1. Get help. The first sign of trouble is reckless spending and creeping debt.
“A red flag is when you don’t have control over your money,” says Aaron Smith, a registered investment adviser, or RIA, with A.W. Smith Financial Group Inc. in Glen Allen, Virginia. A financial planner can help you see and correct your errors.
“We often overlook the areas a professional scrutinizes. But they can undermine you,” says James Richardson, a certified financial planner with Ameriprise Financial Advisors in Raleigh, North Carolina. If foreclosure or bankruptcy is looming, see a credit counselor first. An attorney can also offer guidance and alternatives.
2. Develop a plan. Your plan must be more than a list—it should encourage behavioral change.
“Acting on a financial plan is what makes it living and effective,” says LaToya Parker, a certified financial planner with Infinity Financial L.L.C. in Atlanta. Include items that will prompt you to change bad habits.
“It can be as simple as not buying a daily cup of coffee,” says Parker.
3. Leave home without it. Credit is not meant to bridge the gap when you can’t meet your financial needs. Pursue a cash-only lifestyle until your debt is under control. Don’t charge any item you can’t pay off by the end of the month.
4. Add income. “If cutting back isn’t working, the only way to get a handle on debt is to earn more money. Sometimes people cut living expenses to the bone. At this point, you need to add additional sources of income,” says Parker.
5. Find a money mentor. Habits—whether good or bad—are learned. Find someone who is good with money and ask him or her to mentor you. Ask this person to be your “money mentor,” Smith suggests, by showing you how to develop and maintain good financial habits.