November 12, 2023 • 28 mins
The basic rules of staying debt free how to go about getting high interest debt gone. Not an easy task but can be done once the rules are applied consistency. It starts with knowing there a problem and a plan to get the problem under control.
Article Links:
https://www.tiaa.org/public/learn/retirement-planning-and-beyond/managing-your-money/seven-steps-to-more-effectively-manage-and-reduce-your-debt
https://www.consumerfinance.gov/about-us/blog/how-reduce-your-debt/ By Courtney-Rose Dantus
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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. The
(00:25):
basic rules of staying debt freehow to go about getting high
interest debt gone. Not an easytask, but can be done once the
rules are applied consistently.
It starts with knowing there's aproblem and a plan to get the
problem under control. Thisidentify the problem, too much
debt, what is too much debt, itdepends on each individual. And
(00:48):
it also depends on how muchincome you have. The lower your
income level, the lower the debtat when can become a problem. If
you're spending all your money,paying your monthly bills, and
trying to keep your credit cardand minimum payments down
(01:10):
timely, and you're coming upshort for groceries and maybe
gas for the car. So you have tomaybe use a credit card to pay
for something with the option ofI'm gonna pay that back as soon
as I can. He probably have toomuch debt, if you have more than
two credit cards you carry anybalance on or if you have any
(01:32):
credit cards, one that youconsistently carry a balance and
a large balance, say a morethree or $4,000. Or even greater
than that you have too muchdebt, there is a potential
problem. I have links in my shownotes. For two articles I'm
going to refer to there, okay.
(01:56):
But there's some parts in thereI don't like and I'm going to
talk about my plan and why I doit. If you find this podcast,
she was filling in like to makea contribution and my show
notes, he can find acontribution, a contribution
link where you can do so ifyou're interested in the
(02:18):
software I talk about later on,that I use to get out of debt,
there is a link in my show notesfor that also at the bottom, you
need to copy and paste becauseit's not going to take you right
to where you need to go. Solet's get started. The first is
identifying the problem andknowing how bad the problem is.
(02:41):
So you need to get all yourcredit card bills in line. If
you don't get the paper bills,you need to go online, write
down on a piece of paper or in aspreadsheet, the name of the
credit card, outstandingbalance, the rate of interest
you pay, and the date you'resupposed to pay it and the
(03:05):
minimum balance he needed. Dothat for all your debt and total
it up. How much do you owe, I'mtalking about everything, your
mortgage, your line of creditagainst your house, your auto
payments, auto loans, personalloans, payday loans, added up.
(03:25):
And that is gonna be somethingthat might surprise you, you
might be carrying more debt thanwhat you realize. And that's why
you're living paycheck topaycheck. That's why you don't
have that extra money to dosomething with or to put into
savings. We're gonna talk aboutthat later on. This is a general
(03:49):
overview. Then my next episodesI'm gonna work through in more
detail each individual step youneed to take, but this is step
one, identifying the problem,finding out how big the problem
is, and start getting thingsunder control. take account of
(04:09):
your accounts, check your creditreports, how bad is your credit
rating, if you're making latepayments, because you have a lot
of debt, your credit is probablygonna be on the hurting on the
downside you need it gets usstuff under control, and you
need to pay everything as timelyas possible. And this article
says look for opportunities toconsolidate, it's a little early
(04:33):
for that now, you'll do thatdown the road once you get
everything under control.
Because credit cards are ahigher rate of interest. I
understand that and you maybeget another loan where you can
pay those off at a lower rate ofinterest. I understand that.
Overall, it may be a good thing.
But the bad side of that is ifyou don't quit using your credit
(04:57):
cards, you're just gonna be backinto a wall was placed in you
are currently. So put this off,don't consolidate your loans.
Now, let's get down the roadthree or six months before,
because we have other optionsthat might be better than that
be honest about your spending.
The reason why you're having allthis credit card debt is because
(05:20):
you're buying too much stuff,and you don't have the income on
hand to pay for it. So you'respending more money than what
you make. The only twoexceptions to that is your
housing and transportation,houses costs a lot of money, the
I don't expect you to save allyour money for 30 years and buy
(05:41):
a house for Ash. That's notpractical. But look at the
payment, the monthly payment foryour home should not be more
than 35% of your total income.
But your expenses related to thehouse, you got utilities, you
have maintenance, you haveentertainment, you got internet,
(06:06):
you got streaming, you got allthese other things that are kind
of connected to your home,that's going to be under
housing. And the same thing withautomobiles, you got your loan
payment, and then you got gasand repairs and maintenance for
the each individual automobile.
