October 15, 2023 • 29 mins
Getting debt under control a plan is needed. Debt Reduction Plan must do more than just reduce debt to be successful. More about the Happy giraffe Debt Spreadsheet to work with every plan.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Charles McDonald (00:04):
Hello, I'm your host, Mr. Chuck, I retired
accountant turned truck driver,I reduce my debt in a relatively
short period of time, debtreduction, to achieve financial
freedom takes commitment,confidence determination.
(00:24):
debt reduction plan, gettingdebt under control a plan is
needed. debt reduction plan mustdo more than just reduce debt to
be successful. And more aboutthe happy giraffe.org. That
spreadsheet to work with everyplan, I have a link in my show
(00:50):
notes to the happy draft.org Forslash live, where you can
download two good spreadsheets.
One of them is the debtspreadsheet, which we put in all
the debt you're trying to payoff. For example, if you're
trying to pay off your creditcards, he just put in your
credit cards, all theinformation, the name, the
(01:11):
amount you owe the interestrate, maybe even a due date. And
then it will do a give you asummary. Bow how long it's going
to take you to pay it off, youalso put in the minimum payment.
And then you put in how muchextra you can pay. But if you're
(01:32):
following my plan, you put inzero there. But we can still
make this work by when you go tothe tracking part of that
spreadsheet, you put in how muchyou actually pay. And you keep a
running balance, you update thebalance, and also gives you if
you're ahead of schedule behindthe schedule, how you're doing
(01:56):
all that kind of stuff. But it'sa great spreadsheet. If you can
get all your informationtogether and be in one place. In
this at a glance, you'll knowwhat your unpaid balances are on
all your credit cards, forexample, and you can just keep
things under control. I alsohave a link in my show notes as
(02:17):
to ferry last one. For those ofyou who may be interested in the
software, I personally use toget out of debt, I couldn't get
it to work as far as justclicking on it and pulling up
the link to the website, youhave to copy and paste the link
to your browser to find thesite. And in the upper left hand
(02:42):
corner it should read Mei LANand Chuck, I'm Chuck Milan is my
wife so that you know you're inthe right place. So what is a
debt reduction plan? A debtreduction plan is a plan that
you put together for you tofollow to help you get your debt
under control. And it gives youguidelines on how you're going
(03:09):
to achieve that process. So ifyou're overwhelmed with debt, I
have no idea how you're gonna doit. Or maybe you've been making
extra payment on all four orfive of your credit cards,
you've been paying $50 $75 extraa month, on every one of your
(03:30):
credit cards, you're alwaysbroke, you're living paycheck to
paycheck, he can ever seem toget ahead, he start getting one
unpaid down, maybe a couple ofthem getting close to being paid
off, and something happens. Andyou have to use them again. So
you never really get them paidoff. If that sounds familiar,
(03:52):
you're never gone to achieveyour goal of getting your debt
paid off, or at least yourcredit cards. And then
eventually your car loans,personal loans mortgages. I was
motivated to get it done. So Ireally cut back on all my
(04:12):
spending in every area Ipossibly could. Now there's some
things you can't price ofgasoline keeps going up. And you
need that to go back and forthto work. You need to eat food,
you got to pay your utilities,you got to make your mortgage
payment or your rent payment. Sothere are things that you always
have to pay on an ongoing basisthat maybe you can't reduce. And
(04:37):
maybe you have trouble or maybeyou're in an industry where you
can't maybe change jobs to makemore money. That's what I did. I
changed jobs got a big increasein pay, which really helped my
cause. So here is my debtreduction plan. To end the
(04:58):
order, you need to do thanks.
And the first thing you have todo is quit using credit. Quit
using your credit cards, quitborrowing money, quit getting
payday loans, quit going to thepawn shop and pawning something,
(05:19):
he quit doing that, no longeruse your credit note, you got to
stop using credit. And you'rethinking, Well, how's that gonna
help me pay off my debt. But ifyou're not increasing your debt
every month, is a lot easier toget it reduced. And the only
thing that you're paying is theinterest, but you're gonna pay
(05:43):
the interest every month. That'swhy it's so hard to get
everything paid off. Becauseeven though you're paying extra,
most of your payment is going tointerest and fairy Ludo of it's
reducing your principal. Sothat's the first thing to do, he
got to stop increasing theprincipal amount. The second
(06:04):
thing you have to do is startmaking the minimum payments on
all your debts and all yourloans don't pay any more than
the minimum required. Andthere's a reason for that you're
struggling to pay your bills,you're struggling you live in
(06:25):
paycheck to paycheck, and partof that reason is all your cash
is going to these extrapayments, or while you're trying
to pay down something thenyou're struggling in other
areas. Let's quit doing that.
Number three, if you don't havean emergency fund, you need to
set one up. An emergency fund isnothing but a savings account.
(06:48):
If you don't have any, go to thebank or you have your checking
account, tell him you want toset up a savings account and
open it up, put the minimum inand the minimum might be
$25 $50. Whatever the bet yourparticular bank requires. And
why are you going to do that?
