Last Updated on Feb 11, 2020 by James W
If you don’t know how you’re going to pay the bills at the end of the month, you’re not alone. At some point or another, we’ve all experienced a financial setback. The good news is financial troubles don’t have to last forever.
If you need help to get out of debt, take your life back with these empowering tips and start anew.
1. Assess your finances
Take an afternoon off one weekend to analyze your monthly income and compare it against your expenses. Then, check how much debt you have compared to the assets you hold.
This should help to paint a clear picture of your current financial situation and help you spot areas of improvement almost immediately.
Having a birds-eye view of the situation can help you adjust your budget and allow you to create an informed plan of action.
2. Set new, realistic goals
Use the SMART goal setting method to set new financial goals for yourself. The S.M.A.R.T. goal-setting framework is designed to help you set Specific, Measurable, Attainable, Realistic and Timely goals.
Simply put, it helps you set clear and practical goals that’ll actually stick. It also prevents you from setting unattainable goals in a bid to avoid doing the real work. The more realistic your goals are, the better your chances of achieving them.
3. Come up with actionable steps
Now it’s time to implement your goals. The easiest way to do this is by breaking them down into actionable steps with a timeline. Be sure to outline the following:
- The amount of money to set aside each month to pay off your debt.
- A strategy for your budget. This includes expense tracking and savings account management so you can build up a rainy day fund that’ll help you deal with unexpected events and avoid getting into more debt
- A detailed plan of how to attack your debt. Finance author David Ramsey always recommends paying off your smallest debts first before you attempt to pay off the largest one. That way, you’ll have more disposable income later to pay off your largest debt faster.
- Create a timeline with specific amounts of how much you plan to pay each creditor at the end of the month.
4. See the opportunity
When you’re knee-deep in debt and financial stress, it’s hard to see the forest for the trees. However, this time in your life presents you with the perfect opportunity to clean house and evaluate your life.
Maybe this setback is the wake-up call you needed to finally improve your finances for good. A financial crisis blows the lid off all your excuses and forces you to deal with your finances from a fundamental level.
Looked at from another angle, it could be the second chance you need to make a stronger comeback.
Take this opportunity to improve your financial literacy through podcasts and books.
Empowering yourself with this knowledge will give you the impetus needed to stick to your financial goals.
5. Realize that this is temporary
The hardest part about overcoming a financial setback is that it really requires a lifestyle change. You’ll have to cut back on certain areas of your spending such as recreation, entertainment, shopping sprees, etc. so you can free up money in your budget to put towards paying down your debt.
Remember, a financial setback is only temporary. Once you pay off your debt and cultivate a reliable stream of income, your quality of life will improve and you’ll come out the other end all the wiser for it.