So it's more than that onemonthly payment that you have to
consider. So if you want to livea more comfortable life, and not
(06:29):
be stretched on your income,your budget, or you're living
paycheck to paycheck, and you'renot paying bill A, you're
putting it off, so he can paybill b and then the next month
you flipping it around, heshouldn't have to do that. If
you're managing your moneycorrectly, you should know how
much you have, you shouldn't bebuying things you cannot afford
(06:53):
to pay for. Even though it'sonly $89 a month, for three
years, sounds cheap, to maybeyou can't afford $85 a month,
because you're already stretchedto your limit, figure out how
much how much extra you canbudget, I'm not really sure what
they're talking there. What youneed to do is go through your
(07:15):
spending, identify the thingsthat you're paying for that you
no longer need or use, cancelit, that's gonna save you money
right on the gate, get goingthrough that first thing,
determine your debt reductionstrategy. Well, yeah, we're
gonna quit using debt, that'syour strategy, we, you're not
going to be able to pay offthese credit cards, if you keep
(07:39):
putting new charges on him. Ihope that makes sense. It makes
sense to me, if you keep usingthem, and you keep trying,
you're trying to pay them offhow you gonna pay it off, if you
keep adding to the problem, youkeep adding to the problem that
you're not gonna ever get thempaid down, where you can get
your life back under control.
(08:02):
The second article is how toreduce debt, it tells you how to
do it, organize your monthlybill taking control of your
fine, create your debt reductionplan, I'm going to talk about a
debt reduction plan. And that'sgoing to be in my very next
episode. But before we do that,you have to know how much debt
(08:23):
you have, how much the minimumpayment is on all this debt,
what's your monthly bills?
What's your rent? What's yourmortgage payment?
What's your utilities how muchyou pay out every month? And how
much income do you have to coverthat income I mean is your take
home pay the amount of moneybeing deposited into your
(08:43):
checking account, that's theamount of money you have to work
with. And if you're taking thecheck and you're taking cash off
the top and not putting 100% inthere, you're not being honest
with yourself because yourspending is still out of
control, just that you don't seeit. Because you're paying cash
for things. We have to identifyeverything. And that's where
(09:09):
it's called a budget. I call ita control center. But the easy
way to do a control center andthe ferry first thing once you
identify you have a problem.
Once you identify how big orlittle The problem is, doesn't
matter. It could be that youonly have $1,000 in credit card
debt, that minimum payment oryour pet trying to pay $250 A
(09:32):
month towards it and you nevermake any progress because one
you're you got some monthlybills that keeps going on there.
So that $1,000 come down alittle bit it goes up a little
bit it goes down and you're notreally getting that pay down to
zero. He should only be usingyour credit card for your
(09:54):
monthly bills if you're payingit off in full to zero every
month. That's a basic rule.
Remember, we're trying tocontrol our spending, we're
trying to control our finances.
Why? Because the easier, thebetter your finances at home,
the better life you're gonnahave, the happier, less worries
(10:18):
less stress, everything is justmuch better. So trying to live
within your means don't buythings because your neighbor did
or your boss did or whoever,whatever, buy things that you
like and want and can afford, ifyou can afford it and save up
your money. One of the veryfirst things that you identify
(10:41):
all these things, he identifyyour monthly payments, he may be
you write it down, it'd be agood idea. How much is your rent
your mortgage, your utilities,get an idea. That's the starting
point. I call that tracking. Tomake it even easier. If you have
a computer, there's a lot of appapplications out there that you
(11:03):
can use will help you do thesethings. Part of the tracking is
to identify what it's for ascolor category, you're gonna
categorize thanks. A lot ofthese apps come with categories
are already in them. So onething I do is look at a list and
select it and boom, put thatpayment in there, put that bill
(11:25):
in there, put this bill in thatcategory, whatever they do most
of the work for you and just beconsistent when you're entering
things. But it makes it eveneasier is while you're gonna
you're putting in your electricbill the first time, you know
you pay that every month. So goto the reoccurring part of the
(11:46):
application, or marketreoccurring meaning it happens
on a regular basis, put in theinformation put in your payment.
Now the payment can change andyou know, we know the dates
going to change and the paymentcan change. Put in the electric
company put in all yourinformation, set it up with
monthly set it recruitreoccurring every month, do you
(12:09):
want to approve it or not? Doeshe just want it automatically be
posted to your checking account,I say approve it because you
have to change the date. And youmight have to change the dollar
amount. If you don't know whatI'm talking about, you will if
you have an application heactually looking at in using it,
then every month that will popup, you'll know it's gonna come
(12:29):
due, I'd say always set my topop up about five days before
they're due. So I know I havethe money available to pay for
it. I approve it, I know howmuch it was I changed the date I
changed the dollar amount I'mdone. So the first time the
first month, it's gonna take alittle bit longer. But then as
(12:51):
you go, it's gonna get quicker.