(07:11):
Well, because if we build up anemergency fund, and have a
minimum of $1,000, when thatunexpected expense comes along,
you don't have to use credit. Oryou can use a lot less credit,
your car could break down, youmight need new tires, a battery
(07:35):
appliance in your home couldbreak, a child could have an
accident need medical attention,you could lose to get sick, not
go to work, probably get laidoff. There's all kinds of
reasons why you need anemergency fund. So let's get
started and get it up to aminimum of $1,000. Now the
(07:59):
hardest part of all this plan isthe first one, stop using
credit, especially if you'vebeen using your credit cards to
pay your monthly bills. So ifyou're doing that, and you're
making extra payments on yourcredit cards, why are you doing
that you just increasing theprincipal, every month you're
(08:21):
getting farther behind yourinterest keeps going up, and you
never got to get out from underit. That's why you don't do
that. So that's step one, quitusing credit, make the minimum
payments, that's going to happenthe same month soon as you start
this plan that's gonna happen onthe very next payment you make
(08:43):
on any of your debt, the minimumamount, and then anything you
have, that you've been applyingto that external debt, or maybe
using credit instead, you know,put at least $50 To get started,
get that savings account set up.
Because we want to start putting$10 A pay in there or $20 a pay.
(09:03):
So slowly build it up whileyou're getting the rest of your
finances under control. Thispart of the process might take
30 to 90 days. Maybe it won'ttake us long, maybe it could
take longer. But while we'redoing this, we're slowly
building our emergency fund.
(09:26):
We're paying cash. Cash, I meanis paying money directly from
your checking account. You'repaying all your your your
monthly expenses on time. You'repaying all your loans on time.
You're paying all yourutilities, you're buying and
paying for gasoline, groceries,whatever else you may have.
(09:47):
You're paying for it withoutborrowing money and you're
making timely payments. Andwhile you're doing it any little
bit extra cash you have is goinginto us the MSA count. That's
the main part of the plan. Butyou're thinking to yourself when
I'm going to pay down debt,well, that's a good thing to
(10:10):
think. Because eventually youwill, once you build up your
emergency fund to a minimum of$1,000, you keep building it up
until you have three to $4,000.
Once you have the three, the$4,000 range, in your savings
account, all your monthly billsare paid, or at least you have
(10:32):
the money to pay them in yourchecking account. And they're
not currently due. But you haveeverything under control, you
your timely and all yourpayments, you got your credit
cards, all your loans are beingpaid your utilities,
everything's caught up, you gota positive balance in your
(10:53):
checking account, you got threeto 4000 range in your savings
account, everything's lookinggood pay day is tomorrow, or
maybe it may be at the end ofthe week, and we're looking at
Tuesday, and at the end of theweek, you get another paycheck,
and you're gonna have everythingpaid for without that check, you
don't pretty good. So at thispoint, now, you don't have to
(11:18):
have meet all those parameters.
But mostly everything somewhatpaid up to date, or be able to
pay up to date without usingyour savings and have the three
to 4000 of rent range betweenthree to 4000, you take the
access over the your minimum of$1,000. So let's say you have
(11:41):
3000, your minimum is 1000, youhave $2,000, you apply it to one
of your debt, if we're trying topay off your credit cards,
you're gonna pay off one ofthose credit cards, or you're
gonna pay down one of thosecredit cards. Now, the very
first time you do this, it'syour choice. You can pay if you
(12:05):
have a credit card with abalance of 2000 or less, or the
$2,000 or bring it to zero, paythat one first. If you don't
have any of those, then pay theone with the highest rate of
interest, and may be the largestbalance that if you have a
(12:28):
credit card, let's say one witha $3,500 balance, we're gonna
apply 2000, let's apply it tothat $3,500 One, so that it's
now 1500. The next time you havethe money, you pay off that one,
or you can still be makingminimum payments, so it's gonna
(12:48):
be creeping down a little bit.
But then the next time you go todo it, if it's not already paid
off, you pay off that one. Andthen from now on, after you get
that first one paid off, youdon't use that credit card, you
do not cancel that credit card,take it out of your wallet, put
it in someplace safe. And don'tforget you have it because
(13:10):
someday, the next year, so hemight be able to use it to your
advantage. Now we're going toconcentrate the next time on
applying it to the highest rateof interest first. And then you
got to keep doing this over andover and over. Now as you go
when the first one you get paidoff, your minimum payment is
(13:35):
going to go away. So that'sgoing to give you a little bit
more to put in your savings. Soyour savings will grow a little
bit faster than when you get thesecond one paid off, the same
things gonna happen, yourminimum payments gonna go away,
your savings gonna grow a littlebit faster. And as you go,
you're gonna pick up speed overtime as you get less and less
(13:59):
debt. The last minimum paymentsyou have, the more you have the
put in savings. And the more youhave in savings, the faster it's
gone to grow, the sooner you'llbe able to apply a chunk of
money to another debt. It's afairly easy concept. But it's
hard for a lot of people to dobecause they cannot stop using
(14:24):
credit. So that's a problem.
