Not everyone can say they have had perfect finances through every stage of their lives. Seeing as financial literacy isn’t something that’s taught in schools, most people don’t have any idea how to maintain healthy finances. As a result, it’s easy to make the wrong financial decisions and find yourself in debt or with bad credit. For those who do know how to manage their finances, it could be a series of unfortunate events that lead to poor finances. Whatever the case, here is how you can recover from financial challenges.
1. Develop Healthy Habits
To begin with, developing healthy financial habits is the first place to start if you want to fix your financial situation. If it is those habits that got you into a difficult spot, then you should work on getting rid of them. Below are a couple of healthy habits you could try adopting.
Live Within Your Means: It’s crucial that you prioritize living within your means. As tempting as it may be, don’t spend more than you earn and also, don’t become dependent on credit as a way to fund an expensive lifestyle. Remember that when you use your credit cards too often and don’t pay them back in full, you’re incurring more debt than you need to.
Pay Your Bills on Time: This sounds simple, but paying your bills on time is key when it comes to finances. If not, you end up with late payment fees and dents in your credit score. To remind you to pay your bills, add your payments to a calendar and set up automated payments.
Track Your Spending: Making a note of how much you’re spending is a healthy habit to develop. You can track your expenses by using apps such as Clarity Money, Wally or Mint.
2. Check Your Credit Report
Your credit reports are a major part of your finances. It will become most important if you ever want to take out a loan as lenders will look at it to help them make a decision. Check your credit report often to ensure there aren’t any discrepancies on it.
In the event that you’ve ever had a foreclosure, you should know that it can be removed from your credit report. Some reasons for removal may include a lack of available records or lack of proper procedure. Check out more information on managing foreclosures if you are looking to improve your credit score.
3. Get Financial Advice
There are so many finance professionals that can help you get on track with your finances. Instead of trying to do it all on your own, see if you can get help from a financial advisor. When choosing one, decide what type of service you want and whether you’d rather get it remotely or face-to-face. Also, ensure the charges are within your budget and that you get value for money.
4. Have Goals
Financial goals are necessary and also helpful when you’re trying to fix your finances. They help you stay focused, especially the times you’re discouraged. A financial goal to consider is paying off your debt or saving a specific amount every month. Think about the type of lifestyle you want to live and how you can take necessary action to bring it to life. Here are a few tips on setting effective financial goals.
Create A Timeframe: One of the most important steps to take when setting goals is giving yourself a timeframe. This is what creates a sense of urgency and can also help you become more disciplined in your efforts. You could separate your goals into short, medium and long-term goals. A short-term goal could be to save $500 in six months while a long-term goal could be to buy your first house.
Create A Realistic Budget: Budgeting is going to be a major part of setting financial goals. Ensure you accurately list your expenses as well as your income so you know how much you can afford to live on every month. Budgeting will give you an idea of how much you need to make to meet your goals in a timely manner. Budgeting could also show you that you aren’t making enough and need to increase your income through a better paid job or a side hustle.
5. Reduce Your Expenses
No matter how much you make, it’s always a good idea to continue make a conscious effort to reduce your expenses. Having excess gives you the chance to beef up your emergency fund and put more into your retirement pot. Some expenses you may want to reduce are your unused subscriptions or the amount you spend on clothing and groceries. Have a minimalist mindset remembering that you’re working towards a bigger goal.