Saving to Reduce Debt

How to reduce debt there are two things can do to achieve this goal. First to increase income second decrease spending so how to get these things done.

Article Link
https://www.lendingtree.com/student/how-to-save-money/ By Miranda Marquit

Transcript

Charles McDonald: 0:01

Hello, I'm your host, Mr. Chuck, a retired accountant turned truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination, save savings to reduce debt, how to reduce debt, there are two things you can do to achieve this goal. First, to increase income, second, decrease spending. So how do you get these things done? This is just a episode to give you ideas, whether it's to increase your income or to look for new ways or ideas for ways to save more money, there are only two things you can do to achieve the goal of increasing your savings to reduce your debt. And either you can increase your income, whether you are working in a field where you can change jobs and get a nice increase. Maybe you don't like your current employer for whatever reason, and you can maybe move somewhere else, make more money and be happier. Or you can find a second income, maybe a weekend job or a part time job, whatever that's up to you to figure out what you want to do. Another ways to get some more income would be to have a garage sale, sell the things you're no longer using and get some cash. If you don't want to spend the time on doing a garage sale because it might take all day or even a couple of days. Depending on how much stuff you got. You can consider putting everything you're no longer using and donate it to charity and get a receipt and deducted from your taxes. That is only if you itemize your deductions. So if you have a mortgage, pay real estate taxes, you're probably have itemized deductions unless your mortgage is almost paid off. So that can help you it might save you a couple $100 in income taxes because you made a charitable donation. Don't overvalue things don't undervalue but be reasonable on that. But that's a way you can reduce your income taxes, which is a once a year thing. So if you save a couple 100 bucks, you save a couple $100 These are just ideas of things you can do to increase your income, or to decrease your income taxes or decrease your overall spending. The second thing is to decrease spending. If you've been listening to this podcast, you know you guys should be do tracking, you know, you should create a budget, you know, you should review everything and do away with those things you're no longer using and cancel any subscriptions, you're no longer using our name. And that is gonna reduce your spending, do away with duplicate things that you're paying for twice for the same service and look for ways to get the same service at a lower cost. Those are things I've talked about in the past. How do you decrease your spending, it's got to be a mindset. You have to be conscious, you got to try to spend less money so that you can save more money. I have a link in my show notes that I'm going to be referring to. Okay, one of the ways you can try to reduce your spending, I know there are certain things you absolutely have to buy. And that would be groceries gas for the automobile. And I'll pay your insurance on all your monthly bills and make them pay them on time and avoid those late penalties and fees that you might be paying. And that's going to help you save some money if you pay things on time. And it's going to help your credit rating and the better credit credit rating will help you get your insurance a little bit cheaper. So it all kind of works together. So one of the ideas you can do to try to spend less is have a no spend day with within your week. You want to take more control your personal finances, try introducing a no spend day into your week where you don't spend money on anything except for maybe essentials, like a subway ride to work and back If it turns out to be really tough, you'll get some useful insight into your spending habits. So if you try to go a whole day, without spending any money, other than paying for a way to get to and from work, that's what the article is saying. That'll give you some ideas or some insight of how, where your spending is, and may be ways to reduce your overall spending. So if you're not going to spend anything for the day, and you go into work, that means you have to pack your lunch and take your lunch. Well, you do it one day a week, why not do it five days a week, Ill make your dinner and you make a little extra and then the next day you take the leftovers, and that's your lunch. And you'll probably be eaten a little bit more healthier. Also, try walking more, instead of getting that cab ride to go to blocks or getting on a bus to go one block or whatever the case, depending on where you live, try to walk instead of paying fares for rides or taxis or Ubers or whatever. And then we have a 30 day rule. And it's something intriguing but non essential item catches your eye. Say you're thinking you want a new computer a wait 30 days before you buy if you still want it after a month and go ahead and take the spoilers and many cases the weight will make you realize you can do without. So thank you, you have an old computer you think it's getting slow, or your hard drive is getting filled up and you want to buy a new computer. Well don't do it. Wait 30 days and within that 30 days, you might figure out oh, I could buy an external hard drive for $130 and add more storage to my computer. Or I can get this free malware software stuff and try to clean up my stop my computer and get all the things working back up to peak efficiency. It still won't be as fast as that brand new computer. But you can make it faster by just learning how to maintain your