Maybe they have trouble payingtheir monthly bills because they
have too many. Maybe theirincome is not high enough to
even cover monthly bills. Sothey were using credit cards to
cover the difference. So youneed to get rid of thanks. If
(14:47):
you're paying cable TV over 100and anything over 100 bucks on
cable TV, you're paying toomuch. You got to get rid of
cable TV and pick one or twostreaming plan. forms and
stream. Because if you're payingfor Internet service, and you're
not using streaming, you're notgetting the full benefit of that
(15:12):
payment for your internet.
That's the way I looked at it.
So maximize my internet servicethat I was paying for no matter
what I cut out cable, I got twochannels that I stream, and I'm
good to go and I'm save I saveda bundle of money. Another way
(15:33):
to save money is to once a yearreview your plans and call your
provider and see what they haveavailable for the same service.
Maybe they got a another plan ata lower price, because they're
always trying to attract newcustomers and tell them, if you
(15:54):
don't get a price reduction, ifhe can't do anything to save you
money, you're gonna go somewhereelse, because there's three
other providers out there thatcan give me the same service for
less money. And maybe they'llwork a deal with you to keep you
as a customer, the only thingyou can do is try or cancel it
(16:16):
and move on, don't be loyal toany one service, because the
longer you're there, the morethey're going to charge you and
the less loyal they are towardyou, they're gonna take
advantage of you for notcontinuing, updating and keeping
track of the pricing stuff.
Because they'll leave you lockedin at higher price, they have no
problem doing that. So we needto, you know, look at where your
(16:38):
money is going, you got to betracking everything, the money
coming in and everything goingout, you need to have a control
center. And then with those two,you have a debt reduction plan,
you set yourself some goals, Iwant to pay off all my credit
cards. That's goal number one.
Now how do I do it? Well, I needa plan. Here's my debt reduction
(17:01):
plan, I quit using credit, Imake the minimum payment, I
start an emergency fund, buildit up to a minimum, and then I
apply big chunks of money when Ihave the money in my savings
account, the longer it's in yoursavings account, the bigger the
emergency fund. So as somethingwould happen, you have more in
(17:21):
your savings emergency fund, youcan cover a bigger disaster
without using credit, fairlyeasy thing to think about. I'm
gonna happy draft that or hastwo spreadsheets, the debt
reduction, they have a debtspreadsheet where you list all
(17:45):
your debt that you're trying topay off. And then you have a
tracking area where you put inyour monthly payment how much
you paid for the month, you putin the running balance. Now you
get this information eitheronline from your account, or
from the paper bill that you getor have that remember that your
(18:07):
updated balance is always gonnabe one month behind. Because you
may have made a paymentrecently. And it's not updated
yet because your statement isfrom the last period. So keep
that in mind. He can go online,maybe get a better, more current
up to date balance, and then hecan see what's going on, you can
(18:29):
see all your for every one ofyour credit cards, you can see
all your minimum payments. Andyou can see where he applied a
big chunk of money. So you know,it tells you the balance at the
top, it gives you a rate ofinterest the name, so you can
make informed decisions on howyou want to pay down your debt.
(18:51):
If you want to use the Avalanchemethod that's paying the highest
interest rate first, to pay inthe lowest interest rate last to
the snowball method where youpay the lowest bounce first to
the highest bounce. I do a mixof that I always start paying
(19:13):
the lowest balance off firstbecause that brings a credit
card to zero. And the reason Iwant a credit card was a zero
balance is because maybe threemonths six months down the road
into the future. They may offeryou a zero rate interest on any
(19:34):
other debt that you transfer totheir card. So if you have a
credit card that has a interestrate of 20% 17% 15% and you can
pay 3% or 5% to transfer it ontothe zero card and then have 12
(19:56):
months or 18 months to pay itoff. Interest Free Be, you're
gonna save a chunk of money, andyou're going to pay down your
debt a little bit faster, that'swhat I did, they're gonna offer
you these incentives to putmoney on there and use it to
your advantage. If you cantransfer a mound of money onto
(20:20):
there, that's going to beinterest free, or you can pay
$50 a month, $75 a month on it,and get it paid off and under
the terms of the card. So youhave a zero balance before that
date comes, you know, do, you'regonna save a chunk of money, and
you're gonna take that highinterest rate card, and you're
(20:42):
gonna lower the balancesignificantly, to 3000, like
making a big payment, you'regonna pay a little bit less
interest, which means you'regonna apply more to principal,
so it'd be paid off faster.
That's why you never close yourcredit card, you use them to
your advantage. And also, if youclose it out, you reduce your
(21:04):
amount of available credit, thathurts your credit score. So
we're, if you've been strugglingwith debt, and your credit score
is probably not that great. Youdon't want to close any of these
cards you pay off, because thatwill kill your credit score
because your income, the creditratio will change. So if you
(21:25):
have a lot of credit cards waszero bounce, like three or four
was a zero balance,you got a lot of income, you got
a lot of available credit, theylove that you get a higher
credit rating. Once again, ifyou're interested in the
software, I talk about coming upthat I personally use to pay off
(21:46):
my debt, I have a link in myshow notes, the very last one,
you most likely have to copy andpaste it in order to get it to
work. I couldn't figure out howto get it to work by just
clicking on it. If it works,when you click on it, and you
great if not, you need to copyand paste it. And upper left
(22:08):
hand corner should say mainlandand Chuck. I'm Chuck. My wife's
may land.
