Every once in a while at Dough Roller, we get emails from people in seemingly hopeless financial situations. They are single moms struggling with high debt. They’re low-income, unemployed, or in the middle of a financial or medical crisis.
While many of them believe their finances are hopeless, there is always a light at the end of the tunnel — even if it’s a very long tunnel.
If this sounds like your financial situation, don’t give up. Take these steps to begin improving your finances — and your life.
Every Situation is Unique
Before we launch into some ways you might deal with a hopeless financial situation, let’s make this clear: Your financial situation is unique to you. The suggestions listed here may or may not make sense in your situation. But they might help you get started.
If you’re at a complete loss, talk to a professional credit or financial counselor. The National Foundation for Credit Counseling offers free or low-cost credit counseling, bankruptcy counseling and financial education around the U.S. Its website is a good place to begin if you need serious financial help.
Start by Discovering Causes
Many people in a terrible financial situation know exactly how they got there. In your situation, maybe you lost your job and drained your emergency fund. Or maybe you’re in tens of thousands of dollars of medical debt.
But for many of us, financial difficulties creep up slowly. Instead of having one financial meltdown, choices and chances slowly eat at our financial security until we’re left with nothing.
If you’re in this second situation, it’s important that you understand how you came to this place.
Do you routinely make poor spending choices? Have you been living beyond your means? Do you make too little money to support an adequate lifestyle? Do you have trouble paying bills on time and end up with lots of extra fees and payments?
Discovering the causes of your financial crisis can be disheartening, but once you know why you landed in this place, you can figure out how to get out of it.
Focus on the Basics
Any time you’re in dire straits financially, you need to focus on the basics: food, shelter, lights/water, and transportation to get to work.
This may mean cutting out extras: cable, Internet, cell phone, debt payments, eating out, entertainment, etc. It’s tough, but until you have the basics taken care of, you won’t have a foundation on which to build your financial security.
Find Local Resources
If you’re in a real financial emergency, in which you can’t pay rent, get to work or put food on the table, it’s time to find local resources to help you. Assistance programs through the government and local organizations are there for people in situations like yours. Use them!
These links will get you started finding resources to take care of the essentials:
- Temporary Assistance for Needy Families – This page includes all sorts of information for families in need, including information on food stamps, housing vouchers, Medicaid and the Low Income Energy Assistance Program.
- Child Nutrition Programs – Feeding your kids is obviously your No. 1 priority. This page has information on various nutrition programs during the school year and the summer.
- Supplemental Nutrition Assistance Program – The SNAP program gives food benefits to low-income families and individuals around the country. Check here to see if you’re eligible.
- Making Home Affordable – If you’re struggling with mortgage payments, this program could help.
- Housing Help – This federal page includes links to state and local resources that could help you get housing vouchers.
Along with these government resources, you might look into local resources provided by nonprofits. Local churches and food pantries, for instance, may give direct assistance or be able to steer you toward other resources.
Live Within to Your Means
If your finances seem hopeless, it’s tempting to just give up. Why not rack up more and more debt? It’s not like you’ll get out of the debt you already have, right?
Well, not necessarily. Racking up more debt will only snowball into greater financial difficulties down the road.
So right now, focus on trimming all the extras so that you can live within your means. This means getting on a budget and cutting out unnecessary spending. Living within your means also entails planning your cash flow so that you don’t have to take out a payday loan to make it to your next check. Budget each check so that you don’t run out of money before the next one, and you’ll be on your way to more financial freedom.
Right now, it may seem as if you’ll never work your way to a better financial situation. But many wealthy people came from nothing or less. With hard work, perseverance and the right resources, you can turn your financial situation around, too.
Bankruptcy is meant for people in financial trouble so dire they may never be able to pay off all their debts. If you’re in mountains of debt, bankruptcy may be your best bet.
Although bankruptcy may not erase all your debts, if you qualify, it could erase a good portion of them. This could make for more manageable payments and a better financial future.
This article on resources for those considering bankruptcy is a good place to begin learning about bankruptcy basics, whether you would qualify, and how to go about filing.
Hang in There
As anyone who has dealt with major financial crises will tell you, digging yourself out of a big hole takes time. Sometimes, it takes decades.
The key is to set a series of manageable goals that you can achieve. Start by making a budget and sticking to it for a month. Then maybe you can pay off one small debt, or simply go six months without adding to your debt load.
As you achieve these small goals, you’ll be empowered to make the disciplined choices necessary to achieving larger financial goals – saving an emergency fund, buying a home, paying off all your debts.