The moment we realize our personal finances have gotten out of control is a difficult one. It's too easy to dupe ourselves into thinking we're coping; managing; getting through just fine.
It's possible to have poor financial management even if you have a manageable debt. Even if you can meet minimum payments and don't have creditors hounding you - you can still be out of control. You just haven't hit the point where it's a problem yet. Key word: yet.
If you have ever done anything on the list below, then there may be an issue. There is no dressing it up or down, making it sound nicer to save your feelings. It's time to face the harsh light of day - but know it's going to make life better in the long run.
Have You Ever...
- Borrowed from one source to pay off a debt elsewhere?
- Found yourself struggling for money in the last week before you are paid?
- Even further, needing to rely on credit in the last week?
- Not known what is coming out of your account when?
- Potentially gone overdrawn or drawn charges because of the above?
If the above sound a little too familiar, then - unmanageable debt or not - then you have to leap into action.
So how do you get back on track?
1. Forgive Yourself
Given the rather harsh reality check of the above, this might seem surprising - but it's an important step. When you have lost control of your finances, there is an inevitable psychological impact of realizing the problem.
You're not a failure; you've not let anyone down. Debt is a almost to the point of being a national pastime, as household debt continues to soar.
Balance this with knowing it doesn't give you a reason for complacency. You can't dismiss you have an issue just because everyone else does it. But at the same time, you have to see it as the past and work toward a brighter future. Removing your head from the sand is going to give you the ability to see clearly.
2. Identify Your Problem Areas
In the process of figuring out what you owe where (an essential part of any financial management plan), a pattern should begin to emerge. Look at the dates of transactions; are there times in a month when you are more likely to spend? Do certain events trigger spending issues for you?
When you know, you can be proactive about preventing it happening again.
3. Limit Your Spending Immediately
Don't try and put off making the change. It should be at the forefront of your mind, before you investigate courses like bill consolidation or even bankruptcy. This is the change that you can make today.
From this point on, you can only spend on "essentials". These are the basics, such as food, groceries, bills and education-related costs. Anything else is going to have to wait.
This probably sounds harsh. You're already thinking about the things you will have to miss out on; the way your life is going to be impacted.
So it's time for a reality check. The way that you are living and managing your finances is not sustainable. You are spending beyond your means, and eventually, it's going to come crashing down. Stop it before it does.
4. Honesty Is The Best Policy
If you have kept your issues quiet, it can feel terrifying to think of your friends and family finding out.
However, this is a conversation that you need to have. It doesn't need to go all true confessions, detailing amounts of debt or telling them of the things you discovered above. It does, however, need to leave you room to breathe. If you're invited on nights out which you can no longer afford to attend, people need to know about it.
A basic conversation should go as follows: "I am looking into my finances at the moment, so please don't be offended if I cancel plans." If you want to share more, fine, but you don't have to.
5. Pay Off A Small Debt
Many will suggest you have to focus on paying off the balance that accrues the highest interest. This makes sense and is not a bad way to go about things, but there is a psychological element to eliminating a debt.
So get one ticked off before moving on to the bigger problems. Never underestimate doing something just to make yourself feel better, except do it in a healthy way. Did you once go and spend to treat yourself? Now you treat yourself by paying off a debt - and guaranteeing your future.