For some of you, you may be stuck in a financial situation that feels never ending, one that feels like you will never get out of. Some may want to take the sticking their head in the sand (unfortunately this won’t help your financial issues will still be there unless you do something about it), while others will vow to fix their damaged financial situation.
In my case the thought of owing hundreds of thousands in debt with no assets to show for it was terrifying and for a while I did put my head in the sand and yes there were times when I wanted to give up. Eventually I decided to do something about it and eventually got onto the path of financial respectability.
Below are 5 tips that I used to help me get back on track financially.
1. Don’t lose hope
It’s easy to feel hopeless, to want to give up when you are tens of thousands of dollars in personal debt! Whether it’s credit card debt, personal loans, student loans or medical debt
As long as you have your health and are on the right side of the grass there is always a way. Build that belief that you can change, that you can be financially successful. This belief won’t come overnight, it will build the financial goals that you hit but you will need to draw a line in the sand and take the leap of faith that your financial issues can be overcome if you take a disciplined planned approach.
2. Get real with yourself
Are you living above your means? Are you living in a world where you are trying to keep up with others? If so the quicker you accept that you are your own person and your financial journey is your own then the quicker you will be able to get out of the financial mess you are in. Accept that you don’t have the resources to live the life others are living.
Review your expenses with a critical eye. How did you get in this precarious financial situation? Unless a sudden health reason or family emergency has occurred it’s highly unlikely that you suddenly became financially compromised.
The author and motivational speaker Tony Robbins has a saying, success leaves clues. Financial success (or financial mismanagement) also leaves clues. Look at your previous spending and investment habits, what clues can you find that led you to this precarious financial position? You may need to make some changes with your friends and family that aren’t good financial influences. That’s fine. This is your life and you should be living it your way, not trying to keep up with others. Be honest with yourself and be honest with others about living within your means. The quicker you do this the quicker you will be back on track financially.
3. Go back to basics
Go back to square one and calculate what your net household income is and what your minimum lifestyle expenses will be. Set up your budget, look to build up an emergency fund and set up your own financial hub. Be disciplined with this.
When doing your financial review, are you sticking to a budget or are your expenses all over the place? This might be one of your issues. The quicker you get a handle on what your monthly expenses are (and should be to reach your financial goals)
What expenses can you cut or at least reduce? When was the last time you put your mortgage (if your financial situation allows it), insurances or utility bills up for review? Similar to your health with at least an annual check up or visit to the doctor, these large expenses should be reviewed every year as part of your annual financial check up.
After you’ve completed this budget breakdown, reach out to your debtors and be honest with your current financial situation, how much you can allocate towards repayment how often you can make a repayment, etc. Avoiding this will prolong your financial misery, be honest (to yourself and others) after you’ve come up with your new budget and stick to it!
4. Break it down
If you have debts and they feel enormous, break these down into smaller pieces. Let’s say that you had a debt of $100,000 which you may find terribly daunting. Break this amount down into smaller amounts. Repaying $1,000 is a lot easier than paying $100,000 so if you have a large amount of debt break it down into smaller lots.
In the above example once you’ve repaid several lots of $1,000 (as part of the larger $100,000 debt) then you can expand this small goal to repaying $2,500 over a certain shorter term period then keep increasing this. Before you know it you have broken the back of the larger debt amount and you are on your way to reaching your financial goals.
There are some finance commentators who offer various approaches to paying down debt (such as the snowball method) find you find the method that works for you and run with it. Set the smaller financial goals that match up with your larger financial goals and get cracking!
5. Increase the income coming into your household
Easier said than done right? We know this will take some time but there’s no better time than to start this process today. Take a look around your home, is there any items that you don’t use or don’t need that you can sell and put the proceeds towards your debt
There are so many ways to make money these days that weren’t available. The internet and other tech advances have so many income generating opportunities. You can rent out your car, sell 2nd hand clothes, sell old sports cards or toys, you can get paid as a secret shopper, paid to rearrange peoples pantry’s, find additional work as a freelancer or virtual assistant, driver, delivery person, etc. If you are serious about improving your financial situation you will find the time and find a way to increase income into your household.
Look at your current job, can you get a pay rise? Are there any opportunities at your workplace for overtime or for a promotion? Can you undertake additional training or education (at your employer’s expense if possible) for a pay rise and or promotion? What about moving jobs for more money and or benefits?
The take out from this is no matter what serious goals you are looking to achieve always break this down into smaller lots. Prove to yourself you can hit the smaller financial goals then expand your horizons. Once you are on this path to financial independence, don’t fall off it! Always check in financially at the minimum every month to see how you are travelling and to see where you are on your path to financial respectability.