If you don't set up areoccurring entry. The next time
you start typing in thedescription, the description is
going to pop up and it's goingto select a category for you. So
you get a scan, make change thedate and put enough so it gets
faster. Either way you do it. Ilike to reoccurring stuff,
(13:12):
because why work harder when youreally don't have to. You do
this for 30 days or put go back30 days and put in your
information from your checkingaccount. Put the information in
from your credit cards for thelast 30 days. Now you have a
history of your spending of whatyou're paying for. You can do a
(13:35):
report by category. And it'sgonna give you some totals for
the for that particular monthfrom the beginning to the end of
the month, it will report bycategory printed out Wow, geez,
now you know your numbers. Howeasy was that? Took you maybe 20
minutes. And every week you keepupdating this, you keep updating
(13:58):
it on a regular basis so thatyou know how much is in that
checking account at all timeshow much you owe on all your
credit cards at all times. Whatpayments you need to make what
payments are coming Do you haveyour finances under control, you
have it right there in front ofyou. The next step after
(14:19):
tracking you get that report bycategory is to do a control
center. And only thing that isyou're going to rearrange these
categories to gather and groupthem any way you want. But this
is how I do it. I put all myhousing together. Okay, when you
(14:39):
do a budget it starts out withyour income you list your income
at the top total. Now we havewhat am I going to pay every
month. Okay. My needs comesfirst housing, transportation
food. After that you can expandyour needs to savings insurance
now Not included anywhere else,because housing, you're gonna
(15:03):
put your mortgage payment there,you can put all your utilities,
I put my cell phone, phone billsin there, I put my internet
service there, because it'spretty much connected to the
house, any cable, entertainment,that's all under housing because
it's basically at your home,then transportation is your
automobile your loans, he canbreak it down by each individual
(15:27):
auto if you'd like. It'd be yourauto loan, gasoline repairs,
maintenance, maintenance, likeoil change, new windshield
wipers, light bulbs, you know,little odds and ends stuff,
maybe you do yourself, maybe youdon't, I do it myself, because
it's not that difficult. And Isaved some money, basically a
(15:48):
lot of money. The more you dothings on your own, the less you
pay somebody else, the moremoney you gotta keep for
yourself. Go down. And we havebeen while you have debt, I've
kind of forgot about that. So wehave housing, transportation,
food, that because you had topay it every month, savings,
(16:10):
insurance, not anywhere else,six items that your needs.
Anything else is a want.
clothing, entertainment, that'snot included in housing, like
tickets for ballgame, concert,those type of stuff that's down
below and your wants thatnecessary your needs, your needs
are things you're going to payevery month, is really what you
(16:33):
need to focus on. If you'restruggling to pay off debt, you
need to look at things thatyou're paying for today that you
no longer need, want, or use.
And then cancel it and get outfrom those payments. And a good
example, is these anti virusprograms. Maybe you bought a new
(16:55):
computer but you had an oldcomputer? Did you just put the
old subscription on your newcomputer? Or did you buy a new
subscription, you might have twosubscriptions for your
computers, maybe that oldcomputer you're not even using
anymore? Cancel that anti virussubscription on that old
machine. Don't let it renewal goin, find out what it is and take
(17:20):
care of it gym membershipsfeeling go to gym two months out
of the year, why are you payingfor 12 months of the year, try
to avoid things like that. I'mnot saying not to do it, we're
focusing on reducing yourspending. So we can save some
more money so we can reduce ourdebt. So reduce spending has
(17:41):
gone to reduce debt. I'll beback in one moment with my final
thoughts. If you're interestedin learning about an online
software that helped myself getout of debt, it does tracking,
budgeting, and keeps track ofall your assets and all your
debt. And even tells you howmuch and when to transfer money
(18:04):
into your savings account. Andhow much and when to transfer
money to your debt and whichdebts to pay off and order.
First. It's not cheap. It's aone time payment. But it will
definitely be an investment,something and yourself and an
investment in your personalfinancial life.
(18:28):
If you're interested, send me anemail at reduce debt increase
wealth@gmail.com. And I'll sendyou the information about this
online software that workedgreat for me. So remember the
basic rules, don't spend morethan you make with two
(18:49):
exceptions, housing andtransportation, where you
finance it, obviously, becauseof the cost of them are so
great. Your monthly bills eat ona pay every month is something
you shouldn't be putting oncredit cards, or financing says
simple You can't keep up, theywill get to a point where you
(19:11):
have so much debt, you won'teven be able to make a payment
on anything because he'll justbe flat out broke and bankrupt.
So identify a problem. Are youspending too much, maybe you
don't have enough income, thatsomething happened in your life
to where your income gotreduced. Everything is a
(19:32):
possibility. But we need toadjust our financial life based
on our income and for incomegoes down. We need to reduce our
spending. And if our income goesup, you need to save more.
