How To Improve Your Financial Status By Managing Spending

Like it or not, American consumers are perceived as reckless spenders. According to the Federal Reserve Bank in October 2008, the personal saving rate of Americans is 0.7% of their income. This is a sharp contrast to 24% for Chinese. I have read the stories about foreclosures and financial stress of some unfortunate people. I sometimes found interesting things in the pictures that came with the articles. For example, I clearly remember a lady who was facing foreclosure of her house sit in front of her RV with a cigarette between her fingers and two soft drinks on the picnic table. I later used that picture to teach my kids about what I thought was wrong with that picture. I am not suggesting that a TV, a pack of cigarettes, or a couple of soft drinks would save her from her financial trouble. I do think that her luxury living style was somewhat related to her financial trouble, though.

Understand and budget your expenses

To assess your financial situation, you should have a good understanding of all your expenses. Software like Intuit Quicken and Microsoft Money can help you record your expenses and analyze where your money goes. Alternately, you can refer to the annual spending report from your credit card companies. With that big picture at hand, you can take strategic and conscious actions in restructuring or cutting your expenses.

Some more tips

If you have made some strategic changes in your spending and are still in need of some small ideas, here are some tips that might help:

1. Credit card interest: Try to pay off your credit cards in full and on time and avoid high interests charged by the credit card companies. It would greatly improve your credit rating and allow you to qualify for business loans at lower rates. If you really need the money for you business, consider a home equity loan that is at a much lower rate and tax deductible.
2. Insurance: You have to change your mindset, when looking at your insurance policies. Insurances are the safety nets for big losses not for casual bad lucks. Avoid small claims, if possible, because the insurance companies are likely to raise your premiums at the next renewal. Raising the deductibles significantly of both your auto or home insurances can save you lot of money.
3. Cellphone: How much does your cell phone plan cost you every month? You should consider a less costly program or even a GO phone (pay as you go) based on your usage. Take advantages of night and weekend minutes that are often free of charge. Save the money for new ring tones and pay for the features that are absolutely necessary. Similarly, you should review your phone bills for your local and long distance phone services.
4. Entertainment: You may be paying too much to the cable company or for your satellite TV. Cutting down your time on TV may actually benefits your business. If you agree, consider terminating your TiVo or NetFlix subscription all together.
5. Travel and gas: Defer your travel plans to Europe or Asia. With dollars weakening in the recent years, you end up spending more for less. Consider shorter trips instead, which would benefit your local economy. Also, cut down unnecessary rides to save on gasoline. Trade in your SUV for a smaller car or a hybrid, if that makes sense.
6. Food and drinks: Food spending is normally small compared to other types of spending. Going to restaurants daily or too often could be costly, though. Drink plain water instead of soft drinks which are bad for your teeth and health over a long term. Drink tap water that is as good as bottled water and does not harm the environment. Lastly, enjoy home-made coffee and save the trip to Starbucks.
7. Newspapers and magazines: If you are paying subscriptions to printed newspapers or magazines, consider to read the equivalent contents on-line. A RSS reader, such as, Google Reader, helps you find and organize the contents of interest to you. The RSS feeds are more up-to-date than your printed newspapers. Best of all, they are free of charge.

Believe it or not, these tips can easily save you hundreds, if not thousands, every year. Plus, use the saved money to invest in your business assets further maximize the power of the money. What money can be made easier than this?