Financial rock bottom is not an uncommon experience. Statistics have shown that one in every 399 people entered insolvency in the UK in 2022. The pandemic is a huge contributing factor that led to many people making rash financial decisions, and more importantly, losing their jobs. Some of you may feel as though you have hit financial rock bottom, but there are a large majority of people who only realise the repercussions of their financial mistakes when it is too late. There is an abundance of support for people who are facing financial dismay, but accepting the position you are in is the first step toward finding a resolution.
One thing that everyone who has reached financial rock bottom should keep in mind is that the only way is up. Essentially, if you are at the lowest of the low of your finances you should look at your cup half full, and see this as an opportunity for resolution and restoration of your life. Whilst the richest of people on the planet advise us common folk that money isn’t the key to happiness, it can be the key to living a comfortable life and living free from financial burdens. As mentioned, the only way is up, so if you are looking to restore the faith you have in yourself take a look at the following suggestions for building your finances back to where they need to be:
What is deemed as financial rock bottom
Financial rock bottom can be painted differently per each individual’s unique experiences. For some financial rock bottom might be the accumulation of thousands of pounds of debt, but for others, it can be more serious and might result in homelessness. Here are just a few examples of what financial rock bottom can look like for different individuals:
- Have debt repayments accumulating to more than your monthly expenses
- Are not working in a stable job or are currently not receiving any form of income
- Are struggling to pay for necessities such as rent and food
- Your credit score is at an all-time low
Your mental health is suffering as a result of your financial struggles
Steps you can take to pick yourself back up
Remind yourself there is hope
Feeling like you are at rock bottom is not pretty. It can affect not only the finances in your life, but this stress can manifest into something much more sinister that affects the relationships you have with others as well as yourself.
Although it might be the worst financial place you have been in, you have to keep hope. Hundreds of thousands of people have been in dire financial situations who successfully got themselves out and ended up in much better situations. The key to being in a better financial situation is to believe that you are capable of being in a better one. This is where positive thinking becomes so important. Keep the hope that you will be able to pull yourself out of the place you are in.
Look from an outsider’s perspective
Secondly, self-awareness is essential if you hope to acknowledge your mistakes and begin to take the appropriate action to become financially secure. Take a look at the actions that got you into the financial position you are currently in.
Did you take out a lot of credit? Did you make an uneducated investment and lose a lot of your money? Pretend you are an outsider judging the actions that have led to this situation.
Whilst some money-related problems may be the result of other people’s carelessness, you have to put your ego to the side and understand what you have done or neglected. Once you have an idea of the behaviours that have resulted in a poor financial decision, keep them in mind to avoid making these same decisions moving forwards.
Consider consolidating debts
This is a suggestion for individuals who have accumulated a large quality of debt across multiple accounts. Improving from rock bottom financially begins with consolidating all the problems, including debts. The weight of debt can be paralysing. So much so that people who have got themselves into the early stages of unmanageable debt seem to dig themselves deeper.
There is financial support and government operations that are designed to help people manage their debts and consulate them into one manageable payment. Take a look at the lump sum of what you have to pay, and slowly begin searching for your options for creating manageable payments. There is no shame in seeking help if things have taken a turn for the worst.
Prioritise repayments, saving, and building credit
At the height of importance when getting yourself back up when hitting financial rock bottom is starting to rebuild what you have lost. Of course, any sort of debt repayments should be prioritised, but you should also try to save and build your credit back up at the same time.
Building your credit back up will be a long process, but showing your lenders that you can make monthly payments on time is one of the fastest ways to get things up to scratch. Also, you should begin to accumulate a pot of savings.
As your savings begin to build back up this will become the foundation of the new and improved version of you who can responsibly handle either finance. It is recommended to have 6 months’ worth of savings in your bank account to be prepared for the worst-case scenario.
Understand that the process will be slow
Additionally, it is important to be patient in the process of building your finances back up to a secure place. It will be slow, and it may seem like a never-ending road of paying repayments, but as long as you stay consistent and refrain from any of the behaviours that got you into this position, you will be completely fine.
Find new income streams
Many of us suffer in jobs that offer little prosperity and growth, ultimately leading to little to no increases in income across long periods. If you are at rock bottom financially you should also be looking for a higher-paying role that can support you in improving your finances, whilst also covering your necessary expenses.
If you truly are at rock bottom you might consider getting a second job on top of your current role, or if you have a sellable skill that can be utilised online you might create a side hustle and generate multiple income streams. Some of the richest people in the world built what they now have as a result of hitting rock bottom. Consider what your skills are and also value the worth of your work appropriately.
Sell your non-necessities
When you are at the beginning of your financial struggles you need to drop the weight of what is holding you down. That means that any non-necessities that you are either paying for on finance or items you are holding onto that you do not need should be sold in one way or another. That would mean seeking the opportunity to end any credit agreements for these non-essentials such as cars, and also seeing if you can make any profit from items you own but have no need for like an engagement ring. These items may be initially hard to part ways with, but they will be a huge help when reducing the number of liabilities you hold, and making large sum repayments when possible.
Bottom line
Overall, the key to easing your way out of financial rock bottom is to first come to terms with the behaviours that got you into the current situation, and then be proactive in consolidating any debts, improving your savings, and also increasing your monthly income. You should consider getting creative when finding new sources of income, after all, we should all aim to be a part of the FIRE movement.