Half the battle in digging your way out of a financial hole is just getting started. From your position at the starting line, you can see the finish line far ahead—but the distance between is daunting. You know you want to take control of your financial destiny. For consumers with debt, this means getting back in the black so you can focus on other long-term goals like saving more for retirement, building an emergency fund, buying a home or simply stretching your paychecks further.
There’s good news: Small actions add up to big-picture changes. You don’t have to change your entire lifestyle overnight; rather, you can take small concrete actions to work toward the future you want.
Assess Your Financial Situation
The first step is simply acknowledging and understanding your financial situation. It’s important to do so without judgment. Your goal here is to simply take stock of your overall financial health: income, debts, spending habits, bank accounts, etc. Remember, it’s perfectly fine if you’re not currently where you want to be. Instead of getting down on yourself, take pride in the fact that you’re empowering yourself by taking an honest look at your overall financial situation.
Utilizing a simple spreadsheet here will help you keep track of how much you’re making, how much you’re saving and how much you owe on various balances. Luckily, there are plenty of free templates online that make it easy to plug and play. Again, reserve judgment here so you don’t get overwhelmed. Simply aim to get an accurate view of your comprehensive financial health, as this is the only way you can formulate an accurate game plan.
Adjusting Spending Behaviors
Rome wasn’t built in a day, as the saying goes. It’s unrealistic to expect yourself to change everything about your financial behavior overnight. Focus instead on adjusting your current spending habits so they’re more sustainable for the future as you work toward your money-related goals. Seemingly insignificant actions actually add up quickly, and before you know it you’ll have more money in your pocket.
Here are a few suggestions from debt relief expert Andrew Housser on how consumers can save $100 per week during the holiday season or any time of year:
- Sell what you aren’t using: Sell items you no longer use online, including hobby supplies, clothing and more.
- Cut back on indulgences: Watch your spending on “indulgences” like alcohol, coffee from a café, cigarettes and more.
- Downsize entertainment costs: Instead of paying full price for cable, try to streamline your entertainment costs into just what you need. Consider checking out media from the library or using one or two inexpensive streaming services instead.
- Cancel underused subscriptions: Have you ever signed up for a subscription or membership with good intentions only to find yourself underutilizing it? Common examples are gym memberships and music subscription services.
- Make food at home: Instead of eating out, make food at home. Bring lunches to work. Get creative with your cooking so it’s fun to dine in rather than pay more to eat out.
Apply whatever you save here to repaying debts or growing your savings.
Address Your Debts in Order
Want to chip away at your debts, but unsure where to start? Most experts recommend starting with the highest interest rates first. While you should always pay the minimum balance on all your debts so as to avoid racking up late fees and interest charges, you can focus on one debt at a time. Once it’s paid off, focus on the next most pressing balance.
Digging your way out of a financial hole is more about making small, effective changes than it is overhauling your entire life in a short amount of time.