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Personal Finance
More money may not be the answer

Diane Neaher -- Does your job pursuit ever find you thinking, "If I can just land a job making more money, then I'll be able to improve my financial situation and begin saving for my future?

The reality is, making more money won't necessarily lead to financial success. Living within your means and having money available for a savings program is about spending habits and making choices. It's not the size of your income that will determine your financial success over the years to come, it's how you handle the money you earn. Are you in control of your spending, or is your spending controlling your future? To answer this question, try a simple exercise that will help you see where the money you make 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.

Add them up and compare the total to your monthly take-home pay. Most people are shocked at the difference. Now ask yourself, and be honest, can you live on what's left over after the bills are paid. I'd bet that you can, and have plenty left to build a savings or pay off debts.

Don't feel bad. 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. So if you want to stop wasting money, it's as simple as deciding to stop.

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.

To develop a winning attitude about money, think about your spending habits. Do you buy things you don't need when you're depressed? Do you treat your friends just to gain their approval? Do you spend money for convenience, such as eating at a restaurant or having food delivered? Do you spend a lot of money at convenience stores? The answers to these questions could reveal the root cause of poor spending habits.

For the most part, though, this type of behavior stems from an inability to distinguish between what you "want" and what you "need." When you think about something you "want" for any length of time, you eventually convince yourself that it truly is something you "need." Once the thing you "want" becomes something you "need," it gets lumped in with all the things you really do "need," like food, shelter, and electricity.

The key is to make sure you separate in your mind the difference between "wants" and "needs," and put achieving your financial goals in the "need" category.

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.

Money Management 911

Most families are ill prepared for a financial setback and it's not hard to understand why. As a nation, we're saving less than one percent of our income. In fact, we haven't saved less since the Great Depression. Experts say that not having an adequate savings cushion is what sends many families into financial crisis. Layoffs, downsizing, "right" sizing and merger mania are all very real threats that catch many by surprise.

Though you may be working very hard to get a new job, to get on your feet financially and to once again become current on your bills, time can pass more quickly than you realize. If you find yourself unprepared for a financial crisis or in the midst of one, the following steps will you weather the storm:

* Assess your situation and develop a survival budget. Determine (1) the amount of take-home income you can realistically count on, (2) your set monthly payments such as housing, vehicles, and insurance, and (3) your current variable expenses such as costs for food, utilities, and gasoline. Don't forget to consider periodic expenses such as auto registration, insurance, or school tuition.

* Establish priorities: What must be done first? Obviously, spending must be reduced to the bare essentials. Overall spending must be evaluated. This takes a budget!

* Keep a handle on credit and charge accounts: What must be continued and which can be deferred? Notify and negotiate with all creditors for reduced or extended payments. Be honest and forthright. Explain that there is not enough to go around but you will eventually pay everyone.

* Stop charging and overextending yourself: You will not get out of this problem by attempting to get more credit. EXCEPTION: If you know that the income interruption is only temporary, then a small loan to tide you over is okay.

* Protect you home and assets necessary to gain income once again: This means you must make every effort to keep the rent or mortgage payments up to date (and utilities), along with the car payments, if that car is necessary to look for work. However, the second car or recreational vehicle or boat can go.

* Consider selling of assets to keep afloat: What do you own that you can sell, (including the gun collection and family silver)?

* Seek professional advice: Career counseling, VA benefits, United Way agencies, or a reputable credit counseling agency such as Money Management International.

Major financial setbacks such as losing your job, a major illness, or divorce can be devastating. To minimize the long-term effects on your credit worthiness and financial status, immediate actions need to be taken. To help you manage, MMI has created Money Management 911, an online financial resource tool for consumers who are facing a financial emergency. It is free to consumers and available at

This content is provided by Consumer Credit Counseling Services (CCCS). Visit them online at

© 2003

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The views and opinions expressed in these articles do not necessarily reflect those of College Central Network, Inc. or its affiliates. Reference to any company, organization, product, or service does not constitute endorsement by College Central Network, Inc., its affiliates or associated companies. The information provided is not intended to replace the advice or guidance of your legal, financial, or medical professional.