Four exercises to increase your bottom line

Have you ever known someone who does very well with investments and savings, even though they make the same money you do? They never seem to be lacking a decent car, nice clothes, and other non-essential luxuries, while you live paycheck to paycheck, working to pay down debts, only able to dream of a savings account. You ask yourself, how is this possible? The best answer is that it has nothing to do with how much you earn, it has do with how much you spend.

If you want to increase your bottom line, you need develop a winning attitude about money. A winning attitude starts with a commitment to reign in spending and reduce credit card debt. If you are concerned that you personal economy is less than robust, consider adopting the following fiscal fitness program to get back into shape.

Exercise 1: Find out where the money goes. To find out where your hard-earned money is going, start by listing your monthly, fixed expenses, such as rent or mortgage, utilities, cable television, insurance, loan payments, and minimum credit payments. Include every monthly bill, estimating those that are variable, including what you spend every month on groceries and gas.

Next, add up your expenses and compare the total to your monthly take-home pay; most people are shocked to see large amount of “disposable” income they have to work with each month. Now ask yourself if you can live on what’s left over after the bills are paid. Most people find that they can, and have money left to build an emergency savings account or pay off debts.

If this is true for your case, don’t dismay—almost everybody wastes money to some degree. It’s important to understand that every purchase we make—excluding such absolute necessities as food, rent, and gas for the car—is a choice.

Exercise 2: Plug the holes in your budget. To take control of your spending, you will need to make very clear, conscious decisions about what is important to you and your family and eliminate the rest. Start carrying a pocket-sized spiral notebook with you at all times, and write down every purchase you make, including the amount. Even if it’s only a soft drink from the convenience store, or a trip to the drive-thru at a fast food restaurant, record it in your notepad.

Most people discover that this exercise curbs spending automatically because it draws their attention to it. After two weeks, review your notes and ask yourself if you really need all the things you buy. Also commit to tackling the big money wasters, like paying high interest charges on credit card debt.

Exercise 3: Stop using credit. To improve your financial standing, make a commitment to stop adding to your debt load. For the next 30 days, try to avoid using your credit cards for any reason; be on a cash basis 100 percent. If you don't have the money to pay cash for any purchase, you can't afford the purchase and you must forego the purchase until you have money to pay cash. If the temptation to use credit proves too much, leave the credit cards at home when you head out to the store.

Exercise 4: Pay down debt. Reducing your debt allows you the freedom to make smart future financial choices. Start by focusing on your debt with the highest interest rate first (never forgetting to make required payments to all debts). Once that account is paid off, apply that amount to your next highest interest rate debt. If this task seems impossible, you might also consider paying off your smallest balance first. Seeing quick progress is often a good motivator.

A winning financial attitude means not buying items at a convenience store if they’re available at a supermarket. It means cooking meals at home instead of having them delivered. It means being sensible about credit and not piling up enormous debts. Most of all, it means making smart decisions about your money.

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

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