Your bills are too damn high, your income sucks and debt traps are everywhere. Mastering your finances isn't easy, but here's the thing: if you actually want to improve your financial situation, focusing on these injustices, even though they're real, won't help. Taking control, on the other hand, can help more than you probably realise.
llustration by Nick Criscuolo.
No one's making excuses for loans designed to keep you in debt, banks that hope you're too busy or apathetic to read the fine print and lenders that trick you into taking on more than you can afford. These are awful practices. But there's only so much you can do about them, and giving into helplessness is exactly what those entities want.
Control is a huge part of financial freedom. If you don't feel in control of your situation, you're at the mercy of a screwed up system. There are a number of ways you can put yourself in control even if your situation seems bleak.
Focus on Solutions
It's easy to get overwhelmed by the problems that make you feel financially helpless. Things like:
- Not being able to pay your credit card minimum
- Dealing with an emergency you can't afford
- Barely being able to afford groceries because your other bills are so high
These problems can bring you to your knees. If you want things to change, you can't get wrapped up in the things you can't control. Focus on what you can do instead. Find solutions, even if those solutions are outside the box. For example, you might consider:
- Calling your credit card or utility company and asking for a hardship payment plan
- Building an emergency fund by selling stuff you don't need
- Building and sticking to a budget-friendly meal plan
Are these one size fits all solutions for everyone? Hell no. You might not have time to plan your meals. You might not have junk to sell. Maybe your creditor denied your hardship. When I was struggling to pay off my debt, my mum told me the story of a friend who sold her car to pay hers off. I immediately got defensive, because selling my car was not an option. Instead of focusing on her point, I was still focused on what wasn't possible, which is not a good mindset for making positive change.
The point is: look for what does work instead of focusing on what doesn't. Try lots of things. There's no guarantee you'll find a solution, but the more you try, the more you'll be in a position to find one. If it helps, think of it as fighting back against a system that profits from your failure.
Come Up With a Plan
Nothing will make you feel more in control than coming up with a solid plan. Even if you're just chipping away the tiniest amount of your massive debt, a plan helps you feel like you're calling the shots and taming the beast. And the good news is, there are easy-to-follow instructions for just about every financial plan you might need. Here are a few:
- A step-by-step guide to getting out of debt
- How to break the paycheck to paycheck cycle
- How to build a budget when you're broke
- How to create a debt payoff plan
Whenever we write these guides, we usually add a disclaimer: your own situation might vary, so plan accordingly. That's a pretty broad statement, but it's a necessary one, and it supports the point that getting your shit together has everything to do with control. Ultimately, you have to come up with a plan that works for you, even if that means bucking some of these rules.
Your plan should be realistic. Don't try to come up with a plan that's too difficult to follow, or you risk setting yourself up for failure. For example, don't try to break the paycheck to paycheck cycle by only budgeting $30 for groceries each week, telling yourself you'll survive on beans and instant noodles. That's unrealistic, and you're likely to fail. When your plan gets the best of you, you go right back to feeling out of control. Your best bet is to take it slow and steady. It's better to have total control over a plan that gets you out of debt in a decade than go off the rails trying to do it in two.
Master Your Willpower
Taming your finances is a balancing act of being realistic with your money and striving to reach your goals. Either way, willpower is a must.
Even if you don't blow a ton of cash on fun stuff like games or booze or clothes, willpower still has a place. You need willpower to stick to the budget you created. You need willpower to use the $50 you got for Christmas to pay off debt. You need it to fend off distracting advertising that tempts you to overspend. It's essential to tap into your willpower so you can use it to your advantage. For one, that means acknowledging that you have a limited supply of it. As the New York Times puts it, willpower is "somewhat like a muscle in that it can get fatigued if overused."
You want to keep that muscle healthy and strong. When I was paying off my student loan, for example, I overestimated my willpower in a big way. I told myself I'd never do anything fun, ever, and I'd use 100% of my discretionary income to pay my debt principal. Of course, I only have so much willpower. Eventually, I stretched it to the max, destroying my plan. Once it was destroyed, I gave up, went right back to overspending, and I had to start from scratch.
