Financial slumps are a painful topic for many these days. Thanks to Covid-19, people around the globe have lost jobs or hours, putting a damper on their income.
The good news is that getting out of your financial slump is far from impossible. You’ll have to make some changes, but with planning and diligence, you’ll soon be back on your feet.
Ready to get started? Use these nine tips to get on the road to financial recovery:
1. Pinpoint Your Problems
Before you can make progress, you need to identify the particular source of your financial woes. While the underlying cause is quite likely the ongoing global pandemic, isolate the specific aspects of your finances that require your direct attention.
Is your financial slump being caused by debt? Lack of savings? Do you have too little money coming in or too much going out? Knowing what to focus on will help you take the right steps.
2. Ditch the Credit Card
Credit cards have their benefits, but they are often misused. Instead of being treated as a way to build up credit, consumers use them to treat themselves to things they can’t afford. These rash purchases result in interest-accruing debt that becomes a monster to get rid of.
If you have credit card debt, start paying it off right away. Skip your daily latte, and put your monthly java savings toward your outstanding balance.
Once you have it under control, put your credit card on ice for a while. Opt for a debit card instead, which performs the same function without letting you spend money you don’t have.
3. Pay Off Remaining Debt
Do you have debt other than your credit card? Debt can be crippling when you have too much of it. Make a plan to pay off any debt you have now so that it doesn’t keep you from reaching your financial goals.
While some loans are necessary, such as a home mortgage, much consumer debt can be avoided. Instead of putting a new big-screen TV on store credit, check Craigslist or Facebook Marketplace instead. You’ll probably find one that you can pay for with cash. Once you’ve paid off existing loans and credit cards, do everything in your power to avoid debt’s grip in the future.
4. Stabilize Your Income
Without a consistent income, managing your finances is next to impossible. If you lost your job in the pandemic, you’re doubtless already looking for one. Keep at it. Signs of recovery are encouraging: The unemployment rate in September was 7.9%, down from April’s high of 14.7%.
In addition to regularly checking sites like LinkedIn, Glassdoor, and Indeed, don’t hesitate to reach out to former managers and colleagues. They know your value and would likely be delighted to inform you of openings or throw you some freelance work. There are many opportunities to make money online right now. And getting out of a financial slump can only happen if you’re bringing money in, so let your network help you with that.
5. Start a Side Hustle
Maybe you already have a job, but you need some extra cash. Engaging in a side hustle, however big or small, can provide the additional income to help you out of your rut. It will require extra work, but the financial cushion will give you peace of mind in the long run.
There are so many side hustles to choose from. You can pick up freelancing jobs on sites like TaskRabbit or FlexJobs, or make products and sell them on Etsy (I hear face masks are in demand.) Whatever you choose to do will help you beef up your income as you work to get back on your feet.
6. Establish — and Stick to — a Budget
Once you have some steady income, you’ll want to manage it well by setting a budget. A proper budget will help you monitor your spending and start saving, two important steps toward financial stability. Far too many people get in a financial bind because they failed to follow a budget.
Start with your guaranteed income per month. Calculate necessary expenses, such as rent or mortgage, insurance, and groceries, then add in discretionary spending (e.g., meals out, movie tickets). Once you’ve laid everything out, you can make adjustments that lower your costs and enable you to live within your means.
When talking about budgeting, cutting costs will be a common theme. You may have to sacrifice things like taco runs and retail therapy to stick to your budget and get back on track.
7. Set Up Autopay
Bills should always take the highest priority in your budget. While that may be a no-brainer, they can be incredibly easy to forget, resulting in penalties. To avoid late payment charges (and dings to your credit rating), set up autopay whenever possible.
This is a small change that can make a big difference. As long as your budget is set up correctly, you won’t need to worry about having the money to autopay bills. This means you can focus your attention on areas where it’s more needed.
8. Start Saving
When you’re climbing out of a financial hole, you’re not going to have extra cash to save right away. As soon as you do, make building up an emergency fund a priority. This reserve can help prevent you from falling into a financial crisis down the road if catastrophe were to strike again.
Saving can and should be a part of your monthly budget. Setting aside even a few Hamiltons a month is a good start. Before you know it, your savings will grow to provide a comforting safety net.
9. Seek Professional Advice
Even with the wealth of financial information available online, it can be a challenge determining your best course of action. If you’re in significant financial trouble, you may want to seek professional advice.
Nonprofit credit counselors can help you create a debt management plan and may even help you negotiate lower interest rates. Banks offer free financial literacy courses, and other organizations provide financial mentorship. Once you find a “financial doctor” who understands your situation, they can diagnose your condition and offer treatments tailored to your needs.
Financial slumps are no fun. If you’re stuck in one, it’s time to take steps to escape it. The tips on this list will help you make the right moves to break free and enjoy financial security once more.