When have lots of debt you will suffer from mental health issues and there are no two ways about it. You will experience symptoms like depression and anxiety which will cause your debt situation to aggravate and become worse over time. In such situations you should focus on rebuilding your finances especially when you find your credit and health is being affected.
However, when it comes to rebuilding your finances it may seem like an uphill task to you. Yes, this is a process that will require a lot of things such as:
- A proper plan
- Due diligence
- Hard work and
However, all these efforts and sacrifices will prove to be worthy enough when you realize that you have come out of debt on your own without having to go through all those confusing and contradicting debt settlement reviewsand ratings to choose a suitable debt relief option for you.
- This will give you a sense of satisfaction and pride when you achieve your goal of living a debt free life and establishing financial independence.
- This will also have a number of positive effects on your mental as well as physical health enabling you to take more useful and effective decisions.
When you see that your finances and your debt are all on the right track it will make this challenge worth it.
Rebuilding your finance
There are a few specific steps and guidelines to follow when you want to rebuild your finances successfully and take control of your uncontrollable debts.
Taking mental health seriously:
It all starts with taking care of your mind. This is ideally one of the best things that you can do for yourself.
- This will set you off at the right course in your journey to rebuild your financial health.
- This will also make sure that you are not ignoring your mental health.
- This will also get you into a habit of finding out time for your mental health as a daily routine and talk to a doctor or see a therapist to know the best ways to treat your symptoms.
All this will make your journey more comfortable because it will be very difficult if not impossible, to address your financial issues when you are depressed or anxious.
Setting up a budget:
You may have come across this step in several articles and blogs that you may have read on finance and debt management. This is the most significant part of your journey and you should make it a point that you stick to it as well for a successful journey of handling your finances.
When it comes to budgeting the financial experts often advise that you stick to a 50-30-20 budget model while designing it. This goes like this:
- Half of your budget must be ideally allocated for your daily household necessities such as rent, groceries, utilities and other key bills.
- 30% should be allocated for ‘wants’ such as clothes shopping, weekend vacations or nights out with friends.
- The rest 20% of your budget must be set aside to meet your financial goals such as putting money away to create an emergency fund, paying your monthly bills to get out of debt, or setting up your retirement fund.
You may feel at this point, why is it necessary to allocate as high as 30% of your fund for your ‘wants’ while creating a budget given the fact that you are already experiencing financial hardships and mental stress due to your debts. Well, it is simply to deal with your mental stress.
According to research it is found that this 30% is often excluded when budgeting but this will actually help you to alleviate your mental stress. Spending quality time with friends and family as well as occasional pampering can prove to be good for your mental health.
However, it is important for you to understand that:
- You should craft your budget according to your lifestyle and
- Consider what will work best for you under the given financial conditions.
Remember, even a well-crafted budget is of no use if it is not feasible enough for you and you cannot stick to it month after month, since building your finances will take time and need your patience and diligence.
Rebuilding credit score:
This is the third important part of your journey towards building your finances when you are found to be struggling with your debt. Ideally, your credit score will bedamaged considerably in such situations. If you have a lower credit score it will either limit or nullify your eligibility to get a loan or even if you manage to get one it will fetch higher interest rates as well as less favorable terms. Apart from such serious effects on your future lines of credit, it will also affect your approval for a new card, apartment, small business loan or mortgage.
To ensure that you have your credit score improved you will have to make some changes in your habits and practices such as:
- Making sure that you pay your bills on time
- Paying more than the minimum amount whenever possible
- Automating payments alerts so that you do not have to juggle multiple due dates which is a hassle by itself
- Minimizing your debt as soon as possible by sticking to your strong budget
- Prioritizing your debts according to the rate of interest while getting out of it and
- Becoming an authorized user of any family member or friend having a good credit and wants you to be their authorized user to one of their longstanding credit card debt.
All these activities will appear on your credit reports and when these are added it will surely build your credit score. You will not have to use your credit card at random to make it happen either. Just make sure you are able to pay back whatever the monthly bill is on time each month by establishing an emergency fund. Once you have your debts under control, you will see your mental health improving.