2010 seemed to be a much better year financially than 2009. Small businesses were pulling out of the red, people were saving their homes from foreclosure and spending trends seemed to be back on track. However, as my own personal and business financial position improved over the year I noticed old money problems rearing their ugly heads. Fortunately, after surviving hard financial times over the last few years I made an effort to do things differently during this fiscal year.
The Good – Financial Improvements
This year I noticed a marked improvement in small business economies. My clients, who reduced their spending in 2008 and 2009 to deal with market problems, increased their spending in 2010 to take advantage of an improved economic outlook. This increased spending meant that I received more work orders and brought in a reasonable amount of money for the year.
This increase in cash flow allowed me to catch up on bills, to pay down my debt and to establish a good payment history, once again. In 2009 my business struggled, so I had a lot of rebuilding to do in 2010. I focused on rebuilding my credit score and history, as well as on making better financial decisions. For example, instead of spending money blindly I made it personal and professional policy to document what I was spending money on, how much money I was spending and how I was paying for each expenditure. This helped me to identify areas where I was I could reduce costs by being more mindful of how much I was spending on luxury items that I really didn’t need.
Another financial lesson that I learned this year is to take advantage of financial opportunities when they present themselves. The mortgage modification program is what I took advantage of this year. At first I wasn’t going to have my mortgage modified as I didn’t think that I would qualify, but I took the chance, completed the paperwork and got by interest reduced significantly. I now save over $400 a month on mortgage, and will save hundreds of thousands of dollars in interest over the life of the mortgage.
The Bad – Financial Problems
It is easy to fall back into poor financial management practices once economic conditions start to improve. I noticed that once I had more cash coming in I became more complacent and frivolous with my purchases. I stopped comparing prices and went shopping without a shopping list to control what I purchased. This increased my monthly expenses dramatically and forced me to use credit cards once again to cover my purchases. This is a dangerous financial practice to engage in as it increases your debt and lowers your economic resiliency.
Reigning Things In
After living through an extremely rough financial year in 2009, I was more aware about my finances in 2010. Even though I fell back into some of the old financial traps that produced my economic problems in the first place, I was able to take advantage of the improving economy, financial opportunities and the lessons that I learned in previous years to turn things back around. I now know that maintaining tight control of your money during both good times and bad is critical to your financial success and stability.