Unknown (22:16):
That's our website.
Look it over. And
Charles McDonald (22:19):
if you need to contact me, there's a contact
information in there. Send me anote, if you're not interested,
fine. I'll be back in one momentwith my final thoughts. If
you're interested in learningabout an online software that
helped myself get out of debt,it does tracking, budgeting, and
(22:43):
keeps track of all your assetsand all your debt. And even
tells you how much and when totransfer money into your savings
account. And how much and whento transfer money to your debt
and which debts to pay off inorder. First. It's not cheap.
It's a one time payment. But itwill definitely be an
(23:06):
investment, something andyourself and an investment in
your personal financial life. Ifyou're interested, send me an
email at reduce debt increasewealth@gmail.com. And I'll send
you the information about thisonline software that worked
(23:29):
great for me. If you'restruggling to live and you're
living from paycheck topaycheck, you probably have two
problems. You have too muchdebt, which is forcing you to
make those debt payments, whichis leaving you're short on other
(23:50):
things that you need to do tosurvive, to live, like buying
groceries, gas in the car.
Whatever the case, paying yourutilities, you need to get your
debt under control. And you dothat by having a tracking app.
He track everything that you'redoing and your finances. You
have a control center, which isnothing but a budget. I call it
(24:12):
a control center. And if youlisten to my episodes, it's not
that difficult. You can go tohappy draft and use their first
spreadsheet in that web page. Ifyou've been tracking in you know
your numbers, and you can put ingood information. It will tell
(24:32):
you how much you have availableto spend every week. What you
how much money you have, thenyou use that money to pay for
your groceries and pay for yourgasoline and whatever else that
you're paying for it. Just becareful. You don't go over that
dollar amount. If you stay underthat dollar amount, you'll save
(24:54):
a little bit you can throw thatsavings into a say payments that
count, and you can stay ontrack, you can use the debt
Sheet worksheet they have to getall the debt you're trying to
get under control, I would startwith just first doing credit
cards only, then once they'reall paid off car loans, if you
(25:15):
have personal loans, you canmaybe do car loans and personal
loans, then finally, you canwork on your line of credit, or
your first mortgage or whateveryour mortgage situation would
be, it's helpful, and you'll beright there, all the information
that you need is in front ofyou, you can see it, you can
(25:37):
make an informed decision, youknow what you're doing, this
makes this process much easier.
So once again, debt reductionplan, your goal was to get out
of debt. This is generally say abroad statement, I want to pay
(25:58):
off debt, I want to name moredebt, talk, credit cards, car
payments, everything. That's mygoal, how am I gonna do it? Well
not start making, I'm going toquit using credit, I'm going to
make the minimum payment, I'mgoing to build up my emergency
fund to at least $1,000. Andeventually, over time as my debt
shrinks on the money increases,I get my credit cards paid off,
(26:21):
I increase my emergency fund to$1,500, I get my car loans paid
off, I increase my emergencyfund to $2,000, I get a line of
credit paid off, which is aequity line of credit on my
home, I increase it to $3,000.
Because now everything I got isa mortgage which I can pay
easily every month play increasemy emergency fund or my savings
(26:44):
to a point where I have aminimum of three months worth of
expenses. If something wouldhappen, and I can't go to work
or if I lose my job, whateverthe case, then I can get by for
at least a minimum of threemonths before we need to panic
may give me time to recover. IfI had an accident, maybe it'd be
(27:10):
time to find a new job. Whateverthe case, may be, you don't have
to make rash decisions in thehurry. You can take it and make
informed decisions over time,because you have the finances to
do it. That's the purpose of anemergency fund. Don't get too
bogged down in that slowly bringit up. If you want to increase
(27:34):
it by 50 bucks. After you payoff your first credit card and
then another $50 that you payoff, you can do it like that and
gradually increase it. So youjust have a little bit more a
little bit more and a little bitmore. That whatever you do,
write it down, you need a plan,quit using credit, make the
minimum payment, have anemergency fund, set yourself up
(27:58):
a minimum, keep building up thatemergency fund until you have
access of your minimum, applythe excess to one of your debts,
however you choose to do it,continue doing everything and
repeat the last part over andover. Over time, it will get
faster your savings youremergency fund will grow faster,
(28:20):
you'll start paying down moredebt and one chunk, your debt
will start disappearing faster.
And it just speeds up up and upbecause you got the same income.
