How To Get Your Finances Back on Track

You can get your finances back on track—it just takes a little time, effort, and planning. Here's how to get back on track financially.

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We’ve all been there. You’re doing great with your finances, sticking to your spending plan, and saving money. Then something comes up—you lose your job, have a medical emergency, or get hit with an unexpected bill—and suddenly you’re off track.

Whether you’re dealing with a short-term setback or a long-term financial crisis, getting your finances back on track can seem daunting. And if you’re unsure where to start, it’s easy to feel like you’re swimming against the tide.

According to a recent survey, 56% of Americans say they don’t have enough savings to cover a $1,000 emergency. And another study found that 40% of Americans have less than $300 in savings. Between medical bills, car repairs, job loss, and other financial emergencies, it’s no wonder that so many of us are struggling to stay afloat.

But there’s hope. You can get your finances back on track—it just takes a little time, effort, and planning.

Financial mistakes that can set you back

While it may be easy to blame your financial struggles on bad luck or a low income, the reality is that there are often other factors at play. From making impulsive purchases to racking up credit card debt, here are some of the most common mistakes that can set you back financially:

1. Living paycheck to paycheck

If you’re barely scraping by, living paycheck to paycheck, you’re in danger of falling into a financial hole. One missed paycheck plus one unexpected bill could land you in a financial crisis.

Living paycheck to paycheck also makes it difficult to contribute to savings and retirement accounts. And without savings, you’re more likely to rely on credit cards or loans to cover unexpected costs, which can quickly add up and put you further in debt.

2. Excessive and frivolous spending

We all have guilty pleasures—that new pair of shoes, the fancy coffee every morning, or an expensive dinner out. But if you’re spending more money than you can afford on unnecessary things, it’s time to cut back on at least one category.

Instead of buying new clothes or going out to eat every day, try to save money by shopping at thrift stores or cooking at home. You may be surprised how much money you can save by making a few small changes to your spending habits.

3. Carrying too much debt

Debts can quickly spiral out of control. And if you’re already struggling to make ends meet, adding more debt to the mix can push you over the edge.

Many people find themselves in a never-ending cycle of debt, making minimum payments on their credit cards and loans while interest and late fees continue to add up. Even when they’re able to make extra payments, their debt never seems to shrink.

If you’re struggling with debt, it’s crucial to take action. You may need to make sacrifices, like giving up your cable TV or eating out, but it’s important to get your debt in order before it spirals further out of control.

There are several ways to get out of debt, including consolidating your loans, negotiating with your creditors, or, as a last resort, declaring bankruptcy. But before you make any decisions, speak with a financial advisor or counselor to explore all of your options.

4. Not having an emergency fund

Yes, life happens. And when it does, you need to be prepared.

An emergency fund is a savings account that you can use to cover unexpected costs, like medical bills, car repairs, or job loss. As the name suggests, it’s a fund set aside for emergencies—not vacations or new clothes.

Ideally, you should have enough money saved to cover three to six months of living expenses. But if you’re just starting out, even $1,000 can make a big difference.

Building an emergency fund may require some sacrifices in the short term, but it’s worth it to have a cushion of cash to fall back on when life gets tough.

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5. Failing to plan for retirement

When you’re young, retirement may seem like a lifetime away. But the earlier you start saving, the better. Compound interest is a powerful tool that can help you grow your nest egg. But it takes time to work.

So, if you wait until you’re in your 50s or 60s to start saving, you’ll have a lot less money than if you’d started earlier. There are a number of retirement savings plans available, including 401(k)s, IRAs, and annuities. 

By contributing even a small amount to one of these plans, you can significantly boost your retirement savings.

6. Not tracking your spending

If you’re not keeping track of where your money is going, it’s easy to overspend. You can track your spending by creating a spending plan, using expense tracking software, or simply writing down your expenses in a notebook.

Once you know where your money is going, it’s time to find ways to cut back. Let’s say you spend $5 a day on coffee. If you cut back to just two coffees a week, you’ll save $100 over the course of a month. And if you invest that $100, it has the potential to grow over time.

Making small changes to your spending can significantly impact your finances. So, if you’re not already tracking your spending, now is the time to start.

7. Not having insurance

Whether it’s health insurance, life insurance, or disability insurance, not having coverage can put you at financial risk. In the event of an accident or illness, you could be left with a hefty medical bill. And if you die without life insurance, your loved ones may be left to foot the bill.

No one likes to think about accidents or illness. But the truth is, they can happen to anyone at any time, irrespective of how healthy you are. That’s why it’s important to have insurance. It may not be fun to think about, but it could save you a lot of money—and heartache—in the long run.

9 ways to get your finances back on track

1. Create a spending plan and stay organized

Like anything else in life, you need a plan to achieve your financial goals. And it starts with creating a spending plan. With a spending plan, you can track your income and expenses so you know exactly where your money is going.

Start by creating a list of all your income sources, including your salary, investments, and any other sources of income. Then, list all your expenses—fixed expenses like your mortgage or car payment, as well as variable expenses like food and entertainment. Once you have a clear picture of your income and expenses, you can start making changes to your spending.

Organization is key when it comes to managing your finances. So, be sure to keep track of your spending plan and make adjustments as needed.

2. Try and increase your debt payments

The more you can pay towards your debt, the faster you’ll be able to get out of debt. So, if you’re carrying a balance on your credit card, try to pay more than the minimum monthly payment. Even an extra $50 or $100 can make a big difference.

If you have multiple debts, you may want to consider using the debt avalanche method. With this method, you focus on paying off your debt with the highest interest rate first. Once that debt is paid off, you can move on to the next debt on your list.

