The 1st Step to Financial Independence After Recovery

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Okay, if you are someone in recovery and are trying to get your financial ducks in a row, this post is for you. I have an awesome guest post to share that is near and dear to my heart. How does one even get on the path to financial independence after recovery? My first words of wisdom are to not think this too lofty of a goal…wherever you are at in life. I’m doing it. You can too.

Adam breaks it down in a very systematic way. Those of us in recovery, like to work on things in steps and IMHO that is the best way to work on our finances.

Adam reached out to me because it seems we have some things in common. I’m really excited to introduce him to you. Here is a little biography and then we’ll get right to it…

Bio: Adam Durnham is a freelance blogger that writes primarily about mental health and wellness, addiction, and recovery. He currently lives (and can often be found running) in Detroit. You can find much of his work on Sunshine Behavioral Health

The 1st Step to Financial Independence After Recovery

Addiction is a problem that turns every aspect of a person’s life upside down. This includes finances since drug and alcohol use costs money. It also jeopardizes relationships with family, friends, co-workers, and employers.

Getting your finances in order after recovery may be a slow and frustrating process, but it’s necessary to ensure your life in recovery is not only healthy but fulfilling.

Goal Setting

The first step to financial independence after recovery is to know you’re not the only person who has made financial mistakes. Then, set one financial goal at a time. Often when people set goals, they create broad goals for themselves. These usually end up being unrealistic and unmet. For instance, when asked, “What’s your financial goal?” Most people say, “I want to save.”

Saving money requires a lot of different actions: Do you want to save money just for the sake of it? Are you saving to go on a trip? Or are you saving to buy something special? There are goals that need financial momentum such as putting some cash aside to rent an apartment, so you can find a place to stay after leaving a drug rehab center or sober living. The most important thing you need to do is set reasonable goals, one at a time.

What other steps will ensure you attain financial freedom after recovery?

Find Employment

Getting back into the workforce, especially if your resume has a gap as a result of time out of work because of addiction, is a great starting point. Begin your job hunt based on things you enjoy doing. After a tough recovery journey, a job you love will encourage you to work hard and overlook its less appealing side.

Remember, there are three factors that affect your job choice

1. Reasonable Expectations

Your work environment or job shouldn’t be stressful; otherwise, it will affect your long-term sobriety.

2. Growth Opportunities

Your long-term recovery journey requires a less demanding lifestyle. As such, if the pressure at work becomes too much, you’ll need to take a step back and only take on work you’re able to handle. At the same time, a job that allows you to advance your skills without having to move from one job to another is great. This is because it will save you from the stress of having to look for another job in the future.

3. A Regular Routine

A lot of people who’ve recovered from addiction find a structured work environment makes their lives easier and more manageable.

Save

Whether you’re saving for a rainy day or to cover any unexpected costs, at least 20% of your income ought to be set aside every month. This may prove difficult initially because you might make less than you once did before your addiction. However, any progress, no matter how small, is good progress.

Having automatic funds transfer into your savings account can really help in making sure you save every month.

Stick to Your Budget

One effective way of sticking to your budget is to create a workable one. Major expenses like rent, food, and utilities should be at the top of the list. Ensure you set aside part of your income for saving as well as other discretionary purchases.

Financial experts advise you use the 50-30-20 method for your budget. This method states that 50% of your income should be set aside for necessities which include rent, food, and utilities. The next 30% goes to your wants like shopping for clothes and shoes, weekend getaways, and dining out. Finally, 20% should be directed towards attaining your financial goals such as saving for retirement, paying off debts, and setting up your emergency fund.

In the beginning, you may have to use part of the 30% to pay off larger bills and debts. That said, you have to set aside money and time every month to work on your well-being, mental health, and social life. Your mental health, overall well-being, and not forgetting rebuilding relationships are all extremely important in your sobriety journey. As you improve financially, you can adjust your budget accordingly to fit your needs and lifestyle.

Rebuild Your Credit Score

Bad credit brings a host of problems such as securing an apartment or difficulty getting your loans approved. If what damaged your credit was an addiction, then rebuilding your credit score should be one of your financial priorities.

