It is important to remind yourself that you will not always be in this financial situation. If you are unemployed or underemployed, avoid the trap of falling into binges of Seinfeld reruns with scoops of ice-cream on top. You need to take advantage of this time that you’ve been given because it will not last forever.
Go Back to Paying Only the Minimum Payments on Your Debt
It’s going to hurt to not be able to send more than the monthly minimum payments into your creditors like you have been doing (you have been doing that, right?). But the fact is, now’s not the time to freely give your limited money over to someone else. Continue making the minimum payments on all of your debt but don’t pay more unless you absolutely know you can afford it.
Once you are out of this hot mess, then you can go back to paying your debt down more quickly, which will only put you in a better position for your next financial churn.
Preserve Your Savings by Immediately and Drastically Cutting Back
The best policy is to immediately make the cutback to bare-bone necessities. This strategy will enable you to preserve your emergency savings for as long as possible. And if you haven’t got any emergency savings, well then you’ll need to do this anyway.
What does a survival financial strategy look like? Do away with the easy things first like eating out, going out, and clothes shopping. Then call your service providers where you have fixed expenses and negotiate lower ones. Next, take out all of the extra goodies that have crept into your grocery basket each week and keep it to the necessities plus one or two items to keep a smile on your face (for us, it’s ice cream!). And once you’ve done all that, start working on ways to cut your electricity use, your gas use, and any other areas you have control over.
Don’t Let Fear Dictate Your Decisions
This one is difficult to do, but is very important as decisions made from a fearful place are often only good for you in the short-term. If you have savings, then you need to remind yourself of that each and every time the fear-bug creeps up during times of financial churn. For those without savings, you need to remember to have faith that your situation is not going to last forever. By taking a few minutes each day to check yourself mentally, you will be putting yourself in a much better place to make the kinds of decisions and find the kinds of opportunities you need to get you out of this time period and into more lucrative days.
How to Regain Your Confidence After Being Buried in Debt
Even if you found yourself in debt due to a few financial missteps, the how doesn’t matter as much as what followed afterwards. And, if you’ve managed to right your ship and get out of the red, that is a successful journey in anyone’s book.
One of the best ways to realize how powerful we are in creating change and establishing positive habits is looking back at how we managed to do this in the past. Deciding you were going to get out of debt, determining how you were going to do that and staying committed to the process means you have the determination and dedication to continue managing your finances in the future.
Just make sure you take a moment to stop and smell those debt-free roses – before allowing yourself to become overwhelmed with what’s next.
Create a new plan of action
When you spend a long period of time committed to one plan of action, reaching the finish line can suddenly feel like your life has been stripped of all structure. Having a plan creates space to feel confident — you know what you want and you know how to get there.
Now that you’ve slayed the debt monster, it’s time to create a brand new plan of action.
What financial goals really light your fire? What would you like to achieve in order to keep this momentum going? Once you’ve determined what is next on your financial bucket list, create a plan of action just like you did when you decided you wanted to be debt-free.
Come up with a new identity
Throughout our lives, we allow ourselves to be identified by a few distinguishing factors – what we do, where we live, the type of family we grew up in, etc. Debt and money woes can also be something we come to attach to our identity – even if it’s not something we willingly say aloud.
Say, for instance, you’ve been plagued with debt for as long as you can remember. You probably have an invisible script running in your head that says you don’t know how to manage money and you will never be able to get ahead. That thinking needs to be identified and shifted – otherwise it will forever strip you of any confidence you have in handling your money going forward.
It’s time to stop confusing who you are at the core with situations that you have obviously taken great care to change.
You are able to be a smart money manager because it’s a choice you make here and now. Period.
No one is born with the ability to manage their money in the best way possible without any outside help or teaching.
Whether it be schooling from money-savvy parents, personal finance education in school, or simply learning about best practices through reading blogs and websites, everyone needs guidance when it comes to handling money.
Those who constantly seek that guidance are the ones that are the most successful and the most confident when it comes to making decisions regarding their finances.
So start gathering knowledge. Take a close look at what you struggle with and find a resource either through reading or speaking with an expert to get a better understanding.
There is plenty of help out there – you just have to look.
Give it time.
You’ve accomplished something huge by pulling yourself out of debt. Take a moment to look back on that journey and let it sink in.
Shifting out of one mindset into another – i.e. getting out of debt vs. building wealth or a financial foundation – can take some time. And that is entirely OK.