In most areas of life, problems have a straightforward solution. For example, if you want to lose weight, you undoubtedly know that you should get more exercise and eat healthier. But that doesn’t always translate into action – we’ll start tomorrow; we need to find “the right gym”; it would be a real shame to let those pudding cups in the fridge go to waste. Even then, on any given day, you can wake up in the morning and decide to take a long walk or have a grapefruit for breakfast instead of a donut, and you’ve taken a step in the right direction.
In the financial arena, it isn’t always that easy. You may have the same sort of general idea that you need to cut expenses or bring in more money, but the action steps aren’t nearly so clear–at least, not until you’ve taken inventory and done some research. Those tips you keep hearing about skipping the $5 coffee and taking your lunch to work may help somewhat, but they won’t necessarily be enough to keep a crisis at bay. To make real progress, you need a real plan.
If you’re having trouble making your monthly income stretch to cover your expenses, can’t seem to get started saving, or just feel like you’re not managing your money strategically enough, you’re not alone.
Most Americans Know their Finances Need Work
71% of respondents in Northwestern Mutual’s 2020 Planning & Progress Study said their financial planning needed improvement. The data backs that up. 21% said they were within one missed paycheck of having to borrow money or skip bills. Another 15% said they’d reach that point after 2-4 missed checks. Perhaps worse, nearly half don’t know how long they could get by without a paycheck.
That’s at least in part because most people don’t love tackling their finances. 16% of respondents said they got worried and nervous about the prospect of looking at the details of their financial lives. 6% said they preferred not to deal with their financial situations until they had no choice, and 8% said they were frustrated and annoyed when confronting their financial situations. That’s nearly ⅓ of respondents saying that when it comes to their finances, they’d prefer not to look too closely. Which makes sense – finances can be boring, frustrating, and stressful.
But avoidance can easily become a damaging cycle. Those under financial stress feel like they don’t have control of their finances. Understandably, they’re more reluctant to dig in and confront the details. But, ignoring the problem often makes it worse, increasing the stress level and reluctance to dig in and look for solutions.
Clearly, that’s not workable.
So what’s the first step?
You Can’t Solve a Problem You Don’t Understand
The first step is to take a deep breath and face the facts. That means more than just acknowledging that your finances aren’t what you’d like them to be, or even that they’re totally out of control. Financial problems take many different forms, and the range of possible solutions will differ depending on your circumstances.
It’s time to take a hard look at things like:
- The amount of money you can rely on receiving each week or month
- The amount you’re spending on necessities such as food and shelter
- The amount you’re spending servicing debt, such as making credit card or loan payments
- How much you’re paying in late fees, reconnection fees and other costs of being broke
- The amount you’re spending on non-essentials, and what you might be able to cut out
- The total amount of your outstanding debt–especially unsecured debt–and how long it will take to pay off at your current rate
It can be tough to get started, especially if you’re feeling anxious about your financial situation. But knowledge really is power, and you can’t take control until you know what you’re dealing with. You can’t do it piecemeal. If you’ve tried that before, you’ve probably noticed that while you’re solving one problem, another may be spiraling out of control. Be prepared to look at every debt, every bill, every expenditure.
At the simplest level, you have to balance the budget. That means either increasing income or reducing expenses until you’re consistently spending less than you’re bringing in each month. The concept is simple, but that doesn’t mean it’s going to be easy. You’re going to have to take a thorough inventory of your financial situation, and then take the time to educate yourself about your options.
Finding the Right Solution for You
Depending on your circumstances, the answer may be as simple as taking on a part-time job for a few months to knock out a couple of debts, downsizing a bit, or consolidating high-interest credit card debt with one lower-interest loan. But for many people, a more comprehensive solution is required. For instance, Chapter 7 bankruptcy provides a way for many people with a lot of unsecured debt, like personal loans, medical bills, and credit card debt, to wipe out those obligations and start fresh. Chapter 13 bankruptcy allows many people with secured debts like mortgages and automobile loan debt to repay past due balances over time, without pressure from debt collectors, fear of repossession or other action, or mounting late fees.
In bankruptcy, participants are protected by the automatic stay – a legal mechanism that inhibits contact from creditors and debt collection agencies. According to Nathan Rester, one of our associate attorneys in Jackson, achieving this kind of peace of mind is half the battle in gaining financial stability:
At the end of every appointment, I judge myself on one metric: is the client’s blood pressure lower than when they walked in? If the answer is yes, I’ve done my job right. Your financial life doesn’t exist in a bubble: it bleeds into your health, your home, your relationships. Money isn’t everything, obviously, but if you’re sitting under a pile of bills and they’re all past due, then it’s hard to think about anything else.
Rester is just one of several attorneys at Bond & Botes, who have decades of experience helping people resolve their debts. We offer free consultations so you can gather the information you need to make the best decision for you, based on your specific circumstances, goals and priorities. You can schedule yours right now by calling 877-581-3396 or filling out the contact form on this page.
Nathan Rester is an Associate Attorney at the Bond & Botes Law Offices location in Jackson, Mississippi. He holds a Bachelor of Arts from Mississippi State University, and a Juris Doctorate from the University of Mississippi School of Law. He prides himself in his work assisting his bankruptcy clients to achieve financial stability for themselves. Read his full bio here.