Your Personal Stimulus Program

Here is a simple strategy to help you through these hard times.

1. Review your spending
2. Reduce or eliminate unimportant items
3. Save or invest what is left over

Review your Spending

You’ve probably heard this before. The reason you have is because it works. Keep track of your spending for a month. Write down every time you spend a penny. Use that information along with information from your check book and credit card statements to determine what you spend on a regular basis. Put everything into logical categories. If you are using a credit card to pay for some of your expenses don’t put the amount of your credit card payment on your list. Put the cost of the individual items you used the credit card for. You should also create a category called “credit card interest” and put the amount of interest you pay for your credit cards.

Reduce or Eliminate Unimportant Items

When you’ve determined where your money goes, put the items in order. Put the most costly items on the top and the least costly on the bottom. Your mortgage may be the item that is on top. You probably can’t eliminate that cost. However, you may be able to reduce the figure by getting a better interest rate. If you do, make sure that you don’t wind up paying more in the long run because you have delayed the date when your mortgage will be paid off. Look at each item on your list and decide whether you can reduce or eliminate the costs. Look especially hard at reducing or eliminating things that cost more than just money such as cigarettes.

Eventually you will get to items that involve insurance. You may find that another company can give you a lower rate on quality auto insurance, home owners insurance or medical insurance. Shop around and look for the best deal. If you pay for your own medical insurance, ask your agent about high deductible health plans and health savings accounts. You may save a lot of money if you use those programs properly.

If you can, leave some fun stuff in your budget. But not everything that is a lot of fun costs a lot of money. If you reduced the number of nights out with your family, I hope you can replace them with walks on the beach or more fun times at home or something else that appeals to your family. Maybe you can invest in a popcorn machine and save money by having a stay-at-home family night watching DVDs. Maybe you can trade DVDs with co-workers or borrow them from the library and further reduce your costs.

Save or invest what is left over

If you are one of the fortunate ones and have some money left over to invest or save, congratulations! Before you get involved in a long-term plan first make sure that you have ready cash available to take care of the small stuff that pops up from time to time. Once you have taken care of that, look at the interest that you are paying on your credit cards and other debts. It makes no sense to me to pay 18% on a credit card and invest money at 2%. Pay off your high interest debt before you get involved in any significant investment program. Remember to pay of the credit cards in reverse order of their interest rates regardless of the amount of the balances.

If you are comfortable with where you are financially and more importantly, where you are headed, please help someone else who isn’t. This may mean that you give money to family members or a charitable organization like FoodforThePoor.org. Your electric or heating utility company may participate in Operation Fuel. You can add a small amount, like two or three dollars, to your monthly gas bill and make a difference to someone who really needs it.