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How to reset your financial life

Our financial life doesn’t always follow our plans. Unexpected surprises can come at us from different angles, and they can keep coming, one after another. So, even when you thought you had a good financial plan, things can suddenly go off course.

This change might happen slowly, and you might not even know exactly what went wrong or how it happened. One day, you wake up and realize that your financial situation doesn’t look good, and you need to start fresh.

Does any of this sound familiar? No worries! Here’s how to reset your financial life and get back on the right path. 

1. Understand how much your life cost

Many people create a budget – but then forget about it, never making any changes.

While it’s possible to use the same budget for months or even years without problems, over time your expenses can change. This is likely happening now due to inflation making many things more expensive.

For instance, in May 2022, gas prices were about a dollar higher than in 2020, and food prices went up by 8.5% to 9.5% in 2022. These are just a couple of examples, as many everyday items have also become pricier.

Sometimes, we stick to what we used to pay for items, not realizing how much more we’re spending until we crunch the numbers. Or we might underestimate the increase. 

To reset your financial life, the first thing is to sit down and figure out how much your life costs today. The truth is, the budget you made last year or even just six months ago probably won’t work anymore. If you try to stick to those old numbers, you’re more likely to overspend and run out of money.

2. Reset your financial life by identifying your “pain points”

We all face specific financial challenges, and these issues might keep you awake at night or linger in the back of your mind.

These challenges vary from person to person. It might be credit card debt, debt collectors, or having nothing in savings. Sometimes, it’s easier to ignore these problems, especially if you don’t know what to do or if you feel overwhelmed.

However, ignoring these issues is one of the worst ways to handle them. Some problems don’t just go away on their own, so the longer you keep your head in the sand, the more stressful it becomes. The best approach is to be proactive. Focus on the problem, and then start researching and brainstorming solutions.

Even when there isn’t a quick fix, there’s something empowering about finding a way out of a tough situation. Sometimes, all you need is a plan to get back on track.

As you’re resetting your financial life, think about your biggest financial frustrations and then research the next steps. For example, if you feel your income isn’t sufficient or you’re stuck in a career rut and want to start a business, take the time to explore potential solutions.

Related: Learn how to improve your writing skills and earn $100 (or more) per hour as a freelance writer

3. Align money with your values

One way people veer off their financial track is by spending money on things that don’t truly matter to them.

Most of us don’t have endless resources, so staying financially secure often means being careful about how we spend. Sometimes, though, we fall into a pattern of spending on things we only “sort of” like or enjoy. This can include saying yes to invitations to places or events that don’t really interest us.

Now, this isn’t always a bad thing, but one important question to ask yourself is: do I often regret or second-guess these invitations or purchases? This question can help you figure out if you’re living your best financial life and if your spending brings value to your life.

Keep in mind that our money has limits. If you’re using most of it on things that don’t make you happy, you might end up feeling unsatisfied because you’re missing out on experiences that would truly bring you joy. Or you might overspend because you’re trying to have both – the things that make you happy and the things that don’t.

To break this cycle and reset your financial life, think about and jot down the things you truly value, and then create a budget that matches these values. For instance, if you enjoy watching movies but dislike going to the theater, you could stream movies from home and invite friends to share the cost instead of buying tickets and snacks at the cinema.

4. Save with a purpose to reset your financial life

As time goes on, your saving plan might get off course. You could go from saving money regularly to not saving at all.

Various reasons can cause this change. Shifts in your income and expenses may make it harder to save. However, even if you can’t save as much as you used to, it’s crucial to keep saving a priority. So, part of your financial reset should involve getting back into a regular saving routine.

There are several ways to achieve this. One key step is to ensure you have a specific purpose for your savings. Saving money just for the sake of it might not be motivating enough for some people. They need a clear savings goal in mind.

So, if you’ve fallen off track and need to reset your financial life, consider making this week the one where you restart your savings journey and give yourself a meaningful reason to save. This reason could be needing a long-overdue vacation, wanting to break the paycheck to paycheck cycle, or gaining more financial confidence.

5. Take control of spending

During a financial reset, regaining control over your spending is essential. Overspending alone can lead to financial difficulties, making it challenging to pay bills on time, resulting in credit card debt, and preventing savings.

For this step, I recommend trying a no-spend challenge, like a 30-day period where you only spend money on necessities.

This challenge offers several benefits: firstly, it helps you save money, which you can then use to grow your savings. Moreover, a no-spend month can highlight any harmful spending habits, enhance your financial awareness, and teach you to be more resourceful.

Some people believe they don’t have enough money to save, yet a no-spend month can reveal how much you’re currently spending on non-essential items. This realization can explain why it often feels like there’s never enough money.