September 24, 2023 • 31 mins
Knowing the problems with personal finance the first fix is start tracking. Tracking is simple and once started does not require much time if kept up to date.
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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. fix
(00:25):
mistakes, start tracking,knowing the problems with
personal finance. And the firstfix is start tracking. Tracking
is simple and one started doesnot require much time if kept up
to date. Okay, what is tracking?
To put it in the easiest termsthat I can add it's nothing but
(00:48):
keeping a check register if youknow what a check register is,
for every account, you have yourchecking your savings your every
credit card, every loan that youhave, what is a register
register a register is nothingbut where you record the events
(01:11):
or transactions that happen.
Every time you make a deposit inyour checking account, you
record the deposit amount thatday. And words from every time
you pay a bill or write a checkor use a ATM or do electronic
(01:33):
funds transfer. You record theevent that date who it's to the
dollar amount, put a memo in ifyou want. But it's a matter of
keeping track of where yourmoney is coming from and where
your money is going. And this isvery important for your personal
(01:57):
finances. Because if you don'tknow where your money is going,
most people know where it'scoming from. But not knowing
where it's going, you can losetrack of how much money you may
have in your checking account.
And the same thing happens withcredit cards. And you may be
(02:18):
using a credit card more thanwhat you want to and you lose
track of how much you owe. Andthen the time comes to pay, you
can't pay the full amount. So heended up making less than a full
payment. So you are carrying abalance, then you get to the
point where you're making theminimum payment. So all these
(02:38):
things happen over a slow periodof time. And it's so slow, you
don't realize it's happening.
It's like you put a frog and apot of water and you put the
heat on underneath it, the frogdoesn't realize he's being
boiled to death, as the waterslowly warms up, he's doesn't
(03:02):
realize this gonna be so hot isgonna harm him. The same thing
is happening here in yourpersonal finances. You're not
harmed but you are harmedfinancially by not knowing
things about what's going on. Soin order to track either again,
(03:23):
do it manually, and a piece ofpen or paper, which is going to
be difficult and time consuming,because you got to do a lot of
math, adding subtraction, mostlysubtraction, and addition, when
you make a deposit. So it's ayou can either do it in a
spreadsheet, which will do themath for you if you know how to
(03:45):
use a spreadsheet. Or you canget an application and app to do
it. There is one app that'sfairly good, it's quite
expensive. I think it'sexpensive. You need a budget,
why an A B? Add does tracking,but it does more than tracking
button when you first get it,you have to start out tracking,
(04:09):
because it cannot do anythingfor you until it has information
in there. And that's true withany app that you may use. Or if
you don't want to spend thatkind of money, you want to be a
little bit on the less expensiveside. I use an app called count
(04:30):
about all one word count aboutthat comm it's like less than
$10 a year I've in the past saida month. But I meant to say per
year $10 A year. It's reallycheap. It does a lot of the work
for you. And you could use thatinformation in the future to put
(04:52):
in somewhere else. I'm not sureif these apps allow you to
import from a different app. Idon't know you'd have to Check
that out. My thing is, you startout with tracking. And you start
out with your check checkingaccount, then once you get the
last 30 days in, then you doyour savings account, which be a
(05:16):
lot faster than you do everycredit card you have, then you
do every loan you have, theloans are not quite as important
at this time, because it'susually just one payment a
month. And the only thing you'redoing is breaking out the
principal and interest on thepayment. So you can have a good
(05:36):
idea of the unpaid balance onyour loans. But at this point,
don't worry about your car loansand or your mortgage, we're
focusing on checking account, atleast one savings account, all
your credit cards, anythingthat's high interest, they
charge you knew more than apercent a year annual interest,
(05:59):
you need to keep track of it,you need to identify those
loans, whether they're creditcards, personal loans line of
credit, whatever it is, we needto identify those things. And
the reason is, once you have a30 day period, typically you
(06:19):
want to do a little more than 30days, but we're looking at the
monthly cycle of you paying yourbills. I'm assuming that you're
trying to pay all your bills,whether it's rent, your
mortgage, your car payments, andall your utilities in a timely
manner that you're payingeverything timely. If not, then
(06:41):
we need to focus on gettingthese things done on a timely
matter. And then once we have acomplete cycle of 30 days, maybe
35 days where all thetransactions you put in there,
start repeating. Now you havesome information that you can
(07:03):
use for your control center. Ifyou don't know what a control
center is, it's your budget. Andthat's the next step. Going
forward. I'm not talking aboutthat now, we're focusing on
tracking. So the important thingabout tracking is you have to
(07:25):
keep track of certain things,the date the event happened, who
you're paying, or who themoney's coming from, the dollar
amount and the date that it'sdue. So if you're
paying utility bill, you need toknow the date you paid it, you
(07:45):
need to know who you pay thedollar amount, the category that
you're gonna put it in, whichwould be the utilities would be
the main account the headaccount. And then electricity
would be a sub account,utilities, gas, trash, water,
and sewer, whatever you have,those are the common ones. Now
(08:08):