Because we're going to talkabout how to go about paying off
debt but the first thing youneed to do is identify you have
(19:53):
a problem. Try to figure out howto solve the problem. And one of
the things is Maybe the problemis you have a lot of debt. And
maybe it's because you'respending too much money. So we
got to reduce our spending isstep one. And then step two is,
quit using credit, quit usingcredit. That's part of my debt
(20:17):
reduction plan. In fact, that'sthe number one thing you have to
do, quit using credit and startpaying for all your monthly
bills. That's why it's soimportant to have a control
center, know how much is dueeach and every month, know when
and the month is it due. So youhave an idea of how much money
(20:40):
you need, so you don't spend itbefore you need it. There's a
lot of programs out there thathelps you solve these basic
problems. And it's willing ofhow much are you willing to
spend, I don't get paid by anyof them. But one of the better
ones I've seen is you need abudget that tackles all these
(21:03):
problems for you a lot more. Youneed a budget, that's an app,
it's I think it's kind ofexpensive, thinking around
$14 $15 a month, but you can dothis with I use an app for my
tracking cost me $10 a year, Iuse a spreadsheet for my budget
(21:27):
that I've already paid for boomGhazi anything No, nothing extra
anyway, I already have it. SoI'm set $10 A years all I'm
spending. But it once you starttracking the you have to know
what you're doing. And the firstthing you do is we have to start
I was thinking about this, a lotof them want you to put in your
(21:50):
starting bank balance and thenwork for a while you could do
that, go back 30 days, becauseremember, we want to see a
history so that in order tospeed up the process, go back to
previous month, it could be morethan 30 days. Or if you're close
to the end of the month, startthe beginning of the current
(22:11):
month, figure out what your bankbalance is plugin number, put in
all your transactions anddeposits and all the
withdrawals, all the way up tothe current date, maybe you have
to do a month in a few weeks,that's the most time consuming
part of this whole process isgetting started. And once you
(22:31):
get all caught up, then youshould be able that balance,
then that program should matchthe balance in your checking
account. And if it doesn't, thatmeans you entered something
wrong, you gotta find yourmistake and fix it. That's one
way to do it. Another way is tostart with a zero balance. Go
back 30 days, put your beginningbalance zero, enter all your
(22:55):
transactions, get the ferry andtake the difference between what
does your program app shows andwhat your bank shows and take
the difference in that yourbeginning bank balance and it
should match. But you're notgoing to find any mistakes that
way, but it will match. And thenwe can go forward and keep it
(23:15):
matching the bank. So if therewas mistakes in the past this
6090 days, it's going to work assouth through and be no longer a
problem if it ever was aproblem. That's a couple tips I
just gave you on the easiest wayto do it. Once you got it up to
(23:38):
the current date as if youupdate it on a weekly basis of
10 minutes a week or less.
Because if you use thereoccurring entries, it's going
to be almost done for you. Onceyou start entering, if you go to
the same grocery store to sayinggas stations, once you've gone
through 30 or 60 days, you'vegone to about every place you go
(23:59):
to on a regular basis. Sothey're gonna pop up, the only
thing that's not going to pop upinstantly, or the new places go
online shopping places orwhatever. But if you always type
in Amazon is going to pop up.
And it's going to have some typeof category. So like Amazon,
your categories could be allover the bit. It could be
(24:20):
groceries, it could be homesupplies, could be lawn
supplies, it could be almostanything. So you just need to be
aware of what you're buying. Andyou want to be consistent on the
categories they use them becausethat's information, good
information going in is going togive you good information coming
(24:41):
out. You got to be able to lookup how much am I spending and
give you an example. I don'thave a printer for my computer I
haven't had and for years. I'vebeen going to FedEx Office and
what I do is send a file printand Go and then I get my gives
(25:02):
you a code, you go to the FedExOffice, you put in the money,
then you put in the code, andyou can print off what you need
to print. I select black andwhite 99% of the time, because
that's all I need. I'm notprinting anything and color. So
why pay for something you don'tneed? Always have that type of
(25:24):
mindset. So I went into my app,I went back two years, I'm
looking at buying a printer,because it's it's a hassle doing
all that. For the last twoyears, I've only spent $88, at
FedEx Office. And most of thatwas in the last two months
because of something new I'mdoing. And that will go away,
(25:47):
eventually, the printer I'mlooking at is $200 will take me
like five years to break even onthat printer if I never buy ink
for Who am I gonna buy it? Imight, I might not. Because it's
kind of a hassle. But I drive byit almost every other couple of
days anyway. So I can alwaysstop there. But that's just an
(26:10):
example of I got myself a reportI make I can make an informed
decision before I spent $200.
Maybe I'm not going to do it,maybe I will. But it's going to
come down convenience in thisparticular case, but I might
look for a cheaper printer, butI go to a different printer than
the cost of the ink is gonna bea lot more and I'm not saving
anything in the long run. So Iprobably won't do that either.
(26:36):
But you get the idea. So we needto identify the problem. And we
need to look at the problem. Andyou need to get your monthly
bills in front of you so youknow how much you owe, how much
is coming in, get all thatinformation in front of you. And
next episode, I'm going to talkabout you once we identify the
(27:00):
problem. And what we do itlooked for things you can cut
back on your spending in thenext week or so try to get an
app, get that information inthere. Try to get yourself a
report by category so that youknow how much you spend on a
monthly basis. We can startfiguring averages, and the
(27:25):
average is getting better thelonger time we have because we
can get a better average. We'recoming up to Thanksgiving so
your groceries might skyrocket.
But then we got Christmas, yourgroceries could skyrocket again.
But then you got six months ofno holiday all day. So we'll
(27:46):
have an average. I'm gonna talkabout the next episode a debt
reduction plan. He identified ityou know how much no one it's Do
you know how much you have topay, you know the interest rate.