current device. And you can say 800 900 1000 $1,200 He didn't have to spend because you waited 30 days and within that 30 days you found ways to correct your problem. Other than buying a new computer, replace beauty products with do it d y i y A turnips beauty products are expensive, a lot of them can be filled with harmful chemicals. Consider making your own which is a few ingredients. Now this is mostly for the ladies out there. So if you're spending more than $50 a month on beauty products and I know you are because they're very expensive because I had my niece this bought some and I know that was a lot of money. Try doing your own look, Google YouTube whatever of ways to do the same thing with you know products that you already have within the house or that are cheaper to buy. And you do the same thing with cleaning products. Brush and floss twice a day you can brushing and flossing and save your money. Dental Care is mighty expensive. take preventative action today avoid big expenses in the future. Well, just for a health reason you should brush and floss at least twice a day. Take up biking. Apart from the natural cost of a bike biking is a form of transportation that's mostly free of charge, minus the occasional tune up. Plus biking has been shown to make people happier and healthier when when if you're within a couple miles from work instead of driving the work. Maybe it'll take you too long to walk. You get a bicycle and ride to work and ride home. Not only are you getting some health benefits, but you're also saving the cost of gas and maintenance on the automobile which over time will add up. Now if you live in a place where you get a lot of deep snow you can't do it in the winter. You can only do it in the summer I understand, but you're getting the idea. We're looking for ways to reduce our spending whether it's driving the car last or buying less stuff or stretching out what we have the go farther or using products to do something they weren't initially like beauty Perino like from beauty related or cleaning relay it. So we're just looking for ways we can reduce our spending. And maybe it only be 10 or 15 or$5 a month. But it all adds up have the whole cumulative of everything that you're doing is gonna add up and over time, it definitely will make a difference. You can also carpool with a co worker, do you have any co workers that live near you, you can drive the work, consider carpooling and save gas money, take turns driving, one drives for a week and the other drives for a week. If you can do that. And I know some jobs you may be you're an outside salesperson, you might go into the office, but then you have to have your own vehicle to go call on your customers find new routes to avoid temptation. Do you have a favorite bakery of botique that you pass by all the time. But if you can't help yourself from stopping in, consider switching your route to avoid temptation, out of sight out of mind, instead of stopping for that coffee that you pay $5 for and maybe that donut or whatever coffee cake or whatever you're getting, take a different route where you don't pass by it and you don't buy it. So you're saving some money there. And again, you're not, you're gonna lose some weight because you're eating healthier, hopefully, plan your errands. Don't make multiple trips over a period of time, combine them into one trip. So say you need to go and buy lightbulbs at the hardware store, but you're out of milk. So you need to go to the grocery store, or someplace to get milk when maybe you need gas for the law more. Well don't do three separate trips. Combine them all in one trip and get it over with if you can do it all at once. So you need to look and plan ahead, check before you leave, you're going to get the light balls but check the refrigerator to your low A melki low and anything you might need to replace in the next couple of days. Check your gas for your lawn more or your lower out. I'll take it with you do one trip, do multiple things and then avoid doing a bunch of trips for doing the same thing. Beware of the treat yourself mentally to treat yourself Montra could be destroy a savings account. Instead of training self with a fancy spa and fine leather goods. Practice free self care. He can try medicating exercising or writing in a journal I stopped buying fashion fast fashion every time I walk into forever 21 The clothes are completely different. Stores like these have a rapid turnover because their clothes aren't built to last fast fashion with has higher price tags than you realize. And encourage people to throw out clauses and shop continuously. Consider investing in higher quality pieces with a classic look that lasts a long time. And don't buy jeans that are wore out looking. Because just buy new jeans and Weyermann till they look like that sweat i do this at your secondhand store or online can shop consignment shop. Instead of buying brand new look for hidden treasure a secondhand clothing store in town or online. Yes, you can do that. And I have seen what I did when I was looking for tools until I discovered Harbor Freight where I can buy tools very cheap. Some of them are not so good. Some of them are okay but you get what you pay for. But I'm saving money to track down free events in your city or town that something's going on. You want to go out with your spouse. If there's a free event going on. Go do that or go for a walk in the park or something else. Plan cheap fun dates with your significant other have a night end on occasion. You don't have to go out every single weekend. Save money by staying and sometimes skip the happy hour with your co workers and fight a couple of friends over to play board games instead of going to clubs a great way to have fun because I'm