some of these, you may only payonce every quarter or every
three months. So that might takea while before it pops in to
your tracking where you can addit to your budget. But for now,
we're just focusing on a 30 daycycle. If you have more
(08:29):
information, you can go back 60days, that gives you a little
more information, if you can getthat information in there, we
can come up with some averagesfor your grocery bills, for your
gas on your automobile. Andwhatever ever else that you're
paying, it's important to figurea average because some you know,
(08:53):
then you don't pay the sameamount. Every time you make the
payment in may be different itmight be $250, one week, then
from talking about groceries,that might be 275. The next
week, it might be 350. The weekafter that, we need to figure
out an average, add them all updivided by the number of that
(09:14):
you put in there and come upwith an average and you that's
what you're gonna use going downthe road for your budget, or
your control center. So when youneed to do is categories. If
you're using an app, thecategories are already set up,
you just need to go through thelist. Find the one that's most
(09:39):
appropriate for what you'retrying to pay. Say you're paying
a trash bill. So you go in, youlook through the list you find
utility you find trash, or waterand sewer trash and then you
know, trash is put that bill inthere and then Then you hit
(10:00):
Enter, once you got all theinformation in there, you hit
enter, the next time you type inthat description, the name of
that company, everything's gonnapop up. And once it pops up, the
trash should be the yourcategory should be there, he
just put in the current date,and the dollar amount. If it's
changed, well, you got to put $1amount if it changed or not,
(10:23):
because it's, you got to put itin every time. So as you go
through this process, that'sgoing to take the most time, the
very first month you do it, whenyou're putting in a lot of new
information. And then the nextmonth is it's gonna start
popping up. Because thatinformation is already in there,
(10:44):
you just have to be careful thatyou're consistent with putting
the same company that you'repaying, and to the same category
every time you pay it. So thatyou have consistent and good
information. The one place youhave to be where least what I
(11:07):
can think of is at a grocerystore, you might go to a Costco
or one of those warehousestores, or even a grocery store
nowadays, they have gasoline,while you go to grocery store,
maybe most of the time is goingto be groceries. But
occasionally you got to put gasin the car there. Just be
(11:28):
careful that you remember thatkeep the paper receipt, so that
when you enter it, you make sureyou put it in transportation
fuel, or gas or whatever it iscategory that you find so that
you're not overstating groceriesand understating gasoline
because down the road, when wedo averages, we want to try to
(11:51):
be as accurately as possible. Soif you go to the same place, and
buy different things that wouldfall into a different category,
then you would need to splitthose categories out. So to keep
it simple, I go to a grocerystore 99% of the time is gonna
be groceries, they 1% of thetime that might be fuel, or
(12:14):
gasoline for the car, I go to mycigar store, that's gonna be
hobby, I put everything Ipurchased cigars, I call that
hobby spending. And I'mconsistently doing that every
time so that we have the samecategory. And you do not enter
(12:39):
the dollar amount into theheading category. So let's say
you have housing while housingis the heading, your mortgage
payment would be under housing,but it would be a sub account of
housing, you enter all yourtransactions into a sub account
(13:02):
that total up into the headingaccount. I hope that makes
sense. So when you're setting upyour own, say you want to set up
a separate category of say yourhobby, and you have your hobby
which is different than yourspouse's hobby. So you could set
(13:23):
up a main heading as hobbies andthen you can put your name in
for your hobbies or the name ofyour hobbies, say it's boating.
And then your spouse might bewaterskiing or something
different. I just I don't knowwhy I said waterskiing sets
(13:43):
wouldn't be related to boating,but it would be something
different than that. Maybejogging or exercise. And you
would do that and youhad separate yours from hers but
that they were totaled togetherso he had one number so you can
see the total amount you'respending out your total budget
for hobbies for say. So this isvery important to be consistent.
(14:09):
And every time you enter it andtry to be as accurately as
possible but don't create toomany accounts. Don't get down
into too MyNet minut details,say under clothing. You don't
want your your clothing shirt,your clothing and you don't want
(14:32):
to separate just say husband'sclothing and then the total
children's and the name of allyour children's and the total
for all their clothing, whichincludes shirt pants, underwear,
shoes, socks, everything. Underone thing, if you want to see
how much you spent for shoes,you can go in Look at the detail
(14:54):
because you know the name of theshoe store that you would go to
say You could just do a searchfor that shoe store and find
out, you know, a report. Thatway, you're not creating too
much detail for your monthlyentry. We're trying to keep this
as simple as possible, so thatwhen you update it, it takes the
least amount of time. And youshould update it at least once a
(15:18):
week or every pay period. If youget paid weekly, when you enter
your paycheck, you update allyour expenses. If you want to do
it every day, that's fine, youcannot keep it up to date too
much. If you don't want to spendthat much time, the longer you
wait, and the more you put itoff, if you wait to the end of
(15:39):
the month, and then enter a hole30 days, it's gonna take you a
long time. If you do it everypay period more every week, it's
gonna take 510 minutes. The moreyou do it, the faster it gets.
