Keeping Your Small Business Out of Debt

In recent years the financial community has created an abundant archive of material regarding debt elimination. These materials range from step plans to "too good to be true" loan consolidation avenues. While much of this information and many of these tactics can help individuals in over their heads, they often overlook or minimally concentrate on the last and most important step - staying out of debt. After all, the ultimate goal of beating existing debt is fighting off the future over-spending that leads to overwhelming financial obligation.

At a quick glance, staying in the black is quite simple and comes down to one action - spending less. However, like keeping the pounds off after a rigorous nutritional and exercise routine, a successful financial diet requires a lifestyle makeover. It is this change that will subdue and/or eliminate the bad habits that result in adverse financial conditions.

The first step to a financial lifestyle change is to identify "true income." This step is almost never the same for any individual and can be more complicated than it seems. Specifically, those who have multiple and/or variable income streams may find this a bit more difficult than those who have one easy to track source. In either case, it is necessary to know exactly what is coming in before determining any plan of action for debt avoidance.

After identifying a "true income" dollar amount, the next task is to breakdown expenses for a designated time frame. One suggestion here is to analyze expenses on a weekly, monthly, quarterly, and yearly basis. This will help to reveal spending trends and identify problem areas. For example, it could be found that at a certain time of the week, month, quarter, or year spending is simply higher. Now, some of these, such as rent due on the 1st of the month or dinners on a Friday night, may seem quite obvious. Other costs will shock and surprise the spender - sometimes this awareness is enough to set debtors in a new direction!

Once expenses and costs have been totaled and examined, they should be divided into two categories. These categories are needs (necessities) and wants. This divide and conquer approach will allow for some indulgence while still leaving meat on the bone (Money in the bank and numbers in the black!).

The first category of needs is self explanatory and consists of the costs associated with human necessities. These costs can include, but are not limited to: food, shelter, clothing, medicine, etc. Now, it is important to not turn needs into wants. For example, everyone needs to eat, but no one needs to eat surf and turf or sushi every night. With this said and assuming that needs are not being transformed into wants, minimal adjustment can be made to this category. These are things we need to live!

The second category, wants, is where cuts and adjustments need to be made. Keep in mind, this involves much more than just telling one's self no. It consists of controlling the sometimes overwhelming emotions that go along with "want" spending. However, with discipline this type of emotional spending can be decreased. Remember, it is very important to not completely starve of wanted goods, but rather adopt a "not at this time" attitude. In other words, staying out of debt requires coming to grips with the fact that sometimes the timing is not right for certain spending - the deciding factor being whether or not the addition of need and want spending is below true income.

By following simple steps and making calculated decisions regarding spending, anyone can stay out of debt. Everyone has to start sometime and there is no better time than now! Just remember, think before you spend and before you know it you will be on the fast track to a debt free life.