spending a lot of money. Abandoned online shopping. I never put my credit card. I never save it into an online account. Whether it's Amazon or whoever I don't leave it there because if you have a credit card there and say you go back six months later you forgot he put something in your shopping cart and then needs a sign if you go to pay for it. He hit a button and all sudden you bought it and you really wasn't ready didn't have a chance to apply your discount code because you had that credit card already in there. So don't save credit cards to any on Line account for security reasons. And four, make that extra effort when you go to buy something, that's what it's going to come down to. If you have to make extra effort to purchase something online, they'll give you some time to rethink it. And maybe you don't need to buy it at this time. So Saving money is a mindset is something that you have to be conscious about, and be doing on a regular basis. And don't look for ways to save $100 or $500 look for things that will save 50 cents or $1, or a quarter coupons at the grocery store is a good way to save some money. But don't buy things you normally don't buy or things you normally don't use. You coupons for newer products that get you to try a new product. And and definitely be a name brand product. And it's probably something you're not going to always buy when you go in the grocery store by the grocery store brand products because they're lesser expensive. So you'd look for every angle to reduce your spending to save a little bit of money, what I've started doing was I would guesstimate how my miles I'm going to drive between pay periods. And I would put in just enough gas to drive that distance, maybe a little bit more just in case, then I tried to reduce the driving as much as possible and stay within that period, I used to go and fill up the car. And that was when I was a lot cheaper. But today would cost me 50 $60. So instead of spending $60, instead of putting my money in the gas tank, I would just put $20 in and try to stretch it out as long as possible. And that gave me $40 in my checking account to do other things with now I tried to keep some of it in case I was low on gas. And I need to put another 10 or $20 in. But you get the idea. You're not saving money there, really. But you're not spending money. You can't save money by spending. So let's say the store has a sale. And they say you save 50% He didn't save a penny because she had to spend money, you spend 50% less, but you save zero. That's the way you have to think I mean, if you saved 50%, did you go to the bank and put 50% of whatever that was into your savings account? Probably not. Because you probably paid for it by using a credit card. And now you have a bill that's going to come due in a few days or a few weeks or at least a month. So where did you save money? You don't say money when you spend money. You only say money when you don't spend it. And the reason you want to do this is so that you can build up your savings account so that you can then reduce your dad and then build your savings account and reduce your debt. And over time as your debt goes away, your savings will increase a much faster rate. Once you have zero that your savings will increase a lot because you're spending less like all those minimum payments you're no longer paying. And that's money. Where is it gonna go? Well, some of it you're gonna use for groceries and everything else clothes in your normal living expenses. But over time, you're gonna build up your checking account where he anyway, but you don't want to keep four or 5000 in your checking account. You want to put that into a high yield savings or money market account where you can earn some interest and build up that emergency fund. Put the money to work for you to help you build it into a larger fund. And then when it gets over six months or a year's worth of your living expenses for your emergency fund, and then anything over that you can start investing however you want to do. It should be savings for your retirement from day one. If you work for an employer or offers or 401k, or any type of savings plan for retirement, you should contribute to it, most likely, they're gonna have some type of match. Even if they don't have a match, if you put five or $10 of pay in there over a long period of time over a lifetime, that's gonna build into more and more money is something you won't miss a small amount you won't miss today. But over your lifetime of working for 30 or 40 years, it can grow into a million half million, three quarters of a million million and a half, depending on how much you increase it over time and how you invest it and how the investments do. So put your money to work for you, when you have debt, you're working for the money. And that's not the way to get through life, you need to have them your money working for you. And you do that by being conscious on how you spend your money. So you can increase the amount of money that you're saving over a longer period of time. Another way is to review everything that you pay for on a monthly basis is there any way you can get the same level of service for a lesser price? Check around with competition, that cell phone, that'd be internet service, that would be insurance on your car, your home, whatever you have insurance on, it's all things you can shop for and get a better price for the same level of service. And they need to do that at least once a year, he got to do review or you might be paying more than what you need to be paying. And that would be not saving money. In the mindset. Wait 30 days for any purchase larger than unlimited date you set I say 250 bucks,$100 500? Whatever it is, wait 30 days, give you a time to think