Go ahead and put it in order bywhatever you want. The highest
and gerade on top, the lowest onbottom, or the lowest balance to
(28:08):
the highest bounce, it doesn'tmuch matter. Whatever you want
to do. And we're going to focusthe next episode on how you're
going to put together a planthat you're going to follow
consistently month in and monthout. That's going to pay off
that debt and you'll be debtfree. Before you know it
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. The
(00:25):
basic rules of staying debt freehow to go about getting high
interest debt gone. Not an easytask, but can be done once the
rules are applied consistently.
It starts with knowing there's aproblem and a plan to get the
problem under control. Thisidentify the problem, too much
debt, what is too much debt, itdepends on each individual. And
(00:48):
it also depends on how muchincome you have. The lower your
income level, the lower the debtat when can become a problem. If
you're spending all your money,paying your monthly bills, and
trying to keep your credit cardand minimum payments down
(01:10):
timely, and you're coming upshort for groceries and maybe
gas for the car. So you have tomaybe use a credit card to pay
for something with the option ofI'm gonna pay that back as soon
as I can. He probably have toomuch debt, if you have more than
two credit cards you carry anybalance on or if you have any
(01:32):
credit cards, one that youconsistently carry a balance and
a large balance, say a morethree or $4,000. Or even greater
than that you have too muchdebt, there is a potential
problem. I have links in my shownotes. For two articles I'm
going to refer to there, okay.
(01:56):
But there's some parts in thereI don't like and I'm going to
talk about my plan and why I doit. If you find this podcast,
she was filling in like to makea contribution and my show
notes, he can find acontribution, a contribution
link where you can do so ifyou're interested in the
(02:18):
software I talk about later on,that I use to get out of debt,
there is a link in my show notesfor that also at the bottom, you
need to copy and paste becauseit's not going to take you right
to where you need to go. Solet's get started. The first is
identifying the problem andknowing how bad the problem is.
(02:41):
So you need to get all yourcredit card bills in line. If
you don't get the paper bills,you need to go online, write
down on a piece of paper or in aspreadsheet, the name of the
credit card, outstandingbalance, the rate of interest
you pay, and the date you'resupposed to pay it and the
(03:05):
minimum balance he needed. Dothat for all your debt and total
it up. How much do you owe, I'mtalking about everything, your
mortgage, your line of creditagainst your house, your auto
payments, auto loans, personalloans, payday loans, added up.
(03:25):
And that is gonna be somethingthat might surprise you, you
might be carrying more debt thanwhat you realize. And that's why
you're living paycheck topaycheck. That's why you don't
have that extra money to dosomething with or to put into
savings. We're gonna talk aboutthat later on. This is a general
(03:49):
overview. Then my next episodesI'm gonna work through in more
detail each individual step youneed to take, but this is step
one, identifying the problem,finding out how big the problem
is, and start getting thingsunder control. take account of
(04:09):
your accounts, check your creditreports, how bad is your credit
rating, if you're making latepayments, because you have a lot
of debt, your credit is probablygonna be on the hurting on the
downside you need it gets usstuff under control, and you
need to pay everything as timelyas possible. And this article
says look for opportunities toconsolidate, it's a little early
(04:33):
for that now, you'll do thatdown the road once you get
everything under control.
Because credit cards are ahigher rate of interest. I
understand that and you maybeget another loan where you can
pay those off at a lower rate ofinterest. I understand that.
Overall, it may be a good thing.
But the bad side of that is ifyou don't quit using your credit
(04:57):
cards, you're just gonna be backinto a wall was placed in you
are currently. So put this off,don't consolidate your loans.
Now, let's get down the roadthree or six months before,
because we have other optionsthat might be better than that
be honest about your spending.
The reason why you're having allthis credit card debt is because
(05:20):
you're buying too much stuff,and you don't have the income on
hand to pay for it. So you'respending more money than what
you make. The only twoexceptions to that is your
housing and transportation,houses costs a lot of money, the
I don't expect you to save allyour money for 30 years and buy
(05:41):
a house for Ash. That's notpractical. But look at the
payment, the monthly payment foryour home should not be more
than 35% of your total income.
But your expenses related to thehouse, you got utilities, you
have maintenance, you haveentertainment, you got internet,
(06:06):
you got streaming, you got allthese other things that are kind
of connected to your home,that's going to be under
housing. And the same thing withautomobiles, you got your loan
payment, and then you got gasand repairs and maintenance for
the each individual automobile.
So it's more than that onemonthly payment that you have to
consider. So if you want to livea more comfortable life, and not
(06:29):
be stretched on your income,your budget, or you're living
paycheck to paycheck, and you'renot paying bill A, you're
putting it off, so he can paybill b and then the next month
you flipping it around, heshouldn't have to do that. If
you're managing your moneycorrectly, you should know how
much you have, you shouldn't bebuying things you cannot afford
(06:53):
to pay for. Even though it'sonly $89 a month, for three
years, sounds cheap, to maybeyou can't afford $85 a month,
because you're already stretchedto your limit, figure out how
much how much extra you canbudget, I'm not really sure what
they're talking there. What youneed to do is go through your
(07:15):
spending, identify the thingsthat you're paying for that you
no longer need or use, cancelit, that's gonna save you money
right on the gate, get goingthrough that first thing,
determine your debt reductionstrategy. Well, yeah, we're
gonna quit using debt, that'syour strategy, we, you're not
going to be able to pay offthese credit cards, if you keep
(07:39):
putting new charges on him. Ihope that makes sense. It makes
sense to me, if you keep usingthem, and you keep trying,
you're trying to pay them offhow you gonna pay it off, if you
keep adding to the problem, youkeep adding to the problem that
you're not gonna ever get thempaid down, where you can get
your life back under control.
