Although my own current financial situation is a mess, I clearly know how to get back into control. I’ve done that a few times in my past when I was struggling financially. I often had only mini jobs or worked as a freelancer, and hardly made enough money to pay the rent and bills. But still I didn’t give up control - at least not for a very long time. I kept a firm grip on the steering wheel to stay on top of my financial situation.
So here’s my process to get back on top of your finances if you somehow lost control. it begins with mental work, and then continues with some actual actual things to do to get to the steering wheel again.
The first thing you have to deal with is your own mind. Most probably you have some issues there that prevent you from getting in control regarding your finances.
When you struggle financially, it is a common pattern to sink into a state of denial. Maybe you stop opening letters because you expect bills inside. Flight is perhaps the most common response to financial problems: “If I only don’t stop thinking about it, it will eventually solve itself magically…”
Although this is perhaps the most widely used method to deal with difficult situations, it has one clear disadvantage: It just doesn’t work!
So the first step on your way is to accept your current situation, whatever it may look like. Maybe you will still feel a strong urge to look away from it, but it is vitally important that you are able to accept that your financial situation is what it is.
If you don’t have enough money to pay the next rent, then you don’t have enough money to pay the next rent right now, no matter what. And it doesn’t change anything to try and talk your situation better than it actually is.
The next step is to take responsibility for your finances again. Maybe you don’t feel responsible for how you got into your current situation. I won’t discuss this with you (at least for now…), as long as you take responsibility for what your finances will look like in the future.
Responsibility also means that you don’t spend money without knowing that it will not lead you into problems later on.
This is important because if you are only a little bit like many others, you probably only have a vague idea on where you really stand financially.
I don’t think it is necessary to calculate your net worth to the dollar, but you should get more exact than just order of magnitude.
Doing this probably means some serious paper shuffling, because you need to collect everything that has a dollar sign on it (or whatever currency you use) and is an open or recurring post, something that you will have to take care of in the future.
Then make a list of your monthly income, expenses, and on your current assets and liabilities. Again, you don’t have to calculate them exactly, but be exact enough to not give up control. I suggest that the nearer your ins and outs are together, the more exact you get regarding to these posts.
To ease the answer to questions like “can I afford x”, I suggest that you start to budget your money, going from the most important things to the lesser important.
If you don’t like the idea of living under a bridge, I guess that your rent and other expenses that cover your most basic needs are on top of your list.
This gives you some basic control over your situation, and with budgets you have a basic overwiew without the necessity for excessive private bookkeeping.
This is only the beginning of your own path to financial independence. I will make financial issues a great aspect on this blog. One reason for this is that this is a big issue for many of you on the way to your dream life. The other is that it is one for myself, and it is my goal to share my own path with you here on my blog.
Do you have your own story to tell, another useful strategy, or some challenges yourself? Share them in the comments, or contact me privately using my contact form.
If you enjoyed this post, make sure you get new posts via RSS feed!
If you would like to make a comment, please fill out the form below.
[...] How To Quickly Get Control Over Your Financial Situation [...]
[...] How To Quickly Get Control Over Your Financial Situation [...]