If you have gotten in financial trouble, it can be hard to move forward from it. Luckily, it is possible to make a fresh start, no matter where you are in your journey. Know that every financial journey has bumps along the way, and the same is true for making a fresh start. The key is to take action now instead of waiting, and this can set you on the path to financial success.
Debt is a drain on your resources, and it can negatively affect your finances. This is even more true if your debt is high-interest, like credit card debt. Credit cards often have higher interest rates than average, and much of the repayment may go toward the interest instead of the actual balance. Credit card debt is not the only kind of debt that may be draining your funds. Many still have debt from school, and this may come in the form of multiple student loans. Luckily, refinancing can help you save money each month and simplify the repayment process. If you are interested in learning more about this process, you can see your options online here and take advantage of a refi.
Take Time to Consider Where You Are Currently
You’ll need to evaluate your situation to see where you are currently. If you do not have a good understanding of where you currently stand, it will be hard to mark progress or even understand what your next steps should be. Begin by tracking your spending on a regular basis. This will help you see where your funds are going. You may immediately learn where you need to make some changes.
You’ll also want to take stock of the bigger picture of your money. You may want to see what your current net worth is. You can do this by adding your assets and subtracting your liabilities from this number. Sometimes, you may find you are better than you thought, and in other situations, you may be unpleasantly shocked by what you find. But no matter where you stand, it is important to understand what the numbers reveal about this situation.
Think About Your Priorities
You’ll want to spend some time thinking about where you stand currently. Think about the things you like and do not like about your current situation. You might find you are spending too much on subscriptions and food, which doesn’t leave enough for the areas you would rather spend on, like travel. You may want to consider which long-term priorities are most important to you as well. Maybe you want to save enough money to allow you to retire comfortably. Or you may want to be able to pay for your kids’ education. While you may not be able to save for all these things at once, you can decide which ones are the most important. Something such as buying a home may be a more immediate desire than paying for your children’s college educations.
Create a Budget
Creating a budget does not have to be hard, especially because there are plenty of apps that will help you create one. However, it’s important to make sure the budget is realistic for your situation and allows you to save for your goals. Many times, creating a budget means you will end up cutting back in certain areas. A budget can prevent you from spending too much money, and it can feel restrictive at times. However not having a budget is one of the common ways people end up in debt without realizing it. A realistic and successfully managed budget can lead to financial freedom because capping some areas gives you more to spend in others. It can give you peace of mind because you know you will have enough to meet your needs.
Get to Know Yourself
Ideally, managing your money would only be about the numbers and making sure you spent less than you made. However, life is not that easy in reality. Managing your money is also about getting to know yourself. Everyone has perspectives and triggers that make them unique. It is hard to find financial advice that fits you perfectly because something that works well for one individual may not impact another person in the same way. Think about whether you have any long-term or short-term goals. Perhaps you want to give your children an unforgettable experience by taking them on a fun vacation. Or maybe you want to quit renting and step into homeownership. Knowing what you want will help you create a budget that is realistic and motivating because it can free you up to meet your goals.
Consider how well you manage cash versus money in the bank. You may find it easy to spend money on your credit or debit card but hate the feeling of physical money leaving your hands. If this is the case, you may want to start with cash in envelopes for different expenses. Or if you feel spending physical money is overwhelming, you may want to develop a cashless system for yourself. Think about what makes you feel motivated. Starting over is about more than just making up your budget. It is also about coming up with a system that can help you get the best support, resources, and tools, which will help you stay on track. Acknowledge what you want and need. Knowing yourself can help you get the needed support to stick to your budget and start over.
Make Plans for Unexpected Expenses
Life is full of unexpected surprises, and it’s best to plan for them before they happen. Unexpected events can affect you both emotionally and financially. The pandemic caused numerous economic disruptions, and these may have negatively affected your financial situation. A good budget should include an emergency fund, which is different than retirement savings or general investments. You will not build the emergency fund overnight, so know it will take hard work and persistence. However, if you start now, you will give yourself greater peace of mind about your finances. The fund can give you something to fall back on.