(08:02):
The second article is how toreduce debt, it tells you how to
do it, organize your monthlybill taking control of your
fine, create your debt reductionplan, I'm going to talk about a
debt reduction plan. And that'sgoing to be in my very next
episode. But before we do that,you have to know how much debt
(08:23):
you have, how much the minimumpayment is on all this debt,
what's your monthly bills?
What's your rent? What's yourmortgage payment?
What's your utilities how muchyou pay out every month? And how
much income do you have to coverthat income I mean is your take
home pay the amount of moneybeing deposited into your
(08:43):
checking account, that's theamount of money you have to work
with. And if you're taking thecheck and you're taking cash off
the top and not putting 100% inthere, you're not being honest
with yourself because yourspending is still out of
control, just that you don't seeit. Because you're paying cash
for things. We have to identifyeverything. And that's where
(09:09):
it's called a budget. I call ita control center. But the easy
way to do a control center andthe ferry first thing once you
identify you have a problem.
Once you identify how big orlittle The problem is, doesn't
matter. It could be that youonly have $1,000 in credit card
debt, that minimum payment oryour pet trying to pay $250 A
(09:32):
month towards it and you nevermake any progress because one
you're you got some monthlybills that keeps going on there.
So that $1,000 come down alittle bit it goes up a little
bit it goes down and you're notreally getting that pay down to
zero. He should only be usingyour credit card for your
(09:54):
monthly bills if you're payingit off in full to zero every
month. That's a basic rule.
Remember, we're trying tocontrol our spending, we're
trying to control our finances.
Why? Because the easier, thebetter your finances at home,
the better life you're gonnahave, the happier, less worries
(10:18):
less stress, everything is justmuch better. So trying to live
within your means don't buythings because your neighbor did
or your boss did or whoever,whatever, buy things that you
like and want and can afford, ifyou can afford it and save up
your money. One of the veryfirst things that you identify
(10:41):
all these things, he identifyyour monthly payments, he may be
you write it down, it'd be agood idea. How much is your rent
your mortgage, your utilities,get an idea. That's the starting
point. I call that tracking. Tomake it even easier. If you have
a computer, there's a lot of appapplications out there that you
(11:03):
can use will help you do thesethings. Part of the tracking is
to identify what it's for ascolor category, you're gonna
categorize thanks. A lot ofthese apps come with categories
are already in them. So onething I do is look at a list and
select it and boom, put thatpayment in there, put that bill
(11:25):
in there, put this bill in thatcategory, whatever they do most
of the work for you and just beconsistent when you're entering
things. But it makes it eveneasier is while you're gonna
you're putting in your electricbill the first time, you know
you pay that every month. So goto the reoccurring part of the
(11:46):
application, or marketreoccurring meaning it happens
on a regular basis, put in theinformation put in your payment.
Now the payment can change andyou know, we know the dates
going to change and the paymentcan change. Put in the electric
company put in all yourinformation, set it up with
monthly set it recruitreoccurring every month, do you
(12:09):
want to approve it or not? Doeshe just want it automatically be
posted to your checking account,I say approve it because you
have to change the date. And youmight have to change the dollar
amount. If you don't know whatI'm talking about, you will if
you have an application heactually looking at in using it,
then every month that will popup, you'll know it's gonna come
(12:29):
due, I'd say always set my topop up about five days before
they're due. So I know I havethe money available to pay for
it. I approve it, I know howmuch it was I changed the date I
changed the dollar amount I'mdone. So the first time the
first month, it's gonna take alittle bit longer. But then as
(12:51):
you go, it's gonna get quicker.
