Get Fiscally Fit in 2014, Part IV

For the past several weeks, we’ve outlined the steps toward becoming fiscally fit for 2014. This week, we have Part IV of our series, which is all about getting a grasp of your expenses.

When it comes to expenses, many of us act like an ostrich and put our heads in the sand. That’s because tallying up your expenses can be a both disconcerting, and quite revealing. I recall that just a few short years ago, many of my friends, acquaintances and colleagues were on spending binges like you couldn’t believe.

I saw many upper-middle class people behaving like they were Arab sheiks, throwing money around lavishly (and in my view, frivolously) on cars, boats, vacations, home improvements and other goodies. A few years ago, expenses didn’t really matter, because the economy was booming and home values and stock portfolios were sky high.

As we all know, times have changed. And even though the economy and the markets have made headway during the past couple of years, the lesson most of us learned is not to overextend ourselves, and to keep expenses down.

The first step in getting a handle on expenses is to do a simple list of what you owe, to whom, and at what interest rates you’re paying. Doing so allows you to identify where you can make adjustments, and making the right adjustments can help you increase your wealth.

For example, if you have toys like a boat, a sports car or a motorcycle that you aren’t using very much, why not consider selling them and shedding those payments? Also, if your home mortgage is well above the current rate of interest, then you need to consider refinancing while interest rates remain low. I know it’s almost impossible to refinance if you’re underwater in your home. But if you do qualify, you can save thousands and thousands of dollars over the life of the loan by getting that rate lowered.

If you have high-interest credit cards, then consider putting a plan in place to pay that debt down to manageable levels. There’s nothing worse than constantly paying each month on purchases with high interest, because you end up increasing the overall cost of those purchases. The longer it takes to pay them off, the more money you’re losing.

When it comes to protecting your net worth, think about how you can keep more of what you make by reducing expenses. This move alone will really help you get fiscally fit in 2014.