Paying off debt can be a long and challenging process. But by increasing your payments, you can speed up the process and save yourself a lot of money in interest.

3. Don’t use pay-later schemes

Pay-later schemes like buy now, pay later, and deferred interest can be tempting. After all, who doesn’t like the idea of getting something now without incurring the immediate cost? But these schemes can be dangerous.

With deferred interest, you may be tempted to spend more than you can afford since you’re not paying interest on the purchase immediately. But when the interest-free period ends, you’ll be stuck with a large bill. And if you can’t pay it off, you’ll be charged interest on the entire purchase amount—which can add up quickly.

Buy now, pay later schemes can also be problematic. If you miss or are late on a payment, you may be charged interest or fees. And, like deferred interest schemes, buy now, pay later schemes can tempt you to spend more than you can af

Avoid using pay-later schemes unless you’re confident you can pay off the purchase in full before the interest-free period ends.

4. Plan for unexpected events

In life, there will be unexpected events—a broken-down car, a medical emergency, or a job loss. And when these events happen, they can have a significant impact on your finances. The result? You could find yourself struggling to make ends meet.

Whether it’s setting aside money in an emergency fund or getting insurance to protect yourself from financial hardship, it’s essential to plan for the unexpected. You never know when an unexpected event will happen. But by planning ahead, you can protect yourself—and your finances—from the impact.

5. Create a habit tracker

Habits—whether good or bad—can have a big impact on your finances. So, if you want to get your finances back on track, it’s essential to create good money habits.

One way to do this is by creating a habit tracker. A habit tracker is a tool that can help you track your progress and stay on track with your goals.

There are different ways to create a habit tracker:

  • You can use a paper and pen to track your progress
  • You can use a spreadsheet or other digital tool
  • You can use a habit-tracking app

No matter how you choose to track your progress, the important thing is to be consistent. Track your progress daily, weekly, or monthly—whatever works best for you. And don’t be discouraged if you slip up. Everyone makes mistakes. Just get back on track and continue working towards your goals.

6. Learn to love (or at least tolerate) admin work

One of the best things you can do for your finances is to get organized. That means keeping track of your income and expenses, creating a spending plan, and tracking your progress.

While it may not be the most exciting thing in the world, admin work is important. And the good news is that it doesn’t have to be complicated or time-consuming.

To get started, try these tips:

  • Set up a simple filing system: Create a place for all your financial documents—bills, statements, receipts, etc. That way, you can find what you need when you need it.
  • Automate your finances: Use online tools and apps to automate your finances. For example, you can set up automatic bill payments and reminders.
  • Track your progress: Keep track of your progress to see where your money is going and how your spending habits change over time. And if you ever need the motivation to keep going, you can look back and see how far you’ve come.

Organizing your finances may not be the most exciting thing in the world. But it’s essential. And by taking the time to do it, you can simplify your finances—and your life.

7. Focus on what you can control

It’s easy to get caught up in what’s happening in the world—the stock market, the economy, politics. But the truth is, there’s only so much you can control. The stock market will go up and down. The economy will have its ups and downs. And politics will always be… well, politics.

So, how can you stay focused on what’s important? By focusing on what you can control.

Your spending: You can choose how to spend your money. You can choose to save or to spend. You can choose to buy things you need or things you want. The choices are yours.

Your mindset: you can control your reactions. 

Your relationships: The people you surround yourself with can have a significant influence on your life—including your finances. So, choose your relationships wisely. 

If you have friends who are always trying to get you to spend money, let them know that you’re trying to build up your savings. And if they can’t respect your decision, maybe it’s time to make new friends. You don’t need people in your life who don’t support your financial goal.

8. Create a realistic long-term savings plan

Without a plan, it’s easy to let your savings goals fall by the wayside. Life happens, and before you know it, you’ve dipped into your savings account—without ever really meaning to. 

First, figure out how much you need to save. Do you want to have $10,000 in savings? $50,000? $100,000? Once you know how much you need to save, you can start setting aside money each month to reach your goal. If you’re unsure where to start, try setting aside 10% of your income.

Next, figure out how long it will take you to reach your goal. Let’s say you want to have $10,000 in savings. If you’re saving $100 per month, it will take you 100 months—or just over eight years—to reach your goal. The important thing is to be realistic. If you set a goal that’s too high, chances are you’ll get discouraged and give up.

9. Prioritize your values

When it comes to your finances, there’s no one-size-fits-all solution. What works for one person may not work for another. That’s because we all have different values and priorities. Some people place a high value on experiences. 

For them, spending money on travel or tickets to a concert is worth it. Others place a high value on material possessions. They’re happy to spend money on a new car or a big-screen TV.

The key is to figure out what’s important to you and to make sure your spending aligns with your values. Don’t be afraid to spend money on the things that matter to you. Just be mindful of how much you’re spending and make sure you’re not going into debt to pay for them.

Getting your finances back on track can seem challenging. But by taking things one step at a time, you can make it happen. What’s more? The rewards are worth it—a simpler, less stressful life and the peace of mind that comes with knowing you’re on solid financial footing.

Sam Garrison

Sam Garrison

Sam Garrison is the President and co-founder of Stackin, a financial wellness company. Before Stackin, Sam built and launched new ventures at BCG Digital Ventures, the venture and incubation arm of The Boston Consulting Group, where he also supported the executive team as strategic program lead. As a lifelong millennial, Sam has tried to solve most of his problems through technology instead of waiting in line at a drab office.