How to Get Back on Your Feet Financially

Financial setbacks can happen to anyone and, with a solid plan in place, anyone can bounce back. No matter what put you behind, making small changes can add up to big steps forward. With some time and commitment, you should be on your way to brighter days. Get started with these tips on how to get back on your feet financially.

1. Create new habits

Just as you can develop bad habits that stick, you can also reinforce good ones as you’re getting back on your feet financially. If you don’t typically pay your bills on time, set up calendar alerts and pay them the day they’re due (or earlier). If you don’t regularly check your credit, start checking it at least once a year. Spending money on takeout and restaurants? Plan your meals and eat at home. No matter how long you’ve been stuck in old patterns, it’s surprising how quickly you can develop new healthy financial habits (ones that will boost your budget and your morale).

2. Set your goals

A little planning can go a long way. Setting goals is a great place to start if you don’t know how to improve your financial situation. Maybe you want to save for your child's education, start a retirement account, get out of debt, or buy a home. Perhaps you just want to feel in control of your finances. Once you’ve defined what you want to achieve, you can make progress on getting what you really want. Don’t get sidetracked! It’s easy to get distracted from your goals if you don’t have a clear plan.

3. Get a snapshot of your current financial situation

When learning how to turn your finances around, you first need to know where you stand. Every 12 months, federal law allows you to get a free copy of your credit report from all three major credit reporting companies. If you find errors, you can get them corrected, which could improve your financial health. Plus, you can see how much you owe on all your accounts, so nothing slips through the cracks.

Now is also a good time to review your insurance, bank and credit card accounts, retirement plans and other items. Shop around to see if you're getting the best interest rates, lowest fees and widest range of benefits. Also, look at the beneficiaries on your bank and retirement accounts and make sure they're up to date.

4. Create a budget

The next step is making a budget — that’s your roadmap to getting back on your feet financially. Just tally up your monthly expenses (things like rent or mortgage, utilities, cable and cell phone service, credit card/loan payments, etc.), then subtract from your post-tax income. You’ll likely have some expenses that change every month, such as groceries, gas and utility bills. If you track these expenses over time, you may be able to predict an amount you can factor into your budget. Plan how you’ll use the difference between your income and your expenses, no matter how large or small, and be sure to set money aside (even if it’s just a little bit).

5. Cut down on spending

After you create a budget, you might realize you’re spending too much. If you’re wondering how to improve your financial situation, take a good look at your spending habits first. Can you join a less expensive gym? Do you have monthly subscription services you don’t use regularly? For instance, the average American spends $133 more a month than they realize on subscriptions.¹

6. Be a smart saver

While saving money can be tough, when your budget is tight, it's an important commitment for your financial future. Work on building an emergency fund, so you can pay your bills if you need to miss work for an extended time. When you have a safety net, you’re less likely to have a financial setback if something unexpected comes up. Saving is even easier if you set up automatic transfers to your savings account every time you get paid. This way, you put away the money before it goes into your easily accessible checking account.

You can also try “round-up” apps for saving money. They make saving so easy, you’ll barely even realize you’re doing it. Every time you make a debit card purchase—like a trip to the grocery store for $18.75—the app rounds up to the nearest dollar (25 cents in this case) and deposits the difference into your savings account.

7. Tackle your debt (and monthly payments)

Examine your outstanding debt. High-interest credit card debt is the best thing to tackle first when getting back on your feet financially. The snowball method and the avalanche method are the most common strategies used to pay off your credit cards for good.² You may also want to consider debt consolidation to help make paying down your debts easier and potentially more affordable. Don’t forget that, as you chip away at your debt, your monthly payments will eventually decrease, creating more wiggle room in your budget.

If you’re trying to recover from financial hardship, know you have what it takes to overcome it. When it comes to financial planning, small changes really can add up—and make an immediate difference. And you’ll be rewarded with the peace of mind that comes with getting your finances in order.

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This article has been updated from a previous posting on September 6, 2021. Maureen Rayburn contributed.

1. "Consumers spend $133 more monthly on subscriptions than they ...." 2 Jun. 2022, https://www.cnbc.com/2022/06/02/consumers-spend-133-more-monthly-on-subscriptions-than-they-realize.html. Accessed 30 Aug. 2022.
2. https://www.forbes.com/sites/robertberger/2017/07/20/debt-snowball-versus-debt-avalanche-what-the-academic-research-shows/#7d74a1861454