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How to Gain More by Cutting Back


Look closer at your spending patterns on grooming, clothing, and food.

There's been some interest regarding what's changed in my lifestyle as I go about dealing with debt. I'm happy to share some of this with you, but there's some background information you probably need for context.

First, I own a business, which affords me a great deal of flexibility in how I handle my cash flow. Last year was probably the worst year in revenue I've had in 15 years, and only the second time ever it's been below six figures.

Second, while I do have debt, I do not have a negative net worth. Because I'm a sole proprietor, all debt is on the personal balance sheet for tax/reporting purposes, because it's all tied to my social security number. The IRS recognizes sole proprietors through the use of a Schedule C on the 1040 federal return.

I don't have "corporate" lines of credit, because I don't have a corporation. Even if I incorporated today, it would take time for the corporation to build a credit history under its EIN (tax id number) and all lines of credit would have to be personally guaranteed by me. So, while I have two bank accounts (business, personal) and separate credit cards for business and personal, all of it reports on my social security number.

Why is this important, you may wonder? As I've mentioned before, I incurred about 75% of the debt I have from investing in my business. It's not a good idea to use personal wealth to pay business debt. The business needs to earn enough revenue to repay the debt, which is part of my repayment plan. Often times, it costs more to use personal assets than the debt service itself is actually costing.

The other 25% of the debt was incurred getting used to the increased cost of living in New York. The year I moved from Arizona to New York, my income dropped precipitously while my expenses more than doubled. I supported two households that first year while I commuted from AZ to NY every 10 days.

Okay, so now you have a bit more background information. What do I "cut" and what do I "keep" when there's less money to go around?

When I started in my business, my mentor was relentless in driving home the importance of keeping up a polished and professional image. This led me to make a decision to quit biting my nails. This was no easy task, I can assure you. To help me, I went for my first manicure and had silk wraps and extensions put on. I quit biting them, but this required maintenance and expense -- which I was happy to do back then. Now that I don't bite my nails (although I do occasionally slip), I prefer natural nail care, which is less expensive and time consuming. The savings can be anywhere from $500-800 per year!

Although I haven't had that kind of nail care in years, I hope the example makes my point. Choosing "low maintenance" options in all of your personal services allows you to go longer between services without giving up having a good image. The same applies to hair care (color, cuts, products, etc.) and other "personal services."
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