THE BLOG
01/07/2013 10:05 pm ET Updated Mar 09, 2013

5 Tips for Financial Fitness in 2013

Forget about the national debt for a minute. Let's take a look in the mirror. Are you carrying some extra credit card weight from excessive gift giving? Do you occasionally binge on the Iman collection at 3 a.m. on Home Shopping Network? Do you pay down your debt just to have it creep back up again? It happens. Especially during the holidays. Ready to dodge the emotional traps that keep the debt on, no matter how hard you try to reduce? Here are five tips for achieving and maintaining financial (and lifestyle!) freedom:

Tip #1: Stop talking about how broke you are. Or how expensive things are. Or how you can't afford it. Blah blah blah. This becomes self-fulfilling prophecy. Catch yourself and stop yourself. Replace the nasty self-talk with an affirmation. "I am healthy, wealthy and wise." Or, "I buy what I want and need with the money I have." The idea is to feel better. When you feel better, you make better decisions. Nobody who feels GREAT about themselves devours a whole bag of potato chips. Or overbuys on www.HSN.com .

Tip #2: Go on a fiscal fast. Do a spending cleanse. Go one entire day without spending a dime. Don't buy your morning coffee at Starbucks and save $5. Pack your lunch to work. Once you can survive a day, aim for zero spending for two days. Then, see how lean you can be for one week. The idea is to be conscious of your spending and make deliberate choices. Before you buy something, consider, "Is this necessary? Will it give me joy? Will it solve a problem? Or will the charge just end up as a boat-anchor item on my Amex statement?" Consider, too, that our economic problems are the sum of millions of individual, mindless decisions.

Tip #3: Cancel automatic fees for rarely used stuff. Record monthly bills and debt payments to get an clear idea of what your cash requirements are. Check out www.mint.com, a neat, free tool for managing your checkbook and personal finances. Look over your expenses for a month to see where your money is going. Review credit card statements and make sure that you are not being billed for anything you didn't buy. It happens. Look for ways to save: Bundle your phone service, credit card fees, etc. Get rid of monthly charges for stuff you really don't use or need. Monthly hair care or cosmetic clubs? The super macho sports cable TV package? Cut them off. Then, if you find that you really miss them, you can re-up in a few months. BONUS: You often get a great deal when you sign up as a returning customer, as a bribe to get you back.

Tip #4: "Super Think" five ways to make more money. It's always a matter of more income and/or less outgo. You know those are always our only two options. (Really, our elected officials should be able to grasp this.) If you only tighten the belt, you may run out of breathing room. So, consider how you can make more money. You could sell something on eBay or Craig's List. You could offer a service... for pets or kids or homeowners? Consider a business of your own. Even a modest venture could net you a few extra hundreds every month. You don't have to quit your job... just yet. Write down at least five ways to increase income and pull the trigger on one of them.

Tip #5: Put a debt reduction plan on autopilot. Don't fuss over debt. Deal with it and get on with your life. Remember Tip No. 1. Endless worry and chatter about how much debt you have is counterproductive. (And not very interesting to those with whom you are over-sharing.) The key is incorporating a simple debt reduction plan and sticking to it. Here's are the basic steps:

  • List all your loans (credit cards, money from mom, car loan) on a spreadsheet, a white board or a columnar pad. Name, balance, current monthly amount.
  • Contact the loan companies/individuals and negotiate what you owe. (You may be astounded at their willingness to deal.)
  • Commit to a monthly debt reduction payment schedule.
  • As you pay one loan off, apply that payment amount to the principal portion of the next loan on the list.

Most folks rack up new credit card charges once they have paid the balance due. No, no! Stay the course. Applying the payments for the retired loans to the existing loans escalates your debt reduction efforts. It's exciting to put loans to bed, so update your plan monthly with the diminishing balances.

It's about freedom! If you want a healthy body, it takes discipline. Just enough discipline to get an exercise and diet program started. Then, the rewards kick in. You feel good. It's liberating to be physically fit. Financial fitness and business plan basics travel a similar path to joy and freedom. Freedom from worry, and from debt. Freedom to choose.

Our congressional members may not understand financial basics. But you do.

"I am indeed rich, since my income is greater than my expense, and my expense is equal to my wishes." ~Edward Gibbons

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