There are many reasons finances can get out of control. Sometimes it can happen through no fault of your own. Life happens, unpredictable expenses come tumbling upon you all at once, and you find that your outgoings have exceeded what you’re earning. Before long, you’re relying on credit, then perhaps not following along with the required minimum payments – and soon, it feels like everything is in free fall.
When you finally get the chance to take a breath, you can find yourself surveying a financial landscape that looks like it has been run over by tanks. Maybe you have fallen from bad habits, or perhaps you didn’t ever get the chance to establish good habits in the first instance.
Sometimes, before you can pursue a route forward, you have to go through the entire situation and break it down. Identify the priorities, look for the problems, and find their solutions. Call it a financial rehab. If your finances have been on the less-than-stellar side and you’re in need of a fresh start, then here’s a guide to looking back while making plans for moving forward.
The Essentials – What You Have To Pay
We all need a roof over our heads, so this should be your foremost concern.
- Can you afford your monthly payment?
- Are you on a good deal, such as a low-interest mortgage?
- Can you haggle or switch for a better one?
- Is your accommodation suitable for you and your family needs? And if not, would you consider moving to change it?
Taxes and Essential Bills
- Have you switched your suppliers for phone, internet, utilities etc. in the last year? If not – do so, you could save hundreds of dollars per year.
- Are you up-to-date on your tax affairs, both in terms of potential refunds owed and filings for future years?
- Do you have enough money to cover your essential bills? If you do, where can you make cutbacks?
This would include things like your Netflix subscription, your cell phone plan, and those things you like but don’t necessarily need.
- Often if you try to cancel a subscription to services like Netflix, they will offer you a cheaper incentive deal for three months so you can stay for a reduced cost. It’s worth a try.
- Call any providers and say you’re going through a time of financial difficulty. It’s embarrassing to an extent, but they might be able to do something about the subscription price. A bit of embarrassment is worth it for the financial saving!
If possible, begin to set aside money for an emergency fund as soon as possible. This is a fund you keep back for those unexpected expenses; the ones you might at some point have been tempted to put on credit to cope with. It should exist separately from your main savings. Try to keep away from it unless dearly needed, though!
- Set a target amount for your emergency fund. $500 is a good place to start.
- When creating your new budget, treat the emergency fund like an essential bill that has to be paid. Then the money is gone, saved for a rainy day, without you having the chance to spend it.
- Use the fund only in the case of true financial emergencies.
Transport is an essential, especially if you live in a rural location. It’s therefore important to prioritize this area when going through your financial rehab.
- If you have an older car, there’s a good chance it’s costing more to run than it’s worth – especially when you factor in the cost of repairs. Even with bad credit you might be able to invest in a new(er) vehicle which will cost less in maintenance; don’t assume you’re ineligible. The saving is worth it if you’re constantly losing a couple of hundred dollars to repairs to a car that has a high mileage – you can refer to this page and shop around. To an extent, there’s no point throwing good money after bad, so if your current car has gone past the point of no return, it might be more financially prudent to take action.
- With a car established, there are things you can do to cut your running costs. Practice economical driving habits to save on fuel, for example. Even small things like ensuring your tires are at the right pressure can make a big difference.
On A Final Note…
Don’t be afraid to talk to creditors and providers to explain you are suffering through a financial rough patch. It’s far better to be honest than just ignore the problem and hope it’s going to go away. It won’t: so face up to it and ask for help. Long-term, it’s the best remedy for all financial ills.