Financial Resolutions 2002

However, within these expenses are degrees of discretion that can ultimately increase or decrease your cash flow. For example, food is a non-discretionary expense because you need to eat yet, discretionary spending comes into play when choosing between filet mignon and hamburger. Ask yourself, can I carpool or take the bus to work instead of driving?

Simply exercising degrees of discretion will ultimately increase your cash flow. Knowing these fixed costs will determine the true discretionary income you can allocate to such endeavors as fashion, travel and leisure. To ensure a sound financial future, think of investing as non-discretionary income.

Organize. Buy a simple accordion file to keep track of all your bills and help you follow when they are due and when they are paid. Many come with pre-set categories like utilities, auto, and mortgage to make it easier to manage. This upfront organization ultimately saves time and money. At the end of the year, this simple filing system also allows for you to track your overall spending and obtain a firm grasp on your financial picture.

Mellody Hobson, president of Ariel Capital Management in Chicago, is GoodMorning America's personal finance expert. Click here to visit her Web site, Ariel Mutual Ariel associates Matthew Yale and Anne Roche contributed to this report.

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