You have decided: 2022 is the year to break out of your financial slump. But where do you start? Start by setting your life goals, creating automated savings, and making a plan to pay off those credit cards.
Sound hard? Thank again. Putting some money back in your pocket can be as easy as researching cheap auto insurance to find coverage you can truly afford. Read on for other great tips.
Assess Yourself
The first step to breaking out of your financial slump is discovering your money archetype. An in-depth understanding of your money personality, spending habits, and beliefs about money can help you identify your strengths and weaknesses. This enables you to leverage your strengths and avoid self-sabotaging beliefs about money.
Each person has money problems in varying degrees and forms. Even the rich ones face them too. Most people don’t realize that they have a set of money beliefs deeply rooted in their childhood. And these beliefs may have been heavily influenced by their parents and cultural background, among other factors.
Failure to assess and challenge yourself may lead to financial illiteracy. As a result, you might find yourself in a long-term debt-loan cycle and never experience financial freedom. Financial independence is a big word. Not everyone can claim they have reached this particular point in their lives.
Many people work long hours or have two or more jobs only to splurge mindlessly. While being hard-working is an excellent trait, unwise spending can ruin everything. So, what stops you from saving or investing? What are your financial fears and doubts? One way to beat financial problems is to understand how you perceive money. It would help to take a money archetypes quiz such as the Denise Duffield-Thomas quiz to unlock your money personality and gain insights on how to avoid money pitfalls.
Make a True Commitment to Your Financial Wellbeing
Being in a financial slump can pose not just money hardships but also an increase in stress and a decrease in quality of life. When you decide that you really want to break out of the slump, you must make a commitment to it, an investment in yourself first. Ask yourself these questions as you embark on this new journey.
- WHY? Why do you want to break out of your slump? Why is it important for you to climb out of debt? Immediate reasons might be so debt collectors stop calling and long-term reasons may be so you feel more in control of your life and feel comfortable knowing that you will someday be able to retire or move to the home of your dreams.
- What is the strongest, most important reason to commit to this financial goal? Write it down – write it as a message to yourself in places that will plant the seed of commitment. On the bathroom mirror, on a Post it at your desk, in your agenda.
Become an Organization Guru
Being organized is the key to weaving your way out of the financial mess you may find yourself in. Choose a dedicated area and dedicated folders to organize the bills you may be avoiding.
- Write down every bill – due date/amount due/late fees
- Write down your income – salary/alimony/dividends/etc.
- Condense everything into a binder and separate income from outgoing expenses. Review and update this on a regular basis
Prioritize Your Emergency Fund
Rainy days might not happen often, but when one does, you’ll want to be prepared. Your furnace dies, you aren’t able to pay the rent for some reason, your pet gets sick… there are a million things that can go wrong in life, but what is even worse is when you aren’t prepared to set them right.
- Set aside a certain amount or percentage of your paycheck every week, to be distributed to an emergency fund account
- Most funds are between $1,000 and $2,000, but you can choose to invest as much as you feel comfortable
- Consider dropping any ‘extra’ income into the fund to help it grow as quickly as possible, such as income tax refunds, side gigs, work bonus, etc.
Climb out of the Credit Hole
This might be a good time to call on the WHY of your commitment toward your financial goal. It’s difficult to resist the impulse of credit card purchases, but if you want to get out of your financial slump, it’s an imperative step. If you must have an item, pay for it in cash or debit. Don’t allow yourself to take on additional debt because that would be going against your ultimate goal to be in full control of your finances and making them work for you.
Trim the Fat
Are you an empty nester but still live in the house you raised your children? If it’s still financially viable for you, then all is well. But, if you’re struggling with the cost of the home in utilities, taxes, mortgage, etc., it’s time to rethink and consider downsizing.
- Move to a smaller home that requires less maintenance and has lower taxes/HOA
- Sell the excess ‘stuff’ in the house that is no longer useful to you or brings you joy
- Buy second hand items instead of brand new ones, and learn how to reuse, repair and recycle items that you might in the past have thrown away.
- Turn down the heat and turn up the air conditioning, turn off lights when not in use and cut the cable TV cord, stream entertainment instead.
Examine Your Own Habits
Habits, either good or bad, may be so automatic in our daily lives that we fail to see when they need to be changed. Write down your daily habits to see where you can save money so you can splurge on the right things.
- Take out every day? Pack your own lunch.
- Cut your shower time in half.
- Get rid of any memberships or subscriptions that are no longer serving you.
- Do you really have the best phone plan? There are plans out there that could cost you a fraction of what you’re spending now.
Break out of your financial slump by changing your habits, examining your spending, and rerouting your savings to put you in a position of management and control to obtain future goals.
Hey Guys! My name is Richard Andrew. I am a contributor to the Strategy Watch. I have finished my graduation with a major in Economics. My interest areas are Economics, Financial Analysis, Stock Analysis, and Business Strategy.