If you’re currently in a financial hole, you might be feeling like there is no way out. Listen, I know you are overwhelmed but if you follow these steps you can get yourself out of that financial hole.
You might feel out of control over an aspect of your life that you should be in control of. Maybe you got yourself in this hole because you had no other choice. You had to take out student loans to go to school and are now faced with paying them back at a high interest or a high payment amount. You might have bought a house with a payment that was feasible until you lost your job. There are so many reasons why people find themselves in a hole. It’s okay You can fix this but you need to take action.
1. Assess Your Financial Situation
Really sit and look at your finances. Remember the numbers don’t lie. Try to just think of them as numbers and not put any emotion to them. Write down how much income you bring in, what expenses do you have and what debts do you have to pay. Make a list of the debts and the interest rates. This will help you to understand how and what to pay off first. If you need help with this, check out my Debt Destroyer Course.
2. Create a Budget
I know this might seem overwhelming but you need to have a realistic budget to see how much debt you can pay off each month. I recommend budgeting per paycheck so you can really see what expenses come out of each paycheck and when you can allocate extra money. If you’re like “Alli, I have nothing to allocate” then you need to look at either increasing your income or decreasing your expenses.
3. Prioritize Tackling Debt
Make a list of all your debts including the minimum payment, current balance, and interest rate. Then you can decide how you want to pay them off. I always recommend by interest since mathematically that makes the most sense but some people like paying the smallest balance first. It really does not matter as long as you create a plan. What debt is keeping you up at night? That is where you should start!
4. Negotiate with Creditors
Did you know that you can negotiate with your creditors to lower payments or even settle debt at a lower amount? It may not hurt to talk with your creditors and see what they are offering. You can also check out debt consolidation loans to help you only have one payment instead of multiple, especially if you can get a better interest rate.
5. Cut Expenses and Increase Income
Once you have explored all of your options and decided how you are going to pay off your debt, you may decide you need more income. Is there a side hustle you could do? Do you have items that you are not using that you can sell? Is there any type of freelancing you can offer? Will your job let you work overtime or extra hours? Maybe there is something in your budget that you pay for but don’t use like a gym membership or a streaming service. Look at your expenses and see if you can temporarily reduce or cut any of them.
6. Build an Emergency Account
It might seem counterintuitive but you need to build an emergency fund so that you won’t fall further into a financial hole. Even having an extra $300 or $500 will help. I know you are going to be working hard to get out of the hole, so it is is important that you have an emergency fund.
7. Seek Professional Help
If you were sick, you would go to a doctor. Your car starts acting up, you go to a mechanic. Your toilet backs up so you call a plumber, quick. Getting help with your budget is no different. There’s no reason to be embarrassed or to feel shame about getting help. Budgeting and money is not something that we are really taught. People seem to think you just know how to spend your money but there are so many feelings that go along with spending and saving money. If you aren’t sure where to start, fill out this short form and I will tell you the best option for you.
8. Stay Motivated
Motivation can be hard to keep when you may not be seeing huge results quickly. Keep it up because your hard work will pay off. It might take a minute or two for you to see a change but remember you did not get yourself in a financial hole overnight. Interest builds up over time so it will take time to pay it off unless you somehow come into a large amount of money to pay off your debt. Celebrate your wins.
9. Reestablish Your Credit Score
If you are having trouble with your credit, you may shy away from looking at your credit score. It is a necessary evil if you plan on buying a house, or buying a car. Some electric companies use your credit score to decide on deposits. While it may seem like a number you won’t have to worry about, you really want to make sure that you have a good score. If you need help increasing your credit score or you’re just overwhelmed, you can get my course Master Your Credit for just $27! Make sure you are paying your bills on time. You may want to get a secured credit card through your bank. You put the money in the card and then use it as a credit card. It’s a safe way to build up credit. Even a small loan can be helpful but don’t do this if it is going to put you further in the hole.
All of these steps can help you dig yourself out of your financial hole. It is not going to be easy but it will be worth it. You won’t have to worry about money everytime you go to the store. You can check your mail without worrying about what bills are coming in or if you are getting letters from creditors. Take charge of your finances instead of letting them take charge of you. You can do this. If you are not sure where to start check out my free foundations course.