How can you improve your credit after a financial setback? Getting caught up can seem overwhelming, especially since having bad credit drives up your costs, which feels like being kicked while you’re down.
If you’re going through an economic hardship, improving your financial situation will take a combination of specific steps as well as big-picture thinking and life changes. But it is possible.
Fix your mindset
The first step on the path to financial recovery is one that few economists will mention; your belief system. Do you believe you’re doomed to fail, that you’ll never amount to anything, or that whenever something starts going well, disaster will probably strike? Human psychology is critical for success in relationships, careers, financial matters, and overall well-being.
Yet, beliefs are a choice: you can choose to believe in yourself, or you can choose to believe in other people’s low opinion of you. If you want to build a better life, it takes grit, determination, and an unshakable belief that you are worthy, you are capable, and you matter.
Plan your future
Do you want to go back to school or switch careers? Retire early? Purchase your first home? No matter what you do from this point forward, you need something to dream about when you reluctantly roll out of bed at 5:00 a.m. so that you can make that dream come true.
Once you have a dream, then you can calculate what it will take to get there. Keep in mind, if you have a big dream, you may need to start small and be creative to get things off the ground.
Leaving a company for a new job could mean higher wages, but depending on your industry and career, it could also make you look unstable. If you’ve switched jobs several times in the past year or two, understand that appearing unreliable on job applications eventually leads to lower earnings in the long run, so it’s important to be strategic.
If you are disengaged and disenfranchised at work, resolve to turn over a new leaf for 3-6 months. Bring your A-Game, show initiative, take on more responsibility and encourage your coworkers; essentially, “be the change you want to see”. Next, advocate for yourself and ask for a raise or promotion. If your situation doesn’t improve, then it may indeed be time to move on, but this isn’t a decision to make lightly.
Additionally, think about how you can take up a side-hustle. Many people make money dog-walking, baby-sitting, cleaning houses, detailing cars, mowing lawns, and more. Think about what can fit into your already busy schedule and capitalize on the daily routine you already perform.
We often believe we are already living on the bare minimum. But imagine cutting all your bills in half. Think a $50 phone bill is the bare minimum? Challenge yourself to find a $25 monthly plan instead. Challenge yourself to cut your utility bill in half. The overall message is “challenge yourself to do better” rather than insisting you can’t change your situation.
Set a time frame and a goal if it helps: cut your bills in half for 6 months so that you can save $500 for a set of tires instead of racking up credit card debt. Occasionally, you may need to outlay some money upfront to improve your long-term situation. When you contemplate something like a payday loan from Eastern Loans, make sure it will improve your overall economic situation.
Methodical debt reduction
Once you reduce your expenses and earn additional income, use that new-found money to pay off or pay down one outstanding debt (closing accounts can actually damage your credit score). After you pay that bill off, take all the extra money and start paying off your next bill.
You might choose the debt with the highest interest rate or monthly payment next ,but resolve to keep chipping away at your debt until you have disposable monthly income and money in savings. With a structured plan and determination, you can improve your credit and your financial situation, and make your best dreams (not your worst nightmares) come true.