It is tough to be in a financial rut as it makes everything else in life a little bit more challenging. You cannot move forward with any financial plans you might have. Getting stuck in a rut ties you down to a place you want so badly to get out of. It can be a huge debt, non-stop payments where you see no end or even lack of financial resources.
Why are you in a financial rut?
One thing you need to know is that there are a number of reasons why you are in that situation. There are factors that would contribute why you are in that difficult stage in your financial life. Here are a few of them which could help you understand your situation better.
One of the most obvious reasons why you might be struggling financially is because you are not earning enough. Your monthly expenses could be bigger than what you are bringing in every month. As a result, you always find yourself trying to stretch your budget just to make ends meet. Not to mention the constant stress you feel every time you receive your monthly statements knowing you don’t have enough to cover them.
Not enough savings
This can also be a result of not having enough income coming in every month. However, there are a number of consumers who deal with this problem regardless how much they are earning. It is because your ability to save is not always a direct reflection of how much you are making. In the end, a low balance on your bank accounts is a clear sign that you are in a financial rut. In fact, a CNN article points out that over 50% of Americans do not have enough savings to cover a $500 emergency.
Too much social life
There is nothing wrong with spending some quality time with your family and friends. You can meet them for lunch, dinner, movies, or even for a holiday break. However, there are times when you might be going overboard with your social life. This can adversely affect your finances and quickly send your down into a spiral of debt and never ending payments.
One of the reasons why you might have an inflated lifestyle is that you do not have a proper household budget, to begin with. A Time article even pointed out that 20% of Americans just budget mentally. As a result, you do not have a benchmark on your baseline expenses. This results to spending too much and ending up with an inflated lifestyle. Of course, there are times that you simply want to keep up with the Joneses and you find yourself spending more than what you really need.
No long-term goals in life
This is one of the main problems why you might be in a financial rut. Not having any plans or long-term financial goals in life makes your present situation to not seem to matter. You might not be able to find the purpose of what you are doing at present simply because you have no direction in life. Not having any long and even short-term goals makes your present actions seem irrelevant.
Lack of financial management skills
There is no denying that you need a certain level of financial management skills to help you budget your money. If you do not have any idea how to put together a budget or even understand some of the funds you need, you will have a difficult time managing your finances. This can lead to multiple problems and the feeling of being stuck in a rut.
How to get out of a financial rut?
After learning of some of the reasons why you might be in a financial hole, here are a few things to help you get out of it.
Identify your problem areas
It is important that you be able to identify the reasons why you are having problems with your finances. This would help you direct your efforts in solving the problem head on. This is a perfect example of working smart. Rather than just trying to fix everything in one go, you focus your efforts on getting down to the problem areas. When you do, everything else will follow.
Focus on earning more money
This is always a great move to get you out of most financial problems. You can choose to get a side hustle, put in more hours at work, and even consider income positive hobbies. Earning more every month would usually help you cover your expenses and put you on track to saving for the future. You just have to manage your finances wisely and have the discipline to do what is right when you start earning more money every month.
Lower down your monthly expenses
This strategy always goes well when you are trying to earn more every month. It is because it frees up more in your monthly budget. As you look for expense items to cut down on, you are increasing your disposable income. The challenge now is to make sure that you are able to use that money for good and get yourself out of a financial rut.
Go on a cash transaction basis
One of the biggest factors why you might be in a challenging financial situation is that you spend more than what you can pay for. This is all made possible with the use of credit cards. To address and help correct this mindset, it is a good idea to use cash for a certain stretch of time. This forces you to budget your funds and prevents you from picking up unnecessary expenses. As you do this, you become more in control of your finances.
Change your expensive habits
Another change that you can look into is to take out or taper down on expensive habits. Unless you can turn it around and convert them into income positive hobbies, it would be best to eliminate that financial burden. As you do this, you get to save money and allocate them to areas that would strengthen your financial future.
Find your support system
You need to understand that no matter how bleak the situation is, there will always be people who will support you. Oftentimes, these would be family and even close friends. They will only want what is best for you and will be a great source of support. It is tough to be in a financial rut but having people who will help you through can make the journey a little bit easier.
Lay down concrete steps towards long-term goals
This is one of the most important steps you would ever make when you find yourself in a difficult situation. For one, this financial exercise gives you purpose. It puts your present money decisions into context. Laying them down as steps to an even bigger goal helps you connect your present actions to a future target. This helps you be more aware of your finances and appreciate even the little steps you need to make.
Getting caught in a financial rut is a challenging phase in your life and you just need to know that it is not a permanent situation. After you identify what the problem is, you have to make a series of committed steps in order to turn your finances around.