4 Financial Pitfalls for People in Recovery – And How to Avoid Them

When in recovery, one of the main challenges you’ll face is rebuilding your life. During active addiction, the addiction was your life, putting everything else in the back seat, including your finances. Now, as you rebuild, it’s important to get your finances in order. However, certain financial pitfalls can occur that can stand in the way of getting your money on the right track. The good news is that with some work, you can overcome these challenges.

Why Financial Stability Is Important During Recovery

After treatment, as you continue your recovery journey, you have a lot to think about and much to do. However, your main focus should be doing the things you need to do to maintain your sobriety. But one of the keys to recovery is managing stress, and nothing can cause more stress than financial hardship, so it’s important to take control and get your finances in order. Once you have a financial plan in place, you’ll be free to focus more on your recovery and achieving your goals.

4 Common Financial Pitfalls in Recovery

In recovery, four financial pitfalls are common, but you can create a plan to avoid these pitfalls and overcome financial challenges.

1.   Debt

During active addiction, many people find themselves in debt due to the money spent on drugs or alcohol, as well as medical and legal bills. This debt is overwhelming in some cases and should be one of the first challenges you tackle. The first step in doing so is to take stock of your financial picture and create a budget.

To create a budget, list all of your monthly sources of income and all your monthly expenses, then calculate how much you’ll have left to pay toward your debt or save, if any.

Now that you know what your financial picture looks like, you can follow these tips to start reducing your debt and eventually eliminating it.

• If you have large legal or medical bills, check with the companies to see if you can work out payment plans that you can afford.
• Allocate the most money to the debts with the highest interest rates.
• Eliminate or reduce any expenses that you can and allocate that saved money to debt payments. Examples include shopping for lower insurance rates, eliminating services like streaming services, or downgrading your phone plan.
• Consider selling items that you own and using the money to pay down debt.
• Add extra income by taking on an extra part time job, or providing services like dog walking, or lawn care.

2.   Lack of Emergency Funds

You also may find yourself without any money as a safety net. It’s always good to have some money saved for unexpected expenses like car repairs, or medical bills. When you create your budget and your debt repayment plan, you should also include putting money into a savings account. Some of the same tips for paying down debt also apply to saving money, such as eliminating or reducing expenses and adding extra income.

You can also consider apps that allow you to round up your purchases and save the spare change. You’d be surprised at how quickly that can add up. Additionally, you can set up automatic transfers of a certain amount from your checking account to your savings account.

If you get any extra income, like a rebate or a tax refund, use that money for savings or debt repayment.

3.   Financial Avoidance

Sometimes in recovery, in order to avoid stress, people put their finances on the backburner, ignoring bills and debts. It seems easier sometimes than facing the challenge of trying to get your finances back in order. However, it’s always going to be nagging at you in the back of your mind, causing even more stress because you haven’t taken control of your financial situation. However, if you take control and do what you need to do to handle it, you’ll feel empowered and more secure because you’re taking positive action.

The key may be to start with small goals, such as setting up a payment plan for a legal bill, or paying off one credit card, or building a savings account of $500. You don’t have to tackle everything all at once, although you should be aware of your full financial picture.

Sometimes it’s also helpful to have a friend or family member review and manage your finances with you so that you don’t feel alone in the battle. If you don’t have anyone that you can trust, a financial counselor is another option.

4.   Overspending

If you’re lucky enough not to be in a financial hole, you could easily find yourself in one if you start overspending. Sometimes people trade one addiction for another, and shopping can be an addiction. You can get a rush from buying nice things or going out for expensive dinners.

To avoid this, go back to your budget, and decide on a reasonable amount that you can spend each month on clothing, entertainment, or other “luxuries”. Then only keep this amount in your checking account and put the rest in some kind of savings vehicle.

If you have credit cards, don’t carry them with you. Better yet, get rid of all of them, or just keep one for emergencies.

None of these things can stop you, however, from overspending if you’re an impulse buyer, particularly with online shopping at your fingertips. A strategy to overcome this is to make a deal with yourself that if you feel the impulse to buy something, you’ll wait a certain amount of time, at least a day, before you actually decide to make the purchase. That way you have time to think about it and reconsider if it’s really necessary and if you can really afford it.

In Closing

Recovery is challenging, particularly if you have other life challenges like financial difficulties. That’s why it’s so important to take control and manage your finances so that you’re not overwhelmed with stress that can threaten your sobriety. No financial challenge is insurmountable, and if you can overcome your addiction, you can overcome anything. Then you’ll be free to focus on your recovery journey and better, healthier future.