When You Spend Too Much: Getting Back on Track
“Financial plans are not just for people who have a lot of money,” says financial advisor Robyn Stone. “In fact, the middle class is the fastest-growing segment of our society, and they need to plan.” But sometimes, life throws us a curveball, and we can’t control what happens next. We may get laid off from a job after years of service or face an unexpected medical emergency that leaves us in debt. One thing is clear: it’s time to take action, and fast.
Read on to learn how to put your financial plan back on track.
What is your financial plan, and why do you need it?
First, take a deep breath and assess the situation. Don’t panic; this is exactly what you need to do to get your finances back on track. Make a list of all your debts and assets, including your monthly expenses, income, and any short-term title loans. This will help you figure out where you stand financially.
Next, start creating a budget that works for you. It’s important to be realistic about what you can afford each month and not overspend just because you’re trying to catch up. Factor in things like debt payments, groceries, utilities, transportation costs, and any other necessary expenses.
If you have any extra money each month after budgeting for your essential needs, put it toward paying down your debts. Try to pay off your highest-interest debts first so that you can save money on interest. Once those are paid off, continue to put that extra cash toward the next debt on your list until they’re all gone.
How to improve your financial situation according to an expert
Financial advisor Robyn Stone says she often sees people who have lost their jobs and feel hopeless because they don’t know how they’ll ever be able to catch up again financially. “But with a plan in place for getting back into work, it becomes more manageable,” she says. “I think of these as ‘low points’ rather than ‘high points’ because we need them as motivation for action.”
When considering what you would like life after this low point—house, car, family—put together a plan that gets you there.
Some things Stone recommends for getting your finances back on track:
- Stay positive and don’t give up
- Create a budget and stick to it
- Pay off your high-interest debts first
- Find ways to make extra money
“The best way to get out of debt is not by cutting expenses but by increasing income,” Stone says. “There are many creative ways to do this.” She suggests looking into online opportunities, such as freelance work or starting a small business. “It’s important to remember that Rome wasn’t built in a day, so be patient and take one step at a time.”
How to create a budget that works for you and fits into your life
It can be hard to stick to a budget if it’s unrealistic or doesn’t take into account your lifestyle. That’s why it’s important to create a budget that works for you, not the other way around. Start by writing down your monthly income and expenses. Be honest about what you spend money on and how much you have left over each month. If your expenses are more than your income, you’ll need to figure out where to make cuts.
If you find it difficult to cut back on certain expenses, try looking for cheaper alternatives. For example, if you usually eat out at restaurants, try cooking at home instead. Or if you can’t live without cable TV, see if there are any cheaper packages.
Once you have a budget that works for you, keep track of your spending and make sure to stick to it every month. It’s the most effective way to get back on track with your financial plan.
How to improve your situation
To avoid debt and build up savings: Set short-term goals for yourself, such as saving $100 each week or paying off one credit card in six months. Find ways to earn extra income, like taking an online job or asking if there are any tasks at work you can do from home and during business hours (check with your boss first). Create a monthly budget and stick to it—this will help ensure that no money is unaccounted for
Pay off high-interest debts first—this will save you money in the long run
Be mindful of your spending, even when you don’t have any extra cash—chances are, if you’re not careful, those small purchases can add up over time.
Don’t panic if something unexpected comes up and throws your finances off track. This happens to everyone at some point or another. Take a deep breath and figure out what steps you need to take in order to get back on track as soon as possible. Revisit your budget and see where there might be room for adjustments. Can you cut back on some expenses? Or maybe sell some unused belongings online?
What resources can help people who are struggling financially?
The National Foundation for Credit Counseling provides free advice and resources to people who need financial counseling.
The Federal Trade Commission has information on how to avoid identity theft, report fraud online or by phone (or in person), get a refund if you lost money because of investment fraud, stop scam artists from calling your house or emailing you, protect yourself during tax season, and more.
Contact the Better Business Bureau. Search their directory for an office near you. They can provide helpful tips on avoiding scams and filing complaints against businesses that don’t deliver what they promise.
How do you take your life back? Next steps: Set short-term goals for yourself, like saving $100 each week.
The best way to get back on track with your finances is to face the facts, create a budget and start paying off your debts. With a little hard work and patience, you can get back on the path to financial security.
