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“My Finances are Out of Control” (Here’s What to Do Next)

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These days, it's easier than ever to feel like your finances are out of control. Between high inflation, high-interest rates, student loan repayments kicking back in, and the holidays, it can be hard to get ahead. Maybe you had a “rock bottom” moment where you can't pay your bills, an embarrassing situation where your debit/credit card was declined, or perhaps you've just been spending too much lately and you're thinking to yourself, “My finances are out of control and I just have to get it together.

This post attempts to tackle both the tactical and emotional side of what to do when you feel like your financial situation is untenable.

In the eleven (!!!) years that I have been running this website, my personal and financial life has had too many twists and turns to count. I've written about the financial misdeeds of my youth: overcoming a shopping addiction in college, moving to New York with barely $300 and a suitcase, and navigating multiple career transitions (here and here.) More recently, I've weathered a divorce and a layoff.

These events were stressful, but I made it through. Below are the five most important things I’ve learned to do when you feel your finances are completely out of control.

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Mastering Financial Balance: Navigating Life's Twists and Turns

First and foremost, it's important to assess your current financial situation.

You can't get a grip on any situation until you know what the entire picture is. And often, this is the hardest part of taking back control of your financial situation. You know it's bad. You just aren't sure how bad it is. And taking a real, sharp look is hard. Often the hardest step of all.

But you gotta “man up” as they say. Take a close look at your income, expenses, and debts. This will give you a clear understanding of where you stand and help you identify areas that need immediate attention.

Next, create a budget.

A budget is a crucial tool for managing your finances effectively. Start by listing all your sources of income and then categorize your expenses. (Here's my guide on how to create a budget here. There's also a free template in the worksheet vault, here.)

A budget helps you prioritize your spending and identify areas where you can cut back, and if things are pretty messy, you're likely going to have to cut back to clean up some of the mess.

If you already have a budget that works for you, but you just haven't been paying attention to it, here's my best tutorial on how to cut expenses in times of crisis.

Make a debt plan.

90% of people when they come to me and say, “my finances are out of control,” they are either talking about their debt burden, or they aren't making enough to pay their bills. (Here is my best post on ways to increase your income.)

  • Once you have a budget in place that outlines your minimum monthly payments to your creditors, it's time to create a plan to tackle your debts.
  • Start by making a list of all your debts, including credit cards, loans, and any other outstanding balances. Prioritize your debts based on interest rates and start paying off the lowest amounts first (I prefer the Snowball method).
  • You could also consider consolidating your debts or negotiating with creditors to lower interest rates or create a more strategic repayment plan. Here's how I paid off $8,000 in 90 days.

Make a Savings Plan

I almost listed this one first, because it's the most vital to taking back control of your finances. But, I listed it in this order because if you're starting from zero – you really do need a budget first to see how much you can comfortably save each month.

An emergency fund, f*ck off fund, slush fund, whatever you want to call it — having money tucked away has been my saving grace. I'll tell you when I learned that not having money in savings can hold you back.

I moved to New York with no money. While my friends were working at Starbucks and going on auditions, I took a desk job at a hedge fund just to get my bank account back in the black and pay my bills so that I could stay in the city. It was a fantastic financial move, but that experience also taught me that savings aren't just for the “oopsies” in life. They can also help you strive for your dreams (and yes, this experience is where the idea for Financial Best Life came from.)

Flash forward to 2023.

My savings saved my ass (again!). After getting laid off, I don't know how I would have paid my mortgage or supported my son without the substantial amount I had put away. I've almost used up the entirety of my 9-month emergency fund, but thank goodness I had it.

That's why it’s important to have some money in savings, so you never have to put your dreams on hold or worry. Financial stress is just about the worst kind it is. I hate it.

Give yourself lots and lots of grace

Managing money is a hard thing to do even in the best of times: when we're making tons of money and feeling really good emotionally, physically, and spiritually. But life keeps life-ing, and sometimes the most we can do is just get by. And that goes for our finances. It took a full year for me to actually get divorced and so my financial situation was in limbo during that time.

I felt a lot of guilt and shame. But I told myself I was going through a really try and time and it was okay to not contribute to retirement and put my legal fees on a credit card, etc. In really difficult times, grace is more important than progress or perfection.

At least, that's what I believe.

My favorite mantra is that “money is a lifelong process.”

I've excerpted these two paragraphs from this article I wrote ages ago for MyBankTracker because I think they're some of the most profound I've written and they summarize how I feel about life and money so beautifully; the fluidity of it, I mean.

“I adore this [mantra] because it carries such a spirit of self-love toward our finances. Most individuals begin managing their money between the ages of 18 and 22, and then they’ll manage it well into their 80’s and 90’s. Over the span of so many decades, it’s not only expected for your money situation to change, it’s a given.

The way you manage your money in college will look drastically different than the way you manage it in a marriage or retirement. And in those times when your life situation changes, your money situation will too. Most likely, in those instances, you’ll have to relearn how to best manage your money, which can be very frustrating.”

Set Just Three Financial Goals

It can be really overwhelming to think about all the things we want to do with our money: travel, home repair, save, pay off debt, buy an expensive piece of furniture. Whew! And when you're feeling out of control, the last thing you need to do is pile on more pressure on top.

I keep it simple. I write down my top three financial goals for the year at the beginning of each year. And I'm specific. Things like “Contribute $3300 to my HSA,” or “Buy the kiddo a new bed.” Very, very, very specific and measurable. You can't just say, “I want to take control of my finances.” What are the smaller tasks you're going to do to make sure that happens?

Once you have your “big three” in mind, reverse engineer your goals and monthly contributions. The baby bites work just as well when it comes to taking control of your money.

Educate yourself

It's also crucial to educate yourself about personal finance. Read books (or blogs!), listen to podcasts, attend workshops, or free webinars, or take online courses to enhance your financial literacy. The more you know, the better equipped you'll be to make informed decisions about your money. Here are my favorite personal finance books for beginners and my favorite finance books on saving. The more you know, the easier it will be to keep your finances in line the next time life throws something unexpected your way.

Lastly, don't be afraid to seek professional help if needed.

Financial advisors or credit counselors can provide valuable guidance and help you create a personalized plan to regain control of your finances.

Don’t Let Money Hold You Back

When I was contemplating leaving my full-time job to work for myself, I ran the numbers and did my homework on how the transition would impact my finances. While financial homework is always good (and recommended), it doesn't always tell the whole story.

My homework told me I was going to be taking a pay cut, but I left anyway because I prioritized the opportunity to learn and grow as a business owner over earning as much as my full-time salary.

Yes, you should always consider the “money” side of a situation. But then make a decision based on what's best for you all around.

You know the best thing about money? It's not finite. In fact, I’d argue that money is the most fluid thing there is. At the end of the day, it’s just math. Is your net worth negative? Work hard and cut back and make a plan to put it in the red. You have control over all of it. It’s thrilling!

Don't Forget: Money is Personal

More from my circa 2015 article from MyBankTracker. (Apparently, I was pretty wise that year.)

“At the end of the day, money is a deeply personal experience. From marriage to kids to buying a home, to changing jobs and cities, it all varies per person per circumstance.

So, how do you manage your finances for the long haul while sustaining good money momentum now? All you have to do is understand that it’s okay to throw out a few of those hard and fast personal finance basics. Take the basics into account and then create your own rules during times of change. And don't forget to infuse a little more kindness to yourself as you go.”

Remember, regaining control of your finances takes time and effort. Be patient with yourself and stay committed to your financial goals. With determination and the right strategies, you can turn your financial situation around and achieve long-term financial stability.

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