If you do it every two weeksagain, take a little bit longer.
So if you get paid every twoweeks, you may want to update
(16:01):
your expenses. Every time you goto the store, you do a lot of
spending. Maybe on Saturday, yougo to the grocery store, you go
to hardware store, you go tosporting goods store, he go to
the clothing store, once you getback from doing all that, enter
it all on that day, whether it'son a Saturday or Sunday or
(16:21):
Tuesday, whatever day it is, tokeep your accounts up to date.
That way you know how much moneyyou have, you know how much you
charge on a credit card, youknow what's going on. That's the
reason you're doing it to beaware of your personal finances.
It's that simple. Okay, if youfind this podcast useful, and
(16:45):
you'd like to make acontribution, you can go to my
show notes, and I have a link tomy contribution page. And I also
have a link to the articles thatI'm referring to in my show
notes. So let's go to an articletracking monthly expenses. The
first step to money success,this is from the NerdWallet.
(17:07):
Tracking your expenses on aregular base can give you an
accurate picture of where yourmoney is going, and where you'd
like it to go instead. So youknow you know where it's going.
And once you know that you canchange where it's going. Then by
using a budget, you can actuallyaccount for the bills you need
(17:27):
to pay going forward. Knowingwhat's coming due before they
come due is also important. Butbefore you start plugging
numbers into a spreadsheet ormap, take a minute to list out
each of your monthly expenses.
Check your account statementspinpoint your money habits by
(17:49):
taking inventory of all youraccounts, and including your
checking account and all creditcards you have. Looking at your
accounts will help you identifyyour spending pattering. Your
spending are consists of bothfixed and variable expenses.
Fixed expenses are less likelyto change from month to month.
They include mortgage or rent,utilities, insurance and debt
(18:13):
payments, you have more room toadjust variable expenses like
food, clothing, and travel.
That's all important that partof it is where you have an app,
you go back 30 days in your bankaccount, you go back 30 days on
every credit card and you enterit into the app, that's going to
tell you the same thing as justlooking at your statement. You
(18:34):
can all do that online. If youhave your credit card
statements, and you can enterthe transactions from that
that's fine. And then they talkabout categories your expenses.
Begin by grouping your expenses,some personal finance websites
and credit cards automaticallytagged your purchases, and
(18:56):
categories like department storeor automotive, you might find
that those impulse buys atargets are costing you a lot.
Or maybe you realize you'repaying for reoccurring
subscription services that youcould do without. Now if you go
back and look at multiple monthson your credit cards, and your
(19:16):
checking account, you'll seesome of these reoccurring
subscriptions come up, becausethere'll be the same amount to
the same place every month. Ifyou see something that you're no
longer using, now's the time tocancel it. You identified a
potential waste of money. Let'sget rid of than sorting out two
(19:39):
expenses and two needs and onecan help you organize your
budget and prioritize spending.
Especially if you need to trimcosts to make room for saving or
debt repayment needs. I got itdown to three maybe four
(20:00):
categories, housing,transportation, food. That's it.
Three major categories, housing,transportation, and food. Those
are your head accounts and ahap, under housing, include your
mortgage rent or your rent,include all your utilities,
(20:23):
because it's related to yourhousing, your gas, your
electric, I include telephone,and I also include cell phone.
The reason is that telephoneused to be fixed with the house,
you couldn't take it with you.
So let's just leave it there. Soyour cell phone, leave it with
housing is a neat, same thingwith transportation, also in
(20:46):
housing, would be real estatetaxes, and then how homeowners
insurance. If you're not payingit through your mortgage, you
can also include a category forrepairs and maintenance, and put
a smaller amount in there. Soyou would have it budgeted
transportation will include yourcar payment, your insurance, all
(21:09):
your gasoline, maintenance, andour public transportation that
you may or may not use. So areyou Uber, Uber, for instance, or
your train if you ride a subwayor your bus ticket, and then
groceries, or food Icall it, I call it food be my
(21:32):
general heading. That would begroceries dining out, and
delivery. And any thing that youbuy at a grocery store such as
shampoo for your hair, sotoothbrushes, toothpaste, those
type of things. Also included asneeds should be as savings,
(21:56):
where you set aside so much forsavings. And some insurance
that's not somewhere else wouldbe life insurance, disability
insurance, short term disabilityinsurance. So if you get
injured, and you're off work sixor seven months, you can get a
(22:17):
payment from the insurancecompany to help you with your
finances. That could be down theroad. But that's something you
need to consider. There is aneed anything else is a want.
Clothing is a one child wellchild care could be a need if
you have to have child care. Soyou could go to work, k would be
(22:39):
a need to be under need. Buteverything pretty much else
would be a one. And all yourloans would be a need your
student loans, your credit cardpayments, because you have to
pay them every month. So me seeI just keep adding the needs
(22:59):
housing, transportation, food,insurance, that savings, six
categories, anything else wantclothing, hobbies, whatever else
you may have or be doing,because the wants is where we
need to trim back. And the needswe can trim back and get a lower
(23:21):
cost for a particular service.
