Guide to setting a budget After Financial Abuse
Victims of financial abuse can be left devastated and isolated after leaving their abusive situation. Believe it or not, one of the hardest parts of recovering from an abusive relationship is moving forward without your controlling abuser. Setting and sticking to a budget after financial abuse will seem overwhelming.
You may find yourself questioning where you go from here, and what steps you need to take to get there. As a victim of financial abuse and domestic violence, you have been controlled and abused and due to this, you will lack confidence in your ability to navigate simple tasks in life.
Don’t feel ashamed if you need to learn simple things like how to set a budget and take care of your own financial affairs after being financially abused.
Many people, including myself, have traveled this journey and know how hard it is, but we got through it and so will you. With patience, a belief in yourself, and some hard work you will ultimately be much happier.
There are many examples of financial abuse. But in a nutshell, financial abuse is when an intimate partner controls the financial matters of the household leaving you without a voice, or using your personal information and good credit score for their own benefit.
You will be isolated from access to money, financial assets, and sometimes basic necessities. The devastating impact of financial abuse will be felt after you leave the abusive relationship and you now need to provide for yourself and your children.
You will need to gain financial literacy and prepare for the next chapter of your life.
It can be helpful to set financial goals for yourself and think about what you want your finances to look like in the future.
Whether you want to save for a vacation or a new car, you want to make sure you have enough money saved for emergencies, or just want to ensure that all your bills are taken care of, setting financial goals for yourself can help keep you on track and provide you with motivation.
There are many ways to save money, and it can help to find a saving method that works best for you. It could be contributing to a savings account each month, or investing in a retirement account. Whatever method works best for you, it is important to make sure your finances are on track and you are moving toward financial stability.
So how do you find financial independence after these traumatic romantic relationships come to an end?
Open Your own bank accounts
The first step after leaving a financially abusive relationship should be to open your own bank account. It’s best to choose smaller local banks that often have a personal touch and will provide you with the assistance that is needed. Ensure that your bank of choice is also a reputable bank.
Having your own bank account is the first step to managing your own finances. It is a big step, especially if you have recently come out of an abusive relationship and financial abuse.
Assessing the Damage: Understanding the impact of financial abuse on your present and future
The next step, after financial abuse, is assessing the damage that has been done. You need to know where you stand financially, and what resources are currently available to you.
Remember, not all financial abuse leaves a visible or obvious impact, so it is important to look at the big picture. Fortunately, there are several ways you can do this.
- First, sit down and make a list of your assets and liabilities. This includes everything from your home value to the amount that you owe on your credit cards.
- Next, make a list of your monthly expenses, including things such as rent, utilities, and groceries.
- Once you have a list of your assets, liabilities, and expenses, you will be able to get a better idea of the state of your finances and what you are working with.
- List what your financial priorities are so that you can create some order and everything seems less chaotic.
- Find out what your credit score is and whether any damage has been done and how you can repair the damage if any exists.
- Don’t be overwhelmed, just start the process one step at a time. The important thing is to start.
Establishing a Budget: Crafting a budget that works with your current income and expenses
Once you have assessed the damage and know where you stand, the best way forward will be to learn how to set a budget after financial abuse.
You could be wondering what a budget means.
Or you may think to yourself, ‘No Way am I going to use a budget,’ as this was your abuser’s weapon of control.
Getting started may seem overwhelming at the moment. But believe me, when I say, that learning to budget now on your terms, is one of the most important things you can do for yourself and your financial health.
A budget is a financial plan that outlines your expected income, assets, debts, and expenses for a given period, helping you make better financial decisions. This will not only help you get a better idea of your monthly financial needs but will also provide you with a roadmap to financial recovery.
There are many different ways to create a budget, and you can find one that works best for you.
It is important to remember that you are in control of your budget, and only you can make sure it is followed and stays on track.
Take the time to set and stick to a budget, so that you can save money, pay off debt, and reach your financial goals.
What is a budget?
A budget is a plan for your financial future. It allows you to plan and estimate how much you will be spending each month so that you don’t spend more than you have.
Budgeting helps you better understand your financial situation, and with that knowledge, you can make adjustments where necessary to ensure that your finances are in order.
Budgeting is all about prioritizing your spending. It’s not about depriving yourself of everything you enjoy; rather, it’s about making sure your spending aligns with your financial goals and your financial situation.
