How Do You Fix Your Finances After Addiction?

There are two things addiction will ruin very quickly: your relationships and your finances. Drugs and alcohol get expensive when you need them every day, but the secondary costs are even more expensive. These include debts, legal and medical bills, and lost income. You might find yourself facing a pretty bleak financial situation in recovery. Financial stress is one of the biggest sources of stress for most people, which makes it a liability for recovery. As stressful as money problems are, it’s important to remember that they can be solved with a good strategy and consistent effort. The following is a brief look at how you can recover financially as you’re recovering from addiction.

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Write Down All Your Debts

Before you can make a plan, you have to figure out exactly what your situation looks like. This part can feel incredibly demoralizing but it’s necessary. Write down all your debts, including credit card debt, private debts, past due bills, student loans, home, and car loans, as well as any money you owe people for damaging their property or stealing from them. It might help to sort of compartmentalize while doing this. Don’t worry about how you’re going to deal with all of this; you’re just taking inventory right now. In the end, it actually makes you feel a little better to know what all of your financial obligations are, rather than having them all lurking in the dark.

Contact Your Creditors

If you thought writing down your financial liabilities was unpleasant, wait until you have to contact your creditors and other people you need to repay. Talking to creditors and people you’ve wronged is one of the most humbling things you’ll ever have to do, but again, it’s a necessary step. At this point, you have two primary aims: let them know you intend to repay them and see if they’ll be flexible on terms. Many people underestimate how much their creditors are willing to negotiate on repayment terms. It’s important to understand that debt collectors often buy your debt for pennies on the dollar, so pretty much anything you’re willing to pay them is gravy and other lenders would much rather work with you than write off your debt or sell it for a big loss. 

Your friends and family will likely be the most flexible on repayment terms, although it largely depends on how mad they are at you. Some might be willing to forget it entirely, but this isn’t just about the money; it’s also about taking personal responsibility and putting things right. Let these people know you intend to repay them even if it might take you a while.

Prioritize Your Debt Repayment

Once you have a complete picture of your debts and repayment terms, it’s time to make a plan for repaying them. Start with debts that are both urgent and important. For example, if you’re about to lose your house because you’re behind on the mortgage, focus on that first, and make minimum payments on the other things until you get out of danger. Next, focus on debts that are important but not urgent. Typically, these will be things like paying off high-interest loans or credit cards. Nothing bad will happen immediately if you don’t pay them, but the longer you wait, the bigger they get. Debts with high interest are like having a very big hole in your bucket: No matter how much money you make or how well you invest your money, your bucket is very hard to fill. 

Another good strategy for paying off debts is the “snowball” strategy. With this strategy, you focus on paying off the smallest debts first. There are a number of reasons this is often a good strategy. First, it can give you a huge psychological boost. If you have a list of 10 debts but five are small enough to pay off in a month or two, you feel like you’re making great progress and it’s much easier to think about how to pay off five debts rather than 10. It’s a big load off your mind. Second, knocking out small debts frees up money that you can use to pay down larger debts--hence “snowball.” While focusing on getting rid of high-interest debt is often numerically superior, the snowball strategy is often less stressful and more sustainable.

Write Down Everything You Spend Your Money On

Next, you have to figure out where to get the money to pay off these debts. Just like you made a list of all your debts, make a list of all your expenses. The best way to do this is to actually track your spending in real-time. This includes big things like car payments and small things like candy bars. Online credit card and bank statements make this process easier but you might want to keep a notebook to record spending as it happens. We often spend more money than we realize on things that don’t really improve our lives. This will help you spot that kind of wasteful spending and recording each transaction as you make it will force you to reflect on whether you really need the thing you’re about to buy.‍

Eliminate Wasteful Spending

Once you have a clear picture of your spending habits, look for things you can get rid of. How deep you go will depend on your money situation. There are probably things you can get rid of and not even notice--magazine subscriptions, apps, the membership to the gym you haven’t been to in a year, and so on. The tighter your money situation, the deeper the cuts. You may have to consider finding a cheaper place to live or do without some things until you get your money situation under control.

Work on Increasing Income

Eventually, you’ll need some kind of income. For most people, that will be from a job. There’s a huge range of employment situations people find themselves in after treatment, from going right back to their six-figure professional job as if they had been on vacation, to having trouble getting any job because of their substance use history. If you’re in the former category, you’re probably doing fine in terms of income but people in the latter category are in a tighter spot. For the moment, any job will do but be looking to trade up as soon as possible. The main things are to establish your reliability and skills. It may help to volunteer for a cause you care about. This helps improve your reputation, builds skills, and broadens your network. If you can, it’s also a good idea to learn some new job skills, possibly at a university or community college. 

Start Saving as Soon as Possible

Once you have things basically under control, which means you're making regular, perhaps even automatic, payments on your debts and you have some kind of steady income, it’s time to start saving some money. Living hand-to-mouth is extremely stressful and the more savings you have, the less you’ll stress about money. You might feel like you should wait until your debts are paid before you start saving but that might take years and in the meantime, you’ll be working without a net. Put a little money in savings every time you get paid, even if it’s only 10 bucks, and don’t touch it unless it’s an absolute emergency. 

Getting your finances sorted out in recovery may take a while. The hardest part is taking an honest look at your financial situation and talking to creditors. However, once you get working on the problem with a good strategy, you’ll feel much better. Keep in mind that paying your debts isn’t just about money; it’s part of the recovery process and often explicitly part of making amends. At Foundry, we know that addiction is a problem that affects every area of your life and therefore requires holistic solutions. We don’t just teach skills to help you abstain from drugs and alcohol; we teach skills to help you live a happier, more purposeful, more connected life. To learn more, call us at (844) 955-1066.