1. Assess your debt.
Zero debt is what you’re aiming for, right? Not necessarily. There’s good debt, and there’s bad debt. The good kind is debt that will produce a return in the future—or, at the very least, it’s deductible. Credit card debt is always bad debt. Pay it off first.
2. Set a monthly financial target.
Do the math, and determine how much money you need each month to return to stable financial ground. Getting there may require cutting expenses or it may require finding another source of revenue, such as a second job. Don’t damage personal relationships by counting on family or friends for credit. And don’t dip into retirement savings—or stop funding your retirement—unless it’s unavoidable. Compounding is your biggest ally.
3. Identify smart savings.
If you do have to make cuts, try to find savings that won’t hurt your household or your business. For example, it might be OK to go without letterhead for a month or cancel your cable TV, but don’t fall behind on the office or car lease since late payments have a way of multiplying the problem. As you learn to live with less, gradually increase the amount going into savings or toward paying off debt.
4. Look ahead.
Always be aware of new revenue opportunities and expenses that may lie down the road. On the revenue side, don’t get so wrapped up in the day-to-day work that you forget to prospect for tomorrow’s deals. That includes maintaining networks and your connections to allied professionals. They can be an invaluable source of trends or links to new clients. On the expense side, keep an eye on what you may need to replace or renew over the next five years. Will you need a new car three years from now? How much should you save annually to make sure there’s a substantial down payment or, even better, enough for a cash purchase when the time comes?
5. Prepare for the worst.
Ask yourself: If the next three sales fall through, how will I pay my mortgage? Putting together a simple “what-if” plan to deal with worst-case scenarios can be comforting because you know there’s already a solution in place.
6. Develop a savings habit.
Like any good habit, saving money can be difficult. People tend to drift away from things that are hard or that they don’t like or aren’t good at. But keep plugging away anyway. The literal payoff will be seeing your debt decrease and your savings increase.