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To
Your Wealth Column Eliminating
Financial Drains |
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Learning to identify those things
that drain you of your financial resources is an important, albeit difficult
lesson. Being prepared to actually do something about that draining sensation
is even more important and often more difficult. You can take charge of your
financial drain game by doing some careful analysis, preparing a plan to plug
the flow, and exercising some hard to come by discipline. One of the best
ways to analyze exactly what is causing your finances to dwindle is to record
every dollar you spend for a one-month period. Be sure to include withdrawals
from cash machines, discretionary spending, investments, entertainment costs,
and fixed bills such as mortgages, utilities, and car payments. Keeping track
of exactly where you spend every dollar of your hard-earned money can provide
some valuable insights into where exactly you might not spend it. After you have
a typical month’s data you can evaluate if the money you’re paying out
represents the best use of your financial resources. Is it absolutely
necessary to dine out three times a week? How much could you save if you cut
that back to twice, or even once a week? Rather than
stopping for that extra tall latte on the way to work every day, could you
settle for a nice cup of Kona, sans froth? That
extra buck can add up over a period of time—to the tune of $300 or more a
year, which is a nice start on a vacation fund. Another factor
to analyze is if there are people who are draining you of your financial
strength. In his book, Million Dollar Habits, Robert Ringer talks
about "drain people elimination." This refers to identifying any
one who is tapping you of your resources and effectively separating yourself
from them. Ringer refers to any non-contributor who uses your emotional,
physical or financial resources disproportionately to their value in your
relationship as a drain person. You should consider those people who may
represent a non-obligatory financial burden, like friends who tend to take
advantage of the fact that you offer to buy lunch all the time or co-workers
who just know that you can’t refuse donating to the Friends of the North
American Spotted Whale Fund or some such "cause." These people may
represent a financial drain potential that can easily be eliminated once
clearly identified. While I would
never advocate not buying Girl Scout Cookies or Little League candy bars,
those types of impulse expenses can lead to extra inches in your waistline
while significantly trimming the size of your wallet. Consider leaving the
sweets behind but giving the tikes a flat donation, which would most likely
be lower than the total cost of the purchase. You help them out, and you do
something good for financial and physical self while you’re at it. Once you’ve
identified all the areas where your cash seems to flow in a month, devise an
attainable plan of action for plugging the drain. It takes 30 days to form a
habit, so come up with a 30-day plan to reduce some identified area of
comparatively useless financial drain. For example, commit to packing a lunch
for the 30-day period rather than hitting the local haunts. Or you could make
a concerted effort to ensure that you turn unused lights off in your house to
conserve energy, and reduce your utility expense—there’s a worthwhile cause
that could result in financial gain rather than loss. At the end of
the 30 days do another analysis of your expenditures. I’ll bet you will
discover that you have eliminated some unnecessary expenses, become savvier
about knowing exactly where you’re spending your money, and formed some new
spending habits that will keep your money from slipping down the drain
without changing the quality of life. Michael Haubrich,
CFP, is president of Financial Service Group, Inc., a registered investment
advisory firm in |