Most of us are trying to improve our finances since no one’s situation is absolutely perfect. The current circumstances of your finances can help determine how much hope you have for improvement in the future.
If you’re in a bad situation, however, I can completely understand how you can feel pretty hopeless. I recently spoke with a family member who was getting a divorce after being separated from her husband for several years.
They had no intentions of a romantic relationship anymore, but both of them were struggling financially and she confided in me about feeling hopeless in terms of improving her financial situation. Her ex can only provide a little financial assistance, and she has a low income but hardly qualifies for government assistance.
As a single mom of 3 children, she was struggling to pay her high rent even after getting a second job. She has no time or energy to consider going back to school right now even though it could help her land a high paying job.
During our conversation, I was mainly quiet because I figured she just wanted someone to vent to. However, I also figured she was expecting some type of advice or guidance from me. When she stopped talking, I still remained quiet as I was gathering my thoughts. It was true, she was in a bad financial situation like so many others Americans.
I decided to offer her my best advice and be completely honest just like I would if I were talking to someone I didn’t know very well.
If you find yourself in a bad financial situation, here are some actionable ways to turn your finances around.
Create a Budget
This is the most basic step in the process of improving your financial situation. Some people argue against budgeting and while they have some valid points, I’d bet they used a budget themselves at one time.
If you are living paycheck to paycheck, don’t know how you will make ends meet, or are dealing with debt, you need to set up a basic budget.
List out all your expenses in comparison to your income. It’s important to do this because you can visualize a clear picture of your finances and see where most of your money is going. Set realistic amounts for your spending categories.
If you are really struggling, I would let non-necessities and impulse purchases go for the time being. Lifestyle inflation should not even be an option at this point. Stop using your credit cards, quit dining out, get a cheaper cell phone and service plan, don’t buy anything new, and eliminate your entertainment budget if you have to. Period. You can always find free ways to entertain yourself and your family, especially during the warmer months.
Creating a budget is important because it tells your money where to go and highlights how much money you should or shouldn’t be spending on certain things in order to help yourself get ahead.
List Out Your Short-Term Goals
Decide what you would like to achieve within the next few months or a year. Do you want to pay off debt? Build a small emergency fund? Stop living paycheck to paycheck? It’s crucial that you determine what specifically is making your financial situation ‘bad’ and how it’s most likely leaking into your personal life as well.
If you are working all the time and missing out on experiences with your friends and family, working less and earning more may be a short-term goal of yours.
Also, make sure you are dedicated to your goal. If you aren’t truly tired of your bad situation or you aren’t passionate about your goals for improving it, you could easily give up or waste time complaining when you could be taking actionable steps to change your life.
Assess Possible Solutions
Once you have your short-term goal(s) in place, determine possible solutions to your problems and how likely they are to be successful if you tried them. For my family member, I think her biggest issue is earning a low income and having so many needs. A minor issue I see is a slight overspending problem since I know her personally and believe there are a few things she could cut temporarily or avoid spending money on to improve her situation.
If you want to earn more money, some solutions may be to get a higher-paying job or start a side hustle. If you don’t know what you’d like to do on the side, consider what your skills and capabilities are along with how much time and energy you’d have to devote to it. If you can’t find a higher-paying job, ask your current employer for a raise and see what they say.
To improve your income and advance your career, you may need to go back to school. This is especially true if you work in a field that thrives on certifications like the medical field. For example, a certified nurse’s assistant will never earn as much as registered nurse. In this case, asking for a raise may not do you much good. If you want to advance your education, you can talk to an advisor at a college or university to learn more about their programs and scholarship options.
Another possible solution could be moving in with a friend or family member to lower your living expenses or applying for housing assistance if you qualify.
This is the hard part, but it’s necessary if you want to get out of a bad financial situation. If your finances are not in a good place, you’ll have to really refrain from spending money while you work on implementing your solution.
You may have to:
- Live on a bare bones budget for some time
- Avoid buying your child new clothes for school in the fall and accept hand-me-downs instead
- Move from a house to an apartment because it’s cheaper
- Sell your smartphone and get a prepaid phone
- Sell your car and bike to work if you can
- Not take a vacation for a long time
These are just a few common ways to sacrifice, but you can choose your own things to give up in order to keep more of your money while you work toward reaching the goal you highlighted in the previous step.
It will be a tough time in your life but you don’t have to do it alone. Talk to other friends, family members, or even people on online forums who are going through similar issues or have similar goals to gain encouragement. Make sure your family is all on the same page so you can motivate each other.
All of these tips and strategies I highlighted are actionable things you can start doing today to get out of a bad financial situation. If you don’t take action, nothing will change.
Exhaust all your resources, and explore each and every money-making and money-saving opportunity you come across in order to see results. Let go of your pride and focus on trying out every possible solution to help you achieve your short-term goals and set you on the path to success from your long-term goals. Don’t be afraid of sacrificing because your future reward will be so much greater than anything you’ve given up.
Have you ever found yourself in a bad financial situation before? What have you done to improve it?