The Power of Knowing your Bottom Line - Part 1

Updated: Mar 6

When most people describe their financial situations, they often describe them as being "good" or "bad" or "just okay." If you ask why they feel that way, most people will normally describe a situation. For example:

  • "I'm okay...the bills are getting paid."

  • "I have a lot of student loan debt."

  • "We make pretty good money."

The problem with simply describing your financial situation as good, bad or okay is that it really doesn't indicate if you have a firm financial foundation. For example, you can be making good money on paper, but if it's not allocated properly, you can still have the same financial challenges that you experienced when you made much less money. Also, if you associate money with a moral judgment - good, bad, okay - you can subconsciously develop habits that support that judgment, like chronically overspending or not taking time to reassess your finances because "you make good money" and the "bills are getting paid."


One tactic I like to recommend is to regularly assess your Bottom Line, that is the total dollar amount of your housing and transportation costs. While there are a number of ways to evaluate your finances, calculating your Bottom Line is one of the fastest, easiest ways to know where you stand financially. For example, if you earn $5,000 monthly and bring home $3,600 after taxes, it's helpful to see that the cost of your housing (rent and utilities) is $2,300 and that your transportation costs (car note and insurance) are $700. Those two sets of expenses quickly show that of the $3,600 you're bringing home, you're spending $3,000 on your Bottom Line. This means you only have $600 left for the month to pay any remaining expenses that you have, including groceries, childcare, cable and more.


Knowing your Bottom Line is the starting point for financial transformation. I'll discuss the Bottom Line in Part 2 of this post. In the meantime, please take a few moments to assess what your housing and transportation costs truly are.


**Consider downloading my free Bottom Line worksheet to help you get started. It's very easy to understand and gives you an even greater sense of financial clarity.**



Your personal financial coach,

Tamara


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