Hopefully you'll get a pay raisein there and I'll speed it up a
little bit also. But you got tostay focused and you got to
(28:42):
continuing doing all those stepsthe whole time. Remember the
emergency fund is for emergencyonly not to pay your monthly
bills as far as somethingunforeseen that happens that you
need money so you don't have touse credit. You'll be glad it
(29:03):
did. So
Hello, I'm your host, Mr. Chuck, I retired
accountant turned truck driver,I reduce my debt in a relatively
short period of time, debtreduction, to achieve financial
freedom takes commitment,confidence determination.
(00:24):
debt reduction plan, gettingdebt under control a plan is
needed. debt reduction plan mustdo more than just reduce debt to
be successful. And more aboutthe happy giraffe.org. That
spreadsheet to work with everyplan, I have a link in my show
(00:50):
notes to the happy draft.org Forslash live, where you can
download two good spreadsheets.
One of them is the debtspreadsheet, which we put in all
the debt you're trying to payoff. For example, if you're
trying to pay off your creditcards, he just put in your
credit cards, all theinformation, the name, the
(01:11):
amount you owe the interestrate, maybe even a due date. And
then it will do a give you asummary. Bow how long it's going
to take you to pay it off, youalso put in the minimum payment.
And then you put in how muchextra you can pay. But if you're
(01:32):
following my plan, you put inzero there. But we can still
make this work by when you go tothe tracking part of that
spreadsheet, you put in how muchyou actually pay. And you keep a
running balance, you update thebalance, and also gives you if
you're ahead of schedule behindthe schedule, how you're doing
(01:56):
all that kind of stuff. But it'sa great spreadsheet. If you can
get all your informationtogether and be in one place. In
this at a glance, you'll knowwhat your unpaid balances are on
all your credit cards, forexample, and you can just keep
things under control. I alsohave a link in my show notes as
(02:17):
to ferry last one. For those ofyou who may be interested in the
software, I personally use toget out of debt, I couldn't get
it to work as far as justclicking on it and pulling up
the link to the website, youhave to copy and paste the link
to your browser to find thesite. And in the upper left hand
(02:42):
corner it should read Mei LANand Chuck, I'm Chuck Milan is my
wife so that you know you're inthe right place. So what is a
debt reduction plan? A debtreduction plan is a plan that
you put together for you tofollow to help you get your debt
under control. And it gives youguidelines on how you're going
(03:09):
to achieve that process. So ifyou're overwhelmed with debt, I
have no idea how you're gonna doit. Or maybe you've been making
extra payment on all four orfive of your credit cards,
you've been paying $50 $75 extraa month, on every one of your
(03:30):
credit cards, you're alwaysbroke, you're living paycheck to
paycheck, he can ever seem toget ahead, he start getting one
unpaid down, maybe a couple ofthem getting close to being paid
off, and something happens. Andyou have to use them again. So
you never really get them paidoff. If that sounds familiar,
(03:52):
you're never gone to achieveyour goal of getting your debt
paid off, or at least yourcredit cards. And then
eventually your car loans,personal loans mortgages. I was
motivated to get it done. So Ireally cut back on all my
(04:12):
spending in every area Ipossibly could. Now there's some
things you can't price ofgasoline keeps going up. And you
need that to go back and forthto work. You need to eat food,
you got to pay your utilities,you got to make your mortgage
payment or your rent payment. Sothere are things that you always
have to pay on an ongoing basisthat maybe you can't reduce. And
(04:37):
maybe you have trouble or maybeyou're in an industry where you
can't maybe change jobs to makemore money. That's what I did. I
changed jobs got a big increasein pay, which really helped my
cause. So here is my debtreduction plan. To end the
(04:58):
order, you need to do thanks.
And the first thing you have todo is quit using credit. Quit
using your credit cards, quitborrowing money, quit getting
payday loans, quit going to thepawn shop and pawning something,
(05:19):
he quit doing that, no longeruse your credit note, you got to
stop using credit. And you'rethinking, Well, how's that gonna
help me pay off my debt. But ifyou're not increasing your debt
every month, is a lot easier toget it reduced. And the only
thing that you're paying is theinterest, but you're gonna pay
(05:43):
the interest every month. That'swhy it's so hard to get
everything paid off. Becauseeven though you're paying extra,
most of your payment is going tointerest and fairy Ludo of it's
reducing your principal. Sothat's the first thing to do, he
got to stop increasing theprincipal amount. The second
(06:04):
thing you have to do is startmaking the minimum payments on
all your debts and all yourloans don't pay any more than
the minimum required. Andthere's a reason for that you're
struggling to pay your bills,you're struggling you live in
(06:25):
paycheck to paycheck, and partof that reason is all your cash
is going to these extrapayments, or while you're trying
to pay down something thenyou're struggling in other
areas. Let's quit doing that.
Number three, if you don't havean emergency fund, you need to
set one up. An emergency fund isnothing but a savings account.
(06:48):
If you don't have any, go to thebank or you have your checking
account, tell him you want toset up a savings account and
open it up, put the minimum inand the minimum might be
$25 $50. Whatever the bet yourparticular bank requires. And
why are you going to do that?