Or maybe cut out some thingsentertainment is a once so your
cable TV and your streamingswould be a one. So these are
then counted categories that youcan consistently use. And you
(23:42):
reason you break in needs andwants it because that's how
you're going to set up yourcontrol center or your budget in
the future. So I kinda like togroup them the same way.
housing, transportation, food,loans, savings, insurance, those
(24:02):
are my needs. And after that,shopping, general merchandise
shopping hobbies, I can't thinkof anything else entertainment,
streaming services would bewants. So that's a good way to
get started and nerdy tip if youfind your budget is way out of
(24:23):
whack. Look closely at thoseitems you classified as needs
and consider negotiatingrefinancing or an or
downgrading. I'll be back in onemoment with my final thoughts.
If you're interested in learningabout an online software that
helped myself get out of debt,it does tracking, budgeting, and
(24:46):
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 when totransfer money to you At and
which debts to pay off in order.
First, it's not cheap. It's aone time payment. But it will
definitely be an investment,something and yourself and an
(25:11):
investment in your personalfinancial life. If you're
interested, send me an email atreduce debt increase
wealth@gmail.com. And I'll sendyou the information about this
online software that works greatfor me. So I'm going to do a
(25:33):
quick recap, here are my myfinal thoughts in make a mistake
by not doing anything, that's amistake, by not doing tracking
by not doing budgeting, but notknowing what's going on and your
personal finances that amistake. And to fix that
(25:53):
mistake, the first thing you'redoing is you're gonna start
tracking your checking account,your savings account and all
your credit cards, as that's theonly thing you track. So in
order to track, you can eitherdo it manually do it a
spreadsheet, or get an app, theapp I use is less than $10 a
(26:17):
year. If you have a computer athome, that's the way to go. You
can also have it in your fivefor your smartphone to enter
transactions. But it doesn'twork to saying you have to have
a computer to get the fullbenefit of the app. But then, if
you're out and about and youhave it loaded, on your
(26:41):
smartphone, you can enter atransaction as you go. And then
when you go on at home on yourcomputer, it's already in there.
So it's kind of good. I have itset up that way, but I hardly
ever use it. I don't know whypart of the tracking is
identifying is recording thedate, who you pay, or where the
(27:02):
money's coming from adescription, the dollar amount,
and a category. So if you'rerecording a paycheck could be
the date, your employer's name,the dollar amount or net take
home of your pay category,income, or category could be
wages or salary. As long as it'sunder an income account, it
(27:28):
doesn't much matter what youcall it, the try to get as
accurately as possible, then yourecord everything that you spend
money on the date, who it's tothe dollar amount. And what it's
for. Is it housing as atransportation, is it groceries?
Is it general merchandiseshopping, is it a hobby kind of
(27:51):
category, you do that for overat least a 30 day period, once
you start re entering the samedescription is gonna pop up. So
you just click on it, and acategory is gonna fill in for
you. He just changed it to thedate, the correct data was paid,
because the default will be thecurrent date. And maybe there's
(28:14):
something that you paid threedays ago, you're just entering
today. So you move the date tothe correct date, make sure it
has the correct dollar amount oryou enter the dollar amount. And
that's basically all there is toit. Once you get a 30 day
period, now you can create areport by category. And for a
date range. So you go back thelast 30 days, you create a
(28:41):
report by category, it's goingto come out in alphabetical
order and printed out and nowyou can see at a glance where
your money went on paper, itdoes all the work for you.
That's the same report you'regonna use to create your control
center or your budget. Andthat's pretty much all is to it.
(29:05):
It's just a matter of keepingeverything up to date entering
the information. I do not advisehaving an automatically come in
from your bank account. I do notlink up to my bank account.
Because that's you lose out onlearning or seeing and knowing
(29:28):
where your money is going. Whenyou enter that in those
transactions in there you canstart to remember, okay is the
first week of the month. Whatbills did I pay? Oh, I paid my
mortgage, my gas for my naturalgas and I had groceries and
automobile gasoline. The secondmonth I paid some more utility
(29:55):
the second week I paid some moreutilities and grow Freeze, and I
had an insurance bill on my car,you get over time you get to
know when things become due. Andit comes easier. The important
part here is, once you knowwhat's happened in the past, you
(30:17):
know what's going to happen inthe future. So now you can start
planning. Looking forward, we'reno longer planning looking
backwards, we're using the whathappened in the past, to use it
as $1 amount control for whatmay happen in the future. It may
(30:37):
not be exactly to the penny, butwe're using it. So we know that
we have enough money availableto pay some bills. That's why I
always kept the amount of $300in my checking account.
I never let my checking accountgo below $300 because of some
(31:02):
bills an extra $50 or $20, morethan what I thought it was gonna
be. I have the money there. Andthen no big deal. I can keep
making timely payments. This ishow you build a good credit
report. If you're doingtracking, and you do all these
(31:22):
things, and you get to the pointand you can look forward and
plan ahead. You're in goodfinancial shape, and you're
gonna be ready for the nextstep. Creating your control
center.
