In Part One and Two of Understanding Your Bottom Line, we learned how knowing the total amount of your housing and transportation costs (the Bottom Line) is a very simple way to quickly assess your financial standing. So now that you know how to calculate your Bottom Line, let's talk about why it's so important.
I believe it's much easier to change something when you understand the need for that change. In other words, if your doctor suggests you lose weight because you should, you may or may not do it. But if the doctor says that losing 15 pounds could help reduce your cholesterol numbers to a healthier level and prevent you from needing prescription medication, suddenly the suggestion to lose weight becomes a greater priority. Notice how I mentioned 15 pounds. If you decided to take on that challenge to preserve your health, you're likely going to set 15 pounds as your goal, cut back on fast food and exercise more regularly. With each pound you lose, you'll likely celebrate the fact that you're getting closer to your goal. And then, before you know, you'll be there - celebrating your victory and improved health.
It's the same with finances. It's one thing to say, "I want to get out debt someday and have more money." It's another to say, "I plan to pay off $12,000 in credit card debt and increase my personal liquid (cash) savings to $3,000 within the next two years." Understanding Your Bottom Line helps you to make definitive goals and statements like these. And here are the top three reasons why:
#1 - Knowing Your Bottom Line will provide immediate transparency into your finances. If your Bottom Line is one that you're comfortable with, you can look at what you're doing to maintain that success and share your tips with others. You can also revisit your Bottom Line periodically - maybe once every quarter or twice yearly - to see if there's anything you can do to fine tune that number even further, like changing your energy provider or getting a more economical cell phone plan. Both of these options don't necessarily require a sacrifice in comfort but are easy ways to enhance your Bottom Line and free up extra cash in your monthly budget.
# 2 - If your Bottom Line is less than ideal, first of all, there is no condemnation with this scenario. But knowing this information can help you set clear, specific goals to improve it (as shown in the weight loss example above). For example, if you do your Bottom Line calculation and discover that you're consistently short $400 each month, you can proactively decide how you will address that gap. Maybe you could pick up an extra overtime shift once a month or maybe you could work a side hustle that would generate the needed $400. It's so much more motivating to make temporary sacrifices like working extra hours if you know exactly how it's going to improve your situation. In this case, maybe it will reduce stress and instill an even greater sense of pride and confidence that you can set and achieve your goals.
#3 - One of the best benefits of knowing your Bottom Line is that you can apply several key Biblical principles to help you improve this number. First, when you write down your Bottom Line and how you would like to see it improve, you are activating a spiritual principle described in Habakkuk 2:2 that encourages the people to, "Write the vision down, make it plain upon tablets." God wanted the Israelites to keep their vision before them because He knew they would be more likely to believe it and less likely to give up if they saw this vision every day. The same principle is true for us today. Additionally, if you know exactly where you're experiencing shortfalls in your budget, you can pray very specifically about what you need. My grandparents were both pastors and they always encouraged me to be specific with my prayers so that I would get a specific answer. This has proven true in my life many times, so I'd like you to consider this approach as well.
I hope this article shared more insight on why the Bottom Line is so important. Please view Part Four of Understanding the Bottom Line, which features one of my TV episodes where I discuss the Bottom Line in great detail. You can also download your free Bottom Line worksheet here. Thank you for taking a deeper interest in transforming your personal finances!
Always in your corner,