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Credit and Financial Management in Crisis and Beyond

It’s no secret that 2020 has been a trying year for many of us – especially financially. Studies have shown that financial stress can bear one of the biggest burdens when it comes to our mental health and recovery from drug and alcohol addiction. Tackling your finances may seem intimidating at first but getting ahead of them and devising a plan is sure to help reduce stress and provide peace of mind. To learn how to better manage your finances, follow these helpful tips:  

  1. Take a Finance Inventory – The first step is to identify all your sources of income – every dollar that comes in. Income includes salary, benefits, child support, alimony or spousal support, etc.

  2. Track Expenditures – Expenses include mortgage or rent, car payment, insurance, and debts; even the smaller expenses such as your Netflix or Amazon Prime account. Tracking every single expense and understanding where your money goes each month is crucial for budgeting. If you’re in need of some budgeting tools, check out some of Microsoft’s templates or free apps such as Mint or PocketGuard.

  3. Devise a Plan and Stick to it – After you’ve taken a finance inventory, you will better be able to determine what you have left at the end of the month for everyday spending like that cup of coffee you occasionally grab on the way to work or lunch with friends. Set a plan to allow yourself to spend a predetermined amount of that leftover money each month and put the rest into savings. Remember, your savings is your safety net for any unexpected finances!

  4. Check Yourself – Do you have a habit of stopping for takeout on the way home from work instead of cooking? Or maybe when you’re stressed or overwhelmed you like to indulge in a little “retail therapy.” This is called impulse spending and not only is it important to monitor for your overall well-being, it is also important to monitor when sticking to a budget. Try to recognize what emotions trigger this impulse buying and devise a plan to prevent you from giving into it such as calling your sponsor or utilizing one of the many coping skills learned in treatment.

Another essential piece to regaining financial stability is your credit. Your credit score and credit health are the deciding factors for lenders, and essentially determine the risk or reward for loaning to you (the borrower). If you are looking to achieve good financial standing to secure your future and repair your credit, check out these tips below:

  1. Check Your Credit Report – There are three credit bureaus; Equifax, Experian, and TransUnion. These credit bureaus are required to provide you with a free credit report every year. However, if you would like to view your credit report more periodically, there are free services, such as Credit Karma that can help you do just that. On your credit report, you will be able to view your credit score and open accounts such as credit cards, student loans, auto loans, and collections.

  2. Dispute Errors – If you see any accounts on your credit report that you know in good conscience are not yours, report it to the credit reporting company in writing. You can find a sample dispute letter on the Federal Trade Commission’s website. Credit reporting companies are required to thoroughly examine these claims typically within 30 days upon receipt. The Consumer Financial Protection Bureau also provides plenty of information and how-to guides when it comes to reporting fraudulent activity.

  3. Check your Credit Utilization RateExperian suggests that it’s a good rule of thumb to keep your credit utilization to under 30%. For example, if your credit limit is $15,000, you’ll want to keep your balances below $4,500. If you are utilizing more than 30%, don’t fret – you can work towards paying down those balances.

  4. Pay Off Outstanding Balances – If you want to repair your credit quickly, it’s a good idea to pay off your accounts in collections in full with a one-time payment or by settling with the creditor for a lower payment. However, if this isn’t a financially sound option for you, try making manageable monthly payments on the accounts with the highest interest rates first to ensure you don’t accrue any further unnecessary debt.

  5. Ask for Help – The Consumer Data Industry Association (CIDA) issued a press release in response to COVID-19 stating there is guidance “available in the current situation to help consumers work with their banks and other creditors if they are impacted—directly or indirectly—by the virus.”  TransUnion suggests that those affected financially by the pandemic contact their lenders or creditors and ask if they offer hardship or forbearance plans. These plans may vary, but typically this is an ask for a payment deferral.

The most important things to remember when managing your credit and finances are to be easy on yourself, focus on the things you can control, and know that you are not alone. Don’t let an unfavorable financial situation get the best of you. Instead, learn to lean on those who understand, such as your recovery support community and the RCA Alumni Association.

If you would like to join our strong community of supportive, likeminded individuals, please email alumni@recoverycoa.com and a member of our Alumni Team can assist you in getting connected.

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