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. fix
(00:25):
mistakes, start tracking,knowing the problems with
personal finance. And the firstfix is start tracking. Tracking
is simple and one started doesnot require much time if kept up
to date. Okay, what is tracking?
To put it in the easiest termsthat I can add it's nothing but
(00:48):
keeping a check register if youknow what a check register is,
for every account, you have yourchecking your savings your every
credit card, every loan that youhave, what is a register
register a register is nothingbut where you record the events
(01:11):
or transactions that happen.
Every time you make a deposit inyour checking account, you
record the deposit amount thatday. And words from every time
you pay a bill or write a checkor use a ATM or do electronic
(01:33):
funds transfer. You record theevent that date who it's to the
dollar amount, put a memo in ifyou want. But it's a matter of
keeping track of where yourmoney is coming from and where
your money is going. And this isvery important for your personal
(01:57):
finances. Because if you don'tknow where your money is going,
most people know where it'scoming from. But not knowing
where it's going, you can losetrack of how much money you may
have in your checking account.
And the same thing happens withcredit cards. And you may be
(02:18):
using a credit card more thanwhat you want to and you lose
track of how much you owe. Andthen the time comes to pay, you
can't pay the full amount. So heended up making less than a full
payment. So you are carrying abalance, then you get to the
point where you're making theminimum payment. So all these
(02:38):
things happen over a slow periodof time. And it's so slow, you
don't realize it's happening.
It's like you put a frog and apot of water and you put the
heat on underneath it, the frogdoesn't realize he's being
boiled to death, as the waterslowly warms up, he's doesn't
(03:02):
realize this gonna be so hot isgonna harm him. The same thing
is happening here in yourpersonal finances. You're not
harmed but you are harmedfinancially by not knowing
things about what's going on. Soin order to track either again,
(03:23):
do it manually, and a piece ofpen or paper, which is going to
be difficult and time consuming,because you got to do a lot of
math, adding subtraction, mostlysubtraction, and addition, when
you make a deposit. So it's ayou can either do it in a
spreadsheet, which will do themath for you if you know how to
(03:45):
use a spreadsheet. Or you canget an application and app to do
it. There is one app that'sfairly good, it's quite
expensive. I think it'sexpensive. You need a budget,
why an A B? Add does tracking,but it does more than tracking
button when you first get it,you have to start out tracking,
(04:09):
because it cannot do anythingfor you until it has information
in there. And that's true withany app that you may use. Or if
you don't want to spend thatkind of money, you want to be a
little bit on the less expensiveside. I use an app called count
(04:30):
about all one word count aboutthat comm it's like less than
$10 a year I've in the past saida month. But I meant to say per
year $10 A year. It's reallycheap. It does a lot of the work
for you. And you could use thatinformation in the future to put
(04:52):
in somewhere else. I'm not sureif these apps allow you to
import from a different app. Idon't know you'd have to Check
that out. My thing is, you startout with tracking. And you start
out with your check checkingaccount, then once you get the
last 30 days in, then you doyour savings account, which be a
(05:16):
lot faster than you do everycredit card you have, then you
do every loan you have, theloans are not quite as important
at this time, because it'susually just one payment a
month. And the only thing you'redoing is breaking out the
principal and interest on thepayment. So you can have a good
(05:36):
idea of the unpaid balance onyour loans. But at this point,
don't worry about your car loansand or your mortgage, we're
focusing on checking account, atleast one savings account, all
your credit cards, anythingthat's high interest, they
charge you knew more than apercent a year annual interest,
(05:59):
you need to keep track of it,you need to identify those
loans, whether they're creditcards, personal loans line of
credit, whatever it is, we needto identify those things. And
the reason is, once you have a30 day period, typically you
(06:19):
want to do a little more than 30days, but we're looking at the
monthly cycle of you paying yourbills. I'm assuming that you're
trying to pay all your bills,whether it's rent, your
mortgage, your car payments, andall your utilities in a timely
manner that you're payingeverything timely. If not, then
(06:41):
we need to focus on gettingthese things done on a timely
matter. And then once we have acomplete cycle of 30 days, maybe
35 days where all thetransactions you put in there,
start repeating. Now you havesome information that you can
(07:03):
use for your control center. Ifyou don't know what a control
center is, it's your budget. Andthat's the next step. Going
forward. I'm not talking aboutthat now, we're focusing on
tracking. So the important thingabout tracking is you have to
(07:25):
keep track of certain things,the date the event happened, who
you're paying, or who themoney's coming from, the dollar
amount and the date that it'sdue. So if you're
paying utility bill, you need toknow the date you paid it, you
(07:45):
need to know who you pay thedollar amount, the category that
you're gonna put it in, whichwould be the utilities would be
the main account the headaccount. And then electricity
would be a sub account,utilities, gas, trash, water,
and sewer, whatever you have,those are the common ones. Now
(08:08):
some of these, you may only payonce every quarter or every
three months. So that might takea while before it pops in to
your tracking where you can addit to your budget. But for now,