Rebuilding your credit is extremely important. Your credit score may determine whether you qualify to rent an apartment. It helps lenders evaluate whether you can be trusted to make repayments on time. Your credit score also determines how much interest you’ll pay. A number of credit reporting agencies assign credit scores based on:

Credit mix

Managing a combination of credit lines and installment loans can give you a higher credit rating as it’s an indication that you’re responsible with several debts.

Payment history

Always ensuring your bills are paid on time is a crucial component of any credit score. Meeting your financial obligations consistently is a sign that you’ll continue doing the same in the future.

Credit history

Using your credit responsibly over a considerable period gives you a higher credit score.

Credit utilization

Outstanding bills on multiple cards brings down your credit score. If your credit lines are drawn to their limits, it could be an indication that you don’t handle your debts responsibly.

New credit

Opening a number of credit lines at a go may be seen as a sign that you are in financial trouble. This can interfere with your credit score.

So, how can you rebuild your credit after recovery?

There are three main things that will help improve your credit score:

  1. Make sure whatever you’re earning can cover what you spend
  2. Don’t apply for credit cards or loans you don’t need
  3. Reduce your debts

Rebuilding your credit score will take time. But there are a number of ways to improve your score including:

Automate Payments

Ensure you maintain a good credit score by making timely payments. Setting up an automatic funds transfer will help you avoid unnecessary slip-ups.

Start by Paying Down Cards with High Utilization

Your priority should be paying down the cards with higher balances compared to their limits, especially if they are almost maxed out. This is because individual and overall card utilization affect your credit score.

All in all, you have to make a budget and then stick to it. If you have outstanding debts, your budget has to include how to pay them off.

Photo by sydney Rae on Unsplash

Closing Thoughts

Okay, Deanna here again. I love how Adam tied in ways to work on your finances while keeping your recovery in the forefront. When I first got sober, I did some minimal things to improve my financial situation and then focused hard on my recovery. It was about 4 years into recovery when I really became ready to focus hard on my fiances and pay off mountains of debt. 

As Adam said, getting your finances in order may be slow and frustrating (at times) but it is a key ingredient to a healthy and fulfilling recovery. Amen!

Adam had some great things to say about finding employment in new sobriety. He said your job environment shouldn’t be stressful so to not affect your sobriety. I actually have some disagreement with this. Sure, you don’t want to choose an extremely stressful job, but I also believe it’s in the challenges where we learn our best lessons. Additionally, most jobs involve some type of stress. However, to Adam’s point when our sobriety is new, we need to set ourselves up for success and sometimes that means we need to ease into things (i.e. part-time work that has the option to turn full time).

Having a routine is huge. Furthermore, saving, budgeting and building up your credit are going to be the first steps in gaining control of your finances. Don’t forget to have an accountability partner on your finances!!

Thank you, Adam, for your thoughtful post!

Alright, it’s your turn. What are your thoughts, questions and/or concerns?

P.S. I’m on the What’s Up Next Podcast today with two awesome hosts & three other amazing ladies to answer the question is financial independence different for women? You can listen to that episode here.

 

 

 

6 thoughts on “The 1st Step to Financial Independence After Recovery”

  1. This applies to so many mental health issues people can face. I wasn’t an adult when I went in and out of treatment, but I can imagine this information would have helped so many of the people I met. Routine and self-efficacy in work while re-establishing a social network is huge. It’s so easy for people to start to view the hospital as a safe place (or a social network) where they don’t have to face larger questions (making relapse a sadly welcomed fate). Thanks to Adam and to you for putting this together.

    Can’t wait to listen to the Doc G Podcast btw!

  2. Wonderful post and wonderful side comments. Thank you Adam and Deanna. I cringed a little when Adam wrote to stay clear of stressful jobs. What job isn’t stressful and sucky? But there are jobs that are less stressful and sucky than other jobs. And like Deanna pointed out, a part-time job is a great way to easy into the trials and tribulations of employment. Also, I never was aware that individual credit card utilization hurt your credit score. I thought your credit score was based on the utilization of all your credit cards combined. Whoo-whoo! I learned something today.

    1. Thank you for coming by, Mr. G. It’s always an honor.

      BTW, Jim from Route to Retire did a presentation in our local ChooseFI group yesterday and he had a slide about the Groovy’s in it. I was specifically about your U.S. geo-arbitrage. Hats off on that move!

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