(07:11):
Well, because if we build up anemergency fund, and have a
minimum of $1,000, when thatunexpected expense comes along,
you don't have to use credit. Oryou can use a lot less credit,
your car could break down, youmight need new tires, a battery
(07:35):
appliance in your home couldbreak, a child could have an
accident need medical attention,you could lose to get sick, not
go to work, probably get laidoff. There's all kinds of
reasons why you need anemergency fund. So let's get
started and get it up to aminimum of $1,000. Now the
(07:59):
hardest part of all this plan isthe first one, stop using
credit, especially if you'vebeen using your credit cards to
pay your monthly bills. So ifyou're doing that, and you're
making extra payments on yourcredit cards, why are you doing
that you just increasing theprincipal, every month you're
(08:21):
getting farther behind yourinterest keeps going up, and you
never got to get out from underit. That's why you don't do
that. So that's step one, quitusing credit, make the minimum
payments, that's going to happenthe same month soon as you start
this plan that's gonna happen onthe very next payment you make
(08:43):
on any of your debt, the minimumamount, and then anything you
have, that you've been applyingto that external debt, or maybe
using credit instead, you know,put at least $50 To get started,
get that savings account set up.
Because we want to start putting$10 A pay in there or $20 a pay.
(09:03):
So slowly build it up whileyou're getting the rest of your
finances under control. Thispart of the process might take
30 to 90 days. Maybe it won'ttake us long, maybe it could
take longer. But while we'redoing this, we're slowly
building our emergency fund.
(09:26):
We're paying cash. Cash, I meanis paying money directly from
your checking account. You'repaying all your your your
monthly expenses on time. You'repaying all your loans on time.
You're paying all yourutilities, you're buying and
paying for gasoline, groceries,whatever else you may have.
(09:47):
You're paying for it withoutborrowing money and you're
making timely payments. Andwhile you're doing it any little
bit extra cash you have is goinginto us the MSA count. That's
the main part of the plan. Butyou're thinking to yourself when
I'm going to pay down debt,well, that's a good thing to
(10:10):
think. Because eventually youwill, once you build up your
emergency fund to a minimum of$1,000, you keep building it up
until you have three to $4,000.
Once you have the three, the$4,000 range, in your savings
account, all your monthly billsare paid, or at least you have
(10:32):
the money to pay them in yourchecking account. And they're
not currently due. But you haveeverything under control, you
your timely and all yourpayments, you got your credit
cards, all your loans are beingpaid your utilities,
everything's caught up, you gota positive balance in your
(10:53):
checking account, you got threeto 4000 range in your savings
account, everything's lookinggood pay day is tomorrow, or
maybe it may be at the end ofthe week, and we're looking at
Tuesday, and at the end of theweek, you get another paycheck,
and you're gonna have everythingpaid for without that check, you
don't pretty good. So at thispoint, now, you don't have to
(11:18):
have meet all those parameters.
But mostly everything somewhatpaid up to date, or be able to
pay up to date without usingyour savings and have the three
to 4000 of rent range betweenthree to 4000, you take the
access over the your minimum of$1,000. So let's say you have
(11:41):
3000, your minimum is 1000, youhave $2,000, you apply it to one
of your debt, if we're trying topay off your credit cards,
you're gonna pay off one ofthose credit cards, or you're
gonna pay down one of thosecredit cards. Now, the very
first time you do this, it'syour choice. You can pay if you
(12:05):
have a credit card with abalance of 2000 or less, or the
$2,000 or bring it to zero, paythat one first. If you don't
have any of those, then pay theone with the highest rate of
interest, and may be the largestbalance that if you have a
(12:28):
credit card, let's say one witha $3,500 balance, we're gonna
apply 2000, let's apply it tothat $3,500 One, so that it's
now 1500. The next time you havethe money, you pay off that one,
or you can still be makingminimum payments, so it's gonna
(12:48):
be creeping down a little bit.
But then the next time you go todo it, if it's not already paid
off, you pay off that one. Andthen from now on, after you get
that first one paid off, youdon't use that credit card, you
do not cancel that credit card,take it out of your wallet, put
it in someplace safe. And don'tforget you have it because
(13:10):
someday, the next year, so hemight be able to use it to your
advantage. Now we're going toconcentrate the next time on
applying it to the highest rateof interest first. And then you
got to keep doing this over andover and over. Now as you go
when the first one you get paidoff, your minimum payment is
(13:35):
going to go away. So that'sgoing to give you a little bit
more to put in your savings. Soyour savings will grow a little
bit faster than when you get thesecond one paid off, the same
things gonna happen, yourminimum payments gonna go away,
your savings gonna grow a littlebit faster. And as you go,
you're gonna pick up speed overtime as you get less and less
(13:59):
debt. The last minimum paymentsyou have, the more you have the
put in savings. And the more youhave in savings, the faster it's
gone to grow, the sooner you'llbe able to apply a chunk of
money to another debt. It's afairly easy concept. But it's
hard for a lot of people to dobecause they cannot stop using
(14:24):
credit. So that's a problem.
