So you have finally come to grips with the fact that you are in over your head financially. What is your first step? STOP DIGGING. Stop. Spending. Money. Now.
Then start answering these questions.
First of all, where do you stand financially? Who do you owe money to, who owes you money. What assets do you have, what liabilities do you have? What contracts do you have with clients?
The next question is where did you spend the money – cash, credit, barter, checks, debit cards – all of it. Don’t hide anything, you are only lying to yourself. It is important to know how you got to your current situation.
Third, find out where can you make the most money the fastest. If you don’t know your margins, you don’t know where to focus your efforts. Focus on high margin products until you are stabilized. Look at both the income and expense side of the equation, sometimes it is easier to increase income than cut costs. Keep in mind that 10 hours of work at $40 per hour is much better than 40 hours of work at $10 per hour. You may not have the $40 per hour work available when you need cash, but work towards that type of work. You will be much better off in the long run.
Third, develop a realistic budget. A budget not only shows cash inflows and outflows, but what your priorities are. By making a conscious decision on what to fund and what to ignore, you have set your priorities. Any time you deviate from your budget, you should question if the purchase fits your priorities. If your priority is to stop bleeding cash, then you should probably cancel the spring break trip to Florida.
Financial turn arounds happen every day. But it takes a concerted effort to change the habits that got you there in the first place. Make a commitment, enlist help, and develop a plan to make it happen. It is your choice!
