While debt and having no money are vicious problems, the millions of people facing the nightmare of a financial downward spiral have a shared problem which runs much deeper. This is simply human behavior, and though many financial problems are unforeseeable, behavior is the ultimate culprit.
Ultimately, this problem demands 100% of your attention in forming an effective solution that actually works to dig you out of the downward financial spiral and puts you on a better footing going forward.
This guide will help you begin on the road to financial recovery, with information and advice centered on the key behavioral problems, and their related behavioral solutions. As you read through this guide, remember the following, as they are important and you will always need them:
1. Self confidence – Addressing the financial problems in your life requires courage and ability to tackle the issue head on. But you can only begin to build self confidence once you accept your circumstances and begin to adopt a strategy.
2. Realistic Rational thinking – Debts are never easy to clear, but they are very easy to acquire. If you don’t agree with this then you are either sensible with your money, or (more likely for any reader of this article) thinking unrealistically.
3. Discipline – Lack of discipline often leads to debt, and without discipline, it is extremely difficult to solve any debt problem.
4. Responsibility – If you take anything away from this guide, it should be taking responsibility and full accountability for your problem, and the solution. When was the last time you heard of a bank forcing money into the accounts of consumers?
5. Determination – Never lose sight of your goal and never let setbacks get the better of you. This is the final key to reaching the end of your troubles.
The First Step: Analysis
Knowing exactly where you stand with your finances is an important first step, but once you know where you stand, there is no need to obsess over it further. No matter the extent of the problem, money is just money, and though we all like to obsess over it whether we’re in the red or the black, there are many things in life which are more important. But just how important is your debt?
Write down all of your debt on a single line, and then write down all the other problems in your life below this number – which of these other problems are connected to this debt? Even in the most difficult of situations, you may be surprised to see that the number at the top is linked to few other problems, and the things that are linked are often more an inconvenience than an actual problem.
The point is to not be afraid of your financial burden, so you can develop the self confidence to know that it can be solved just like any other problem. You should not be afraid, but you should never see it as a triviality, and though you should appreciate the fact that bad finances are not usually one of life’s fundamental problems, healthy finances are an amazing facilitator for solving such problems.
Financial Solutions
When it comes to addressing the problem, there is only one ultimate solution, and that is to repay your debts with the money you earn, above the level of your minimum debt repayments if possible. A credit card with both a modest balance and APR can take an extraordinary amount of time to pay off when keeping to the minimum payments, and the same goes for any personal debt.
A secondary solution is to consolidate your debt to reduce the interest you pay on it, either with a loan or perhaps a credit card. This is a secondary solution, because while it may reduce your minimum monthly debt payment, the time taken to pay it off in full will increase.
You should have the confidence to see your total balance, and not get frustrated in the fact that the problem will not go away any time soon. The percentage accrued on your debt will come to a finite amount each month, and this (on top of the balance) is what angers most people, especially when it increases the debt burden despite the repayments. But that is the nature of debt, and if you are realistic about it, you will avoid this blame game and keep yourself disciplined.
Setting Suitable Goals
It is almost always best to create your own repayment goals, which should be clear and suitable goals set as much above the minimum repayments as possible. It could be one payment a month, or two payments a week, but regardless, it should be stuck to no matter what.
Your goals need to be verifiable. In other words, with every passing month you should be able to prove that your financial situation is getting better. This does not necessarily mean that your debt is reducing — for this situation, an improvement means a reduction in the amount that your debt is increasing. Either way, when you stick to a plan and keep on seeing these improvements, you know that your discipline and responsibility is paying off. This will increase your confidence and in turn strengthen your positive behavior.
You can gain a deeper understanding of your debts by using financial software and researching how interest rates work. A better understanding of how to make personal improvements can be found with many self-improvement solutions.
Strip Away the Excess
Here comes by far the most important (and the most difficult) solution – to use your discipline and responsibility to make significant changes to your spending habits. You should first record all your purchases
and separate them into the categories ‘essential’ and ‘non-essential.’ Prioritize your non-essential purchases by splitting them up into further sub-categories.
Why do so many fail at stripping away the excess? Because it takes every single positive behavior — such as self-confidence, self-determination and responsibility — to make the right social changes in life and to stick to any changes made to spending habits.