If you don't set up areoccurring entry. The next time
you start typing in thedescription, the description is
going to pop up and it's goingto select a category for you. So
you get a scan, make change thedate and put enough so it gets
faster. Either way you do it. Ilike to reoccurring stuff,
(13:12):
because why work harder when youreally don't have to. You do
this for 30 days or put go back30 days and put in your
information from your checkingaccount. Put the information in
from your credit cards for thelast 30 days. Now you have a
history of your spending of whatyou're paying for. You can do a
(13:35):
report by category. And it'sgonna give you some totals for
the for that particular monthfrom the beginning to the end of
the month, it will report bycategory printed out Wow, geez,
now you know your numbers. Howeasy was that? Took you maybe 20
minutes. And every week you keepupdating this, you keep updating
(13:58):
it on a regular basis so thatyou know how much is in that
checking account at all timeshow much you owe on all your
credit cards at all times. Whatpayments you need to make what
payments are coming Do you haveyour finances under control, you
have it right there in front ofyou. The next step after
(14:19):
tracking you get that report bycategory is to do a control
center. And only thing that isyou're going to rearrange these
categories to gather and groupthem any way you want. But this
is how I do it. I put all myhousing together. Okay, when you
(14:39):
do a budget it starts out withyour income you list your income
at the top total. Now we havewhat am I going to pay every
month. Okay. My needs comesfirst housing, transportation
food. After that you can expandyour needs to savings insurance
now Not included anywhere else,because housing, you're gonna
(15:03):
put your mortgage payment there,you can put all your utilities,
I put my cell phone, phone billsin there, I put my internet
service there, because it'spretty much connected to the
house, any cable, entertainment,that's all under housing because
it's basically at your home,then transportation is your
automobile your loans, he canbreak it down by each individual
(15:27):
auto if you'd like. It'd be yourauto loan, gasoline repairs,
maintenance, maintenance, likeoil change, new windshield
wipers, light bulbs, you know,little odds and ends stuff,
maybe you do yourself, maybe youdon't, I do it myself, because
it's not that difficult. And Isaved some money, basically a
(15:48):
lot of money. The more you dothings on your own, the less you
pay somebody else, the moremoney you gotta keep for
yourself. Go down. And we havebeen while you have debt, I've
kind of forgot about that. So wehave housing, transportation,
food, that because you had topay it every month, savings,
(16:10):
insurance, not anywhere else,six items that your needs.
Anything else is a want.
clothing, entertainment, that'snot included in housing, like
tickets for ballgame, concert,those type of stuff that's down
below and your wants thatnecessary your needs, your needs
are things you're going to payevery month, is really what you
(16:33):
need to focus on. If you'restruggling to pay off debt, you
need to look at things thatyou're paying for today that you
no longer need, want, or use.
And then cancel it and get outfrom those payments. And a good
example, is these anti virusprograms. Maybe you bought a new
(16:55):
computer but you had an oldcomputer? Did you just put the
old subscription on your newcomputer? Or did you buy a new
subscription, you might have twosubscriptions for your
computers, maybe that oldcomputer you're not even using
anymore? Cancel that anti virussubscription on that old
machine. Don't let it renewal goin, find out what it is and take
(17:20):
care of it gym membershipsfeeling go to gym two months out
of the year, why are you payingfor 12 months of the year, try
to avoid things like that. I'mnot saying not to do it, we're
focusing on reducing yourspending. So we can save some
more money so we can reduce ourdebt. So reduce spending has
(17:41):
gone to reduce debt. I'll beback in one moment with my final
thoughts. If you're interestedin learning about an online
software that helped myself getout of debt, it does tracking,
budgeting, and keeps track ofall your assets and all your
debt. And even tells you howmuch and when to transfer money
(18:04):
into your savings account. Andhow much and when to transfer
money to your debt and whichdebts to pay off and order.
First. It's not cheap. It's aone time payment. But it will
definitely be an investment,something and yourself and an
investment in your personalfinancial life.
(18:28):
If you're interested, send me anemail at reduce debt increase
wealth@gmail.com. And I'll sendyou the information about this
online software that workedgreat for me. So remember the
basic rules, don't spend morethan you make with two
(18:49):
exceptions, housing andtransportation, where you
finance it, obviously, becauseof the cost of them are so
great. Your monthly bills eat ona pay every month is something
you shouldn't be putting oncredit cards, or financing says
simple You can't keep up, theywill get to a point where you
(19:11):
have so much debt, you won'teven be able to make a payment
on anything because he'll justbe flat out broke and bankrupt.
So identify a problem. Are youspending too much, maybe you
don't have enough income, thatsomething happened in your life
to where your income gotreduced. Everything is a
(19:32):
possibility. But we need toadjust our financial life based
on our income and for incomegoes down. We need to reduce our
spending. And if our income goesup, you need to save more.
