3 Steps to Financially Reset
Life is unpredictable, and financial setbacks are a hard reality for many. While resetting can seem scary, rebuilding your financial life is achievable with a practical plan. Here are three simple steps for getting your financial health back on track after a setback.
1. Ask Yourself the Right Questions
• How much do you have saved?
• How much debt do you have?
• What are your total monthly expenses?
• What is your total monthly income?
Answering these questions will help you understand your current financial situation in detail. For each answer, make sure you list out the total balance, the interest rate (for debt like a credit card or loan), and the monthly payment. All of these details are necessary to determine what pivots need to be made for a practical financial reset plan.
2. Create a Realistic Plan
Although budgeting is often thought of as a task for tracking spending and earnings, it’s also a plan for ensuring money is allocated for both debt repayment and savings.
First, ensure you have your essential expenses covered by listing out things such as rent/mortgage payments, food, utilities, and transportation. Then prioritize paying off your high-interest debts; The faster you pay these off, the less you'll pay in interest over time. If you find that you're spending more than you're earning, it's time to make some adjustments. Prioritize your essential expenses and see where you can trim costs to balance your budget. If your debt obligations feel overwhelming, you can also consider alternatives like negotiating lower interest rates, requesting temporary relief (such as forbearance), or consolidating debts to simplify payments.
Ultimately, the goal of a budget is to chip away at your debt while ensuring you can meet basic needs and save for future emergencies, too.
3. Focus On Your Credit
Consider using a free credit score monitoring tool – like Credit Karma or our Free Credit Score Tool in the MoneyTracks mobile app. From qualifying for loans to securing lower interest rates, your credit score opens doors. Over time, consistent positive credit behavior can help boost your score and present you with more financial opportunities.
• Commit to paying bills on time
• Set up automatic payments
• Explore the option of a secured credit card
Resetting financially isn’t just about the numbers – if you can focus on progress over perfection, the journey to financial recovery will be less stressful. Make sure you are celebrating your small wins to achieve your bigger goal. Take it one step at a time, remain focused, and trust that you can bounce back and create a brighter financial future for yourself.
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