we're just focusing on a 30 daycycle. If you have more
(08:29):
information, you can go back 60days, that gives you a little
more information, if you can getthat information in there, we
can come up with some averagesfor your grocery bills, for your
gas on your automobile. Andwhatever ever else that you're
paying, it's important to figurea average because some you know,
(08:53):
then you don't pay the sameamount. Every time you make the
payment in may be different itmight be $250, one week, then
from talking about groceries,that might be 275. The next
week, it might be 350. The weekafter that, we need to figure
out an average, add them all updivided by the number of that
(09:14):
you put in there and come upwith an average and you that's
what you're gonna use going downthe road for your budget, or
your control center. So when youneed to do is categories. If
you're using an app, thecategories are already set up,
you just need to go through thelist. Find the one that's most
(09:39):
appropriate for what you'retrying to pay. Say you're paying
a trash bill. So you go in, youlook through the list you find
utility you find trash, or waterand sewer trash and then you
know, trash is put that bill inthere and then Then you hit
(10:00):
Enter, once you got all theinformation in there, you hit
enter, the next time you type inthat description, the name of
that company, everything's gonnapop up. And once it pops up, the
trash should be the yourcategory should be there, he
just put in the current date,and the dollar amount. If it's
changed, well, you got to put $1amount if it changed or not,
(10:23):
because it's, you got to put itin every time. So as you go
through this process, that'sgoing to take the most time, the
very first month you do it, whenyou're putting in a lot of new
information. And then the nextmonth is it's gonna start
popping up. Because thatinformation is already in there,
(10:44):
you just have to be careful thatyou're consistent with putting
the same company that you'repaying, and to the same category
every time you pay it. So thatyou have consistent and good
information. The one place youhave to be where least what I
(11:07):
can think of is at a grocerystore, you might go to a Costco
or one of those warehousestores, or even a grocery store
nowadays, they have gasoline,while you go to grocery store,
maybe most of the time is goingto be groceries. But
occasionally you got to put gasin the car there. Just be
(11:28):
careful that you remember thatkeep the paper receipt, so that
when you enter it, you make sureyou put it in transportation
fuel, or gas or whatever it iscategory that you find so that
you're not overstating groceriesand understating gasoline
because down the road, when wedo averages, we want to try to
(11:51):
be as accurately as possible. Soif you go to the same place, and
buy different things that wouldfall into a different category,
then you would need to splitthose categories out. So to keep
it simple, I go to a grocerystore 99% of the time is gonna
be groceries, they 1% of thetime that might be fuel, or
(12:14):
gasoline for the car, I go to mycigar store, that's gonna be
hobby, I put everything Ipurchased cigars, I call that
hobby spending. And I'mconsistently doing that every
time so that we have the samecategory. And you do not enter
(12:39):
the dollar amount into theheading category. So let's say
you have housing while housingis the heading, your mortgage
payment would be under housing,but it would be a sub account of
housing, you enter all yourtransactions into a sub account
(13:02):
that total up into the headingaccount. I hope that makes
sense. So when you're setting upyour own, say you want to set up
a separate category of say yourhobby, and you have your hobby
which is different than yourspouse's hobby. So you could set
(13:23):
up a main heading as hobbies andthen you can put your name in
for your hobbies or the name ofyour hobbies, say it's boating.
And then your spouse might bewaterskiing or something
different. I just I don't knowwhy I said waterskiing sets
(13:43):
wouldn't be related to boating,but it would be something
different than that. Maybejogging or exercise. And you
would do that and youhad separate yours from hers but
that they were totaled togetherso he had one number so you can
see the total amount you'respending out your total budget
for hobbies for say. So this isvery important to be consistent.
(14:09):
And every time you enter it andtry to be as accurately as
possible but don't create toomany accounts. Don't get down
into too MyNet minut details,say under clothing. You don't
want your your clothing shirt,your clothing and you don't want
(14:32):
to separate just say husband'sclothing and then the total
children's and the name of allyour children's and the total
for all their clothing, whichincludes shirt pants, underwear,
shoes, socks, everything. Underone thing, if you want to see
how much you spent for shoes,you can go in Look at the detail
(14:54):
because you know the name of theshoe store that you would go to
say You could just do a searchfor that shoe store and find
out, you know, a report. Thatway, you're not creating too
much detail for your monthlyentry. We're trying to keep this
as simple as possible, so thatwhen you update it, it takes the
least amount of time. And youshould update it at least once a
(15:18):
week or every pay period. If youget paid weekly, when you enter
your paycheck, you update allyour expenses. If you want to do
it every day, that's fine, youcannot keep it up to date too
much. If you don't want to spendthat much time, the longer you
wait, and the more you put itoff, if you wait to the end of
(15:39):
the month, and then enter a hole30 days, it's gonna take you a
long time. If you do it everypay period more every week, it's
gonna take 510 minutes. The moreyou do it, the faster it gets.
If you do it every two weeksagain, take a little bit longer.
