How to Maximize the Return of All Your Financial Activities

When it comes to achieving financial success, the emphasis is usually on finding ways to earn more money. While this is an important aspect, it’s just as important to find ways to maximize the return from all your financial activities. By spending less money, working more efficiently and adopting better lifestyle habits, you can do just that.

Save Money on Everyday Purchases

If you can cut your monthly spending budget by 10%, that will be the equivalent of giving yourself a double-digit raise!

And here’s something else to think about; increasing your income by cutting your expenses is even more rewarding than getting a raise in pay. The spending cut will not result in a higher income tax liability, the way a pay raise will.

That being the case, one of your financial goals should be to lower your cost of living on an ongoing basis.

The first way to do this, is simply avoid “lifestyle inflation”. When you get an increase in pay, or a large windfall, simply save and invest it. By doing so, you’ll be investing in your future rather than applying extra money to a higher standard of living.

Another significant way to do this is by paying off debt. Each debt you payoff is like giving yourself a pay increase. And again that “increase” will not come with any negative tax consequences.

Lastly, look for discounts and less expensive substitutions in as many areas of your life as possible.

For example, you should always be on the lookout for less expensive insurance policies. Typically, when you’re with one insurance company for many years, the annual premium increases can make a company’s policies noncompetitive. If so, it’s time for a change.

It’s Not What You Make, But What You Save that Counts

The goal of saving money on your purchases should be to redirect the cash into savings and investments. Many people focus on income level as a meter of success, but investing success comes as a result of having accumulated the largest amount of money possible.

Since the size of your investment portfolio will become more significant than your income as you approach retirement, your overriding goal should be to increase that portfolio as early and as consistently in life as possible. Finding ways to free up income for savings will make this happen.

Adopt a Better and Healthier Lifestyle

Sometimes the most unnecessary drains on cash-flow are not in how you spend your money, but rather in how you live your life. There are habits you can change to save you thousands of dollars each year:

Exercise and diet. More frequent exercise and a better diet can lead to fewer trips to the doctor and eventually even to lower health insurance premiums. But being healthier can also improve your productivity in your work, ultimately increasing your income. That’s a double win!
Cigarette smoking. If you smoke a pack of cigarettes per day, at six dollars per pack, quitting will save about $2,200 per year.
Too much TV time. Not only does too much TV time take away from productive activities, it also encourages you to spend more money than you would if you didn’t watch TV. If you doubt this, just spend a little more time paying attention to the commercials — that’s their whole reason for existence. You can earn more and save more simply by spending less time in front of the TV.
Recreational shopping. Many people react to the stresses and strains of life by going recreational shopping. Though this can seem more benign than alcohol or drug abuse, the financial damage it can do is often substantial nonetheless. The size of your credit card bills can provide a clue if this is a problem in your life.

These are just some examples of how changing lifestyle habits can reap big financial rewards. Examine your own life and think about areas of excess that you might be able to modify or change completely.

Improving Your Work Habits

Just as you can improve your financial situation by making changes in personal lifestyle habits, you can also make improvements in your work habits to provide positive results.

Concentrating on what’s most productive. Spending 80% of your energy on activities that produce 20% of your productivity, is a common problem — whether you have your own business or you work for someone else. But rather than getting immersed in minutiae, begin to focus on what areas of your work produce the best financial results. Those functions should be what you focus on from now on.

Improving your job skills. Is there a certain skill that will enable you to do your job better? If so, do what you can to acquire it now. In fact, improving your job skills should be an ongoing effort. Small changes implemented over a long period of time can yield big results.

Working from home. An increasing number of people are working from home, and perhaps you can become one of them. Even if your employer will not permit you to do it on ongoing basis, just having the arrangement one or two days a week can make a big difference in your finances. Not only will you save money on commuting costs, but you may also find you’re more productive working from home than you ever could be at the office.

As you can see, not nearly all of the improvements you can make in your financial situation relate strictly to increasing your income.

Have you considered making any of these changes, or are there others you can recommend to create financial improvements in your life?