Managing Finances in Recovery

As you work through recovery in your sober living home, you likely have a lot of responsibilities to manage. Dealing with your adulthood responsibilities and maintaining sobriety can be a lot all at once. You may struggle with managing your finances. Financial management is not typically an easy task, but there are some techniques you can use to help ease the stress of this responsibility.

What Is Financial Management?

Financial management is the act of gaining knowledge regarding your financial situation and applying skills to plan where your assets are going. The ultimate goal of financial management is to make the most out of the assets you have.

To do this effectively, you may need some basic knowledge of how to navigate this process. By reviewing the following tips for financial management, you can create a successful plan to take accountability for your finances and develop a sense of financial independence in recovery.

Budgeting

You may not look deeply at each of your monthly expenses. It can be easy to engage in mindless purchases that you quickly forget. Creating a budget tracking spreadsheet is a great resource to help you manage your finances and stay on top of your spending habits. This can be used with a Google Sheet or Excel spreadsheet or can be written in a notebook. No matter what resources you have available, budgeting can be accomplished.

When you create your budget spreadsheet, evaluate each expense you have made in the last month. Doing this every month is recommended, as it doesn’t take up a great deal of your time but still allows you to get a full picture of your spending habits. Moving forward, try to purchase everything you can on a card. This allows room for easy access to look back on your expenses and track your spending habits.

Try to separate each expense into categories such as rent and utility costs, internet, insurance expenses, transportation or gas, entertainment, eating out, groceries, etc. After a month or two of tracking these expenses, you can set spending goals for each category. Doing this can help you set an expectation for how much you should spend each month based on your current income level. You may need to adjust these goals as your financial situation changes, but implementing a starting point is a great way to start the habit of budgeting.

Credit Card Management

You may have a credit card, debit card, or cash that you regularly use to purchase items. If you do not currently have a credit card, getting one can help build your credit score. A credit card requires you to pay off the balance of your expenses by the end of each month.

If you do not pay off your credit card debt, you often have to pay interest on the balance. While having a credit card does require responsibility to manage, it is a great way to get used to paying your bills on time and build up your credit score.

In the future, when you seek to rent a place, purchase a house, or acquire a loan, having a credit score is essential. Building up your credit score can be done by purchasing items on a credit card and paying your bills on time. There are many cards that provide rewards for specific purchases. For example, some cards may give you discounts for purchasing gas.

Using specific cards for these intended purchases can help you make the most of your credit cards. While you can obtain several credit cards, it is important to ensure you only get cards that you can effectively manage. If you struggle to remember to pay your monthly statement, start with one credit card. Set your bills to automatically pay on a certain date each month to avoid late fees or accumulating interest.

Get Out of Debt

You may not have acquired any debt. If so, that is great news. If you have some form of debt, there is no need to stress. Most individuals acquire debt at some point in their lives. While you may have student loans, mortgage payments, or other large forms of debt that cannot be paid off immediately, make a list of all the debts you have acquired.

Any smaller forms of debt such as credit card payments, or the money you owe a friend or family member, should be paid off as soon as possible. Create a payment plan to help get yourself out of debt. Add these expenses into your monthly budget to ensure a part of your income is going towards paying off your debt each month. This is a great way to reduce the money you owe without causing a high amount of external stress.

Create a Savings Plan

Accumulating savings throughout your life is crucial. Many individuals in the United States live paycheck to paycheck. If an emergency arises, there is no way to provide for these unexpected expenses. This may take time to accumulate a savings account; however, adding this category to your budget and contributing money to your savings every month can help it slowly grow over time.

When managing your finances, it is important to plan for the worst. You never know when a hospital bill, car maintenance, or any other unexpected bill may arise. Having some backup money to put towards these expenses can help to eliminate the stress of these occurrences when they happen.

As much as we wish to never be in this situation, it is best to prepare for the worst. There are automatic transfers that can be set up within your bank account to help ensure you are adding money to your savings each month. Having a savings plan and eliminating the potential stress from unexpected expenses can benefit your recovery as well.

You may feel the desire to relapse and use substances again to cope with moments of high stress. Being set up for these occurrences can push you one step ahead and alleviate the potential of relapse occurring. Financial management and recovery often do not seem to correlate, but being financially responsible can better your chances of success in recovery.

Look at Your Work Benefits

Depending on your employment situation, you may have benefits that can help you with your financial situation. Many jobs support their employees through more than just a paycheck. You may be eligible to receive discounted insurance rates to cut costs down on medical expenses. You may also have the option to enroll in a 401k retirement plan.

A 401k gives you the option to invest money into a retirement savings account. Your employer may match up to a certain amount of funds that you contribute.  This means that whatever funds you contribute have the potential to double. This is a great resource to take advantage of. While it may feel like a large amount to give up at the moment, it can drastically help to set you up for financial success in the future.

Investments

Investing your money is a great way to prepare for future expenses. Investments can be made through various methods. When you choose to invest in the stock market, or in invest in a business, you are also choosing to invest in yourself.

In the recovery journey, all of the work you are doing is to set yourself up for success. By starting an investment, you are doing the same for yourself in the long run. Investments can help ensure you have the proper means to live your desired life later on.

The key to investing is to start small. It can be easy to get excited about the potential growth with different investment opportunities, but there is often a risk of losing money. Starting small allows you to learn from your mistakes at the beginning and develop an effective way of investing that works for you. You may lose money initially when choosing to invest. Mentally preparing for this possibility can keep you from pouring your emotions into your investments.

It is also highly recommended to diversify your investments. If you choose to put all of your money into one place and something goes wrong, you may lose everything. Dividing up your investments allows you to have setbacks with some and success with others, drastically increasing your chances for your investment to be worthwhile. When it comes to investments, knowledge is power. Research the companies you choose to invest in and seek help from others with experience in investing to find the best resources to invest in.

Think About Your Future

It is important to consider your future when managing your finances. Many aspects of financial management seem strenuous in early recovery. Putting money into savings or retirement funds and paying off debt may take away from money that is available for entertainment and other enjoyable things.

Doing this now can help ensure that you have the funds to enjoy your life in the future. Using all of your funds for enjoyment purposes can lead you to live on a paycheck-to-paycheck basis for the majority of your life.

If you wish to have kids or a family in the future, the need for saving is vital. To support those around you, you have to be able to support yourself. You may have to give up minor forms of enjoyment to ensure you are set for the future ahead of you. This does not mean that you can never spend money on anything fun for yourself. It just means that you have to be mindful of your spending habits.

Financial freedom can positively impact your long-term sobriety. Avoiding the stress of paying multiple debts means that this stress won’t contribute to problems that could lead to a relapse.

Try setting a goal for how much debt to pay off or money to save. Once you reach that goal, reward yourself with something that you have put off purchasing. Just be sure to add this expense to your overall financial management plan. Acquiring these skills can help build your independence in sober living and set yourself up for success to move forward.

Managing your finances on top of recovery can be a difficult task. Using these tips, you can help establish financial management skills and be on top of your finances moving forward. By creating a budget, managing credit card expenses, building your credit score, getting out of debt, creating a savings plan, utilizing your employment benefits, and thinking about your future, you can become responsible for your finances. Reaching a point of financial stability may take years to achieve. It is important to be patient with each of these techniques and think about the benefit each will provide to your future. To learn more about managing your finances in recovery, reach out to Real Recovery Sober Living at (727) 290-9156.