Have you ever been in a financial rut, where you feel like you can’t get ahead? Do you feel like your financial systems aren’t working? Well, you’re not alone.
Many of us find ourselves in a financial rut from time to time. It’s easy to get stuck, especially after complacency sets in. Old systems may no longer work for your current reality.
If you’re feeling stuck and looking for a way out of your financial rut, try these 5 tips.
1. Go On a Cash Detox
To completely overhaul your finances, go on a cash detox. For at least three months, put away the plastic and say no to credit cards.
While credit cards are convenient and nice for accruing rewards, they have a way of enticing you to spend more money. Parting with hard-earned cash has been proven to be more difficult — it’s also easier to track when you’re about to run out of cash.
Start by employing the envelope budgeting system, popularized by finance guru Dave Ramsey. List out your expenses and understanding how much you typically spend. Create an envelope for housing, groceries, transportation, etc. and fill the envelopes with the desired amount of cash.
Let’s say you allot $200 for groceries for a month. You’d withdraw $200 in cash from your bank account and deposit it into the envelope. Throughout the month, use the cash from this envelope to buy groceries. Once the cash is gone, it’s gone. This method can help you spend within your means and lessen the dependence on credit cards.
Credit cards can be addictive, so if you’re looking for a fresh start, a cash detox is the way to go. It will make you hyper aware of where you are spending your money and how often you are parting with it. If you have no money left in the envelopes by the 15th, you know you’re spending much more than you should.
2. Cut Out One Expense for a Month
Being in a financial rut can often arise from the status quo. Things have gotten stale and there’s a lack of progress. So if you want to jolt your finances and boost your savings, commit to cut out one recurring expense for a month.
Do you like to go out for daily coffees? Or go out to eat three times a week? Pick one expense and commit to cutting it for 30 days. This exercise will help in two ways: one, it will help you realize that you don’t need those extra expenses (even as hard as it may be), and secondly, you will save a ton of money.
From the money you save, put that extra money to debt or savings. If you feel inspired, challenge yourself once-a-month to cut out, or significantly cut back on, one expense.
3. Focus on Making More Money
Cutting back can be a great way to save money and get out of a financial rut. Unfortunately though, there are only so many areas you can cut back on, before you’ve reached your bare bones, necessities-only budget.
On the other side of the coin though is earning more. I personally believe that making money feels more empowering and can inspire action. Whenever I feel like I’m in a financial rut, I start looking for ways to make more money.
I’ve worked as a babysitter, pet sitter, house cleaner, writer, editor, and so much more. I like working extra gigs to help fund my debt payments and I always end up learning more or acquiring a new working relationship.
4. Figure Out Your Problem Areas
If you’re really feeling stuck, it’s imperative you figure out the problem areas and what exactly is causing this rut. Is it a stunted savings rate? A lack of income growth? A reliance on credit? Whatever the case may be, write down your problem areas and come up with a proposed solution.
The point is to try something different than what you’ve already been doing. A rut often occurs after we try the same thing, with little change in results.
Start going about things differently, in both the ways you save and spend. Consider automating your savings for maximum impact, and creating positive money habits like checking your account balances daily.
5. Start Dreaming (Big)
Being in a financial rut can feel frustrating and isolating — like you’re going around in circles. While following the above steps of cutting back, earning more, and changing your systems, will help you get out of a rut, it’s also important that you don’t stop dreaming.
Dream of what you want out of life — what you really want, not what your parents want, the Joneses want, etc. What you want! Maybe you want a house on a hill, or the opportunity to sail the Caribbean. Perhaps you long for days of working for yourself and not being chained to a desk.
Whatever your dream is, hold it close and start thinking about how you will get there. It may seem intimidating at first, but with every big action, there are small steps.
Create a map of small actions you can take every day to get you closer to your dreams. Don’t get sucked into the day-to-day needs that can blind you from your dreams, but stay focused. Dreaming big can help keep your priorities straight and remind you of the big picture.
These tips will help you get out of a financial rut and make the necessary changes to live the life you want.
What’s another way to get yourself out of a financial rut?
{ read the comments below or add one }
I hate articles like this that don’t even understand what “financial rut” means. Cut out credit cards? If you have a credit card, you’re not really in a rut yet. Mortgage? If you can afford to own a house, you’re not really in a rut yet. Eat out less often? Who can afford to eat out? Yeesh. Get real.
Try to determine where the majority of your monthly expenditure is going. See what areas of spending that you can cut back on, whether it is:
– Eating out less
– Reviewing your bills to determine if you can get better deals elsewhere
– If you have a mortgage, ensure that you have a competitive interest rate and try to lower your interest payments via an offset account.
I’d add tracking your spending. Many times there is an expense that is flying under the radar that when added up, makes a big difference to your bottom line. By tracking your expenses, you can see what this expense is and make changes.
Great article. Cash detox works best for me. My wife took my credit cards 4 months ago and now I don’t even miss them….forces me to think about each purchase thoroughly.
I like the side hustle thing. Go a month where everything you buy you use a coupon or must be on sale. Save non-coupon/sale items for next month. It makes you really look for the savings.
Great idea!
Thank you. A useful article.
You are welcome!