Because we're going to talkabout how to go about paying off
debt but the first thing youneed to do is identify you have
(19:53):
a problem. Try to figure out howto solve the problem. And one of
the things is Maybe the problemis you have a lot of debt. And
maybe it's because you'respending too much money. So we
got to reduce our spending isstep one. And then step two is,
quit using credit, quit usingcredit. That's part of my debt
(20:17):
reduction plan. In fact, that'sthe number one thing you have to
do, quit using credit and startpaying for all your monthly
bills. That's why it's soimportant to have a control
center, know how much is dueeach and every month, know when
and the month is it due. So youhave an idea of how much money
(20:40):
you need, so you don't spend itbefore you need it. There's a
lot of programs out there thathelps you solve these basic
problems. And it's willing ofhow much are you willing to
spend, I don't get paid by anyof them. But one of the better
ones I've seen is you need abudget that tackles all these
(21:03):
problems for you a lot more. Youneed a budget, that's an app,
it's I think it's kind ofexpensive, thinking around
$14 $15 a month, but you can dothis with I use an app for my
tracking cost me $10 a year, Iuse a spreadsheet for my budget
(21:27):
that I've already paid for boomGhazi anything No, nothing extra
anyway, I already have it. SoI'm set $10 A years all I'm
spending. But it once you starttracking the you have to know
what you're doing. And the firstthing you do is we have to start
I was thinking about this, a lotof them want you to put in your
(21:50):
starting bank balance and thenwork for a while you could do
that, go back 30 days, becauseremember, we want to see a
history so that in order tospeed up the process, go back to
previous month, it could be morethan 30 days. Or if you're close
to the end of the month, startthe beginning of the current
(22:11):
month, figure out what your bankbalance is plugin number, put in
all your transactions anddeposits and all the
withdrawals, all the way up tothe current date, maybe you have
to do a month in a few weeks,that's the most time consuming
part of this whole process isgetting started. And once you
(22:31):
get all caught up, then youshould be able that balance,
then that program should matchthe balance in your checking
account. And if it doesn't, thatmeans you entered something
wrong, you gotta find yourmistake and fix it. That's one
way to do it. Another way is tostart with a zero balance. Go
back 30 days, put your beginningbalance zero, enter all your
(22:55):
transactions, get the ferry andtake the difference between what
does your program app shows andwhat your bank shows and take
the difference in that yourbeginning bank balance and it
should match. But you're notgoing to find any mistakes that
way, but it will match. And thenwe can go forward and keep it
(23:15):
matching the bank. So if therewas mistakes in the past this
6090 days, it's going to work assouth through and be no longer a
problem if it ever was aproblem. That's a couple tips I
just gave you on the easiest wayto do it. Once you got it up to
(23:38):
the current date as if youupdate it on a weekly basis of
10 minutes a week or less.
Because if you use thereoccurring entries, it's going
to be almost done for you. Onceyou start entering, if you go to
the same grocery store to sayinggas stations, once you've gone
through 30 or 60 days, you'vegone to about every place you go
(23:59):
to on a regular basis. Sothey're gonna pop up, the only
thing that's not going to pop upinstantly, or the new places go
online shopping places orwhatever. But if you always type
in Amazon is going to pop up.
And it's going to have some typeof category. So like Amazon,
your categories could be allover the bit. It could be
(24:20):
groceries, it could be homesupplies, could be lawn
supplies, it could be almostanything. So you just need to be
aware of what you're buying. Andyou want to be consistent on the
categories they use them becausethat's information, good
information going in is going togive you good information coming
(24:41):
out. You got to be able to lookup how much am I spending and
give you an example. I don'thave a printer for my computer I
haven't had and for years. I'vebeen going to FedEx Office and
what I do is send a file printand Go and then I get my gives
(25:02):
you a code, you go to the FedExOffice, you put in the money,
then you put in the code, andyou can print off what you need
to print. I select black andwhite 99% of the time, because
that's all I need. I'm notprinting anything and color. So
why pay for something you don'tneed? Always have that type of
(25:24):
mindset. So I went into my app,I went back two years, I'm
looking at buying a printer,because it's it's a hassle doing
all that. For the last twoyears, I've only spent $88, at
FedEx Office. And most of thatwas in the last two months
because of something new I'mdoing. And that will go away,
(25:47):
eventually, the printer I'mlooking at is $200 will take me
like five years to break even onthat printer if I never buy ink
for Who am I gonna buy it? Imight, I might not. Because it's
kind of a hassle. But I drive byit almost every other couple of
days anyway. So I can alwaysstop there. But that's just an
(26:10):
example of I got myself a reportI make I can make an informed
decision before I spent $200.
Maybe I'm not going to do it,maybe I will. But it's going to
come down convenience in thisparticular case, but I might
look for a cheaper printer, butI go to a different printer than
the cost of the ink is gonna bea lot more and I'm not saving
anything in the long run. So Iprobably won't do that either.
(26:36):
But you get the idea. So we needto identify the problem. And we
need to look at the problem. Andyou need to get your monthly
bills in front of you so youknow how much you owe, how much
is coming in, get all thatinformation in front of you. And
next episode, I'm going to talkabout you once we identify the
(27:00):
problem. And what we do itlooked for things you can cut
back on your spending in thenext week or so try to get an
app, get that information inthere. Try to get yourself a
report by category so that youknow how much you spend on a
monthly basis. We can startfiguring averages, and the
(27:25):
average is getting better thelonger time we have because we
can get a better average. We'recoming up to Thanksgiving so
your groceries might skyrocket.
But then we got Christmas, yourgroceries could skyrocket again.
But then you got six months ofno holiday all day. So we'll
(27:46):
have an average. I'm gonna talkabout the next episode a debt
reduction plan. He identified ityou know how much no one it's Do
you know how much you have topay, you know the interest rate.
Go ahead and put it in order bywhatever you want. The highest
and gerade on top, the lowest onbottom, or the lowest balance to
(28:08):
the highest bounce, it doesn'tmuch matter. Whatever you want
to do. And we're going to focusthe next episode on how you're
going to put together a planthat you're going to follow
consistently month in and monthout. That's going to pay off
that debt and you'll be debtfree. Before you know it
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