If you’re feeling trapped in spiraling debt or unstable finances, you’re not alone. Overall consumer debt in America reached $11.52 trillion in February 2014, which is higher than it’s been since the peak of the Great Recession. Debt among the individual is rising again, and studies show that 28% of Americans have more credit card debt than they do in their savings. Banks are once again comfortable with high credit lines, which are skyrocketing.
It might not look like America has learned anything from the past few years of recession, but studies also show that an increasing number of Americans are uncomfortable or anxious about their financial situations. Progress might be slow, but many are looking for ways to rid themselves of debt and become more financially stable.
Here are a few ways to take your finances back under control:
1. Say Yes; Avoid No
Everyone needs a budget. It’s the first step to becoming financially responsible. But attitude is essential, and will make all the difference in any budget’s success.
When you create your budget, don’t focus on what you can’t have. Focus instead on what you can spend your money on. Human nature reacts much better to “yes” than “no,” and if you’re always wishing you could spend your money on items or activities that don’t fit your budget, you’ll lose motivation and slip back into your old spending habits.
But if you choose instead to think of all the “no’s” as a way to say “yes” to other, more important purchases, keeping a budget will be much easier.
For example, if travelling is your priority, cut back on other, less important non-essentials. Cutting back on eating out or an excessive clothing budget is not a punishment, but a means to an end.
2. Build Emergency Funds
If you struggle with debt, odds are you don’t have an emergency fund. Creating one while you’re trying to pay off debt might seem counterproductive, but there is no better place to put your money than in an account you can only touch on those “rainy days.”
If you don’t have an emergency fund, you’ll be forced to use your credit card more often to cover unexpected expenses. And if you’re laid off, having an emergency fund will keep you going until you can find another job.
An adequate emergency fund will have enough in it to cover bills and expenses for 3-6 months. Set aside a certain percentage of your income every month, and make it a priority. Putting money into an emergency fund is non-negotiable. It might be difficult, but it will be worth it.
3. Ask for Help
Don’t be afraid to ask a professional for help. Set up a consultation with a financial advisor. Their job is to help people eliminate debt and get their finances under control, and you don’t have to be 6 feet under in debt before you ask for advice.
If your debt ceiling is out of your control, however, don’t think that filing for bankruptcy is your only option. Professional companies like A C Waring and Associates can help you set up a consumer proposal, which is the best alternative to bankruptcy. A consumer proposal is a negotiated settlement that will allow you to repay only a portion of your debts over several years. It is legally binding, and will benefit both you and your creditors in most cases.
Professional companies can also give you debt counseling, help you negotiate with your creditors, or set up a debt management program. There is nothing wrong with asking for help, especially if it helps you avoid bankruptcy and financial instability.
Being fiscally responsible is a lifestyle choice, not a single decision. Once you get your finances back under your control, don’t go back to your previous spending habits. Keep your budget faithfully, make wise investments, and don’t live outside your means. Getting out of debt might be difficult, but it’s definitely possible if you take the right steps.