Do you have to juggle which bills you can afford to pay each month? Maybe bill collectors are leaving daily messages or calling you at work. Or maybe you never have enough left from your paycheck to set aside savings for emergencies or retirement.
If that sounds like your current situation — or maybe even most of your adult life — you don’t have to resign yourself to a lifetime of debt and financial stress.
Plenty of people with money troubles dig themselves out of debt, improve their credit, and learn to manage money better so they can stay out of debt and build savings.
Time is on your side
Did you know that negative credit accounts automatically drop off your credit report after seven years? Even bankruptcy drops off after seven to 10 years, depending on the type filed.
Meanwhile, you can find ways now to become more financially stable and pay your bills on time so that your credit steadily gets better and then improves a lot once those old, haunting accounts drop from your credit report.
Seven years may sound like a long time. But that time will pass whether you spend it living with the stress of financial struggles or gradually improving your money management skills so you can become more financially stable.
6 steps to become more financially stable
1. Review your credit report
Before you can plan to improve financial stability, you need to know where your credit stands. Order a free copy of your credit report at AnnualCreditReport.com. Once you have a copy, review the report, looking for negative payment history accounts so you’ll know when each one will drop from the report.
Also, check for any inaccurate information that could be hurting your credit and contact the creditor and the credit bureau to dispute the information and have it removed.
2. Meet with a credit counselor
Whether you’re deep in debt or see you’re headed for financial trouble, meeting with a nonprofit credit counselor can get you on track to become more financially stable.
A credit counselor can help you create a budget and debt payoff plan. The counselor can also tell you what’s holding you back on your credit report and how to improve your credit.
3. Stick to a budget
Create a monthly budget with the help of a credit counselor or a friend or family member who’s good with money. You can also create one with a budgeting app like Mint or You Need a Budget (YNAB). Once you lay everything out, you’ll see where you can cut expenses and where you’re consistently overspending.
To keep credit card spending in check, try setting aside cash for expenses like groceries, toiletries, your daily coffee run, and other expenses. That way, you won’t be tempted to overspend and run up that credit card balance you’re trying to pay off.
Then commit to sticking to your budget each month, adjusting it when necessary as you evaluate your finances each month.
Find out: How to Build a Budget and Stick to it
4. Build savings
If you don’t have a savings account, scrape together $100, or even $25 if the bank allows, and open an account. Then add to it consistently, even if you can afford only a small amount at first. To make saving as painless as possible, have your employer deduct an amount from each paycheck and deposit it directly to your savings account.
Set your first savings goal low, maybe $500 or $1,000. Then add to it with each paycheck. Soon, you’ll have enough to cover small emergencies so you don’t have to charge them on a credit card. Eventually, you’ll save enough to cover large emergency expenses, too.
Find out: 6 Painless Ways to Build Savings
5. Educate yourself
Make it a daily habit to search online for articles about budgeting, paying off debt, or managing personal finances. You’ll be surprised at the great advice out there that can help you manage your finances to become more financially stable.
6. Set financial goals
When you’re struggling to just get by, financial goals may seem like just a distant dream. But once you become more financially stable, that obstacle will no longer be the case.
You’ll believe in yourself and your money management skills enough to set milestone goals such as buying a house, having kids, traveling, and other ways to make your life happier and more fulfilling.