How to get your Finances Back on Track

It is extremely easy to slip into debt almost without noticing; it is often a slow process which over time develops in a downward spiral which becomes harder to climb out of the longer and deeper you are in debt. The situation can result in you being forced to go further in debt just so to appease previous debt charges and can turn in a seemingly never ending cycle and increasing poor credit ratings. There are several ways of breaking free and getting your finances back on track. However it needs to recognise that for the majority, especially for students and young couples, that this is also a slow process, there is rarely a quick overnight fix. It is perhaps the first lesson which needs to be faced when entering the world of independent finances. Whether the debt has accumulated quickly or slowly, it requires change and sometimes sacrifice achieve financial stability once more. 

The first step is to recognise that you have reached your limit; this could mean that either the bank will not extend your over draft, or allow the withdrawal of money. Credit cards may be maxed out, loans denied and the amount of unpaid bills and charges mounting, as more money flies out than trickles in. There is now an issue of paying what is owed, maintaining the charges and then paying off the debt so your finances get back on track. 

Now it is time to take full stock of the situation, sit down  and write a brutally honest budget of what you currently spend. Discover what you spend non essential shopping, eating out, takeouts, cinema trips, pub nights, cigarettes, online spending, in relation to the necessities of life. It may simply be a case that you have had your priorities mixed, spending frivolously throughout the month, leaving the essential bills to last. Prioritising is key here for getting finances back on track. A new budget should be written honoring life’s essentials first, ie rent/mortgage, debt charges, utility bills, realistic food bills. Calculate then how much is left from your  monthly income and if there is any spare then this can be allotted between shopping, hobbies etc. It is vital to remain in this budget in order to get the finances back in order and stop the downward spiral.

It may become apparent however that the budget  has highlighted that essential bills take you to your monthly limit and that in fact your entertainment, hobbies, holidays and spending trips etc had been funded by overdrafts, credit cards, money shop lenders etc. This has then resulted in poor credit ratings and the refusal of further help from banks and companies. If this is the case then it needs to be recognised and accepted. There is little choice other than to put your finances on track and repay debt so to get rid of the debt charges which will mercilessly consume your income. 

In this case strict measures are required and self control must be exercised. There are new challenges to embrace for the next few months; exercising stringent control over the finances and keeping only to the essential budget of bills, rent, charges and nothing else. A status quo must be reached where the finances remain stable for a couple of months. 

The next stage is to slowly repay  the debt and diminish debt charges. As your regular income is tied, extra income is required in order for debt to be paid off. This could be in the form of a family/friend loan, but more realistically it can be derived from extra hours worked, a temporary second job, maybe downsizing to a smaller rented property for a while, selling unnecessary furniture/technology etc. There are many sustainable options available so long you are seriously willing to change your finances. This extra income can then be put towards clearing debt and over time reducing it to the extent that the charges also reduce.

There is no quick fix, your lifestyle may have to alter for half a year or so, however it is not for forever and before you know it your finances are back on track and the goal is reached. The destructive downward spiral of debt has ceased, debt has been paid, charges disappeared, you are more aware and in control of finances and can now look forward to living within means whilst recovering your former lifestyle and previous spending habits. It is important that lessons are acknowledged and learnt during this journey of getting finances back on track, habits and attitudes must be shifted in order to prevent similar situations in the future. A healthy bank balance is achievable alongside a healthy attitude and knowledge of personal finances and income.