Adjust Spending - Adjust Your Life

When it comes to your financial 'spoke of life', there are many things one can do to improve their situation. TOne place to start is working on the debt you have accumulated. In a USA Today article (September 5, 2006), an example is given for one particular family. Advice is then given on how to control their debt.

Coming up with ways to control and then eliminate your debt isn't as simple as earning more money. The basic issue is that people will typically spend to their level of income. If someone has an income of $20,000 or $200,000, their spending habits will reflect that same. All of us have this tendency as our society has done an excellent job on the marketing side.

The commercial comes on and the spokesman sells you on the idea of a new car, more fuel efficient with the latest 'needful' gadget. All of us will fall for things that are truly 'wants' and not really 'needs'. If you don't have the latest this or that, then you are not person aspiring for the greatest things in life.

The key is to not spend all that we have. One way to accomplish this is to sit down with a pen and paper. Write down what your average 'take home' pay is for the month in one column. Then write down in a second column what each of your bills are on a monthly basis. Subtract column two from column one - simple but very eye opening when you do this.

To get to a firmer financial position, goal yourself to the 10/10/80 rule. Give 10% to charity, save (long term savings) for yourself and only spend 80%. The hard part is to get the monthly spending under control. More on that in a minute, the charity amount is historical in nature and many will disagree with me. But giving to others will ultimately benefit you, even at its most base level benefit - tax deductions.

Saving for yourself is very important. It helps protect against future expenses that you may normally use that credit card for or keep you from having to take out a loan. Remember, credit cards and loans can be good. But never believe that companies that extend credit are in the business to help you or give you a great deal. Plain and simple, they are in the business to make money. The more you borrow from them, the more money they make. It is in their best interest to keep you in debt.

One suggestion about saving is if your company provides automatic payroll deposit, see if the deposits can go to different accounts. Then set up a 10% automatic deposit to a savings account and the remainder to your checking account. If possible, keep the two accounts seperate so that you are not tempted to continually pull money from savings into checking.

Now the hard part as I said previously. All of those monthly items in column two have to be examined. One another sheet of paper, create two columns and label them NEEDS and WANTS. Like I said, here comes the hard part. In the column labeled NEEDS, place the necessities in life such as your rent or mortgage, the utilities and a car loan to get you back and forth to work.

The column called WANTS is where you place the TV cable bill, the gym membership and other similar items. You have to be honest with yourself about what a WANT is versus a NEED. You can lie to yourself but it only hurts yourself...so again, be honest about this.

Now that you have a list of WANTS, eliminate those bills from your life. Learn to live without them for now. The savings should go to paying off short term debt. Some financial experts say to pay off the high interest debt first. My belief is to pay off the one with the smallest amount first. It gives you a sense of accomplishment and then you can start taking that money combined with the WANTS savings - apply both to the next debt.

But let us think about what happens if we can not make the income exceed the expenses. You have eliminated the wants but a deeper look at the needs is required. You have that nearly new car that is costing you $350 - $450 per month. Sell this one and get a more used car for only $5000 and maybe a payment of $200 per month. It could also be that the big house with the yearly association fee is too much of a mortgage.

Those are tough choices to make but ones you should consider before you become forced into a decision. Being able to have a choice in the matter will save you money as opposed to being required. In being required, it usually means foreclosure or repossession - not the choice you want in your life.

Some of the simple things are keeping lights turned off, maybe not using the air conditioning as much. Saving on water, generic brand food and less of the 'designer' brand clothes are other ways that you can make a change.

The key here is to lower your expenses to 80% of your income. Once you have done this, work to eliminate debt, work to a point of being able to pay in cash as opposed to credit card. Your stress will go down, you will be able to enjoy more things since your savings will grow. Life will be better all around. I am confident that each of you can do this.

David Bach is quoted as saying, “Before you can really start setting financial goals, you need to determine where you stand financially.” He has several books out but one that caught my attention was Start Late, Finish Rich. It helps to take away any doubts that you are too old to help your situation.

His book is good but know that there are several out there. Go to your local library or look online, maybe go sit in your local bookstore. The key is to find something that you are comfortable with, find easy to understand and will get you on a path to improving the financial spoke of your life. Just do it tonight, don't think about it, just get started...you've been putting it off too long.