This is where you start to climb out of the financial stress you have found yourself in, one action at a time. Hopefully creating a budget, or tracking your spending, already has you feeling a bit more in control of your situation.
Essentially the key to lifting yourself out of your current money situation is two-fold. It involves engaging with your finances and having more awareness of your financial choices.
It is easy to feel disheartened because you can now see the mountain you may have ahead of you. You are looking down the barrel at a lot of debt and a shortfall of money in your budget. When I was at this point I felt a bit angry at myself, that as an intelligent person I didn’t know better. How could I have let myself get into this predicament?
Try to acknowledge the small wins and changes, and most of all just keep going. It will get better.
First things first
The first thing I did at the start of my journey was to try and turn around some of the bad feelings I had about my debt and the money situation I was in. I understand it is not for everyone (and there are more practical tips coming) but for me, it really helped to feel grateful and re-frame my money situation.
When I was in debt I resented it so much, it felt like a weight on my shoulders. I found thanking the debt really helped shift my mindset. It dissolved some of the resentment I was feeling which helped me to move forward.
I thanked my debt for helping my son and I survive. For keeping a roof over our heads and keeping food on the table. I realised how much worse things could have been for us without having credit available at that point in time.
For you, it could be thanking the debt for your education that opened doors for you or helped you get your high paying job. Or you could say ‘thank you debt for making me feel good when I made that purchase but now I have other ways to feel good’.
Now just get on with doing what you need to do to get rid of that debt once and for all!
“Anyone can run away, it’s super easy. Facing problems and working through them, that’s what makes you strong”.
Give yourself some breathing space
Following are some ways you could possibly give yourself some breathing space while you come up with some longer-term solutions.
With the budget we have put together you will notice that I split expenses into fixed expenses and variable expenses. This makes it easier to start going through the expenses and working out how to manage them.
Beginning with the fixed expenses, here are some tips to take the pressure off:
• Apply for hardship on loans
If you have a mortgage, car loan or another type of loan you can ring the provider and ask for hardship provisions. Usually, this will mean you won’t have to make payments for 3 months. They will want you to fill in some paperwork to show them that you are truly facing a hardship situation. At the end of the three month period, they may adjust your repayments slightly if they want you to still repay the loan in the original time frame.
This can buy you some time to make decisions on what to do about these loans, for example, you may choose to sell your car if it is no longer affordable for you.
• Ring providers about overdue bills
If you have bills that you are unable to pay it is better to ring the provider and discuss the situation. For utilities, you can call the provider and organise a payment arrangement to get you through by spreading the repayments over the next couple of months. The key here is to improve your cash flow situation. You could also change the payment terms, you might find it easier to pay monthly as opposed to quarterly. Or you might want to pay a set amount each month, at times you may get ahead and that money in credit can be used if you find yourself with an unexpectedly large bill.
• Ring your bank about credit cards
1) Ring your bank and negotiate a lower rate or rate freeze. They are more open to this than you may think. When I had a credit card debt it was the only card I had ever had, and I had that card for twenty years. It was at its maximum so I called my bank and explained that I was a loyal customer who could get a balance transfer elsewhere if I wanted. I let them know that I would prefer to stay with them and pay for it, so I asked what they could do. The end result was an interest rate of only 12.49%, lower than most unsecured loans, which helped a lot. Don’t be scared to ring and ask.
2) As you pay down the debt ring the bank and ask them to lower your available limit. This stops any temptation to use the card again.
Start engaging with your finances
The key to engaging with your finances is to go through everything with the aim of improving your situation.
It’s your money, make the most of it. Check everything to make sure things are happening the way they should be. No amount is too small. Never apologise for wanting to know you what is happening with your money.
Look at your bank statements and question transactions you are unsure of, that don’t make sense or you think are unfair. Follow through, for example, if a fee has been mistakenly charged ask for it to be reversed.
Some things I have found when looking through my client’s finances:
• They were not claiming family benefits they were entitled to, they received a surprise lump sum of $6,000 by lodging a claim.
• Their course fee loan didn’t look right in their tax return, turns out they were part of a scam and the loan had been charged at $18,000 instead of $1,800.
• Their retirement fund was losing money due to high financial planner fees they didn’t realise they were paying.
• Their rental property statement showed they were losing money, when I asked for copies of all invoices there were some invoices had been wrongly charged to the account – one for over $800.
Simplify and shop around
Go through your fixed expenses and work out which ones you can do without for a while and cancel them. I don’t believe in telling people what they should or should not cut from their budget. Budgets are highly personal and there is not a one size fits all, you will instinctively know what sits right with you.
When you get to your final list of fixed expenses shop around and see if it is possible to get a better deal on any of them.
The variable expenses in my budget include spending, food, and petrol.
I must admit I am not much of a frugal person but I am by no means extravagant. I have recently learned that everyone has a different version of what they call frugal. I am a minimalist who is careful with my money, however, I am not a penny pincher.
On the internet and social media, you will find plenty of people with frugal tips if that is your thing – from meals under $10 per day to buying in bulk.
During the times I have been low on money I would find ways to spend leisure time that did not cost money. My son and I did a cycle challenge for charity one month, our weekends were spent cycling which didn’t cost us anything. I have also shopped for food at farmers markets which have really good food at a lower cost.
One trick that can work for some is withdrawing your weekly food and spending budget in cash. It can be easy to go over budget when you are paying for everything by card as small amounts add up and it can be easy to lose track. Having the budgeted amount in cash can be quite visual and make it easy to monitor how much money you have left.
All the tips so far have been focused on eliminating or reducing expenses, as this is an area that you can focus on and get some immediate traction. It is also an area where you have a lot of control over so it can be an easy place to start.
If there is a choice between getting your spending under control and having more money I do think it is important to get your spending under control first. Doing this first means when you do have more money coming in you won’t be struggling with bad habits.
Get money flowing towards you
The long-term game is to increase your income in a way that suits you. That could be by working towards a promotion, asking for a raise, changing jobs or careers, starting a side hustle or investing.
Below are some ways to get some extra income to you now while you are waiting for some of the other ways to come to fruition.
It’s also about taking your mind off lack of money and relieving some pressure in your budget. It feels good to take action in the right direction. A great way to take your mind off lack of money is to look for all the ways you can get money flowing to you.
Some ideas to get you started:
• Collect any money owing to you, no matter how small the amount
• Take back that purchase waiting to be returned and get the refund
• Bank any cheques you may have laying around on in your purse
• Claim any health care rebates owing to you
• Sell something you don’t want on ebay
• Close down a bank account you don’t need and save on fees
• Pay as many bills on time as you can to avoid fees
• Review one expense to see if you can get a better deal
• Participate in market research that pays for your time
By taking all these steps you will start to build some forward momentum. With some positive action, the high levels of anxiety from your financial stress will start to calm down fairly quickly. Over time you will find your money situation improving. It won’t be overnight but it will happen.
I would love to hear if any of these tips have helped you, or if you have any of your own that you would like to add.