So if you get paid every twoweeks, you may want to update
(16:01):
your expenses. Every time you goto the store, you do a lot of
spending. Maybe on Saturday, yougo to the grocery store, you go
to hardware store, you go tosporting goods store, he go to
the clothing store, once you getback from doing all that, enter
it all on that day, whether it'son a Saturday or Sunday or
(16:21):
Tuesday, whatever day it is, tokeep your accounts up to date.
That way you know how much moneyyou have, you know how much you
charge on a credit card, youknow what's going on. That's the
reason you're doing it to beaware of your personal finances.
It's that simple. Okay, if youfind this podcast useful, and
(16:45):
you'd like to make acontribution, you can go to my
show notes, and I have a link tomy contribution page. And I also
have a link to the articles thatI'm referring to in my show
notes. So let's go to an articletracking monthly expenses. The
first step to money success,this is from the NerdWallet.
(17:07):
Tracking your expenses on aregular base can give you an
accurate picture of where yourmoney is going, and where you'd
like it to go instead. So youknow you know where it's going.
And once you know that you canchange where it's going. Then by
using a budget, you can actuallyaccount for the bills you need
(17:27):
to pay going forward. Knowingwhat's coming due before they
come due is also important. Butbefore you start plugging
numbers into a spreadsheet ormap, take a minute to list out
each of your monthly expenses.
Check your account statementspinpoint your money habits by
(17:49):
taking inventory of all youraccounts, and including your
checking account and all creditcards you have. Looking at your
accounts will help you identifyyour spending pattering. Your
spending are consists of bothfixed and variable expenses.
Fixed expenses are less likelyto change from month to month.
They include mortgage or rent,utilities, insurance and debt
(18:13):
payments, you have more room toadjust variable expenses like
food, clothing, and travel.
That's all important that partof it is where you have an app,
you go back 30 days in your bankaccount, you go back 30 days on
every credit card and you enterit into the app, that's going to
tell you the same thing as justlooking at your statement. You
(18:34):
can all do that online. If youhave your credit card
statements, and you can enterthe transactions from that
that's fine. And then they talkabout categories your expenses.
Begin by grouping your expenses,some personal finance websites
and credit cards automaticallytagged your purchases, and
(18:56):
categories like department storeor automotive, you might find
that those impulse buys atargets are costing you a lot.
Or maybe you realize you'repaying for reoccurring
subscription services that youcould do without. Now if you go
back and look at multiple monthson your credit cards, and your
(19:16):
checking account, you'll seesome of these reoccurring
subscriptions come up, becausethere'll be the same amount to
the same place every month. Ifyou see something that you're no
longer using, now's the time tocancel it. You identified a
potential waste of money. Let'sget rid of than sorting out two
(19:39):
expenses and two needs and onecan help you organize your
budget and prioritize spending.
Especially if you need to trimcosts to make room for saving or
debt repayment needs. I got itdown to three maybe four
(20:00):
categories, housing,transportation, food. That's it.
Three major categories, housing,transportation, and food. Those
are your head accounts and ahap, under housing, include your
mortgage rent or your rent,include all your utilities,
(20:23):
because it's related to yourhousing, your gas, your
electric, I include telephone,and I also include cell phone.
The reason is that telephoneused to be fixed with the house,
you couldn't take it with you.
So let's just leave it there. Soyour cell phone, leave it with
housing is a neat, same thingwith transportation, also in
(20:46):
housing, would be real estatetaxes, and then how homeowners
insurance. If you're not payingit through your mortgage, you
can also include a category forrepairs and maintenance, and put
a smaller amount in there. Soyou would have it budgeted
transportation will include yourcar payment, your insurance, all
(21:09):
your gasoline, maintenance, andour public transportation that
you may or may not use. So areyou Uber, Uber, for instance, or
your train if you ride a subwayor your bus ticket, and then
groceries, or food Icall it, I call it food be my
(21:32):
general heading. That would begroceries dining out, and
delivery. And any thing that youbuy at a grocery store such as
shampoo for your hair, sotoothbrushes, toothpaste, those
type of things. Also included asneeds should be as savings,
(21:56):
where you set aside so much forsavings. And some insurance
that's not somewhere else wouldbe life insurance, disability
insurance, short term disabilityinsurance. So if you get
injured, and you're off work sixor seven months, you can get a
(22:17):
payment from the insurancecompany to help you with your
finances. That could be down theroad. But that's something you
need to consider. There is aneed anything else is a want.
Clothing is a one child wellchild care could be a need if
you have to have child care. Soyou could go to work, k would be
(22:39):
a need to be under need. Buteverything pretty much else
would be a one. And all yourloans would be a need your
student loans, your credit cardpayments, because you have to
pay them every month. So me seeI just keep adding the needs
(22:59):
housing, transportation, food,insurance, that savings, six
categories, anything else wantclothing, hobbies, whatever else
you may have or be doing,because the wants is where we
need to trim back. And the needswe can trim back and get a lower
(23:21):
cost for a particular service.
