Are you one of the millions of Americans in debt? Based on statistics, it's very likely your answer is yes. Has debt started to overwhelm you on a regular basis? How do you navigate the emotions associated with financial struggles?
It's a topic that more Americans are dealing with due to the massive debt load that we have accumulated since the financial crisis in 2007-2008, and interest rates have begun to increase again as The Fed views the economy as strong. What gets left out of this narrative is the story of those people who are already at a financial breaking point. Those on variable rate debts like an ARM (adjustable-rate mortgage) or HELOC (home-equity line of credit).
These types of loans charge a rate that is based on the prime rate plus an additional charge for the bank to make a profit. Since they are borrowing near the prime rate, they will charge you a higher rate in order to avoid losing money. Since interest rates are currently rising, guess what? So are the payments on these loans. For families who are already stretching their budget thin, this could spell major financial disaster.
However, this does not mean the end of the world. It is possible to go through a major financial crisis and still come back stronger than before. Just look at the current state of the U.S. Economy and you'll see what I mean.
If you are currently recovering from crisis or see one potentially on the horizon, I've got some tips and suggestions for how to navigate the storm and come out stronger.
#1 - Get on a budget
This should be your first step toward getting your money in order. To get back on track, you need to spend less than you make. With a budget, you give a name to each and every dollar you receive. Whether it's for saving, spending, groceries, rent/mortgage, or any other expense, your budget will give you a roadmap to follow during the month. Of course, it won't do you any good if you don't attempt to set realistic budget goals and attempt to meet them. No matter how much you make, you need to plan what you do with it. That is what a budget will do for you.
#2 - Make a needs/wants list
Each time you are considering a purchase, make sure it is something you actually need. This can save you so much money over time that you didn't realize you were spending frivolously. I sometimes find myself hyped up for a new product or service. If I ask myself whether it's a need or want, it can put things into perspective, and if you're an impulse buyer, this is a must for you.
#3 - Join a support group
Everyone needs a little help every now and then. If your financial trouble has led to a bout with depression, then you definitely need help. Finding other people in the same situation you're in can help you make emotional connections to people who know what you're going through. Often times, people in these groups have already been through the same thing and are continuing to attend in order to help others. I can't stress enough the importance of good mental health. You will need it in order to recover.
#4 - Start a blog/journal
Research has shown that writing can be therapeutic. Writing down your journey toward financial freedom can help you keep track of where you've been, and where you're going. The benefits of getting your thoughts out on paper can also be relieving for some people. Being a good writer is no longer a requirement thanks to the internet. Look at me, I'm writing this blog right now and I'm just a regular guy in my pajamas. Whether you keep it private in a hand-written journal or put it online for the world to read, writing down your experiences will help you stay motivated.
#5 - Cut out all "luxuries"
Since 5 is my favorite number, this will be the last point. If you're behind on bills or they're already sent off to collections, you really don't need that new iPhone every 12 months. You really don't need to have brand new clothes and shoes every 3 months. You really don't need fancy jewelry or tattoos. Anything that will not help you remain living and in good health, I'd say is no longer a priority. What you need to be focused on is maximizing your income, reducing your expenses, and saving as much as you can. One thing most people don't realize is that if you save money, invest money, and generate more income, eventually you'll be able to buy those luxuries with the return on your investments. At that point, you're no longer buying your things. Your money is now buying you things. Have some patience and you can get there as well.
This list is a very minimal list of things you can do to help yourself get back on track from financial disaster. Obviously, I left out some other good options. If you're struggling financially and are in need of some coaching, feel free to message me in the comments or send me an email to kevin@thepennilessgentleman.com and I'll respond to you within 24 hours.
Thanks for reading! Have a good weekend.
- The Penniless Gentleman