Financial Reset: 7 Steps to Take Control of Your Money
Life happens. Maybe you've been overspending on subscriptions you forgot about, or perhaps your emergency fund has taken a hit. Whatever brought you here, you're not alone.
Think of a financial reset like spring cleaning for your wallet. It’s about hitting pause, taking note of where you’re at, and making intentional choices about where you want to go with your finances.
Why You Need a Financial Reset
Over time, financial clutter accumulates. This could be unused accounts, forgotten subscriptions, or outdated budgets that no longer reflect your reality. These small oversights add up and can become overwhelming as they quietly drain your resources.
But there's another reason to reset: life changes. Maybe you've switched jobs, had a major life event, or simply realized your spending doesn't align with your goals anymore. A financial reset gives you the chance to realign your money with what actually matters to you.
Step 1: Assess Your Current Financial Situation
You can't improve what you don't know. The best way to start is by pulling together a complete picture of your finances.
Calculate your net worth by listing all assets and subtracting all debts.
Review your credit score to understand where you stand.
Track your spending for the past three months to see where your money actually goes.
Make note of any outstanding or recurring payments, such as bills, loan payments, or credit card payments.
Through this process, you might discover you're spending $200 a month on takeout when you thought it was $75. Or you might find accounts you forgot existed. Mobile banking makes it easier than ever to get a clear view of your financial standing.
Look for red flags like collections, bankruptcies, or signs of identity theft while reviewing your credit reports. Catching these early protects your financial future.
Step 2: Identify and Break Bad Financial Habits
Not all, but a lot of financial struggles are due to behavior. Impulse buying, ignoring bills, or avoiding financial decisions altogether can sabotage even the best intentions.
Start by recognizing your patterns. Do you shop when you're stressed? Avoid checking your account balance? Make purchases without thinking about whether you actually need them?
Breaking bad financial habits takes time, but you can start small. Try a 7-day financial reset challenge: for one week, pause before every purchase and ask yourself three questions:
Do I actually need this, or do I just want it right now?
Will I still value this purchase next week?
Does this align with my financial goals?
This simple pause disrupts automatic spending patterns and creates space for better decisions. And if you slip up? That's normal and okay! What matters is getting back on track without beating yourself up about it.
Step 3: Tackle Debt Strategically
When you have debt, it can feel like it’s controlling your life. But ignoring it won’t make it disappear. To tackle this challenge, start by listing every debt you have from credit cards, personal loans, student loans, etc.
Two proven methods help you pay down debt faster:
Debt Snowball Method
Pay off your smallest balance first while making minimum payments on everything else. Once that's gone, roll that payment into the next smallest debt. This approach builds quick wins that keep you motivated.
Debt Avalanche Method
Focus on the debt with the highest interest rate first. Mathematically, this saves you the most money over time and gets you debt-free faster.
How to Choose
Choose the method that fits your personality. If you need psychological wins to stay on track, go with the snowball. If you want maximum savings, choose the avalanche. You also may realize that after choosing one method, you actually need to switch to the other. That’s okay, too!
For multiple high-interest credit cards, consider debt consolidation through a personal loan with a lower rate. This simplifies your payments and can save you hundreds in interest.
You can also set up automatic payments to ensure you never miss a due date. Late fees damage your credit score and cost you money.
If you're struggling with overwhelming debt, don't wait until it spirals further. Reach out to a financial professional who can help you explore options and create a realistic payoff plan.
Step 4: Set Realistic Financial Goals
Once you know where you stand, decide where you want to go. But be specific. "Save more money" isn't a solid goal—it’s more of a wish. However, "Build a $1,000 emergency fund by June" is a goal that can be worked toward, and you know when you achieve it.
Your financial goals should reflect your life priorities. Maybe you're focused on:
Building an emergency fund to cover 3–6 months of expenses
Paying off high-interest credit card debt
Saving for a down payment on a house
Increasing your retirement contributions
Setting aside money for a major purchase or vacation
Step 5: Create (or Reset) Your Budget
Maybe you already have a budget created but there are too many categories that just don’t make sense anymore. Or maybe you’ve never created one. Budgets naturally evolve over time. It’s good to reevaluate, refresh, and simplify your budget as your income, spending needs, or goals change. But remember that your budget should feel like a spending plan, not a prison sentence. Start with the basics:
Fixed expenses come first—rent, insurance, loan payments.
Then allocate money to variable expenses, like groceries and gas.
Finally, decide how much goes toward financial goals and discretionary spending.
The 50/30/20 rule works well as a starting point: 50% for needs, 30% for wants, 20% for savings and debt payoff. But adjust these percentages based on your situation. If you're tackling serious debt, you might flip to 50/20/30.
Don't forget the small expenses that add up. That $12.99 streaming service? It's $156 a year. The $4 coffee three times a week? That's over $600 annually. These numbers aren't meant to shame you—they're meant to empower you to make conscious choices.
Step 6: Educate Yourself on Financial Products
Part of resetting your finances means understanding the tools available to you. You don't need to become a financial expert overnight, but learning the basics helps you make smarter decisions.
Savings Certificate or Certificates of Deposit (CDs): Fixed-rate savings that earn higher interest when you commit to leaving money untouched for a set period
Personal loans: Can consolidate high-interest debt into one manageable payment with a lower rate
Encompass offers all these products with transparent terms and no hidden fees. Our team takes time to explain your options—not pressure you into decisions. Check out our rates and fees page to see how we stack up.
The more you understand about money management techniques, the more confident you'll feel making financial decisions. And confidence leads to better outcomes.
Step 7: Automate Your Savings and Review Expenses
One of the best ways to save is to never see the money in the first place. Set up automatic transfers from your checking account to savings right after payday.
Even $25 per paycheck adds up. That's $650 a year if you're paid biweekly—enough to start an emergency fund or cover unexpected expenses without resorting to credit cards.
Consider opening multiple savings accounts for different goals:
Emergency fund: 3–6 months of expenses for true emergencies
Sinking funds: Planned expenses, like car maintenance or holiday gifts
Goal-specific accounts: Down payment fund, vacation fund, whatever matters to you
Encompass offers competitive rates on savings accounts that help your money grow while staying accessible. And because we're a credit union, not a bank, our profits go back to our members—not shareholders.
While you're automating savings, review every recurring payment and subscription. Cancel what doesn't serve you. That freed-up money can go toward your goals instead of someone else's bottom line.
Check In Regularly
A financial reset isn't a one-and-done event. It's the beginning of a new relationship with your money.
Schedule monthly “money dates” with yourself. Review your spending, check your progress toward goals, and adjust as needed. Life changes, and your financial plan should change with it.
Consider quarterly reviews of your:
Credit reports for errors or signs of identity theft
Insurance coverage to ensure it still fits your needs
Investment allocations and retirement contributions
Beneficiary designations on accounts
These check-ins don't have to be complicated. Even 30 minutes a month makes a massive difference over time.
Moving Forward with Confidence
A financial reset might feel overwhelming at first. But try to remember that you don't have to do everything at once. Pick one step and just start there, then build momentum.
And you don't have to do it alone.
About Encompass Credit Union
At Encompass Credit Union, we've been helping members in Tipton, Kokomo, and Frankfort Counties manage their finances since 1953. We're not here to judge where you've been—we're here to help you get where you want to go.
Whether you need a checking account that works harder for you, competitive rates on savings, or just someone to talk through your options, we're here.
Ready to reset your finances? Contact us t oday or stop by one of our convenient branch locations. Let's build your financial future together.