3 Easy Ways to Get Back on Track Financially...
and how to avoid messing up in the future

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Every personal finance book or expert will more often then not lay out a concise and easy to follow plan to achieve your financial goals. This plan will consist of fairly easy to follow (in theory) steps that can be applied to most people in your situation. Similar to a weightless plan, your success is dependent on whether or not you follow those steps as prescribed. However, life happens and sometimes we “fall off the wagon”. Perhaps you incurred an unexpected medical bill or maybe you were unfortunately caught up in the massive layoffs as a result of the pandemic. Or maybe, you just lost focus and discipline along the way. Whatever your reason, we have three easy ways to help you get back on track financially.

How Do I Know It’s Time to Reset?

You may think this is a fairly easy question to answer. After all, a simple check in to your bank account or investments should be the tell tale sign that something isn’t right. However, for a lot of us, derailing our plan may have occurred in small steps along the way without us even noticing. For example, my husband and I share a joint back account for everyday expenses such as utilities, insurance, groceries, etc. A few months ago I was wondering why we were constantly running low in this account. With the help of our online banking tool that conveniently bucketed our expenses into all the basic categories, I realized that we were spending upwards of $1400 a month on dining out and groceries. I was so taken back by the amount I actually thought it was a mistake. Unfortunately there was no mistake. My husband and I had completely let go of our budgeting and allowed ourselves a few months of indulging and paid the price. However, because this happened over the course of a few months, we weren’t able to spot the difference immediately.

Sometimes a derailment in our plan doesn’t come out of bad habits but out of the unexpected. For example, as I noted earlier, maybe you were hit with a major medical bill. This unexpected bill may require you to pause on investments or savings and prioritize this payment to avoid the dreaded debt collectors.

Being able to recognize when to hit the reset button on your finances may not be as intuitive as you think. It may in fact require a little digging. Additionally, it requires sheer and blunt honesty with your partner (if you’re in this together) and more importantly, yourself.

Getting Back on Track Financially Step 1: Committ

Committing to change is the first step to hitting reset on your finances and getting back on track. Too often I see people ignore their bad spending habits. Unfortunately when it comes to personal finance, ignorance is not bliss. While your missteps may not hurt you today, in the long run they will become a great burden. Make a solid committment to changing and hold yourself accountable.

Getting Back on Track Financially Step 2: Don't Over-Correct

One major mistake people make whether in budgeting, gambling, or dieting, is that they tend to over correct. Gamblers for example will take on additional risk after losing in the hopes of recouping their lost funds. People struggling to lose weight will crash diet after binging. This behavior is destructive and counter productive. In the case of your finances, don’t fall victim to the same vice. If you’ve over spent on budget in the past, attempting to live like a hermit will last all of a few days until you realize it’s not sustainable. If your lifestyle has changed, take that into consideration when hitting reset on your finances. For example, if you know you live a super busy lifestyle and will probably end up ordering in more than before, take that into consideration when creating a budget. However, in cases like this be aware of lifestyle inflation or lifestyle creep.

Getting Back on Track Financially Step 3: Set a new standard for yourself

You may be a little confused here. Didn’t I just tell you to not over-correct? Setting a new standard for yourself is not over-correcting, but deciding what is worth your spend and what’s not. After my husband and I hit the reset on our finances, we decided to hold a higher standard for dining out. We no longer went to the local restaurants because they were convenient, but decided instead to only dine out when we know it served us. Setting a standard will help you re-evaluate how you spend. Maybe that $5 coffee every morning is what makes your day but you can deal without the subpar $15 sub for lunch.

How Can I Avoid Slipping Up In the Future?

Truth be told, you will likely experience a slip up in the future. We are all human and mistakes and missteps are a natural part of life. To help minimize this I suggest the following three tips:

Expect the Expected: I learned this not too long ago at a training seminar on mindfulness. It is likely that you will not run your financial life perfectly so be kind to yourself when mistakes happen.
Pay Yourself First: If you’ve spent some time in the personal finance world you have likely come across this phrase quite a bit. In this case, I like to pay into my 401k and investments first before I start spending on other non-essentials. With these automatic deductions I can rest assured knowing I won’t miss a payment and without seeing the money in my account first hand, I don’t even miss it. Please bear in mind, you should not be paying into retirement funds or investment accounts if you can’t pay the rent, food, utilities, or transportation. Keeping yourself sheltered and fed (with the lights on) is top priority.
Check In With Yourself: The example I noted about my husband and I is a perfect example as to why checking in is important. Create and schedule regular updates with yourself (and your partner if need be) to review your financial situation. Personally I recommend monthly for everyday budgeting and quarterly for bigger investments*. These check-ins should take no more than a few minutes and are just there to make sure you’re on track. If you’re tracking your finances with a partner, I recommend downloading our FREE couples financial worksheet to help navigate tough conversations.

*These are just general recommendations and should be tailored to fit your budgeting/investment needs.