about it. Can you live without it? Do you really need it? Is there at are things you can do instead of what you're planning on that could be cheaper and solve the same problem. Now you got if you're gonna spend some money like that, you may maybe there's a problem. What's the other alternatives to solving that problem, there's more than one way to do it. Have you tried every other solution before this one that's going to cost you a bunch of money. That is what you got to be thinking about. And it's a never ending process. Over time, it'll become natural for you. And you'll automatically do it. And you won't even think about when you go into the store. You walked by the front door where all the high price stuff is you'll know where to go where they marked down stuff, look through the clearance stuff. Look for the stuff that you use on a daily basis that you don't want to pay full price for, such as Jeans, Shorts, socks, underwear, stuff like that, no, find a deal. Look for a clearance item, look for something, look for ways to save money, and it's a never ending process. I'll be back in one moment with my final thoughts. If you're interested, and the software that I use personally, to reduce my debt, I have a link in my show notes, shop financial.com, copy and paste it. And it'll take you to the website. If you are looking for any spreadsheets or other information that I talk about from time to time. I have links in my show notes. And I always have links to the articles I refer to and my show notes. Plus other things like the happy draft.org, which is a another organization that helps you with your debt. So feel free to go on my show notes and link and check out whatever I'm putting out there. I appreciate it very much. If you would like to make a contribution to help keep this alive, then I would gladly accept that said my shownotes. Thank you very much. If you're looking for ideas, to say money, once you start it my debt reduction plan, let's go over that for a second. You quit using credit. You're making a minimum payment on all your credit cards and all other debt. You've set up your emergency fund. You're putting money in a savings account. You're building that up Over time, when you have a minimum of 1000, he continue to build up until you have a maximum, this is $1 amount that you can set, I say 4000. Because the more you have in there, when something bad or unforeseen happens, the better off you're going to be in the long run. Once you build up to your maximum, then you take the difference between the minimum and the maximum 1004 1000 or 3000. And you apply it to one of your debts, I always recommend you who pay off the credit card with the smallest balance first, that might take a couple times or more. But you don't, once you get it to a zero balance, you do not close it or cancel the account. Unless they do it for you. You want to leave that credit card open but do not use it. Why? Because down the road, they might send you an offer, where you can do a balance transfer and have up to 18 months of zero interest, you pay to transfer the balance usually a percentage of the amount you transfer 3% to 5%, I think I paid 3%. And you can genuinely recoup that money that you paid to transfer it within 30 to 60 days of not having to pay interest on that balance that you transferred in there. Because now you get zero interest, you pay it off in that time period. That's the important part, you have to pay it off before the time period expires. Or they may go back to the beginning and clear and calculate all the interest you should have paid. And then they'll charge it to you. So you don't want that to happen. And that will help you reduce your debt a little bit faster, because you're paying less interest because you got this interest free loan on that credit card that you paid off. First, you're gonna transfer a balance from a credit card with the highest interest rate, you got the maximize your savings, and then you're gonna continue trying to pay off the highest interest rate credit card, as you're making those monthly payments, it's important to pay that one off with that free interest. And you got to figure out how much you can afford to transform it to it how much to make a monthly payment, which becomes your new minimum payment that you want to pay and not stress out the rest of your budget $50 a month, $100 a month, whatever it is, you don't want to stress out your budget, you're using it as a tool to reduce the amount of interest you're paying, which will result in paying off the principal faster. When you do that you'll pay less interest overall, that is a very important tip. And that's what I talk about in my debt reduction plan. Make your credit cards work for you instead of you work in for them. That's the key concept here. To get to that point. You need to be consciously thinking, how can I say money? Do I never do I really need to buy that product. Or I really need this new dress this new coat those new shoes, whatever it is, you're going to buy thing? Do you need it? Why do you need it? Or do you just want it because of fashion? Where you want it? Because you want to keep up with the Jones? Or what's the reason and unless you can justify to yourself the reasons why you need to buy something. Perhaps you shouldn't buy it. Get that dirty 30 day rule. In fact, even if you do for smaller items, anything $100 to $200 a seven day rule. You wait seven days before you spend the money on it. One can I afford it, too? Do I really need it? What's what's the problem I'm trying to solve? What are the other alternatives to solve that problem? If you think like that and analyze it before you spend your money, you'll have more money to put in your savings account, and you'll be glad you did so