Giving myself some breathing room would have been better for my willpower. For example, our own Eric Ravenscraft explained how allowing himself the occasional indulgence, even it was just a gas station hot dog, helped keep him sane and protect his own willpower.
To master your willpower, assess it periodically. Every now and then, check in on your progress to your money goal. Review your spending on your bank statements. Look at your debt payoff progress. By assessing how well you've done with your self control, you can recalibrate. If you're failing, you can pinpoint where you failed and adjust your financial plan accordingly.
You can make this easier by setting specific goals for yourself. Researcher Kathleen Vohs tells the New York Times:
"'If or when I do this, then I will do that...For example, 'When I am done with work, I will go to the gym,' works much better than 'I should go to the gym.' Or, 'If I am offered dessert, I will ask for a cup of coffee instead.' "
Rewarding yourself when you pay off $1000 worth of debt is another specific goal. Or depositing cash into your savings account anytime you give into a spending temptation.
Like a muscle, you can also build and strengthen your willpower. Try building a completely unrelated small habit like emptying the dishwasher every night or saying "yes" instead of "yeah." It sounds crazy, but building that discipline can help you feel stronger.
Stay in the Driver's Seat
Put yourself in a position of control, and stay there. Ever since screwing up my debt payoff goal, I've asked myself this question when making tough financial decisions: will this decision make me feel more or less in control?
When I was in debt, I wanted to throw more money at my loan, but that meant spreading myself thin, which put me in a vulnerable position. That decision might have made financial sense on paper, but it made me feel less in control, so it was a bad one for me. I blew my budget, racked up late payment fees and overdraft fees.
Another example is using all of your money to buy a house, and then finding yourself unable to pay for anything else. The common term for this is being "house poor," and it basically means your finances are stretched super thin because you spent everything on your home and have nothing left over. Owning a home is great, but not if you can't pay your bills.
When you give up control in your financial decisions, you make yourself vulnerable to traps like debt consolidation. Those financial services thrive on making sure you're at their mercy, and they do this by offering a "solution" when you're desperate. Asking, will this decision make me feel more or less in control? can help you avoid making desperate, vulnerable decisions.
In short, staying in the proverbial driver's seat means trying to stay ahead of potential pitfalls. Those pitfalls make you feel helpless and put a strain on your willpower. When you feel helpless, powerless, and desperate, you usually don't make the best financial decisions. You're not in the driver's seat, so you're not able to steer your finances in the direction you want.
Make Your Own Decisions
Make decisions based on your own values, not someone else's. It's easy to make assumptions about people based on their job, age group, or income. Freelance writers are supposed to be poor. Artists are supposed to be starving. Young people are supposed to live hand to mouth. Those generalizations might ring true, but you don't have to live up to those assumptions; you can try to work past them. Your friends might all be broke and assume, because you have a low-paying job, you're broke, too. I once had a good friend who worked full time at Starbucks, and I assumed, like me, he was a typical broke twenty-something. I was pretty surprised when I learned he'd built up a decent nest egg by scrimping, saving, and taking on side jobs.
Don't pay attention to financial shame, either. And there's quite a bit of it going around. Millennials are moochers for moving back in with parents. Baby Boomers screwed themselves by not saving for retirement. Not only are these insulting generalizations, they're not helpful at all. People will say you're taking the easy way out. They will say you're cheap for skipping lattes. They will make fun of you for moving back in with your parents. It doesn't matter. What matters is that you put yourself in a position of control and stay there. The most important money rules never change, and the critics might have a point, but ultimately, you have to do what works for you.
A lot of us are broke these days. There's no easy solution for fixing the social and structural problems that drag people down. No one's handing out money or "get out of debt free" cards. The best way to fight back though, is to take control as much as you can and steer your own financial ship. Even if slow and steady, you'll accomplish more by feeling in control than you will feeling at the mercy of an imperfect system.