Make a psychological adjustment. “Knowing” is half the battle. In fact, according to an article in the November 2008 issue of DVM newsmagazine, “The least-examined document in veterinary practice is the profit & loss statement.” If you are losing ground month-after-month, laying out your income and expenses on a spreadsheet will give you a clear indication of the situation. This might not be a strong enough wake-up call, especially if you have savings or available debt, but both of these are temporary fixes for ways how to get cat urine smell out of carpet. Living above your means is not sustainable indefinitely. In order to succeed you must spend less than you earn.
For some people, changing a state of mind is more difficult than it is for others. Whether it’s a lack of motivation or a lack of faith, keep this in mind: Other people in worse conditions have succeeded. Think of the young veterinarian, who, a couple of years ago, started his own practice and is still working 12-hour days, six days a week as the only vet in his suburb.
No matter how difficult your financial situation is right now, many people with worse problems have been able to adjust their attitude and behavior. This dedication to change is necessary for stabilizing finances. The young veterinarian I use as an example above, now has a few years under his belt, has more clients and staff because his motto has been, “You’ve got to be responsible with your money.” In my experience, people in a variety of conditions were able to get past the present and improve the future. If they can, so can you.
Once you’ve made the psychological adjustment, continue to spend less than you earn. Let’s look at this idea from a mathematical standpoint. While there is more to money than math, the numbers form the basis of any financial decision, so this concept should always be in the back of your mind.
Net Income = Income – Expense
If Income is greater than Expense, Net Income is positive, and you have positive cash flow. If Expense is greater than Income, Net Income is negative, and you have negative cash flow (a loss). There are two mathematical solutions to a negative cash flow. You can either increase income or decrease expenses. For many people decreasing expenses is the easier option. Many people have a steady income that may not be flexible – especially if they’re already paying extra each month to try and bring down the balance of the two wheel scooter they purchased last year. Even if income is not flexible, it may take more effort to earn an extra $200 per month after taxes than it would to save an extra $200 month.
Adopt a philosophy of frugality. Some people see this as having negative connotations, like “cheap” or “penny-pinching,” but there are ways to be smart about being frugal. Frugality is simply reducing your desires to match your needs and making purchasing decisions economically. It’s critically important to distinguish between WANTS and NEEDS. You NEED dinner…you WANT a filet mignon!