Benefits of setting a budget after financial abuse
Budgeting helps you better understand your spending habits. Once you know how much you spend each month, you can make adjustments as needed to help ensure that you stay within your budget.
When it comes to your finances a budget will give you clarity and direction. When you have a budget, you know exactly where your money is going each month and how much you have to spend on certain things.
You will be able to plan and prioritize for the future with a budget. This includes saving for retirement, buying a house, paying for your children’s education, and more.
Budgeting provides freedom and a feeling of empowerment. When you have a budget, it’s easier to accomplish your goals. In fact, many people credit budgeting for helping them pay off debt, starting a successful business, or being able to travel.
Steps to creating a budget
First, figure out where you’re currently spending your money. Make a list of all your expenses, including bills, food, clothing, and anything else that you need to spend.
You can then break these expenses down into monthly amounts if you want. This will give you a good idea of how much you’re spending on average each month.
Create a savings plan.
After you know how much you’re spending, it’s time to create a savings plan.
First, figure out how much you can realistically save each month. Then, determine how much money you want to save for retirement and other financial goals.
Assess your debt situation.
If you have any debt, such as credit card or student loans, you first want to make a plan to get out of that debt as quickly as possible.
Once you’ve created your budget, you will have a better understanding of how much money you need to earn each month and where that money will be allocated. It’s a good idea to check in on your budget periodically to make sure everything is still accurate and adjust where needed.
Types of budgeting
Each person has their own unique financial situation and budgeting style.
No two budgets are ever the same, and there are various types of budgeting techniques that can help you create a budget that works for you. Here are a few different types of budgeting techniques that you can try out to find one that works best for you.
Cash flow budgeting
This budgeting method allows you to see your cash flow and spending habits in real-time. You track your spending as you make purchases to help you better understand where your money is going each month.
This is a very hands-on budgeting method, so it’s a good idea to keep a pen and paper nearby to keep track of your spending throughout the month especially if you are not comfortable with using digital forms of recording.
There are a number of other ways to do this, but the easiest way is to set up a budgeting spreadsheet on your computer, tablet, or smartphone. You can even use a free online budgeting tool if you don’t want to create one manually.
When tracking your income and expenses, be sure to record everything! This includes things such as cash gifts, income from side hustles, rebates, and more. The more accurate your budget is, the better it will serve you.
A spending plan allows you to set a specific amount of money for each category of spending each month. For example, you may decide to set aside $100 each month for grocery shopping and $100 each month for eating out.
While this method may seem rigid, it can help you stay on track and know exactly how much you’re spending on different categories throughout each month.
Balanced budgeting is a mix between a cash flow budget and a spending plan. You track your spending as you make purchases throughout the month, but you also set aside money for specific categories as well. For example, you may decide to budget $200 each month for groceries and $300 each month for eating out.
The 50/30/20 budgeting Rule
The 50/30/20 budgeting rule is a simple and flexible budgeting method that involves dividing your after-tax income into three categories:
- 50% for needs: This category includes expenses that are necessary for your basic survival, such as housing, food, utilities, insurance, and transportation.
- 30% for wants: This category includes expenses that you may want, but aren’t necessarily essential, such as dining out, entertainment, and leisure activities.
- 20% for savings and debt repayment: This category includes expenses that are focused on the future, such as saving for retirement, paying off debt, and building an emergency fund.
The 80/20 budgeting Rule
One way to use the 80/20 rule for budgeting is to focus on the things that are most important to you and allocate a larger portion of your budget to those areas. For example, you might decide to allocate 80% of your budget to your needs and 20% to your wants.
This would involve prioritizing expenses like housing, food, utilities, and insurance, and allocating a smaller portion of your budget to discretionary spending on things like dining out, entertainment, and leisure activities.
The Envelope Method
The envelope method of budgeting is a cash-based budgeting system that involves dividing your budget into categories and setting aside a specific amount of cash in envelopes or a digital equivalent (such as a separate bank account or a budgeting app) for each category.
To use the envelope method, you first need to determine your monthly income and expenses. You can then divide your expenses into categories, such as housing, utilities, food, transportation, and entertainment. Once you have your categories, you can set aside a specific amount of cash or transfer a specific amount to a digital envelope for each category.