Maybe they have trouble payingtheir monthly bills because they
have too many. Maybe theirincome is not high enough to
even cover monthly bills. Sothey were using credit cards to
cover the difference. So youneed to get rid of thanks. If
(14:47):
you're paying cable TV over 100and anything over 100 bucks on
cable TV, you're paying toomuch. You got to get rid of
cable TV and pick one or twostreaming plan. forms and
stream. Because if you're payingfor Internet service, and you're
not using streaming, you're notgetting the full benefit of that
(15:12):
payment for your internet.
That's the way I looked at it.
So maximize my internet servicethat I was paying for no matter
what I cut out cable, I got twochannels that I stream, and I'm
good to go and I'm save I saveda bundle of money. Another way
(15:33):
to save money is to once a yearreview your plans and call your
provider and see what they haveavailable for the same service.
Maybe they got a another plan ata lower price, because they're
always trying to attract newcustomers and tell them, if you
(15:54):
don't get a price reduction, ifhe can't do anything to save you
money, you're gonna go somewhereelse, because there's three
other providers out there thatcan give me the same service for
less money. And maybe they'llwork a deal with you to keep you
as a customer, the only thingyou can do is try or cancel it
(16:16):
and move on, don't be loyal toany one service, because the
longer you're there, the morethey're going to charge you and
the less loyal they are towardyou, they're gonna take
advantage of you for notcontinuing, updating and keeping
track of the pricing stuff.
Because they'll leave you lockedin at higher price, they have no
problem doing that. So we needto, you know, look at where your
(16:38):
money is going, you got to betracking everything, the money
coming in and everything goingout, you need to have a control
center. And then with those two,you have a debt reduction plan,
you set yourself some goals, Iwant to pay off all my credit
cards. That's goal number one.
Now how do I do it? Well, I needa plan. Here's my debt reduction
(17:01):
plan, I quit using credit, Imake the minimum payment, I
start an emergency fund, buildit up to a minimum, and then I
apply big chunks of money when Ihave the money in my savings
account, the longer it's in yoursavings account, the bigger the
emergency fund. So as somethingwould happen, you have more in
(17:21):
your savings emergency fund, youcan cover a bigger disaster
without using credit, fairlyeasy thing to think about. I'm
gonna happy draft that or hastwo spreadsheets, the debt
reduction, they have a debtspreadsheet where you list all
(17:45):
your debt that you're trying topay off. And then you have a
tracking area where you put inyour monthly payment how much
you paid for the month, you putin the running balance. Now you
get this information eitheronline from your account, or
from the paper bill that you getor have that remember that your
(18:07):
updated balance is always gonnabe one month behind. Because you
may have made a paymentrecently. And it's not updated
yet because your statement isfrom the last period. So keep
that in mind. He can go online,maybe get a better, more current
up to date balance, and then hecan see what's going on, you can
(18:29):
see all your for every one ofyour credit cards, you can see
all your minimum payments. Andyou can see where he applied a
big chunk of money. So you know,it tells you the balance at the
top, it gives you a rate ofinterest the name, so you can
make informed decisions on howyou want to pay down your debt.
(18:51):
If you want to use the Avalanchemethod that's paying the highest
interest rate first, to pay inthe lowest interest rate last to
the snowball method where youpay the lowest bounce first to
the highest bounce. I do a mixof that I always start paying
(19:13):
the lowest balance off firstbecause that brings a credit
card to zero. And the reason Iwant a credit card was a zero
balance is because maybe threemonths six months down the road
into the future. They may offeryou a zero rate interest on any
(19:34):
other debt that you transfer totheir card. So if you have a
credit card that has a interestrate of 20% 17% 15% and you can
pay 3% or 5% to transfer it ontothe zero card and then have 12
(19:56):
months or 18 months to pay itoff. Interest Free Be, you're
gonna save a chunk of money, andyou're going to pay down your
debt a little bit faster, that'swhat I did, they're gonna offer
you these incentives to putmoney on there and use it to
your advantage. If you cantransfer a mound of money onto
(20:20):
there, that's going to beinterest free, or you can pay
$50 a month, $75 a month on it,and get it paid off and under
the terms of the card. So youhave a zero balance before that
date comes, you know, do, you'regonna save a chunk of money, and
you're gonna take that highinterest rate card, and you're
(20:42):
gonna lower the balancesignificantly, to 3000, like
making a big payment, you'regonna pay a little bit less
interest, which means you'regonna apply more to principal,
so it'd be paid off faster.
That's why you never close yourcredit card, you use them to
your advantage. And also, if youclose it out, you reduce your
(21:04):
amount of available credit, thathurts your credit score. So
we're, if you've been strugglingwith debt, and your credit score
is probably not that great. Youdon't want to close any of these
cards you pay off, because thatwill kill your credit score
because your income, the creditratio will change. So if you
(21:25):
have a lot of credit cards waszero bounce, like three or four
was a zero balance,you got a lot of income, you got
a lot of available credit, theylove that you get a higher
credit rating. Once again, ifyou're interested in the
software, I talk about coming upthat I personally use to pay off
(21:46):
my debt, I have a link in myshow notes, the very last one,
you most likely have to copy andpaste it in order to get it to
work. I couldn't figure out howto get it to work by just
clicking on it. If it works,when you click on it, and you
great if not, you need to copyand paste it. And upper left
(22:08):
hand corner should say mainlandand Chuck. I'm Chuck. My wife's
may land.
