,you'll never be done doing that.
(20:58):
That goes on and on. Because yougot inflation, the price of gas
goes up and down, your insurancewill go up and down, you'll
change insurance policy to savesome money, you'll do away with
some entertainment, and thenyou'll get new entertainment.
And it's ever changing. So wewant to try to get your control
(21:20):
amount as accurate as possible.
So that we can always hit itclose to zero or not off by very
much has put it that way. Maybeyou go over $100 This month, or
and then you had three monthswhere you're 30 or $40, under so
(21:42):
you're kind of close, but notperfect, you'll never get a
perfect end to the net secondmonth. So we got a new control
amount. And what you gonna do isfrom your tracking, go from the
beginning of the month to thecurrent date. And you're going
to update all those numbers andsee how you're doing. Now there
might be some things like yourmortgage payment or car payment
(22:06):
that you paid, there'll beexactly it'll come to zero, the
difference will be zero, whichthat's what you're looking for.
Maybe you didn't pay all yourbills that month. So you're
gonna still be way under yourcontrol amount, which is good.
Does next time you do it thesecond pay period, beginning
(22:28):
among to the new current date,you update all your numbers. Now
on your income, you want to doit because you got one line for
every pay period. So the onlything you're updating is adding
another pay period and thedollar amount that you actually
made. Especially if your incomefluctuates week to week or paper
(22:49):
to paper, it was always the samethen you just enter the second
pay period, the same dollaramount and it's easy peasy. So
we update everything in again,we look at what's going on. Are
we over? Have we've gone overspent on any category and then
look at the detail. Why are youdid you overspend, maybe you had
(23:12):
some expense in that categorythat you only pay once a quarter
or semiannual once a year. Andthat's the case that's okay.
Maybe we need to analyze thoseyearly payments divided by 12
and put it in there. So we'll beunder for 11 months and then we
(23:33):
have one month will be over butthe net of the total is going to
be close to the same thing. It'sjust keeping you aware that you
have that particular expense. Soas we do that
the next column is percent toyour gross income. What percent
of your gross income is yourhousing category, your
(23:56):
transportation category, andwhat percent to your gross
income is your mortgage payment,your loan, your auto loan. Now
if you have an escrow includeyour insurance and real estate
taxes, that's fine. bed shouldgive you a number of how much of
(24:17):
your gross income that you'respending and gross income as
before taxes are deducted. Andbefore any retirement alimony or
anything like that is deductedas the gross amount of pay that
you make per pay period. Andwe're gonna look at that on a
monthly basis. So how much doyou get you make in a particular
(24:40):
month and take that and divideit by our expense. Come up with
a percentage your housing, whichshould include your insurance
and real estate taxes shouldprobably be around 35 to 40% or
less. Kitten under that isbetter your transportation Asian
(25:00):
eight to 12% of your food 10%.
And if any of these categoriesand you can Google these
percentages and see what otherexperts say, and come up with
some numbers, right, you know,printed off, write it down, have
it as your guidelines so you cansee how you're doing compared to
what the experts things youshould be doing or what the
(25:23):
average person is doing. So athelps you control your spending,
inhale, help identify where youmay have overspent in the past.
So if you have a loan, such as acar loan, and your
transportation is four or 5%,over what you think it should
be, then that means you may bebuying a too expensive car and
(25:47):
you finance too much. Or maybeyou get upside down on a car and
and you had to get an you got anew car and you're rolling the
loan over. So you're paying fortwo cars on one loan now. And
that got you, you know, over theamount. So we're ever category
that you overspent III have tomake adjustments someplace else.
(26:08):
Because you cannot spend morethan 100% of your income comes
down to that. So if you got 2%too much from transportation,
and your housing is pretty closeto where it should be. You gotta
cut back on your food? Or whatmakes up your food expense. Do
(26:28):
you have delivery? Do you goout? To eat a lot? Or do you
cook everything at home? So youneed to look to be more
efficient. You need to look atways to say insurance for
example, entertainment, how canyou cut back their do away with
cable TV and go 100% streaming Idid that years ago, no problems,
(26:51):
and I save quite a bit of money.
Your control center not only isgonna give you the numbers and
gave me an idea what's going on,it's gonna help you decide where
you need to cut back where youneed to get your spending under
control. Harder that should beyour savings and other debt,
(27:13):
which the other debt would becredit cards. Other debt is any
debt that can't be assigned toanother category. Your mortgage
is your housing, your car loansis transportation. I think he
got the point. They're sayingthat you should pay 10% of your
gross income, your income andyour savings and your credit
(27:34):
card. But if you're spending 40%of your income to pay your
minimum, mountain dew on yourcredit cards, you definitely
vote overspent in the past. Andeither you have a spending
problem or something happenedand you know what that would be?
So you need to get your financesunder control and start taking
(27:56):
control of your money so thatyou're not working for the money
that the money is working foryou and you'd be glad you did.
So
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