As you spend money throughout the month, you can withdraw cash from the appropriate envelope or transfer money from the digital envelope to pay for expenses. When an envelope is empty, you know that you have reached your budgeted amount for that category and should not spend any more money in that category until the next month.
The envelope method is a simple and effective way to manage your budget and stay on track with your spending. It helps you to stay mindful of your spending habits and can help you to avoid overspending or getting into debt.
However, it can be inconvenient if you need to use a debit or credit card for purchases, as you would need to withdraw cash from an envelope to pay for those expenses.
Setting financial goals
When you first start budgeting, you’ll want to set financial goals for the short and long term. You will need to build up your financial knowledge which will assist you in making good financial decisions.
Short-term goals are the things that are necessary and important to you right now, such as paying off your credit card debt.
Long-term goals are those things you’d like to achieve in the future, such as buying a house, saving for your children’s college education, and retiring comfortably.
Whatever goals you set, should be specific and measurable so you can track your progress along the way. For example, if one of your long-term goals is to save $100,000 for retirement, you’ll want to set a specific goal such as saving $100 each month towards your retirement fund.
Being specific with your goals will provide motivation for setting a budget and sticking to it.
Sticking to your budget
Now that you’ve created a budget, it’s time to stick to it!
Create a budgeting ritual
Developing a budgeting ritual will help you stay consistent with your budget. This could be something as simple as creating a monthly budget worksheet and budget spreadsheet and setting it up as a recurring event on your calendar.
Budgeting can be challenging, but it can also be incredibly rewarding. When you first start creating a budget, it will be difficult to know if your numbers are accurate.
However, over time, as you continue to track your income and expenses, your numbers will become more accurate and you’ll have a better idea of how much you can afford to spend each month.
It’s important to stay committed to your budget. If you find yourself struggling to stick to your budget, take a step back and figure out why. Maybe you need to adjust your budget or learn how to say “no” to certain expenses.
Tips for budgeting success
When creating your budget, be realistic with your numbers. Don’t try to make your budget foolproof; instead, make it work for you. It’s better to start off a little bit on the tight side and then loosen up as you become more comfortable with your budget than to have a budget that is too loose from the start.
Track your spending
It’s important to track your spending so that you can make adjustments as needed. This will help you better understand where your money is going each month and will help you stay on track with your budget.
Budgeting doesn’t happen overnight. It takes time, effort, and commitment to make a budget work for you. Be patient with yourself and don’t give up if you aren’t seeing immediate results.
When budgeting, it is important to learn to live within your means so as to ensure that your budgeting is as successful as possible.
After leaving an abusive relationship it can often be difficult to find a job and you may need to start with an entry-level job as you probably would not have worked for a long time.
Money will probably be tight, if you are struggling with paying your bills on time looking at a side hustle will help whilst you are starting on your journey to rebuilding yourself financially.
Look for affordable housing to help you keep your costs down. If you are based In the U.S. you will be able to apply to National Programs that can provide assistance. These can cover rental housing assistance, food programs, health care, and temporary assistance for needy families.
If you require immediate assistance contact the National Domestic Violence Hotline for assistance.
Repairing Your Credit: Restoring your credit score and improving your financial standing
One of the many consequences of financial abuse is that it can damage your credit score. If you have been experiencing financial abuse, there are steps you can take to help repair your credit score. Some of the steps you can take to help repair your credit score include:
- Avoid taking on too many new credit cards.
- Balancing your cards and paying them on time.
- Paying down your debts.
- Avoid taking on new debts.
Doing these things will help you to build and repair your credit score. With financial abuse, you may have had your credit card breached, and it would be a good idea to request a free credit report to see the damage that has been done.
It can be helpful to review your credit report and look for errors. If you find any errors, you can report them to be corrected. A credit report is a great way to track your progress and see how the actions you are taking are affecting your financial standing.
You can request a free credit report from any of the 3 major credit bureaus in the U.S. and it is a good idea to request a new report every 12 months.
There are many benefits to budgeting, from better financial management to a plan for the future. To start budgeting, begin by tracking your spending and creating a savings plan. Assess your debt situation and make adjustments as needed.
Then, set financial goals for the short and long term and track your income and expenses to stay on track. Finally, stay committed to your budget and be persistent.
With patience and consistent effort, I know that you will overcome this hurdle and you will be able to create a life of freedom on your terms.