Unknown (22:16):
That's our website.
Look it over. And
Charles McDonald (22:19):
if you need to contact me, there's a contact
information in there. Send me anote, if you're not interested,
fine. I'll be back in one momentwith my final thoughts. If
you're interested in learningabout an online software that
helped myself get out of debt,it does tracking, budgeting, and
(22:43):
keeps track of all your assetsand all your debt. And even
tells you how much and when totransfer money into your savings
account. And how much and whento transfer money to your debt
and which debts to pay off inorder. First. It's not cheap.
It's a one time payment. But itwill definitely be an
(23:06):
investment, something andyourself and an investment in
your personal financial life. Ifyou're interested, send me an
email at reduce debt increasewealth@gmail.com. And I'll send
you the information about thisonline software that worked
(23:29):
great for me. If you'restruggling to live and you're
living from paycheck topaycheck, you probably have two
problems. You have too muchdebt, which is forcing you to
make those debt payments, whichis leaving you're short on other
(23:50):
things that you need to do tosurvive, to live, like buying
groceries, gas in the car.
Whatever the case, paying yourutilities, you need to get your
debt under control. And you dothat by having a tracking app.
He track everything that you'redoing and your finances. You
have a control center, which isnothing but a budget. I call it
(24:12):
a control center. And if youlisten to my episodes, it's not
that difficult. You can go tohappy draft and use their first
spreadsheet in that web page. Ifyou've been tracking in you know
your numbers, and you can put ingood information. It will tell
(24:32):
you how much you have availableto spend every week. What you
how much money you have, thenyou use that money to pay for
your groceries and pay for yourgasoline and whatever else that
you're paying for it. Just becareful. You don't go over that
dollar amount. If you stay underthat dollar amount, you'll save
(24:54):
a little bit you can throw thatsavings into a say payments that
count, and you can stay ontrack, you can use the debt
Sheet worksheet they have to getall the debt you're trying to
get under control, I would startwith just first doing credit
cards only, then once they'reall paid off car loans, if you
(25:15):
have personal loans, you canmaybe do car loans and personal
loans, then finally, you canwork on your line of credit, or
your first mortgage or whateveryour mortgage situation would
be, it's helpful, and you'll beright there, all the information
that you need is in front ofyou, you can see it, you can
(25:37):
make an informed decision, youknow what you're doing, this
makes this process much easier.
So once again, debt reductionplan, your goal was to get out
of debt. This is generally say abroad statement, I want to pay
(25:58):
off debt, I want to name moredebt, talk, credit cards, car
payments, everything. That's mygoal, how am I gonna do it? Well
not start making, I'm going toquit using credit, I'm going to
make the minimum payment, I'mgoing to build up my emergency
fund to at least $1,000. Andeventually, over time as my debt
shrinks on the money increases,I get my credit cards paid off,
(26:21):
I increase my emergency fund to$1,500, I get my car loans paid
off, I increase my emergencyfund to $2,000, I get a line of
credit paid off, which is aequity line of credit on my
home, I increase it to $3,000.
Because now everything I got isa mortgage which I can pay
easily every month play increasemy emergency fund or my savings
(26:44):
to a point where I have aminimum of three months worth of
expenses. If something wouldhappen, and I can't go to work
or if I lose my job, whateverthe case, then I can get by for
at least a minimum of threemonths before we need to panic
may give me time to recover. IfI had an accident, maybe it'd be
(27:10):
time to find a new job. Whateverthe case, may be, you don't have
to make rash decisions in thehurry. You can take it and make
informed decisions over time,because you have the finances to
do it. That's the purpose of anemergency fund. Don't get too
bogged down in that slowly bringit up. If you want to increase
(27:34):
it by 50 bucks. After you payoff your first credit card and
then another $50 that you payoff, you can do it like that and
gradually increase it. So youjust have a little bit more a
little bit more and a little bitmore. That whatever you do,
write it down, you need a plan,quit using credit, make the
minimum payment, have anemergency fund, set yourself up
(27:58):
a minimum, keep building up thatemergency fund until you have
access of your minimum, applythe excess to one of your debts,
however you choose to do it,continue doing everything and
repeat the last part over andover. Over time, it will get
faster your savings youremergency fund will grow faster,
(28:20):
you'll start paying down moredebt and one chunk, your debt
will start disappearing faster.
And it just speeds up up and upbecause you got the same income.
Hopefully you'll get a pay raisein there and I'll speed it up a
little bit also. But you got tostay focused and you got to
(28:42):
continuing doing all those stepsthe whole time. Remember the
emergency fund is for emergencyonly not to pay your monthly
bills as far as somethingunforeseen that happens that you
need money so you don't have touse credit. You'll be glad it
(29:03):
did. So
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