Or maybe cut out some thingsentertainment is a once so your
cable TV and your streamingswould be a one. So these are
then counted categories that youcan consistently use. And you
(23:42):
reason you break in needs andwants it because that's how
you're going to set up yourcontrol center or your budget in
the future. So I kinda like togroup them the same way.
housing, transportation, food,loans, savings, insurance, those
(24:02):
are my needs. And after that,shopping, general merchandise
shopping hobbies, I can't thinkof anything else entertainment,
streaming services would bewants. So that's a good way to
get started and nerdy tip if youfind your budget is way out of
(24:23):
whack. Look closely at thoseitems you classified as needs
and consider negotiatingrefinancing or an or
downgrading. I'll be back in onemoment with my final thoughts.
If you're interested in learningabout an online software that
helped myself get out of debt,it does tracking, budgeting, and
(24:46):
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 when totransfer money to you At and
which debts to pay off in order.
First, it's not cheap. It's aone time payment. But it will
definitely be an investment,something and yourself and an
(25:11):
investment in your personalfinancial life. If you're
interested, send me an email atreduce debt increase
wealth@gmail.com. And I'll sendyou the information about this
online software that works greatfor me. So I'm going to do a
(25:33):
quick recap, here are my myfinal thoughts in make a mistake
by not doing anything, that's amistake, by not doing tracking
by not doing budgeting, but notknowing what's going on and your
personal finances that amistake. And to fix that
(25:53):
mistake, the first thing you'redoing is you're gonna start
tracking your checking account,your savings account and all
your credit cards, as that's theonly thing you track. So in
order to track, you can eitherdo it manually do it a
spreadsheet, or get an app, theapp I use is less than $10 a
(26:17):
year. If you have a computer athome, that's the way to go. You
can also have it in your fivefor your smartphone to enter
transactions. But it doesn'twork to saying you have to have
a computer to get the fullbenefit of the app. But then, if
you're out and about and youhave it loaded, on your
(26:41):
smartphone, you can enter atransaction as you go. And then
when you go on at home on yourcomputer, it's already in there.
So it's kind of good. I have itset up that way, but I hardly
ever use it. I don't know whypart of the tracking is
identifying is recording thedate, who you pay, or where the
(27:02):
money's coming from adescription, the dollar amount,
and a category. So if you'rerecording a paycheck could be
the date, your employer's name,the dollar amount or net take
home of your pay category,income, or category could be
wages or salary. As long as it'sunder an income account, it
(27:28):
doesn't much matter what youcall it, the try to get as
accurately as possible, then yourecord everything that you spend
money on the date, who it's tothe dollar amount. And what it's
for. Is it housing as atransportation, is it groceries?
Is it general merchandiseshopping, is it a hobby kind of
(27:51):
category, you do that for overat least a 30 day period, once
you start re entering the samedescription is gonna pop up. So
you just click on it, and acategory is gonna fill in for
you. He just changed it to thedate, the correct data was paid,
because the default will be thecurrent date. And maybe there's
(28:14):
something that you paid threedays ago, you're just entering
today. So you move the date tothe correct date, make sure it
has the correct dollar amount oryou enter the dollar amount. And
that's basically all there is toit. Once you get a 30 day
period, now you can create areport by category. And for a
date range. So you go back thelast 30 days, you create a
(28:41):
report by category, it's goingto come out in alphabetical
order and printed out and nowyou can see at a glance where
your money went on paper, itdoes all the work for you.
That's the same report you'regonna use to create your control
center or your budget. Andthat's pretty much all is to it.
(29:05):
It's just a matter of keepingeverything up to date entering
the information. I do not advisehaving an automatically come in
from your bank account. I do notlink up to my bank account.
Because that's you lose out onlearning or seeing and knowing
(29:28):
where your money is going. Whenyou enter that in those
transactions in there you canstart to remember, okay is the
first week of the month. Whatbills did I pay? Oh, I paid my
mortgage, my gas for my naturalgas and I had groceries and
automobile gasoline. The secondmonth I paid some more utility
(29:55):
the second week I paid some moreutilities and grow Freeze, and I
had an insurance bill on my car,you get over time you get to
know when things become due. Andit comes easier. The important
part here is, once you knowwhat's happened in the past, you
(30:17):
know what's going to happen inthe future. So now you can start
planning. Looking forward, we'reno longer planning looking
backwards, we're using the whathappened in the past, to use it
as $1 amount control for whatmay happen in the future. It may
(30:37):
not be exactly to the penny, butwe're using it. So we know that
we have enough money availableto pay some bills. That's why I
always kept the amount of $300in my checking account.
I never let my checking accountgo below $300 because of some
(31:02):
bills an extra $50 or $20, morethan what I thought it was gonna
be. I have the money there. Andthen no big deal. I can keep
making timely payments. This ishow you build a good credit
report. If you're doingtracking, and you do all these
(31:22):
things, and you get to the pointand you can look forward and
plan ahead. You're in goodfinancial shape, and you're
gonna be ready for the nextstep. Creating your control
center.
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