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Get Control of Your Spending
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Author:
Article: Financial Tip of the Month - Get Control of Your Spending
Even the BEST financial plan is doomed to fail without a specific strategy for effective spending management. You wouldn't think of starting to build a home without knowing how much it will cost to build. You would go out of business unless you make more than what it costs you to build a home. It all comes down to one simple principle: You will NEVER get ahead financially if you spend more money than you make. It is mathematically impossible.
Take a couple of common scenarios:
1. I recently met with a client who has jumped from job to job over the last two years. He spent the previous twenty years working for a large company earning a decent income. During that time, he had contributed to his 401K retirement saving program regularly. With a lagging demand for the company's products, he soon fell victim to one of the many rounds of company downsizing. His new jobs paid less than his previous one, and like many of our fellow contractors, the income was somewhat inconsistent. Because he had become accustomed to the standard of living his previous income allowed, he had a hard time adjusting to a lower income. To compensate for his lower income, he frequently took money out of his retirement plan to pay off credit card bills he had accumulated, buy a new truck, etc. In a very short period of time, he had undone most of a retirement savings plan it had taken years to create. His main financial problem was poor spending management. Unfortunately, my client's story is not all that uncommon.
2. With interest rates as low as they have been lately, many people are rushing out to get debt consolidation loans. You see them advertised on TV and radio constantly. There are many mortgage companies out there encouraging you to consolidate your credit card bills, auto loans, student loans, and other consumer debts into a new first or second mortgage. After all, you are left with just "one easy payment". Here's the problem: most people who consolidate their debt will be back six months to three years later to do the same thing over again. Why? Because in most cases, the source of the problem is poor spending habits. The reason most people get a debt consolidation loan in the first place is that they have paid for things on credit that they otherwise would not have been able to afford at the time. It becomes a habit. If the habit is not changed along with the debt consolidation loan, it is only a matter of time before another debt consolidation loan will be needed to fix the problem again. Don't misinterpret what I'm saying here: getting a debt consolidation loan can be a fantastic idea - if it is accompanied by an effective spending management plan.
Fortunately, spending management is not a difficult thing to master. Being a successful contractor requires having the right resources at your disposal. Likewise, spending management is simply a matter of choosing the right tools to help you along the way. There are several spending management programs available (from basic to extremely high-tech). These programs will help you prioritize your spending and put you back in control. A good spending management program can help you find up to 10% of your income that you don't realize is being spent. This could mean hundreds of extra dollars to you each and every month. Imagine what a dramatic impact it would have if you were able to increase the profit margin on every home you build by 10%! Best of all, spending management programs don't have to take up a lot of your time. They are fun and easy to implement. When you see how much of a difference it will make for you, you will be excited about the new possibilities it creates for you financially. Once your spending management is in place, you will be well on your way to reaching your other financial goals.
Without it, good luck!!!
Contractor Financial Solutions: www.contractormd.com
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